Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Note 2—Acquisitions and Divestitures

2024 Bolt-On Acquisition

On September 17, 2024, the Company completed its acquisition of oil and gas properties with certain affiliates of Occidental Petroleum Corporation for total cash consideration of $743.5 million, subject to customary post-closing purchase price adjustments (the “Bolt-On Acquisition”). The Bolt-On Acquisition included approximately 29,500 net leasehold acres and approximately 9,900 net royalty acres that are predominately located directly offsetting the Company’s existing assets in Reeves County, Texas, as well as Eddy County, New Mexico. Additionally, the acquired assets in Reeves County include a fully integrated midstream system, consisting of over 100 miles of operated oil and gas gathering systems, approximately 10,000 surface acres, and water infrastructure including saltwater disposal wells, a recycling facility, frac ponds and water wells. The Bolt-On Acquisition was completed to drive long-term accretion across the Company’s key financial and operating metrics, enhance shareholder returns and add core inventory locations to the Company’s existing position in the Permian Basin.

Purchase Price Allocation

The Bolt-On Acquisition has been accounted for as a business combination using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Under the acquisition method of accounting, the assets acquired and liabilities assumed are recorded at their respective fair values as of the acquisition closing date, which requires judgment and certain estimates and assumptions to be made. Oil and natural gas properties were valued using an income based approach, which incorporates a discounted cash flow method. The pro forma impact of this business combination to revenues and net income is not disclosed as it was deemed not to have a material impact on the Company’s results of operations.

As of the date of this filing, the fair value of assets acquired and liabilities assumed are preliminary and not complete as adjustments may be made. The Company expects to complete the purchase price allocation during the 12-month period subsequent to the Bolt-On Acquisition closing date. The following table represents the preliminary consideration and purchase price allocation of the identifiable assets acquired and the liabilities assumed based on their respective fair values as of the closing date of the business combination.


(in thousands, except share and per share data)	Bolt-On Acquisition Consideration
Total cash consideration given	$	743,496

Fair value of assets acquired:	Preliminary Purchase Price Allocation
Accounts receivable, net	$	5,556
Oil and natural gas properties, net	770,449
Total assets acquired	$	776,005

Fair value of liabilities assumed:
Accounts payable and accrued expenses	$	17,355
Asset retirement obligations	15,154
Total liabilities assumed	$	32,509
Net assets acquired	$	743,496

2024 Asset Acquisitions

During the nine months ended September 30, 2024, the Company completed multiple acquisitions of oil and natural gas properties for a cumulative adjusted purchase price of approximately $363 million. These transactions were recorded as asset acquisitions in accordance with ASC 805.

Earthstone Merger

On November 1, 2023, the Company completed its merger (the “Earthstone Merger”) with Earthstone Energy, Inc. (“Earthstone”). Earthstone was an independent oil and gas company engaged in the operation and development of oil and natural gas properties in the Permian Basin in both Texas and New Mexico. Refer to Note 2—Business Combinations footnote in the notes to the consolidated financial statements in Item 8 of the Company’s 2023 Annual Report for additional details regarding the Earthstone Merger.

Purchase Price Allocation

As of the date of this filing, the fair value of assets acquired and liabilities assumed are not complete and adjustments may be made. The Company expects to complete the purchase price allocation during the fourth quarter of 2024. There were no significant adjustments to the purchase price allocation during the nine months ended September 30, 2024.

Supplemental Unaudited Pro Forma Financial Information

The results of Earthstone’s operations have been included in the Company’s consolidated financial statements since November 1, 2023, the effective date of the Earthstone Merger. The following supplemental unaudited pro forma financial information (“pro forma information”) for the three and nine months ended September 30, 2023 has been prepared from the respective historical consolidated financial statements of the Company and Earthstone and has been adjusted to reflect the Earthstone Merger as if it had occurred on January 1, 2023.

The pro forma information is not necessarily indicative of the results that might have occurred had the Earthstone Merger occurred in the past and is not intended to be a projection of future results. Future results may vary significantly from the results reflected in the following pro forma information.


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
Total Revenue	$	1,283,969	$	3,519,042
Net Income	137,779		432,571

Earnings per share:
Basic	$	0.29	$	0.92
Diluted	0.25		0.79

2023 SWD Divestiture

On March 13, 2023, the Company completed the sale of its operated saltwater disposal wells and the associated produced water infrastructure in Reeves County, Texas. The total cash consideration received at closing was $125 million of which $65 million was directly related to the sale and transfer of control of its water assets, while the remaining $60 million consisted of contingent consideration that is tied to the Company’s future drilling, completion and water connection activity in Reeves County, Texas. The $60 million of contingent consideration will require repayment if certain performance obligations through September 2026 are not met, and it has been recorded as a liability within the Company’s consolidated balance sheet accordingly. All performance obligations have been met during the payment periods and as of September 30, 2024, the remaining balance of the contingent consideration was $40 million. There was no gain or loss recognized as a result of this divestiture.