Acquisitions and Dispositions Acquisitions and Dispostions

6 Months Ended

Jun. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

(7) Acquisitions and Dispositions

Bay De Chene Disposition

Effective December 22, 2017, the Company closed a purchase and sale contract to sell the Company's wellbores and facilities in the Bay De Chene field and recorded a $16.3 million obligation related to the funding of certain plugging and abandonment costs. Of the $16.3 million original obligation, $0.8 million and $1.1 million was paid during the six months ended June 30, 2022 and 2021, respectively. There is no remaining obligation under this contract as of June 30, 2022.

August 2021 Acquisition

On August 3, 2021, the Company acquired the remaining working interest in 12 wells that SilverBow operates and additional acreage in Webb county. The total aggregate consideration was approximately $23.0 million, consisting of $13.0 million in cash and 516,675 shares of common stock valued at approximately $10.0 million based on the Company's share price on the closing date. Management determined that substantially all the fair value of the gross assets acquired were concentrated in the proved oil and gas properties and have therefore accounted for this transaction as an asset acquisition and allocated the purchase price based on the relative fair value of the assets acquired and liabilities assumed. As a result, we allocated substantially all of the purchase price to proved oil and gas properties.

October 2021 Acquisition

On October 1, 2021, we closed on an all-stock transaction to acquire oil and gas assets in the Eagle Ford with three affiliated entities. The acquired assets include working interests in oil and gas properties across Atascosa, Fayette, Lavaca, McMullen and Live Oak counties. After consideration of closing adjustments, we issued 1,341,990 shares of our common stock valued at approximately $35.6 million, based on the Company's share price on the closing date. The acquisition was subject to further customary post-closing adjustments. We incurred approximately $0.6 million in transaction costs for the year ended December 31, 2021. Management determined that substantially all the fair value of the gross assets acquired were concentrated in the proved oil and gas properties and have therefore accounted for this transaction as an asset acquisition and allocated the purchase price based on the relative fair value of the assets acquired and liabilities assumed. As a result, we allocated substantially all of the purchase price to proved oil and gas properties. As part of the post-closing settlement of this acquisition, in the first quarter of 2022, we received 41,191 shares back to our Treasury from two of the entities, and we issued 489 new shares to one of the entities. In the second quarter of 2022, 19,448 shares were released from escrow to three of the entities and 184 shares returned back to our Treasury from one entity.

November 2021 Acquisition

On November 19, 2021, the Company closed on an acquisition of oil-weighted assets in the Eagle Ford. The acquired assets included wells and acreage in La Salle, McMullen, DeWitt and Lavaca counties. After consideration of closing adjustments, total aggregate consideration was approximately $77.4 million, consisting of $37.6 million in cash, 1,351,961 shares of our common stock valued at approximately $37.9 million based on the Company's share price on the closing date, and contingent consideration with an estimated fair value of $1.9 million. The contingent consideration consists of up to three earn-out payments of $1.6 million per year for each of 2022, 2023 and 2024, contingent upon the average monthly settlement price of WTI exceeding $70 per barrel for such year (the “2021 WTI Contingency Payout”). During the three and six months ended June 30, 2022, the Company recorded losses of $0.2 million and $1.5 million, respectively, related to the 2021 WTI Contingency Payout recorded in “Gain (loss) on commodity derivatives, net” on the accompanying condensed consolidated statements of operations. For further discussion of the fair value related to the Company's contingent consideration, refer to Note 9 of these Notes to Consolidated Financial Statements. Management determined that substantially all the fair value of the gross assets acquired were concentrated in the proved oil and gas properties and have therefore accounted for this transaction as

an asset acquisition and allocated the purchase price based on the relative fair value of the assets acquired and liabilities assumed. As a result, we allocated substantially all of the purchase price to proved oil and gas properties.

May 2022 Acquisition

On May 10, 2022, the Company closed the acquisition of certain oil and gas assets located in La Salle and McMullen Counties, Texas, as well as assumed the seller's commodity derivative contracts in place at the closing date, from SandPoint Operating, LLC, a subsidiary of SandPoint Resources, LLC. After consideration of closing adjustments, total aggregate consideration was approximately $67.2 million, consisting of $29.0 million in cash, 1,300,000 shares of our common stock valued at approximately $39.8 million based on the Company's share price on the closing date and accrued purchase price adjustments receivable of $1.5 million. The acquisition is subject to further customary post-closing adjustments. We incurred approximately $0.4 million in transaction costs during the six months ended June 30, 2022 related to the acquisition. Management determined that substantially all the fair value of the gross assets acquired were concentrated in the proved oil and gas properties and have therefore accounted for this transaction as an asset acquisition and allocated the purchase price based on the relative fair value of the assets acquired and liabilities assumed.

The following table represents the allocation of the total cost of the acquisition to the assets acquired and liabilities assumed (in thousands):


Total Cost
Cash consideration	$	28,972
Equity consideration	39,767
Accrued purchase price adjustments receivable	(1,501)
Total Consideration	67,238

Transaction costs	400

Total Cost of Transaction	$	67,638

Allocation of Total Cost
Assets
Oil and gas properties	$	84,307
Total assets	84,307

Liabilities
Fair value of commodity derivatives	16,511
Asset retirement obligations	158
Total Liabilities	$	16,669

Net Assets Acquired	$	67,638

May 2022 Disposition

On May 16, 2022, the Company closed its disposition of non-strategic oil and gas assets located in Dimmit County, Texas. After consideration of closing adjustments, total proceeds from the sale were approximately $2.5 million. The transaction is subject to further customary post-closing adjustments. There was no gain or loss recognized in connection with the disposition.

June 2022 Acquisition

On June 30, 2022, the Company closed the acquisition of certain oil and gas assets located in Atascosa, La Salle, Live Oak and McMullen Counties, Texas, as well as assumed the seller's commodity derivative contracts in place at the closing date, from Sundance Energy, Inc., and its affiliated entities Armadillo E&P, Inc. and SEA Eagle Ford, LLC. After consideration of closing adjustments, total aggregate consideration was approximately $342.5 million, consisting of $242.3 million in cash, 4,148,472 shares of our common stock valued at approximately $117.7 million based on the Company's share price on the closing date, accrued purchase price adjustments receivable of $26.0 million which is expected to be collected by the end of 2022 and contingent consideration with an estimated fair value of $8.6 million. The contingent consideration consists of up to

two earn-out payments of $7.5 million each, contingent upon the average monthly settlement price of NYMEX West Texas Intermediate crude oil exceeding $95 per barrel for the period from April 13, 2022 through December 31, 2022 which would trigger a payment of $7.5 million in 2023 and $85 per barrel for 2023 which would trigger a payment of $7.5 million in 2024 (the “2022 WTI Contingency Payout”). For further discussion of the fair value related to the Company's contingent consideration, refer to Note 9 of these Notes to Consolidated Financial Statements. The acquisition is subject to further customary post-closing adjustments. We incurred approximately $5.3 million in transaction costs during the six months ended June 30, 2022 related to the acquisition. Management determined that substantially all the fair value of the gross assets acquired were concentrated in the proved oil and gas properties and have therefore accounted for this transaction as an asset acquisition and allocated the purchase price based on the relative fair value of the assets acquired and liabilities assumed.

The following table represents the allocation of the total cost of the acquisition to the assets acquired and liabilities assumed (in thousands):


Total Cost
Cash consideration	$	242,298
Equity consideration	117,651
Fair value of contingent consideration	8,566
Accrued purchase price adjustments receivable	(26,000)
Total Consideration	342,515

Transaction costs	5,264

Total Cost of Transaction	$	347,779

Allocation of Total Cost
Assets
Other current assets	$	4,202
Oil and gas properties	392,645
Right of use assets	890
Total assets	397,737

Liabilities
Accounts payable and accrued liabilities	12,857
Fair value of commodity derivatives	33,767
Non-current lease liability	890
Asset retirement obligations	2,444
Total Liabilities	$	49,958

Net Assets Acquired	$	347,779