Organization and Basis of Presentation

12 Months Ended

Dec. 31, 2015

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Basis of Presentation

Note 1. – Organization and Basis of Presentation

Earthstone Energy, Inc., a Delaware corporation formed in 1969, is a growth-oriented independent oil and gas exploration and production company engaged in the development and acquisition of oil and gas reserves through an active and diversified program that includes the acquisition, drilling and development of undeveloped leases, purchases of reserves, and exploration activities, with its current primary assets located in the Eagle Ford trend of south Texas and in the Williston Basin of North Dakota and Montana. The Company also has conventional wells in East Texas, South Texas and Oklahoma.  Unless the context otherwise requires, the terms “Earthstone” and the “Company” refer to Earthstone Energy, Inc. and it consolidated subsidiaries.  The Company has evaluated events or transactions through the date of issuance of this report in conjunction with the preparation of these consolidated financial statements.

Oak Valley Resources, LLC (“OVR”), is a Delaware limited liability company, formed on December 14, 2012. Prior to the Exchange (described below), OVR was an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids (“NGLs”), with properties in Texas, Oklahoma, and Louisiana. OVR was formed through a series of transactions that conveyed properties and committed cash contributions from various investors including EnCap Investments L.P. (“EnCap”), Wells Fargo Central Pacific Holdings, Inc. (“Wells Fargo”), VILLCo Capital II, LLC (“VILLCo”) and an affiliate of OVR, Oak Valley Management, LLC (“OVM”).  

On December 19, 2014, the Company acquired three operating subsidiaries of OVR, in exchange for shares of Earthstone common stock (the “Exchange”), which resulted in a change of control of the Company. Pursuant to the Exchange Agreement, OVR contributed to Earthstone the membership interests of its three subsidiaries, Earthstone Operating, LLC (formerly Oak Valley Operating, LLC (“OVO”)), EF Non-Op, LLC (“EF Non-Op”) and Sabine River Energy, LLC (“Sabine”), each a Texas limited liability company (collectively “Oak Valley”), in exchange for 9.124 million shares, representing 84% of the Company’s common stock.  The transaction was accounted for as a reverse acquisition whereby Oak Valley was considered the acquirer for accounting purposes.  All historical financial information, prior to December 19, 2014, contained in these Consolidated Financial Statements is that of Oak Valley.  

Immediately following the exchange, the Company, through its wholly owned subsidiary, Sabine, acquired an additional 20% undivided ownership interest in certain crude oil and natural gas properties located in Fayette and Gonzales Counties, Texas, in exchange for the issuance of approximately 2.957 million shares of common stock (the “Contribution Agreement”) to Flatonia Energy, LLC, increasing the Company’s ownership in these properties from a 30% undivided ownership to a 50% undivided ownership interest.  As a result of the share issuance to Flatonia, OVR’s ownership in the Company decreased from 84% to 66%.