Civitas Resources(CIVI) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the company's unaudited condensed consolidated financial statements and detailed notes on key accounting policies and transactions Condensed Consolidated Balance Sheets 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) 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 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 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 NOTE 1 - ORGANIZATION AND BUSINESS - Bonanza Creek Energy, Inc (BCEI) is primarily engaged in acquiring, developing, extracting, and producing oil and gas properties[20] - The Company's assets and operations are concentrated in the rural portions of the Wattenberg Field in Colorado[20] NOTE 2 - BASIS OF PRESENTATION - 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] - 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] - 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] - 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] 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 - Bonanza Creek completed the acquisition of HighPoint Resources Corporation on April 1, 2021, through a prepackaged Chapter 11 plan of reorganization[41] - The Company obtained net operating losses of $170.6 million as part of the HighPoint Merger[47] - 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][52][54] - 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][54] 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 - 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] 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 - 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] - 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] - As of June 30, 2021, the Company had $99.0 million outstanding on the Credit Facility, compared to zero at December 31, 2020[74] - 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] - The Company was in compliance with all Credit Facility covenants as of June 30, 2021, and through the filing date[74] 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 - 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] - 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] - 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] - 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] - 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][85] 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 - 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] - 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][96] - 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] 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 - 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] - 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] - Proved oil and gas properties are evaluated for impairment using Level 3 inputs, primarily through income valuation techniques or market valuation approaches[103] 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 - 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][105] 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 - 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] - 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][177] 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 - 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] 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 - 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] - 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] - As of June 30, 2021, and December 31, 2020, the Company had no unrecognized tax benefits[130] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial performance, operational results, strategic initiatives, and liquidity Executive Summary - 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] - The Company's primary objective is to maximize shareholder returns through dividends and debt reduction by responsibly developing oil and gas resources[137] - Key strategic aspects include well-balanced asset mergers and acquisitions, multi-well pad development, enhanced completions, scaled infrastructure, and environmental stewardship[137] Financial and Operating Results - 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] - 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] - Borrowings under the Credit Facility were reduced by $56.0 million to $99.0 million during the three months ended June 30, 2021[138] - Total liquidity was $325.4 million at June 30, 2021, consisting of cash on hand and available Credit Facility funds[138] - 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] - Capital expenditures, inclusive of accruals, totaled $73.6 million during the six months ended June 30, 2021[138] Rocky Mountain Infrastructure - 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] - 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] - 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] - The net book value of the Company's RMI assets was $196.1 million as of June 30, 2021[139] Current Events and Outlook - 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] - 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] - 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] - 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] Results of Operations Three Months Ended June 30, 2021 vs. 2020 - 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] - Merger transaction costs increased significantly by $18.2 million due to the HighPoint Merger and anticipated XOG and Crestone mergers[158] - 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] 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 - 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] - 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] - 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] 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 - 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] - 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] - 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][184] - 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][185] - 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][186] - 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] Non-GAAP Financial Measures - 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] 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 - Refer to Note 2 – Basis of Presentation for information on recently issued or adopted accounting standards[190] Critical Accounting Policies and Estimates - Information regarding critical accounting policies and estimates is contained in Part II, Item 7 of the 2020 Form 10-K[191] Material Commitments - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] - 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][208] - 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] - 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][212] - 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][218] Item 4. Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Risks Relating to the XOG Merger and the Crestone Peak Merger - 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][226][227] - 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][230] - 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][233][234] - 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][239] - 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][243][244][245][249] Risks Relating to the HighPoint Merger - 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][253] - 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][255] - 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - The Company's Credit Facility contains restrictive thresholds on the payment of dividends[260] 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 There were no defaults upon senior securities reported - None[262] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable[264] Item 5. Other Information No other information is reported under this item - None[266] Item 6. Exhibits 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] - Certifications of the Principal Executive Officer and Principal Financial Officer are filed/furnished with this report[268][270] 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]