ACQUISITIONS AND DIVESTITURES

3 Months Ended

Mar. 31, 2024

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.

Vencer Acquisition

On January 2, 2024, we completed the acquisition of certain oil and gas assets with Vencer Energy, LLC (“Vencer”) for adjusted aggregate consideration of approximately $2.0 billion, inclusive of customary post-closing adjustments and $550 million in cash to be paid on or before January 3, 2025 (the “Vencer Acquisition”). In connection with and upon execution of the Vencer Purchase and Sale Agreement, we deposited cash of $161.3 million with an escrow agent. This deposit, along with interest accrued thereon, was credited against the cash payable at closing.The following tables present the consideration transferred and preliminary purchase price allocation of the assets acquired and the liabilities assumed in the Vencer Acquisition:


Consideration (in thousands, except per share amount)
Cash consideration	$	1,000,000
Deferred acquisition consideration(1)(3)	$	532,284

Shares of common stock issued	7,181,527
Closing price per share(2)	$	68.08
Equity consideration(3)	$	488,918

Total consideration	$	2,021,202

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(1)Based on discounted fixed and determinable future payments of cash.

(2)Based on the closing stock price of Civitas common stock on January 2, 2024.

(3)Amounts represent non-cash investing and financing activities.


Preliminary Purchase Price Allocation (in thousands)
Assets Acquired
Proved properties	$	1,853,288
Unproved properties	231,548
Other property and equipment	666
Right-of-use assets	4,049
Total assets acquired	$	2,089,551

Liabilities Assumed
Crude oil and natural gas revenue distribution payable	$	24,143
Asset retirement obligations	40,157
Lease liability	4,049
Total liabilities assumed	68,349
Net assets acquired	$	2,021,202

The purchase price allocation for the Vencer Acquisition is preliminary, and we continue to assess the fair values of certain of the Vencer 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.

Hibernia Acquisition

On August 2, 2023, we acquired all of the issued and outstanding equity ownership interests of Hibernia Energy III, LLC (“HE3”) and Hibernia Energy III-B, LLC (“HE3-B”, and together with HE3, “Hibernia”) for aggregate consideration of approximately $2.2 billion in cash, inclusive of customary post-closing adjustments (the “Hibernia Acquisition”). 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 March 31, 2024, 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 AcquisitionCo”), Tap Rock Resources II, LLC (“Tap Rock Resources II”), and Tap Rock NM10 Holdings, LLC (“Tap Rock NM10” and, together with Tap Rock AcquisitionCo and Tap Rock NM10, “Tap Rock”) for aggregate consideration of approximately $2.5 billion, inclusive of customary post-closing adjustments (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	$	1,502,880

Shares of common stock issued	13,538,472
Closing price per share(1)	$	73.14
Equity consideration	$	990,204

Total consideration	$	2,493,084

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(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	31,300
Prepaid expenses and other	17,930
Proved properties	2,330,485
Unproved properties	298,859
Other property and equipment	12,827
Right-of-use assets	626
Total assets acquired	$	2,804,825

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	$	2,493,084

Through March 31, 2024, 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 acquiree

The results of operations for the Vencer Acquisition since the closing date have been included on our unaudited condensed consolidated financial statements for the three months ended March 31, 2024. The amount of revenue of Vencer included in our accompanying unaudited condensed consolidated statements of operations (“statements of operations”) was approximately $198.2 million during the three months ended March 31, 2024. We determined that disclosing the amount of Vencer-related net income included in the accompanying statements of operations is impracticable as the operations from the acquisition was integrated into our operations from the date of the acquisition.

Supplemental pro forma financial information

The results of operations for the Vencer Acquisition, Hibernia Acquisition, and Tap Rock Acquisition since their respective closing dates have been included in our unaudited condensed consolidated financial statements and therefore do not require pro forma disclosure for the three months ended March 31, 2024. The following unaudited pro forma financial information (in thousands, except per share amounts) represents a summary of the consolidated results of operations for the three months ended March 31, 2023, assuming the Vencer Acquisition had been completed as of January 1, 2023 and 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 Vencer Acquisition, Hibernia Acquisition, and Tap Rock Acquisition had been effective as of those dates, or of future results, and includes certain nonrecurring pro forma adjustments that were directly related to these business combinations.


	Three Months Ended March 31,
	2023
Total revenue	$	1,234,007
Net income	329,254
Earnings per common share - basic	$	3.21
Earnings per common share - diluted	3.19

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 $22.7 million and $0.5 million during the three months ended March 31, 2024 and 2023, respectively.