ACQUISITIONS AND DIVESTITURES

6 Months Ended

Jun. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [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 crude oil and natural gas assets from 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	$	996,420
Deferred acquisition consideration(1)(3)	$	532,284

Shares of common stock issued	7,181,527
Closing price per share(2)	$	68.08
Equity consideration(4)	$	488,918

Total consideration	$	2,017,622

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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 activities until such time payments are made, as applicable. Please refer to Note 5 - Long-Term Debt for additional information.

(4)Amounts represent non-cash financing activities.


Preliminary Purchase Price Allocation (in thousands)
Assets Acquired
Proved properties	$	1,855,909
Unproved properties	231,627
Other property and equipment	666
Right-of-use assets	4,049
Total assets acquired	$	2,092,251

Liabilities Assumed
Accounts payable and accrued expenses	$	2,000
Crude oil and natural gas revenue distribution payable	28,423
Asset retirement obligations	40,157
Lease liability	4,049
Total liabilities assumed	74,629
Net assets acquired	$	2,017,622

Through June 30, 2024, there have been immaterial adjustments made to the allocation presented in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 2, 2024. 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	2,147,368
Unproved properties	115,802
Other property and equipment	520
Right-of-use assets	30,393
Total assets acquired	$	2,418,983

Liabilities Assumed
Accounts payable and accrued expenses	$	110,022
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	234,301
Net assets acquired	$	2,184,682

Through June 30, 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	30,415
Prepaid expenses and other	17,930
Proved properties	2,332,011
Unproved properties	300,859
Other property and equipment	12,827
Right-of-use assets	626
Total assets acquired	$	2,807,466

Liabilities Assumed
Accounts payable and accrued expenses	$	152,779
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	314,382
Net assets acquired	$	2,493,084

Through June 30, 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 and six months ended June 30, 2024. The amount of revenue of Vencer included in our accompanying unaudited condensed consolidated statements of operations (“statements of operations”) was approximately $199.8 million and $398.0 million during the three and six months ended June 30, 2024, respectively. 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, Hibernia, and Tap Rock acquisitions 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 and six months ended June 30, 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 and six months ended June 30, 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, Hibernia, and Tap Rock acquisitions 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 June 30, 2023		Six Months Ended June 30, 2023
Total revenue	$	1,203,468	$	2,437,475
Net income	230,903		564,055
Earnings per common share - basic	$	2.28	$	5.54
Earnings per common share - diluted	2.27		5.50

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. Transaction costs also include costs associated with our efforts to divest of certain non-core assets in the DJ Basin. We incurred transaction costs of $7.9 million and $31.1 million during the three months ended June 30, 2024 and 2023, respectively, and $30.6 million and $31.6 million during the six months ended June 30, 2024 and 2023, respectively.