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ACQUISITIONS AND DIVESTITURES | 9 Months Ended
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Sep. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS AND DIVESTITURES | ACQUISITIONS AND DIVESTITURESAll mergers and acquisitions disclosed are accounted for under the acquisition method of accounting for business combinations under ASC Topic 805, Business Combinations. Accordingly, we conduct 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 are 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 oil and natural gas properties are measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of 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. These inputs require significant judgments and estimates by management at the time of the valuation. Hibernia Acquisition On June 19, 2023, the Company entered into a membership interest purchase agreement (the “Hibernia Acquisition Agreement”) with Hibernia Energy III Holdings, LLC and Hibernia Energy III-B Holdings, LLC, pursuant to which the Company agreed to purchase all of the issued and outstanding equity ownership interests of Hibernia Energy III, LLC and Hibernia Energy III-B, LLC. On August 2, 2023, the Company completed the transactions contemplated by the Hibernia Acquisition Agreement (the “Hibernia Acquisition”) for aggregate consideration of approximately $2.2 billion in cash, subject to certain customary purchase price adjustments set forth in the Hibernia Acquisition Agreement. The following table presents the preliminary purchase price allocation of the assets acquired and the liabilities assumed in the Hibernia Acquisition:
Preliminary Purchase Price Allocation (in thousands) |  |
Assets Acquired |  |
Cash and cash equivalents |  | $ | 30,671 |
Accounts receivable - oil and natural gas sales |  | 89,766 |
Accounts receivable - joint interest and other |  | 4,874 |
Proved properties |  | 2,123,791 |
Unproved properties |  | 115,802 |
Other property and equipment |  | 520 |
Right-of-use assets |  | 30,393 |
Total assets acquired |  | $ | 2,395,817 |
Liabilities Assumed |  |
Accounts payable and accrued expenses |  | $ | 91,977 |
Production taxes payable |  | 10,320 |
Oil and natural gas revenue distribution payable |  | 75,267 |
Asset retirement obligations |  | 8,299 |
Lease liability |  | 30,393 |
Total liabilities assumed |  | 216,256 |
Net assets acquired |  | $ | 2,179,561 |
The purchase price allocation for the Hibernia Acquisition is preliminary, and Civitas is continuing to assess the fair values of certain of the Hibernia assets acquired and liabilities assumed. The Company expects to finalize the purchase price allocation as soon as practicable, which will not extend beyond the one-year measurement period. Tap Rock Acquisition On June 19, 2023, the Company entered into a membership interest purchase agreement (the “Tap Rock Acquisition Agreement”) with Tap Rock Resources Legacy, LLC (“Tap Rock I Legacy”), Tap Rock Resources Intermediate, LLC (“Tap Rock I Intermediate” and, together with Tap Rock I Legacy, the “Tap Rock I Sellers”), Tap Rock Resources II Legacy, LLC (“Tap Rock II Legacy”), Tap Rock Resources II Intermediate, LLC (“Tap Rock II Intermediate” and, together with Tap Rock II Legacy, the “Tap Rock II Sellers”), Tap Rock NM10 Legacy Holdings, LLC (“NM10 Legacy”), and Tap Rock NM10 Holdings Intermediate, LLC (“NM10 Intermediate” and together with NM10 Legacy, the “NM10 Sellers”, and the NM10 Sellers, together with the Tap Rock I Sellers and Tap Rock II Sellers, the “Tap Rock Sellers”), solely in its capacity as “Sellers’ Representative” (as defined therein), Tap Rock I Legacy, and solely for the limited purposes set forth therein, Tap Rock Resources, LLC, pursuant to which the Company agreed to purchase all of the issued and outstanding equity ownership interests of Tap Rock AcquisitionCo, LLC, Tap Rock Resources II, LLC, and Tap Rock NM10 Holdings, LLC from the Tap Rock I Sellers, the Tap Rock II Sellers and the NM10 Sellers, respectively. On August 2, 2023, the Company completed the transactions contemplated by the Tap Rock Acquisition Agreement (the “Tap Rock Acquisition”). The following tables present the consideration transferred and preliminary purchase price allocation of the assets acquired and the liabilities assumed in the Tap Rock Acquisition:
Consideration (in thousands, except per share amount) |  |  |
Cash consideration |  | $ | 1,508,143 |  |
Shares of common stock issued |  | 13,538,472 |  |
Closing price per share(1) |  | $ | 73.14 |  |
Equity consideration |  | $ | 990,204 |  |
Total consideration(2) |  | $ | 2,498,347 |  |
_______________________ (1)Based on the closing stock price of Civitas common stock on August 2, 2023. (2)Subject to certain customary purchase price adjustments set forth in the Tap Rock Acquisition Agreement.
Preliminary Purchase Price Allocation (in thousands) |  |
Assets Acquired |  |
Cash and cash equivalents |  | $ | 6,543 |
Accounts receivable - oil and natural gas sales |  | 106,255 |
Accounts receivable - joint interest and other |  | 31,300 |
Prepaid expenses and other |  | 22,013 |
Proved properties |  | 2,377,649 |
Unproved properties |  | 298,859 |
Other property and equipment |  | 12,827 |
Right-of-use assets |  | 626 |
Total assets acquired |  | $ | 2,856,072 |
Liabilities Assumed |  |
Accounts payable and accrued expenses |  | $ | 179,626 |
Production taxes payable |  | 15,557 |
Oil and natural gas revenue distribution payable |  | 78,758 |
Ad valorem taxes |  | 1,374 |
Asset retirement obligations |  | 31,518 |
Lease liability |  | 626 |
Deferred revenue |  | 50,266 |
Total liabilities assumed |  | 357,725 |
Net assets acquired |  | $ | 2,498,347 |
The purchase price allocation for the Tap Rock Acquisition is preliminary, and Civitas is continuing to assess the fair values of certain of the Tap Rock assets acquired and liabilities assumed. The Company expects to finalize the purchase price allocation as soon as practicable, which will not extend beyond the one-year measurement period. Revenue and earnings of the acquirees The results of operations for the Hibernia Acquisition and Tap Rock Acquisition since the closing date have been included on our condensed consolidated financial statements for the three and nine months ended September 30, 2023. The amount of revenue of Hibernia and Tap Rock included in our accompanying unaudited condensed consolidated statements of operations (“statements of operations”) was approximately $124.1 million and $182.6 million, respectively, during the three and nine months ended September 30, 2023. We determined that disclosing the amount of Hibernia and Tap Rock related earnings included in the statements of operations is impracticable as the operations from these acquisitions 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 condensed consolidated results of operations for the three and nine months ended September 30, 2023 and 2022, assuming the Hibernia Acquisition and Tap Rock Acquisition had been completed as of January 1, 2022. The pro forma financial information is not necessarily indicative of the results of operations that would have been achieved if the Hibernia Acquisition and Tap Rock Acquisition had been effective as of this date, or of future results, and includes certain nonrecurring pro forma adjustments that were directly related to these business combinations. Specifically, pro forma earnings were adjusted to exclude transaction costs incurred associated with these acquisitions for the three and nine months ended September 30, 2023 and include such transaction costs in pro forma earnings for the nine months ended September 30, 2022.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Total revenue |  | $ | 1,157,615 |  |  | $ | 1,575,493 |  |  | $ | 3,306,345 |  |  | $ | 4,542,055 |
Net income |  | 179,307 |  |  | 597,835 |  |  | 686,951 |  |  | 1,413,135 |
Net income per common share - basic |  | $ | 1.91 |  |  | $ | 6.06 |  |  | $ | 7.28 |  |  | $ | 14.35 |
Net income per common share - diluted |  | 1.90 |  |  | 6.03 |  |  | 7.22 |  |  | 14.27 |
Bison Acquisition On March 1, 2022, the Company completed the acquisition of privately held DJ Basin operator Bison Oil & Gas II, LLC for 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. Transaction costs Transaction costs related to the aforementioned acquisitions are accounted for separately from the assets acquired and liabilities assumed and are included in transaction costs in the statements of operations. The Company incurred transaction costs of $28.5 million and $1.8 million during the three months ended September 30, 2023 and 2022, respectively, and $60.1 million and $23.8 million during the nine months ended September 30, 2023 and 2022, respectively.

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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 -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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