Acquisitions and Divestitures
|12 Months Ended
Dec. 31, 2022
|Business Combination and Asset Acquisition [Abstract]
|Acquisitions and Divestitures
|Acquisitions and Divestitures
2022 Acquisitions and Divestitures
The Company did not have any material acquisitions or divestitures for the year ended December 31, 2022.
2021 Acquisitions and Divestitures
On October 1, 2021, the Company closed on the acquisition of certain producing oil and gas properties, undeveloped acreage and associated infrastructure assets in the Delaware Basin from Primexx Resource Development, LLC (“Primexx”) and BPP Acquisition, LLC (“BPP”) for an adjusted purchase price of approximately $444.8 million in cash, inclusive of the deposit paid at signing, 8.84 million shares of the Company’s common stock and approximately $25.2 million paid upon final closing for total consideration of $877.0 million (the “Primexx Acquisition”). The Company funded the cash portion of the total consideration with borrowings under its credit facility. Of the 8.84 million shares of the Company’s common stock issued upon closing, 2.6 million shares were held in escrow pursuant to the purchase and sale agreements with Primexx and BPP (collectively, the “Primexx PSAs”). Pursuant to the Primexx PSAs, 1.3 million of the shares held in escrow were released to the sellers six months after the closing date, which was on April 1, 2022. In early October 2022, the remaining 1.2 million shares were released to the sellers, net of shares that were released to the Company for the satisfaction of indemnification claims made under the Primexx PSAs and subsequently retired.
Also, pursuant to the Primexx PSAs, certain interest owners exercised their option to sell their interest in the properties included in the Primexx Acquisition to the Company for consideration structured similarly to the Primexx Acquisition, for an incremental purchase
price totaling approximately $31.8 million, net of customary purchase price adjustments, of which $22.4 million closed during the fourth quarter of 2021 and the remaining $9.4 million closed during the first quarter of 2022.
The Primexx Acquisition was accounted for as a business combination; therefore, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated acquisition date fair values with information available at that time. A combination of a discounted cash flow model and market data was used by a third-party specialist in determining the fair value of the oil and gas properties. Significant inputs into the calculation included future commodity prices, estimated volumes of oil and gas reserves, expectations for timing and amount of future development and operating costs, future plugging and abandonment costs and a risk adjusted discount rate.
The following table sets forth the Company’s final allocation of the purchase price of $908.9 million to the assets acquired and liabilities assumed as of the acquisition date.
Approximately $570.7 million of revenues and $141.2 million of direct operating expenses attributed to the Primexx Acquisition were included in the Company’s consolidated statements of operations for the year ended December 31, 2022. For the period from the closing date of the Primexx Acquisition on October 1, 2021 through December 31, 2021, approximately $114.3 million of revenues and $32.1 million of direct operating expenses were included in the Company’s consolidated statements of operations for the year ended December 31, 2021.
Pro Forma Operating Results (Unaudited). The following unaudited pro forma combined condensed financial data for the years ended December 31, 2021 and 2020 was derived from the historical financial statements of the Company giving effect to the Primexx Acquisition, as if it had occurred on January 1, 2020. The below information reflects pro forma adjustments for the issuance of the Company’s common stock and the borrowings under the Credit Facility as total consideration, as well as pro forma adjustments based on available information and certain assumptions that the Company believes provide a reasonable basis for reflecting the significant pro forma effects directly attributable to the Primexx Acquisition.
The pro forma consolidated statements of operations data has been included for comparative purposes only, is not necessarily indicative of the results that might have occurred had the Primexx Acquisition taken place on January 1, 2020 and is not intended to be a projection of future results.
Non-Core Asset Divestitures
During the second quarter of 2021, the Company completed its divestitures of certain non-core assets in the Delaware Basin for net proceeds of $29.6 million. The divestitures were primarily comprised of natural gas producing properties in the Western Delaware Basin as well as a small undeveloped acreage position.
On November 19, 2021, the Company closed on its divestiture of certain non-core assets in the Eagle Ford Shale, comprised of producing properties as well as an undeveloped acreage position, for net proceeds of $91.9 million.
In the fourth quarter of 2021, the Company closed on the divestiture of certain non-core assets in the Midland Basin, comprised of producing properties as well as an undeveloped acreage position for net proceeds of $30.5 million.
On October 28, 2021, the Company closed on the divestiture of certain non-core water infrastructure for net proceeds of $27.9 million, as well as up to $18.0 million of incremental contingent consideration based on completed lateral length for wells in a specified area.
The aggregate net proceeds for each of the 2021 divestitures discussed above were recognized as a reduction of evaluated oil and gas properties with no gain or loss recognized as the divestitures did not significantly alter the relationship between capitalized costs and estimated proved reserves.
ORRI Transaction. On September 30, 2020, the Company sold an undivided 2.0% (on an 8/8ths basis) overriding royalty interest, proportionately reduced to the Company’s net revenue interest, in and to the Company’s operated leases, excluding certain interests to Chambers Minerals, LLC, a private investment vehicle managed by Kimmeridge Energy, for net proceeds of $135.8 million (“ORRI Transaction”), which were used to repay borrowings outstanding under the Credit Facility.
Non-Operated Working Interest Transaction. On November 2, 2020, the Company sold substantially all of its non-operated assets for net proceeds of approximately $29.6 million, which were used to repay borrowings outstanding under the Credit Facility. The transaction had an effective date of September 1, 2020 and is subject to post-closing adjustments.
The aggregate net proceeds for each of the 2020 divestitures discussed above were recognized as a reduction of evaluated oil and gas properties with no gain or loss recognized as the divestitures did not significantly alter the relationship between capitalized costs and estimated proved reserves.