All mergers and acquisitions disclosed were 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 were 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 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. These inputs required significant judgments and estimates by management at the time of the valuation.

On April 1, 2021, Civitas acquired HighPoint Resources 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 (the “HighPoint Merger”). Each eligible share of common stock of HighPoint issued and outstanding was automatically converted into the right to receive 0.11464 shares of common stock of Civitas (“Civitas Common Stock”). 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, in exchange for the aggregate principal amount outstanding of HighPoint Operating Corporation's senior notes, Civitas issued 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.

On November 1, 2021, Civitas completed its merger with Extraction Oil & Gas, Inc. (“Extraction”), pursuant to the terms of the related Agreement and Plan of Merger (the “Extraction Merger Agreement”) (the “Extraction Merger”). Pursuant to the Extraction Merger Agreement, each share of common stock of Extraction (the “Extraction Common Stock”) issued and outstanding 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”).

Additionally, each unvested award of restricted stock units issued pursuant to Extraction’s 2021 Long Term Incentive Plan (the “Extraction Equity Plan”) was assumed by Civitas and converted into a number of restricted stock units with respect to shares of Civitas Common Stock (such restricted stock unit, a “Converted RSU”) using the Extraction Exchange Ratio. Each Converted RSU continued to be governed by the same terms and conditions that were applicable immediately prior to the Extraction Merger closing date.

Further, Civitas executed warrant agreements to replace the warrants previously issued by Extraction consisting of (i) 3.4 million Tranche A warrants to purchase Civitas Common Stock at an exercise price of $91.91 in whole or in part, at any time or from time to time on or before January 20, 2025, issued pursuant to a warrant agreement by and between Civitas and Broadridge Corporate Issuer Solutions, Inc., as warrant agent (“Broadridge”), dated as of November 1, 2021 (the “Tranche A Warrants”), and (ii) 1.7 million Tranche B warrants to purchase Civitas Common Stock at an exercise price of $104.45 in whole or in part, at any time or from time to time on or before (i) January 20, 2026, issued pursuant to a warrant agreement by and between Civitas and Broadridge, as warrant agent, dated as of November 1, 2021 (the “Tranche B Warrants,” and, together with the Tranche A Warrants, the “Warrants”). A holder of a 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 warrant agreement. Please refer to Note 8 - Fair Value Measurements for further discussion.

Total merger consideration transferred under the Extraction Merger was $1.8 billion. The following table presents the preliminary purchase price allocation of the assets acquired and the liabilities assumed in the Extraction Merger:


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 valuation of proved properties for the Extraction Merger applied a market-based weighted-average cost of capital rate of approximately 10%. The purchase price allocation is preliminary, and Civitas is continuing to assess the fair values of certain of the assets acquired and liabilities assumed in the Extraction Merger as adjustments may be made to these measurements in subsequent periods (up to one year from the acquisition date). 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 potential outcomes of the assessment.

On November 1, 2021, Civitas completed its merger with CPPIB Crestone Peak Resources America Inc. (“Crestone Peak”), pursuant to the terms of the related Agreement and Plan of Merger (the “Crestone Merger Agreement”) (the “Crestone Peak Merger”). Pursuant to the Crestone Merger Agreement, the shares of Crestone Peak common stock were converted into the right to collectively receive 22.5 million shares of Civitas Common Stock, representing total merger consideration of $1.3 billion.

The following table presents the preliminary purchase price allocation of the assets acquired and the liabilities assumed in 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 valuation of proved properties for the Crestone Peak Merger applied a market-based weighted-average cost of capital rate of approximately 10%. The purchase price allocation is preliminary, and Civitas is continuing to assess the fair values of certain of the assets acquired and liabilities assumed in the Crestone Peak Merger as adjustments may be made to these measurements in subsequent periods (up to one year from the acquisition date). 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 potential outcomes of the assessment.

The amount of revenue of HighPoint included in our statement of operations during the three and nine months ended September 30, 2021 was $84.7 million and $159.4 million, respectively, as the HighPoint Merger was completed on April 1, 2021. There was no revenue included in our statement of operations during the three and nine months ended September 30, 2021 related to the Extraction and Crestone Peak mergers as both mergers were completed after September 30, 2021. We determined that disclosing the amount of HighPoint, Extraction, and Crestone Peak related earnings included in the unaudited condensed consolidated statements of operations and comprehensive income (“statements of operations”) 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 condensed consolidated results of operations for the three and nine months ended September 30, 2021, assuming the HighPoint, Extraction, and Crestone Peak mergers had been completed as of January 1, 2020. 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, and includes certain non-recurring pro forma adjustments that were directly attributable to the business combinations (in thousands, except per share amounts).


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021

Total revenue	$	619,913	$	1,713,023
Net income	103,485		859,756
Net income per common share - basic	$	1.23	$	10.20
Net income per common share - diluted	$	1.22	$	10.15

On March 1, 2022, the Company completed the acquisition of privately held DJ Basin operator Bison Oil & Gas II, LLC (“Bison”) for merger consideration of approximately $280.4 million (the “Bison Acquisition”). Net assets acquired under the preliminary purchase price allocation were $294.0 million and consequently resulted in a bargain purchase gain of $13.6 million. Because of the immateriality of the Bison Acquisition, the related revenue and earnings, supplemental pro forma financial information, and detailed purchase price allocation are not disclosed.

Merger transaction costs related to the aforementioned mergers and acquisitions are accounted for separately from the assets acquired and liabilities assumed and are included in merger transaction costs in the statements of operations. The Company incurred merger transaction costs of $1.8 million and $5.6 million during the three months ended September 30, 2022 and 2021, respectively, and $23.8 million and $27.1 million during the nine months ended September 30, 2022 and 2021, respectively.

On July 5, 2022, the Company entered into and closed on Purchase and Sale Agreements to acquire additional working interests in certain Company-operated wells for cash consideration of $81.6 million, subject to customary purchase price adjustments.