How do I enter the Halcon Resources merger with GeoResources?

Halcon Resources completed its merger with GeoResources 8/1/2012 for cash and Halcon Resources stock.


This merger is a cash plus stock reorganization. All the information below is from the information available from the S-4/A filed with the SEC unless otherwise indicated.


First, if you have made any entries for this transaction in the Club Accounting software, you should delete them.

To record this merger will require multiple entries in the accounting software. The basic outline of these entries is given below:

Enter a large Return of capital transaction to have the program calculate the capital gain reportable for this merger.

Write down the capital gains, both long-term (LTCG) and short-term (STCG).

Delete the large Return of capital entry.

Enter capital gain distributions for the LTCG and STCG.

Enter a smaller Return of capital for the remainder of the cash received.

Enter the actual merger transaction

The capital gain realized is limited to the actual cash received so some clubs may need to adjust the capital gain amounts before entering the capital gain distributions. Instructions for doing this are included. The total merger consideration is $ 32.0943 per GeoResources share. This was calculated using the closing price of HK shares on the merger completion date of 8/1/12. It is not mandatory to use the closing price. The closing price was used because it was used in IRS form 8937 filed by Halcon. Your capital gain will be based on this total consideration with a limit that the total capital gain cannot exceed the total cash received, excluding cash-in-lieu of fractional shares.


1. Calculate the capital gain.

The total merger consideration is $32.0943 per GeoResources share. This is $20.00 in cash and $12.0943 in Halcon Resources shares. Calculate the total value received for your GeoResources shares by multiplying 32.0943 by the total shares of GeoResources owned.

Total Proceeds = [32.0943 x (# of GeoResources shares owned)] (Reorganization fee)


Enter the total proceeds amount in the dividend entry screen. Change the type to Return of capital. Date the transaction 7/31/2012. The security is GeoResources. Save the transaction.

The program will change some of the Return of capital, if appropriate, to LTCG and STCG.

Look at your transactions history and WRITE DOWN the amount for LTCG and STCG.

After you have recorded these amounts you can delete the Return of capital transaction. Although the LTCG and STCG entries were generated by the Return of capital entry you may need to delete them separately in the program.

Next you need to compare the sum of the capital gains to the total cash received, excluding cash for fractional shares.

The total cash received should be [20.00 x (# of GeoResources shares held)] (Reorganization fee).

If your total capital gains are less than or equal to the total cash received skip to the next section, Accounting for Cash Received.

If your total capital gains are greater than the total cash received, continue in this section to adjust your capital gains so they are equal to your total merger cash received.

Since the structuring of this merger limits your capital gains to the cash received you need to adjust your gains to the total cash received. This will be done by calculating the per cent of the total capital gain that was LTCG and STCG. The percentage of each type of capital gain contributed to the total will then be multiplied by the maximum gain, the total merger cash. This will give the dollar amount each type of gain contributed to the total capital gain.

Total Merger Cash = 20 x (# of Catalyst shares owned)

Total Capital gain = Total CG = LTCG + STCG (From the large return of capital entry)



With these calculated you can calculate the final LTCG and final STCG.

Actual LTCG = %LTCG x (Total Merger cash)

Actual STCG = STCG x (Total Merger cash)

If you have done the calculations correctly, (Actual LTCG + Actual STCG) = Total cash received.

If, (Actual LTCG + Actual STCG) = Total cash received, go to the next section, Accounting for Cash Received.


2. Accounting for Cash Received

All of the following entries use the cash dividend screen, in CA3 this is Transactions > Cash Dividend or Distribution, and online at Accounting > Cash Dividends.

Date these transactions 7/31/2012

The security should be GeoResources (GEOI)

Change the type field to Long-term capital gain.

Amount should be your LTCG as calculated above.

Next repeat the process for your short-term capital gain.

Change the type field to Short-term capital gain.

Amount should be your STCG as calculated above.

If you had to adjust you capital gain, the amount of LTCG and STCG in these entries will be the actual LTCG and actual STCG as adjusted above.

Finally, enter a return of capital entry.

Change the type field to Return of capital.

Amount should be: (Total Cash received) capital gains

If your capital gains (LTCG + STCG) = Total Cash Received, no return of capital entry is needed.

Continue to step 3, The Merger.


3. The Merger

Go to Transactions > Merger or Accounting > Securities > Record merger of securities depending on the version of the software being used. If you are unfamiliar with merger transactions you can get help at this URL:


Here is the information you need to complete the merger.

Date: 8/1/2012

Old Security or Merging Company: GeoResources (GEOI)

Price per share of old Security / GeoResources: Use the last valuation price

Cash received: See your broker statement for cash-in-lieu

New Security: Halcon Resources (HK)

Shares received: 1.932 x (# of GeoResources shares owned)

(Remember to include fractional shares.)

Price per Share: 6.26 (HK)

Save the transaction and this is finally done.


A worksheet is provided below to record the items that need to be calculated.


A. Total Proceeds received.

32.0943 x (# of GeoResources shares) = ____________________________


B. Total cash received.

[20.00 x (# of GeoResources shares)] (Reorganization fee, if any) = ________________


Large Return of Capital (ROC) entry amount is equal to A.


C. LTCG = _____________________ (see transaction list after large ROC entry, record here)


D. STCG = ____________________ (see transaction list after large ROC entry, record here)


E. LTCG + STCG = __________________. Is this greater than B, Total cash received


F. Return of Capital amount = (Total Cash Received) (LTCG + STCG) = ______________

Use this if (LTCG + STCG) is less than Total Cash received.


Capital gain adjustment, if LTCG + STCG is greater than Total Cash received.



= _________________


H. % STCG = (STCG)/ (LTCG + STCG) = _________________


I. Actual LTCG = %LTCG x (Total Merger cash) = ______________________.

Enter this amount if LTCG + STCG are greater than Total Merger Cash received.


J. Actual STCG = %STCG x (Total Merger cash) = ________________________.

Enter the Actual LTCG and Actual STCG if the original LTCG + STCG are greater than Total Merger Cash received.


K. Shares of Halcon Resources Received = 1.932 x (# of GeoResources shares owned) = _________________. (For the merger transaction)