Document

On June 14, 2023, Earthstone Energy Holdings, LLC (“EEH”), a subsidiary of Earthstone Energy, Inc. (“Earthstone”), entered into (i) a Securities Purchase Agreement (the “Agreement”) with Novo Oil & Gas Legacy Holdings, LLC, Novo Intermediate, LLC and Novo Oil & Gas Holdings, LLC (“Novo”), pursuant to which EEH will acquire 100% of the issued and outstanding equity interests of Novo (the “Novo Acquisition”) and (ii) an Acquisition and Cooperation Agreement with Northern Oil and Gas, Inc. (“NOG”), pursuant to which NOG has agreed to acquire, immediately after the closing of the Acquisition, an undivided one-third interest in Novo’s oil and gas and related assets acquired in the Novo Acquisition for $0.5 billion, resulting in a $1.0 billion purchase price net to Earthstone for the retained two-thirds interest acquired pursuant to the Purchase Agreement (together with the Novo Acquisition, the “Novo Transactions”). The effective date of the Novo Transactions is May 1, 2023. Consideration at closing will be subject to customary purchase price adjustments.

Earthstone is in the process of evaluating the accounting treatment of the Novo Acquisition. For the purposes of the unaudited pro forma condensed combined financial statements presented herein, Earthstone is assuming the Novo Acquisition will be accounted for as an asset acquisition. The fair value of the consideration paid by us and allocation of that amount to the underlying assets acquired and liabilities assumed, on a relative fair value basis, will be recorded on our books as of the date of the closing of the Novo Acquisition. Additionally, costs directly related to the Novo Acquisition will be capitalized as a component of the purchase price.

As previously disclosed in its Current Report on Form 8-K filed on August 11, 2022 with the SEC, on August 10, 2022, EEH completed the acquisition of the assets of Titus Oil & Gas Production, LLC, Titus Oil & Gas Corporation, Lenox Minerals, LLC, Lenox Mineral Title Holdings, Inc., Titus Oil & Gas Production II, LLC, Lenox Minerals II, LLC, and Lenox Mineral Holdings II, LLC (the “Titus Acquisition”). At the closing of the Titus Acquisition, among other things, EEH acquired interests in oil and gas leases and related property located in the Delaware Basin, New Mexico, for a purchase price of approximately $568.5 million in cash, net of customary purchase price adjustments and an aggregate 3,857,015 shares of Class A common stock, par value $0.001 per share, of Earthstone (“Class A Common Stock”).

The Titus Acquisition was accounted for as an asset acquisition in accordance with ASC 805. The fair value of the consideration paid by us and allocation of that amount to the underlying assets acquired, on a relative fair value basis, is recorded on our books as of the date of the closing of the Titus Acquisition. Additionally, costs directly related to the Titus Acquisition are capitalized as a component of the purchase price. The operating results of Titus are consolidated in our financial statements beginning on the date of the closing of the Titus Acquisition. The unaudited pro forma condensed combined financial statements presented herein have been prepared to reflect the transaction accounting adjustments to Earthstone’s historical condensed consolidated financial information in order to account for the Titus Acquisition and include the assumption of liabilities for acquisition-related expenses and the recognition of the estimated tax impact of the pro forma adjustments.

As previously disclosed in its Current Report on Form 8-K filed on April 18, 2022 with the SEC, on April 14, 2022, EEH completed the acquisition of the assets of Bighorn Asset Company, LLC (the “Bighorn Acquisition”). At the closing of the Bighorn Acquisition, among other things, EEH acquired interests in oil and gas leases and related property of Bighorn located in the Midland Basin, Texas, for a purchase price of approximately $628.2 million in cash, net of preliminary and customary purchase price adjustments, and 5,650,977 shares of Class A Common Stock.

Investments, LLC (“Cypress” and collectively with EnCap Fund XI, the “Investors”), a fund managed by Post Oak Energy Capital, L.P., consummated the sale and issuance of 280,000 shares of newly authorized Series A convertible preferred stock, par value $0.001 per share, of Earthstone (the “Preferred Stock”), pursuant to that certain Securities Purchase Agreement dated as of January 30, 2022, by and among Earthstone and the Investors (the “SPA”) that was previously reported on Form 8-K filed on February 2, 2022 with the SEC. At the closing of the SPA, Earthstone issued 280,000 shares of Preferred Stock in exchange for cash proceeds, net of offering costs, of $278.7 million. On July 6, 2022, the Series A Preferred Stock automatically converted into 25,225,225 shares of Class A Common Stock.

The Bighorn Acquisition was accounted for as an asset acquisition in accordance with ASC 805. The fair value of the consideration paid by us and allocation of that amount to the underlying assets acquired, on a relative fair value basis, is recorded on our books as of the date of the closing of the Bighorn Acquisition. Additionally, costs directly related to the Bighorn Acquisition are capitalized as a component of the purchase price. The operating results of Bighorn are consolidated in our financial statements beginning on the date of the closing of the Bighorn Acquisition. The unaudited pro forma condensed combined financial statements presented herein have been prepared to reflect the transaction accounting adjustments to Earthstone’s historical condensed consolidated financial information in order to account for the Bighorn Acquisition and include the assumption of liabilities for acquisition-related expenses and the recognition of the estimated tax impact of the pro forma adjustments.

As previously disclosed in its Current Report on Form 8-K filed on February 18, 2022 with the SEC, on February 15, 2022, EEH completed the acquisition of the assets of Chisholm Energy Holdings, LLC (the “Chisholm Acquisition”). At the closing of the Chisholm Acquisition, among other things, EEH acquired interests in oil and gas leases and related property of Chisholm located in Lea County and Eddy County, New Mexico, for a purchase price consisting of approximately $383.8 million in cash, net of preliminary and customary purchase price adjustments, and 19,311,582 shares of Class A Common Stock.

The Chisholm Acquisition was accounted for as a business combination in accordance with ASC 805 using the acquisition method of accounting, with Earthstone identified as the acquirer. The unaudited pro forma condensed combined financial statements presented herein have been prepared to reflect the transaction accounting adjustments to Earthstone’s historical condensed consolidated financial information in order to account for the Chisholm Acquisition and include the assumption of liabilities for acquisition-related expenses and the recognition of the estimated tax impact of the pro forma adjustments.

The unaudited pro forma condensed combined balance sheet as of March 31, 2023 gives effect to the Novo Transactions as if they had been completed on March 31, 2023. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2023 gives effect to the Chisholm Acquisition, Bighorn Acquisition and Novo Transactions (collectively, the “Acquisitions”) as if they had been completed on January 1, 2022. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022 gives effect to the Acquisitions as if they had been completed on January 1, 2022. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined balance sheet does not purport to represent what Earthstone’s financial position would have been had the Novo Transactions actually been consummated on March 31, 2023. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2023 does not purport to represent what Earthstone’s results of operations would have been had the Acquisitions been consummated on January 1, 2022. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022 does not purport to represent what Earthstone’s results of operations would have been had the Acquisitions been consummated on January 1, 2022. The unaudited pro forma condensed combined financial information may not be indicative of Earthstone’s future financial position or results of operations and does not reflect future events that may occur after the Acquisitions, including, but not limited to, the anticipated realization of ongoing savings from operating efficiencies, or offsetting unforeseen incremental costs.


ASSETS	Earthstone Historical		Novo Historical		Unacquired Portion of Novo		Novo Portion Sold to NOG		Transaction Accounting Adjustments			Earthstone Pro Forma Combined
Current assets:					(n)
Cash	$	—	$	24,679	$	—	$	500,000	$	(500,000)	(a)	$	24,679

Accounts receivable	161,151		69,773		(14,021)		—		—			216,903
Derivative asset	14,444		36,157		(36,157)		—		—			14,444
Prepaid expenses and other current assets	24,658		1,348		(1,293)		—		—			24,713
Total current assets	200,253		131,957		(51,471)		500,000		(500,000)			280,739

Oil and gas properties, successful efforts method:
Proved properties	4,195,206		1,172,432		(58,576)		(500,000)		393,040		(b)	5,202,102
Unproved properties	282,228		56,688		(21,814)		—		(14,874)		(b)	302,228
Land (surface rights)	5,482		—		—		—		—			5,482
Total oil and gas properties	4,482,916		1,229,120		(80,390)		(500,000)		378,166			5,509,812

Accumulated depreciation, depletion, amortization and impairment	(729,318)		(248,386)		28,014		—		220,372		(b)	(729,318)
Net oil and gas properties	3,753,598		980,734		(52,376)		(500,000)		598,538			4,780,494

Other noncurrent assets:
Office and other equipment, net of accumulated depreciation	5,571		251		(235)		—		—			5,587
Derivative asset	73		3,592		(3,592)		—		—			73
Operating lease right-of-use assets	6,573		86		(86)		—		—			6,573
Other noncurrent assets	17,407		3,183		(3,038)		—		1,266		(c)	18,818
TOTAL ASSETS	$	3,983,475	$	1,119,803	$	(110,798)	$	—	$	99,804		$	5,092,284
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	40,148	$	42,168	$	(11)	$	—	$	12,744	(d)	96,315
									1,266		(c)
Revenues and royalties payable	194,900		44,153		—		—		—			239,053
Accrued expenses	123,704		7,178		(1,287)		—		—			129,595
Asset retirement obligation	881		—		—		—		—			881
Derivative liability	3,864		—		—		—		—			3,864


Advances	8,242		7		—		—		—			8,249
Operating lease liabilities	890		86		(86)		—		—			890
Finance lease liabilities	880		—		—				—			880
Other current liabilities	11,447		2,333		—		—		—			13,780
Current portion of long-term debt	—								—			—
Total current liabilities	384,956		95,925		(1,384)		—		14,010			493,507

Noncurrent liabilities:
Long-term debt, net	991,855		310,000		(310,000)		—		988,445		(e)	1,967,556
									(12,744)		(d)
Deferred tax liability	156,937		—		—		—		—			156,937
Asset retirement obligation	29,941		2,779		—		—		—			32,720
Deferred revenues	—		21,778		—		—		—			21,778
Derivative liability	3,698		3,392		(3,392)		—		—			3,698
Operating lease liabilities	3,758		—		—		—		—			3,758
Finance lease liabilities	865		—		—		—		—			865
Other noncurrent liabilities	3,735		—		—		—		—			3,735
Total noncurrent liabilities	1,190,789		337,949		(313,392)		—		975,701			2,191,047

Equity:
Members' Equity	—		685,929		203,978		—		(889,907)		(f)	—
Preferred stock	—		—		—		—		—			—
Class A common stock	106		—		—		—		—			106
Class B common stock	34		—		—		—		—			34
Additional paid-in capital	1,343,965		—		—		—		—			1,343,965
Retained earnings	353,259		—		—		—		—			353,259
Total Earthstone Energy, Inc. stockholders’ equity	1,697,364		685,929		203,978		—		(889,907)			1,697,364
Noncontrolling interest	710,366		—		—		—		—			710,366
Total equity	2,407,730		685,929		203,978		—		(889,907)			2,407,730

TOTAL LIABILITIES AND EQUITY	$	3,983,475	$	1,119,803	$	(110,798)	$	—	$	99,804		$	5,092,284


	Earthstone Historical		Novo Historical		Unacquired Portion of Novo		Novo Portion Sold to NOG		Transaction Accounting Adjustments			Earthstone Pro Forma Combined
REVENUES					(n)
Oil and natural gas revenues	$	413,136	$	177,519	$	(19,663)	$	(52,619)	$	—		$	518,373


Total revenues	413,136		177,519		(19,663)		(52,619)		—			518,373

OPERATING COSTS AND EXPENSES
Lease operating expense	87,978		21,490		8,813		(10,101)		—			108,180
Production and ad valorem taxes	33,153		13,029		(2,021)		(3,669)		—			40,492
Depreciation, depletion, amortization and accretion	111,379		36,412		(19,935)		(5,492)		20,230		(g)	142,594

General and administrative expense	17,579		1,723		(162)		—		—			19,140

Transaction costs	193		—		—		—		(15)		(h)	178
Exploration expense	466		61		(61)		—		—			466
Total operating costs and expenses	250,748		72,715		(13,366)		(19,262)		20,215			311,050

Loss on sale of oil and gas properties	(3,140)		—		—		—		—			(3,140)

Income from operations	159,248		104,804		(6,297)		(33,357)		(20,215)			204,183

OTHER INCOME (EXPENSE)
Interest expense, net	(22,856)		(5,692)		5,692		—		(21,573)		(i)	(45,352)
									(923)		(j)
Write-off deferred financing costs	(5,109)		—		—		—		752		(k)	(4,357)
(Loss) gain on derivative contracts, net	(26,464)		31,934		(31,934)		—		—			(26,464)
Gain (loss) on disposal of asset	—		8		(8)		—		—			—
Deferred midstream revenue	—		583		—		—		—			583
Other income (expense), net	(7)		76		(4)		—		—			65
Total other income (expense)	(54,436)		26,909		(26,254)		—		(21,744)			(75,525)

Income (loss) before income taxes	104,812		131,713		(32,551)		(33,357)		(41,959)			128,658
Income tax (expense) benefit	(18,601)		(71)		—		24		(5,948)		(l)	(24,596)


Net income (loss)	$	86,211	$	131,642	$	(32,551)	$	(33,333)	$	(47,907)		$	104,062

Less: Net income (loss) attributable to noncontrolling interests	25,663		—		—		—		(240)		(m)	25,423
Net income (loss) attributable to Earthstone Energy, Inc. common stockholders	$	60,548	$	131,642	$	(32,551)	$	(33,333)	$	(47,667)		$	78,639

Net income per common share:
Basic	$	0.57										$	0.74
Diluted	$	0.56										$	0.73

Weighted average common shares outstanding:
Basic	105,972,734											105,972,734
Diluted	107,525,017											107,525,017


	Earthstone Historical		Chisholm Historical (1/1/22 - 2/15/22)		Bighorn Historical (1/1/22 - 4/14/22)		Titus Historical (1/1/22 - 8/10/22)		Novo Historical		Unacquired Portion of Novo		Novo Portion Sold to NOG		Transaction Accounting Adjustments			Earthstone Pro Forma Combined
REVENUES											(n)
Oil and natural gas revenues	$	1,695,154	$	36,005	$	190,951	$	500,046	$	663,540	$	(71,773)	$	(197,256)	$	—		$	2,816,667


Total revenues	1,695,154		36,005		190,951		500,046		663,540		(71,773)		(197,256)		—			2,816,667

OPERATING COSTS AND EXPENSES
Lease operating expense	230,515		5,503		29,956		35,094		45,326		20,477		(21,934)		—			344,937
Production and ad valorem taxes	123,054		2,948		12,521		37,210		48,969		(7,574)		(13,798)		—			203,330
Depreciation, depletion, amortization and accretion	304,465		7,140		16,769		104,021		102,851		(4,889)		(32,654)		17,245		(g)	514,948

General and administrative expense	74,175		—		7,441		—		8,641		(818)		—		—			89,439

Transaction costs	8,248		—		—		—		—		—		—		1,070		(h)	9,318
Exploration expense	2,492		—		—		—		808		(282)		—		—			3,018
Total operating costs and expenses	742,949		15,591		66,687		176,325		206,595		6,914		(68,386)		18,315			1,164,990

Gain (loss) on sale of oil and gas properties	13,900		—		—		—		(60)		136		—		—			13,976

Income (loss) from operations	966,105		20,414		124,264		323,721		456,885		(78,551)		(128,870)		(18,315)			1,665,653

OTHER INCOME (EXPENSE)
Interest expense, net	(66,821)		—		(1,597)		—		(8,791)		8,792		—		(102,512)		(i)	(175,638)
															(4,709)		(j)
(Loss) gain on derivative contracts, net	(125,107)		—		(63,874)		—		(10,325)		10,325		—		—			(188,981)
Deferred midstream revenue	—		—		—		—		2,333		—		—		—			2,333

Other income (expense), net	856		—		57		—		331		88		—		—			1,332

Total other income (expense)	(191,072)		—		(65,414)		—		(16,452)		19,205		—		(107,221)			(360,954)

Income (loss) before income taxes	775,033		20,414		58,850		323,721		440,433		(59,346)		(128,870)		(125,536)			1,304,699
Income tax (expense) benefit	(124,416)		—		(959)		—		(403)		52		117		(96,106)		(l)	(221,715)
Net income (loss)	$	650,617	$	20,414	$	57,891	$	323,721	$	440,030	$	(59,294)	$	(128,753)	$	(221,642)		$	1,082,984


Less: Net income attributable to noncontrolling interests	198,132		—		—		—		—		—		—		74,689		(m)	272,821
Net income (loss) attributable to Earthstone Energy, Inc. common stockholders	$	452,485	$	20,414	$	57,891	$	323,721	$	440,030	$	(59,294)	$	(128,753)	$	(296,331)		$	810,163

Net income per common share:
Basic	$	5.12																$	7.96
Diluted	$	4.83																$	7.39

Weighted average common shares outstanding:
Basic	88,349,088														13,442,289			101,791,377
Diluted	96,328,217														13,373,179			109,701,396

The accompanying unaudited pro forma condensed combined financial statements (the “Pro Forma Financial Statements”) were prepared in accordance with Article 11 of Regulation S-X, as amended by SEC Final Rule Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and based on the historical consolidated and combined financial information of Earthstone, Chisholm, Bighorn, Titus and Novo. The Novo Acquisition has been accounted for as an asset acquisition in accordance with ASC 805. The fair value of the consideration paid by us and allocation of that amount to the underlying assets acquired, on a relative fair value basis, is recorded on our books as of the date of the closing of the Novo Acquisition. Additionally, costs directly related to the Novo Acquisition are capitalized as a component of the purchase price.

Presented in the Pro Forma Financial Statements are the combined impact of the Chisholm Acquisition, Bighorn Acquisition, Titus Acquisition and Novo Transactions (the “Acquisitions”). The Bighorn Acquisition, Titus Acquisition and Novo Acquisition were accounted for as asset acquisitions in accordance with ASC 805 and the Chisholm Acquisition was accounted for as a business combination in accordance with ASC 805. Certain transaction accounting adjustments have been made in order to show the effects of the Acquisitions in the Pro Forma Financial Statements. The accounting adjustments related to the Novo Acquisition are preliminary and based on estimates of the purchase consideration and estimates of fair value and useful lives of the assets to be acquired and liabilities to be assumed.

The accounting adjustments are described in the accompanying notes and are based on available information and certain assumptions that Earthstone believes are reasonable; however, actual results may differ from those reflected in these statements. The Pro Forma Financial Statements do not purport to represent what Earthstone’s financial position or results of operations would have been if the Acquisitions had occurred on the dates described in the Pro Forma Financial Statements, and they may not be indicative of Earthstone’s future financial position or results of operations. Certain information normally included in financial statements and the accompanying notes has been condensed or omitted. The Pro Forma Financial Statements should be read in conjunction with the historical financial statements and related notes of Earthstone, Chisholm, Bighorn, Titus and Novo for the periods presented.

The pro forma condensed combined balance sheet as of March 31, 2023 gives effect to the Novo Transactions as if they had been completed on March 31, 2023. The pro forma condensed combined statement of operations for the three months ended March 31, 2023 gives effect to the Acquisitions as if they had been completed on January 1, 2022. The pro forma condensed combined statement of operations for the year ended December 31, 2022 gives effect to the Acquisitions as if they had been completed on January 1, 2022.

The unaudited pro forma condensed combined balance sheet as of March 31, 2023 and the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2023 and the year ended December 31, 2022 have been compiled in a manner consistent with the accounting policies adopted by Earthstone. Certain reclassifications and adjustments have been made to the historical financial information of Chisholm, Bighorn, Titus and Novo presented herein to conform to Earthstone’s historical presentation.

The preliminary allocation of the total purchase price in the Novo Acquisition, on a relative fair value basis, is based upon management’s estimates of and assumptions related to the fair value of assets to be acquired and liabilities to be assumed as of the closing date of the transaction using currently available information. Because the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on financial position and results of operations may differ significantly from the pro forma amounts included herein.


Consideration:
Cash consideration (1)	$	985,945
Direct transaction costs (2)	2,500
Total consideration transferred	$	988,445

Assets acquired:
Cash	$	24,679
Accounts receivable - Oil, natural gas, and natural gas liquids revenues	46,789
Accounts receivable - Joint interest billings and other, net of allowance	8,963
Prepaid expenses and other current assets	55
Oil and gas properties	1,026,896
Office and other equipment, net	16
Other noncurrent assets	145
Amount attributable to assets acquired	$	1,107,543

Liabilities assumed:
Accounts payable	$	42,157
Revenues and royalties payable	44,153
Accrued expenses	5,891
Advances	7
Other current liabilities	2,333
Asset retirement obligation, noncurrent	2,779
Deferred revenues, noncurrent	21,778
Amount attributable to liabilities assumed	$	119,098

The consideration will be allocated to the assets acquired and liabilities assumed on a relative fair value basis. The fair value measurements of assets acquired and liabilities assumed, on a relative fair value basis, are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of oil and gas properties and asset retirement obligations were measured using the discounted cash flow technique of valuation.

Significant inputs to the valuation of oil and gas properties include estimates of: (i) reserves, (ii) future operating and development costs, (iii) future commodity prices, (iv) future plugging and abandonment costs, (v) estimated future cash flows, and (vi) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates and are the most sensitive and subject to change.

l)Adjustments to reflect the estimated incremental Income tax expense that would have been recorded in the period presented if the Acquisitions had occurred on January 1, 2022. The income tax rates used in calculating the tax impact of the adjustments recorded to the pro forma condensed combined statements of operations presented herein included a statutory federal income tax rate of 21%, a statutory Texas Margin tax rate of 0.75%, and a statutory New Mexico income tax rate of 5.9%, which represent the statutory rates in effect in those jurisdictions during the periods presented. The effective federal and New Mexico tax rates are less than the statutory rates as they only apply to taxable income related to the controlling interest of Earthstone.

The following table sets forth information with respect to the historical and combined estimated oil and natural gas reserves as of December 31, 2022 for Earthstone and Novo. The Earthstone reserve data presented below was derived from the independent engineering report of Cawley, Gillespie & Associates, Inc. (“CG&A”), Earthstone’s independent reserve engineer. The reserve information of Novo was prepared by Netherland, Sewell & Associates, Inc. Future exploration, exploitation and development expenditures, as well as future commodity prices and service costs, will affect the quantity of reserve volumes. The reserve estimates shown below were determined using the average first day of the month price for each of the preceding 12 months for oil and natural gas for the year ended December 31, 2022 for Earthstone and Novo.


	Earthstone (1)	Novo (2)	Combined
Estimated Proved Developed Reserves:
Oil (MBbl)	88,759	12,335	101,094
Natural Gas (MMcf)	574,762	143,669	718,431
Natural Gas Liquids (MBbl)	80,168	20,944	101,112
Total (MBoe)(3)	264,721	57,224	321,945
Estimated Proved Undeveloped Reserves:
Oil (MBbl)	49,641	8,197	57,838
Natural Gas (MMcf)	167,404	58,304	225,708
Natural Gas Liquids (MBbl)	25,673	9,694	35,367
Total (MBoe)(3)	103,215	27,608	130,823
Estimated Proved Reserves:
Oil (MBbl)	138,400	20,532	158,932
Natural Gas (MMcf)	742,166	201,973	944,139
Natural Gas Liquids (MBbl)	105,841	30,638	136,479
Total (MBoe)(3)	367,936	84,832	452,768
(1) As of December 31, 2022, holders of Earthstone's Class B Common Stock owned a non-controlling indirect interest of 24.4% of the estimated proved reserves, as adjusted for the impact of the Acquisitions.
(2) Represents the retained two-thirds interest acquired in the Novo Acquisition.
(3) Assumes a ratio of 6 Mcf of natural gas per Boe.

The following table sets forth summary information with respect to historical and combined oil and natural gas production for the year ended December 31, 2022 for Earthstone, Chisholm, Bighorn, Titus and Novo. The Earthstone oil and natural gas production data presented below was derived from Earthstone’s Annual Report on Form 10-K for the year ended December 31, 2022. The Chisholm, Bighorn, Titus and Novo oil and natural gas production data presented below was derived from the supplemental oil and gas reserve information (unaudited) included in notes to their audited financial statements for the year ended December 31, 2022.


	Earthstone (1)	Chisholm (2)	Bighorn (3)	Titus (4)	Novo (5)	Combined
Oil (MBbl)	11,866	343	902	4,021	2,259	19,391
Natural Gas (MMcf)	54,392	705	10,417	6,247	18,022	89,783
Natural Gas Liquids (MBbl)	7,599	90	1,338	1,007	2,607	12,641
Total (MBoe)(6)	28,531	551	3,976	6,069	7,870	46,997
(1) As of December 31, 2022, holders of Earthstone's Class B Common Stock owned a non-controlling indirect interest of 24.4% of the estimated proved reserves, as adjusted for the impact of the Acquisitions.
(2) Based on the pro rata allocation of 45 days of January-February 2022 production from internal reports.
(3) Includes the pro rata allocation of 14 days of April 2022 production from internal reports.
(4) Includes the pro rata allocation of 41 days of July-August 2022 production from internal reports.
(5) Represents the retained two-thirds interest acquired in the Novo Acquisition.
(6) Assumes a ratio of 6 Mcf of natural gas per Boe.


	Earthstone (1)		Novo (2)		Combined
Future cash inflows	$	21,506,026	$	4,013,814	$	25,519,840
Future production costs	(6,362,901)		(1,258,890)		(7,621,791)
Future development costs	(1,207,597)		(195,155)		(1,402,752)
Future income tax expense	(1,910,370)		(4,213)		(1,914,583)
Future net cash flows	12,025,158		2,555,556		14,580,714
10% annual discount for estimated timing of cash flows	(5,300,657)		(925,442)		(6,226,099)
Standardized measure of discounted future net cash flows	$	6,724,501	$	1,630,114	$	8,354,615
(1) As of December 31, 2022, holders of Earthstone's Class B Common Stock owned a non-controlling indirect interest of 24.4% of the estimated proved reserves, as adjusted for the impact of the Acquisitions.
(2) Represents the retained two-thirds interest acquired in the Novo Acquisition.