Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Introduction

 

On October 24, 2022, Executive Network Partnering Corporation, a Delaware corporation (“ENPC”), consummated its business combination by and among ENPC, Granite Ridge Resources, Inc., a Delaware corporation (“Parent”), ENPC Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Parent (“ENPC Merger Sub”), GREP Merger Sub, LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Parent (“GREP Merger Sub” and, together with ENPC Merger Sub, the “Merger Subs”), and GREP Holdings, LLC, a Delaware limited liability company (“GREP”), which provides, among other things, that (i) ENPC Merger Sub merged with and into ENPC (the “ENPC Merger”), with ENPC surviving the ENPC Merger as a wholly-owned subsidiary of Parent and (ii) GREP Merger Sub merged with and into GREP (the “GREP Merger,” and together with the ENPC Merger, the “Mergers”), with GREP surviving the GREP Merger as a wholly-owned subsidiary of Parent.

 

The unaudited pro forma condensed combined financial statements have been prepared in accordance with Article 11 of SEC Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Business” to aid you in your analysis of the financial aspects of the Transactions (as defined below) and is for informational purposes only. The unaudited pro forma condensed combined financial statements present the pro forma effects of the following transactions, collectively referred to as the “Transactions” for purposes of this section, and other related events as described in Note 1 to the accompanying notes to the unaudited pro forma condensed combined financial statements:

 

·the formation transaction of Fund III and its business combination with Fund I and Fund II; and

 

·the business combination of Grey Rock and ENPC, referred to in this section as the “Business Combination.”

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2022 (the “pro forma balance sheet”), and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2022 and the year ended December 31, 2021 (the “pro forma statement of operations,” together with the pro forma balance sheet and the corresponding notes hereto, the “pro forma financial statements”) present the pro forma financial statements of the Parent after giving effect to the Transactions.

 

The pro forma financial statements have been developed from and should be read in conjunction with the following historical financial statements and related notes of ENPC and Grey Rock Energy Fund III, Grey Rock Energy Fund, LP and Grey Rock Energy Fund II:

 

·unaudited financial statements of ENPC as of June 30, 2022 and for the six months ended June 30, 2022 and 2021 and the related notes as set forth in the Current Report on Form 8-K (“Current Report”) filed on October 24, 2022, incorporated herein by reference and the audited financial statements of ENPC as of and for the fiscal year ended December 31, 2021 and the related notes as set forth in the Registration Statement on Form S-4/A filed on September 12, 2022 (Reg. No. 333-264986), incorporated herein by reference,

 

·unaudited condensed consolidated financial statements of Grey Rock Energy Fund, LP and Subsidiaries as of June 30, 2022 and for the six months ended June 30, 2022 and 2021 and the related notes as set forth in the Registration Statement on Form S-4/A filed on September 12, 2022 (Reg. No. 333-264986), incorporated herein by reference and audited consolidated financial statements of Grey Rock Energy Fund, LP and Subsidiaries as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 and the related notes as set forth in the Registration Statement on Form S-4/A filed on September 12, 2022 (Reg. No. 333-264986), incorporated herein by reference,

 

·unaudited condensed combined financial statements of Grey Rock Energy Fund II as of June 30, 2022 and for the six months ended June 30, 2022 and 2021, and the related notes as set forth in the Registration Statement on Form S-4/A filed on September 12, 2022 (Reg. No. 333-264986), incorporated herein by reference and audited combined financial statements of Grey Rock Energy Fund II as of and for the years ended December 31, 2021 and 2020, and the related notes as set forth in the Registration Statement on Form S-4/A filed on September 12, 2022 (Reg. No. 333-264986), incorporated herein by reference, and

 

 

 

 

·unaudited condensed combined financial statements of Grey Rock Energy Fund III as of June 30, 2022 and for the six months ended June 30, 2022 and 2021, and the related notes as set forth in the Registration Statement on Form S-4/A filed on September 12, 2022 (Reg. No. 333-264986), incorporated herein by reference and audited combined financial statements of Grey Rock Energy Fund III as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 and the related notes as set forth in the Registration Statement on Form S-4/A filed on September 12, 2022 (Reg. No. 333-264986), incorporated herein by reference.

 

GREP Formation Transaction

 

The GREP Formation Transaction is accounted for consistent with that of a common control transaction pursuant to the guidance in ASC 805-50, recognizing the assets and liabilities received in the transaction at their historical carrying amounts. Fund III has been identified as the acquirer and “predecessor” to the Parent. As control of each Fund will remain with its respective general partner and there will not be a substantive economic change with respect to the Funds pre and post the GREP Formation Transaction, the transaction is accounted for consistent with that of a common control transaction and the GREP Formation Transaction combined Fund III, Fund I and Fund II at historical cost.

 

The pro forma balance sheet as of June 30, 2022 assumes that the GREP Formation Transaction occurred on June 30, 2022. The pro forma statement of operations for the six months ended June 30, 2022 and the year ended December 31, 2021 gives pro forma effect to the GREP Formation Transaction as if they had occurred on January 1, 2021.

 

Business Combination

 

The Business Combination is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, ENPC is treated as the “acquired” company for financial reporting purposes. Fund III is the accounting acquirer because Grey Rock, as a group, retained a majority of the outstanding shares of Parent as of the closing of the Business Combination, and they have nominated all members of the board of directors as of the closing of the Business Combination.

 

The pro forma balance sheet as of June 30, 2022 assumes that the Business Combination and related transactions occurred on June 30, 2022. The pro forma statement of operations for the six months ended June 30, 2022 and the year ended December 31, 2021 give pro forma effect to the Business Combination and related transactions as if they had occurred on January 1, 2021. ENPC and Grey Rock have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

The pro forma financial statements are presented to reflect the Transactions and do not represent what ENPC’s financial position or results of operations would have been had the Transactions occurred on the dates noted above, nor do they project the financial position or results of operations of Parent following the Transactions. The transaction accounting adjustments are based on available information and certain assumptions that management believes are factually supportable and are expected to have a continuing impact on the results of operations with the exception of certain non-recurring charges to be incurred in connection with the Transactions, as further described below. In the opinion of management, all adjustments necessary to present fairly the pro forma financial statements have been made.

 

ENPC anticipates that certain non-recurring charges will be incurred in connection with the GREP Formation Transaction and the Business Combination. Any such charges could affect the future results of Parent in the period in which such charges are incurred; however, these costs are not expected to be incurred in any period beyond 12 months from the effective date of the Business Combination, which is expected to close the same day as the effective date of the transaction. Accordingly, the pro forma statement of operations for the six months ended June 30, 2022 and for the year ended December 31, 2021 reflect the effects of these non-recurring charges.

 

 

 

 

As a result of the foregoing, the transaction accounting adjustments are preliminary and subject to change as additional information becomes available and additional analysis is performed. The transaction accounting adjustments have been made solely for the purpose of providing the pro forma financial statements presented below. Any increases or decreases in the fair values of assets acquired and liabilities assumed upon completion of the final valuation related to the Business Combinations and/or the initial public offering price of ENPC’s Class A common stock will result in adjustments to the pro forma balance sheet and if applicable, the pro forma statement of operations. The final transaction accounting adjustments described herein may be materially different than the preliminary amounts previously reflected in the pro forma financial statements.

 

The pro forma financial statements should be read together with the sections titled “ENPC’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Grey Rock’s Management’s Discussion and Analysis of Financial Condition and Results of Operations — Fund III, Fund I and Fund II,” and the historical financial statements and related notes thereto of ENPC, Grey Rock Energy Fund III, Grey Rock Energy Fund, LP, and Grey Rock Energy Fund II as set forth in the Registration Statement on Form S-4/A filed on September 12, 2022 (Reg. No. 333-264986), incorporated herein by reference.

 

 

 

 

ENPC

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

 

As of June 30, 2022

 

       GREP Formation Transaction   Business Combination 
   Historical   Transaction
Accounting
     Pro Forma
Combined
   Transaction
Accounting
     Pro
Forma
 
(in thousands)  ENPC   Fund I   Fund II   Fund III   Adjustments     GREP Formation   Adjustments     Combined 
Assets                                            
Current Assets:                                            
Cash  $172   $813   $22,927   $22,869   $(9,358) 2a  $37,251   $20,593  3a,g  $58,016 
Prepaid expenses   56    3    9    16    -      28    -      84 
Revenue receivable   -    1,974    21,744    70,836    -      94,554    -      94,554 
Advances to operators   -    -    -    15,276    -      15,276    -      15,276 
Other assets   -    341    531    754    -      1,626    -      1,626 
Contributions receivable   -    -    -    10    -      10    -      10 
Other Receivable   -    -    -    469    -      469    -      469 
Total current assets   228    3,131    45,211    110,230    (9,358)     149,214    20,593      170,035 
                                             
Property and equipment (successful efforts):                                            
Oil and gas properties, successful efforts method   -    45,016    325,055    482,156    -      852,227    -      852,227 
Accumulated depletion   -    (30,135)   (166,937)   (128,528)   -      (325,600)   -      (325,600)
Total property and equipment, net   -    14,881    158,118    353,628    -      526,627    -      526,627 
Cash deposit   -    -    300    -    -      300    -      300 
Investments held in trust account   414,554    -    -    -    -      -    (414,554) 3a   - 
Total assets  $414,782   $18,012   $203,629   $463,858   $(9,358)    $676,141   $(393,961)    $696,962 
                                             
Liabilities, stock subject to possible
redemption, partners' capital and
stockholders' equity
                                            
Current Liabilities:                                            
Accounts payable  $68   $-   $-   $-   $-     $-   $-     $ 68 
Accounts payable - related party   100    -    -    -    -      -    -      100 
Convertible note—related party   1,549    -    -    -    -      -    (1,549) 3b   - 
Accrued expenses   8,530    284    6,736    4,606    (365) 2a   11,261    35,374  3c   55,165 
Other payable   -    168    -    -    -      168    -      168 
Derivative liabilities - current   -    336    1,664    13,479    -      15,479    -      15,479 
Credit facilities - current   -    700    17,000    34,959    (8,993) 2a   43,666    -      43,666 
Distributions payable   -    -    -    -    -      -    -      - 
Related party payable   -    -    -    -    -      -    -      - 
Franchise tax payable   18    -    -    -    -      -    -      18 
Income tax payable   45    -    -    -    -      -    -      45 
Total current liabilities   10,310    1,488    25,400    53,044    (9,358)     70,574    33,825      114,709 
                                             
Long-term liabilities:                                            
Asset retirement obligations   -    377    2,086    1,519    -      3,982    -      3,982 
Credit facilities - noncurrent   -    -    -    -    -      -    -      - 
Derivative liabilities - noncurrent   -    28    211    688    -      927    -      927 
Deferred income taxes   -    -    -    -    -      -    25,808  3d   25,808 
Derivative warrant liabilities   9,560    -    -    -    -      -    (140) 3e   9,420 
Total liabilities   19,870    1,893    27,697    55,251    (9,358)     75,483    59,493      154,846 
                                             
Class A common stock subject to possible redemption   414,070    -    -    -    -      -    (414,070) 3f   - 
Partners' capital and stockholders equity                             -           - 
General partner   -    139    8,224    34,621    -      42,984    (42,984) 3g   - 
Limited partners   -    15,980    167,708    373,986    -      557,674    (557,674) 3g   - 
Total partners' capital   -    16,119    175,932    408,607    -      600,658    (600,658)     - 
                                             
Class A common stock   0    -    -    -    -      -    (0) 3f   - 
Class B common stock   0    -    -    -    -      -    (0) 3f   - 
Class F common stock   0    -    -    -    -      -    (0) 3f   - 
Accumulated deficit   (19,158)   -    -    -    -      -    19,158  3i   - 
ParentCo Class A common stock   -    -    -    -    -      -    1,710  3f,g,h   1,710 
Additional paid in capital   -    -    -    -    -      -    540,406  3b,c,d,e,f,g,h,i   540,406 
Total partners' capital, stock subject to possible redemption and stockholders' equity   394,912    16,119    175,932    408,607    -      600,658    (453,454)     542,116 
Total liabilities, stock subject to possible redemption, partners' capital and stockholders' equity  $414,782   $18,012   $203,629   $463,858   $(9,358)    $676,141   $(393,961)    $696,962 

 

See accompanying “Notes to the Unaudited Pro Forma Condensed Combined Financial Statements”

 

 

 

ENPC

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

 

For the Six Months Ended June 30, 2022

 

          GREP Formation Transaction     Business Combination  
    Historical     Pro Forma
Combined
    Transaction
Accounting
      Pro
Forma
 
(in thousands, except share and per share amounts)   ENPC     Fund I     Fund II     Fund III     GREP Formation     Adjustments       Combined  
Revenue:                                                          
Oil, natural gas, and related product sales   $ -     $ 4,231     $ 66,818     $ 173,068     $ 244,117     $ -       $ 244,117  
                                                           
Operating Expenses:                                                          
Lease operating expenses     -       808       7,897       9,470       18,175       -         18,175  
Production taxes     -       274       2,805       9,574       12,653       -         12,653  
Depletion and accretion expense     -       1,107       15,760       30,662       47,529       -         47,529  
Impairment expense     -       -       -       -       -       -         -  
Professional fees     -       70       305       458       833       (833 ) 4a     -  
Management fees     -       -       1,158       1,889       3,047       (3,047 ) 4b     -  
General and administrative     8,516       6       397       757       1,160       2,090 4a     11,766  
Gain on disposal of oil and natural gas properties     -       -       -       -       -       -         -  
Administrative fee—related party     120       -       -       -       -       4,951 4b     5,071  
Franchise tax expense     75       -       -       -       -       -         75  
Total operating expenses     8,711       2,265       28,322       52,810       83,397       3,161         95,269  
Operating Income (Loss)     (8,711 )     1,966       38,496       120,258       160,720       (3,161 )       148,848  
Gain/(loss) on derivative contracts     -       (803 )     (7,826 )     (25,228 )     (33,857 )     -         (33,857 )
Interest expense     -       (19 )     (398 )     (718 )     (1,135 )     -         (1,135 )
Change in fair value of derivative warrant liabilities     (2,424 )     -       -       -       -       35 4c     (2,389 )
Income from investments held in Trust Account     501       -       -       -       -       (501 ) 4d     -  
Income (Loss) before income taxes     (10,634 )     1,144       30,272       94,312       125,728       (3,627 )       111,467  
Income tax expense     45       -       -       -       -       27,977 4e     28,022  
Net Income (Loss)   $ (10,679 )   $ 1,144     $ 30,272     $ 94,312     $ 125,728     $ (31,604 )     $ 83,445  
                                                           
Net income per share (Note 5)                                                          
Weighted average shares outstanding of Class A common stock, basic and diluted     42,014,000                                                    
Basic and diluted net income per share of Class A common stock   $ (0.25 )                                                  
Weighted average shares outstanding of Class B common stock, basic and diluted     300,000                                                    
Basic and diluted net income per share of Class B common stock   $ (0.25 )                                                  
Weighted average shares outstanding of Class F common stock, basic and diluted     828,000                                                    
Basic and diluted net income per share of Class F common stock   $ (0.25 )                                                  
                                                         
Weighted average shares outstanding of ParentCo Class A common stock                                                       132,923,379  
Basic and diluted net income per share of ParentCo Class A common stock                                                     $ 0.63  

 

See accompanying “Notes to the Unaudited Pro Forma Condensed Combined Financial Statements”

 

 

 

 

ENPC

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

 

For the Year Ended December 31, 2021

 

       GREP Formation Transaction   Business Combination 
   Historical   Pro Forma
Combined
   Transaction
Accounting
     Pro
Forma
 
(in thousands, except share and per share amounts)  ENPC   Fund I   Fund II   Fund III   GREP Formation   Adjustments     Combined 
Revenue:                                     
Oil, natural gas, and related product sales  $-    10,257   $82,391   $197,546   $290,194   $-     $290,194 
                                      
Operating Expenses:                                     
Lease operating expenses   -    1,799    13,128    12,362    27,289    -      27,289 
Production taxes   -    627    5,675    10,808    17,110    -      17,110 
Depletion and accretion expense   -    3,038    31,090    60,534    94,662    -      94,662 
Impairment expense   -    -    -    -    -    -      - 
Professional fees   -    218    541    1,552    2,311    (2,311) 4f   - 
Management fees   -    -    2,315    3,878    6,193    (6,193) 4g   - 
General and administrative   1,964    171    672    832    1,675    4,826  4f   8,465 
Gain on disposal of oil and natural gas properties   -    (1,341)   (938)   -    (2,279)   -      (2,279)
Administrative fee—related party   240    -    -    -    -    10,000  4g   10,240 
Franchise tax expense   159    -    -    -    -    -      159 
Total operating expenses   2,363    4,512    52,483    89,966    146,961    6,322      155,646 
Operating Income (Loss)   (2,363)   5,745    29,908    107,580         (6,322)     134,548 
Gain/(loss) on derivative contracts   -    (1,842)   (13,232)   (17,315)   (32,389)   -      (32,389)
Interest expense   -    (138)   (848)   (1,399)   (2,385)   -      (2,385)
Change in fair value of derivative warrant liabilities   3,794    -    -    -    -    (55) 4h   3,739 
Income from investments held in Trust Account   41    -    -    -    -    (41) 4i   - 
Income (Loss) before income taxes   1,472    3,765    15,828    88,866    (34,774)   (6,418)     103,513 
Income tax expense   -    -    -    -    -    25,789  4j   51,597 
                             25,808  4j     
Net Income (Loss)  $1,472   $3,765   $15,828   $88,866   $(34,774)  $(58,015)    $51,916 
                                      
Net income per share (Note 5)                                     
Weighted average shares outstanding of Class A common stock, basic and diluted   42,014,000                                 
Basic and diluted net income per share of Class A common stock  $0.03                                 
Weighted average shares outstanding of Class B common stock, basic and diluted   300,000                                 
Basic and diluted net income per share of Class B common stock  $0.03                                 
Weighted average shares outstanding of Class F common stock, basic and diluted   828,000                                 
Basic and diluted net income per share of Class F common stock  $0.03                                 
                                     
Weighted average shares outstanding of ParentCo Class A common stock                                   132,923,379 
Basic and diluted net loss per share of ParentCo Class A common stock                                  $0.39 

 

See accompanying “Notes to the Unaudited Pro Forma Condensed Combined Financial Statements”

 

 

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 1 — Basis of Presentation and Description of the Transaction

 

The pro forma financial statements have been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786, “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria which simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management Adjustments”). Only Transaction Accounting Adjustments are presented in the pro forma financial information and notes thereto. The adjustments presented in the pro forma financial statements have been identified and presented to provide relevant information necessary for an understanding of Parent upon consummation of the GREP Formation Transaction and Business Combination.

 

The GREP Formation Transaction is accounted for consistent with that of a common control transaction pursuant to the guidance in ASC 805-50, recognizing the assets and liabilities received in the transaction at their historical carrying amounts. Fund III has been identified as the acquirer and “predecessor” to Parent. Management determined that Fund III was the predecessor as it is the largest of the three Funds and comprised the majority of the Combined Company upon consummation of the Business Combination. For the purposes of effecting the GREP Formation Transaction, it was determined that a high degree of common ownership exists among Fund III, Fund I and Fund II and there will not be a substantive economic change with respect to the Funds, pre and post the GREP Formation Transaction. As such, the GREP Formation Transaction is accounted for consistent with that of a common control transaction and Fund III, Fund I and Fund II are combined at their historical cost.

 

The Business Combination is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, ENPC is the “accounting acquirer” and GREP is the “accounting acquirer” for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of GREP issuing shares for the net assets of ENPC, followed by a recapitalization. The net assets of ENPC are stated at historical cost. Operations prior to the Business Combination are those of GREP.

 

The pro forma balance sheet as of June 30, 2022 assumes that the Business Combination and related transactions occurred on June 30, 2022. The pro forma statement of operations for the six months ended June 30, 2022 and the year ended December 31, 2021 give pro forma effect to the Business Combination and related transactions as if they had occurred on January 1, 2021, the beginning of the earliest period presented. These periods are presented on the basis that GREP is the acquirer for accounting purposes.

 

The unaudited pro forma adjustments reflecting the GREP Formation Transaction and the consummation of the Business Combination are based on certain currently available information and certain assumptions and methodologies that management believes are reasonable under the circumstances. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely the actual adjustments will differ from the pro forma adjustments, and it is possible that the difference may be material. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the GREP Formation Transaction and the Business Combination based on information available to management at this time and the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

 

The pro forma financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the GREP Formation Transaction or the Business Combination. The pro forma financial statements are not necessarily indicative of what the actual results of operations and financial position would have been had the GREP Formation Transaction and Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of Parent following the Business Combination. They should be read in conjunction with the historical financial statements and notes thereto of ENPC, Grey Rock Energy Fund, LP, Grey Rock Energy Fund II and Grey Rock Energy Fund III.

 

 

 

 

Note 2 — Preliminary Accounting of the GREP Formation Transaction

 

The GREP Formation Transaction closed in conjunction with the Business Combination with consideration of $1.3 billion. Grey Rock Energy Fund III will be treated as the accounting acquirer to the GREP Formation Transaction which is accounted for consistent with that of a common control transaction in accordance with ASC 805-50, recognizing the assets and liabilities received in the transaction at their historical carrying amounts.

 

(a)Represents settlement of the preferred limited partnership credit facility balances for Fund II and Fund III at June 30, 2022 of $8,993 thousand, and the associated interest expense totaling $365 thousand for a total decrease in cash of $9,358 thousand.

 

Note 3 — Transaction Accounting Adjustments — Balance Sheet

 

The unaudited pro forma condensed combined balance sheet has been adjusted to reflect the Business Combination and has been prepared for informational purposes only.

 

(a)Reflects the reclassification of cash held in ENPC’s Trust Account to cash and to reflect the cash available to consummate the Business Combination or to fund redemption of existing public shares.

 

(b)Reflects the elimination of the $1,549 thousand working capital loan ENPC borrowed from the Sponsor. This loan was cancelled in conjunction with the consummation of the Business Combination.

 

(c)Reflects the pro forma adjustment of $35,374 thousand for the estimated legal, accounting, printer and capital market advisory fees incurred directly related to the Business Combination.

 

(d)The pro forma adjustment to deferred tax assets and liabilities were computed as if GREP became subject to corporate U.S. federal and state income taxes under Subchapter C of the U.S. Internal Revenue Code as of June 30, 2022. These balance sheet adjustments reflect future tax consequences attributable to differences between financial statement amounts and their respective tax basis utilizing an estimated blended statutory U.S. federal and state income tax rate of 23%. The adjustment amount is primarily driven by the recognition of deferred tax liabilities related to differences between the book and tax basis of oil and gas properties and related depletion and the expected realization of unrealized gain/loss on hedging activities. The change in tax status resulted in a pro forma adjustment to establish a deferred tax liability of $25,808 thousand.

 

(e)Reflects the elimination of 153,500 of ENPC’s private placement warrants forfeited as part of the Business Combination.

 

(f)Reflects the reclassification of ENPC’s Class A common stock subject to redemption of $414,070 thousand to 41,400,000 shares of Class A common stock and additional paid in capital, the forfeiture of ENPC’s Class B shares and the conversion of ENPC’s Class F shares in conjunction with the consummation of the Business Combination.

 

(g)Reflects the redemption of 39,343,496 shares of Class A ordinary shares redeemed for $393,961 thousand allocated to ENPC common stock and additional paid in capital using a par value of $0.01 per share at a redemption price of approximately $10.00 per share in conjunction with the consummation of the Business Combination.

 

(h)Reflects the exchange of the Funds’ historical Partners’ capital balances in which 130,000 thousand shares of Class A common stock are redeemed for $1,300 thousand using a par value of $0.01 per share at a redemption price of approximately $10.00 per share with the remaining Partners’ capital balances exchanged for additional paid in capital.

 

(i)Reflects the reclassification of ENPC’s historical accumulated deficit into additional paid-in capital as part of the reverse recapitalization.

 

 

 

 

Note 4 — Transaction Accounting Adjustments - Statement of Operations

 

The unaudited pro forma condensed combined statement of operations has been adjusted to reflect the Business Combination and has been prepared for informational purposes only. There were no adjustments to the unaudited pro forma condensed combined statement of operations related to the GREP Formation Transaction.

 

(a)Reflects the pro forma adjustment to increase general and administrative expense of $1,257 thousand associated with ENPC’s future executive team and other incremental personnel expenses. The pro forma adjustment also reclassifies professional fees to “General and administrative.”

 

(b)Reflects the pro forma adjustment to increase management fees of $1,904 thousand in accordance with the “Management Services Agreement” and reclassification of Fund II and Fund III’s existing management fees of $3,047 thousand to “Administrative fee-related party.”

 

(c)Reflects the elimination of the gain associated with the mark-to-market of ENPC’s private placement warrants forfeited upon consummation of the Business Combination.

 

(d)Reflects the elimination of “Income from investments held in Trust Account” associated with ENPC’s investment held in trust.

 

(e)To record the $27,977 income tax expense impact of the unaudited pro forma adjustments at an estimated statutory rate of 23%. Fund I, Fund II and Fund III operate in multiple jurisdictions, so the statutory rate may not be reflective of the actual impact of the tax effects of the adjustments.

 

(f)Reflects the pro forma adjustment to increase general and administrative expense of $2,515 thousand associated with ENPC’s future executive team and other incremental personnel expenses. The pro forma adjustment also reclassifies professional fees to “General and administrative.”

 

(g)Reflects the pro forma adjustment to increase management fees of $3,807 thousand in accordance with the “Management Services Agreement” and reclassification of Fund II and Fund III’s existing management fees of $6,193 thousand to “Administrative fee-related party.”

 

(h)Reflects the elimination of the gain associated with the mark-to-market of ENPC’s private placement warrants forfeited upon consummation of the Business Combination.

 

(i)Reflects the elimination of “Income from investments held in Trust Account” associated with ENPC’s investment held in trust.

 

(j)To record the $25,789 thousand income tax expense impact of the unaudited pro forma adjustments at an estimated statutory rate of 23%. Fund I, Fund II and Fund III operates in multiple jurisdictions, so the statutory rate may not be reflective of the actual impact of the tax effects of the adjustments. In addition, the pro forma adjustment also reflects the tax impact of $25,808 thousand to establishing the deferred tax liability of Fund I, Fund II and Fund III upon conversion to a taxable corporation.

 

Note 5 — Pro Forma Net Income per Share

 

Pro forma net income per share was calculated using the historical weighted averages shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2021. As the Business Combination and the related transactions are being reflected as if they had occurred at the beginning of the earliest period presented, the calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the shares issuable relating to the Business Combination and related transactions have been outstanding for the entirety of all periods presented.

 

 

 

 

   For the Six Months
Ended
June 30, 2022
   For the Year Ended
December 31, 2021
 
(in thousands, except share and per share information)  Actual
Redemptions
   Actual
Redemptions
 
Pro forma net income  $83,445   $51,916 
Weighted average shares outstanding — basic and diluted   132,923,379    132,923,379 
Net income per share — basic and diluted    0.63    0.39 
Excluded securities:(1)          
Public Warrants   10,350,000    10,350,000 
           

 

(1)The potentially dilutive outstanding securities were excluded from the computation of pro forma net income per share, basic and diluted, because their effect would have been anti-dilutive, issuance or vesting of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the periods presented. In addition, Parent common stock of 45,000 shares issued to ENPC’s independent directors have not been reflected in the weighted average shares outstanding.

 

Note 6 — Supplemental Pro Forma Oil and Natural Gas Reserve Information

 

The following tables present the estimated pro forma combined net proved developed and undeveloped oil and natural gas reserve information as of December 31, 2021, along with a summary of changes in quantities of net remaining proved reserves during the year ended December 31, 2021.

 

The following estimated pro forma oil and natural gas reserve information is not necessarily indicative of the results that might have occurred had the Business Combination been completed on December 31, 2021 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those described in the Proxy Statements and Prospectus in the section titled “Risk Factors” which is incorporated herein by reference.

 

   Historical     
   Fund I   Fund II   Fund III   Pro Forma 
                 
   Pro Forma Oil Reserves (in MBbl) 
Balance at December 31, 2020    1,708    5,405    9,349    16,462 
Production    (162)   (956)   (2,295)   (3,413)
Revision of previous estimates    173    292    186    651 
Divestiture of reserves    (1,068)   (30)       (1,098)
Acquisition of reserves            7,673    7,673 
Extensions and discoveries    6    589    1,948    2,543 
Balance at December 31, 2021    657    5,300    16,861    22,818 
                     
Proved developed reserves at:                    
December 31, 2020    1,052    3,745    5,256    10,053 
December 31, 2021    630    4,213    6,815    11,658 
                     
Proved undeveloped reserves at:                    
December 31, 2020    656    1,660    4,093    6,409 
December 31, 2021    27    1,087    10,046    11,160 

 

 

 

 

   Historical     
   Fund I   Fund II   Fund III   Pro Forma 
                 
   Pro Forma Natural Gas Reserves (in MMcf) 
Balance at December 31, 2020    3,701    48,557    22,665    74,923 
Production    (505)   (5,595)   (8,761)   (14,861)
Revision of previous estimates    637    16,489    1,838    18,964 
Divestiture of reserves    (2,302)   (51)       (2,353)
Acquisition of reserves            39,254    39,254 
Extensions and discoveries    27    888    8,505    9,420 
Balance at December 31, 2021    1,558    60,288    63,501    125,347 
                     
Proved developed reserves at:                    
December 31, 2020    2,127    18,979    15,479    36,585 
December 31, 2021    1,437    22,110    30,710    54,257 
                     
Proved undeveloped reserves at:                    
December 31, 2020    1,574    29,578    7,186    38,338 
December 31, 2021    121    38,178    32,791    71,090 

 

   Historical     
   Fund I   Fund II   Fund III   Pro Forma 
                 
   Total Pro Forma Reserves (in MBoe) 
Balance at December 31, 2020    2,324    13,498    13,126    28,948 
Production    (246)   (1,889)   (3,755)   (5,890)
Revision of previous estimates    280    3,041    493    3,814 
Divestiture of reserves    (1,452)   (39)       (1,491)
Acquisition of reserves            14,216    14,216 
Extensions and discoveries    11    737    3,365    4,113 
Balance at December 31, 2021    917    15,348    27,445    43,710 
                     
Proved developed reserves at:                    
December 31, 2020    1,406    6,908    7,836    16,150 
December 31, 2021    870    7,898    11,934    20,702 
                     
Proved undeveloped reserves at:                    
December 31, 2020    918    6,590    5,290    12,798 
December 31, 2021    47    7,450    15,511    23,008 

 

Standardized Measure of Discounted Future Net Cash Flows

 

The following tables present the estimated pro forma discounted future net cash flows at December 31, 2021. The pro forma standardized measure information set forth below gives effect to the Business Combination as if the Business Combination had been completed on December 31, 2021. The disclosures below were determined by referencing the “Standardized Measure of Discounted Future Net Cash Flows” reported in Grey Rock Energy Fund III’s, Grey Rock Energy Fund, LP’s and Grey Rock Energy Fund II’s respective historical financial statements for the year ended December 31, 2021; an explanation of the underlying methodology applied, as required by SEC regulations, can be found within the respective historical financial statements included elsewhere in this proxy statement/prospectus. The calculations assume the continuation of existing economic, operating and contractual conditions at December 31, 2021.

 

Therefore, the following estimated pro forma standardized measure is not necessarily indicative of the results that might have occurred had the Business Combination been completed on December 31, 2021 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those described in the Proxy Statement and Prospectus in the section titled “Risk Factors” which are incorporated herein by reference.

 

 

 

 

Discounted Future Net Cash Flows

 

The following table sets forth the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves as of December 31, 2021:

 

   Historical     
(in thousands)  Fund I   Fund II   Fund III   Pro Forma 
                 
Future cash inflows  $48,311   $530,180   $1,428,934   $2,007,425 
Future production costs   (20,308)   (164,426)   (381,379)   (566,113)
Future development costs   (1,304)   (45,962)   (175,771)   (223,037)
Future income tax expense   (150)   (801)   (5,272)   (166,094)
Future net cash flows  $26,549   $318,991   $866,512   $1,052,181 
10% discount for estimated timing of cash flows   (9,975)   (113,779)   (313,947)   (383,396)
Standardized measure of discounted future net cash flows  $16,574   $205,212   $552,565   $668,785 

 

Sources of Change in Discounted Future Net Cash Flows

 

The principal changes in the pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the year ended December 31, 2021 are as follows:

 

   Historical     
(in thousands)  Fund I   Fund II   Fund III   Pro Forma 
                 
Balance at beginning of period   $19,993   $69,690   $105,900   $195,583 
Sales of oil and natural gas produced, net of production costs    (7,831)   (63,588)   (174,377)   (245,796)
Extensions and discoveries    172    14,236    43,615    58,023 
Previously estimated development costs incurred during the period    14    9,483    12,545    22,042 
Net change of prices and production costs    10,056    136,694    185,875    332,625 
Change in future development costs    (289)   (667)   (2,877)   (3,833)
Revisions of quantity and timing estimates    5,660    28,644    15,854    50,158 
Accretion of discount    2,018    6,994    10,702    19,714 
Change in income taxes    99    (220)   (2,194)   (107,881)
Acquisition of Reserves            332,947    332,947 
Divestiture of Reserves    (13,107)   (482)       (13,589)
Other    (211)   4,428    24,575    28,792 
Balance at end of period   $16,574   $205,212   $552,565   $668,785