Acquisitions and Dispositions Acquisitions and Dispostions

9 Months Ended

Sep. 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 nine months ended September 30, 2022 and 2021, respectively. There is no remaining obligation under this contract as of September 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 a seller and its two 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, during the nine months ended September 30, 2022 we issued 489 new shares and received 41,375 shares back into treasury stock.

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 nine months ended September 30, 2022, the Company recorded gains of $0.7 million and losses of $0.8 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 $67.5 million, consisting of $27.7 million in cash and 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. We incurred approximately $0.5 million in transaction costs during the nine months ended September 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	$	27,709
Equity consideration	39,767
Total Consideration	67,476

Transaction costs	466

Total Cost of Transaction	$	67,942

Allocation of Total Cost
Assets
Oil and gas properties	$	84,611
Total assets	84,611

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

Net Assets Acquired	$	67,942

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 $346.1 million, consisting of $220.9 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 $1.0 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”). During both the three and nine months ended September 30, 2022, the Company recorded gains of $5.4 million related to the 2022 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. The acquisition is subject to further customary post-closing adjustments. We incurred approximately $6.5 million in transaction costs during the nine months ended September 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	$	220,866
Equity consideration	117,651
Fair value of contingent consideration	8,566
Accrued purchase price adjustments receivable	(1,000)
Total Consideration	346,083

Transaction costs	6,545

Total Cost of Transaction	$	352,628

Allocation of Total Cost
Assets
Other current assets	$	4,202
Oil and gas properties	397,448
Right of use assets	890
Total assets	402,540

Liabilities
Accounts payable and accrued liabilities	12,811
Fair value of commodity derivatives	33,767
Non-current lease liability	890
Asset retirement obligations	2,444
Total Liabilities	$	49,912

Net Assets Acquired	$	352,628

August 2022 Acquisition

On August 15, 2022, the Company closed the acquisition of certain oil and gas assets in Webb County, Texas. After consideration of closing adjustments, total consideration was approximately $31.8 million. The acquisition is subject to further customary post-closing adjustments. We did not incur any significant transaction costs during the nine months ended September 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.

2022 Non-strategic Dispositions

During 2022, the Company closed on multiple dispositions of non-strategic oil and gas assets. After consideration of closing adjustments, total proceeds from the dispositions were approximately $4.4 million. The transactions are subject to further customary post-closing adjustments. There was no gain or loss recognized in connection with the dispositions.