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Acquisitions

12 Months Ended

Dec. 31, 2022

Note 3 — Acquisitions

Asset Acquisitions

Acquisitions qualifying as an asset acquisition requires, among other items, that the cost of the assets acquired and liabilities assumed to be recognized on the Consolidated Balance Sheets by allocating the asset cost on a relative fair value basis. The fair value measurements of the oil and natural gas properties acquired and asset retirement obligations assumed were derived utilizing an income approach and based, in part, on significant inputs not observable in the market. These inputs represent Level 3 measurements in the fair value hierarchy and include, but are not limited to, estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows and appropriate discount rates. These inputs required significant judgments and estimates by the Company’s management at the time of the valuation. Transaction costs incurred on an asset acquisition are capitalized as a component of the assets acquired and any contingent consideration is recognized as the contingency is resolved.

Acquisition of LLOG Properties — On November 16, 2020, the Company completed the acquisition of select oil and natural gas assets from LLOG Exploration & Production Company, L.L.C. (the “LLOG Acquisition”). The oil and natural gas assets consist of interests in the Mississippi Canyon core area. The LLOG Acquisition was consummated pursuant to a Purchase and Sale Agreement executed on November 16, 2020 for $13.2 million in cash, inclusive of customary closing adjustments and $0.2 million of transaction related expenses.

Acquisition of Castex Energy 2005 — On August 5, 2020, the Company completed the acquisition of select oil and natural gas assets from affiliates of Castex Energy 2005 Holdco, LLC (the “Castex Energy 2005 Acquisition”). The Castex Energy 2005 Acquisition was consummated pursuant to a Purchase and Sale Agreement dated June 19, 2020 for consideration consisting of (i) $6.5 million in cash, (ii) 4.6 million shares of the Company’s common stock valued at $35.4 million and (iii) $1.4 million in transaction related expenses, inclusive of customary closing adjustments.

Business Combination

Business Combinations

Acquisitions qualifying as business combinations are accounted for under the acquisition method of accounting, which requires, among other items, that assets acquired and liabilities assumed be recognized on the Consolidated Balance Sheets at their fair values as of the acquisition date. The fair value measurements of the oil and natural gas properties acquired and asset retirement obligations assumed were derived utilizing an income approach and based, in part, on significant inputs not observable in the market. These inputs represent Level 3 measurements in the fair value hierarchy and include, but are not limited to, estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows and appropriate discount rates. These inputs required significant judgments and estimates at the time of the valuation.

EnVen Acquisition — On September 21, 2022, the Company executed a merger agreement to acquire EnVen Energy Corporation (“EnVen”), a private operator in the Deepwater U.S. Gulf of Mexico (the “EnVen Acquisition,” and such agreement, the “EnVen Merger Agreement”). The Company incurred $9.0 million of transaction related costs for the year ended December 31, 2022. These costs are reflected in “General and administrative expense” on the Consolidated Statements of Operations.

Subsequent Event — On February 13, 2023, the Company completed the EnVen Acquisition for consideration consisting of (i) $207.3 million in cash and (ii) 43.8 million shares of the Company’s common stock valued at $832.2 million. Due to the timing of the EnVen Acquisition, the Company is unable to estimate the purchase price allocation of such acquisition at this time.

ILX and Castex Acquisition — On February 28, 2020, the Company acquired the outstanding limited liability interests in certain wholly owned subsidiaries of ILX Holdings, LLC; ILX Holdings II, LLC; ILX Holdings III LLC and Castex Energy 2014, LLC, each a related party and an affiliate of the Riverstone Funds (as defined in Note 11 — Related Party Transactions) (the “Riverstone Sellers”), and Castex Energy 2016, LP (together with the Riverstone Sellers, the “Sellers”) with an effective date of July 1, 2019 (collectively, the “ILX and Castex Acquisition”). The ILX and Castex Acquisition was consummated pursuant to separate Purchase and Sale Agreements, dated December 10, 2019 (as amended from time to time, the “Purchase Agreements”) for aggregate consideration consisting of (i) $303.1 million in cash after customary closing adjustments and (ii) an aggregate 110,000 shares of a series of the Company’s preferred stock designated as “Series A Convertible Preferred Stock” which subsequently converted to 11.0 million shares of the Company’s common stock on March 30, 2020 (such common stock, the “Conversion Stock”). The Conversion Stock was valued at $156.2 million. The cash consideration was funded with borrowings under the Bank Credit Facility.

The Company incurred $12.1 million of transaction related costs, of which $8.7 million was recognized in the year ended December 31, 2020. These costs are reflected in “General and administrative expense” on the Consolidated Statements of Operations.

The following table presents revenue and net income attributable to the assets acquired in the ILX and Castex Acquisition:


	Year Ended December 31, 2020
Revenue	$	126,857
Net loss	$	(6,011	)

Pro Forma Financial Information (Unaudited) — The following supplemental pro forma financial information (in thousands, except per common share amounts), presents the consolidated results of operations for the year ended December 31, 2020 as if the ILX and Castex Acquisition had occurred on January 1, 2019. The unaudited pro forma information was derived from historical statements of operations of the Company and the Sellers adjusted to (i) include depletion expense applied to the adjusted basis of the oil and natural gas properties acquired, (ii) include interest expense to reflect borrowings under the Bank Credit Facility, (iii) eliminate the write-down of oil and natural gas properties on the assets acquired to reflect the pro-forma ceiling test calculation and (iv) include weighted average basic and diluted shares of common stock outstanding, which was calculated assuming the 11.0 million shares of Conversion Stock were issued to the Sellers. This information does not purport to be indicative of results of operations that would have occurred had the ILX and Castex Acquisition occurred on January 1, 2019, nor is such information indicative of any expected future results of operations.


	Year Ended December 31, 2020
Revenue	$	634,921
Net loss	$	(449,988	)
Basic net loss per common share	$	(6.48	)
Diluted net loss per common share	$	(6.48	)