On April 1, 2021, Civitas completed its previously announced acquisition of HighPoint Resources Corporation, a Delaware corporation (“HighPoint”), pursuant to the terms of HighPoint’s prepackaged plan of reorganization under Chapter 11 of the United States Bankruptcy Code (the “Prepackaged Plan”), which was confirmed by the U.S. Bankruptcy Court for the District of Delaware on March 18, 2021 pursuant to a confirmation order, and went effective on April 1, 2021 (the “HighPoint Merger”).

The Prepackaged Plan implemented the merger and restructuring transactions in accordance with the Agreement and Plan of Merger, dated as of November 9, 2020 (the “HighPoint Merger Agreement”), by and among Civitas, HighPoint and Boron Merger Sub, Inc., a wholly-owned subsidiary of Civitas (“Merger Sub”). Pursuant to the Prepackaged Plan and the HighPoint Merger Agreement, at the effective time of the HighPoint Merger (the “HighPoint Effective Time”) and the effective date under the Prepackaged Plan, Merger Sub merged with and into HighPoint, with HighPoint continuing as the surviving corporation and wholly-owned subsidiary of Civitas. At the HighPoint Effective Time, each eligible share of common stock, par value $0.001 per share, of HighPoint issued and outstanding immediately prior to the HighPoint Effective Time was automatically converted into the right to receive 0.11464 shares of common stock, par value $0.01 per share, of Civitas (“Civitas Common Stock”), with cash paid in lieu of the issuance of any fractional shares. As a result, Civitas issued 487,952 shares of Civitas Common Stock to former HighPoint stockholders.

Concurrently with the HighPoint Merger and pursuant to the Prepackaged Plan, and in exchange for the $625.0 million in aggregate principal amount outstanding of 7.0% Senior Notes due 2022 of HighPoint Operating Corporation (“HighPoint OpCo”) and 8.75% Senior Notes due 2025 of HighPoint OpCo (collectively, the “HighPoint Senior Notes”), Civitas issued to all holders of HighPoint Senior Notes an aggregate of (i) 9,314,214 shares of Civitas Common Stock and (ii) $100.0 million aggregate principal amount of 7.5% Senior Notes due 2026 (“7.5% Senior Notes”). Please refer to Note 5 - Long-term Debt for further discussion of the 7.5% Senior Notes.


Merger Consideration (in thousands, except per share amount)
Shares of Civitas Common Stock issued to existing holders of HighPoint Common Stock (1)	488
Shares of Civitas Common Stock issued to existing holders of HighPoint Senior Notes	9,314
Total additional shares of Civitas Common Stock issued as merger consideration	9,802

Closing price per share of Civitas Common Stock (2)	$	38.25

Merger consideration paid in shares of Civitas Common Stock	$	374,933
Aggregate principal amount of the 7.5% Senior Notes	100,000
Total merger consideration	$	474,933


Purchase Price Allocation (in thousands)
Assets Acquired
Cash and cash equivalents	$	49,827
Accounts receivable - oil and natural gas sales	26,343
Accounts receivable - joint interest and other	9,161
Prepaid expenses and other	3,608
Inventory of oilfield equipment	4,688
Proved properties	539,820
Other property and equipment, net of accumulated depreciation	2,769
Right-of-use assets	4,010
Deferred income tax assets	110,513
Other noncurrent assets	797
Total assets acquired	$	751,536

Liabilities Assumed
Accounts payable and accrued expenses	$	51,088
Oil and natural gas revenue distribution payable	20,786
Lease liability	4,010
Derivative liability	18,500
Current portion of long-term debt	154,000
Ad valorem taxes	3,746
Asset retirement obligations	24,473
Total liabilities assumed	276,603
Net assets acquired	$	474,933

The HighPoint Merger was accounted for under the acquisition method of accounting for business combinations. Accordingly, we conducted assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition were expensed as incurred. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market, and therefore represent Level 3 inputs. The fair values of crude oil and natural gas properties and asset retirement obligations were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of proved oil and natural gas properties include estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, and a market-based weighted-average cost of capital rate of approximately 13%. These inputs require significant judgments and estimates by management at the time of the valuation.

Pursuant to the Extraction Merger Agreement, at the effective time of the Extraction Merger (the “Extraction Merger Effective Time”), (i) Raptor Eagle Merger Sub merged with and into Extraction, with Extraction continuing its existence as the surviving corporation as a wholly owned subsidiary of Civitas following the Extraction Merger (the “Extraction Surviving Corporation”), (ii) each share of common stock, par value $0.01 per share, of Extraction (the “Extraction Common Stock”) issued and outstanding as of immediately prior to the Extraction Merger Effective Time was converted into the right to receive 1.1711 shares of Civitas Common Stock for each share of Extraction Common Stock (the “Extraction Exchange Ratio”), with cash paid in lieu of the issuance of fractional shares, if any, and (iii) each holder of Extraction Common Stock received a total dividend equalization payment, as part of the Extraction Merger consideration, of approximately 0.017225678 shares of Civitas Common Stock per share of Extraction Common Stock related to dividends paid to Civitas’ stockholders on June 30, 2021 and September 30, 2021, with cash paid in lieu of the issuance of fractional shares, if any. Following the Extraction Merger and prior to the Crestone Peak Merger (as defined below), persons who were stockholders of Extraction immediately prior to the Extraction Merger owned approximately 50% of the combined company and persons who were stockholders of Civitas immediately prior to the Extraction Merger owned approximately 50% of the combined company.

Additionally, pursuant to the Extraction Merger Agreement, at the Extraction Merger Effective Time, each award of restricted stock units (including those subject to performance-based vesting conditions) issued pursuant to Extraction’s 2021 Long Term Incentive Plan (the “Extraction Equity Plan”) that was outstanding immediately prior to the Extraction Merger Effective Time and that by its terms did not settle by reason of the occurrence of the closing of the Extraction Merger (each, an “Extraction RSU Award”) was assumed by Civitas and converted into a number of restricted stock units with respect to shares (rounded to the nearest number of whole shares) of Civitas Common Stock (such restricted stock unit, a “Converted RSU”) equal to the product of the number of Extraction Common Stock subject to the Extraction RSU Award immediately prior to the Extraction Merger Effective Time multiplied by the Extraction Exchange Ratio, effective as of the Extraction Merger Effective Time.

As of the Extraction Merger Effective Time, each Converted RSU continued to be governed by the same terms and conditions (including vesting and forfeiture) that were applicable to the corresponding Extraction RSU Award immediately prior to the Extraction Merger Effective Time. However, any Extraction RSU Award subject to performance-based vesting conditions continued to be measured pursuant to the same terms and conditions of the underlying Extraction RSU Award in effect as of immediately prior to the Extraction Merger Effective Time. In addition, Converted RSUs subject to performance-based vesting conditions held by certain Extraction executives provide that, in the event such individual’s employment is terminated for death, disability, by Civitas for any reason other individual for good reason, in each case, on or within twelve months following the Extraction Merger Effective Time, the portion of such individual’s Converted RSUs subject to performance-based vesting conditions shall, effective as of such individual’s termination date, immediately vest in full based on deemed achievement of any applicable performance goals at the maximum level of performance. Further, effective as of immediately prior to the Extraction Merger Effective Time, each award of deferred stock units granted under the Extraction Equity Plan and held by a member of the Extraction board who was not a designee of Extraction for appointment to Civitas’ Board as of the Extraction Merger Effective Time immediately vested in full.

Additionally, at the Extraction Merger Effective Time, in accordance with the terms of (i) the Extraction Tranche A warrants to purchase Extraction Common Stock, issued pursuant to that certain Warrant Agreement by and between Extraction and American Stock Transfer & Trust Company, LLC, as warrant agent (“AST”), dated as of January 20, 2021 (the “Tranche A Warrants”), and (ii) the Extraction Tranche B warrants to purchase Extraction Common Stock, issued pursuant to that certain Warrant Agreement by and between Extraction and AST, as warrant agent, dated as of January 20, 2021 (the “Tranche B Warrants,” and, together with the Tranche A Warrants, the “Extraction Warrants”), that were issued and outstanding immediately prior to the Extraction Merger Effective Time, were cancelled and Civitas executed a replacement warrant agreement for the Tranche A Warrants and a replacement warrant agreement for the Tranche B Warrants and issued to each holder of the Extraction Warrants a replacement warrant (each, a “Replacement Warrant”) that is exercisable for a number of shares of Civitas Common Stock equal to the number of shares of Civitas Common Stock that would have been issued or paid to a holder of the number of shares of Extraction Common Stock into which such Extraction Warrant was exercisable immediately prior to the Extraction Merger Effective Time. Each Replacement Warrant has an exercise price as set forth in the applicable Replacement Warrant Agreement, subject to adjustment as set forth therein.

The Replacement Warrants may be exercised, in whole or in part, at any time or from time to time on or before 5:00 p.m., New York time, on (i) January 20, 2025, in the case of the Replacement Warrants for the Tranche A Warrants, or (ii) January 20, 2026, in the case of the Replacement Warrants for the Tranche B Warrants. The number of shares of Civitas Common Stock for which a Replacement Warrant is exercisable, and the exercise price of such Replacement Warrant, are subject to customary adjustments from time to time upon the occurrence of certain events, including the payment of in-kind dividends or distributions, splits, subdivisions or combinations of shares of Civitas Common Stock. A holder of a Replacement Warrant, in its capacity as such, is not entitled to any rights whatsoever as a stockholder of Civitas, except to the extent expressly provided in the applicable Replacement Warrant Agreement. 3.4 million Tranche A and 1.7 million Tranche B Replacement Warrants were issued.


Merger Consideration (in thousands, except per share amount)
Shares of Civitas Common Stock issued as merger consideration(1)	31,095
Closing price per share of Civitas Common Stock(2)	$	56.10
Merger consideration paid in shares of Civitas Common Stock	$	1,744,431

Unvested restricted stock compensation expense as merger consideration	$	19,338
Unvested performance restricted stock compensation expense allocated as merger consideration	2,897
Total merger consideration	$	22,235

Tranche A warrants issued as merger consideration	$	52,164
Tranche B warrants issued as merger consideration	25,299
Total warrant merger consideration	$	77,463

Total merger consideration	$	1,844,129


Preliminary Purchase Price Allocation (in thousands)
Assets Acquired
Cash and cash equivalents	$	106,360
Accounts receivable - oil and natural gas sales	119,585
Accounts receivable - joint interest and other	33,054
Prepaid expenses and other	3,044
Inventory of oilfield equipment	9,291
Derivative assets	5,834
Proved properties	1,876,014
Unproved properties	193,400
Other property and equipment, net of accumulated depreciation	40,068
Right-of-use assets	6,883
Deferred income tax assets	49,194
Other noncurrent assets	4,248
Total assets acquired	$	2,446,975

Liabilities Assumed
Accounts payable and accrued expenses	$	90,353
Production taxes payable	63,572
Oil and natural gas revenue distribution payable	170,002
Income tax payable	14,000
Lease liability	6,883
Derivative liability	100,474
Ad valorem taxes	87,071
Asset retirement obligations	68,741
Other noncurrent liabilities	1,750
Total liabilities assumed	602,846
Net assets acquired	$	1,844,129

The Extraction Merger was accounted for under the acquisition method of accounting for business combinations. Accordingly, we conducted assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition were expensed as incurred. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market, and therefore represent Level 3 inputs. The fair values of crude oil and natural gas properties and asset retirement obligations were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of proved oil and natural gas properties include estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, and a market-based weighted-average cost of capital rate of approximately 10%. These inputs require significant judgments and estimates by management at the time of the valuation.

The purchase price allocation is preliminary, and Civitas is continuing to assess the fair values of certain of the Extraction assets acquired and liabilities assumed. In particular, assets and liabilities subject to potential adjustment, in amounts that could be material to the pro forma financial statements, include, but are not limited to, proved properties, unproved properties, and accounts payable and accrued expenses related to our continued assessment over the application of lease contracts and related deductions. We cannot reasonably estimate the impact of such conclusions as there is still a high level of uncertainty regarding the underlying terms and application.

Pursuant to the Crestone Merger Agreement, at the effective time of the Crestone Peak Merger (the “Crestone Merger Effective Time”), (i) Merger Sub 1 merged with and into Crestone Peak (the “Merger Sub 1 Merger”), with Crestone Peak continuing its existence as the surviving corporation as a wholly owned subsidiary of Civitas following the Merger Sub 1 Merger (the “Crestone Surviving Corporation”), and (ii) subsequently, the Crestone Surviving Corporation merged with and into Merger Sub 2 (the “Merger Sub 2 Merger” and together with the Merger Sub 1 Merger, the “Crestone Peak Merger”), with Merger Sub 2 continuing its existence as the surviving entity as a wholly owned subsidiary of Civitas (the “Crestone Surviving Entity”).

Pursuant to the Crestone Merger Agreement, at the effective time of the Merger Sub 1 Merger (the “Merger Sub 1 Merger Effective Time”), the shares of Crestone Peak common stock, par value $0.01 per share (“Crestone Peak Common Stock”) (excluding shares of Crestone Peak Common Stock held by Crestone Peak as treasury shares or by Civitas or Merger Sub 1 immediately prior to the Merger Sub 1 Merger Effective Time), issued and outstanding as of immediately prior to the Merger Sub 1 Merger Effective Time were converted into the right to collectively receive 22.5 million shares of Civitas Common Stock (the “Crestone Peak Merger Consideration”). In addition, at the effective time of the Merger Sub 2 Merger (the “Merger Sub 2 Merger Effective Time”), each share of common stock of the Crestone Surviving Corporation issued and outstanding as of immediately prior to the Merger Sub 2 Merger Effective Time was automatically cancelled and each unit of Merger Sub 2 issued and outstanding immediately prior to the Merger Sub 2 Merger Effective Time remained issued and outstanding and represents the only outstanding units of the Crestone Surviving Entity immediately following the Merger Sub 2 Merger.

The Crestone Merger Agreement did not provide for specific treatment of equity compensation awards in connection with the Crestone Peak Merger. Certain Crestone Peak employees held profits interests and phantom equity awards based upon the Class B units of Crestone Peak vested in connection with the Crestone Peak Merger under the terms and conditions of the governing equity compensation plans. No employees received settlement payments with respect to any outstanding profits interests, but the outstanding phantom equity awards vested in connection with the Crestone Peak Merger and certain Crestone Peak employees received an aggregate amount of approximately $1.5 million in cash for settlement with respect to the outstanding phantom equity awards in connection with the Crestone Peak Merger.


Preliminary Purchase Price Allocation (in thousands)
Assets Acquired
Cash and cash equivalents	$	67,505
Accounts receivable - oil and natural gas sales	81,340
Accounts receivable - joint interest and other	9,917
Prepaid expenses and other	2,929
Inventory of oilfield equipment	11,951
Proved properties	1,797,814
Unproved properties	453,321
Other property and equipment, net of accumulated depreciation	7,980
Right-of-use assets	7,934
Total assets acquired	$	2,440,691

Liabilities Assumed
Accounts payable and accrued expenses	$	134,791
Production taxes payable	52,435
Oil and natural gas revenue distribution payable	83,950
Lease liability	7,934
Derivative liability	338,383
Credit facility	280,000
Ad valorem taxes	66,913
Deferred income tax liabilities	125,086
Asset retirement obligations	88,949
Total liabilities assumed	1,178,441
Net assets acquired	$	1,262,250

The Crestone Peak Merger was accounted for under the acquisition method of accounting for business combinations. Accordingly, we conducted assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition were expensed as incurred. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market, and therefore represent Level 3 inputs. The fair values of crude oil and natural gas properties and asset retirement obligations were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of proved oil and natural gas properties include estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, and a market-based weighted-average cost of capital rate of approximately 10%. These inputs require significant judgments and estimates by management at the time of the valuation.

The purchase price allocation is preliminary, and Civitas is continuing to assess the fair values of certain of the Crestone Peak assets acquired and liabilities assumed. In particular, assets and liabilities subject to potential adjustment, in amounts that could be material to the pro forma financial statements, include, but are not limited to, proved properties, unproved properties, and accounts payable and accrued expenses related to our continued assessment over the application of lease contracts and related deductions. We cannot reasonably estimate the impact of such conclusions as there is still a high level of uncertainty regarding the underlying terms and application.

The amount of revenue of HighPoint, Extraction, and Crestone Peak included in our statement of operations during the year ended December 31, 2021 was approximately $244.7 million, $172.3 million, and $114.8 million, respectively. We determined that disclosing the amount of HighPoint, Extraction, and Crestone Peak related earnings included in the statements of operation is impracticable, as the operations from these mergers were integrated into the operations of the Company from the dates of each acquisition.

The following unaudited pro forma financial information (in thousands, except per share amounts) represents a summary of the consolidated results of operations for the year ended December 31, 2021 and 2020, assuming the HighPoint, Extraction, and Crestone Peak mergers had been completed as of January 1, 2020. The pro forma financial information includes certain non-recurring pro forma adjustments that were directly attributable to the business combinations. The pro forma financial information is not necessarily indicative of the results of operations that would have been achieved if the mergers had been effective as of this date, or of future results.


	Year Ended December 31, 2021
	As reported		HighPoint(1)		Extraction(2)		Crestone Peak(2)		Civitas Pro Forma Combined
Total revenue	$	930,614	$	72,019	$	882,255	$	508,038	$	2,392,926
Net income (loss)	178,921		(46,657)		944,814		(299,688)		777,390
Net income per common share - basic	$	4.82							$	9.37
Net income per common share - diluted	$	4.74							$	9.30
_________________________
(1) Based on a closing date of April 1, 2021.
(2) Based on a closing date of November 1, 2021.
	Year Ended December 31, 2020
	As reported		HighPoint		Extraction		Crestone Peak		Civitas Pro Forma Combined
Total revenue	$	218,090	$	250,347	$	557,904	$	285,426	$	1,311,767
Net income (loss)	103,528		(1,081,347)		(1,335,406)		(268,057)		(2,581,282)
Net income (loss) per common share - basic	$	4.98							$	(28.83)
Net income (loss) per common share - diluted	$	4.95							$	(28.83)

Merger transaction costs of $43.6 million and $6.7 million related to the aforementioned mergers were accounted for separately from the assets acquired and liabilities assumed and are included in merger transaction costs in Civitas' statements of operations for the years ended December 31, 2021 and 2020, respectively.