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Basis of Presentation and Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies
Earthstone Energy, Inc., a Delaware corporation (“Earthstone” and together with its consolidated subsidiaries, the “Company”), is a growth-oriented independent oil and natural gas development and production company. In addition, the Company is active in corporate mergers and the acquisition of oil and natural gas properties that have production and future development opportunities. The Company's operations are all in the upstream segment of the oil and natural gas industry and all its properties are onshore in Texas and New Mexico.
Earthstone is the sole managing member of Earthstone Energy Holdings, LLC, a Delaware limited liability company (together with its wholly-owned consolidated subsidiaries, “EEH”), with a controlling interest in EEH. Earthstone, together with its wholly-owned subsidiary, Lynden Energy Corp., a corporation organized under the laws of British Columbia (“Lynden Corp”), and Lynden Corp’s wholly-owned consolidated subsidiary, Lynden USA Inc., a Utah corporation (“Lynden US”), collectively own a 75.7% interest in EEH. The Company consolidates the financial results of EEH and presents a noncontrolling interest in the Condensed Consolidated Financial Statements representing the economic interests of EEH’s members other than Earthstone and Lynden US. Each of the outstanding shares of Class A common stock, $0.001 par value per share of Earthstone (the “Class A Common Stock”), has a corresponding unit of limited liability company interests denominated as a common unit in EEH (an “EEH Unit”). Each of the outstanding shares of Class B common stock, $0.001 par value per share of Earthstone (the “Class B Common Stock” and with the Class A Common Stock, “Common Stock”), has a corresponding EEH Unit and collectively represent the noncontrolling interests in the Condensed Consolidated Financial Statements.
At any time, at the holder’s discretion, a holder of an EEH Unit and a share of Class B Common Stock may receive a share of Class A Common Stock in exchange for an EEH Unit and a corresponding share of Class B Common Stock, resulting in the immediate cancellation of both the EEH Unit and share of Class B Common Stock exchanged. As of September 30, 2023, outstanding common shares of Earthstone, along with the equal number of corresponding outstanding EEH Units, were approximately 140.7 million, consisting of 106.4 million shares of Class A Common Stock and 34.3 million shares of Class B Common Stock.
The accompanying unaudited Condensed Consolidated Financial Statements and notes thereto have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements. Pursuant to such rules and regulations, certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The accompanying unaudited Condensed Consolidated Financial Statements and notes should be read in conjunction with the financial statements and notes included in Earthstone’s 2022 Annual Report on Form 10-K.
The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for the fair presentation of the Company's financial position, results of operations and cash flows for the periods presented. Any such adjustments are of a normal, recurring nature. The Company’s Condensed Consolidated Balance Sheet as of December 31, 2022 is derived from the audited Consolidated Financial Statements at that date.
For the purposes of these Condensed Consolidated Financial Statements, short-term investments, which have an original maturity of three months or less, are considered cash equivalents.
Permian Resources Merger Agreement
On August 21, 2023, Earthstone entered into an agreement and plan of merger (the “Merger Agreement”) with Permian Resources Corporation, a Delaware corporation (“PR”), and certain of its subsidiaries, pursuant to which, subject to the conditions of the Merger Agreement, PR will acquire the Company in an all-stock transaction (“Merger”). Upon completion of the Merger Agreement, each outstanding share of Class A Common Stock will be converted into the right to receive 1.446 shares of PR’s Class A common stock, par value $0.0001 per share (the “PR Class A Common Stock”), and each share of Class B Common Stock will be converted into the right to receive 1.446 shares of PR’s Class C common stock, par value $0.0001 per share (the “PR Class C Common Stock”). On October 30, 2023, at the special meeting of stockholders of Earthstone, the stockholders of Earthstone approved the Merger Agreement and the transactions contemplated thereby, among other proposals. The parties to the Merger Agreement expect the Merger to close on or about November 1, 2023, subject to other customary closing conditions. The consolidated financial statements and notes presented herein have been prepared under the assumption that the Company will continue as a going concern for the next 12 months.