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Subsequent Event
 12 Months Ended
Dec. 31, 2021
Subsequent Events [Abstract]  
Subsequent Event Subsequent Event
Chisholm Acquisition
On February 15, 2022, Earthstone, EEH, Chisholm Energy Operating, LLC (“OpCo”) and Chisholm Energy Agent, Inc. (“Agent” and collectively with OpCo, “Chisholm”), as seller, consummated the transactions (the “Chisholm Closing”) contemplated in the Chisholm Agreement. At the closing of the Chisholm Agreement, among other things, EEH acquired (the “Chisholm Acquisition”) interests in oil and gas leases and related property of Chisholm located in Lea County and Eddy County, New Mexico, for aggregate consideration consisting of: (i) approximately $314.7 million in cash, net of preliminary and customary purchase price adjustments and remains subject to post-closing settlement between EEH and Chisholm paid at the closing of the Chisholm Acquisition, (ii) $70 million in cash to be paid as follows: $40 million to be paid six months after the closing of the Chisholm Acquisition and $30 million to be paid 12 months after the closing of the Chisholm Acquisition, subject to acceleration in the event that Earthstone receives gross proceeds of more than $450 million from a high yield bond offering or more than $50 million in gross proceeds from an offering of Class A Common Stock or preferred stock; and (iii) 19,417,476 shares of Class A Common Stock. On December 17, 2021, in accordance with the Chisholm Agreement and prior to the Chisholm Closing, Earthstone provided a deposit in the amount of $30.5 million which was recorded in Other noncurrent assets in the Consolidated Balance Sheeet as of December 31, 2021, as well as included in Acquisition of oil and gas properties in Cash flows from investing activities in the Consolidated Statements of Cash Flows for the year then ended. A Significant Shareholder was the majority owner of Chisholm as of the closing of the Chisholm Acquisition. A majority of the stockholders of Earthstone not affiliated with the Significant Shareholder approved the issuance of 19,417,476 shares of Class A Common Stock in connection with the closing of the Chisholm Acquisition.
Cash consideration for the Chisholm Acquisition was funded by borrowings under the Credit Agreement whose borrowing base was increased from $650 million to $825 million at the closing of the Chisholm Acquisition on February 15, 2022.
Bighorn Agreement
On January 30, 2022, Earthstone, EEH, and Bighorn Asset Company, LLC, a Delaware limited liability company (“Bighorn”), as seller, entered into a Purchase and Sale Agreement (the “Bighorn Agreement”). Pursuant to the Bighorn Agreement, EEH will acquire (the “Bighorn Acquisition”) interests in oil and gas leases and related property of Bighorn located in the Midland Basin, Texas, for a purchase price (the “Bighorn Purchase Price”) of $770 million in cash and 6,808,511 shares of Class A Common Stock. The Bighorn Purchase Price is subject to customary purchase price adjustments with an effective date of January 1, 2022. In connection with the Bighorn Agreement, EEH deposited $50 million in cash into a third-party escrow account as a deposit pursuant to the Bighorn Agreement, which will be credited against the Bighorn Purchase Price upon closing of the Bighorn Acquisition.
Credit Agreement
On January 30, 2022, Earthstone, EEH, as Borrower, Wells Fargo Bank, National Association (“Wells Fargo”) as Administrative Agent, the lenders party thereto (the “Lenders”) and the guarantors party thereto entered into an amended and restated Fifth Amendment (the “Amendment”) to the Credit Agreement. Among other things, the Amendment increases the borrowing base and corresponding elected commitments from $650 million to $825 million upon the closing (“Chisholm Closing”) of the Chisholm Agreement; provides that upon the closing of the Bighorn Acquisition (assuming the occurrence of the Chisholm Closing), the borrowing base and corresponding elected commitments will increase to $1.325 billion, unless Earthstone completes an unsecured senior notes offering (the “Notes Offering”) prior to the closing of the Bighorn Acquisition in which case the elected commitments will be reduced by the amount of the net proceeds from a Notes Offering up to $500 million; provides for an increase in interest rates by 0.50% in the event a Notes Offering has not been completed prior to the closing of the Bighorn Acquisition; provides mechanics relating to the transition from LIBOR to a benchmark replacement rate to be effective contemporaneously with the effectiveness of the Amendment on January 30, 2022; adds certain hedging requirements relating to anticipated oil and natural gas production of the properties to be acquired pursuant to the Bighorn Acquisition; adjusts some financial covenants; redefines the limitations on certain restricted payments the Borrower may make; and makes certain administrative changes to the Credit Agreement.
Securities Purchase Agreement
On January 30, 2022, Earthstone entered into a securities purchase agreement (the “Securities Purchase Agreement”) with EnCap Capital Energy Fund XI, L.P. (“EnCap Fund XI”), an affiliate of EnCap, and Cypress Investments, LLC, a fund managed by Post Oak Energy Capital, LP (“Post Oak” and collectively with EnCap Fund XI, the “Investors”) to sell, in a private placement (the “Private Placement”), 280,000 shares of newly authorized convertible preferred stock, $0.001 par value per share (the “Preferred Stock”), each share of which will be convertible into 90.0900900900901 shares of Class A Common Stock for anticipated gross proceeds of $280.0 million, at a price of $1,000.00 per share of Preferred Stock (or $11.10 per share of Class A Common Stock on an as-converted basis). The Private Placement is contingent upon the closing of the Bighorn Acquisition. The Company intends to use the net proceeds from the sale of the Preferred Stock to partially fund the Bighorn Acquisition. As of the date of the Securities Purchase Agreement, EnCap and its affiliates beneficially owned approximately 46.5% of the outstanding voting power of Earthstone. Two of Earthstone’s directors are employed by EnCap. The Securities Purchase Agreement and the Private Placement were evaluated and approved by the Audit Committee of the Board and unanimously approved by the Board.