Acquisitions, Divestitures, and Assets Held for Sale

12 Months Ended

Dec. 31, 2024

Asset Acquisition [Abstract]

Acquisitions, Divestitures, and Assets Held for Sale

Note 17 – Acquisitions

2024 Acquisition Activity

Uinta Basin Asset Acquisition. On June 27, 2024, the Company entered into a Purchase and Sale Agreement (“XCL Acquisition Agreement”) with XCL AssetCo, LLC, XCL Marketing, LLC, Wasatch Water Logistics, LLC, XCL Resources, LLC, and XCL SandCo, LLC, (collectively referred to as the “XCL Sellers” or “XCL Resources”) and, for the limited purposes described therein, Northern Oil and Gas, Inc. (“NOG”). Pursuant to the XCL Acquisition Agreement, the Company agreed to purchase all of the rights, titles and interests in primarily proved oil and gas assets, and related supporting facilities in the Uinta Basin owned by the XCL Sellers (“XCL Assets”). Concurrently with the execution of the XCL Acquisition Agreement, the Company entered into an Acquisition and Cooperation Agreement (“Cooperation Agreement”) with NOG, pursuant to which the Company and NOG agreed to cooperate in connection with the XCL Acquisition Agreement and NOG agreed to acquire an undivided 20 percent interest in the assets acquired pursuant to the XCL Acquisition Agreement. Upon execution of the XCL Acquisition Agreement, the Company deposited with an escrow agent a cash deposit of $102.0 million (“Cash Deposit”). Pursuant to the terms of the XCL Acquisition Agreement, the Company had the option to acquire certain additional assets adjacent to the XCL Assets (“Altamont Option Assets”) from the XCL Sellers for a purchase price equal to the XCL Sellers’ cost to acquire the Altamont Option Assets plus the XCL Sellers’ related out of pocket expenses. On August 5, 2024, the Company exercised the option to acquire the Altamont Option Assets.

On October 1, 2024 (“Closing Date”), immediately prior to the closing of the transactions contemplated by the XCL Acquisition Agreement, and as permitted by the XCL Acquisition Agreement and Cooperation Agreement, the Company assigned an undivided 20 percent interest in the XCL Acquisition Agreement to NOG and caused the XCL Sellers to directly assign an undivided 20 percent interest in both the XCL Assets and the Altamont Option Assets to NOG. Accordingly, on the Closing Date, the Company completed the acquisition of an undivided 80 percent interest in both the XCL Assets and the Altamont Option Assets with an effective date of May 1, 2024 (“Uinta Basin Acquisition“). The Company’s undivided 80 percent interest in the assets acquired in the Uinta Basin Acquisition consists of approximately 63,300 net acres.

On the Closing Date, the unadjusted purchase price, net to the Company’s 80 percent undivided interest in the Uinta Basin Acquisition, was approximately $2.1 billion. The Company paid approximately $1.9 billion in cash to the XCL Sellers, using a portion of the net proceeds from the issuance of the 2029 Senior Notes and 2032 Senior Notes discussed in Note 5 – Long-Term Debt, cash on hand, and borrowings under the Company’s revolving credit facility. Additionally, the $102.0 million Cash Deposit was applied toward the unadjusted purchase price and a majority of the Cash Deposit was disbursed to the XCL Sellers on the Closing Date. The beneficial ownership of the remaining portion of the Cash Deposit transferred to the XCL Sellers on the Closing Date and will remain in escrow pending the completion of post-closing purchase price adjustments, which are expected to occur in the first quarter of 2025.

In accordance with GAAP, this transaction was considered to be an asset acquisition as substantially all the gross assets acquired were concentrated in a group of similar identifiable assets. Therefore, the properties were recorded based on the total consideration paid after purchase price adjustments and the transaction costs were capitalized as a component of the cost of the assets acquired. The adjusted purchase price was allocated to the assets and liabilities acquired based on their estimated fair value as of the acquisition date using certain assumptions including: (i) estimated net proved and unproved reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices, including price differentials; (v) risk adjusted future cash flows; and (vi) a market participant-based weighted average cost of capital rate. These inputs required significant judgment by management at the time of the valuation.

The adjusted purchase price was $2.0 billion and was allocated to the assets acquired and liabilities assumed based on the relative fair values on the closing date as follows: (i) $1.6 billion to proved oil and gas properties, (ii) $495.2 million to unproved oil and gas properties, (iii) $16.3 million to both operating lease right-of-use assets and operating liabilities, (iv) $58.1 million to revenue and royalties payable and other liabilities, net, and (v) $15.1 million to asset retirement obligations.

The Uinta Basin Acquisition is subject to normal post-closing adjustments expected to occur in the first quarter of 2025.

2023 Acquisition Activity

On June 30, 2023, the Company acquired approximately 20,000 net acres of oil and gas properties in Dawson and northern Martin counties, Texas. In accordance with GAAP, this transaction was considered to be an asset acquisition. Therefore, the properties were recorded based on the total consideration paid after purchase price adjustments and the transaction costs were capitalized as a component of the cost of the assets acquired. During the third quarter of 2023, the Company acquired additional working interests in certain wells located in the Midland Basin. Total consideration paid for these transactions, after purchase price adjustments, was $109.9 million.

Additionally, during the year ended December 31, 2023, the Company completed a non-monetary asset exchange of proved properties in Upton County, Texas. This exchange was recorded at carryover basis with no gain or loss recognized.