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Acquisitions of Oil and Natural Gas Properties | 9 Months Ended
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Sep. 30, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract] |
Acquisitions of Oil and Natural Gas Properties | Acquisitions of Oil and Natural Gas Properties Silverback Acquisition On July 1, 2025, the Company completed the acquisition of 100% of the ownership interests of Silverback Exploration II, LLC and its subsidiaries ("Silverback") which own oil and natural gas assets and operations located primarily in the Yeso trend of the Permian Basin in Eddy County, New Mexico (the “Silverback Acquisition”) for approximately $123 million before final customary purchase price adjustments, which includes approximately $120 million paid in cash and approximately $3 million of estimated fair value for earnout payments. The Silverback Acquisition qualified as a business combination using the acquisition method of accounting. The assets acquired and liabilities assumed were recognized at fair value as of the acquisition date. The preliminary purchase price allocation is subject to change for up to one year subsequent to the closing date of the acquisition due to final customary purchase price adjustments. The assets acquired and liabilities assumed were recognized on the condensed consolidated balance sheet at fair value as of the acquisition date. The fair value measurements of the oil and natural gas properties acquired and asset retirement obligations assumed were derived utilizing an income approach and based, in part, on significant inputs not observable in the market. These inputs represent Level 3 measurements in the fair value hierarchy and include, but are not limited to, estimates of reserves, future development, future operating costs, future cash flows and the use of weighted average cost of capital. These inputs required the use of significant judgments and estimates at the date of valuation, and use of different estimates and judgments could yield different results. The following table presents the preliminary allocation of the Silverback Acquisition to the identified assets acquired and liabilities assumed based on estimated fair value as of the closing date of the acquisition:
Preliminary purchase price allocation as of September 30, 2025 (in thousands): |
Consideration: |  |
Cash consideration paid to sellers upon closing |  | $ | 119,684 |
Preliminary estimated fair value of earnout payments |  | 3,100 |
Total consideration transferred |  | $ | 122,784 |
Fair value of assets acquired: |  |
Cash |  | $ | 1,857 |
Accounts receivable |  | 8,234 |
Prepaid expenses |  | 313 |
Inventory |  | 5,371 |
Current derivative assets |  | 1,029 |
Oil and natural gas properties (successful efforts) |  | 139,996 |
Other property and equipment |  | 602 |
Other non-current assets |  | 1,416 |
Amount attributable to assets acquired |  | $ | 158,818 |
Fair value of liabilities assumed: |  |
Accounts payable |  | $ | 554 |
Accrued liabilities |  | 1,825 |
Revenue payable |  | 14,371 |
Asset retirement obligations |  | 19,284 |
Amount attributable to liabilities assumed |  | $ | 36,034 |
Net assets acquired |  | $ | 122,784 |
Cash consideration included deposits into escrow of $14.2 million at signing and $6.9 million at closing for title defects. As of September 30, 2025, $4.6 million of the escrow was returned to the Company, $1.1 million was paid to the sellers and $1.2 million remains in escrow and is reflected as funds held in escrow in our accompanying condensed consolidated balance sheets. The Company may potentially pay the sellers quarterly earnout payments of up to $1.875 million per fiscal quarter during calendar years 2026 and 2027 if the NYMEX WTI quarterly average exceeds certain stated amounts set forth in the Purchase Agreement, ranging from $70 to $75 per barrel or higher. See additional information on the fair value measurement of the earnout payments in Note 7 - Fair Value Measurements. The Company funded the acquisition with cash on hand and borrowings under our Credit Facility. Transaction costs associated with the acquisition were approximately $2.6 million and $4.5 million for the three and nine months ended September 30, 2025, respectively. Post-Acquisition Operating Results The results of operations attributable to the Silverback Acquisition since the closing date of the acquisition have been included in the consolidated statements of operations and include $14.8 million of total revenues, net and $8.3 million of earnings, which represents total revenues, net less production taxes and lease operating expenses ("LOE"), for the three and nine months ended September 30, 2025. Unaudited Pro Forma Operating Results The results of operations of the Silverback Acquisition have been included in the Company's condensed consolidated financial statements since the closing date of the acquisition. The following supplemental, unaudited pro forma combined financial information for the three and nine months ended September 30, 2025, and 2024, reflect the consolidated results of operations of the Company as if the Silverback Acquisition had occurred on January 1, 2024. The information below reflects pro forma adjustments based on available information and certain assumptions that the Company believes are factual and supportable. The unaudited pro forma information includes adjustments for (i) transaction costs being reclassified to the first quarter of 2024 instead of being recorded in the three and nine months ended September 30, 2025, (ii) depletion, depreciation and amortization expense and (iii) interest expense related to the financing for the Silverback Acquisition. In addition, the pro forma information has been effected for income taxes with a blended statutory rate of 25.7% for the three and nine months ended September 30, 2025 and 2024.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  |  | 2025 |  | 2024 |
|  | (In thousands, except per share amounts)
Total revenues, net |  | $ | 106,852 |  |  | $ | 118,582 |  |  |  | $ | 331,297 |  |  | $ | 364,335 |  |
Net income |  | $ | 17,515 |  |  | $ | 26,585 |  |  |  | $ | 82,755 |  |  | $ | 80,730 |  |
Basic net income per common share |  | $ | 0.83 |  |  | $ | 1.27 |  |  |  | $ | 3.91 |  |  | $ | 3.92 |  |
Diluted net income per common share |  | $ | 0.82 |  |  | $ | 1.25 |  |  |  | $ | 3.91 |  |  | $ | 3.89 |  |
The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations that the Company would have reported had the Silverback Acquisition been completed as of January 1, 2024, and should not be taken as indicative of the Company's future combined results of operations. The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma combined financial information and actual results. New Mexico Mineral Rights Acquisition In April 2025, the Company closed on its acquisition of undivided interests in oil, natural gas and minerals, which added approximately 175 contiguous net acres to our Red Lake field for approximately $2.1 million. 2024 New Mexico Asset Acquisition On May 7, 2024, the Company completed the acquisition of oil and natural gas properties in Eddy County, New Mexico ("2024 New Mexico Asset Acquisition"), for a cash purchase price of approximately $19.1 million plus $0.5 million in transaction costs. The 2024 New Mexico Asset Acquisition was accounted for as an asset acquisition, with the final purchase price and transaction costs being capitalized to oil and natural gas properties. This acquisition was funded through a combination of proceeds from the 2024 equity issuance ("2024 Equity Offering") discussed in Note 11 - Shareholders' Equity and cash on hand.

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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 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent + Details
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