ACQUISITIONS AND DIVESTITURES

12 Months Ended

Dec. 31, 2023

Business Combination and Asset Acquisition [Abstract]

All mergers and acquisitions disclosed below are accounted for under the acquisition method of accounting for business combinations under ASC Topic 805, 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 were measured using valuation techniques that converted future cash flows to a single discounted amount. Significant inputs to the valuation of the crude oil and natural gas properties included estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, reserve adjustment factors, and a market-based weighted-average cost of capital. These inputs required significant judgments and estimates by management at the time of the valuation.

Hibernia Acquisition

On August 2, 2023, we acquired all of the issued and outstanding equity ownership interests of Hibernia Energy III, LLC and Hibernia Energy III-B, LLC (the “Hibernia Acquisition”) for aggregate consideration of approximately $2.2 billion in cash, inclusive of customary post-closing adjustments. 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 - crude oil and natural gas sales	89,766
Accounts receivable - joint interest and other	4,463
Proved properties	2,135,085
Unproved properties	115,802
Other property and equipment	520
Right-of-use assets	30,393
Total assets acquired	$	2,406,700

Liabilities Assumed
Accounts payable and accrued expenses	$	97,739
Production taxes payable	10,320
Crude oil and natural gas revenue distribution payable	75,267
Asset retirement obligations	8,299
Lease liability	30,393
Total liabilities assumed	222,018
Net assets acquired	$	2,184,682

Through December 31, 2023, there have been immaterial adjustments made to the allocation presented in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 filed with the SEC on November 7, 2023. The purchase price allocation for the Hibernia Acquisition is preliminary, and we continue to assess the fair values of certain of the Hibernia assets acquired and liabilities assumed. We expect to finalize the purchase price allocation as soon as practicable, which will not extend beyond the one-year measurement period.

Tap Rock Acquisition

On August 2, 2023, we acquired 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 (the “Tap Rock Acquisition”) for aggregate consideration of approximately $2.5 billion, inclusive of customary post-closing adjustments. 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	$	2,498,347

_______________________

(1)Based on the closing stock price of Civitas common stock on August 2, 2023.


Preliminary Purchase Price Allocation (in thousands)
Assets Acquired
Cash and cash equivalents	$	6,543
Accounts receivable - crude oil and natural gas sales	106,255
Accounts receivable - joint interest and other	31,715
Prepaid expenses and other	17,930
Proved properties	2,335,333
Unproved properties	298,859
Other property and equipment	12,827
Right-of-use assets	626
Total assets acquired	$	2,810,088

Liabilities Assumed
Accounts payable and accrued expenses	$	150,138
Production taxes payable	9,692
Crude oil and natural gas revenue distribution payable	68,094
Ad valorem taxes	1,407
Asset retirement obligations	31,518
Lease liability	626
Deferred revenue	50,266
Total liabilities assumed	311,741
Net assets acquired	$	2,498,347

Through December 31, 2023, there have been immaterial adjustments made to the allocation presented in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 filed with the SEC on November 7, 2023. The purchase price allocation for the Tap Rock Acquisition is preliminary, and we continue to assess the fair values of certain of the Tap Rock assets acquired and liabilities assumed. We expect 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 consolidated financial statements during the year ended December 31, 2023. The amount of revenue of Hibernia and Tap Rock included in our accompanying statements of operations was approximately $312.7 million and $410.4 million, respectively, during the year ended December 31, 2023. We determined that disclosing the amount of Hibernia and Tap Rock related net income included in the accompanying statements of operations is impracticable as the operations from these acquisitions were integrated into our operations 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, 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.


	Year Ended December 31,
	2023		2022
Total revenue	$	4,433,121	$	5,808,411
Net income	929,731		1,821,139
Earnings per common share - basic	$	9.87	$	18.48
Earnings per common share - diluted	9.79		18.37

Bison Acquisition

On March 1, 2022, we completed the acquisition of privately held DJ Basin operator Bison Oil & Gas II, LLC (“Bison”) 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.

Vencer Acquisition

On October 3, 2023, we entered into a purchase and sale agreement (the “PSA”) with Vencer Energy, LLC (“Vencer”), pursuant to which we agreed to acquire from Vencer certain oil and gas properties, interests, and related assets located in Glasscock, Martin, Midland, Reagan, and Upton Counties, Texas (the “Assets”). In connection with and upon execution of the PSA, the Company deposited with an escrow agent a cash deposit of $161.3 million equal to 7.5% of the unadjusted Vencer Purchase Price (as defined below).

On January 2, 2024, we completed the transactions contemplated by the PSA (the “Vencer Acquisition”) for adjusted aggregate consideration of approximately $2.05 billion, which was comprised of (i) $1.0 billion in cash, subject to certain customary purchase price adjustments set forth in the PSA, (ii) 7,289,515 shares of common stock, par value $0.01 per share, valued at approximately $500.0 million, subject to certain customary anti-dilution and purchase price adjustments, and (iii) $550.0 million in cash to be paid on or before January 3, 2025 (as adjusted, the “Vencer Purchase Price”). All amounts deposited were applied towards the aggregate cash consideration due at the closing of the Vencer Acquisition.

The preliminary purchase price allocation for the Vencer Acquisition is not complete as of the date of this report. We expect to finalize the purchase price allocation as soon as practicable, which will not extend beyond the one-year measurement period.

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 accompanying statements of operations. We incurred transaction costs of $84.3 million, $24.7 million, and $43.6 million during the years ended December 31, 2023, 2022, and 2021, respectively.