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ACQUISITIONS AND DIVESTITURES | 12 Months Ended
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Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS AND DIVESTITURES | ACQUISITIONS AND DIVESTITURES 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. Associated transaction and integration costs 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. Please refer to Note 8 - Fair Value Measurement s for additional discussion regarding the various levels within the fair value hierarchy. The fair values of 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 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. HighPoint Merger 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”) (the “HighPoint Merger”). Pursuant to the Prepackaged Plan, each share of common stock of HighPoint issued and outstanding was converted into 0.11464 shares of common stock of Civitas (“Civitas Common Stock”). As a result, Civitas issued 488.0 thousand 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’s senior notes, Civitas issued an aggregate of (i) 9.3 million 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, which have since been redeemed in full. The purchase price allocation was finalized as of the first quarter of 2022. The following tables present the merger consideration and final purchase price allocation of the assets acquired and the liabilities assumed in the HighPoint Merger:
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 |
_________________________ (1)Based on the number of shares of common stock of HighPoint issued and outstanding as of April 1, 2021 and the conversion ratio of 0.11464 per share of Civitas Common Stock. (2)Based on the closing stock price of Civitas Common Stock on April 1, 2021.
Purchase Price Allocation (in thousands) |  |
Assets Acquired |  |
Cash and cash equivalents |  | $ | 49,827 |
Accounts receivable - oil, natural gas sales, and NGL 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 |  | 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 valuation of proved oil and natural gas properties for the HighPoint Merger applied a market-based weighted-average cost of capital rate of approximately 13%. Extraction Merger 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 issued and outstanding was converted into 1.1711 shares of Civitas Common Stock (the “Extraction Exchange Ratio”). As a result, Civitas issued 31.1 million shares of Civitas Common Stock to former Extraction stockholders. 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. The purchase price allocation was finalized as of the fourth quarter of 2022. The following tables present the merger consideration and final purchase price allocation of the assets acquired and the liabilities assumed in the Extraction Merger:
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 allocated as merger consideration |  | $ | 19,338 |  |
Unvested performance restricted stock compensation expense allocated as merger consideration |  | 2,897 |  |
Total stock compensation expense allocated as merger consideration |  | $ | 22,235 |  |
Tranche A warrants issued as merger consideration |  | $ | 52,164 |  |
Tranche B warrants issued as merger consideration |  | 25,299 |  |
Total warrants issued as merger consideration |  | $ | 77,463 |  |
Total merger consideration |  | $ | 1,844,129 |  |
_________________________ (1)Based on the number of shares of common stock of Extraction issued and outstanding as of November 1, 2021 and the conversion ratio of 1.1711 per share of Civitas Common Stock. (2)Based on the closing stock price of Civitas Common Stock on November 1, 2021.
Purchase Price Allocation (in thousands) |  |
Assets Acquired |  |
Cash and cash equivalents |  | $ | 106,360 |
Accounts receivable - oil, natural gas, and NGL 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 |  | 1,878,887 |
Unproved properties |  | 193,400 |
Other property and equipment |  | 40,068 |
Right-of-use assets |  | 6,883 |
Deferred income tax assets |  | 49,194 |
Other noncurrent assets |  | 4,248 |
Total assets acquired |  | $ | 2,449,848 |
Liabilities Assumed |  |
Accounts payable and accrued expenses |  | $ | 90,353 |
Production taxes payable |  | 63,572 |
Oil and natural gas revenue distribution payable |  | 183,875 |
Income tax payable |  | 14,000 |
Lease liability |  | 6,883 |
Derivative liability |  | 100,474 |
Ad valorem taxes |  | 76,071 |
Asset retirement obligations |  | 68,741 |
Other noncurrent liabilities |  | 1,750 |
Total liabilities assumed |  | 605,719 |
Net assets acquired |  | $ | 1,844,129 |
The valuation of oil and natural gas properties for the Extraction Merger applied a market-based weighted-average cost of capital rate of approximately 10%. Crestone Peak Merger 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 22.5 million shares of Civitas Common Stock. The purchase price allocation was finalized as of the fourth quarter of 2022. The following tables present the merger consideration and final purchase price allocation of the assets acquired and the liabilities assumed in the Crestone Peak Merger:
Merger Consideration (in thousands, except per share amount) |  |
Shares of Civitas Common Stock issued as merger consideration |  | 22,500 |
Closing price per share of Civitas Common Stock (1) |  | $ | 56.10 |
Merger consideration paid in shares of Civitas Common Stock |  | $ | 1,262,250 |
_____________________ (1)Based on the closing stock price of Civitas Common Stock on November 1, 2021.
Purchase Price Allocation (in thousands) |  |
Assets Acquired |  |
Cash and cash equivalents |  | $ | 67,505 |
Accounts receivable - oil, natural gas, and NGL 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 |  | 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 oil and natural gas properties for the Crestone Peak Merger applied a market-based weighted-average cost of capital rate of approximately 10%. Revenue and earnings of the acquiree 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. Supplemental pro forma financial information 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 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).
|  | 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 |  |  | (46,434) |  |  | 1,140,653 |  |  | (227,083) |  |  | 1,046,057 |
Net income per common share - basic |  | $ | 4.82 |  |  |  |  |  |  |  |  | $ | 12.61 |
Net income per common share - diluted |  | $ | 4.74 |  |  |  |  |  |  |  |  | $ | 12.52 |
_________________________ |  |  |  |  |  |  |  |  |  |
(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) |
Bison Acquisition On March 1, 2022, the Company acquired the 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 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 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 $24.7 million, $43.6 million, and $6.7 million during the years ended December 31, 2022, 2021, and 2020, respectively. Acquisition of additional working interests in Company-operated wells On July 5, 2022, the Company acquired additional working interests in certain Company-operated wells for cash consideration of $80.7 million, after customary purchase price adjustments.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 + Details
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