Building Trust through Execution May 2022 Cautionary Statement Regarding Forward-Looking Statements and Important Disclosures 1 Forward-Looking Statements and Cautionary Statements Certain statements in this presentation concerning future opportunities for Civitas, future financial performance and condition, guidance and any other statements regarding Civitas' future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts are ...

Civitas Resources, Inc. (NYSE:CIVI) Q1 2022 Earnings Conference Call May 5, 2022 10:00 AM ET Company Participants Chris Doyle – President & Chief Executive Officer Marianella Foschi – Chief Financial Officer Matt Owens – Chief Operating Officer Brian Cane – Chief Sustainability Officer Ben Dell – Chairman John Wren – Investor Relations Conference Call Participants Neal Dingmann – Truist Securities Michael Scialla – Stifel Noel Parks – Tuohy Brothers Nicholas Pope – Seaport Research Bill Dezellem – Tieton ...

[Information Regarding Forward-Looking Statements](index=3&type=section&id=Information%20Regarding%20Forward-Looking%20Statements) This section outlines forward-looking statements based on management's current beliefs, subject to various risks and uncertainties - Forward-looking statements are based on **management's current beliefs** and cover business strategies, reserves, sales volumes, capital expenditures, costs, compliance, and market impacts[6](index=6&type=chunk)[7](index=7&type=chunk) - Actual results may **differ materially** due to factors like commodity price volatility, economic conditions, COVID-19 effects, access to capital, and geopolitical factors[9](index=9&type=chunk)[10](index=10&type=chunk)[12](index=12&type=chunk) - The company **disclaims any obligation to update or revise** these statements unless required by law and advises against **undue reliance** on these forward-looking statements[12](index=12&type=chunk) [Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis - The financial statements are **unaudited** and prepared in accordance with **GAAP** for interim financial information, condensing certain disclosures[25](index=25&type=chunk) - The results of operations for the three months ended March 31, 2022, are **not necessarily indicative** of the results that may be expected for the full year or any other future period[26](index=26&type=chunk) [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Civitas Resources, Inc.'s unaudited condensed consolidated financial statements and detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets provide a snapshot of the company's financial position as of March 31, 2022, and December 31, 2021 | Metric | March 31, 2022 (USD thousands) | December 31, 2021 (USD thousands) | Change (USD thousands) | | :----- | :------------- | :---------------- | :----- | | **ASSETS** | | | | | Total current assets | $674,103 | $719,937 | $(45,834) | | Total property and equipment, net | $6,310,731 | $5,944,842 | $365,889 | | Total assets | $7,033,747 | $6,741,033 | $292,714 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | | Total current liabilities | $1,335,531 | $1,119,506 | $216,025 | | Total liabilities | $2,396,214 | $2,086,035 | $310,179 | | Total stockholders' equity | $4,637,533 | $4,654,998 | $(17,465) | | Total liabilities and stockholders' equity | $7,033,747 | $6,741,033 | $292,714 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This statement details revenues, expenses, and net income (loss) for Q1 2022 and 2021, showing a shift to net income | Metric | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | Change (USD thousands) | | :----- | :-------------------------------- | :-------------------------------- | :----- | | Oil, natural gas, and NGL sales | $817,810 | $74,159 | $743,651 | | Total operating expenses | $415,831 | $50,672 | $365,159 | | Derivative loss | $(295,493) | $(23,419) | $(272,074) | | Income (loss) from operations before income taxes | $115,000 | $(163) | $115,163 | | Net income (loss) | $91,639 | $(119) | $91,758 | | Basic Net income (loss) per common share | $1.08 | $(0.01) | $1.09 | | Diluted Net income (loss) per common share | $1.07 | $(0.01) | $1.08 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement tracks changes in stockholders' equity for Q1 2022 and 2021, including common stock and retained earnings | Metric | December 31, 2021 (USD thousands) | March 31, 2022 (USD thousands) | | :----- | :---------------- | :------------- | | Balances, December 31, 2021 | $4,654,998 | | | Restricted common stock issued | $6 | | | Stock used for tax withholdings | $(12,934) | | | Exercise of stock options | $178 | | | Stock-based compensation | $8,090 | | | Cash dividends, $1.2125 per share | $(104,444) | | | Net income | $91,639 | | | Balances, March 31, 2022 | | $4,637,533 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash flows from operating, investing, and financing activities for Q1 2022 and 2021 | Metric | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | | :----- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $532,541 | $42,964 | | Net cash used in investing activities | $(516,300) | $(28,948) | | Net cash used in financing activities | $(116,346) | $(64) | | Net change in cash, cash equivalents, and restricted cash | $(100,105) | $13,952 | | Cash, cash equivalents, and restricted cash: End of period | $154,451 | $38,797 | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes on accounting policies, acquisitions, revenue, debt, compensation, and other financial items [NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%201%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's E&P operations and the basis of presentation for its unaudited financial statements - Civitas Resources, Inc. is an **independent Denver-based E&P company** focused on oil and associated liquids-rich natural gas in the Wattenberg Field of the DJ Basin[24](index=24&type=chunk) - The financial statements are **unaudited** and prepared in accordance with **GAAP** for interim information, with certain notes and financial information condensed or omitted[25](index=25&type=chunk) - The company is assessing the impact of the **LIBOR transition** on its financial statements, with amendments effective upon issuance and expiring December 31, 2022[28](index=28&type=chunk) [NOTE 2 - ACQUISITIONS AND DIVESTITURES](index=11&type=section&id=NOTE%202%20-%20ACQUISITIONS%20AND%20DIVESTITURES) This note details significant mergers and acquisitions, including HighPoint, Extraction, Crestone Peak, and Bison, and their financial impact - Civitas completed the acquisition of HighPoint Resources Corporation on **April 1, 2021**, issuing **487,952 shares** of common stock to HighPoint stockholders and **9,314,214 shares plus $100.0 million** in 7.5% Senior Notes to HighPoint Senior Note holders[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - The Extraction Merger was completed on **November 1, 2021**, converting each Extraction Common Stock share into **1.1711 shares** of Civitas Common Stock, and involved the issuance of Replacement Warrants[39](index=39&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - The Crestone Peak Merger was completed on **November 1, 2021**, with Civitas issuing **22.5 million shares** of its common stock as consideration[50](index=50&type=chunk)[51](index=51&type=chunk) - On **March 1, 2022**, Civitas acquired privately held DJ Basin operator Bison Oil & Gas II, LLC for approximately **$279.7 million**, resulting in a bargain purchase gain of **$14.5 million**[61](index=61&type=chunk) | Metric | As reported (USD thousands) | HighPoint (USD thousands) | Extraction (USD thousands) | Crestone Peak (USD thousands) | Civitas Pro Forma Combined (USD thousands) | | :----- | :---------- | :-------- | :--------- | :------------ | :------------------------- | | Total revenue | $74,159 | $72,019 | $292,484 | $126,654 | $565,316 | | Net income (loss) | $(119) | $(46,434) | $983,201 | $(78,552) | $858,096 | [NOTE 3 - REVENUE RECOGNITION](index=17&type=section&id=NOTE%203%20-%20REVENUE%20RECOGNITION) This note explains revenue recognition policy for oil, natural gas, and NGL sales, and disaggregates revenue by product type - Revenue from oil, natural gas, and NGL sales is recognized at the point **control transfers to the purchaser**, with gathering, transportation, and processing expenses recorded gross or net depending on the timing of control transfer[65](index=65&type=chunk) | Revenue Stream | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | | :------------- | :-------------------------------- | :-------------------------------- | | Oil sales | $549,502 | $50,064 | | Natural gas sales | $113,161 | $13,132 | | NGL sales | $155,147 | $10,963 | | **Total Oil, natural gas, and NGL sales** | **$817,810** | **$74,159** | - Receivables from contracts with customers increased from **$362.3 million** at December 31, 2021, to **$410.4 million** at March 31, 2022[66](index=66&type=chunk) [NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES](index=18&type=section&id=NOTE%204%20-%20ACCOUNTS%20PAYABLE%20AND%20ACCRUED%20EXPENSES) This note breaks down accounts payable and accrued expenses, showing increases in trade payables and hedging liabilities | Category | March 31, 2022 (USD thousands) | December 31, 2021 (USD thousands) | | :------- | :------------- | :---------------- | | Accounts payable trade | $29,425 | $19,623 | | Accrued drilling and completion costs | $101,415 | $129,430 | | Accrued lease operating expense and gathering, transportation, and processing | $53,597 | $19,077 | | Accrued oil and NGL hedging | $65,418 | $26,601 | | Accrued interest expense | $13,516 | $6,303 | | **Total accounts payable and accrued expenses** | **$296,433** | **$246,188** | [NOTE 5 - LONG-TERM DEBT](index=18&type=section&id=NOTE%205%20-%20LONG-TERM%20DEBT) This note details the company's long-term debt, including Senior Notes and the Credit Facility, and recent amendments - The company issued **$400.0 million** aggregate principal amount of **5.0% Senior Notes due 2026** on **October 13, 2021**, with interest accruing at **5.0% per annum**, payable semiannually[68](index=68&type=chunk) - The **$100.0 million** aggregate principal amount of **7.5% Senior Notes due 2026**, issued in conjunction with the HighPoint Merger, was fully redeemed on **May 1, 2022**[74](index=74&type=chunk)[77](index=77&type=chunk) - On **April 20, 2022**, the Credit Facility's borrowing base was increased from **$1.0 billion to $1.7 billion**, and the aggregate elected commitment amount was increased from **$800.0 million to $1.0 billion**[88](index=88&type=chunk) | Senior Notes | Principal Amount (March 31, 2022) (USD thousands) | Unamortized Deferred Financing Costs (March 31, 2022) (USD thousands) | Net Amount (March 31, 2022) (USD thousands) | Principal Amount (December 31, 2021) (USD thousands) | Unamortized Deferred Financing Costs (December 31, 2021) (USD thousands) | Net Amount (December 31, 2021) (USD thousands) | | :----------- | :-------------------------------- | :---------------------------------------------------- | :-------------------------- | :----------------------------------- | :------------------------------------------------------- | :----------------------------- | | 7.5% Senior Notes | $100,000 | $0 | $100,000 | $100,000 | $0 | $100,000 | | 5.0% Senior Notes | $400,000 | $7,877 | $392,123 | $400,000 | $8,290 | $391,710 | | Metric | May 4, 2022 (USD thousands) | March 31, 2022 (USD thousands) | December 31, 2021 (USD thousands) | | :----- | :---------- | :------------- | :---------------- | | Revolving credit facility | $0 | $0 | $0 | | Letters of credit | $12,393 | $12,393 | $21,656 | | Available borrowing capacity | $987,607 | $787,607 | $778,344 | | Total aggregate elected commitments | $1,000,000 | $800,000 | $800,000 | [NOTE 6 - COMMITMENTS AND CONTINGENCIES](index=22&type=section&id=NOTE%206%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses legal proceedings, including litigation with Boulder County, and various contractual commitments - The company is involved in ongoing litigation with Boulder County regarding oil and gas operations, where the Colorado Court of Appeals issued a **unanimous opinion rejecting Boulder County's claims** on **March 3, 2022**[92](index=92&type=chunk)[96](index=96&type=chunk) - The company has accrued approximately **$1.0 million** associated with Notices of Alleged Violations from the COGCC and Colorado Air Pollution Control Division notices as of **March 31, 2022**[98](index=98&type=chunk) - The company has firm transportation agreements with an aggregate financial commitment of **$44.7 million** and minimum volume agreements for oil, gas, and NGLs with an aggregate financial commitment of **$189.8 million** as of **March 31, 2022**[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) | Year | Firm Transportation (USD thousands) | Minimum Volume (USD thousands) | | :--- | :------------------ | :------------- | | Remainder of 2022 | $10,616 | $42,589 | | 2023 | $14,600 | $32,241 | | 2024 | $14,640 | $22,298 | | 2025 | $4,800 | $20,400 | | 2026 | $0 | $19,553 | | 2027 and thereafter | $0 | $52,716 | | **Total** | **$44,656** | **$189,797** | [NOTE 7 - STOCK-BASED COMPENSATION](index=25&type=section&id=NOTE%207%20-%20STOCK-BASED%20COMPENSATION) This note describes the company's Long Term Incentive Plans (LTIP), including RSUs, DSUs, PSUs, and stock options - The LTIP includes RSUs, DSUs, PSUs, and stock options, with **2,467,430 shares** reserved under 2017 LTIP, **700,000** under 2021 LTIP, and **3,305,080** assumed from Extraction Equity Plan[108](index=108&type=chunk) | Category | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | | :------- | :-------------------------------- | :-------------------------------- | | Restricted and deferred stock units | $5,265 | $1,321 | | Performance stock units | $2,825 | $291 | | **Total stock-based compensation** | **$8,090** | **$1,612** | | Category | Unrecognized Compensation Expense (USD thousands) | Final Year of Recognition | | :------- | :-------------------------------- | :------------------------ | | Restricted and deferred stock units | $21,532 | 2025 | | Performance stock units | $15,685 | 2024 | | **Total unrecognized stock-based compensation** | **$37,217** | | - PSUs tied to TSR performance granted in **2019** vested as of **December 31, 2021**, with a **200% distribution** of shares, while PSUs tied to ROCE performance expired with **zero distribution**[121](index=121&type=chunk) [NOTE 8 - FAIR VALUE MEASUREMENTS](index=28&type=section&id=NOTE%208%20-%20FAIR%20VALUE%20MEASUREMENTS) This note explains fair value measurements, classifying assets and liabilities into a three-level hierarchy based on input observability - The company uses **Level 2 inputs** to measure the fair value of oil, gas, and NGL commodity price derivatives, utilizing industry-standard models and market data[129](index=129&type=chunk) | Category | March 31, 2022 (Level 2) (USD thousands) | December 31, 2021 (Level 2) (USD thousands) | | :------- | :----------------------- | :-------------------------- | | Derivative assets | $0 | $3,393 | | Derivative liabilities | $430,805 | $239,763 | - Warrants issued in connection with the Extraction Merger are classified as equity instruments and recorded within additional paid-in capital at a fair value of **$77.5 million**, with no recurring fair value measurement[132](index=132&type=chunk)[133](index=133&type=chunk) - Proved and unproved properties acquired are valued based on a discounted cash flow approach utilizing **Level 3 inputs**, and unproved properties are routinely evaluated for impairment[134](index=134&type=chunk)[136](index=136&type=chunk) [NOTE 9 - DERIVATIVES](index=29&type=section&id=NOTE%209%20-%20DERIVATIVES) This note details the company's use of commodity derivative contracts to mitigate price volatility, not designated as hedging instruments - The company uses **commodity derivative contracts** (swaps, two-way collars, three-way collars, roll differential swaps) to manage commodity price risk for oil, natural gas, and NGL production[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) - All derivative counterparties are members of the Credit Facility lender group, and contracts are entered into for other-than-trading purposes, **not designated as hedging instruments**[137](index=137&type=chunk) | Category | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | | :------- | :-------------------------------- | :-------------------------------- | | Derivative cash settlement loss | $(166,578) | $(3,791) | | Change in fair value loss | $(128,915) | $(19,628) | | **Total derivative loss** | **$(295,493)** | **$(23,419)** | [NOTE 10 - ASSET RETIREMENT OBLIGATIONS](index=31&type=section&id=NOTE%2010%20-%20ASSET%20RETIREMENT%20OBLIGATIONS) This note explains the company's accounting for asset retirement obligations (AROs) related to oil and gas property abandonment - The company recognizes an **estimated liability for future costs** associated with the abandonment of its oil and gas properties, recorded at fair value with a corresponding increase to the related long-lived asset[145](index=145&type=chunk) - The liability is **discounted using a credit-adjusted risk-free rate** and is based on historical experience, estimated economic lives, and regulatory requirements[146](index=146&type=chunk) | Metric | Amount (USD thousands) | | :----- | :----- | | Balance as of December 31, 2021 | $225,315 | | Additional liabilities incurred | $1,767 | | Accretion expense | $1,000 | | Liabilities settled | $(5,131) | | **Balance as of March 31, 2022** | **$222,951** | | Current portion | $24,000 | | Long-term portion | $198,951 | [NOTE 11 - EARNINGS PER SHARE](index=32&type=section&id=NOTE%2011%20-%20EARNINGS%20PER%20SHARE) This note details the calculation of basic and diluted earnings per share (EPS) using the treasury stock method - **Basic EPS** is calculated by dividing net income (loss) by basic weighted-average common shares outstanding, while **diluted EPS** includes the effect of potentially dilutive securities[149](index=149&type=chunk) - **Potentially dilutive securities** include unvested RSUs, DSUs, PSUs, and in-the-money stock options and warrants; anti-dilutive shares are excluded[149](index=149&type=chunk)[150](index=150&type=chunk) | Metric | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | | :----- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $91,639 | $(119) | | Basic net income (loss) per common share | $1.08 | $(0.01) | | Diluted net income (loss) per common share | $1.07 | $(0.01) | | Weighted-average shares outstanding - basic (shares in thousands) | 84,840 | 20,839 | | Add: dilutive effect of contingent stock awards (shares in thousands) | 486 | 0 | | Weighted-average shares outstanding - diluted (shares in thousands) | 85,326 | 20,839 | - Warrants were **excluded from the earnings per share calculation** for the three months ended March 31, 2022, as their exercise price exceeded the company's stock price[152](index=152&type=chunk) [NOTE 12 - INCOME TAXES](index=33&type=section&id=NOTE%2012%20-%20INCOME%20TAXES) This note discusses deferred tax assets and liabilities, federal NOL carryforwards, and the company's income tax expense - **Deferred tax assets and liabilities** are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years related to cumulative temporary differences[154](index=154&type=chunk) | Metric | HighPoint Merger (USD millions) | Extraction Merger (USD millions) | Crestone Peak Merger (USD millions) | | :----- | :--------------- | :---------------- | :------------------- | | Federal NOL carryforwards | $219.0 | $479.9 | $555.7 | | Deferred tax asset (liability) | $110.5 | $49.2 | $(125.1) | | Valuation allowance | $(48.1) | $0 | $0 | | Net | $62.4 | $49.2 | $(125.1) | - The net deferred tax liability as of **March 31, 2022**, was **$5.8 million**, compared to a net deferred tax asset of **$22.3 million** as of **December 31, 2021**[155](index=155&type=chunk) - The company recorded income tax expense of **$23.4 million** for the three months ended **March 31, 2022**, compared to an income tax benefit of less than **$0.1 million** in the prior year[156](index=156&type=chunk) [NOTE 13 - LEASES](index=34&type=section&id=NOTE%2013%20-%20LEASES) This note outlines the company's operating lease commitments, including field equipment, corporate leases, and vehicles | Category | March 31, 2022 (USD thousands) | December 31, 2021 (USD thousands) | | :------- | :------------- | :---------------- | | Total right-of-use asset | $36,054 | $39,885 | | Total lease liability | $36,508 | $40,271 | - The company incurred gross short-term lease costs of **$9.0 million** for the three months ended **March 31, 2022**, a significant increase from less than **$0.1 million** in the prior year[159](index=159&type=chunk) | Year | Operating Leases (USD thousands) | | :--- | :--------------- | | Remainder of 2022 | $15,271 | | 2023 | $13,389 | | 2024 | $5,333 | | 2025 | $1,695 | | 2026 | $1,195 | | Thereafter | $1,586 | | **Total lease payments** | **$38,469** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, operating results, and outlook - Civitas is an **independent Denver-based exploration and production company** focused on the acquisition, development, and production of oil and associated liquids-rich natural gas in the Rocky Mountain region, primarily in the Wattenberg Field of the Denver-Julesburg (DJ) Basin of Colorado[163](index=163&type=chunk) - The company's primary objective is to **maximize shareholder returns** by responsibly developing its oil and natural gas resources, focusing on multi-well pad development, continuous safety improvement, environmental stewardship, disciplined capital allocation, and prudent risk management[164](index=164&type=chunk) [Executive Summary](index=35&type=section&id=Executive%20Summary) The executive summary introduces Civitas as an independent E&P company focused on maximizing shareholder returns - Civitas Resources, Inc. is an **independent Denver-based exploration and production company** focused on the acquisition, development, and production of oil and associated liquids-rich natural gas in the Wattenberg Field of the DJ Basin, Colorado[163](index=163&type=chunk) - The company's primary objective is to **maximize shareholder returns** through multi-well pad development, continuous safety improvement, strict adherence to health and safety regulations, environmental stewardship, disciplined acquisitions/divestitures and capital allocation, and prudent risk management[164](index=164&type=chunk) [Financial and Operating Results](index=35&type=section&id=Financial%20and%20Operating%20Results) This section highlights key financial and operational achievements for Q1 2022, including increased sales volumes and cash flows - Crude oil equivalent sales volumes increased **663%** for the three months ended **March 31, 2022**, compared to the same period in 2021, primarily due to the HighPoint, Extraction, and Crestone Peak mergers, as well as the Bison Acquisition[165](index=165&type=chunk) - General and administrative expense per Boe decreased by **49%**, and lease operating expense per Boe decreased by **17%** for the three months ended **March 31, 2022**, due to synergies achieved through the aforementioned mergers[165](index=165&type=chunk) - Cash flows provided by operating activities for the three months ended **March 31, 2022**, were **$532.5 million**, a substantial increase from **$43.0 million** during the three months ended March 31, 2021[165](index=165&type=chunk) - Total liquidity was **$0.9 billion** at **March 31, 2022**, consisting of cash on hand plus funds available under the Credit Facility. Capital expenditures, inclusive of accruals, were **$234.5 million**[165](index=165&type=chunk) [Midstream Assets](index=35&type=section&id=Midstream%20Assets) This section describes the company's midstream assets, providing reliable gathering, treating, and storage capabilities - The company's midstream assets, including Rocky Mountain Infrastructure (RMI) and adjacent gathering assets acquired from HighPoint, provide **reliable gathering, treating, and storage**, reducing facility site footprints and ensuring cost-efficient operations and reduced emissions[166](index=166&type=chunk)[168](index=168&type=chunk) - The Crestone Peak Merger added a **gas gathering system and an oil gathering system**, with ongoing expansion of the gas system and additions to the oil gathering infrastructure[169](index=169&type=chunk) - The net book value of the company's midstream assets was **$286.0 million** as of **March 31, 2022**[170](index=170&type=chunk) [Current Events and Outlook](index=36&type=section&id=Current%20Events%20and%20Outlook) This section discusses market conditions, including COVID-19 and geopolitical impacts, and outlines the 2022 capital budget - Oil and natural gas prices are impacted by efforts to contain COVID-19, the pace of economic recovery, changes to OPEC+ production levels, and geopolitical events like Russia's invasion of Ukraine, leading to **increased volatility**[171](index=171&type=chunk) - West Texas Intermediate (WTI) oil prices averaged approximately **$94 per barrel** during the first quarter of **2022**, recovering to pre-pandemic levels due to energy shortages and global economic emergence[171](index=171&type=chunk) - The company **successfully integrated the operations**, production, and accounting databases derived from the HighPoint, Extraction, Crestone Peak, and Bison mergers and acquisitions[172](index=172&type=chunk) - The company's **2022** drilling and completion capital budget is **$825 million to $950 million**, targeting **190 to 210 drilled wells** and **165 to 175 completed wells**, with an additional **$70 million to $90 million** for land, midstream, and other capital activity[173](index=173&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section analyzes revenues and operating expenses for Q1 2022 vs. 2021, highlighting merger impacts and price changes | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Percent Change | | :----- | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Product revenue (USD thousands) | $816,543 | $73,049 | $743,494 | 1,018% | | Crude oil (MBbls) | 6,123.5 | 942.7 | 5,180.8 | 550% | | Natural gas (MMcf) | 26,786.4 | 3,213.9 | 23,572.5 | 733% | | Natural gas liquids (MBbls) | 3,722.7 | 398.1 | 3,324.6 | 835% | | Crude oil equivalent (MBoe) | 14,310.6 | 1,876.5 | 12,434.1 | 663% | | Metric | Three Months Ended March 31, 2022 (USD per unit) | Three Months Ended March 31, 2021 (USD per unit) | Change (USD per unit) | Percent Change | | :----- | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Crude oil (per Bbl) | $89.65 | $52.83 | $36.82 | 70% | | Natural gas (per Mcf) | $4.20 | $3.82 | $0.38 | 10% | | Natural gas liquids (per Bbl) | $41.68 | $27.54 | $14.14 | 51% | | Crude oil equivalent (per Boe) | $57.06 | $38.93 | $18.13 | 47% | | Expense Category | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | Change (USD thousands) | Percent Change | | :--------------- | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Lease operating expense | $36,019 | $5,731 | $30,288 | 528% | | Midstream operating expense | $5,712 | $3,905 | $1,807 | 46% | | Gathering, transportation, and processing | $50,403 | $4,967 | $45,436 | 915% | | Severance and ad valorem taxes | $63,304 | $4,604 | $58,700 | 1,275% | | Depreciation, depletion, and amortization | $184,860 | $18,823 | $166,037 | 882% | | Abandonment and impairment of unproved properties | $17,975 | $0 | $17,975 | 100% | | Merger transaction costs | $20,534 | $3,295 | $17,239 | 523% | | General and administrative expense | $35,720 | $9,251 | $26,469 | 286% | | **Total Operating expenses** | **$415,831** | **$50,672** | **$365,159** | **721%** | | Expense Category | Three Months Ended March 31, 2022 (USD per Boe) | Three Months Ended March 31, 2021 (USD per Boe) | Change (USD per Boe) | Percent Change | | :--------------- | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Lease operating expense | $2.52 | $3.05 | $(0.53) | (17)% | | Midstream operating expense | $0.40 | $2.08 | $(1.68) | (81)% | | Gathering, transportation, and processing | $3.52 | $2.65 | $0.87 | 33% | | Severance and ad valorem taxes | $4.42 | $2.45 | $1.97 | 80% | | Depreciation, depletion, and amortization | $12.92 | $10.03 | $2.89 | 29% | | Abandonment and impairment of unproved properties | $1.26 | $0 | $1.26 | 100% | | Merger transaction costs | $1.43 | $1.76 | $(0.33) | (19)% | | General and administrative expense | $2.50 | $4.93 | $(2.43) | (49)% | | **Total Operating expenses** | **$29.06** | **$27.00** | **$2.06** | **8%** | - Product revenues increased by **1,018%** to **$816.5 million**, driven by a **663% increase** in sales volumes and a **47% increase** in oil equivalent pricing (excluding derivatives), primarily due to recent mergers and acquisitions[176](index=176&type=chunk) - Derivative loss for the three months ended **March 31, 2022**, was **$295.5 million**, up from **$23.4 million** in the prior year, due to settlements and fair market value adjustments from market prices exceeding contracted hedge prices[186](index=186&type=chunk) | Component | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | | :-------- | :-------------------------------- | :-------------------------------- | | Senior Notes | $6,875 | $0 | | Commitment fees on Credit Facility | $982 | $326 | | Letter of credit fees | $131 | $0 | | Amortization of deferred financing costs | $1,078 | $93 | | **Total interest expense** | **$9,066** | **$419** | [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses liquidity sources, including cash from operations and the Credit Facility, and cash flow activities - The company's anticipated sources of liquidity include **cash from operating activities**, borrowings under the **Credit Facility**, potential proceeds from asset sales, and potential equity/debt capital markets transactions, with cash flows subject to commodity price volatility[189](index=189&type=chunk) - Total liquidity was **$0.9 billion** at **March 31, 2022**, consisting of **$154.3 million** cash on hand and **$0.8 billion** of available borrowing capacity on the Credit Facility[191](index=191&type=chunk) - On **April 20, 2022**, the borrowing base of the Credit Facility was increased to **$1.7 billion**, and elected commitments to **$1.0 billion**. The **7.5% Senior Notes** were redeemed on **May 1, 2022**[193](index=193&type=chunk) | Metric | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | | :----- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $532,541 | $42,964 | | Net cash used in investing activities | $(516,300) | $(28,948) | | Net cash used in financing activities | $(116,346) | $(64) | | Cash, cash equivalents, and restricted cash (End of period) | $154,451 | $38,797 | - Net cash used in investing activities was primarily driven by **$300.1 million** of acquisitions of oil and gas properties and **$260.7 million** for exploration and development[196](index=196&type=chunk) - Net cash used in financing activities increased significantly due to **$103.6 million** in dividends paid and **$12.9 million** for employee tax withholdings[197](index=197&type=chunk) [Non-GAAP Financial Measures](index=41&type=section&id=Non-GAAP%20Financial%20Measures) This section defines Adjusted EBITDAX as a non-GAAP measure used to assess operational funds and industry performance - **Adjusted EBITDAX** represents earnings before interest, income taxes, depreciation, depletion, and amortization, exploration expense, and other non-cash and non-recurring charges[199](index=199&type=chunk) - Adjusted EBITDAX is used by management and investors for analysis of the company's ability to **internally generate funds** for exploration, development, acquisitions, and to service debt, and for **industry comparisons**, but should not be considered in isolation or as a substitute for GAAP measures[199](index=199&type=chunk) | Metric | Three Months Ended March 31, 2022 (USD thousands) | Three Months Ended March 31, 2021 (USD thousands) | | :----- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $91,639 | $(119) | | Exploration | $528 | $96 | | Depreciation, depletion, and amortization | $184,860 | $18,823 | | Abandonment and impairment of unproved properties | $17,975 | $0 | | Stock-based compensation | $8,090 | $1,612 | | Merger transaction costs | $20,534 | $3,295 | | Interest expense | $9,066 | $419 | | Derivative loss | $295,493 | $23,419 | | Derivative cash settlements loss | $(166,578) | $(3,791) | | Income tax (benefit) expense | $23,361 | $(44) | [New Accounting Pronouncements](index=41&type=section&id=New%20Accounting%20Pronouncements) This section refers to Note 1 for information on recently issued or adopted accounting standards - Refer to **Note 1 - Summary of Significant Accounting Policies** for details on new accounting pronouncements[201](index=201&type=chunk) [Critical Accounting Policies and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section indicates no significant changes in critical accounting policies during Q1 2022, referring to the 2021 Form 10-K - There were **no significant changes** in the application of critical accounting policies and estimates during the three months ended **March 31, 2022**[202](index=202&type=chunk) [Material Commitments](index=41&type=section&id=Material%20Commitments) This section states no significant changes in material commitments from the 2021 Form 10-K, except as disclosed - There have been no significant changes to material commitments from the **2021 Form 10-K**, other than what is disclosed within **Note 6 - Commitments and Contingencies** and **Note 13 - Leases** of this report[203](index=203&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, including commodity prices, interest rates, and credit risk - The company's financial condition, results of operations, and capital resources are **highly dependent** upon the prevailing market prices of oil and natural gas, which are subject to wide fluctuations and market uncertainties beyond its control[205](index=205&type=chunk) - The company uses commodity price derivative contracts to mitigate exposure to adverse market changes and **reduce cash flow volatility**, but these may also prevent realizing benefits from favorable price changes[206](index=206&type=chunk)[208](index=208&type=chunk) - The company is exposed to counterparty credit risk from derivative transactions with **10 financial institutions**, all members of its Credit Facility syndicate with investment-grade credit ratings, and customer credit risk from significant oil and natural gas receivables[212](index=212&type=chunk)[213](index=213&type=chunk) - The marketability of the company's production relies on **third-party infrastructure**, and any disruptions could adversely affect prices or production[214](index=214&type=chunk) [Oil and Natural Gas Price Risk](index=42&type=section&id=Oil%20and%20Natural%20Gas%20Price%20Risk) This sub-section elaborates on the company's high dependency on fluctuating oil and natural gas prices - The company's financial condition, results of operations, and capital resources are **highly dependent** upon the prevailing market prices of oil and natural gas, which are subject to wide fluctuations and market uncertainties beyond its control[205](index=205&type=chunk) - Sustained weakness in oil and natural gas prices may **adversely affect** the company's financial condition and results of operations, and may also reduce the amount of economically producible reserves, impacting capital for exploration and development activities[205](index=205&type=chunk) [Commodity Price Derivative Contracts](index=42&type=section&id=Commodity%20Price%20Derivative%20Contracts) This sub-section explains the company's use of derivative contracts to manage commodity price risk and reduce cash flow volatility - The company's primary commodity risk management objective is to protect its balance sheet via the **reduction in cash flow volatility** by entering into derivative contracts for oil, natural gas, and natural gas liquids using NYMEX futures or over-the-counter derivative financial instruments[206](index=206&type=chunk) - Upon settlement, if the market commodity price exceeds the contracted swap price or collar's ceiling strike price, the company is required to pay the counterparty, which could **adversely impact cash flows**[207](index=207&type=chunk) - While derivatives reduce the potential negative impact of lower commodity prices, they may also **prevent the company from realizing the benefits** of favorable price changes in the physical market[208](index=208&type=chunk) [Interest Rates](index=42&type=section&id=Interest%20Rates) This sub-section addresses the risk associated with fluctuating interest rates on borrowings under the Credit Facility - Borrowings under the Credit Facility bear interest at a fluctuating rate tied to an adjusted Base Rate or LIBOR, and any increases in these interest rates can have an **adverse impact** on the company's results of operations and cash flows[211](index=211&type=chunk) - As of **March 31, 2022**, and the filing date, the company had a **zero balance** on its Credit Facility and was in compliance with all financial and non-financial covenants[211](index=211&type=chunk) [Counterparty and Customer Credit Risk](index=42&type=section&id=Counterparty%20and%20Customer%20Credit%20Risk) This sub-section outlines the company's exposure to credit risk from derivative counterparties and significant customers - The company has exposure to financial institutions in the form of derivative transactions with **10 counterparties**, all members of its Credit Facility syndicate and possessing investment grade credit ratings[212](index=212&type=chunk) - The company is also subject to credit risk due to concentration of its oil and natural gas receivables with certain significant customers, whose inability to meet obligations may **adversely affect financial results**[213](index=213&type=chunk) [Marketability of Our Production](index=42&type=section&id=Marketability%20of%20Our%20Production) This sub-section discusses how the marketability of production relies on third-party infrastructure availability and capacity - The marketability of the company's production depends on the availability, proximity, and capacity of **third-party refineries, trucking, pipeline, rail infrastructure, natural gas gathering systems, and processing facilities**[214](index=214&type=chunk) - Lack of availability or capacity on these systems and facilities, or operational interruptions due to accidents, weather, or labor issues, could **reduce prices, shut in producing wells, or delay development plans**[214](index=214&type=chunk)[216](index=216&type=chunk) - Currently, there are **no pipeline systems** servicing wells in the French Lake area of the Wattenberg Field, which could prevent full testing or development of resources there[217](index=217&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of disclosure controls and internal control over financial reporting - Management, including the CEO and CFO, evaluated and concluded that disclosure controls and procedures were **effective** at a reasonable assurance level as of **March 31, 2022**[218](index=218&type=chunk) - No material changes in internal control over financial reporting were identified during the quarter ended **March 31, 2022**[220](index=220&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=43&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures - Management, including the principal executive officer and principal financial officer, concluded that the company's disclosure controls and procedures were **effective** at the reasonable assurance level as of **March 31, 2022**[218](index=218&type=chunk) [Changes in Internal Control over Financial Reporting](index=43&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This sub-section reports on any changes in the company's internal control over financial reporting during the quarter - There were **no changes** in the company's internal control over financial reporting identified during the quarter ended **March 31, 2022**, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[220](index=220&type=chunk) [Part II. Other Information](index=43&type=section&id=Part%20II.%20Other%20Information) This part contains information on legal proceedings, risk factors, equity sales, and other miscellaneous disclosures [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 6 - Commitments and Contingencies for information regarding legal proceedings - Information regarding legal proceedings can be found in **Note 6 - Commitments and Contingencies** of Part I, Item 1 of this report[222](index=222&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section states that the business faces many risks, referring to the risk factors discussed in the 2021 Form 10-K - The company's business faces many risks, and any of the risk factors discussed in this report or its other SEC filings could have a **material impact** on its business, financial position, or results of operations[223](index=223&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered sales of equity securities and details issuer purchases and dividend policy - There were **no unregistered sales** of equity securities during the three-month period ended **March 31, 2022**[225](index=225&type=chunk) - The company purchased **215,811 shares** of equity securities at an average price of **$54.56** during Q1 2022, primarily for employee tax withholdings related to restricted stock awards[227](index=227&type=chunk) - The company's dividend policy includes a fixed annual cash dividend (increased to **$1.85/share** for Q4 2021) and a quarterly variable cash dividend (**50% of free cash flow** after fixed dividend), resulting in a total Q1 2022 dividend of **$1.2125 per share**[227](index=227&type=chunk) [Unregistered sales of securities](index=43&type=section&id=Unregistered%20sales%20of%20securities) This sub-section confirms that there were no unregistered sales of equity securities during the reporting period - There were **no sales** of unregistered equity securities during the three-month period ended **March 31, 2022**[225](index=225&type=chunk) [Issuer Purchases of Equity Securities](index=44&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) This sub-section provides a table detailing the company's acquisition of equity securities, primarily for tax withholding | Period | Total Number of Shares Purchased (shares) | Average Price per Share (USD) | | :----- | :------------------------------- | :---------------------- | | January 1, 2022 - January 31, 2022 | 149,126 | $54.92 | | February 1, 2022 - February 28, 2022 | 66,685 | $52.07 | | March 1, 2022 - March 31, 2022 | 0 | $0 | | **Total** | **215,811** | **$54.56** | - The purchased shares represent those surrendered by employees for payroll tax withholding obligations upon the vesting of restricted stock awards, and these repurchases were **not part of a publicly announced plan**[227](index=227&type=chunk) [Dividend Policy](index=44&type=section&id=Dividend%20Policy) This sub-section outlines the company's dividend policy, including the initiation of fixed and variable cash dividends - The company initiated an annual cash dividend of **$1.40 per share** in **May 2021**, increased it to **$1.85 per share** for Q4 2021, and approved a quarterly variable cash dividend (**50% of free cash flow** after fixed dividend) in **March 2022**[227](index=227&type=chunk) - The inaugural quarterly variable cash dividend was declared at **$0.75 per share** and paid in combination with the fixed cash dividend on **March 30, 2022**, resulting in a total quarterly dividend of **$1.2125 per share**[227](index=227&type=chunk) - Future dividend payments are at the **sole discretion of the Board** and subject to profitability, financial condition, contractual restrictions, and applicable law[227](index=227&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities - **No defaults** upon senior securities were reported[228](index=228&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable - Mine safety disclosures are **not applicable** to the company[230](index=230&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - **No other information** to report[232](index=232&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including corporate documents and certifications - The exhibits include **corporate governance documents** (e.g., Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation, Fifth Amended and Restated Bylaws), **merger-related agreements** (e.g., Membership Interest Purchase Agreement for Bison Oil & Gas II, LLC), **long-term incentive plans**, **credit agreement amendments**, and **CEO/CFO certifications**[234](index=234&type=chunk) [SIGNATURES](index=46&type=section&id=SIGNATURES) This section contains the signatures of the company's President, CEO, CFO, and Chief Accounting Officer, certifying the report - The report is duly signed by **Chris Doyle** (President and Chief Executive Officer), **Marianella Foschi** (Chief Financial Officer), and **Sandi K. Garbiso** (Chief Accounting Officer and Treasurer) on **May 4, 2022**[239](index=239&type=chunk)

Building Trust through Execution March 2022 Cautionary Statement Regarding Forward-Looking Statements and Important Disclosures 1 Forward-Looking Statements and Cautionary Statements Certain statements in this presentation concerning future opportunities for Civitas, future financial performance and condition, guidance and any other statements regarding Civitas' future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts ar ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________ Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-35371 Civitas Resources, Inc. (Exact name of registrant as specified in its charter) Delaware 61-1630631 (State or other jurisdict ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-35371 Bonanza Creek Energy, Inc. (Exact name of registrant as specified in its charter) Delaware 61-1630631 (State or other jurisdiction of incorporat ...

ENERCOM PRESENTATION A u g u s t 2 0 2 1 Important Disclosures No Offer or Solicitation This communication relates to proposed business combination transactions between Bonanza Creek Energy, Inc. ("BCEI") and Extraction Oil & Gas, Inc. ("XOG") (the "XOG Merger") and between BCEI, Crestone Peak Resources LP ("CPR"), CPPIB Crestone Peak Resources America Inc. ("CPPIB"), Crestone Peak Resources Management LP ("CPR Management LP," and, together with CPR and CPPIB, the "Group Companies") and XOG (the "Crestone M ...

Bonanza Creek Energy, Inc. (BCEI) Q2 2021 Earnings Conference Call August 10, 2021 11:00 AM ET Company Participants Scott Landreth - Investor Relations Eric Greager - President and Chief Executive Officer Brant DeMuth - Executive Vice President and Chief Financial Officer Conference Call Participants Leo Mariani - KeyBanc Neal Dingmann - Truist Securities Mike Scialla - Stifel Phillips Johnston - Capital One Nicholas Pope - Seaport Noel Parks - Tuohy Brothers Ray Deacon - Petro Lotus Operator Ladies and gen ...

INVESTOR PRESENTATION A u g u s t 2 0 2 1 Important Disclosures No Offer or Solicitation This communication relates to proposed business combination transactions between Bonanza Creek Energy, Inc. ("BCEI") and Extraction Oil & Gas, Inc. ("XOG") (the "XOG Merger") and between BCEI, Crestone Peak Resources LP ("CPR"), CPPIB Crestone Peak Resources America Inc. ("CPPIB"), Crestone Peak Resources Management LP ("CPR Management LP," and, together with CPR and CPPIB, the "Group Companies") and XOG (the "Crestone ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements and detailed notes on key accounting policies and transactions [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $1,916,180 | $1,182,812 | 62.0% | | Total Liabilities | $531,066 | $137,560 | 286.1% | | Total Stockholders' Equity | $1,385,114 | $1,045,252 | 32.5% | | Proved properties, net | $1,406,306 | $845,341 | 66.3% | | Current liabilities | $230,366 | $74,484 | 209.3% | | Long-term debt (Senior notes + Credit facility) | $199,000 | $0 | N/A | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change (%) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Oil and gas sales | $156,035 | $36,192 | 331.1% | $230,194 | $96,597 | 138.3% | | Total operating expenses | $114,624 | $47,448 | 141.6% | $165,296 | $127,834 | 29.3% | | Derivative gain (loss) | $(73,970) | $(25,146) | 194.1% | $(97,389) | $75,273 | -229.3% | | Net income (loss) | $(25,319) | $(38,902) | -34.9% | $(25,438) | $39,649 | -164.2% | | Basic EPS | $(0.83) | $(1.87) | -55.7% | $(0.99) | $1.91 | -151.8% | | Diluted EPS | $(0.83) | $(1.87) | -55.7% | $(0.99) | $1.91 | -151.8% | | Merger transaction costs | $18,246 | $21 | 86785.7% | $21,541 | $21 | 102476.2% | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | June 30, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Common Shares Outstanding | 30,844,625 | 20,839,227 | 47.9% | | Additional Paid-In Capital | $1,083,446 | $707,209 | 53.2% | | Retained Earnings | $297,290 | $333,761 | -10.9% | | Total Stockholders' Equity | $1,385,114 | $1,045,252 | 32.5% | Key Activities (Six Months Ended June 30, 2021) * Issuance pursuant to acquisition: **9,802,166 shares**, contributing **$374,933** to Additional Paid-In Capital * Dividends declared: **$(11,033)** [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $79,559 | $68,229 | 16.6% | | Net cash used in investing activities | $(8,029) | $(52,019) | -84.5% | | Net cash used in financing activities | $(71,870) | $(23,067) | 211.6% | | Net change in cash, cash equivalents, and restricted cash | $(340) | $(6,857) | -95.0% | | Cash acquired from acquisition | $49,827 | $0 | N/A | | Dividends paid | $(10,789) | $0 | N/A | [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1 - ORGANIZATION AND BUSINESS](index=7&type=section&id=NOTE%201%20-%20ORGANIZATION%20AND%20BUSINESS) - Bonanza Creek Energy, Inc (BCEI) is primarily engaged in **acquiring, developing, extracting, and producing oil and gas properties**[20](index=20&type=chunk) - The Company's assets and operations are concentrated in the rural portions of the **Wattenberg Field in Colorado**[20](index=20&type=chunk) [NOTE 2 - BASIS OF PRESENTATION](index=7&type=section&id=NOTE%202%20-%20BASIS%20OF%20PRESENTATION) - The unaudited condensed consolidated financial statements are prepared in accordance with **U.S. GAAP for interim financial statements** and SEC rules, reflecting all necessary normal recurring adjustments[21](index=21&type=chunk) - The Company operates in one industry segment: the **development and production of oil, natural gas, and natural gas liquids (NGLs)**, with all operations in the continental United States[25](index=25&type=chunk) - Revenue from oil, natural gas, and NGLs sales is recognized when control of the product is transferred to the customer, with **pricing tied to market indices**[26](index=26&type=chunk) - Abandonment and impairment of unproved properties for the three and six months ended June 30, 2021, was **$2.2 million**, primarily due to reassessment of economic viability and expiration of non-core leases[37](index=37&type=chunk) Revenue Attributable to Each Identified Revenue Stream (in thousands) | Revenue Stream | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Crude oil sales | $116,091 | $28,934 | $166,155 | $80,080 | | Natural gas sales | $15,168 | $4,712 | $28,300 | $10,730 | | Natural gas liquids sales | $24,776 | $2,546 | $35,739 | $5,787 | | **Total Oil and gas sales** | **$156,035** | **$36,192** | **$230,194** | **$96,597** | Accounts Receivable, Net (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Oil and gas sales | $77,533 | $32,673 | | Joint interest and other | $20,082 | $14,748 | [NOTE 3 - ACQUISITIONS & DIVESTITURES](index=9&type=section&id=NOTE%203%20-%20ACQUISITIONS%20%26%20DIVESTITURES) - Bonanza Creek completed the acquisition of HighPoint Resources Corporation on **April 1, 2021**, through a prepackaged Chapter 11 plan of reorganization[41](index=41&type=chunk) - The Company obtained net operating losses of **$170.6 million** as part of the HighPoint Merger[47](index=47&type=chunk) - Bonanza Creek entered into agreements for a merger of equals with Extraction Oil & Gas, Inc (XOG Merger) on May 9, 2021, and an acquisition of Crestone Peak Resources LP (Crestone Peak Merger) on June 6, 2021, both **expected to close in Q4 2021**[51](index=51&type=chunk)[52](index=52&type=chunk)[54](index=54&type=chunk) - Upon closing of the XOG Merger, the Company intends to increase annual dividend payments to approximately **$1.60 per share**, and to approximately **$1.85 per share** after the Crestone Peak Merger[51](index=51&type=chunk)[54](index=54&type=chunk) HighPoint Merger Consideration (in thousands) | Item | Amount | | :--- | :--- | | Merger consideration paid in shares of Bonanza Creek Common Stock (9,802 shares) | $374,933 | | Aggregate principal amount of Bonanza Creek Senior Notes | $100,000 | | **Total merger consideration** | **$474,933** | HighPoint Purchase Price Allocation (Assets Acquired, in thousands) | Asset | Amount | | :--- | :--- | | Cash and cash equivalents | $49,827 | | Accounts receivable - oil and gas sales | $26,343 | | Proved properties | $539,820 | | Deferred income tax assets | $110,513 | | **Total assets acquired** | **$751,536** | HighPoint Purchase Price Allocation (Liabilities Assumed, in thousands) | Liability | Amount | | :--- | :--- | | Accounts payable and accrued expenses | $51,088 | | Oil and gas revenue distribution payable | $20,786 | | Current portion of long-term debt | $154,000 | | Asset retirement obligations for oil and gas properties | $24,473 | | **Total liabilities assumed** | **$276,603** | Net Assets Acquired $474,933 Merger Transaction Costs (in thousands) | Period | Amount | | :--- | :--- | | 3 Months Ended June 30, 2021 | $18,246 | | 6 Months Ended June 30, 2021 | $21,541 | [NOTE 4 - LEASES](index=13&type=section&id=NOTE%204%20-%20LEASES) - The Company's weighted-average remaining lease term for operating leases as of June 30, 2021, is **2.9 years**, with a weighted-average discount rate of **3.91%**[62](index=62&type=chunk) Operating Leases (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total right-of-use asset | $28,595 | $29,486 | | Total lease liability | $28,856 | $29,905 | Total Lease Cost (in thousands) | Period | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Operating lease cost | $3,557 | $3,607 | $6,894 | $7,098 | | Short-term lease cost | $164 | $292 | $211 | $1,882 | | Variable lease cost | $95 | $(135) | $65 | $(44) | | Sublease income | $(91) | $(89) | $(183) | $(178) | | **Total lease cost** | **$3,725** | **$3,681** | **$6,991** | **$8,767** | Supplemental Cash Flow Information Related to Leases (in thousands) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Operating cash flows from operating leases | $3,340 | $3,279 | $6,490 | $6,412 | | Financing cash flows from finance leases | $0 | $30 | $21 | $40 | | Right-of-use assets obtained in exchange for new operating lease obligations | $4,010 | $1,944 | $5,499 | $7,388 | [NOTE 5 - LONG-TERM DEBT](index=15&type=section&id=NOTE%205%20-%20LONG-TERM%20DEBT) - In conjunction with the HighPoint Merger, Bonanza Creek issued **$100 million** aggregate principal amount of **7.5% Senior Notes due 2026** on April 1, 2021[65](index=65&type=chunk) - The Credit Facility's borrowing base was reaffirmed at **$500.0 million**, with elected commitments set at **$400.0 million**, as of July 20, 2021[68](index=68&type=chunk) - As of June 30, 2021, the Company had **$99.0 million outstanding** on the Credit Facility, compared to zero at December 31, 2020[74](index=74&type=chunk) - The Second Amendment to the Credit Facility (April 1, 2021) increased the maximum commitment to **$1.0 billion**, increased the borrowing base to **$500.0 million**, and adjusted interest rate margins and floors[73](index=73&type=chunk) - The Company was **in compliance with all Credit Facility covenants** as of June 30, 2021, and through the filing date[74](index=74&type=chunk) Interest Expense, Net (in thousands) | Component | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Senior Notes | $1,875 | $0 | $1,875 | $0 | | Credit Facility | $1,160 | $557 | $1,160 | $1,367 | | Commitment fees on available borrowing base | $329 | $270 | $655 | $521 | | Amortization of deferred financing costs | $433 | $557 | $526 | $680 | | Capitalized interest | $(556) | $(400) | $(556) | $(1,367) | | **Total interest expense, net** | **$3,241** | **$984** | **$3,660** | **$1,201** | [NOTE 6 - COMMITMENTS AND CONTINGENCIES](index=17&type=section&id=NOTE%206%20-%20COMMITMENTS%20AND%20CONTINGENCIES) - The Company assumed a breach of contract claim against HighPoint OpCo from Sterling Energy Investments LLC, with possible damages ranging from **zero to $5.5 million**[79](index=79&type=chunk) - The Company recognized approximately **$1.8 million** associated with Notices of Alleged Violations (NOAVs) from the Colorado Oil and Gas Conservation Commission (COGCC), assumed from HighPoint Resources Corporation[80](index=80&type=chunk) - As part of the HighPoint Merger, the Company assumed two firm natural gas pipeline transportation contracts, incurring **$4.3 million in unused commitments** for the three months ended June 30, 2021, which expire July 31, 2021[81](index=81&type=chunk) - The Company has a firm oil pipeline transportation contract with an aggregate financial commitment fee of **$52.1 million** as of June 30, 2021, through April 2025[82](index=82&type=chunk) - A crude oil purchase agreement with NGL Crude has an aggregate financial commitment fee of **$37.3 million** as of June 30, 2021, through 2023, with no deficiency payments expected[83](index=83&type=chunk)[85](index=85&type=chunk) Minimum Annual Payments Under Agreements (in thousands) as of June 30, 2021 | Year | Firm Transportation | Minimum Volume | | :--- | :--- | :--- | | Remainder of 2021 | $6,505 | $13,170 | | 2022 | $13,064 | $24,322 | | 2023 | $14,600 | $4,052 | | 2024 | $14,640 | $0 | | 2025 | $4,800 | $0 | | **Total** | **$53,609** | **$41,544** | [NOTE 7 - STOCK-BASED COMPENSATION](index=18&type=section&id=NOTE%207%20-%20STOCK-BASED%20COMPENSATION) - The Company adopted the 2021 Long Term Incentive Plan (LTIP), reserving an incremental **700,000 shares** of common stock in addition to the 2017 LTIP[88](index=88&type=chunk) - During the six months ended June 30, 2021, the Company granted **175,549 RSUs** with a fair value of **$6.0 million** and **64,258 PSUs** with a fair value of **$4.4 million**[92](index=92&type=chunk)[96](index=96&type=chunk) - As of June 30, 2021, **60,017 stock options were outstanding and exercisable**, with a weighted-average exercise price of $34.36 and an aggregate intrinsic value of $763 thousand[98](index=98&type=chunk) Total Stock-Based Compensation Expense (in thousands) | Award Type | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Restricted stock units | $1,746 | $1,284 | $3,067 | $2,585 | | Performance stock units | $449 | $195 | $740 | $2 | | Stock options | $0 | $(5) | $0 | $126 | | **Total stock-based compensation** | **$2,195** | **$1,474** | **$3,807** | **$2,713** | Unrecognized Compensation Expense (in thousands) | Award Type | Unrecognized Compensation Expense | Final Year of Recognition | | :--- | :--- | :--- | | Restricted stock units | $10,411 | 2023 | | Performance stock units | $5,639 | 2023 | | **Total** | **$16,050** | | [NOTE 8 - FAIR VALUE MEASUREMENTS](index=21&type=section&id=NOTE%208%20-%20FAIR%20VALUE%20MEASUREMENTS) - The Company classifies financial assets and liabilities based on a **three-level fair value hierarchy**: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[100](index=100&type=chunk) - The estimated fair value of the 7.5% Bonanza Creek Senior Notes was **$100.7 million** as of June 30, 2021, classified as **Level 1**[102](index=102&type=chunk) - Proved oil and gas properties are evaluated for impairment using **Level 3 inputs**, primarily through income valuation techniques or market valuation approaches[103](index=103&type=chunk) Fair Value of Derivative Instruments (in thousands, Level 2) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Derivative assets | $0 | $7,482 | | Derivative liabilities | $92,151 | $7,732 | [NOTE 9 - ASSET RETIREMENT OBLIGATIONS](index=22&type=section&id=NOTE%209%20-%20ASSET%20RETIREMENT%20OBLIGATIONS) - The Company recognizes an estimated liability for future costs to abandon its oil and gas properties, discounted using a **credit-adjusted risk-free rate**[104](index=104&type=chunk)[105](index=105&type=chunk) Asset Retirement Obligations (in thousands) | Metric | Amount | | :--- | :--- | | Beginning balance as of December 31, 2020 | $28,699 | | Liabilities settled | $(2,902) | | Additions | $24,633 | | Accretion expense | $764 | | **Ending balance as of June 30, 2021** | **$51,194** | [NOTE 10 - DERIVATIVES](index=22&type=section&id=NOTE%2010%20-%20DERIVATIVES) - The Company uses commodity derivative contracts (swaps, collars, and puts) to mitigate exposure to adverse market changes in commodity prices; **none qualify for hedging relationships**[107](index=107&type=chunk) - The significant derivative losses for the three and six months ended June 30, 2021, were due to **market prices being higher than contracted hedge prices**, impacting settlements and fair market value adjustments[160](index=160&type=chunk)[177](index=177&type=chunk) Derivative Assets and Liabilities Fair Value (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Commodity contracts – current (assets) | $0 | $7,482 | | Commodity contracts – current (liabilities) | $(80,866) | $(6,402) | | Commodity contracts – noncurrent (liabilities) | $(11,285) | $(1,330) | | **Total derivative assets (liabilities), net** | **$(92,151)** | **$(250)** | Derivative Gain (Loss) (in thousands) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Derivative cash settlement gain (loss) | $(20,199) | $22,613 | $(23,990) | $33,867 | | Change in fair value gain (loss) | $(53,771) | $(47,759) | $(73,399) | $41,406 | | **Total derivative gain (loss)** | **$(73,970)** | **$(25,146)** | **$(97,389)** | **$75,273** | [NOTE 11 - EARNINGS PER SHARE](index=26&type=section&id=NOTE%2011%20-%20EARNINGS%20PER%20SHARE) - All potentially dilutive shares (RSUs, PSUs, stock options) were **anti-dilutive** for the three and six months ended June 30, 2021, due to the Company being in a **net loss position**[125](index=125&type=chunk) Net Income (Loss) Per Common Share (in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $(25,319) | $(38,902) | $(25,438) | $39,649 | | Basic net income (loss) per common share | $(0.83) | $(1.87) | $(0.99) | $1.91 | | Diluted net income (loss) per common share | $(0.83) | $(1.87) | $(0.99) | $1.91 | | Weighted-average shares outstanding - basic | 30,655 | 20,776 | 25,774 | 20,713 | | Weighted-average shares outstanding - diluted | 30,655 | 20,776 | 25,774 | 20,759 | Anti-Dilutive Shares * 3 Months Ended June 30, 2021: **747,678 shares** * 3 Months Ended June 30, 2020: **715,639 shares** * 6 Months Ended June 30, 2021: **777,564 shares** * 6 Months Ended June 30, 2020: **407,996 shares** [NOTE 12 - INCOME TAXES](index=27&type=section&id=NOTE%2012%20-%20INCOME%20TAXES) - The Company recorded an income tax benefit of **$10.4 million** for both the three and six months ended June 30, 2021, compared to zero in the prior year[129](index=129&type=chunk) - The **full valuation allowance was removed** as of December 31, 2020, due to cumulative book income for the prior three years and forecasted future book income[128](index=128&type=chunk) - As of June 30, 2021, and December 31, 2020, the Company had **no unrecognized tax benefits**[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial performance, operational results, strategic initiatives, and liquidity [Executive Summary](index=28&type=section&id=Executive%20Summary) - Bonanza Creek Energy, Inc is an independent Denver-based exploration and production company focused on oil and associated liquids-rich natural gas in the **Wattenberg Field, Colorado**[136](index=136&type=chunk) - The Company's primary objective is to **maximize shareholder returns** through dividends and debt reduction by responsibly developing oil and gas resources[137](index=137&type=chunk) - Key strategic aspects include **well-balanced asset mergers and acquisitions**, multi-well pad development, enhanced completions, scaled infrastructure, and environmental stewardship[137](index=137&type=chunk) [Financial and Operating Results](index=28&type=section&id=Financial%20and%20Operating%20Results) - Crude oil equivalent sales volumes **increased 70%** for the three months ended June 30, 2021, compared to the same period in 2020, primarily due to the HighPoint Merger[138](index=138&type=chunk) - Lease operating expense **increased by 15% per Boe**, while general and administrative expense **decreased by 15% per Boe** for the three months ended June 30, 2021, compared to the prior year[138](index=138&type=chunk) - Borrowings under the Credit Facility were **reduced by $56.0 million to $99.0 million** during the three months ended June 30, 2021[138](index=138&type=chunk) - Total liquidity was **$325.4 million** at June 30, 2021, consisting of cash on hand and available Credit Facility funds[138](index=138&type=chunk) - Cash flows provided by operating activities for the six months ended June 30, 2021, were **$79.6 million**, an increase from $68.2 million in the prior year[138](index=138&type=chunk) - Capital expenditures, inclusive of accruals, totaled **$73.6 million** during the six months ended June 30, 2021[138](index=138&type=chunk) [Rocky Mountain Infrastructure](index=29&type=section&id=Rocky%20Mountain%20Infrastructure) - The Company's Rocky Mountain Infrastructure (RMI) subsidiary provides operational benefits, including **reduced gathering system pressures, improved hydrocarbon recovery, and flow assurance** through eleven interconnects to four natural gas processors[139](index=139&type=chunk) - A new oil gathering line to Riverside Terminal has resulted in a **$1.25 to $1.50 per barrel reduction in oil differentials**, with an additional oil interconnect under construction[139](index=139&type=chunk) - The total value of reduced oil differentials was approximately **$2.1 million** for the six months ended June 30, 2021, compared to $2.9 million in the prior year[139](index=139&type=chunk) - The net book value of the Company's RMI assets was **$196.1 million** as of June 30, 2021[139](index=139&type=chunk) [Current Events and Outlook](index=29&type=section&id=Current%20Events%20and%20Outlook) - Oil and natural gas prices **rose in Q1 2021** due to expectations of increased demand, recovering from the decline caused by the COVID-19 pandemic[140](index=140&type=chunk) - The Company's capital budget for 2021 includes **$35-$40 million for Q1** and **$115-$130 million for Q2-Q4** (post-HighPoint Merger), focusing on completing 45 gross (39.9 net) wells and picking up a drilling rig in Q4 2021[142](index=142&type=chunk) - Despite initial delays in realizing synergies from the HighPoint Merger, sales volumes are **expected to recover considerably** through 2021 completion activity and the return of a drilling rig in Q4 2021[143](index=143&type=chunk) - The Company believes it has the skills and personnel to **successfully integrate the upcoming XOG and Crestone Peak mergers**, incorporating best practices from each organization[144](index=144&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) [Three Months Ended June 30, 2021 vs. 2020](index=30&type=section&id=Three%20Months%20Ended%20June%2030%2C%202021%20vs.%202020) - Product revenues **increased by 344% to $155.5 million**, driven by a **161% increase in oil equivalent pricing** and a **70% increase in sales volumes**, primarily due to the HighPoint Merger[147](index=147&type=chunk) - Merger transaction costs increased significantly by **$18.2 million** due to the HighPoint Merger and anticipated XOG and Crestone mergers[158](index=158&type=chunk) - A derivative loss of **$74.0 million** was incurred due to market prices being higher than contracted hedge prices, impacting settlements and fair market value adjustments[160](index=160&type=chunk) Product Revenues, Sales Volumes, and Average Sales Prices (3 Months Ended June 30, in thousands, except per unit) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Product revenue | $155,478 | $35,035 | 343.8% | | Crude oil equivalent (MBoe) | 3,851.4 | 2,262.0 | 70.3% | | Average Sales Prices (before derivatives) per Boe | $40.37 | $15.49 | 160.6% | | Average Sales Prices (after derivatives) per Boe | $35.12 | $25.49 | 37.8% | Operating Expenses (3 Months Ended June 30, in thousands, except per Boe) | Expense | 2021 | 2020 | Change (%) | Per Boe 2021 | Per Boe 2020 | Per Boe Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Lease operating expense | $11,358 | $5,795 | 95.9% | $2.95 | $2.56 | 15.2% | | Midstream operating expense | $4,246 | $3,354 | 26.6% | $1.10 | $1.48 | -25.7% | | Gathering, transportation, and processing | $13,721 | $3,711 | 269.7% | $3.56 | $1.64 | 117.1% | | Severance and ad valorem taxes | $9,813 | $3,478 | 182.2% | $2.55 | $1.54 | 65.6% | | Exploration | $3,547 | $112 | 3066.9% | $0.92 | $0.05 | 1740.0% | | Depreciation, depletion, and amortization | $35,006 | $22,283 | 57.1% | $9.09 | $9.85 | -7.7% | | Abandonment and impairment of unproved properties | $2,215 | $309 | 616.8% | $0.58 | $0.14 | 314.3% | | Unused commitments | $4,328 | $0 | 100.0% | $1.12 | $0.00 | 100.0% | | Merger transaction costs | $18,246 | $21 | 86785.7% | $4.74 | $0.01 | 100.0% | | General and administrative expense | $12,144 | $8,385 | 44.8% | $3.15 | $3.71 | -15.1% | | **Total Operating Expenses** | **$114,624** | **$47,448** | **141.6%** | **$29.76** | **$20.98** | **41.8%** | [Six Months Ended June 30, 2021 vs. 2020](index=33&type=section&id=Six%20Months%20Ended%20June%2030%2C%202021%20vs.%202020) - Product revenues **increased by 144% to $228.5 million**, driven by a **92% increase in oil equivalent pricing** and a **27% increase in sales volumes**, influenced by new wells and the HighPoint Merger[164](index=164&type=chunk) - Abandonment and impairment of unproved properties **decreased significantly by 93% to $2.2 million**, compared to $30.4 million in the prior year, due to reassessment of economic viability and lease expirations[173](index=173&type=chunk) - A derivative loss of **$97.4 million** was incurred, contrasting with a **$75.3 million gain** in the prior year, due to market prices exceeding contracted hedge prices[177](index=177&type=chunk) Product Revenues, Sales Volumes, and Average Sales Prices (6 Months Ended June 30, in thousands, except per unit) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Product revenue | $228,527 | $93,827 | 143.6% | | Crude oil equivalent (MBoe) | 5,727.9 | 4,522.1 | 26.7% | | Average Sales Prices (before derivatives) per Boe | $39.90 | $20.75 | 92.3% | | Average Sales Prices (after derivatives) per Boe | $35.71 | $28.24 | 26.5% | Operating Expenses (6 Months Ended June 30, in thousands, except per Boe) | Expense | 2021 | 2020 | Change (%) | Per Boe 2021 | Per Boe 2020 | Per Boe Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Lease operating expense | $17,089 | $11,494 | 48.7% | $2.98 | $2.54 | 17.3% | | Midstream operating expense | $8,151 | $7,368 | 10.6% | $1.42 | $1.63 | -12.9% | | Gathering, transportation, and processing | $18,688 | $7,192 | 159.8% | $3.26 | $1.59 | 105.0% | | Severance and ad valorem taxes | $14,417 | $8,651 | 66.6% | $2.52 | $1.91 | 31.9% | | Exploration | $3,643 | $485 | 650.1% | $0.64 | $0.11 | 481.8% | | Depreciation, depletion, and amortization | $53,829 | $43,867 | 22.7% | $9.40 | $9.70 | -3.1% | | Abandonment and impairment of unproved properties | $2,215 | $30,366 | -92.7% | $0.39 | $6.72 | -94.2% | | Unused commitments | $4,328 | $0 | 100.0% | $0.76 | $0.00 | 100.0% | | Bad debt expense | $0 | $576 | -100.0% | $0.00 | $0.13 | -100.0% | | Merger transaction costs | $21,541 | $21 | 102476.2% | $3.76 | $0.00 | 100.0% | | General and administrative expense | $21,395 | $17,814 | 20.1% | $3.74 | $3.94 | -5.1% | | **Total Operating Expenses** | **$165,296** | **$127,834** | **29.3%** | **$28.87** | **$28.27** | **2.1%** | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2021, the Company's liquidity was **$325.4 million**, comprising **$24.4 million of cash** on hand and **$301.0 million of available borrowing capacity** on the Credit Facility[181](index=181&type=chunk) - The Company had **$99.0 million outstanding** on the Credit Facility as of June 30, 2021, and **$85.0 million** as of the filing date, with a weighted-average interest rate of **3.6%** for the three months ended June 30, 2021[181](index=181&type=chunk) - Net cash provided by operating activities for the six months ended June 30, 2021, **increased to $79.6 million** from $68.2 million in the prior year[183](index=183&type=chunk)[184](index=184&type=chunk) - Net cash used in investing activities **decreased to $8.0 million** for the six months ended June 30, 2021, from $52.0 million in the prior year, partially offset by **$49.8 million of cash acquired** through the HighPoint Merger[183](index=183&type=chunk)[185](index=185&type=chunk) - Net cash used in financing activities **increased to $71.9 million** for the six months ended June 30, 2021, from $23.1 million in the prior year, primarily due to increased net payments on the Credit Facility and a **$10.8 million dividend payment**[183](index=183&type=chunk)[186](index=186&type=chunk) - The Company has hedged approximately **12,250 Bbls per day** for the remainder of 2021, representing almost **60% of its oil sales volume** during the three months ended June 30, 2021, to mitigate pricing risk[180](index=180&type=chunk) [Non-GAAP Financial Measures](index=37&type=section&id=Non-GAAP%20Financial%20Measures) - **Adjusted EBITDAX** is a non-GAAP measure used to analyze the Company's ability to internally generate funds for exploration, development, acquisitions, and debt service, and is a basis for financial covenants under the Credit Facility[188](index=188&type=chunk) Adjusted EBITDAX (in thousands) | Period | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDAX | $88,132 | $36,222 | $131,842 | $79,491 | [New Accounting Pronouncements](index=37&type=section&id=New%20Accounting%20Pronouncements) - Refer to Note 2 – Basis of Presentation for information on recently issued or adopted accounting standards[190](index=190&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Information regarding critical accounting policies and estimates is contained in Part II, Item 7 of the 2020 Form 10-K[191](index=191&type=chunk) [Material Commitments](index=37&type=section&id=Material%20Commitments) - No significant changes to material commitments from the 2020 Form 10-K, other than those disclosed in Note 4 - Leases and Note 6 - Commitments and Contingencies[192](index=192&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company's financial performance is highly sensitive to oil and natural gas price fluctuations, which are managed through commodity derivative contracts - The Company's financial condition and results of operations are highly dependent on prevailing market prices of oil and natural gas, which are subject to **wide fluctuations beyond its control**[205](index=205&type=chunk) - Commodity derivative contracts (swaps, collars, and puts) are used to mitigate cash flow volatility from price risk, but they also **prevent the Company from fully realizing benefits** of favorable price changes[206](index=206&type=chunk)[208](index=208&type=chunk) - The Company is exposed to **interest rate risk** on its Credit Facility, which bears fluctuating interest rates tied to the Base Rate or LIBOR[210](index=210&type=chunk) - **Credit risk** exists with derivative counterparties (members of the Credit Facility syndicate) and due to concentration of oil and natural gas receivables with certain significant customers[211](index=211&type=chunk)[212](index=212&type=chunk) - Marketability of production depends on the availability and capacity of **third-party infrastructure**, with a lack of service in the French Lake area potentially limiting development[213](index=213&type=chunk)[218](index=218&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded its disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal controls identified - Management concluded that the Company's disclosure controls and procedures were **effective at the reasonable assurance level** as of June 30, 2021[219](index=219&type=chunk) - **No changes in internal control over financial reporting** were identified during the quarter ended June 30, 2021, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[221](index=221&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 6 - Commitments and Contingencies for detailed information regarding the Company's legal proceedings - Information regarding legal proceedings can be found in **Note 6 - Commitments and Contingencies** of Part I, Item 1 of this report[223](index=223&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) The Company faces various risks related to pending mergers, integration of past acquisitions, and regulatory challenges - The Company's business faces many risks, including those discussed in its **Annual Report on Form 10-K** for the year ended December 31, 2020, and other SEC filings[224](index=224&type=chunk) [Risks Relating to the XOG Merger and the Crestone Peak Merger](index=44&type=section&id=Risks%20Relating%20to%20the%20XOG%20Merger%20and%20the%20Crestone%20Peak%20Merger) - The XOG and Crestone Peak Mergers are subject to **regulatory approvals and conditions**, which may delay completion, increase costs, or lead to termination, despite the expiration of HSR Act waiting periods[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - Both merger agreements impose **restrictions on the Company's business activities**, requiring operations to be conducted in the ordinary course until closing, potentially limiting new business opportunities[229](index=229&type=chunk)[230](index=230&type=chunk) - **Failure to realize anticipated benefits and synergies** from the XOG and Crestone Peak Mergers, due to integration difficulties, managing a larger business, or retaining key personnel, could adversely affect financial results[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - The XOG and Crestone Peak Mergers are expected to trigger a **Section 382 limitation** on the utilization of historic U.S. net operating loss carryforwards (NOLs) for Bonanza Creek, XOG, and Crestone Peak[238](index=238&type=chunk)[239](index=239&type=chunk) - Existing stockholders of Bonanza Creek, XOG, and Crestone Peak will experience **reduced ownership in the combined company**, with the Kimmeridge Fund and CPPIB Crestone Peak Stockholder becoming significant holders[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[249](index=249&type=chunk) [Risks Relating to the HighPoint Merger](index=48&type=section&id=Risks%20Relating%20to%20the%20HighPoint%20Merger) - The Company may **not achieve the anticipated benefits and cost savings** from the HighPoint Merger due to complexities in integration, unforeseen liabilities, and challenges in managing expanded operations[252](index=252&type=chunk)[253](index=253&type=chunk) - Following the HighPoint Merger, the Company is proportionately **more exposed to regulatory and operational risks in Colorado** due to a more geographically concentrated asset base[254](index=254&type=chunk)[255](index=255&type=chunk) - The market price of the Company's common stock may fluctuate and decline if the **benefits of the HighPoint Merger do not meet financial analysts' expectations**[256](index=256&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity securities were sold, and the Company repurchased shares from employees to cover tax withholding obligations - There were **no sales of unregistered equity securities** during the three-month period ended June 30, 2021[258](index=258&type=chunk) - The Company's Credit Facility contains **restrictive thresholds on the payment of dividends**[260](index=260&type=chunk) Shares Repurchased for Tax Withholdings (3 Months Ended June 30, 2021) | Period | Total Number of Shares Purchased | Average Price per Share | | :--- | :--- | :--- | | April 1, 2021 - April 30, 2021 | 38,556 | $34.53 | | May 1, 2021 - May 31, 2021 | 22,673 | $38.26 | | June 1, 2021 - June 30, 2021 | 9,101 | $46.87 | | **Total** | **70,330** | **$36.32** | * These repurchases were for employee tax withholding obligations upon vesting of equity awards and were not part of a publicly announced share repurchase program [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities reported - None[262](index=262&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[264](index=264&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - None[266](index=266&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including merger agreements, debt instruments, and officer certifications - Key exhibits include **merger agreements** for HighPoint, XOG, and Crestone Peak, the **Indenture for Senior Notes**, the **Second Amendment to the Credit Agreement**, and the **2017 and 2021 Long Term Incentive Plans**[268](index=268&type=chunk) - **Certifications of the Principal Executive Officer and Principal Financial Officer** are filed/furnished with this report[268](index=268&type=chunk)[270](index=270&type=chunk) [SIGNATURES](index=52&type=section&id=SIGNATURES) - The report is signed by Eric T Greager (President and Chief Executive Officer), Brant DeMuth (Executive Vice President and Chief Financial Officer), and Sandi K Garbiso (Vice President and Chief Accounting Officer) on **August 9, 2021**[275](index=275&type=chunk)