Note 7. Equity

Earnings (Loss) Per Common Share

Basic earnings per share is computed by dividing net income attributable to common shares by the basic weighted-average shares of common stock outstanding during the period. The calculation of diluted earnings per share is similar to basic, except the denominator includes the effect of dilutive common stock equivalents. Common stock equivalents include awards issued under the Company’s long-term incentive plan discussed in Note 8 Stock Based Compensation. The Company had no outstanding common stock equivalents for the years ended December 31, 2015, 2014, and 2013.

The following table is a reconciliation of net income and weighted-average common shares outstanding for purposes of calculating basic and diluted loss per share. The number of shares for the year ended December 31, 2013, reflect the shares issued to OVR on December 19, 2014 as a result of the Exchange Agreement that was accounted for as a reverse acquisition.

	Years Ended December 31,
(In thousands, except per share amounts)	2015			2014			2013
Net loss	$	(116,655	)	$	(28,834	)	$	(19,875	)

Weighted average common shares outstanding:
Basic		13,835			9,279			9,124
Diluted		13,835			9,279			9,124

Net loss per share:
Basic	$	(8.43	)	$	(3.11	)	$	(2.18	)
Diluted	$	(8.43	)	$	(3.11	)	$	(2.18	)

Members’ Equity

As was explained in Note 2 – Summary of Significant Account Policies – Principles of Consolidation the historical financial information contained in these consolidated financial statements is that of OVR and its subsidiaries. OVR was formed on December 14, 2012. On December 21, 2012, OVR was capitalized by affiliates of EnCap via the contribution of certain oil and gas properties which were conveyed by assigning 100% of the issued and outstanding membership interests in ECC VI, LLC and 100% of the issued and outstanding membership interest in Oak Valley Energy, LLC in exchange for membership interests in OVR. Also on December 21, 2012, EnCap, Wells Fargo, VILLCo, and OVM committed an aggregate of $150.0 million in exchange for additional membership interests in OVR. On April 25, 2013, OVR closed a private placement offering amongst accredited investors that raised $62.8 million in capital commitments in exchange for membership interests in OVM. During 2013 OVM members committed an additional $1.7 million (collectively “Investors”).

Capital Call Notices

In January 2013, OVR received cash investments in the amount of $16.8 million related to its first capital call notice sent to Wells Fargo, VILLCo, and OVM.

In May 2013, OVR received cash investments in the amount of $23.7 million related to its second capital call notice to Investors.

In June 2013, OVR received cash investments in the amount of $67.0 million related to its third capital call notice to Investors.

In December 2014, OVR received cash investments in the amount of $107.0 million related to its third capital call notice to Investors.

Common Stock

On December 19, 2014, pursuant to the Exchange Agreement, the Company issued to OVR 9,124,452 shares (the “Exchange Shares”) of Earthstone common stock, in exchange for the outstanding membership interests of OVR’s three subsidiaries. The issuance of the Exchange Shares is exempt from registration as a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, among other exemptions.

Pursuant to the Contribution Agreement, OVR, through its wholly owned subsidiary, Sabine, acquired a 20% undivided ownership interest in certain oil and gas properties located in Fayette and Gonzales Counties, Texas, in exchange for the issuance of 2,957,288 shares (the “Contribution Shares”) of Earthstone common stock to Flatonia Energy, LLC. The issuance of Contribution Shares is exempt from registration as a private placement under Section 4(a)(2) of the Securities Act, and Rule 506 promulgated thereunder, amount other exemption.