Filing summary
Entity/period: Silver Run Acquisition Corporation, Form 10-Q for the quarter ended March 31, 2016. The supplied company metadata names Permian Resources Corp, but this filing is for Silver Run Acquisition Corporation, a blank-check company—not an operating oil and gas business.
Business context and reporting period
Silver Run was formed to pursue a merger, acquisition, or similar initial business combination. It completed its IPO on February 29, 2016 and was searching for targets at quarter-end. The company had no significant operations, no operating revenue, and no definitive business-combination agreement. Financial statements are unaudited.
Financial metrics
| Metric | Quarter ended / as of March 31, 2016 |
|---|---|
| Revenue | $0 |
| General and administrative expenses | $29,943 |
| Operating loss | $29,943 |
| Trust-account investment income | $62,582 |
| Net income | $32,639 in the financial statements; MD&A states $32,629 |
| Basic and diluted earnings per share | $0.00 |
| Cash outside trust account | $1,713,777 |
| Trust-account investments | $500,062,592 |
| Working capital | $1,210,738 surplus, per MD&A |
| Operating / investing / financing cash flow | $12,257 / ($500,062,592) / $501,658,612 |
| Total liabilities | $18,030,975, including $17,500,000 deferred underwriting compensation |
| Debt | No long-term debt; $300,000 sponsor note was repaid at the IPO closing |
Margins are not meaningful because the company had no revenue. The trust assets were invested in money-market instruments holding U.S. government obligations. The $17.5 million deferred underwriting fee is payable only if a business combination is completed.
Changes versus prior comparable period
There is no prior-year quarterly operating comparison in the supplied filing. Compared with December 31, 2015, total assets increased from $476,191 to $501,804,305, principally following the IPO and funding of the trust account. Cash increased from $105,500 to $1,713,777. The company recorded $478,773,320 of Class A shares subject to possible redemption outside permanent equity.
Outlook, risks, and unusual items
- Management expected available funds outside the trust to cover operating needs before a business combination, but said additional financing might be needed to consummate a transaction.
- The company had 24 months from the IPO closing to complete a business combination; otherwise it must redeem public shares and liquidate, subject to applicable requirements.
- A target must have aggregate fair market value of at least 80% of trust assets, excluding specified amounts. Public shareholders may have redemption rights in connection with a transaction.
- Management cautioned there was no assurance a suitable target would be identified or a transaction completed. It disclosed no definitive agreement at quarter-end.
- Trust funds are generally restricted until a business combination, qualifying redemptions, or liquidation; creditor claims could have priority over public shareholders’ claims.
- The company reported no material changes to previously disclosed risk factors, no legal proceedings, and no off-balance-sheet arrangements. Management reported disclosure controls were effective and no material change in internal control over financial reporting.
- After quarter-end, on April 8, 2016, the sponsor forfeited 437,500 founder shares following expiration of the remaining over-allotment option.
Important facts for investors to verify
- Confirm entity identity: the filing is Silver Run Acquisition Corporation, not Permian Resources Corp.
- Reconcile net income: the statements report $32,639, while MD&A reports $32,629.
- Check the share-redemption count: the balance sheet and notes state 47,877,332 shares, while the statement of changes in equity appears to state 47,887,332.
- Review the trust-account redemption terms, 24-month deadline, and potential creditor claims against trust assets.
- Assess remaining outside-trust liquidity and the contingent $17.5 million underwriting fee alongside any proposed transaction financing and shareholder redemptions.