Acquisitions and Divestitures (Tables)

12 Months Ended

Dec. 31, 2015

Earthstone Energy Reverse Acquisition [Member]

Schedule of Consideration Paid to Acquire Net Assets and Estimated Values of Net Assets

The following table summarizes the consideration paid to acquire the legacy Earthstone net assets and the estimated values of those net assets (in thousands, except share and share price amounts):

Shares of Common Stock outstanding before the Exchange		1,734,988
Company director and officer restricted shares that vested in the Exchange		18,400
Shares of Common Stock issued in the Exchange		9,124,452
Total shares of Common Stock outstanding following the Exchange		10,877,840

Shares of Common Stock issued as consideration		1,753,388
Closing price of Common Stock ⁽¹⁾	$	19.08
Total purchase price	$	33,455
Estimated Fair Value of Liabilities Assumed:
Current liabilities	$	7,631
Long-term debt		7,000
Deferred tax liability ⁽²⁾		2,880
Asset retirement obligation		1,035
Amount attributable to liabilities assumed		18,546
Total purchase price plus liabilities assumed	$	52,001
Estimated Fair Value of Assets Acquired:
Cash ⁽³⁾	$	2,920
Other current assets		3,466
Proved oil and natural gas properties ^{(4) (5)}		21,813
Unproved oil and natural gas properties		5,524
Other non-current assets		745
Amount attributable to assets acquired	$	34,468
Goodwill ⁽⁶⁾	$	17,533

(1)

The share price used for the determination of the purchase price, was the adjusted closing price of the Common Stock on December 19, 2014.

(2)

This amount represents the recorded book value versus tax value difference in oil and natural gas properties and other net assets as of the date the Exchange on a tax effected basis of approximately 35%. The tax basis of the legacy Earthstone assets were not adjusted in the Exchange. As noted above, however, ASC 805 requires that the Company in a reverse acquisition record the legacy Earthstone net assets at fair value on the date of the Exchange; the fair value of the net assets was in excess of the tax basis and as such required the recognition of a deferred tax liability.

(3)

The components of cash flow in the Exchange transaction in which the legacy Earthstone assets were acquired was $7.1 million in notes payable and accrued interest that was paid in full in conjunction with the Exchange less the cash acquired of $2.9 million.

(4)

The weighted average commodity prices utilized in the determination of the fair value of oil and natural gas properties was $51.62 per barrel of oil and $4.58 per Mcf of natural gas after adjustments for transportation fees and regional price differentials.

(5)

The market assumptions as to future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development and operating costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates used by the Company to estimate the fair value of the oil and natural gas properties represent Level 3 inputs. For additional information on Level 3 inputs, see Note 6 Fair Value Adjustments.

(6)

Goodwill was determined to be the excess consideration exchanged over the fair value of the Company’s net assets on December 19, 2014. During the three months ended December 31, 2015, a decrease of $1.4 million was recorded to goodwill and reflect purchase price adjustments made to estimated items in the preliminary purchase price allocation. The goodwill recognized will not be deductible for tax purposes.

2014 Eagle Ford Properties [Member]

Business Acquisition [Line Items]

Schedule of Consideration Paid to Acquire Net Assets and Estimated Values of Net Assets

The following table summarizes the consideration paid to acquire the 2014 Eagle Ford Acquisition Properties and the estimated values of those net assets (in thousands, except share and share price amounts):

Shares of Common Stock issued as consideration in the Contribution		2,957,288
Closing price of Common Stock ⁽¹⁾	$	19.08
Total purchase price	$	56,425

Estimated Fair Value of Liabilities Assumed:
Deferred tax liability ⁽²⁾	$	1,547
Asset retirement obligation		173
Amount attributable to liabilities assumed		1,720
Total purchase price plus liabilities assumed	$	58,145

Estimated Fair Value of Assets Acquired:
Proved oil and natural gas properties ^{(3) (4)}	$	34,745
Unproved oil and natural gas properties		21,853
Amount attributable to assets acquired	$	56,598

Goodwill ⁽⁵⁾	$	1,547

(1)

The share price used for the determination of the purchase price, was the adjusted closing price of the Common Stock on December 19, 2014.

(2)

This amount represents the recorded book value to tax difference of the oil and natural gas properties as of the date of the closing of the Contribution Agreement on a tax effected basis of approximately 34%. As noted above, the Company received the net assets acquired at Flatonia’s carryover tax basis; however, ASC 805 requires assets acquired and liabilities assumed be measured at their fair values as of the acquisition date; the fair value of the 2014 Eagle Ford Acquisition Properties on December 19, 2014 was in excess of the tax basis and as such required the recognition of a deferred tax liability.

(3)

The weighted average commodity prices utilized in the determination of the fair value of oil and natural gas properties was $56.36 per barrel of oil and $3.36 per Mcf of natural gas after adjustments for transportation fees and regional price differentials.

(4)

(5)

Goodwill was determined as the excess consideration exchanged over the fair value of the 2014 Eagle Ford Acquisition Properties on December 19, 2014. During the fourth quarter of 2015 and due to the current commodity price environment, the Company determined that the goodwill balance was not recoverable and therefore fully impaired it, recording a goodwill impairment charge of $1.5 million. See Note 5 Asset Impairments.

Schedule of Unaudited Pro forma Revenues and Expenses of Assets Acquired and Liabilities Assumed

The following unaudited pro forma combined condensed results of operations are provided for the years ended December 31, 2014 and 2013 as though the Exchange and Contribution had been completed as of January 1, 2013. These unaudited supplemental pro forma results of operations are provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future. The pro forma results of operations do not include any cost savings or other synergies that resulted, or may result, from the Exchange or Contribution or any estimated costs that will be incurred to integrate the legacy Earthstone net assets and the 2014 Eagle Ford Acquisition Properties. Future results may vary significantly from the results reflected in this unaudited pro forma financial information (in thousands, except per share amounts).

	Years ended December 31,
	2014		2013
	(Unaudited)
Revenue	$	85,633	$	66,450
Income before taxes	$	16,196	$	2,460
Net income available to Earthstone common stockholders	$	10,672	$	1,610
Pro forma net loss per common share:
Basic and diluted	$	0.77	$	0.12

2013 Eagle Ford Acquisition [Member]

Business Acquisition [Line Items]

Schedule of Consideration Paid to Acquire Net Assets and Estimated Values of Net Assets

The following table summarizes the consideration paid to acquire the properties and the amounts of the assets acquired and liabilities assumed:

(In thousands)
Purchase price	$	86,687
Allocation of purchase price:
Proved properties ^{(1) (2)}	$	57,255
Unproved properties		30,041
Asset retirement obligations		(609	)
Total	$	86,687

(1)

The weighted average commodity prices utilized in the determination of the fair value of oil and natural gas properties was $99.32 per barrel of oil and $3.24 per Mcf of natural gas after adjustments for transportation fees and regional price differentials.

(2)

Schedule of Unaudited Pro forma Revenues and Expenses of Assets Acquired and Liabilities Assumed

The unaudited pro forma consolidated results include the Company’s historical financial information and the revenues and expenses of assets acquired and liabilities assumed in the 2013 Eagle Ford Acquisition (in thousands except share amounts):

	Year ended December 31,
	2013
	(Unaudited)
Revenue	$	48,291
Loss before taxes	$	(5,240	)
Net loss available to Earthstone common stockholders	$	(3,406	)
Pro forma net loss per common share:
Basic and diluted	$	(0.37	)

Other Acquisitions [Member]

Business Acquisition [Line Items]

Schedule of Consideration Paid to Acquire Net Assets and Estimated Values of Net Assets

The following table summarizes the consideration paid to acquire the properties and the estimated fair values of the assets acquired and liabilities assumed (in thousands)

Purchase price	$	4,066

Estimated fair value of assets acquired:
Proved oil and natural gas properties	$	588
Unproved oil and natural gas properties		3,496
Total assets acquired	$	4,084

Estimated fair value of liabilities assumed:
Asset retirement obligations	$	13
Other liabilities		5
Total liabilities assumed	$	18
Consideration paid	$	4,066