UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37907


			EXTRACTION OIL & GAS, INC.
			(Exact name of registrant as specified in its charter)

Delaware

46-1473923

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

370 17th Street

Suite ~~5300~~5200

Denver,

Colorado

80202

(Address of principal executive offices)

(Zip Code)

(720) 557-8300


~~(Registrant’s telephone number, including area code)~~

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, par value $0.01

XOG

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒☐

Non-Accelerated Filer

☒

☐

Smaller Reporting Company

☐☒

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes~~ ☐ No ☒

The total number of shares of common stock, par value $0.01 per share, outstanding as of May ~~8, 2020~~21, 2021 was ~~138,135,046.~~25,757,478.

Table of Contents

EXTRACTION OIL & GAS, INC.

TABLE OF CONTENTS

Page

PART I—FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets ~~as of~~ ~~March~~ 3 1 ~~, 20~~20 ~~and December 31, 201~~9

Condensed Consolidated Statements of Operations ~~for the three~~ ~~months ended~~ ~~March~~ 3 1 ~~, 20~~20 ~~and 201~~9

Condensed Consolidated Statements of Cash Flows ~~for the~~ ~~threemonths ended~~ ~~March 31,~~ 20 20 ~~and 20~~19

Condensed Consolidated Statements of Changes in Stockholders’ ~~Equity and Noncontrolling Interest for the three~~ Equit ~~months ended~~ ~~March~~ 3 1 ~~, 20~~20 ~~and 20~~19y

Notes to the Unaudited Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

4947

Item 4.

Controls and Procedures

5047

PART II—OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

5548

Item 3.

Defaults upon Senior Securities

5548

Item 4.

Mine Safety Disclosures

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EXTRACTION OIL & GAS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

March 31,
2020 December 31,
2019
ASSETS
Current Assets:
Cash and cash equivalents $ 31,993 $ 32,382
Accounts receivable
Trade 49,878 32,009
Oil, natural gas and NGL sales 38,850 105,103
Inventory, prepaid expenses and other 34,494 36,702
Commodity derivative asset 164,330 17,554
Total Current Assets 319,545 223,750
Property and Equipment (successful efforts method), at cost:
Proved oil and gas properties 4,676,967 4,530,934
Unproved oil and gas properties 417,021 524,214
Wells in progress 154,981 149,733
Less: accumulated depletion, depreciation, amortization and impairment charges (3,057,098) (2,985,983)
Net oil and gas properties 2,191,871 2,218,898
Gathering systems and facilities, net of accumulated depreciation — 315,777
Other property and equipment, net of accumulated depreciation 72,589 72,542
Net Property and Equipment 2,264,460 2,607,217
Non-Current Assets:
Commodity derivative asset 88,783 13,229
Other non-current assets 30,600 82,761
Total Non-Current Assets 119,383 95,990
Total Assets $ 2,703,388 $ 2,926,957
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 163,057 $ 190,864
Accounts payable and accrued liabilities, related party 46,777 —
Revenue payable 104,702 108,493
Production taxes payable 115,556 115,489
Commodity derivative liability 716 1,998
Accrued interest payable 18,042 20,625
Asset retirement obligations 15,328 27,058
Total Current Liabilities 464,178 464,527
Non-Current Liabilities:
Credit facility 470,000 470,000
Senior Notes, net of unamortized debt issuance costs 1,086,347 1,085,777
Production taxes payable 119,675 98,740
Commodity derivative liability — 108
Other non-current liabilities 59,689 54,579
Asset retirement obligations 78,445 68,850
Deferred tax liability 2,200 —
Total Non-Current Liabilities 1,816,356 1,778,054
Total Liabilities 2,280,534 2,242,581
Commitments and Contingencies—Note 13
Series A Convertible Preferred Stock, $0.01 par value; 50,000,000 shares authorized, 185,280 issued and outstanding 182,157 175,639
Stockholders' Equity:
Common stock, $0.01 par value; 900,000,000 share authorized; 137,891,740 and 137,657,922 issued and outstanding, respectively 1,336 1,336
Treasury stock, at cost, 38,859,078 shares (170,138) (170,138)
Additional paid-in capital 2,143,670 2,156,383
Accumulated deficit (1,734,171) (1,743,208)
Total Extraction Oil & Gas, Inc. Stockholders' Equity 240,697 244,373
Noncontrolling interest — 264,364
Total Stockholders' Equity 240,697 508,737
Total Liabilities and Stockholders' Equity $ 2,703,388 $ 2,926,957

~~THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF~~


	Successor		Predecessor
	March 31, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	38,430	$	205,890
Restricted cash—Note 2	25,641		0
Accounts receivable, net
Trade	24,508		13,266
Oil, natural gas and NGL sales	64,893		63,429
Inventory, prepaid expenses and other	30,274		36,382
Commodity derivative asset	0		6,971
Total Current Assets	183,746		325,938
Property and Equipment (successful efforts method), at cost:
Proved oil and gas properties	969,594		4,743,463
Unproved oil and gas properties	136,679		220,380
Wells in progress	6,984		129,058
Less: accumulated depletion, depreciation, amortization and impairment charges	(36,233)		(3,459,689)
Net oil and gas properties	1,077,024		1,633,212
Other property and equipment, net of accumulated depreciation and impairment charges	56,226		56,701
Net Property and Equipment	1,133,250		1,689,913
Non-Current Assets:
Commodity derivative asset	1,191		0
Other non-current assets	13,936		9,348
Total Non-Current Assets	15,127		9,348
Total Assets	$	1,332,123	$	2,025,199
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	115,550	$	80,082
Revenue payable	145,004		49,376
Production taxes payable	99,929		2,595
Commodity derivative liability	26,674		2,147
Accrued interest payable	1,832		692
Asset retirement obligations	9,942		0
DIP Credit Facility—Note 4	0		106,727
Prior Credit Facility—Note 4	0		453,747
Current tax liability	23,325		0
Total Current Liabilities	422,256		695,366
Non-Current Liabilities:
RBL Credit Facility—Note 4	93,746		0
Production taxes payable	83,197		33,627
Commodity derivative liability	132		0
Other non-current liabilities	19,204		0
Asset retirement obligations	78,125		0
Total Non-Current Liabilities	274,404		33,627
Liabilities Subject to Compromise	0		2,143,497
Total Liabilities	696,660		2,872,490
Commitments and Contingencies—Note 12	0		0
Series A Convertible Preferred Stock, $0.01 par value; 50,000,000 shares authorized, 185,280 issued and outstanding as of December 31, 2020	0		191,754
Stockholders' Equity (Deficit):
Predecessor common stock, $0.01 par value; 900,000,000 shares authorized; 136,588,900 issued and outstanding as of December 31, 2020	—		1,336
Successor common stock, $0.01 par value; 900,000,000 shares authorized; 25,703,212 issued and outstanding as of March 31, 2021	257		—
Predecessor treasury stock, at cost, 38,859,078 shares as of December 31, 2020	0		(170,138)
Additional paid-in capital	546,652		2,140,499
Retained earnings (accumulated deficit)	88,554		(3,010,742)
Total Stockholders' Equity (Deficit)	635,463		(1,039,045)
Total Liabilities and Stockholders' Equity	$	1,332,123	$	2,025,199

~~THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

EXTRACTION OIL & GAS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


							Successor			Predecessor
		For the Three Months Ended March 31,							For the Period from January 21 through March 31,			For the Period from January 1 through January 20,		For the Three Months Ended March 31,
		2020		2019			2021			2021		2020
Revenues:	Revenues:					Revenues:
Oil sales	Oil sales	$	124,219	$	165,424	Oil sales	$	100,547		$	27,137	$	124,219
Natural gas sales	Natural gas sales	22,302		35,892		Natural gas sales	117,336			7,806		22,302
NGL sales	NGL sales	17,193		20,601		NGL sales	31,559			8,099		17,193
Gathering and compression	Gathering and compression	1,473		—		Gathering and compression	0			0		1,473
Total Revenues	Total Revenues	165,187		221,917		Total Revenues	249,442			43,042		165,187
Operating Expenses:	Operating Expenses:					Operating Expenses:
Lease operating expense	Lease operating expense	30,390		21,857		Lease operating expense	10,655			2,555		30,390
Midstream operating expenses		3,935		—
Transportation and gathering	Transportation and gathering	22,786		10,365		Transportation and gathering	23,188			6,256		22,786
Production taxes	Production taxes	13,454		18,129		Production taxes	21,440			3,294		13,454
Exploration and abandonment expenses	Exploration and abandonment expenses	112,480		6,194		Exploration and abandonment expenses	759			316		112,480
Depletion, depreciation, amortization and accretion	Depletion, depreciation, amortization and accretion	76,051		118,770		Depletion, depreciation, amortization and accretion	38,575			16,133		76,051
Impairment of long lived assets		775		8,248
Gain on sale of property and equipment		—		(222)
Impairment of long-lived assets						Impairment of long-lived assets	0			0		775
General and administrative expense	General and administrative expense	10,596		27,652		General and administrative expense	7,541			2,211		10,596
Other operating expenses		52,575		—
Other operating expense						Other operating expense	3,890			1,107		56,510
Total Operating Expenses	Total Operating Expenses	323,042		210,993		Total Operating Expenses	106,048			31,872		323,042
Operating Income (Loss)	Operating Income (Loss)	(157,855)		10,924		Operating Income (Loss)	143,394			11,170		(157,855)
Other Income (Expense):	Other Income (Expense):					Other Income (Expense):
Commodity derivative gain (loss)	Commodity derivative gain (loss)	263,015		(122,091)		Commodity derivative gain (loss)	(28,487)			(12,586)		263,015
Loss on deconsolidation of Elevation Midstream, LLC	Loss on deconsolidation of Elevation Midstream, LLC	(73,139)		—		Loss on deconsolidation of Elevation Midstream, LLC	0			0		(73,139)
Reorganization items, net						Reorganization items, net	0			873,908		0
Interest expense(1)	Interest expense(1)	(21,358)		(13,008)		Interest expense(1)	(3,034)			(1,534)		(21,358)
Other income	Other income	574		1,143		Other income	6			12		574
Total Other Income (Expense)	Total Other Income (Expense)	169,092		(133,956)		Total Other Income (Expense)	(31,515)			859,800		169,092
Income (Loss) Before Income Taxes		11,237		(123,032)
Income tax (expense) benefit		(2,200)		29,000
Net Income (Loss)		$	9,037	$	(94,032)
Income Before Income Taxes						Income Before Income Taxes	111,879			870,970		11,237
Income tax expense						Income tax expense	(23,325)			0		(2,200)
Net Income						Net Income	$	88,554		$	870,970	$	9,037
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	6,160		3,975		Net income attributable to noncontrolling interest	0			0		6,160
Net Income (Loss) Attributable to Extraction Oil & Gas, Inc.		2,877		(98,007)
Net Income Attributable to Extraction Oil & Gas, Inc.						Net Income Attributable to Extraction Oil & Gas, Inc.	88,554			870,970		2,877
Adjustments to reflect Series A Preferred Stock dividends and accretion of discount	Adjustments to reflect Series A Preferred Stock dividends and accretion of discount	(6,518)		(4,317)		Adjustments to reflect Series A Preferred Stock dividends and accretion of discount	0			(418)		(6,518)
Net Loss Available to Common Shareholders, Basic and Diluted		$	(3,641)	$	(102,324)
Loss Per Common Share (Note 12)
Basic and diluted		$	(0.03)	$	(0.60)
Net Income (Loss) Available to Common Shareholders, Basic and Diluted						Net Income (Loss) Available to Common Shareholders, Basic and Diluted	$	88,554		$	870,552	$	(3,641)
Income (Loss) Per Common Share (Note 11)						Income (Loss) Per Common Share (Note 11)
Basic						Basic	$	3.47		$	6.37	$	(0.03)
Diluted						Diluted	$	3.41		$	6.37	$	(0.03)
Weighted Average Common Shares Outstanding	Weighted Average Common Shares Outstanding					Weighted Average Common Shares Outstanding
Basic and diluted		137,726		170,702
Basic						Basic	25,497			136,589		137,726
Diluted						Diluted	25,976			136,589		137,726

(1) Absent the automatic stay described in the Company’s December 31, 2020 Annual Report on Form 10-K in Note 8—Long-Term Debt, interest expense for the Predecessor period January 1 to January 20, 2021 would have included an additional $3.7 million related to 2024 and 2026 Senior Notes.

~~THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF~~

~~THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

EXTRACTION OIL & GAS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


							Successor			Predecessor
		For the Three Months Ended March 31,							For the Period from January 21 through March 31,			For the Period from January 1 through January 20,		For the Three Months Ended March 31,
		2020		2019			2021			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	9,037	$	(94,032)
Reconciliation of net income (loss) to net cash provided by operating activities:
Net income						Net income	$	88,554		$	870,970	$	9,037
Reconciliation of net income to net cash provided by operating activities:						Reconciliation of net income to net cash provided by operating activities:
Depletion, depreciation, amortization and accretion	Depletion, depreciation, amortization and accretion	76,051		118,770		Depletion, depreciation, amortization and accretion	38,575			16,133		76,051
Abandonment and impairment of unproved properties	Abandonment and impairment of unproved properties	106,928		3,893		Abandonment and impairment of unproved properties	0			0		106,928
Impairment of long lived assets		775		8,248
Gain on sale of property and equipment		—		(222)
Gain on repurchase of 2026 Senior Notes		—		(7,317)
Impairment of long-lived assets						Impairment of long-lived assets	0			0		775
Amortization of debt issuance costs	Amortization of debt issuance costs	1,242		1,498		Amortization of debt issuance costs	452			113		1,242
Non-cash lease expense	Non-cash lease expense	4,871		2,486		Non-cash lease expense	871			264		4,871
Non-cash reorganization items, net						Non-cash reorganization items, net	0			(902,653)		0
Non-cash discount on rights offering						Non-cash discount on rights offering	1,792			0		0
Contract asset	Contract asset	8,465		—		Contract asset	0			0		8,465
Commodity derivatives (gain) loss		(263,015)		122,091
Commodity derivatives loss (gain)						Commodity derivatives loss (gain)	28,487			12,586		(263,015)
Settlements on commodity derivatives	Settlements on commodity derivatives	24,932		(3,538)		Settlements on commodity derivatives	(5,025)			542		24,932
Earnings in unconsolidated subsidiaries	Earnings in unconsolidated subsidiaries	(480)		(338)		Earnings in unconsolidated subsidiaries	0			0		(480)
Loss on deconsolidation of Elevation Midstream, LLC	Loss on deconsolidation of Elevation Midstream, LLC	73,139		—		Loss on deconsolidation of Elevation Midstream, LLC	0			0		73,139
Distributions from unconsolidated subsidiaries		—		1,751
Deferred income tax expense (benefit)		2,200		(29,000)
Deferred income tax expense						Deferred income tax expense	0			0		2,200
Stock-based compensation	Stock-based compensation	—		13,008		Stock-based compensation	2,174			302		0
Changes in current assets and liabilities:	Changes in current assets and liabilities:					Changes in current assets and liabilities:
Accounts receivable—trade	Accounts receivable—trade	(9,127)		11,908		Accounts receivable—trade	(12,008)			(598)		(9,127)
Accounts receivable—oil, natural gas and NGL sales	Accounts receivable—oil, natural gas and NGL sales	66,253		2,981		Accounts receivable—oil, natural gas and NGL sales	(195)			(1,269)		66,253
Inventory, prepaid expenses and other	Inventory, prepaid expenses and other	584		136		Inventory, prepaid expenses and other	8,182			(778)		584
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(7,699)		(10,638)		Accounts payable and accrued liabilities	(30,580)			16,192		(7,699)
Accounts payable and accrued liabilities, related party		46,777		—
Accounts payable and accrued liabilities - related party						Accounts payable and accrued liabilities - related party	0			0		46,777

Revenue payable	Revenue payable	(1,690)		(21,506)		Revenue payable	17,251			18,529		(1,690)
Production taxes payable	Production taxes payable	21,002		22,919		Production taxes payable	(13,534)			(13,750)		21,002
Accrued interest payable	Accrued interest payable	(2,583)		(4,429)		Accrued interest payable	1,832			(692)		(2,583)
Current tax liability						Current tax liability	23,325			0		0
Asset retirement expenditures	Asset retirement expenditures	(10,563)		(4,558)		Asset retirement expenditures	(1,045)			(545)		(10,563)
Net cash provided by operating activities	Net cash provided by operating activities	147,099		134,111		Net cash provided by operating activities	149,108			15,346		147,099
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Oil and gas property additions	Oil and gas property additions	(143,000)		(188,027)		Oil and gas property additions	(22,451)			(9,120)		(143,000)
Sale of property and equipment	Sale of property and equipment	12,117		16,521		Sale of property and equipment	0			0		12,117
Gathering systems and facilities additions, net of cost reimbursements	Gathering systems and facilities additions, net of cost reimbursements	4,193		(49,175)		Gathering systems and facilities additions, net of cost reimbursements	0			0		4,193
Other property and equipment additions	Other property and equipment additions	(2,980)		(8,213)		Other property and equipment additions	(248)			0		(2,980)
Investment in unconsolidated subsidiaries	Investment in unconsolidated subsidiaries	(10,033)		(4,929)		Investment in unconsolidated subsidiaries	0			0		(10,033)
Distributions from unconsolidated subsidiary, return of capital		—		1,448
Net cash used in investing activities	Net cash used in investing activities	(139,703)		(232,375)		Net cash used in investing activities	(22,699)			(9,120)		(139,703)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings under credit facility		70,000		65,000
Repayments under credit facility		(70,000)		(25,000)
Repurchase of 2026 Senior Notes		—		(28,460)
Repurchase of common stock		—		(32,212)
Borrowings under Prior Credit Facility—Note 4						Borrowings under Prior Credit Facility—Note 4	0			0		70,000
Repayments under Prior Credit Facility—Note 4						Repayments under Prior Credit Facility—Note 4	0			(453,872)		(70,000)

Repayments under DIP Credit Facility—Note 4						Repayments under DIP Credit Facility—Note 4	0			(106,727)		0
Borrowings under RBL Credit Facility—Note 4						Borrowings under RBL Credit Facility—Note 4	0			265,000		0
Repayments under RBL Credit Facility—Note 4						Repayments under RBL Credit Facility—Note 4	(180,000)			0		0
Proceeds from issuance of common stock						Proceeds from issuance of common stock	7,000			200,473		0
Payment of employee payroll withholding taxes	Payment of employee payroll withholding taxes	(35)		(454)		Payment of employee payroll withholding taxes	0			0		(35)
Dividends on Series A Preferred Stock		—		(2,721)
Debt and equity issuance costs		(22)		(94)
Preferred Unit issuance costs		—		(10)

Debt issuance costs and other financing fees						Debt issuance costs and other financing fees	0			(6,328)		(22)
Net cash used in financing activities	Net cash used in financing activities	(57)		(23,951)		Net cash used in financing activities	(173,000)			(101,454)		(57)
Effect of deconsolidation of Elevation Midstream, LLC	Effect of deconsolidation of Elevation Midstream, LLC	(7,728)		—		Effect of deconsolidation of Elevation Midstream, LLC	0			0		(7,728)
Decrease in cash and cash equivalents	Decrease in cash and cash equivalents	(389)		(122,215)		Decrease in cash and cash equivalents	(46,591)			(95,228)		(389)
Cash, cash equivalents at beginning of period		32,382		234,986
Cash, cash equivalents at end of the period		$	31,993	$	112,771
Cash, cash equivalents and restricted cash at beginning of period						Cash, cash equivalents and restricted cash at beginning of period	110,662			205,890		32,382
Cash, cash equivalents and restricted cash at end of the period						Cash, cash equivalents and restricted cash at end of the period	$	64,071		$	110,662	$	31,993
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Property and equipment included in accounts payable and accrued liabilities	Property and equipment included in accounts payable and accrued liabilities	$	99,602	$	143,168	Property and equipment included in accounts payable and accrued liabilities	$	17,192		$	16,320	$	99,602
Cash paid for interest	Cash paid for interest	$	24,865	$	25,265	Cash paid for interest	787			2,245		24,865
Cash paid for reorganization items, net						Cash paid for reorganization items, net	15,029			6,545		0
Accretion of beneficial conversion feature of Series A Preferred Stock	Accretion of beneficial conversion feature of Series A Preferred Stock	$	1,770	$	1,596	Accretion of beneficial conversion feature of Series A Preferred Stock	0			418		1,770
Preferred Units commitment fees and dividends paid-in-kind	Preferred Units commitment fees and dividends paid-in-kind	$	6,160	$	3,975	Preferred Units commitment fees and dividends paid-in-kind	0			0		6,160
Series A Preferred Stock dividends paid-in-kind	Series A Preferred Stock dividends paid-in-kind	$	4,748	$	—	Series A Preferred Stock dividends paid-in-kind	0			0		4,748
Draw on letter of credit increasing the RBL Credit Facility						Draw on letter of credit increasing the RBL Credit Facility	8,746			0		0
Draw on letter of credit increasing the Prior Credit Facility						Draw on letter of credit increasing the Prior Credit Facility	0			125		0
General unsecured claim within accounts payable and accrued liabilities settled with common stock						General unsecured claim within accounts payable and accrued liabilities settled with common stock	11,088			0		0
Backstop Commitment Agreement premium within accounts payable and accrued liabilities settled with common stock						Backstop Commitment Agreement premium within accounts payable and accrued liabilities settled with common stock	0			23,866		0

~~THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF~~

~~THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~The accompanying notes are an integral part of these condensed consolidated financial statements.

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EXTRACTION OIL & GAS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY AND NONCONTROLLING INTEREST

(In thousands)

(Unaudited)

Common Stock Treasury Stock Additional Paid in Capital Accumulated Deficit Extraction Oil & Gas, Inc. Stockholders' Equity Noncontrolling Interest Total Stockholders' Equity
Shares Amount Shares Amount Amount
Balance at January 1, 2020 176,517 $ 1,336 38,859 $ (170,138) $ 2,156,383 $ (1,743,208) $ 244,373 $ 264,364 $ 508,737
Preferred Units commitment fees & dividends paid-in-kind — — — — (6,160) — (6,160) 6,160 —
Series A Preferred Stock dividends — — — — (4,748) — (4,748) — (4,748)
Accretion of beneficial conversion feature on Series A Preferred Stock — — — — (1,770) — (1,770) — (1,770)
Restricted stock issued, net of tax withholdings and other 234 — — — (35) — (35) — (35)
Net income — — — — — 9,037 9,037 — 9,037
Effects of deconsolidation of Elevation Midstream, LLC — — — — — — — (270,524) (270,524)
Balance at March 31, 2020 176,751 $ 1,336 38,859 $ (170,138) $ 2,143,670 $ (1,734,171) $ 240,697 $ — $ 240,697


	Common Stock			Treasury Stock			Additional Paid in Capital		Retained Earnings (Accumulated Deficit)		Extraction Oil & Gas, Inc. Stockholders' Equity (Deficit)		Noncontrolling Interest		Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Amount								Amount
Balance at January 1, 2020 (Predecessor)	176,517	$	1,336	38,859	$	(170,138)	$	2,156,383	$	(1,743,208)	$	244,373	$	264,364	$	508,737
Preferred Units commitment fees & dividends paid-in-kind	—	—		—	—		(6,160)		—		(6,160)		6,160		—
Series A Preferred Stock dividends	—	—		—	—		(4,748)		—		(4,748)		—		(4,748)
Accretion of beneficial conversion feature on Series A Preferred Stock	—	—		—	—		(1,770)		—		(1,770)		—		(1,770)
Restricted stock issued, net of tax withholdings and other	234	—		—	—		(35)		—		(35)		—		(35)
Net income	—	—		—	—		—		9,037		9,037		—		9,037
Effects of deconsolidation of Elevation Midstream, LLC	—	—		—	—		—		—		—		(270,524)		(270,524)
Balance at March 31, 2020 (Predecessor)	176,751	$	1,336	38,859	$	(170,138)	$	2,143,670	$	(1,734,171)	$	240,697	$	0	$	240,697

Common Stock Treasury Stock Additional Paid in Capital Accumulated Deficit Extraction Oil & Gas, Inc. Stockholders' Equity Noncontrolling Interest Total Stockholders' Equity
Shares Amount Shares Amount Amount
Balance at January 1, 2019 176,210 $ 1,678 4,543 $ (32,737) $ 2,153,661 $ (375,788) $ 1,746,814 $ 147,872 $ 1,894,686
Preferred Units issuance costs — — — — — — — (10) (10)
Preferred Units commitment fees & dividends paid-in-kind — — — — (3,975) — (3,975) 3,975 —
Stock-based compensation — — — — 13,008 — 13,008 — 13,008
Series A Preferred Stock dividends — — — — (2,721) — (2,721) — (2,721)
Accretion of beneficial conversion feature on Series A Preferred Stock — — — — (1,596) — (1,596) — (1,596)
Repurchase of common stock — (77) 7,824 (32,135) — — (32,212) — (32,212)
Restricted stock issued, net of tax withholdings 270 — — — (454) — (454) — (454)
Net loss — — — — — (94,032) (94,032) — (94,032)
Balance at March 31, 2019 176,480 $ 1,601 12,367 $ (64,872) $ 2,157,923 $ (469,820) $ 1,624,832 $ 151,837 $ 1,776,669


Balance at January 1, 2021 (Predecessor)	175,448	$	1,336	38,859	$	(170,138)	$	2,140,499	$	(3,010,742)	$	(1,039,045)	$	0	$	(1,039,045)
Stock-based compensation	—	—		—	—		302		—		302		—		302
Accretion of beneficial conversion feature on Series A Preferred Stock	—	—		—	—		(418)		—		(418)		—		(418)
Net income	—	—		—	—		—		870,970		870,970		—		870,970
Cancellation of Predecessor equity	(175,448)	(1,336)		(38,859)	170,138		(2,140,383)		2,139,772		168,191		—		168,191
Issuance of Successor equity	24,729	247		—	—		504,205		—		504,452		—		504,452
Issuance of Successor warrants	—	—		—	—		20,403		—		20,403		—		20,403
Balance at January 20, 2021 (Predecessor)	24,729	$	247	0	$	0	$	524,608	$	0	$	524,855	$	0	$	524,855


Balance at January 21, 2021 (Successor)	24,729	$	247	0	$	0	$	524,608	$	0	$	524,855	$	0	$	524,855
Stock-based compensation	—	—		—	—		2,174		—		2,174		—		2,174
Net income	—	—		—	—		—		88,554		88,554		—		88,554
Issuance of Successor equity for general unsecured claims	543	5		—	—		11,083		—		11,088		—		11,088
Issuance of Successor equity for rights offering	431	5		—	—		8,787		—		8,792		—		8,792
Balance at March 31, 2021 (Successor)	25,703	$	257	0	$	0	$	546,652	$	88,554	$	635,463	$	0	$	635,463

~~THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF~~

~~THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~The accompanying notes are an integral part of these condensed consolidated financial statements.

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EXTRACTION OIL & GAS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Business and Organization

Extraction Oil & Gas, Inc. (the ~~"Company"~~“Company” or ~~"Extraction")~~“Extraction"” is an independent oil and gas company focused on the acquisition, development and production of oil, natural gas and natural gas liquids (“NGLs”) reserves in the Rocky Mountain region, primarily in the Wattenberg Field of the Denver-Julesburg Basin (the ~~"DJ Basin"~~“DJ Basin”) of ~~Colorado,~~Colorado. As described below in the section titled Voluntary Reorganization under Chapter 11 of the Bankruptcy Code, during the second quarter of 2020, the Company filed for bankruptcy and, as ~~well~~a result, was delisted from the NASDAQ Global Select Market on June 25, 2020 and began trading on the Pink Open Market under the symbol “XOGAQ.” Also described below, on January 20, 2021 the Company emerged from bankruptcy as ~~the construction~~a reorganized entity and, ~~support of midstream assets to gather and process crude oil and gas production. Extraction is~~as a ~~public company listed for trading~~result, was relisted on the NASDAQ Global Select Market on January 21, 2021 and began trading under the symbol ~~"XOG."~~“XOG.”

~~Deconsolidation of Elevation Midstream, LLC~~

~~Elevation Midstream, LLC ("Elevation"), a Delaware limited liability~~To facilitate our financial statement presentations, the Company refers to the post-emergence reorganized company ~~is focused on the construction~~in these condensed consolidated financial statements and ~~operation of gathering systems and facilities to serve the development of acreage in the Company’s Hawkeye and Southwest Wattenberg areas. Midstream assets of Elevation are represented~~footnotes as the ~~gathering systems~~Successor Company for periods subsequent to January 20, 2021 and ~~facilities line item within~~to the ~~condensed consolidated balance sheets.~~

~~During~~pre-emergence company as the first quarter of 2020, Elevation's non-controlling interest owner, which owns 100% of Elevation's preferred stock, per contractual agreement, expanded Elevation's then five member board of managers by four seatsPredecessor Company for periods on or prior to January 20, 2021. This delineation between Predecessor Company periods and filled them with managers of their choosing (the "Board Expansion"). Because Extraction had the right to appoint only three of the managers of Elevation before and after Board Expansion, Extraction determined theSuccessor Company had lost voting control of Elevation, and on March 16, 2020 deconsolidated Elevation and began accounting for the entity as an equity method investment. Though Extraction determined control of Elevation was lost under the voting interest model of consolidation, the Company also determined significant influence was not lost due to (1) Extraction owning 100% of the common stock, (2) Extraction appointing three of the nine managers of Elevation and (3) Extraction's continuing involvement in the day-to-day operation of Elevation through a management services agreement. Because Extraction also determined the Companyperiods is ~~not the primary beneficiary, Elevation Midstream, LLC is not a variable interest entity.~~

Extraction elected the fair value option to remeasure the Elevation equity method investment and determined it had no fair value. The Company recorded a $73.1 million loss on deconsolidation of the investmentshown in the condensed consolidated financial statements, certain tables within the footnotes to the condensed consolidated financial statements and other parts of ~~operations for~~this Quarterly Report on Form 10-Q (“Quarterly Report”) through the ~~three months ended March 31, 2020. Also, as~~use of ~~March 31, 2020, Elevation determined certain gathering systems and facilities were impaired by $50.3 million as~~ a ~~result~~black line, calling out the lack of ~~the abandonment of certain projects. In accordance with Accounting Standards Codification~~ comparability between periods.

~~Topic 323-10-35-20: Investments—equity method and joint ventures, Extraction discontinued applying the equity method investment for Elevation as the impairment charge would have reduced the investment below zero.~~

Bonanza Creek Energy, Inc. Merger

On May ~~1, 2020, Elevation's board~~9, 2021, Bonanza Creek Energy, Inc. (“Bonanza Creek”) and Extraction signed a merger agreement in an all-stock merger of ~~managers issued 1,530,000,000 common units at a price~~equals. The merger is subject to customary closing conditions, and the Company currently expects it to close in the third quarter of ~~$0.01 per unit to certain of Elevation's members other than Extraction (the "Capital Raise"). The Capital Raise caused Extraction's ownership of Elevation to be diluted to less than 0.01%. As a result~~2021. Upon completion of the ~~Capital Raise, beginning~~merger, the combined company will be named Civitas Resources, Inc. (“Civitas”). Bonanza Creek President and Chief Executive Officer, Eric Greager, will serve as President and CEO of Civitas. Other senior leadership positions will be filled by current executives of Bonanza Creek and Extraction. As designated in ~~May 2020~~the merger agreement, of the six named officers, three will be from Bonanza Creek and three from Extraction. Extraction Chairman of the Board, Ben Dell, will serve as Chairman of Civitas, and Bonanza Creek and Extraction will ~~account for Elevation under the cost method of accounting. The Company reserves all rights related~~each nominate four directors to ~~actions taken by Elevation’s board of managers.~~Civitas’ diverse, eight-member Board.

Voluntary Reorganization under Chapter 11 of the Bankruptcy Code

As previously disclosed, on June 14, 2020 (the “Petition Date”), Extraction and its wholly owned subsidiaries (collectively, the “Debtors”), filed voluntary petitions for relief under chapter 11 (“Chapter 11”) of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Debtors’ Chapter 11 cases (the “Chapter 11 Cases”) were jointly administered under the caption In re Extraction Oil & Gas., et al. Case No. 20-11548 (CSS).

On July 30, 2020, the Debtors filed a proposed Plan of Reorganization (as amended, modified, or supplemented from time to time, the “Plan”) and related Disclosure Statement (as amended or modified, the “Disclosure Statement”) describing the Plan and the solicitation of votes to approve the same from certain of the Debtors’ creditors with respect to the Chapter 11 Cases. Subsequently on October 22, 2020 and November 5, 2020, the Debtors filed first and second amendments, respectively, to the Disclosure Statement. The hearing to consider approval of the Disclosure Statement was held on November 6, 2020. On November 6, 2020, the Bankruptcy Court approved the adequacy of the Disclosure Statement and the Debtors commenced a solicitation process to obtain votes on the Plan. The Plan was confirmed by order of the Bankruptcy Court on December 23, 2020 (the “Confirmation Order”).

On January 20, 2021 (the “Emergence Date”), all material conditions were met, and the Plan became effective in accordance with its terms and the Company emerged from Chapter 11. Unless otherwise indicated, capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan. On the Emergence Date and pursuant to the Plan:

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•The Company amended and restated its certificate of incorporation and bylaws;

•The Company constituted a new board of directors;

•The Company appointed a new Chief Executive Officer, President and Chief Operating Officer, and Chief Financial Officer;

•The Successor Company issued new common stock (the “New Common Stock”) and New Warrants (as defined in Note 10—Equity) in reliance on exemptions from registration under Section 1145 of the Bankruptcy Code and Section 4(a)2 of the Securities Act, as applicable:

◦2,832,833 shares of New Common Stock pro rata to holders of the 2024 Senior Notes;

◦4,854,017 shares of New Common Stock pro rata to holders of the 2026 Senior Notes;

◦179,472 shares of New Common Stock, 1,452,773 Tranche A Warrants to purchase 1,452,773 shares of New Common Stock and 726,390 Tranche B Warrants to purchase 726,390 shares of New Common Stock pro rata to holders of the Predecessor Company’s Series A Preferred Stock (the “Predecessor Preferred Stock”) outstanding prior to the Emergence Date;

◦179,496 shares of New Common Stock, 1,452,794 Tranche A Warrants to purchase 1,452,794 shares of New Common Stock and 726,412 Tranche B Warrants to purchase 726,412 shares of New Common Stock pro rata to holders of the Predecessor Company’s existing common stock (the “Predecessor Common Stock”) outstanding prior to the Emergence Date;

◦11,909,430 shares of New Common Stock were issued to participants in the Equity Rights Offering extended by the Company to the applicable classes under the Plan (including to the commitment parties party to the Backstop Commitment Agreement) which includes 430,760 shares issued as part of the rights offering in February 2021;

◦844,760 shares of New Common Stock to the commitment parties under the Backstop Commitment Agreement in connection with their backstop obligation thereunder to purchase unsubscribed shares of New Common Stock;

◦13,392 shares of New Common Stock were issued to participants in rights offering extended by the Company to certain holders of general unsecured claims;

◦3,177,194 shares of New Common Stock to holders of the 2024 Senior Notes and 2026 Senior Notes in respect of claims purchased from general unsecured creditors;

◦1,169,322 shares of New Common Stock to commitment parties under the Backstop Commitment Agreement in respect of the commitment premium due thereunder; and

◦543,296 shares of New Common Stock were issued to general unsecured claims that settled in February 2021. See Note 10—Equity.

•The Company entered into the RBL Credit Facility (as defined in Note 4—Long-Term Debt—RBL Credit Facility);

•The Company repaid in full and terminated the Prior Credit Facility (as defined in Note 4—Long-Term Debt—Prior Credit Facility). All liens and security interests granted to secure such obligations under the Prior Credit Facility were automatically terminated and are of no further force and effect;

•The Company terminated the DIP Credit Facility (as defined in Note 4—Long-Term Debt), and the holders of claims under the DIP Credit Facility received payment in full, in cash, for allowed claims. All liens and security interests granted to secure such obligations under the DIP Credit Facility were automatically terminated and are of no further force and effect;

•The holders of certain trade claims, administrative claims, other secured claims and other priority claims that were allowed by the Bankruptcy Court received payment in full in cash upon emergence or through the ordinary course of business after the Emergence Date.

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Note 2—Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of the Company, including its wholly owned subsidiaries. ~~All significant intercompany~~Intercompany balances and transactions have been eliminated in consolidation. The financial statements included herein were prepared from the records of the Company in accordance with accounting principles generally accepted ~~accounting principles~~ in the United States of America (“GAAP”) and the Securities and Exchange Commission rules and regulation for interim financial reporting. In the opinion of management, all adjustments, consisting primarily of normal recurring ~~accruals~~adjustments that are considered necessary for a fair statement of the unaudited condensed consolidated financial information, have been included. However, operating results for the period presented are not necessarily indicative of the results that may be expected for a full year. Interim condensed consolidated financial

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statements and the year-end balance sheets do not include all of the information and notes required by GAAP for audited annual consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (“Annual Report”).

Significant Accounting Policies

The significant accounting policies followed by the Company are set forth in Note 2 to the Company’s consolidated financial statements in its Annual Report and are supplemented by the notes to the unaudited condensed consolidated financial statements in this report. ~~These unaudited~~As discussed in Note 3—Fresh Start Reporting, upon emergence from bankruptcy on January 20, 2021, we recorded our consolidated balance sheet accounts at fair value.

The Predecessor Company applied ASC Topic 852 — Reorganizations in preparing the condensed consolidated financial statements. ASC 852 did not apply to the Successor Company. ASC 852 requires the financial statements, ~~should be read in conjunction~~for periods subsequent to the Chapter 11 Cases’ filing date, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses incurred during the bankruptcy proceedings, including gain on settlement of debt and fresh-start valuations, are recorded as reorganization items. In addition, for periods after the Petition Date and through the Emergence Date, Predecessor Company pre-petition obligations that may have been impacted by the Chapter 11 process have been classified on the condensed consolidated balance sheets as “Liabilities Subject to Compromise.” These liabilities are reported at the amounts the Predecessor Company anticipated would be allowed by the Bankruptcy Court as of that balance sheet date, even if they may be settled for lesser amounts. See below for more information regarding reorganization items.

GAAP requires certain additional reporting for financial statements prepared between the Petition Date and ~~notes included~~the Emergence Date, including:

•Reclassification of pre-petition liabilities that are unsecured, under-secured or where it cannot be determined that the liabilities are fully secured to a separate line item in the condensed consolidated balance sheets called “Liabilities Subject to Compromise”; and

•Segregation of reorganization items as a separate line in the condensed consolidated statements of operations outside of income from continuing operations.

Accounting policies for the balance sheet accounts listed below are disclosed in the Company’s Annual Report. As of the Effective Date, the amounts for these accounts have been recorded at fair value. After the effective date, the Company will continue to follow the accounting policies within the Company’s Annual Report.

~~Revenue~~ •—Cash and Cash Equivalents

• ~~Contract Balances~~Accounts Receivable

•Inventory, Prepaid Expenses and Other

•Oil and Gas Properties

•Other Property and Equipment

•Debt Issuance Costs

•Commodity Derivative Instruments

•Intangible Assets

•Asset Retirement Obligation

The Company has a certain revenue contract with an initial term beginning on November 1, 2016 and continuing until October 31, 2020 after which the contract begins an automatic month-to-month renewal unless terminated by either party giving notice at least 180 days prior to the effective termination date but in no event can either party give such notice earlier than November 1, 2020. Based on the accounting treatment pursuant to ASC 606 - Revenue from Contracts with Customers, the contract term ends on April 30, 2021 because it may be terminated by either party with no penalty effective as of such date. The contract term impacts the amount of consideration that can be included in the transaction price. Generally, under the Company's various sales contracts, the Company invoices customers once its performance obligations have been satisfied, at which point payment is unconditional. For the three months ended March 31, 2020, the Company allocated $8.5 million to a satisfied performance obligation recognized within oil sales under ASC 606. As of March 31, 2020, the Company estimated a performance obligation under ASC 606 of $46.2 million, of which $3.9 million is recorded in accounts payable and accrued liabilities and $42.3 million is recorded in other non-current liabilities. A corresponding asset was recorded in the amount of $13.0 million, of which $12.1 million is recorded in inventory, prepaid expenses and other and $0.9 million is recorded in other non-current assets. The asset will be amortized into revenue over the contractual term of the contract, and the liability will be relieved if a deficiency payment is made to the counterparty or when the Company's minimum volume commitments are fulfilled.

~~Other Operating Expenses~~

Other operating expenses were $52.6 million for the three months ended March 31, 2020. This amount is primarily made up of a $46.8 million loss contingency from an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020. Please see ~~Note 13—Commitments and Contingencies~~ ~~for further details. Also included in this amount is a $5.8 million charge to income for expenses related to a workforce reduction in February 2020.~~

~~Impairment of Oil and Gas Properties~~

The Company identified an impairment triggering event for its proved oil and gas properties as of March 31, 2020 due to the significant decrease in oil and gas prices during the first quarter of 2020. As such, the Company performed a quantitative assessment as of March 31, 2020, and proved property in its northern field was impaired. For the three months ended March 31, 2020 and 2019, the Company recognized $0.8 million and $8.2 million, respectively, in impairment expense on its proved oil and gas properties related to impairment of assets in its northern field. The fair value did not exceed the Company's carrying amount associated with its proved oil and gas properties in its northern field. The Company did not have any proved property impairment in its Core DJ Basin field, primarily because of the $1.3 billion impairment charge that was recorded in the fourth quarter of 2019.

Of the Company's $112.5 million in exploration and abandonment expenses for the three months ended March 31, 2020, $106.9 million was lease abandonment expense. Unproved oil and gas properties consist of costs to acquire unevaluated leases as well as costs to acquire unproved reserves. The Company evaluates significant unproved oil and gas properties for impairment based on remaining lease term, drilling results, reservoir performance, seismic interpretation or future plans to develop acreage. When successful wells are drilled on undeveloped leaseholds, unproved property costs are reclassified to proved properties and depleted on a unit-of-production basis. Impairment expense and

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~~lease extension payments for unproved properties is reported in exploration and abandonment expenses in the condensed consolidated statements of operations.~~Executory Contracts

~~Recent Accounting Pronouncements~~Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign, or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors from performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance.

~~In June 2016,~~Bankruptcy Claims

The Debtors have filed with the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments—Credit Losses. In May 2019, ASU No. 2016-13 was subsequently amended by ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit LossesBankruptcy Court schedules and ~~ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief. ASU No. 2016-13, as amended, affects trade receivables, financial~~statements setting forth, among other things, the assets and ~~certain other instruments~~liabilities of each of the Debtors, subject to the assumptions filed in connection therewith. These schedules and statements may be subject to further amendment or modification after filing. Certain holders of pre-petition claims that are not ~~measured at fair value~~governmental units were required to file proofs of claim by the bar date of August 14, 2020. As of May 12, 2021, the Debtors’ have received approximately 2,600 proofs of claim, primarily representing general unsecured claims, for an amount of approximately $5.8 billion. The Bankruptcy Court does not allow for claims that have been acknowledged as duplicates. Approximately 2,100 claims totaling approximately $4.2 billion have been withdrawn, disallowed or are pending approval to be disallowed. Differences in amounts recorded and claims filed by creditors are currently being investigated and resolved, including through ~~net income. This ASU replaced~~filing objections with the ~~incurred loss approach with an expected loss model~~Bankruptcy Court, where appropriate. The Company may ask the Bankruptcy Court to disallow claims that the Company believes are duplicative, have been later amended or superseded, are without merit, are overstated or should be disallowed for instruments measured at amortized cost and was effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. ASU No. 2016-13 will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings asother reasons. In light of the ~~beginning~~substantial number of claims filed, the ~~first reporting period in which~~claims resolution process may take considerable time to complete and is continuing even after the ~~guidance is effective. The Company adopted this ASU on January 1, 2020, and the adoption did not have a material impact on the consolidated financial statements and related disclosures.~~Debtors emerged from bankruptcy.

In August 2018, the FASB issued ASU No. 2018-13, which removes or modifies current fair value disclosures and adds additional disclosures. The update to the guidance is the result of the FASB's test of the principles developed in its disclosure effectiveness project, which is designed to improve the effectiveness of disclosures in the notes to the financial statements. The disclosures that have been removed or modified may be applied immediately with retrospective application. For public entities, the new guidance was effective for fiscal years beginning after December 15, 2019, including interim reporting periods within that reporting period. The Company adopted this ASU on January 1, 2020, and the adoption did not have a material impact on the consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. For public entities, the guidance is effective for fiscal years beginning after December 15, 2019, including interim reporting periods within that reporting period. The Company adopted this ASU on January 1, 2020 which did not have a material impact on the consolidated financial statements and related disclosures as capitalized costs for internal-use software were not material as of March 31, 2020.

Other than as disclosed above or in the Company’s Annual Report, there are no other accounting standards applicable to the Company as of March 31, 2020 and through the date of this filing that would have a material effect on the Company’s unaudited condensed consolidated financial statements and related disclosures that have been issued but not yet adopted by the Company.

~~Note 3—Divestitures~~

~~February 2020~~ Divestiture

In February 2020 (the “February 2020 Divestiture”), the Company completed the sale of certain non-operated producing properties for aggregate sales proceeds of approximately $12.2 million, subject to customary purchase price adjustments. No gain or loss was recognized for the February 2020 Divestiture. The Company continues to explore divestitures as part of our ongoing initiative to divest non-strategic assets.

~~December 2019 Divestiture~~Segments

~~In December 2019,~~After March 31, 2020, the Company ~~completed~~had a single reportable segment. Beginning in the ~~sale~~fourth quarter of ~~certain non-operated producing properties for aggregate sales proceeds~~2018, the Company had 2 operating segments, (i) the exploration, development and production of ~~approximately $10.0 million, subject~~oil, natural gas and NGL (the "exploration and production segment") and (ii) the construction of and support of midstream assets to ~~customary purchase price adjustments. No gain or loss~~gather and process crude oil and gas production (the "gathering and facilities segment"). Elevation Midstream, LLC comprised the gathering and facilities segment. Through March 16, 2020, the results of Elevation were included in the condensed consolidated financial statements of Extraction. Effective March 17, 2020, the results of Elevation Midstream, LLC were no longer consolidated in Extraction's results; however, the Company’s segment disclosures included the gathering and facilities segment because it was ~~recognized~~consolidated through March 16, 2020. Due to the immaterial nature of the revenues and expenses for the first quarter of 2020 and because these amounts are already disclosed in the Company's Annual Report on Form 10-K, the Company will no longer present segment metrics separately.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents consist of demand deposits and highly liquid investments which have an original maturity of three months or less. Cash and cash equivalents potentially subject the Company to a concentration of credit risk as substantially all of its deposits held in financial institutions were in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits as of March 31, 2021 and December ~~2019 Divestiture.~~31, 2020. The Company maintains its unrestricted cash and cash equivalents in the form of money market and checking accounts with financial institutions that are also lenders under the Successor’s credit agreement. The Company has not experienced any losses on its deposits of cash and cash equivalents.

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~~August 2019 Divestiture~~Restricted cash as of March 31, 2021 shown in the table below consists of funds remaining in a professional fee escrow account that were reserved to pay certain professional fees upon emergence from the Chapter 11 Cases. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):

In August 2019, the Company completed the sale of certain non-operated producing properties for aggregate sales proceeds of approximately $22.0 million, subject to customary purchase price adjustments. No gain or loss was recognized for the August 2019 Divestiture.


	Successor		Predecessor
	March 31, 2021		December 31, 2020
Cash and cash equivalents	$	38,430	$	205,890
Restricted cash	25,641		0
Total cash, cash equivalents and restricted cash	$	64,071	$	205,890

~~March 2019 Divestiture~~Other Operating Expenses

In March 2019, the Company completed the sale of its interests in approximately 5,000 net acres of leasehold and producing properties for aggregate sales proceeds of approximately $22.4 million. The effective dateOther operating expenses for the ~~March 2019 Divestiture was July 1, 2018 with purchase price adjustments calculated~~periods shown are as ~~of the closing date of $5.9 million, resulting in net proceeds of $16.5 million. No gain or loss was recognized for the March 2019 Divestiture.~~

follow (in thousands).

~~Note 4—Going Concern~~


	Successor		Predecessor
	For the Period from January 21 through March 31,		For the Period from January 1 through January 20,		For the Three Months Ended March 31,
	2021		2021		2020
Restructuring items(1)	$	3,739	$	0	$	5,798
Litigation expense(2)	0		153		46,777
Early termination penalties	0		373		0
Production tax interest expense	151		581		0
Midstream operating expenses(3)	0		0		3,935
Total	$	3,890	$	1,107	$	56,510

_______________

(1) The Company depends on cash flows from operating activities and, as necessary and available, borrowings under its senior secured revolving credit facility (the “revolving credit facility”) to fund its capital expenditures and working capital requirements. Additionally, the Company historically has used proceeds from the issuance of equity and debt securities in the capital markets and from sales or other monetizations of assets to fund its capital expenditures and working capital requirements.

The market price for oil, natural gas and NGLs decreased significantly beginning in the first quarter of 2020, continuing into the second quarter of 2020. The decrease in the market price for the Company’s production directly reduces the Company’s cash flow from operations and indirectly impacts its other potential sources of funds described above. The Company has reduced its 2020 upstream capital budget and as a result expects to suspend drilling in the second half of 2020 and does not see production returning to historical levels for the foreseeable future. As discussed in ~~Note 5—Long-Term Debt, lenders under the revolving credit facility elected to reduce the borrowing base and elected commitments to $650.0~~$5.8 million from $950.0 million on April 27, 2020, and the Company borrowed all of its remaining available capacity under the revolving credit facility. As a result of the reduction of the borrowing base and elected commitments, it is probable that the Company will not meet the financial covenants under the revolving credit facility for the three months ended ~~June 30,~~March 31, 2020 ~~when assuming~~was a charge to income for expenses related to a workforce reduction in February 2020. The $3.7 million for the ~~Company’s current financial forecast.~~period from January 21, 2021 through March 31, 2021 related primarily to professional fees surrounding emergence from bankruptcy.

(2) The $46.8 million was a loss contingency from an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020.

(3) The $3.9 million was for midstream operating expenses previously reported on its own line item on the condensed consolidated statement of operations but now consolidated in other operating expenses due to its relative immaterial amount and because the Company will not be incurring these expenses for the foreseeable future due to the deconsolidation of Elevation Midstream, LLC discussed in the Segments section above.

If the Company does not obtain a waiver of its financial covenants for the three months ended June 30, 2020, the lenders under the revolving credit facility will be able to accelerate maturity of the debt. Any acceleration of the obligations under the revolving credit facility would result in a cross-default and potential acceleration of the maturity of the Company’s other outstanding long-term debt amounting to approximately $1.1 billion. These defaults create uncertainty associated with the Company’s ability to repay its outstanding long-term debt obligations as they become due and creates a substantial doubt over the Company’s ability to continue as a going concern.Recent Accounting Pronouncements

~~As a result of~~Other than as disclosed in the ~~impacts~~Company’s Annual Report, there are no other accounting standards applicable to the ~~Company’s financial position resulting from declining commodity price conditions~~Company as of March 31, 2021 and ~~in consideration~~through the date of the substantial amount of long-term debt and preferred stock outstanding, the Company has engaged advisors to assist with the evaluation of strategic alternatives, which may include, but not be limited to, seekingthis filing that would have a restructuring, amendment or refinancing of existing debt through a private restructuring or reorganization under Chapter 11 of the Bankruptcy Code. However, there can be no assurances that the Company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions. As a result of these uncertainties and the likelihood of a restructuring or reorganization, management has concluded that there is substantial doubt regardingmaterial effect on the Company’s ~~ability to continue as a going concern.~~

~~The~~unaudited condensed consolidated financial statements and related disclosures that have been ~~prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in~~issued but not yet adopted by the ~~normal course of business. The consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern.~~Company.

910

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Note 5—3—Fresh Start Reporting

Fresh Start Reporting

In connection with the Company’s emergence from bankruptcy and in accordance with Accounting Standards Codification (“ASC”) Topic 852—Reorganizations (“ASC 852”), the Company qualified for and applied fresh start reporting on the Emergence Date. The Company was required to apply fresh start reporting because (i) the holders of existing voting shares of the Predecessor Company received less than 50% of the voting shares of the Successor and (ii) the reorganization value (defined below) of the Company’s assets immediately prior to confirmation of the Plan of $1.4 billion was less than the $2.9 billion of post-petition liabilities and allowed claims.

Because the Company qualified for fresh start reporting, a new reporting entity was considered to have been created; as a result and in accordance with ASC 852, the Company allocated the reorganization value of the Company to its individual assets, including property, plant and equipment, based on their estimated fair values in conformity with FASB ASC Topic 820–Fair Value Measurement (“ASC 820”) and FASB ASC Topic 805–Business Combinations (“ASC 805”). As such, the condensed consolidated financial statements after January 20, 2021 are not comparable with the condensed consolidated financial statements as of or prior to that date.

Reorganization Value

Reorganization value represents the fair value of the Successor Company’s assets before considering certain liabilities and is intended to represent the approximate amount a willing buyer would pay for the Company’s assets immediately after reorganization. Reorganization value is derived from an estimate of enterprise value, or fair value of the Company’s interest-bearing debt and stockholders’ equity. As set forth in the Plan and related disclosure statement, the enterprise value of the Successor Company was estimated to be between $875.0 million to $1.275 billion. On the Emergence Date, the Successor Company’s estimated enterprise value was $1.052 billion before the consideration of cash and cash equivalents on hand, which falls slightly below the midpoint of this range. The enterprise value was derived from an independent valuation using an income approach to derive the fair value of the Company’s assets as of the Emergence Date. On the Emergence Date, pursuant to the terms of the Plan, the Successor Company entered into a $1.0 billion reserve-based credit agreement with an initial borrowing base of $500.0 million. Please see Note 4—Long-Term Debt for discussion of the Successor Company’s debt.

The Company’s principal assets are its oil and natural gas properties. The fair value of proved reserves was estimated using a discounted cash flows approach, which was based on the anticipated future cash flows associated with those proved reserves, risked by reserve category and discounted using a weighted average cost of capital rate of 11.0%. The proved reserve locations included in this analysis were limited to wells included in the Company's five-year development plan. Future prices were based on forward strip price curves (adjusted for basis differentials). The fair value of the Company’s unproved reserves was estimated using a discounted cash flows approach. See further discussion below in “Fresh Start Adjustments.”

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The following table reconciles the Company’s enterprise value to the implied value of Successor equity as of January 20, 2021 (in thousands, except per share data):


	Successor
	January 20, 2021
Enterprise value	$	1,052,000
Plus: Cash and cash equivalents	71,793
Plus: General unsecured claims to be satisfied through issuance of equity after Emergence	16,127
Less: Working capital adjustment(1)	(333,938)
Less: Interest bearing liabilities	(265,000)
Less: Fair value of warrants(2)	(20,403)
Implied value of Successor equity after satisfaction of general unsecured claims after Emergence	$	520,579
Less: General unsecured claims to be satisfied through issuance of equity after Emergence	(16,127)
Implied value of Successor equity as of January 20, 2021	$	504,452




Common shares of Successor equity as of January 20, 2021	24,729,681
Implied value per common share as of January 20, 2021	$	20.41

(1) Represents current assets without cash and cash equivalents and restricted cash, current liabilities without the asset retirement obligation and the current liability related to the professional fee escrow accrual in accounts payable and accrued liabilities, other non-current liabilities, non-current production taxes, and the working capital deficit adjustment of $23.9 million utilized by the valuation specialist to determine enterprise value for the Plan. This adjustment considers the impact of liabilities in excess of normalized working capital to the enterprise value for purposes of calculating implied Successor equity.

(2) Warrants were considered as part of equity on the condensed consolidated balance sheet but are broken out separately here for presentation and disclosure purposes.

The following table reconciles the Company’s enterprise value to its reorganization value as of January 20, 2021 (in thousands):


	Successor
	January 20, 2021
Enterprise value	$	1,052,000
Plus: Normalized working capital liabilities(1)	176,976
Plus: Asset retirement obligations, current and non-current	87,199
Plus: Cash and cash equivalents	71,793
Reorganization value	$	1,387,968

(1) Relates to normalized working capital liabilities in the Predecessor ending balance sheet.

Although the Company believes the assumptions and estimates used to develop enterprise value and reorganization value are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and resulting conclusions. The assumptions used in estimating these values are inherently uncertain and require judgment. See below under the caption “Fresh Start Adjustments” for additional information regarding assumptions used in the valuation of the Company’s significant assets and liabilities.

Condensed Consolidated Balance Sheet at the Emergence Date (in thousands)

The adjustments set forth in the following condensed consolidated balance sheet as of January 20, 2021 reflect the consummation of transactions contemplated by the Plan (the “Reorganization Adjustments”) and the fair value adjustments as a result of applying fresh start reporting (the “Fresh Start Adjustments”). The explanatory notes highlight methods used to determine fair values or other amounts of the corresponding assets or liabilities, as well as significant assumptions.

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	Predecessor		Reorganization Adjustments			Fresh Start Adjustments			Successor
ASSETS
Current Assets:
Cash and cash equivalents	$	246,952	$	(175,159)	(a)	$	—		$	71,793
Restricted cash	—		38,869		(b)	—			38,869
Accounts receivable, net
Trade	12,500		—			—			12,500
Oil, natural gas and NGL sales	64,698		—			—			64,698
Inventory, prepaid expenses and other	33,524		0			3,470		(r)	36,994

Total Current Assets	357,674		(136,290)			3,470			224,854
Property and Equipment (successful efforts method), at cost:
Proved oil and gas properties	4,746,225		—			(3,800,981)		(s)	945,244
Unproved oil and gas properties	221,247		—			(75,647)		(s)	145,600
Wells in progress	136,247		—			(136,247)		(s)	—
Less: accumulated depletion, depreciation, amortization and impairment charges	(3,475,279)		—			3,475,279		(s)	—
Net oil and gas properties	1,628,440		—			(537,596)			1,090,844
Other property and equipment, net of accumulated depreciation and impairment charges	56,455		—			350		(t)	56,805
Net Property and Equipment	1,684,895		—			(537,246)			1,147,649
Non-Current Assets:
Commodity derivative asset	134		—			—			134
Other non-current assets	9,003		6,328		(c)	—			15,331
Total Non-Current Assets	9,137		6,328			—			15,465
Total Assets	$	2,051,706	$	(129,962)		$	(533,776)		$	1,387,968
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	93,036	$	58,792	(d)	$	3,469	(r)	$	155,297
Revenue payable	68,003		59,750		(e)	—			127,753
Production taxes payable	3,284		132,255		(f)	—			135,539
Commodity derivative liability	7,897		—			—			7,897
Accrued interest payable	2,236		(2,236)		(g)	—			—
Asset retirement obligations	—		13,937		(h)	(478)		(u)	13,459
DIP Credit Facility	106,727		(106,727)		(i)	—			—
Prior Credit Facility	453,872		(453,872)		(i)	—			—
Total Current Liabilities	735,055		(298,101)			2,991			439,945
Non-Current Liabilities:
RBL Credit Facility	—		265,000		(j)	—			265,000
Production taxes payable	38,716		22,405		(f)	—			61,121

Other non-current liabilities	—		23,307		(k)	—			23,307
Asset retirement obligations	—		80,620		(h)	(6,880)		(u)	73,740

Total Non-Current Liabilities	38,716		391,332			(6,880)			423,168
Liabilities Subject to Compromise	2,135,808		(2,135,808)		(l)	—			—
Total Liabilities	2,909,579		(2,042,577)			(3,889)			863,113

Commitments and Contingencies
Series A Convertible Preferred Stock	192,172		(192,172)		(m)	—			—
Stockholders' Equity (Deficit):
Predecessor common stock	1,336		(1,336)		(n)	—			—
Predecessor treasury stock	(170,138)		170,138		(o)	—			—
Predecessor additional paid-in capital	2,140,383		(2,140,383)		(n)(o)	—			—
Successor common stock	—		247		(p)	—			247
Successor warrants	—		20,403		(p)	—			20,403
Successor additional paid-in capital	0		504,205		(p)	—			504,205
Accumulated deficit	(3,021,626)		3,551,513		(q)	(529,887)		(v)	—
Total Stockholders' Equity (Deficit)	(1,050,045)		2,104,787			(529,887)			524,855
Total Liabilities and Stockholders' Equity (Deficit)	$	2,051,706	$	(129,962)		$	(533,776)		$	1,387,968

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Reorganization Adjustments

(a) The table below reflects the sources and uses of cash and cash equivalents on the Emergence Date pursuant to the terms of the Plan (in thousands):


Sources:
Total cash received from the RBL Credit Facility	$	265,000
Total proceeds from backstopped rights offering	200,255
Total proceeds from the general unsecured claims rights offering	218
Total sources of cash	465,473
Uses:
Payment of DIP Credit Facility, Prior Credit Facility, and related interest	(562,834)
Funding of the professional fee escrow account	(38,869)
Payment of prepetition taxes classified as liabilities subject to compromise	(21,532)
Payment of debt issuance cost associated with the RBL Credit Facility	(6,329)
Payment of contract cure costs classified as liabilities subject to compromise	(5,374)
Payments to professionals at emergence	(5,102)
Payment of the general unsecured claim cash out election for claims classified as liabilities subject to compromise	(592)
Total uses of cash	(640,632)
Net uses of cash	$	(175,159)

(b) Represents the funding of the professional fee escrow account.

(c) Represents $6.3 million of financing costs related to the RBL Credit Facility, which were capitalized as debt issuance costs and will be amortized straight-line to interest expense through the maturity date of July 20, 2024.

(d) Represents amounts shown in accounts payable and accrued liabilities as reorganization adjustments (in thousands):


Reinstatements from liabilities subject to compromise:
Accounts payable and accrued liabilities	$	29,752
Current portion of a settlement liability	17,700
General unsecured claims to be satisfied through issuance of equity after Emergence	16,127
Other general unsecured claims to be satisfied after Emergence	8,746
Other adjustments:
Success fees	20,800
Backstop Commitment Agreement premium satisfied in common shares at Emergence	(29,231)
Professional fees paid at Emergence	(5,102)
Total accounts payable and accrued liabilities reorganization adjustments	$	58,792

(e) Represents revenue payables formerly in “Liabilities Subject to Compromise” that have been reinstated at emergence and will be paid out subsequent to emergence.

(f) Represents production taxes payable formerly in “Liabilities Subject to Compromise” that have been reinstated at emergence and will be paid out subsequent to emergence.

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(g) Represents the satisfaction upon emergence of the Predecessor Company’s accrued interest payable for the Prior Credit Facility and DIP Credit Facility.

(h) Represents $13.9 million and $80.6 million of the current and non-current portions of asset retirement obligations, respectively, formerly in “Liabilities Subject to Compromise” that have been reinstated at emergence.

(i) Reflects the payment in full of the borrowings outstanding under the Prior Credit Facility and DIP Credit Facility.

(j) Reflects borrowings drawn under the RBL Credit Facility upon emergence.

(k) Represents $19.3 million of the non-current portion of a settlement liability and $4.0 million of other non-current liabilities formerly in “Liabilities Subject to Compromise” that have been reinstated at emergence and will be paid out subsequent to emergence.

(l) As part of the Plan, the Bankruptcy Court approved the settlement of certain claims reported within “Liabilities Subject to Compromise” in the Company's consolidated balance sheet at their respective allowed claim amounts. The table below indicates the reinstatement or disposition of liabilities subject to compromise (in thousands):


Liabilities subject to compromise pre-emergence	$	2,135,808
Amounts reinstated on the Emergence Date:
Production taxes payable	(154,660)
Asset retirement obligations	(94,557)
Revenue payable	(59,750)
Accounts payable and accrued liabilities	(72,860)
Other non-current liabilities	(23,307)
Total liabilities reinstated	(405,134)
Consideration provided to settle liabilities subject to compromise per the Plan
Issuance of Successor equity associated with the participation in the backstopped and general unsecured rights offerings	(251,795)
Less proceeds from issuance of Successor equity associated with the backstopped and general unsecured rights offerings	200,473
Issuance of Successor equity to 2024 and 2026 Senior Notes holders, incremental to the backstopped and general unsecured rights offerings, and backstop commitment premium	(156,889)
Issuance of Successor equity to general unsecured claim holders, incremental to the backstopped and general unsecured rights offerings, and backstop commitment premium	(64,857)
Cash payment in settlement of claims and other	(27,498)
Total consideration provided to settle liabilities subject to compromise per the Plan	(300,566)
Gain on settlement of liabilities subject to compromise	$	1,430,108

(m) Pursuant to the terms of the Plan, on the Emergence Date, all Predecessor preferred stock interests were cancelled.

(n) Pursuant to the terms of the Plan, on the Emergence Date, all Predecessor common stock interests were cancelled.

(o) Pursuant to the terms of the Plan, on the Emergence Date, all Predecessor treasury stock interests were cancelled.

(p) Reflects the issuance of Successor equity, including the issuance of 24,729,681 shares of common stock at a par value of $0.01 per share and warrants to purchase 4,358,369 shares of common stock in exchange for claims against or interests in the Debtors pursuant to the Plan. Equity issued is detailed in the table below (in thousands):

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Issuance of Successor equity associated with the participation in the backstopped and general unsecured claims rights offerings	$	251,795
Issuance of Successor equity associated with the backstop commitment premium	23,584
Issuance of Successor equity to 2024 and 2026 Senior Notes holders, incremental to the backstopped and general unsecured rights offerings, and backstop commitment premium	156,889
Issuance of Successor equity to general unsecured claims holders, incremental to the backstopped and general unsecured rights offerings, and backstop commitment premium	64,857
Fair value of warrants (Tranche A and B) to Predecessor common and preferred stockholders	20,403
Issuance of Successor equity to Predecessor common stockholders	3,664
Issuance of Successor equity to Predecessor preferred stockholders	3,663
Total Successor equity as of January 20, 2021	$	524,855

(q) The table below reflects the cumulative net impact of the effects on accumulated deficit (in thousands):


Reorganization items, net:
Gain on settlement of liabilities subject to compromise	$	(1,430,108)
Adjustment to Backstop Commitment Agreement premium	(5,365)
Acceleration of unvested stock compensation	3,468
Success fees	20,800
Impact on reorganization items, net	(1,411,205)
Cancellation of Predecessor equity	(2,140,308)
Net impact on accumulated (deficit)	$	(3,551,513)

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Fresh Start Adjustments

(r) Reflects the adjustment to fair value of the Company's line fill inventory based on market prices as of the Emergence Date.

(s) Reflects the adjustments to fair value of the Company's oil and natural gas properties, proved and unproved, as well as the elimination of wells in progress and accumulated depletion, depreciation and amortization.

For purposes of estimating the fair value of the Company's proved oil and gas properties, a discounted cash flows approach was used that estimated the fair value based on the anticipated future cash flows associated with the Company's proved reserves, risked by reserve category and discounted using a weighted average cost of capital rate of 11.0%. The proved reserve locations included in this analysis were limited to wells included in the Company's five-year development plan. Future prices for the income approach were based on forward strip price curves (adjusted for basis differentials) as of the Emergence Date.

In estimating the fair value of the Company's unproved properties, a discounted cash flows approach was used. The approach utilized for proved properties was also consistently utilized for properties that had positive future cash flows associated with reserve locations that did not qualify as proved reserves.

(t) Reflects the fair value adjustment to recognize the Company’s land as of the Emergence Date based on assessed values provided to management by a licensed appraiser. The appraisals utilized the market approach for comparable properties, where there was market comparable data available or the appraiser’s knowledge of the market and the property, to provide an estimated market value where market comparable data was not available.

(u) Reflects the adjustment to fair value of the Company's asset retirement obligations including using a credit-adjusted risk-free rate as of the Emergence Date.

(v) Reflects the net cumulative impact of the fresh start adjustments on accumulated deficit.

Reorganization Items, Net

Any expenses, gains and losses that were realized or incurred between the Petition Date and the Emergence Date and as a direct result of the Chapter 11 Cases were recorded in reorganization items, net in the Company’s consolidated statements of operations. The following table summarizes the components of reorganization items, net for the periods presented (in thousands):


	Predecessor
	For the Period from January 1 through January 20,
	2021
Gain on settlement of liabilities subject to compromise	$	1,430,108
Adjustment to Backstop Commitment Agreement premium	5,365
Acceleration of unvested stock compensation	(3,468)
Professional fees	(7,410)
Success fees	(20,800)
Fresh start valuation adjustment	(529,887)
Total reorganization items, net	$	873,908

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Note 4—Long-Term Debt

The Company’s long-term debt consisted of the following (in thousands):

March 31,
2020 December 31,
2019
Credit facility due August 16, 2022 (or an earlier time as set forth in the credit facility) $ 470,000 $ 470,000
2024 Senior Notes due May 15, 2024 400,000 400,000
2026 Senior Notes due February 1, 2026 700,189 700,189
Unamortized debt issuance costs on Senior Notes (13,842) (14,412)
Total long-term debt 1,556,347 1,555,777
Less: current portion of long-term debt — —
Total long-term debt, net of current portion $ 1,556,347 $ 1,555,777


	Successor		Predecessor
	March 31, 2021		December 31, 2020
RBL Credit Facility	$	93,746	$	—
DIP Credit Facility	—		106,727
Prior Credit Facility	—		453,747
2024 Senior Notes	—		400,000
2026 Senior Notes	—		700,189
Total principal	93,746		1,660,663
Unamortized debt issuance costs(1)	0		0
Total debt, prior to reclassification to “Liabilities Subject to Compromise”	93,746		1,660,663
Less amounts reclassified to “Liabilities Subject to Compromise”(2)	0		(1,100,189)
Total debt not subject to compromise(3)	93,746		560,474
Less current portion of long-term debt	0		(560,474)
Total long-term debt	$	93,746	$	0

____________________

(1) As a result of the Chapter 11 Cases and the adoption of ASC 852, the Company wrote off all unamortized debt issuance cost balances to reorganization items, net in the consolidated statements of operations during the year ended December 31, 2020.

(2) As of December 31, 2020, debt subject to compromise included the principal balances of the Predecessor Company’s Senior Notes.

(3) Debt not subject to compromise includes all borrowings outstanding under the Prior Credit Facility and DIP Credit Facility.

RBL Credit Facility

~~In August 2017,~~On the Emergence Date, pursuant to the terms of the Plan, the Successor Company entered into ~~an amendment and restatement of its existing credit facility (prior to amendment and restatement, the "Prior Credit Facility"), to provide aggregate commitments of $1.5~~a $1.0 billion with a syndicate of banks, which is subject to a borrowing base. The credit facility matures on the earlier of (a) August 16, 2022, (b) April 15, 2021, if (and only if) (i) the Series A Preferred Stock have not been converted into common equity or redeemed prior to April 15, 2021 (the Company can redeem the Series A Preferred Stock at any time), and (ii) prior to April 15, 2021, the maturity date of the Series A Preferred Stock has not been extended to a date that is no earlier than six months after August 16, 2022 or (c) the earlier termination in whole of the commitments under the credit facility. No principal payments are generally required until thereserve-based credit agreement ~~matures or in the event that the~~(“RBL Credit Agreement”) with Wells Fargo Bank, National Association (“RBL Credit Facility”) with an initial borrowing base ~~falls below the outstanding balance.~~

As of ~~March 31, 2020, the credit facility had a maximum credit amount of $1.5 billion, subject to a~~$500.0 million. The borrowing base and elected commitments of $950.0 million. As of March 31, 2020 and December 31, 2019, the Company had outstanding borrowings of $470.0 million and had standby letters of credit of $49.5 million which reduces the availability of the undrawn borrowing base. At March 31, 2020, the undrawn balance under the credit facility was $480.0 million before letters of credit. The amount available to be borrowed under the Company’s revolving credit facility is subject to a borrowing base that is redetermined semiannually on ~~each~~or around May 1 and November 1 of each year, with one interim “wildcard” redetermination available to us and ~~will depend on the volumes of the Company’s proved oil and gas reserves, commodity prices, estimated cash flows from these reserves and other information deemed relevant by the~~our administrative agent ~~under the Company’s revolving credit facility. Additionally, the undrawn balance may~~between scheduled redeterminations during any 12-month period. On May 6, 2021, our borrowing base was reaffirmed at $500.0 million. The next scheduled redetermination will be constrained by the Company's quantitative covenants under the credit facility, including the current ratio and ratio of consolidated debt less cash balances to its consolidated EBITDAX, at the next required quarterly compliance date.on or around November 1, 2021.

On April 27, 2020, the lenders under our revolving credit facility provided notice to the Company that they had completed the redetermination scheduled to occur on May 1, 2020, and via this redetermination, our borrowing base had been reduced from $950.0 million to $650.0 million. As of May 11, 2020, following this redetermination, the Company had outstanding borrowings of $600.5 million and had standby letters of credit of $49.5 million, which reduce the availability of the undrawn borrowing base. As of the date of this filing, the Company has drawn $153.7 million on the RBL Credit Facility. Total funds available ~~balance~~for borrowing under the Company’s RBL Credit Facility, after giving effect to an aggregate of $0.5 million of undrawn letters of credit, ~~facility was 0.~~were $345.8 million as of the date of this filing.

Principal amounts borrowed on the credit facility will be payable on the maturity date. We may repay any amounts borrowed prior to the maturity date without any premium or penalty other than customary LIBOR breakage costs. Amounts repaid under the credit facility may be re-borrowed from time to time, subject to the termsThe RBL Credit Facility provides for a $50.0 million sublimit of the ~~facility.~~

~~Interest on~~aggregate commitments that is available for the ~~credit facility is payable~~issuance of letters of credit. The RBL Credit Facility bears interest either at ~~one of the following two variable rates as selected by the Company:~~a rate equal to (a) LIBOR plus an applicable margin that varies from 3.00% to 4.00% per annum or (b) a base rate ~~based on the Prime Rate or the Eurodollar rate, based on LIBOR. Either rate is adjusted upward by~~plus an applicable margin ~~based~~that varies from 2.00% to 3.00% per annum. The RBL Credit Facility matures on ~~the utilization percentage of the facility as outlined in the pricing grid below. Additionally, the credit facility provides for a commitment fee of 0.375% to 0.50%, depending on borrowing base usage.~~July 20, 2024. The grid below shows the ~~Base Rate Margin~~base rate margin and Eurodollar ~~Margin~~margin depending on the applicable ~~Borrowing Base Utilization Percentage (as defined in the credit facility)~~borrowing base utilization percentage as of the date of this filing:

RBL Credit Facility Borrowing Base Utilization Grid


					Base Rate		Eurodollar		Commitment
Borrowing Base Utilization Percentage	Utilization				Margin		Margin		Fee Rate
Level 1	<25%				2.00	%	3.00	%	0.50	%
Level 2	≥	25%	<	50%	2.25	%	3.25	%	0.50	%
Level 3	≥	50%	<	75%	2.50	%	3.50	%	0.50	%
Level 4	≥	75%	<	90%	2.75	%	3.75	%	0.50	%
Level 5	≥90%				3.00	%	4.00	%	0.50	%

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~~Borrowing Base Utilization Grid~~

Eurodollar Base Rate Commitment
Borrowing Base Utilization Percentage Utilization Margin Margin Fee Rate
Level 1 <25% 1.50 % 0.50 % 0.38 %
Level 2 ≥ 25% < 50% 1.75 % 0.75 % 0.38 %
Level 3 ≥ 50% < 75% 2.00 % 1.00 % 0.50 %
Level 4 ≥ 75% < 90% 2.25 % 1.25 % 0.50 %
Level 5 ≥90% 2.50 % 1.50 % 0.50 %
The RBL Credit Facility requires the Company to maintain (i) a consolidated net leverage ratio of less than or equal to 3.00 to 1.00 and (ii) a consolidated current ratio of greater than or equal to 1.00 to 1.00. Per the RBL Credit Agreement, for the purpose of calculating the current ratio for fiscal quarters ending March 31, 2021 and June 30, 2021, all ad valorem, severance or tax liabilities can be excluded from current liabilities in the calculation of the current ratio.

The ~~credit facility contains representations, warranties, covenants, conditions and defaults customary for transactions~~Company is required to pay a commitment fee of this type, including but not limited to: (i) limitations on liens and incurrence of debt covenants; (ii) limitations on dividends, distributions, redemptions and restricted payments covenants; (iii) limitations on investments, loans and advances covenants; and (iv) limitations0.50% per annum on the ~~sale~~actual daily unused portion of ~~property, mergers, consolidations and other similar transactions covenants. Additionally,~~ the ~~credit facility limits the Company entering into hedges in excess of 85% of its anticipated production volumes.~~

~~The credit facility also contains financial covenants requiring the Company to comply on the last day of each quarter with a~~ current ~~ratio of its restricted subsidiaries’ current assets (includes availability~~aggregate commitments under the revolving credit facility and unrestricted cash and excludes derivative assets) to its restricted subsidiaries’ current liabilities (excludes obligations under the revolving credit facility, senior notes and certain derivative liabilities), of not less than 1.0 to 1.0 and to maintain, on the last day of each quarter, a ratio of its restricted subsidiaries’ debt less cash balances to its restricted subsidiaries EBITDAX (EBITDAXRBL Credit Facility. The Company is defined as net income adjusted for interest expense, income tax expense/benefit, DD&A, exploration and abandonment expenses as well as certain non-recurring cash and non-cash charges and income (such as stock-based compensation expense, unrealized gains/losses on commodity derivatives and impairment of long-lived assets and goodwill), subject to pro forma adjustments for non-ordinary course acquisitions and divestitures) for the four fiscal quarter periods most recently ended, of not greater than 4.0 to 1.0 as of the last day of such fiscal quarter. As of March 31, 2020, the Company was in compliance with the covenants under the credit agreement.

~~The Company’s 2020 capital program remains focused on generating free cash flow with an emphasis on strengthening liquidity and the balance sheet as the Company works~~also required to pay ~~down debt. However, factors including those outside~~customary letter of ~~the Company’s control may prevent maintaining compliance with such covenants, including commodity price declines~~credit and the Company's inability to access capital markets, to access the asset sale market or to execute on its business plan. Additionally, as a result of the reduction of the borrowing base and elected commitments described above, it is probable that the Company will not meet the financial covenants under the revolving credit facility for the three months ended June 30, 2020 under the Company’s current financial forecast. The Company may seek covenant relief from the lenders under the revolving credit facility, and if the Company does not obtain a waiver of its financial covenants for the three months ended June 30, 2020, the lenders under the revolving credit facility will be able to declare all outstanding principal and interest to be due and payable, and the lenders under the credit agreement could terminate their commitments to loan money and could foreclose against the assets collateralizing their borrowings. Any acceleration of the obligations under the revolving credit facility would result in a cross-default and potential acceleration of the maturity of the Company’s other outstanding long-term debt.

Any borrowings under the credit facility are collateralized by substantially all of the assets of the Company and certain of its subsidiaries, including oil and gas properties, personal property and the equity interests of those subsidiaries of the Company. The Company has entered into oil and natural gas hedging transactions with several counterparties that are also lenders under the credit facility. The Company’s obligations under these hedging contracts are secured by the collateral securing the credit facility. Elevation is an unrestricted subsidiary, which is no longer consolidated or controlled by the Company, and the assets and credit of Elevation are not available to satisfy the debts and other obligations of the Company or its other subsidiaries.

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~~2024 Senior Notes~~

In August 2017, the Company issued at par $400.0 million principal amount of 7.375% Senior Notes due May 15, 2024 (the "2024 Senior Notes" and the offering, the "2024 Senior Notes Offering"). The 2024 Senior Notes bear an annual interest rate of 7.375%. The interest on the 2024 Senior Notes is payable on May 15 and November 15 of each year which commenced on November 15, 2017. The Company received net proceeds of approximately $392.6 million after deductingfronting fees.

The Company's 2024 Senior Notes are its senior unsecured obligations and rank equally in right of payment with all of its other senior indebtedness and senior to any of its subordinated indebtedness. The Company's 2024 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of the Company's current subsidiaries and by certain future restricted subsidiaries that guarantees its indebtedness under a credit facility (the "2024 Senior Notes Guarantors"). The 2024 Senior Notes are effectively subordinated to all of the Company's secured indebtedness (including all borrowings and other obligations under its revolving credit facility) to the extent of the value of the collateral securing such indebtedness, and structurally subordinated in right of payment to all existing and future indebtedness and other liabilities (including trade payables) of any of its future subsidiaries that do not guarantee the 2024 Senior Notes.

~~The 2024 Senior Notes~~RBL Credit Agreement also ~~contain~~contains customary affirmative and negative covenants, ~~that,~~including, among other things, ~~limit~~as to compliance with laws (including environmental laws and anti-corruption laws), delivery of quarterly and annual financial statements and borrowing base certificates, conduct of business, maintenance of property, maintenance of insurance, restrictions on the ~~Company's~~incurrence of liens, indebtedness, asset dispositions, restricted payments, and other customary covenants.

Additionally, the 2024 Senior Notes Guarantors' ability to make investments; declare or pay any dividend or make any other payment to holders of the Company’s or any of its 2024 Senior Notes Guarantors’ equity interests; repurchase or redeem any equity interests of the Company; repurchase or redeem subordinated indebtedness; incur additional indebtedness or issue preferred stock; create liens; sell assets; enter into agreements that restrict dividends or other payments by restricted subsidiaries; consolidate, merge or transfer all or substantially all of the assets of the Company; engage in transactions with the Company's affiliates; engage in any business other than the oil and gas business; and create unrestricted subsidiaries. The indenture governing the 2024 Senior Notes alsoRBL Credit Agreement contains customary events of ~~default. Upon~~default and remedies for credit facilities of this nature. If the ~~occurrence~~Company does not comply with the financial and other covenants in the RBL Credit Agreement, the lenders may, subject to customary cure rights, require immediate payment of ~~events of default arising from certain events of bankruptcy or insolvency,~~all amounts outstanding under the RBL Credit Agreement and any outstanding unfunded commitments may be terminated.

Prior Credit Facility, DIP Credit Facility, 2024 Senior Notes shall become due and payable immediately without any declaration or other act of the trustee or the holders of the 2024 Senior Notes. Upon the occurrence of certain other events of default, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 2024 Senior Notes may declare all outstanding 2024 Senior Notes to be due and payable immediately.

& 2026 Senior Notes

~~In January 2018,~~Information pertaining to these debt facilities can be found in our Annual Report on Form 10-K for the ~~Company issued at par $750.0 million principal amount of 5.625% Senior Notes due February 1, 2026 (the "2026 Senior Notes" and together with the~~year ended December 31, 2020. Our obligations under our Prior Credit Facility, DIP Credit Facility, 2024 Senior Notes ~~the "Senior Notes"~~ and ~~the offering of the~~ 2026 Senior Notes were settled at the "2026 Senior Notes Offering"). The 2026 Senior Notes bear an annual interest rate of 5.625%. The interest on the 2026 Senior Notes is payable on February 1 and August 1 of each year commencing on August 1, 2018. The Company received net proceeds of approximately $737.9 million after deducting fees.

The Company's 2026 Senior Notes are the Company's senior unsecured obligations and rank equally in right of payment with all of the Company's other senior indebtedness and senior to any of the Company's subordinated indebtedness. The Company's 2026 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of the Company's current subsidiaries and by certain future restricted subsidiaries that guarantee the Company's indebtedness under a credit facility (the "2026 Senior Notes Guarantors"). The 2026 Senior Notes are effectively subordinated to all of the Company's secured indebtedness (including all borrowings and other obligations under the Company's revolving credit facility) to the extent of the value of the collateral securing such indebtedness, and structurally subordinated in right of payment to all existing and future indebtedness and other liabilities (including trade payables) of certain of the Company's future restricted subsidiaries that do not guarantee the 2026 Senior Notes.

The 2026 Senior Notes also contain affirmative and negative covenants that, among other things, limit the Company's and the 2026 Senior Notes Guarantors' ability to make investments; declare or pay any dividend or make any other payment to holders of the Company's or any of its 2026 Senior Notes Guarantors' equity interests; repurchase or redeem any equity interests of the Company; repurchase or redeem subordinated indebtedness; incur additional indebtedness or issue preferred stock; create liens; sell assets; enter into agreements that restrict dividends or other

~~Table of Contents~~

payments by restricted subsidiaries; consolidate, merge or transfer all or substantially all of the assets of the Company; engage in transactions with the Company’s affiliates; engage in any business other than the oil and gas business; and create unrestricted subsidiaries. The indenture governing the 2026 Senior Notes also contains customary events of default. Upon the occurrence of events of default arising from certain events of bankruptcy or insolvency, the 2026 Senior Notes shall become due and payable immediately without any declaration or other act of the trustee or the holders of the 2026 Senior Notes. Upon the occurrence of certain other events of default, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 2026 Senior Notes may declare all outstanding 2026 Senior Notes to be due and payable immediately.Effective Date.

Debt Issuance Costs

Predecessor Company debt issuance costs include origination, legal and other fees incurred in connection with the Predecessor Company’s Prior Credit Facility, DIP Credit Facility, 2024 Senior Notes and 2026 Senior Notes. As of January 20, 2021, the Predecessor Company had no debt issuance costs. For the period from January 1, 2021 to January 20, 2021, the Predecessor Company recorded amortization expense related to the debt issuance costs of $0.1 million, which has been reflected on the Predecessor Company’s condensed consolidated balance sheets within the line item “Other non-current assets.”

Successor Company debt issuance costs include origination, legal and other fees incurred in connection with the Successor Company’s RBL Credit Facility. As of March 31, ~~2020,~~2021, the Company had debt issuance costs, net of accumulated amortization, of ~~$2.2~~$5.9 million, ~~related to its credit facility~~ which has been reflected on the Successor Company's condensed consolidated balance sheets within the line item ~~other~~“Other non-current assets.” For the period from January 21, 2021 to March 31, 2021, the Successor Company recorded amortization expense related to the debt issuance costs of $0.5 million.

As of March 31, 2020, the Predecessor Company had debt issuance costs, net of accumulated amortization, of $13.8 million related to its 2024 and 2026 Senior Notes which have been reflected on the Company's condensed consolidated balance sheets within the line item Senior Notes, net of unamortized debt issuance costs. Debt issuance costs include origination, legal, engineering, and other fees incurred in connection with the Company’s credit facility and Senior Notes.$16.0 million. For the three months ~~ended~~ending March 31, 2020, ~~and March 31, 2019, the~~Predecessor Company recorded amortization expense related to the debt issuance costs of $1.2 ~~million and $1.5 million, respectively.~~million.

Interest Incurred on Long-Term Debt

For the period from January 1, 2021 to January 20, 2021, the Predecessor Company incurred interest expense on long-term debt of $1.5 million and capitalized interest expense on long-term debt of $0.1 million. For the period from January 21, 2021 to March 31, 2021, the Successor Company incurred interest expense on long-term debt of $2.6 million and a de minimis amount of capitalized interest expense on long-term debt. For the three months ended March 31, 2020, the Predecessor Company incurred interest expense on long-term debt of $22.3 million ~~as compared to $20.8 million for the three months ended March 31, 2019. For the three months ended March 31, 2020, the Company~~and capitalized interest expense on ~~long term~~long-term debt of $2.1 ~~million as compared to $2.0 million for the three months ended March 31, 2019, which has been reflected in the Company’s consolidated financial statements.~~million.

~~Senior Note Repurchase Program~~

On January 4, 2019, the Board of Directors authorized a program to repurchase up to $100.0 million of the Company’s Senior Notes (the “Senior Notes Repurchase Program”). The Company’s Senior Notes Repurchase Program is subject to restrictions under our credit facility and does not obligate it to acquire any specific nominal amount of Senior Notes. For the three months ended March 31, 2020, the Company did not repurchase any Senior Notes. For the three months ended March 31, 2019, the Company repurchased a nominal value of $35.8 million for $28.5 million in connection with the Senior Notes Repurchase Program. Interest expense for the three months ended March 31, 2019 included a $7.3 million gain on debt repurchase related to the Company's Senior Note Repurchase Program.

~~Note 6—Commodity Derivative Instruments~~

The Company has entered into commodity derivative instruments, as described below. The Company has utilized swaps, put options and call options to reduce the effect of price changes on a portion of the Company’s future oil and natural gas production.

A swap has an established fixed price. When the settlement price is below the fixed price, the counterparty pays the Company an amount equal to the difference between the settlement price and the fixed price multiplied by the hedged contract volume. When the settlement price is above the fixed price, the Company pays its counterparty an amount equal to the difference between the settlement price and the fixed price multiplied by the hedged contract volume.

A put option has an established floor price. The buyer of the put option pays the seller a premium to enter into the put option. When the settlement price is below the floor price, the seller pays the buyer an amount equal to the difference between the settlement price and the strike price multiplied by the hedged contract volume. When the settlement price is above the floor price, the put option expires worthless. Some of the Company’s purchased put options have deferred premiums. For the deferred premium puts, the Company agrees to pay a premium to the counterparty at the time of settlement.

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A call option has an established ceiling price. The buyer of the call option pays the seller a premium to enter into the call option. When the settlement price is above the ceiling price, the seller pays the buyer an amount equal to the difference between the settlement price and the strike price multiplied by the hedged contract volume. When the settlement price is below the ceiling price, the call option expires worthless.Note 5—Commodity Derivative Instruments

The ~~Company combines swaps, purchased put options, purchased call options, sold put options and sold call options in order to achieve various hedging strategies. Some examples of the~~ Company’s hedging strategies are collars which include purchased put options and sold call options, three-way collars which include purchased put options, sold put options and sold call options, and enhanced swaps, which include either sold put options or sold call options with the associated premiums rolled into an enhanced fixed price swap.

The objective of the Company’s use of commodity derivative instruments is to achieve more predictable cash flows in an environment of volatile oil and gas prices and to manage its exposure to commodity price risk. While the use of these commodity derivative instruments limits the downside risk of adverse price movements, such use may also limit the Company’s ability to benefit from favorable price movements. The Company may, from time to time, add incremental derivatives to hedge additional production, restructure existing derivative contracts or enter into new transactions to modify the terms of current contracts in order to realize the current value of the Company’s existing positions. The Company does not enter into derivative contracts for speculative purposes.

~~To reduce the impact of fluctuations in oil and natural gas prices on our revenues, we have periodically entered into~~open commodity derivative contracts with respect to certain of our oil and natural gas production through various transactions that limit the downside of future prices received. We plan to continue our practice of entering into such transactions to reduce the impact of commodity price volatility on our cash flow from operations. Future transactions may include price swaps whereby we will receive a fixed price for our production and pay a variable market price to the contract counterparty. Additionally, we may enter into collars, whereby we receive the excess, if any, of the fixed floor over the floating rate or pay the excess, if any, of the floating rate over the fixed ceiling price. These hedging activities are intended to support oil prices at targeted levels and to manage our exposure to oil price fluctuations.

The use of derivatives involves the risk that the counterparties to such instruments will be unable to meet the financial terms of such contracts. The Company’s derivative contracts are currently with 9 counterparties, all but one of whom are lenders under our credit agreement. The Company has netting arrangements with the counterparties that provide for the offset of payables against receivables from separate derivative arrangements with the counterparties in the event of contract termination. The derivative contracts may be terminated by a non-defaulting party in the event of default by one of the parties to the agreement. There is 0 credit risk related contingent features or circumstances in which the features could be triggered in derivative instruments that are in a net liability position at the end of the reporting period.

~~Table of Contents~~

~~The Company’s commodity derivative contracts~~quarter as of March 31, ~~2020~~2021 are summarized below:


		2020		2021		2022		2023			6/30/2021		9/30/2021		12/31/2021		3/31/2022		6/30/2022		9/30/2022		12/31/2022		3/31/2023
NYMEX WTI Crude Swaps:	NYMEX WTI Crude Swaps:									NYMEX WTI Crude Swaps:
Notional volume (Bbl)	Notional volume (Bbl)	2,800,000		4,200,000		1,020,000		900,000		Notional volume (Bbl)	1,298,500		1,153,000		1,041,000		828,000		—		—		—		—
Weighted average fixed price ($/Bbl)	Weighted average fixed price ($/Bbl)	$	59.75	$	57.10	$	54.84	$	54.87	Weighted average fixed price ($/Bbl)	$	50.34	$	49.64	$	50.01	$	50.05	$	—	$	—	$	—	$	—
NYMEX WTI Crude Purchased Puts:	NYMEX WTI Crude Purchased Puts:									NYMEX WTI Crude Purchased Puts:
Notional volume (Bbl)	Notional volume (Bbl)	5,300,000		3,600,000		—		—		Notional volume (Bbl)	—		—		—		—		345,839		320,247		297,903		94,820
Weighted average purchased put price ($/Bbl)	Weighted average purchased put price ($/Bbl)	$	54.83	$	54.17	$	—	$	—	Weighted average purchased put price ($/Bbl)	$	—	$	—	$	—	$	—	$	40.00	$	40.00	$	40.00	$	40.00
NYMEX WTI Crude Purchased Calls:
Notional volume (Bbl)		250,000		—		—		—
Weighted average purchased call price ($/Bbl)		$	57.06	$	—	$	—	$	—
NYMEX WTI Crude Sold Calls:	NYMEX WTI Crude Sold Calls:									NYMEX WTI Crude Sold Calls:
Notional volume (Bbl)	Notional volume (Bbl)	6,250,000		3,600,000		—		—		Notional volume (Bbl)	—		—		—		—		345,839		320,247		297,903		94,820
Weighted average sold call price ($/Bbl)	Weighted average sold call price ($/Bbl)	$	61.94	$	61.93	$	—	$	—	Weighted average sold call price ($/Bbl)	$	—	$	—	$	—	$	—	$	72.70	$	72.70	$	72.70	$	72.70
NYMEX WTI Crude Sold Puts:
Notional volume (Bbl)		8,100,000		7,800,000		600,000		600,000
Weighted average sold put price ($/Bbl)		$	43.08	$	43.27	$	43.00	$	43.00
NYMEX HH Natural Gas Swaps:	NYMEX HH Natural Gas Swaps:									NYMEX HH Natural Gas Swaps:
Notional volume (MMBtu)	Notional volume (MMBtu)	27,000,000		—		—		—		Notional volume (MMBtu)	9,190,465		8,482,141		7,904,240		6,468,277		—		—		—		—
Weighted average fixed price ($/MMBtu)	Weighted average fixed price ($/MMBtu)	$	2.75	$	—	$	—	$	—	Weighted average fixed price ($/MMBtu)	$	2.94	$	2.93	$	2.93	$	3.00	$	—	$	—	$	—	$	—
CIG Basis Gas Swaps:
NYMEX HH Natural Gas Purchased Puts:										NYMEX HH Natural Gas Purchased Puts:
Notional volume (MMBtu)	Notional volume (MMBtu)	34,200,000		2,400,000		—		—		Notional volume (MMBtu)	—		—		—		—		2,764,135		2,614,602		2,477,469		797,160
Weighted average fixed basis price ($/MMBtu)		$	(0.61)	$	(0.57)	$	—	$	—
Weighted average fixed price ($/MMBtu)										Weighted average fixed price ($/MMBtu)	$	—	$	—	$	—	$	—	$	2.00	$	2.00	$	2.00	$	2.00
NYMEX HH Natural Gas Sold Calls:										NYMEX HH Natural Gas Sold Calls:
Notional volume (MMBtu)										Notional volume (MMBtu)	—		—		—		—		2,764,135		2,614,602		2,477,469		797,160
Weighted average fixed price ($/MMBtu)										Weighted average fixed price ($/MMBtu)	$	—	$	—	$	—	$	—	$	3.25	$	3.25	$	3.25	$	3.25

The following tables detail the fair value of the Company’s derivative instruments, including the gross amounts and adjustments made to net the derivative instruments for the presentation in the condensed consolidated balance sheets (in thousands):

As of March 31, 2020
Location on Balance Sheet Gross Amounts of Recognized Assets and Liabilities
Gross Amounts Offsets in the Balance Sheet⁽¹⁾
Net Amounts of Assets and Liabilities Presented in the Balance Sheet
Gross Amounts not Offset in the Balance Sheet⁽²⁾
Net Amounts⁽³⁾
Current assets $ 293,761 $ (129,431) $ 164,330 $ (716) $ 252,397
Non-current assets 127,705 (38,922) 88,783 — —
Current liabilities (130,147) 129,431 (716) 716 —
Non-current liabilities (38,922) 38,922 — — —


		As of December 31, 2019
Location on Balance Sheet	Location on Balance Sheet	Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offsets in the Balance Sheet⁽¹⁾		Net Amounts of Assets and Liabilities Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet⁽²⁾		Net Amounts⁽³⁾		Location on Balance Sheet	Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offsets in the Balance Sheet(1)		Net Amounts of Assets and Liabilities Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet(2)		Net Amounts(3)
													Successor as of March 31, 2021
Current assets	Current assets	$	48,605	$	(31,051)	$	17,554	$	—	$	30,783	Current assets	$	5,684	$	(5,684)	$	0	$	0	$	1,191
Non-current assets	Non-current assets	38,034		(24,805)		13,229		—		—		Non-current assets	0		1,191		1,191		0		0
Current liabilities	Current liabilities	(33,049)		31,051		(1,998)		—		(2,106)		Current liabilities	(32,358)		5,684		(26,674)		0		(26,806)
Non-current liabilities	Non-current liabilities	(24,913)		24,805		(108)		—		—		Non-current liabilities	(2,963)		2,831		(132)		0		0

													Predecessor as of December 31, 2020
Current assets												Current assets	$	8,372	$	(1,401)	$	6,971	$	0	$	6,971
Non-current assets												Non-current assets	0		0		0		0		0
Current liabilities												Current liabilities	(3,548)		1,401		(2,147)		0		(2,147)
Non-current liabilities												Non-current liabilities	0		0		0		0		0

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__________________

(1)Agreements are in place that allow for the financial right of offset for derivative assets and derivative liabilities at settlement or in the event of a default under the agreements.

(2)Netting for balance sheet presentation is performed by current and non-current classification. This adjustment represents amounts subject to an enforceable master netting arrangement, which are not netted on the condensed consolidated balance sheets. There are no amounts of related financial collateral received or pledged.

(3)Net amounts are not split by current and non-current. All counterparties in a net asset position are shown in the current asset line, and all counterparties in a net liability position are shown in the current liability line item.

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Commodity derivatives gain (loss) are included under the “Other income (expense)” line item in the condensed consolidated statements of operations. The table below sets forth the commodity derivatives gain (loss) for the ~~three months ended March 31, 2020 and 2019~~periods presented (in thousands). ~~Commodity derivatives gain (loss) are included under the other income (expense) line item in the condensed consolidated statements of operations.~~

For the Three Months Ended March 31,
2020 2019
Commodity derivatives gain (loss) $ 263,015 $ (122,091)


	Successor		Predecessor
	For the Period from January 21 through March 31,		For the Period from January 1 through January 20,		For the Three Months Ended March 31,
	2021		2021		2020
Commodity derivatives gain (loss)	$	(28,487)	$	(12,586)	$	263,015

Note 7—6—Asset Retirement Obligations

~~The Company follows accounting for asset retirement obligations in accordance with ASC 410,~~ ~~Asset Retirement and Environmental Obligations, which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it was incurred if a reasonable estimate of fair value could be made.~~ The Company’s asset retirement obligations ~~primarily~~(“ARO”) represent the ~~estimated~~ present value of estimated future costs associated with the ~~amounts expected to be incurred to plug, abandon~~plugging and ~~remediate producing~~abandonment of oil and ~~shut-in~~gas wells, ~~at the end~~removal of ~~their productive lives~~equipment and facilities from leased acreage, and land restoration in accordance with applicable local, state and federal ~~laws,~~laws. The current and ~~applicable lease terms. The Company determines~~non-current portions as of December 31, 2020 (Predecessor) were $14.3 million and $80.5 million, respectively, and have been included in “Liabilities Subject to Compromise” in the ~~estimated fair value~~condensed consolidated balance sheets as of its asset retirement obligations by calculating the present value of estimated cash flows related to plugging and abandonment liabilities. The significant inputs used to calculate such liabilities include estimates of costs to be incurred, the Company’s credit adjusted discount rates, inflation rates and estimated dates of abandonment. The asset retirement liability is accreted to its present value each period and the capitalized asset retirement costs are depleted with proved oil and gas properties using the unit of production method.

that balance sheet date. The following table ~~summarizes the activities~~provides a reconciliation of the Company’s asset retirement obligations for the ~~period indicated~~periods presented (in thousands):

~~For the Three Months Ended March 31, 2020~~

~~Balance beginning of period~~Asset retirement obligations at December 31, 2020 (Predecessor)

~~95,908~~94,769

~~Liabilities incurred or acquired~~

~~192~~

Liabilities settled

(545)

~~(10,787)~~Accretion expense

333

Asset retirement obligations at January 20, 2021 (Predecessor)

94,557

Fresh start adjustment(1)

(7,358)

Asset retirement obligations at January 20, 2021 (Predecessor)

87,199

Asset retirement obligations at January 21, 2021 (Successor)

87,199

Additional liability incurred

Revisions in estimated cash flows

357

~~6,638~~ Liabilities settled

(1,045)

Accretion expense

~~1,822~~1,475

~~Balance end of period~~Asset retirement obligations at March 31, 2021 (Successor)

~~93,773~~88,067

(1) Refer to Note 3—Fresh Start Reporting for more information on fresh start adjustments.

Note 8—7—Fair Value Measurements

~~ASC 820,~~ ~~Fair Value Measurement and Disclosure~~, establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

~~Table of Contents~~

•~~Level 1: Quoted prices are available in active markets for identical assets or liabilities;~~

•~~Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability;~~

•~~Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash flow models or valuations.~~

The financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. There were no transfers between levels during any periods presented below.

The following table (in thousands) presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis ~~as of March 31, 2020 and December 31, 2019~~ by level within the fair value ~~hierarchy (in thousands):~~hierarchy:

Fair Value Measurement at March 31, 2020
Level 1 Level 2 Level 3 Total
Financial Assets:
Commodity derivative assets $ — $ 253,113 $ — $ 253,113
Financial Liabilities:
Commodity derivative liabilities $ — $ 716 $ — $ 716

Fair Value Measurement at December 31, 2019
Level 1 Level 2 Level 3 Total
Financial Assets:
Commodity derivative assets $ — $ 30,783 $ — $ 30,783
Financial Liabilities:
Commodity derivative liabilities $ — $ 2,106 $ — $ 2,106

~~The following methods and assumptions were used to estimate the fair value of the assets and liabilities in the tables above:~~

~~Commodity Derivative Instruments~~

The Company determines its estimate of the fair value of derivative instruments using a market based approach that takes into account several factors, including quoted market prices in active markets, implied market volatility factors, quotes from third parties, the credit rating of each counterparty, and the Company's own credit rating. In consideration of counterparty credit risk, the Company assessed the possibility of whether each counterparty to the derivative would default by failing to make any contractually required payments. Additionally, the Company considers that it is of substantial credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions. Derivative instruments utilized by the Company consist of swaps, put options and, call options. The oil and natural gas derivative markets are highly active. Although the Company’s derivative instruments are valued using public indices, the instruments themselves are traded with third party counterparties and are not openly traded on an exchange. As such, the Company has classified these instruments as Level 2.

~~Fair Value of Financial Instruments~~

The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, commodity derivative instruments (discussed above) and long-term debt. The carrying values of cash and cash equivalents, accounts receivable and accounts payable are representative of their fair values due to their short-term maturities. The carrying amount of the Company’s credit facility approximated fair value as it bears interest at


	Successor								Predecessor
	Fair Value Measurement at March 31, 2021								Fair Value Measurement at December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Commodity derivative assets	$	0	$	1,191	$	0	$	1,191	$	0	$	6,971	$	0	$	6,971
Commodity derivative liabilities	0		26,806		0		26,806		0		2,147		0		2,147

1721

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~~variable rates over~~

The following table (in thousands) presents the ~~term~~fair value of the ~~loan. The fair values of the 2024 Senior Notes~~Company’s financial instruments and ~~2026 Senior Notes were derived from available market data. As such, the Company has classified the 2024 Senior Notes and 2026 Senior Notes as Level 2. Please refer to~~ ~~Note 5—Long-Term Debt~~ ~~for further information. The Company’s policy is to recognize transfers between levels at the end of the period.~~carrying value. This ~~disclosure (in thousands)~~table does not impact the Company's financial position, results of operations or cash flows.

At March 31, 2020 At December 31, 2019
Carrying Amount Fair Value Carrying Amount Fair Value
Credit Facility $ 470,000 $ 470,000 $ 470,000 $ 470,000
2024 Senior Notes⁽¹⁾
$ 395,075 $ 68,000 $ 394,824 $ 250,000
2026 Senior Notes⁽²⁾
$ 691,272 $ 119,032 $ 690,953 $ 420,113

~~(1)The carrying amount of the 2024 Senior Notes includes unamortized debt issuance costs of $4.9 million and $5.2 million as of March 31, 2020 and December 31, 2019, respectively.~~

~~(2)The carrying amount of the 2026 Senior Notes includes unamortized debt issuance costs of $8.9 million and $9.2 million as of March 31, 2020 and December 31, 2019, respectively.~~


	Successor				Predecessor
	At March 31, 2021				At December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
RBL Credit Facility	$	93,746	$	93,746	$	0	$	0
Prior Credit Facility	0		0		453,747		453,747
DIP Credit Facility	0		0		106,727		106,727
2024 Senior Notes	0		0		400,000		70,732
2026 Senior Notes	0		0		700,189		123,408

Non-Recurring Fair Value Measurements

The Company applies the provisions of the fair value measurement standard on a non-recurring basis to its non-financial assets and liabilities, including proved property. These assets and liabilities are not measured at fair value on a recurring basis, but are subject to fair value adjustments when facts and circumstances arise that indicate a need for remeasurement.

The Company utilizes fair value on a non-recurring basis to review its proved oil and gas properties for potential impairment when events and circumstances indicate ~~and at least annually,~~ a possible decline in the recoverability of the carrying value of such property. The Company uses an income approach analysis based on the net discounted future cash flows of producing property. The future cash flows are based on management’s estimates for the future. ~~Unobservable~~The unobservable inputs ~~include~~ listed below are Level 3 inputs within the fair value hierarchy and include:

•estimates of oil and gas production, as the case may be, from the Company’s reserve ~~reports,~~ reports;

•commodity prices based on the sales contract terms and forward price ~~curves,~~ curves;

•operating and development ~~costs~~costs; and,

•a discount rate based on a market-based weighted average cost of ~~capital (all of which are Level 3 inputs within~~capital.

For both the ~~fair value hierarchy).~~periods from January 1, 2021 to January 20, 2021 and January 21, 2021 to March 31, 2021, the Company recognized no impairment expense on their proved oil and gas properties. For the three months ended March 31, 2020, ~~and 2019,~~ the Predecessor Company recognized $0.8 million ~~and $8.2 million, respectively,~~ in impairment expense on its proved oil and gas properties related to impairment of assets in its northern ~~field. The~~field as the fair value did not exceed the Predecessor Company's carrying amount associated with its proved oil and gas properties in its northern field.

See Note 3—Fresh Start Reporting for discussion of the revaluation of the Company’s oil and gas properties upon emergence from bankruptcy.

Note 9—8—Income Taxes

The Company computes an estimated annual effective tax rate (“AETR”) each quarter based on the current and forecasted operating results. The income tax expense or benefit associated with the interim period is computed using the most recent estimated AETR applied to the year-to-date ordinary income or loss, plus the tax effect of any significant or infrequently occurring items recorded during the interim period. The computation of the estimated AETR at each interim period requires certain estimates and significant judgements including, but not limited to, the expected operating income (loss) for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent differences and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, and additional information becomes known or as the tax environment changes.

The effective combined U.S. federal and state income tax rate for the ~~three months ended~~following periods were:

•For the period from January 1, 2021 to January 20, 2021: 0

•For the period from January 21, 2021 to March 31, ~~2020 and 2019 was 19.6% and 23.6%, respectively. The effective rate for~~2021: 20.85%

•For the three months ended March 31, ~~2020 and 2019~~2020: 19.60%

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The effective rate differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income due to (i) the effect of a full valuation allowance in effect at March 31, ~~2020~~2021 and (ii) the effects of state taxes, permanent taxable differences, and income attributable to non-controlling interest for the three months ended March 31, ~~2019.~~

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~~Before accounting for a naked credit deferred tax liability, net~~2020. Net tax expense for the ~~three months ended March 31, 2020~~period January 1, 2021 to January 20, 2021 was reduced to zero due to the valuation allowance. ~~The naked credit deferred tax liability results in~~Current tax expense ~~of $2.2 million~~ for the ~~three months ended~~period January 21, 2021 to March 31, ~~2020.~~2021 was $23.3 million primarily as a result of net operating loss (“NOL”) carryovers limited under Section 382 of the Internal Revenue Service Code of 1986, as amended (“IRC”) due to the change in control as referenced in Note 3 – Fresh Start Reporting.

As described in Note 1 – Business and Organization, Voluntary Reorganization under Chapter 11 of the Bankruptcy Code above, in accordance with the Plan, the Company’s Senior Notes were canceled and exchanged for new common stock. Absent an exception, a debtor recognizes cancellation of indebtedness income (“CODI”) upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The ~~Company considers whether~~IRC provides that a debtor in a Chapter 11 bankruptcy case may exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is determined based on the fair market value of the consideration received by the creditors in settlement of outstanding indebtedness. Upon emergence from Chapter 11 bankruptcy proceedings, the CODI may reduce some ~~portion,~~ or all of the amount of prior tax attributes, which can include net operating losses, capital losses, alternative minimum tax credits and tax basis in assets. The actual reduction in tax attributes does not occur until January 1, 2022.

The Company has evaluated the impact of the reorganization, including the change in control, resulting from its emergence from bankruptcy. From an income tax perspective, the most significant impact is attributable to our carryover tax attributes associated with our net operating losses. On the date of emergence, the estimated NOL was approximately $1.3 billion. The Company believes that the Successor Company will be able to fully absorb the cancellation of debt income realized by the Predecessor Company in connection with the reorganization with its adjusted NOL carryovers. The amount of the remaining NOL carryovers will be limited under Section 382 of the IRC due to the change in control as referenced in Note 3 – Fresh Start Reporting. As the tax basis of the Company's assets, primarily our oil and gas properties, is in excess of the carrying value, as adjusted in the fresh-start accounting process, the Successor Company is in a net deferred tax ~~assets (“DTAs”) will be realized based~~asset position. Per authoritative guidance, historical results along with expected market conditions known on athe date of measurement, it is more likely than not standard of judgment. The ultimate realization of DTAs is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. At December 31, 2019,that the Company ~~had~~will not realize future income tax benefits from the additional tax basis and its remaining NOL carryovers. This is periodically reassessed and could change. Accordingly, the Company has provided for a full valuation allowance totaling $246.1 million against its DTAs resulting from prior year cumulative financial losses, oil and gas impairments, and significant net operating losses for U.S. federal and state income tax. The Company assesses the appropriateness of its valuation allowance on a quarterly basis. As of March 31, 2020, there was no change in the Company’s assessment of the ~~realizability of its DTAs, except for a naked credit~~underlying deferred tax ~~liability.~~assets.

Note ~~10—~~9—Stock-Based Compensation

~~Extraction~~2021 Long Term Incentive Plan

On January 20, 2021, as part of the emergence from bankruptcy, the board of directors adopted the Extraction Oil & Gas, Inc. 2021 Long Term Incentive Plan (the “2021 LTIP”) with a share reserve equal to 3,038,657 shares of New Common Stock. The 2021 LTIP provides for the grant of restricted stock units, restricted stock awards, stock options, stock appreciation rights, performance awards and cash awards to the Company’s employees and non-employee board directors. At emergence, the Successor Company granted awards under the 2021 LTIP to its directors, officers and employees, including restricted stock units, performance stock units and deferred stock units.

2016 Long-Term Incentive Plan

In October 2016, the Predecessor Company’s board of directors adopted the Extraction Oil & Gas, Inc. 2016 ~~Long Term~~Long-Term Incentive Plan ~~(the “2016 Plan” or “LTIP”~~(“2016 LTIP”), pursuant to which employees, consultants, and directors of the Predecessor Company and its affiliates performing services for the Predecessor Company ~~are~~were eligible to receive awards. The 2016 ~~Plan provides~~LTIP provided for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards, and performance awards intended to align the interests of participants with those of stockholders. In May 2019, the ~~Company's~~Predecessor Company’s stockholders approved the amendment and restatement of the ~~Company's~~ 2016 ~~Long Term Incentive Plan.~~LTIP. The amended and restated 2016 ~~Long Term~~Long-Term Incentive Plan ~~provides~~provided a total reserve of 32.2 million shares of ~~common stock~~Predecessor Common Stock for issuance pursuant to awards under the 2016 LTIP. Extraction ~~has~~ granted awards under the 2016 LTIP to certain directors, officers and employees, including stock options, restricted stock units, performance stock awards, performance stock units,

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performance cash awards and cash awards. Effective January 20, 2021, as part of the emergence from bankruptcy, the 2016 LTIP was terminated and no longer in effect and all outstanding awards were cancelled.

Successor Company Restricted Stock Units (“RSUs”)

RSUs issued under the 2021 LTIP generally vest over a one or three-year service period, with 100% vesting in year one or one-third, one-third and one-third of the units vesting in year one, two and three, respectively. Grant date fair value was determined based on the value of Extraction’s New Common Stock pursuant to the terms of the 2021 LTIP. The Successor Company assumed a forfeiture rate of zero as part of the grant date estimate of compensation cost.

The Successor Company recorded $1.4 million of stock-based compensation costs related to Successor Company RSUs for the period from January 21, 2021 through March 31, 2021. These costs were included in the condensed consolidated statements of operations within the “General and administrative expense” line item. As of March 31, 2021, there was $6.6 million of total unrecognized compensation cost related to the unvested Successor Company RSUs granted to certain directors, officers and employees that is expected to be recognized over a weighted average period of 1.2 years. The following table summarizes the Successor Company RSU activity for the period shown and provides information for Successor Company RSUs outstanding at the dates indicated.


	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested Successor Company RSUs at January 21, 2021	0	$	0
Granted	394,144	20.41
Forfeited	(4,589)	20.41
Vested	0	0
Non-vested Successor Company RSUs at March 31, 2021	389,555	$	20.41

Predecessor Company Restricted Stock Units

~~Restricted stock units granted~~RSUs issued under the 2016 LTIP ~~(“RSUs”)~~ generally ~~vest~~vested over either a one or three-year service period, with 100% vesting in year one or 25%, 25% and 50% of the units vesting in year one,, two and three, respectively. Grant date fair value was determined based on the value of Extraction’s ~~common stock~~Predecessor Common Stock pursuant to the terms of the 2016 LTIP. The Predecessor Company assumed a forfeiture rate of 0 as part of the grant date estimate of compensation cost.

The Predecessor Company recorded ~~$0.8~~$0.2 million of stock-based compensation costs related to Predecessor Company RSUs for the ~~three months ended March 31, 2020~~period from January 1, 2021 through January 20, 2021, as compared to ~~$6.9~~$0.8 million for the three months ended March 31, ~~2019.~~2020. These costs were included in the condensed consolidated statements of operations within the ~~general~~“General and administrative ~~expenses~~expense” line item. As of March 31, 2020, there was $8.3 million of total unrecognized compensation cost related to the unvested RSUs granted to certain directors, officers and employees that is expected to be recognized over a weighted average period of 2.2 years.

The following table summarizes the Predecessor Company RSU activity ~~from January 1, 2020 through March 31, 2020~~for the period shown and provides information for Predecessor Company RSUs outstanding at the dates indicated.

Number of Shares Weighted Average Grant Date
Fair Value
Non-vested RSUs at January 1, 2020 2,635,765 $ 8.32
Granted 1,252,000 $ 0.31
Forfeited (351,679) $ 9.44
Vested (356,008) $ 14.23
Non-vested RSUs at March 31, 2020 3,180,078 $ 4.38


	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested Predecessor Company RSUs at January 1, 2021	1,185,351	$	6.99
Vested	(4,500)	8.70
Cancelled at emergence from bankruptcy	(1,180,851)	6.98
Non-vested Predecessor Company RSUs at January 20, 2021	0	$	0

Successor Company Performance Unit Awards (“PSUs”)

Upon emergence from bankruptcy on January 20, 2021, the Successor Company granted PSUs to certain executives under the 2021 LTIP. The number of shares of the Successor Company's New Common Stock that may be

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~~Performance Stock Awards~~

The Company granted performance stock awards ("PSAs") to certain executives under the LTIP in October 2017, March 2018, April 2019 and March 2020. The number of shares of the Company's common stock that may be issued to settle these various ~~PSAs~~PSUs ranges from zero to two times the number of ~~PSAs~~PSUs awarded. ~~PSA's that settle in cash are presented as liability based awards.~~ Generally, the shares issued for ~~PSAs~~PSUs are determined based on the satisfaction of a time-based vesting schedule and ~~a weighting of one or more of the following: (i)~~ absolute total stockholder return ("ATSR"~~), (ii) relative total stockholder return ("RTSR"), as compared to the Company's peer group and (iii) cash return on capital invested ("CROCI") or return on invested capital ("ROIC"~~) measured over a three-year period and vest in their entirety at the end of the three-year measurement period. Any ~~PSAs~~PSUs that have not vested at the end of the applicable measurement period are forfeited. The vesting criterion that is associated with the RTSR is based on a comparison of the Company's total shareholder return for the measurement period compared to that of a group of peer companies for the same measurement period. As the ATSR ~~and RTSR~~ vesting ~~criteria~~criterion are linked to the Successor Company's share price, ~~they each are~~it is considered a market ~~condition for purposes of calculating the grant-date fair value of the awards. The vesting criterion that is associated with the CROCI and ROIC are considered a performance~~ condition for purposes of calculating the grant-date fair value of the awards.

The fair value of the ~~PSAs~~Successor PSUs was measured at the grant date with a stochastic process method using a Monte Carlo simulation. A stochastic process is a mathematically defined equation that can create a series of outcomes over time. Those outcomes are not deterministic in nature, which means that by iterating the equations multiple times, different results will be obtained for those iterations. In the case of the Successor Company's PSUs, the Company cannot predict with certainty the path its stock price or the stock prices of its peers will take over the performance period. By using a stochastic simulation, the Company can create multiple prospective stock pathways, statistically analyze these simulations, and ultimately make inferences regarding the most likely path the stock price will take. As such, because future stock prices are stochastic, or probabilistic with some direction in nature, the stochastic method, specifically the Monte Carlo Model, is deemed an appropriate method by which to determine the fair value of the PSUs. Significant assumptions used in this simulation include the Company's expected volatility, risk-free interest rate based on U.S. Treasury yield curve rates with maturities consistent with the measurement period as well as the volatilities for each of the Company's peers.

The Successor Company recorded $0.4 million of stock-based compensation costs related to Successor Company PSUs for the period from January 21, 2021 through March 31, 2021. These costs were included in the condensed consolidated statements of operations within the “General and administrative expense” line item. As of March 31, 2021, there was $6.1 million of total unrecognized compensation cost related to the unvested Successor Company PSUs granted to certain executives that is expected to be recognized over a weighted average period of 2.8 years. The PSUs will be settled by issuing common stock. The following table summarizes the Successor Company PSU activity for the period shown and provides information for Successor Company PSUs outstanding at the dates indicated.


	Number of Shares(1)	Weighted Average Grant Date Fair Value
Non-vested Successor Company PSUs at January 21, 2021	0	$	0
Granted	230,850	28.11
Forfeited	0	0
Vested	0	0
Non-vested Successor Company PSUs at March 31, 2021	230,850	$	28.11

___________________

(1) The number of awards assumes that the associated maximum vesting condition is met at the target amount. The final number of shares of the Successor Company's New Common Stock issued may vary depending on the performance multiplier, which ranges from zero to two for the 2021 Successor PSU grants, depending on the level of satisfaction of the vesting condition.

Predecessor Company Performance Stock Awards (“PSAs”)

The Predecessor Company granted PSAs to certain executives under the 2016 LTIP in October 2017, March 2018, April 2019 and March 2020. The number of shares of the Predecessor Company's Predecessor Common Stock that may be issued to settle these various PSAs ranges from zero to two times the number of PSAs awarded. PSAs that settle in cash were presented as liability awards. Generally, the shares issued for PSAs were determined based on the satisfaction of a time-based vesting schedule and a weighting of one or more of the following: (i) absolute total stockholder return ("ATSR"), (ii) relative total stockholder return ("RTSR"), as compared to the Predecessor Company's peer group and (iii) cash return on capital invested ("CROCI") or return on invested capital ("ROIC") measured over a three-year period and vest in their entirety at the end of the three-year measurement period. Any PSAs that have not vested at the end of the applicable measurement period were forfeited. The vesting criterion that was associated with the RTSR was based on a comparison of the Predecessor Company's total shareholder return for the measurement period compared to that of a group of peer companies for the same measurement period. As the ATSR and RTSR vesting criteria were linked to the Predecessor Company's share price, they each were considered a market condition for

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purposes of calculating the grant-date fair value of the awards. The vesting criterion that was associated with the CROCI and ROIC were considered a performance condition for purposes of calculating the grant-date fair value of the awards.

The fair value of the Predecessor PSAs were measured at the grant date with a stochastic process method using a Monte Carlo simulation. A stochastic process is a mathematically defined equation that can create a series of outcomes over time. Those outcomes are not deterministic in nature, which means that by iterating the equations multiple times, different results will be obtained for those iterations. In the case of the Predecessor Company's PSAs, the Company cannot predict with certainty the path its stock price or the stock prices of its peer will take over the performance period. By using a stochastic simulation, the Company can create multiple prospective stock pathways, statistically analyze these simulations, and ultimately make inferences regarding the most likely path the stock price will take. As such, because future stock prices are stochastic, or probabilistic with some direction in nature, the stochastic method, specifically the Monte Carlo Model, is deemed an appropriate method by which to determine the fair value of the PSAs. Significant assumptions used in this simulation include the Company's expected volatility, risk-free interest rate based on U.S. Treasury yield curve rates with maturities consistent with the measurement period as well as the volatilities for each of the Company's peers.

The Predecessor Company recorded ~~a credit~~$0.1 million of stock-based compensation costs related to Predecessor Company PSAs for the period from January 1, 2021 through January 20, 2021, as compared to $0.8 million of stock-based compensation costs related to Predecessor Company PSAs for the three months ended March 31, ~~2020 as compared to $1.5 million of stock-based compensation costs related to PSAs for the three months ended March 31, 2019.~~2020. These costs were included in the condensed consolidated statements of operations within the ~~general~~“General and administrative ~~expenses~~expense” line item. As of March 31, ~~2020,~~2021, there was ~~$5.2 million of total~~no unrecognized compensation cost related to the unvested Predecessor Company PSAs granted to certain executives ~~that is expected to be recognized over a weighted average period of 2.3 years.~~

as they were all cancelled at emergence. The following table summarizes the Predecessor Company PSA activity ~~from January 1, 2020 through March 31, 2020~~for the period shown and provides information for Predecessor Company PSAs outstanding at the dates indicated.

Number of Shares ⁽¹⁾
Weighted Average Grant Date
Fair Value
Non-vested PSAs at January 1, 2020 2,863,190 $ 7.72
Granted 5,952,700 $ 0.29
Forfeited — $ —
Vested — $ —
Non-vested PSAs at March 31, 2020 8,815,890 $ 2.70


	Number of Shares(1)	Weighted Average Grant Date Fair Value
Non-vested Predecessor Company PSAs at January 1, 2021	1,196,279	$	5.32
Cancelled at emergence from bankruptcy	(1,196,279)	5.32
Non-vested Predecessor Company PSAs at January 20, 2021	0	$	0

___________________

(1)The number of awards ~~assumes~~assumed that the associated maximum vesting condition is met at the target amount. The final number of shares of the Predecessor Company's ~~common stock~~New Common Stock issued ~~may vary~~would have varied depending on the performance multiplier, which ~~ranges~~ranged from zero to one for the 2017 and 2018 grants and ~~ranges~~ranged from zero to two for the 2019 and 2020 grants, ~~depending~~which would have depended on the level of satisfaction of the vesting condition.

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Successor Deferred Stock ~~Options~~Units (“DSUs”)

~~Expense~~Upon emergence from bankruptcy on January 20, 2021, a new board of directors was appointed and each board member (except the ~~stock options is recognized on a straight-line basis~~CEO) were granted 16,800 Successor DSUs, which vest in quarterly installments over the service period of the award less awards forfeited. The fair value of the stock options was measured at the grant date using the Black-Scholes valuation model. The Company utilizes the "simplified" method to estimate the expected term of the stock options granted as there is limited historical exercise data available in estimating the expected term of the stock options. Expected volatility is based on the volatility of the historical stock prices of the Company’s peer group. The risk-free rates are based on the yields of U.S. Treasury instruments with comparable terms. A dividend yield and forfeiture rate of zero were assumed. Stock options granted under the LTIP vest ratably over three years and are exercisable immediately upon vesting through the tenth anniversary ofone year following the grant date. ~~To fulfill options exercised,~~The DSUs will be settled in shares of New Common Stock upon the ~~Company will issue new shares.~~

~~The Company recorded 0 stock-based compensation costs related to stock options for~~board member’s departure from the ~~three months ended March 31, 2020, as compared to $3.8 million for the three months ended March 31, 2019. These costs were~~Company; thus, these DSUs may not be included in the ~~condensed consolidated statements of operations within the general~~Successor Company’s issued and ~~administrative expenses line item. As of March 31, 2020, there are 0 remaining unrecognized compensation costs related to the stock options granted to certain executives.~~

~~There was no stock option activity from January 1, 2020 through March 31, 2020. However, as of March 31, 2020, there was approximately 5.2 million~~ outstanding ~~and exercisable stock options with a weighted-average exercise price of $18.50.~~

~~Incentive Restricted Stock Units~~

~~Officers of the Company contributed 2.7 million~~ shares of common stock to Extraction Employee Incentive, LLC (“Employee Incentive”), which is owned solely by certain officers of the Company. Employee Incentive issued restricted stock units (“Incentive RSUs”) to certain employees. Incentive RSUs vested over a three year service period, with 25%, 25% and 50% of the units vesting in year ~~one~~, ~~two~~ and three, respectively. On July 17, 2017, the partners of Employee Incentive amended the vesting schedule in which 25% vested immediately and the remaining Incentive RSUs vest 25%, 25% and 25% each six months thereafter, over the remaining 18-month service period.for potentially several years. Grant date fair value was determined based on the value of Extraction’s New Common Stock pursuant to the ~~Company's common stock on~~terms of the ~~date of issuance.~~2021 LTIP. The Company assumed a forfeiture rate of 0 as part of the grant date estimate of compensation cost.

The Successor Company recorded 0$0.4 million of stock-based compensation costs related to ~~Incentive RSUs~~Successor Company DSUs for the period from January 21, 2021 through March 31, 2021, while the Predecessor Company incurred no costs for the three months ended March 31, 2020. ~~The Company recorded $0.8 million of stock-based compensation costs related to Incentive RSUs for the three months ended March 31, 2019.~~ These costs were included in the condensed consolidated statements of operations within the ~~general~~“General and administrative ~~expenses~~expense” line item. As of March 31, ~~2020,~~2021, there ~~are no remaining~~was $1.7 million of total unrecognized compensation ~~costs~~cost related to the ~~Incentive RSUs~~unvested Successor Company DSUs granted to certain ~~employees.~~directors that is expected to be recognized over a weighted average period of 0.8 years. The following table summarizes the Successor Company DSU activity for the period shown and provides information for Successor Company DSUs outstanding at the dates indicated.

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	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested Successor Company Deferred Stock Units at January 21, 2021	0	$	0
Granted	100,800	20.41
Forfeited	0	0
Vested	0	0
Non-vested Successor Company Deferred Stock Units March 31, 2021	100,800	$	20.41

Note ~~11—~~10—Equity

Common Stock

On the Emergence Date, the Successor Company filed an amended and restated certificate of incorporation with the Delaware Secretary of State to provide for, among other things, the authority to issue a total of 950,000,000 shares of all classes of capital stock of which 900,000,000 shares are common stock, par value $0.01 per share (the “New Common Stock”) and 50,000,000 shares are preferred stock, par value $0.01 per share. Upon emergence from the Chapter 11 Cases, all existing shares of the Predecessor Company’s common stock and preferred stock were cancelled, and the Successor issued 25,703,212 shares of New Common Stock during the first quarter of 2021. As of March 31, 2021, the Company expects to issue an additional 256,390 shares of Successor Common Stock to settle general unsecured claims that are recorded in “Accounts payable and accrued liabilities” in the amount of $5.0 million. See Note 1—Business and Organization — Voluntary Reorganization under Chapter 11 of the Bankruptcy Code and Note 3—Fresh Start Reporting for more information.

Series A Preferred Stock

~~The holders~~In connection with emergence from the Chapter 11 Cases on January 20, 2021, pursuant to the Plan, each share of our Series A Convertible Preferred Stock was canceled, released, and extinguished, and is of no further force or effect.

Warrants

On the Emergence Date and pursuant to the Plan, the Successor Company entered into warrant agreements with American Stock Transfer & Trust Company, LLC, as warrant agent, which provided for (i) the Successor Company’s issuance of up to an aggregate of 2,905,567 Tranche A Warrants to purchase the New Common Stock (the ~~"Series~~“Tranche A ~~Preferred Holders"~~Warrants”) to certain former holders of the Predecessor Company’s common stock and (ii) the Successor Company’s issuance of up to an aggregate of 1,452,802 Tranche B warrants to purchase New Common Stock (the “Tranche B Warrants” and together with the Tranche A Warrants, the “Warrants”) to certain former holders of the Predecessor Company’s common stock.

The Tranche A Warrants are ~~entitled~~exercisable from the date of issuance until the fourth anniversary of the Emergence Date, at which time all unexercised Tranche A Warrants will expire, and the rights of the holders of such warrants to ~~receive~~purchase New Common Stock will terminate. The Tranche A Warrants are initially exercisable for one share of New Common Stock per Tranche A Warrant at an initial exercise price of $107.64 per Tranche A Warrant (the “Tranche A Exercise Price”).

The Tranche B Warrants are exercisable from the date of issuance until the fifth anniversary of the Emergence Date, at which time all unexercised Tranche B Warrants will expire, and the rights of the holders of such warrants to purchase New Common Stock will terminate. The Tranche B Warrants are initially exercisable for one share of New Common Stock per Tranche B Warrant at an initial exercise price of $122.32 per Tranche B Warrant (the “Tranche B Exercise Price” and together with the Tranche A Exercise Price, the “Exercise Prices”).

Pursuant to the warrant agreements, no holder of a ~~cash dividend~~Warrant, by virtue of ~~5.875% per year, payable quarterly~~holding or having a beneficial interest in ~~arrears, and we~~a Warrant, will have the ~~ability~~right to ~~pay such quarterly~~vote, receive dividends, ~~in kind at~~receive notice as stockholders with respect to any meeting of stockholders for the election of the Company’s directors or any other matter, or exercise any rights whatsoever as a ~~dividend rate~~stockholder of ~~10% per year (decreased proportionately~~the Company unless, until and only to the extent such ~~quarterly dividends are partially paid in cash). We have paid the quarterly dividends in kind since the fourth quarter~~holders become holders of ~~2019, and expect to pay future quarterly dividends in kind. The Series A Preferred Stock is convertible into~~record of shares of ~~our common stock at the election~~New Common Stock issued upon settlement of the Series A Preferred Holders at a conversion ratio per share of Series A Preferred Stock of 61.9195. Until the three-year anniversary of the closing of the IPO, we could elect to convert the Series A Preferred Stock at a conversion ratio per share of Series A Preferred Stock of 61.9195, but only if the closing price of our common stock had traded at or above a certain premium to our initial offering price, such premium to decrease with time. On October 15, 2019, the three year anniversary had passed for the Series A Preferred Stock to convert into our common stock. We can now redeem the Series A Preferred Stock at any time for the liquidation preference, which is $194.7 million. In certain situations, including a change of control, the Series A Preferred Stock may be redeemed for cash in an amount equal to the greater of (i) 135% of the liquidation preference of the Series A Preferred Stock and (ii) a 17.5% annualized internal rate of return on the liquidation preference of the Series A Preferred Stock. The Series A Preferred Stock matures on OctoberWarrants.

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15, 2021, at which time they are mandatorily redeemable for cash at the liquidation preference to the extent there are legally available funds to do so. For more information, see the Company’s Annual Report.

~~Elevation Common Units~~

On May 1, 2020, Elevation's board of managers issued 1,530,000,000 common units at a price of $0.01 per unit to certain of Elevation's members other than Extraction (the "Capital Raise"). The Capital Raise caused Extraction's ownership of Elevation to be diluted to less than 0.01%. As a result of the Capital Raise, beginning in May 2020 Extraction will account for Elevation under the cost method of accounting. The Company reserves all rights related to actions taken by Elevation’s board of managers.

~~Elevation Preferred Units~~

In July 2018 and July 2019, respectively, Elevation sold 150,000 and 100,000 of Elevation Preferred Units at a price of $990 per unit to a third party (the "Purchaser"). The aggregate liquidation preference when the units were sold was $150.0 million and $100.0 million, respectively. These Preferred Units represent the noncontrolling interest presented on the condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of changes in stockholders' equity and noncontrolling interest. As of March 16, 2020, Elevation is a separate, deconsolidated entity and the assets and credit of Elevation are not available to satisfy the debts and other obligations of the Company or its other subsidiaries. As part of the July 2018 transaction, the Company committed to Elevation that it would drill at least 425 qualifying wells in the acreage dedicated to Elevation by December 31, 2023, subject to reductions if Extraction does not sell the full amount of additional Elevation Preferred Units to the Purchaser. Pursuant to the Fourth Amendment to the Elevation Gathering Agreements between Elevation and Extraction, this drilling commitment would be eliminated, if and only if all Elevation Preferred Units have been redeemed in full or are otherwise no longer outstanding. Please see ~~Note 13—Commitments and Contingencies — Elevation Gathering Agreements~~ ~~for further details~~.

~~Upon deconsolidation of Elevation Midstream, LLC as discussed in~~ ~~Note 1—Business and Organization~~, the $270.5 million Elevation preferred unit balance in the noncontrolling interest line item of the condensed consolidated balance sheets as of March 31, 2020 was removed. The amount comprises the line item effects of deconsolidation of Elevation Midstream, LLC on the condensed consolidated statements of changes in stockholders' equity and noncontrolling interest as of March 31, 2020.

During the twenty-eight months following the July 3, 2018 Preferred Unit closing date, Elevation is required to pay the Purchaser a quarterly commitment fee payable in cash or in kind of 1.0% per annum on any undrawn amounts of such additional $250.0 million commitment. For the three months ended March 31, 2020 and 2019, respectively, Elevation recognized $0.6 million and $0.9 million of commitment fees paid-in-kind included under the Preferred Unit commitment fees and dividends paid-in-kind line item in the condensed consolidated statements of changes in stockholders' equity and noncontrolling interest.

The ~~Elevation Preferred Units entitle~~number of shares of New Common Stock for which a Warrant is exercisable, and the ~~Purchaser~~Exercise Prices, are subject to ~~receive quarterly~~adjustment from time to time upon the occurrence of certain events, including stock splits, reverse stock splits or stock dividends atto holders of New Common Stock or a ~~rate of 8.0% per annum. In~~reclassification in respect of quarters ending prior to and including June 30, 2020, the Dividend is payable in cash or in kind at the election of Elevation. After June 30, 2020, the Dividend is payable solely in cash. For the three months ended March 31, 2020 and 2019, respectively, Elevation recognized $5.5 million and $3.1 million of dividends paid-in-kind included under the Preferred Unit commitment fees and dividends paid-in-kind line item in the condensed consolidated statements of changes in stockholders' equity and noncontrolling interest.New Common Stock.

Note ~~12—~~11—Earnings (Loss) Per Share

Basic earnings per share (“EPS”) includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS reflects the potential dilution of securities that could share in the earnings of the Company.

The Company uses the “if-converted” method to determine potential dilutive effects of the Company’s outstanding Series A Preferred Stock and the treasury method to determine the potential dilutive effects of outstanding

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~~restricted stock awards and stock options.~~ The basic weighted average shares outstanding calculation is based on the actual days in which the shares were ~~outstanding for the three months ended March 31, 2020 and 2019.~~

outstanding. The components of basic and diluted EPS were as follows (in thousands, except per share data):


							Successor			Predecessor
		For the Three Months Ended March 31,							For the Period from January 21 through March 31,			For the Period from January 1 through January 20,		For the Three Months Ended March 31,
		2020		2019			2021			2021		2020
Basic and Diluted Income (Loss) Per Share	Basic and Diluted Income (Loss) Per Share					Basic and Diluted Income (Loss) Per Share
Net income (loss)	Net income (loss)	$	9,037	$	(94,032)	Net income (loss)	$	88,554		$	870,970	$	9,037
Less: Noncontrolling interest	Less: Noncontrolling interest	(6,160)		(3,975)		Less: Noncontrolling interest	0			0		(6,160)
Less: Adjustment to reflect Series A Preferred Stock dividends	Less: Adjustment to reflect Series A Preferred Stock dividends	(4,748)		(2,721)		Less: Adjustment to reflect Series A Preferred Stock dividends	0			0		(4,748)
Less: Adjustment to reflect accretion of Series A Preferred Stock discount	Less: Adjustment to reflect accretion of Series A Preferred Stock discount	(1,770)		(1,596)		Less: Adjustment to reflect accretion of Series A Preferred Stock discount	0			(418)		(1,770)
Adjusted net loss available to common shareholders, basic and diluted		$	(3,641)	$	(102,324)
Denominator:
Weighted average common shares outstanding, basic and diluted^{(1) (2)}		137,726		170,702
Loss Per Common Share
Basic and diluted		$	(0.03)	$	(0.60)
Adjusted net income (loss) available to common shareholders, basic and diluted						Adjusted net income (loss) available to common shareholders, basic and diluted	$	88,554		$	870,552	$	(3,641)
Denominator						Denominator
Weighted average common shares outstanding, basic(1)(2)						Weighted average common shares outstanding, basic(1)(2)	25,497			136,589		137,726
Weighted average common shares outstanding, diluted						Weighted average common shares outstanding, diluted	25,976			136,589		137,726
Income (Loss) Per Common Share						Income (Loss) Per Common Share
Basic						Basic	$	3.47		$	6.37	$	(0.03)
Diluted						Diluted	$	3.41		$	6.37	$	(0.03)

_____________________

(1) For the period from January 1, 2021 to January 20, 2021, 7,138,153 potentially dilutive shares, including restricted stock awards and stock options outstanding, were not included in the calculation above, as they had an anti-dilutive effect on EPS. Additionally, 11,472,445 common shares associated with the assumed conversion of Series A Preferred Stock were also excluded, as they would have had an anti-dilutive effect on EPS.

~~(1)~~(2) For the three months ended March 31, 2020, 8,339,698 potentially dilutive shares, including restricted stock awards and stock options outstanding, were not included in the calculation above, as they had an anti-dilutive effect on EPS. Additionally, 11,472,445 common shares associated with the assumed conversion of Series A Preferred Stock were also excluded, as they would have had an anti-dilutive effect on EPS.

~~(2)~~For the three months ended March 31, 2019, 8,017,004 potentially dilutive shares, including restricted stock awards and stock options outstanding, were not included in the calculation above, as they had an anti-dilutive effect on EPS. Additionally, 11,472,445 common shares associated with the assumed conversion of Series A Preferred Stock were also excluded, as they would have had an anti-dilutive effect on EPS.

Note ~~13—~~12—Commitments and Contingencies

General

As is customary in the oil and gas industry, the Company may at times have commitments in place to reserve or earn certain acreage positions or wells. If the Company does not meet such commitments, the acreage positions or wells may be lost, or the Company may be required to pay damages if certain performance conditions are not met.

Drilling Rigs

As of March 31, 2021, the Company was subject to one drilling rig commitment on a 30-day rolling term to drill various pads during 2021.

Leases

The Company has entered into operating leases for certain ~~office facilities,~~ compressors and office facilities and equipment. Maturities of operating lease liabilities associated with right-of-use assets and including imputed interest were as follows (in thousands):

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	Successor
	As of March 31, 2021
2021 - remaining	$	4,235
2022	2,701
2023	804
2024	60
Thereafter	0
Total lease payments	7,800
Less imputed interest(1)	(359)
Present value of lease liabilities	$	7,441

As of March 31,
2020 As of December 31,
2019
2020 - remaining 13,653 2020 19,040
2021 5,247 2021 5,247
2022 2,211 2022 2,211
2023 2,246 2023 2,246
2024 2,301 2024 2,301
Thereafter 8,273 Thereafter 8,273
Total lease payments 33,931 Total lease payments 39,318
Less imputed interest ⁽¹⁾
(4,264)
Less imputed interest ⁽¹⁾
(4,735)
Present value of lease liabilities ⁽²⁾
$ 29,667
Present value of lease liabilities ⁽²⁾
$ 34,583
____________________________

(1) Calculated using the estimated interest rate for each lease.

(2) Of the total present value of lease liabilities as of March 31, 2020 and December 31, 2019, $15.2 million and $17.4 thousand, respectively, were recorded in accounts payable and accrued liabilities and $14.5 million and $17.2 thousand, respectively, were recorded in other non-current liabilities on the condensed consolidated balance sheets.

~~Drilling Rigs~~

As of March 31, 2020, the Company was subject to commitments on 2 drilling rigs contracted through May 2020 and February 2021. These costs are capitalized within proved oil and gas properties on the condensed consolidated balance sheets and are included as short-term lease costs. In the event of early termination of these contracts, the Company would be obligated to pay an aggregate amount of approximately $9.0 million as of March 31, 2020, as required under the terms of the contracts. Subsequent to March 31, 2020, the Company renegotiated the terms of the drilling rig contracts. After the modifications, in the event of early termination, the Company would be obligated to pay an aggregate amount of approximately $8.0 million as of May 6, 2020.

Delivery Commitments

As of March 31, 2020, the Company’s oil marketer is subject to a firm transportation agreement that commenced in November 2016 and has a ten-year term with a monthly minimum delivery commitment of 45,000 Bbl/d in year one, 55,800 Bbl/d in year two, 61,800 Bbl/d in years three through seven and 58,000 Bbl/d in years eight through ten. In May 2017, the Company amended its agreement with its oil marketer that requires it to sell all of its crude oil from an area of mutual interest in exchange for a make-whole provision that allows the Company to satisfy any minimum volume commitment deficiencies incurred by its oil marketer with future barrels of crude oil in excess of their minimum volume commitment during the contract term. In May 2019, the Company extended the term of this agreement through October 31, 2020 subject to an evergreen provision thereafter where either party can provide a six month notice of termination beginning November 1, 2020. Due to the contract termination date, the amount of consideration recognized in revenue is reduced. Please see ~~Note 2—Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements — Revenue — Contract Balances~~. The Company has posted a letter of credit for this agreement in the amount of $40.0 million. The Company may be required to pay a shortfall fee for any volume deficiencies under these commitments. The aggregate remaining amount of estimated payments under these agreements is approximately $655.8 million.

~~The Company has 2 long-term crude oil gathering commitments with a unconsolidated subsidiary, in which the Company had a minority ownership interest. Please see~~ ~~Note 1—Business and Organization~~ for information related to the deconsolidation of Elevation Midstream, LLC. The first agreement commenced in November 2016 and has a term of ten years with a minimum volume commitment of an average of 9,167 Bbl/d in year one, 17,967 Bbl/d in year two, 18,800 Bbl/d for years three through five and 10,000 Bbl/d for years six through ten. The Company may be required to pay a shortfall fee for any volume deficiencies under this commitment. The second agreement commenced in July 2019 and has a term of ten years for an average of 3,200 Bbl/d in year one, 8,000 Bbl/d in year two, 14,000 Bbl/d in year three, 16,000 Bbl/d in years four through eight, 12,000 Bbl/d in year nine and 10,000 Bbl/d in year ten. The Company may be

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~~required to pay a shortfall fee for any volume deficiencies under this commitment. The aggregate remaining amount of estimated payments under these agreements is approximately $117.7 million.~~

~~In February 2019, the~~Predecessor Company entered into ~~two~~a long-term gas gathering and processing ~~agreements~~agreement (the “Gathering Agreement”) with a third-party midstream ~~providers. One of the agreements additionally includes a long-term NGL sales commitment for take-in-kind NGLs from other processing agreements.~~provider in February 2019. The ~~first agreement~~Gathering Agreement commenced in November 2019 and has a term of twenty years with a minimum volume commitment of 251 Bcf to be delivered within the first seven years. The annual commitments over seven years are to be delivered on an average 85,000 Mcf/d in year one, 125,000 Mcf/d in year two, 140,000 Mcf/d in year three, 118,000 Mcf/d in year four, 98,000 Mcf/d in year five, 70,000 Mcf/d in year six and 52,000 Mcf/d in year seven. The aggregate remaining amount of estimated payments under this agreement is approximately $299.3 million. The second agreement commenced on January 2020 and has a term of ten years with an annual minimum volume commitment of 13.0 ~~Bcf in years one through ten.~~Bcf. The ~~second agreement~~Gathering Agreement also includes a commitment to sell take-in-kind NGLs from other processing agreements of 4,000 Bbl/d in the first year ~~one~~of the Gathering Agreement and 7,500 Bbl/d in years two through seven of the Gathering Agreement with the ability to roll forward up to a 10% shortfall in a given month to the subsequent month. ~~The~~On December 23, 2020, the Predecessor Company ~~may be required to pay~~and the counterparty entered into a ~~shortfall fee for any volume deficiencies under these commitments, calculated based on~~settlement and amended the ~~applicable gathering~~Gathering Agreement (the “Settlement and ~~processing fees and/or, with respect~~Amendment”). No changes were made to the ~~NGL~~Company’s annual minimum volume commitment as a result of the ~~NGL transport cost. Under its current drilling plans, the Company expects to meet these volume commitments.~~settlement and amendment.

~~The summary of these minimum volume commitments as of March 31, 2020, was as follows:~~

Oil (MBbl) Gas (MMcf) Total (MBOE)
2020 - remaining 6,492 25,815 10,794
2021 9,797 46,540 17,554
2022 8,944 49,758 17,237
2023 9,490 41,850 16,465
2024 9,516 34,160 15,209
Thereafter 29,860 40,260 36,570
Total 74,099 238,383 113,829

In ~~collaboration~~December 2016 and August 2017, the Predecessor Company agreed with several ~~other~~third-party producers and a midstream provider ~~on December 15, 2016 and August 7, 2017, the Company agreed~~ to ~~participate in expansions of~~expand natural gas gathering and processing capacity in the DJ ~~Basin. The plan includes~~Basin, including through the addition of 2 new processing plants as well as the expansion of related gathering systems. The first plant commenced operations in August 2018 and the second plant commenced operations in July 2019. The ~~Company’s~~Company��s share of these commitments ~~will require~~requires an incremental 51.5 and 20.6 MMcf per day, respectively, over a baseline volume of 65 MMcf per day ~~to be delivered after the plants' in-service dates~~ for a period of seven years ~~thereafter.~~following the in-service dates of the plants. The Company may be required to pay a shortfall fee for any incremental volume ~~deficiency~~deficiencies under these commitments. These contractual obligations can be reduced by the Company’s proportionate share of the collective volumes delivered to the plants by other third-party incremental volumes available to the midstream provider at the new facilities that are in excess of the total commitments. The Company is also required for the first three years of each contract to guarantee a certain target profit margin on these volumes sold.

In July 2019, the Company entered into 3 long-term contracts to supply 125,000 dekatherms of residue gas per day for five years to a transportation company. While our production is expected to satisfy these contracts, the aggregate remaining amount of estimated commitment assuming no production is $31.0 million. The Company has posted a letter of credit for this agreement in the amount of $8.7 million.

~~The aggregate remaining amount of estimated remaining payments under these agreements is $1,103.8 million.~~

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~~Elevation Gathering Agreements~~

In November 2018, the Company entered into three long-term gathering agreements (the "Elevation Gathering Agreements") for gas, crude oil and produced water with Elevation. Under the agreements, the Company agreed to drill 100 wells in Broomfield and 325 wells in Hawkeye by December 31, 2023 if both facilities are to be built. Elevation has alleged that if the Company fails to complete the wells by the commitment deadline, then it would be in breach of the agreement and Elevation could attempt to assert damages against Extraction and its affiliates. During the first quarter of 2020, Elevation postponed indefinitely further development of gathering systems and facilities that were to be constructed to service the Company's acreage in Hawkeye and another project in the Southwest Wattenberg area. Due to the decision to not complete the Hawkeye facilities and based on the amount of capital invested, the drilling commitment now consists of 297 wells in the Broomfield area of operations.

In April 2019, the Elevation Gathering Agreements were amended to provide for, among other amendments, the inclusion of additional gathering facilities in Elevation’s Badger facility. Pursuant to this amendment, Elevation has asserted that the additional gathering facilities were required to be completed by April 1, 2020 or, within 30 days of such date, Elevation could assert that Extraction must make a payment to Elevation in the amount of 135% of all costs incurred by Elevation as of such date for the development and construction of such additional gathering facilities. As of March 31, 2020, the costs incurred by Elevation for these additional gathering facilities totaled $34.7 million. The Company did not complete these additional gathering facilities by April 1, 2020, and Elevation has alleged that Extraction is in breach of the Elevation Gathering Agreements. On April 2, 2020, Elevation demanded payment of $46.8 million due to an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020. While the Company disputes that these amounts are due to Elevation, under ~~ASC Topic 450 - Contingencies~~, the Company recorded the amount in accounts payable and accrued liabilities, related party on the condensed consolidated balance sheet as of March 31, 2020 and in other operating expenses on the condensed consolidated statements of operations.

In December 2019, the Elevation Gathering Agreements were further amended to provide Elevation additional connection fees that are consistent with market terms (the "Connect Fees"). In the fourth quarter of 2019, the Company incurred $19.5 million for Connect Fees pursuant to the Elevation Gathering Agreements, and in the first quarter of 2020 the Company incurred and paid $23.5 million. The Company does not expect to incur additional Connect Fees for the year ending December 31, 2020.

In March 2020, the Elevation Gathering Agreements were further amended to reset all gathering rates and eliminate existing minimum drilling commitment. This amendment will not become effective until after all Elevation Preferred Units have been redeemed in full or are otherwise no longer outstanding.

Litigation and Legal Items

~~The~~From time to time, the Company is involved in various legal proceedings arising in the ordinary course of its business and reviews the status of these proceedings on an ongoing basis and, from time to time, may settle or otherwise resolve these matters on terms and conditions that management believes are in the Company’s best interests. The Company has provided the necessary estimated accruals in the condensed consolidated balance sheets where deemed appropriate for litigation and ~~legal related~~legal-related items that are ongoing and not yet concluded. Although the results cannot be known with certainty, the Company currently believes that the ultimate results of such proceedings will not have a material adverse effect on our business, financial position, results of operations or liquidity.

Environmental. Due to the nature of the oil and natural gas ~~and oil~~ industry, the Company is exposed to environmental ~~risks.~~liabilities in the ordinary course of its business. The Company has various policies and procedures in place to minimize and mitigate the risks from environmental contamination or with respect to environmental compliance issues. Liabilities are recorded when environmental damages resulting from past events are probable and the costs can be reasonably estimated. Except as ~~discussed~~disclosed herein, the Company is not aware of any material environmental claims existing as of March 31, ~~2020 which~~2021 that have not been provided for or would otherwise have a material impact on ~~our~~the Company’s financial ~~statements; however,~~statements. However, there can be no assurance that current regulatory requirements will not change or that unknown potential past non-compliance with environmental laws, compliance matters or other environmental liabilities will not be discovered on our properties. ~~Accrued environmental liabilities are recorded in accounts payable and accrued liabilities on the condensed consolidated balance sheets.~~ The liability ultimately incurred with respect to a matter may exceed the related accrual.

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COGCC Notices of Alleged Violations (“NOAVs”). The Company has received NOAVs from the ~~COGCC~~Colorado Oil and Gas Conservation Commission (the “COGCC”) for alleged compliance violations ~~that~~to which the Company has ~~responded to. At this time, the COGCC has not alleged any specific penalty amounts in these matters.~~responded. The Company does not believe ~~that any~~ penalties that could result from these NOAVs will have a material effect on ~~our~~its business, financial condition, results of operations or ~~liquidity, but they may exceed $100,000.~~

~~Midstream Connections.~~liquidity. The Company ~~had dedicated~~is in negotiations with the ~~production from some acreage~~COGCC to ~~a certain midstream service provider. However,~~settle all of its outstanding NOAVs. We expect the ~~Company was unable~~settlement amount to connect well pads to the provider due to the inability to secure right of way access for building the connection pipeline. Because the acreage’s production was dedicated to the midstream provider, they have invoiced the Company for oil and gas handled by other midstream providers. The Company disputes these invoices based on force majeure and may have other contractual or legal defenses. The Company’s maximum exposure as of March 31, 2020 was $15.7approximate $0.6 million. ~~As of March 31, 2020, no contingent liability has been recorded as the amount of the loss cannot be reasonably estimated.~~

~~Elevation Matador Facility.~~ Under the Elevation LLC Agreement, the Company is required to complete the gathering facilities in Elevation’s Matador facility servicing the Company’s Hawkeye area by August 1, 2020. As part of the Company’s abandonment of further developing this Matador gathering system and facilities that were being constructed, Elevation has alleged that Extraction will be required to reimburse Elevation for all such expenditures on this project. Elevation is currently disputing certain costs related to this project with a third-party contractor that was working on the project. The Company’s maximum exposure as of March 31, 2020 was $20.7 million. As of March 31, 2020, no contingent liability has been recorded as the amount of the loss cannot be reasonably estimated.

~~Elevation Gathering.~~ ~~As discussed above under~~ ~~Elevation Gathering Agreements~~, on April 2, 2020, Elevation demanded payment of $46.8 million due to an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020. While the Company disputes that these amounts are due to Elevation, under ~~ASC Topic 450 - Contingencies~~, the Company recorded the amount in accounts payable and accrued liabilities, related party on the condensed consolidated balance sheet as of March 31, 2020 and in other operating expenses on the condensed consolidated statements of operations.

~~Note 14—Related Party Transactions~~

~~2024 Senior Notes~~

Several 5% stockholders of the Company were also holders of the 2024 Senior Notes. As of the initial issuance in August 2017 of the $400.0 million principal amount on the 2024 Senior Notes, such stockholders held $54.9 million.

~~2026 Senior Notes~~

Several holders of the 2026 Senior Notes are also 5% stockholders of the Company. As of the initial issuance in January 2018 of the $750.0 million principal amount on the 2026 Senior Notes, such stockholders held $56.2 million.

~~Elevation Midstream, LLC~~

~~As discussed in~~ ~~Note 13—Commitments and Contingencies~~, on April 2, 2020, Elevation demanded payment of $46.8 million due to an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020. While the Company disputes that these amounts are due to Elevation, under ~~ASC Topic 450 - Contingencies~~, the Company recorded the amount in accounts payable and accrued liabilities, related party on the condensed consolidated balance sheet as of March 31, 2020 and in other operating expenses on the condensed consolidated statements of operations.

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~~Note 15—Segment Information~~

Beginning in the fourth quarter of 2018, the Company had 2 operating segments, (i) the exploration, development and production of oil, natural gas and NGL (the "exploration and production segment") and (ii) the construction of and support of midstream assets to gather and process crude oil and gas production (the "gathering and facilities segment"). Elevation Midstream, LLC comprised the gathering and facilities segment. During the three months ending March 31, 2019, the Company’s gathering and facilities segment was in the construction phase and no revenue generating activities had commenced. Through March 16, 2020, the results of Elevation were included in the consolidated financial statements of Extraction. Effective March 17, 2020, the results of Elevation Midstream, LLC are no longer consolidated in Extraction's results; however, the Company’s segment disclosures include the gathering and facilities segment because it was consolidated through March 16, 2020. Please see ~~Note 1—Business and Organization~~ ~~for further information related to the deconsolidation of Elevation Midstream, LLC. After March 31, 2020, Extraction will report as a single operating segment.~~

The following table presents a reconciliation of Adjusted EBITDAX by segment to the GAAP financial measure of income (loss) before income taxes for the three months ended March 31, 2020 and 2019 (in thousands).

For the Three Months Ended March 31,
2020 2019
Reconciliation of Adjusted EBITDAX to Income (Loss) Before Income Taxes
Exploration and production segment EBITDAX $ 122,639 $ 138,339
Gathering and facilities segment EBITDAX 1,256 (152)
Subtotal of Reportable Segments $ 123,895 $ 138,187
Less:
Depletion, depreciation, amortization and accretion $ (76,051) $ (118,770)
Impairment of long lived assets (775) (8,248)
Other operating expenses (52,575) —
Exploration and abandonment expenses (112,480) (6,194)
Gain on sale of property and equipment — 222
Gain (loss) on commodity derivatives 263,015 (122,091)
Settlements on commodity derivative instruments (39,295) 10,329
Premiums paid for derivatives that settled during the period — 9,549
Stock-based compensation expense — (13,008)
Amortization of debt issuance costs (1,242) (1,497)
Gain on repurchase of 2026 Senior Notes — 7,317
Interest expense (20,116) (18,828)
Loss on deconsolidation of Elevation Midstream, LLC (73,139) —
Income (Loss) Before Income Taxes $ 11,237 $ (123,032)

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~~Financial information of the Company's reportable segments was as follows for the three months ended March 31, 2020 and 2019 (in thousands).~~

For the Three Months Ended March 31, 2020
Exploration and Production Gathering and Facilities Elimination of Intersegment Transactions Consolidated Total
Revenues:
Revenues from third parties $ 163,714 $ 1,473 $ — $ 165,187
Revenues from Extraction — 4,513 (4,513) —
Total Revenues $ 163,714 $ 5,986 $ (4,513) $ 165,187
Operating Expenses and Other Income (Expense):
Direct operating expenses $ (70,924) $ (3,935) $ 4,294 $ (70,565)
Depletion, depreciation, amortization and accretion (74,952) (1,099) — (76,051)
Interest income 61 29 — 90
Interest expense (21,358) — — (21,358)
Earnings in unconsolidated subsidiaries — 480 — 480
Subtotal Operating Expenses and Other Income (Expense): $ (167,173) $ (4,525) $ 4,294 $ (167,404)
Segment Assets $ 2,703,388 $ — $ — $ 2,703,388
Capital Expenditures 155,441 (6,311) — 149,130
Investment in Equity Method Investees — — — —
Segment EBITDAX 122,639 1,256 — 123,895

For the Three Months Ended March 31, 2019
Exploration and Production Gathering and Facilities Elimination of Intersegment Transactions Consolidated Total
Revenues:
Revenues from third parties $ 221,917 $ — $ — $ 221,917
Revenues from Extraction — — — —
Total Revenues $ 221,917 $ — $ — $ 221,917
Operating Expenses and Other Income (Expense):
Direct operating expenses $ — $ — $ — $ —
Depletion, depreciation, amortization and accretion (118,751) (19) — (118,770)
Interest income 154 625 — 779
Interest expense (13,008) — — (13,008)
Earnings in unconsolidated subsidiaries — 338 — 338
Subtotal Operating Expenses and Other Income (Expense): $ (131,605) $ 944 $ — $ (130,661)
Segment Assets $ 3,813,513 $ 284,200 $ (714) $ 4,096,999
Capital Expenditures 158,622 58,863 — 217,485
Investment in Equity Method Investees — 17,555 — 17,555
Segment EBITDAX 138,339 (152) — 138,187

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report ~~on Form 10-Q (“Quarterly Report”)~~ contains "forward-looking statements." All statements, other than statements of historical facts, included or incorporated by reference herein concerning, among other things, the Merger (as defined below), any statements regarding the expected timetable for completing the Merger, the results, effects, benefits and synergies of the Merger, future opportunities for the combined company, planned capital expenditures, increases in oil and gas production, the number of anticipated wells to be drilled or completed after the date hereof, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as ''may," "expect," "estimate," "project," "plan," "believe," "intend," "achievable," "anticipate," ''will," "continue," ''potential," "should," "could," and similar terms and phrases. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, among others:

•our ability to ~~meet the financial covenants in~~execute on our ~~debt agreements and continue as a going concern;~~business strategy following emergence from bankruptcy;

•the ~~success of our ongoing efforts to develop~~COVID-19 pandemic, including its effects on commodity prices, downstream capacity, employee health and ~~implement a restructuring of our capital structure;~~safety, business continuity and regulatory matters;

•federal and state regulations and laws;

•capital requirements and uncertainty of obtaining additional funding on terms acceptable to us;

•risks and restrictions related to our debt agreements;

•impact of political and regulatory developments in Colorado, particularly with respect to additional permit scrutiny;

•our ability to use derivative instruments to manage commodity price risk;

•realized oil, natural gas and NGL ~~prices;~~prices as well as the volatility and widening of differentials;

•a decline in oil, natural gas and NGL production, and the impact of general economic conditions on the demand for oil, natural gas and NGL and the availability of ~~capital to oil and natural gas producers;~~capital;

•asset impairments from commodity price declines;

•~~the outbreak of communicable diseases such as coronavirus;~~

•the willingness of the Organization of Petroleum Exporting Countries (“OPEC”) ~~and certain other oil and natural gas producing countries~~ to set and maintain production levels;

•unsuccessful drilling and completion activities and the possibility of resulting write-downs;

•geographical concentration of our operations;

•constraints in the DJ Basin of Colorado with respect to gathering, transportation and processing facilities and marketing;

•~~lack of U.S. domestic storage;~~

•our ability to meet our proposed drilling schedule and to successfully drill wells that produce oil or natural gas in commercially viable quantities;

•seasonal weather conditions.

•shortages of oilfield equipment, supplies, services and qualified personnel and increased costs for such equipment, supplies, services and personnel;

•adverse variations from estimates of reserves, production, production prices and expenditure requirements, and our inability to replace our reserves through exploration and development activities;

•incorrect estimates associated with properties we acquire relating to estimated proved reserves, the presence or recoverability of estimated oil and natural gas reserves and the actual future production rates and associated costs of such acquired properties;

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•drilling operations associated with the employment of horizontal drilling techniques, and adverse weather and environmental conditions;

•limited control over non-operated properties;

•title defects to our properties and inability to retain our leases;

•our ability to successfully develop our large inventory of undeveloped operated and non-operated acreage;

•our ability to retain key members of our senior management and key technical employees;

•cost of pending or future litigation;

•risks relating to managing our growth, particularly in connection with the integration of significant acquisitions;

•impact of environmental, health and safety, and other governmental regulations, and of current or pending legislation;

•~~risks associated with a material weakness in our internal control over financial reporting;~~

•changes in tax laws;

•effects of competition; and

•~~seasonal weather conditions.~~the outbreak of communicable diseases such as coronavirus.

Reserve engineering is a process of estimating underground accumulations of oil, natural gas, and NGL that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers and management. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If

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significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil, natural gas and NGL that are ultimately recovered.

In addition to the other information and risk factors set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in Item 1A of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (our “Annual Report”) and in our other filings with the Securities and Exchange Commission, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. ~~Other than as set forth in this Quarterly Report, there have been no material changes in our risk factors from those described in our Annual Report.~~

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this section and elsewhere in this Quarterly Report. Except as required by law, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial condition, results of operations, liquidity and certain other factors that may affect the Company’s operating results. MD&A should be read in conjunction with the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements and related ~~Notes~~notes included in Part I, Item 1 of this Quarterly Report. The following information updates the discussion of the Company’s financial condition provided in our Annual Report and analyzes the changes in the results of operations between the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

EXECUTIVE SUMMARY

We are an independent oil and gas company focused on the acquisition, development and production of oil, natural gas and NGL reserves ~~as well as the construction and support of midstream assets to gather and process crude oil and gas production~~ in the Rocky Mountain region, primarily in the Wattenberg Field of the Denver-Julesburg Basin of Colorado. We have developed an oil, natural gas and NGL asset base of proved reserves, as well as a portfolio of development drilling opportunities on high resource-potential leasehold on contiguous acreage blocks in some of the

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most productive areas of what we consider to be the core of the DJ Basin. ~~We are focused on improving cash flow and our liquidity while reducing debt.~~

Financial Results

~~For~~Our results of operations as reported in our condensed consolidated financial statements for the periods January 21, 2021 through March 31, 2021 (“Successor”), January 1, 2021 through January 20, 2021 (“Predecessor”) and the three months ended March 31, 2020 are in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Although GAAP requires that we report on our results for the Successor and Predecessor periods separately, management views our operating results for the three months ended March 31, 2021 by combining the results of the Predecessor and Successor periods because management believes such presentation provides the most meaningful comparison of our results to prior periods. We are not able to compare the 20 days from January 1, 2021 through January 20, 2021 operating results to any of the previous periods reported in the condensed consolidated financial statements and do not believe reviewing this period in isolation would be useful in identifying any trends in or reaching any conclusions regarding our overall operating performance. We believe the key performance indicators such as operating revenues and expenses for the Successor period combined with the Predecessor Period provide more meaningful comparisons to other periods and are useful in understanding operational trends. Additionally, there were no changes in policies between the periods and any material impacts as a result of fresh start reporting were included within the discussion of these changes. These combined results do not comply with GAAP and have not been prepared as pro forma results under applicable regulations, but are presented because we believe they provide the most meaningful comparison of our results to prior periods.

For the combined three months ended March 31, 2021, crude oil, natural gas and NGL sales, coupled with the impact of settled derivatives, increased to ~~$204.5~~$281.9 million as compared to ~~$202.0~~$204.5 million in the same prior year period due to an increase ~~in sales volumes~~ of ~~approximately 1,341 MBoe, partially offset by a decrease of $4.25~~$20.06 in realized price per BOE, including settled ~~derivatives.~~derivatives, partially offset by a decrease in sales volumes of approximately 2,131 MBoe.

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For the combined three months ended March 31, ~~2020,~~2021, we had net income of ~~$9.0~~$959.5 million as compared to a net ~~loss~~income of ~~$94.0~~$9.0 million for the three months ended March 31, ~~2019.~~2020. The change toin net income for the combined three months ended March 31, 2021 from the three months ended March 31, 2020 ~~from net loss for the three months ended March 31, 2019~~ was primarily driven by an increase in ~~commodity derivative~~sales revenues of $127.3 million, reorganization gain of ~~$385.1~~$873.9 million, ~~partially offset by an increase~~a decrease in operating expenses of ~~$112.0~~$185.1 million, no loss on deconsolidation of Elevation as compared to a loss of $73.1 million during the three months ended March 31, 2020, and a decrease in ~~sales revenue~~interest expenses of ~~$56.7~~$17.7 million, offset by less commodity derivative gains of $304.1 million and an increase in income tax expense of $21.1 million.

Adjusted EBITDAX was $207.2 million, for the combined three months ended March 31, 2021 as compared to $123.9 million for the three months ended March 31, 2020, ~~as compared to $138.2 million for the three months ended March 31, 2019,~~ reflecting a ~~10.3% decrease.~~67% increase. Adjusted EBITDAX is a non-GAAP financial measure. For a definition of Adjusted EBITDAX and a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP, please ~~read~~refer to “—Adjusted EBITDAX.”

Operational Results

During the combined three months ended March 31, ~~2020,~~2021, we focused on improving free cash flow and implemented operational efficiencies to reduce drilling and completion costs. WeDuring the combined three months ended March 31, 2021, we incurred approximately ~~$146.6~~$31.5 million in drilling 3411 gross ~~(24.5~~(6.1 net) wells with an average lateral length of ~~2.3~~2.2 miles and completing 2815 gross ~~(22.7~~(10.5 net) wells with an average lateral length of ~~2.3~~2.1 miles, all of which were horizontal wells in the DJ Basin. In addition, we incurred approximately ~~$8.8~~$1.2 million of leasehold and surface acreage additions. We did not turn any wells to sales during the combined three months ended March 31, 2021.

Recent Developments

~~COVID-19 Outbreak and Global Industry Downturn~~Emergence from Chapter 11 Bankruptcy

~~The recent worldwide outbreak in several countries, including~~As previously disclosed, on June 14, 2020 (the “Petition Date”), Extraction and its wholly owned subsidiaries (collectively, the ~~United States,~~“Debtors”), filed voluntary petitions for relief under chapter 11 (“Chapter 11”) of a highly transmissible and pathogenic coronavirus (“COVID-19”) and the uncertainty regarding the impact of COVID-19 and various governmental actions taken to mitigate the impact of COVID-19 have resulted in an unprecedented decline in demand for oil and natural gas. At the same time, the decision by Saudi Arabia in March 2020 to drastically reduce export prices and increase oil production followed by curtailment agreements among OPEC and other countries such as Russia further increased uncertainty and volatility around global oil supply-demand dynamics. Decreased demand from muchtitle 11 of the United States being on lockdown to prevent the spread of COVID-19 caused domestic storage capacity to begin to fill up during March and April causing further price declines and ultimately causing oil prices to plummet. We expect the excess supply of oil and natural gasCode (the “Bankruptcy Code”) in the United States ~~to continue~~Bankruptcy Court for ~~a sustained period.~~the District of Delaware (the “Bankruptcy Court”). The Debtors’ Chapter 11 cases (the “Chapter 11 Cases”) were jointly administered under the caption In re Extraction Oil & Gas., et al. Case No. 20-11548 (CSS).

~~The COVID-19 outbreak~~On July 30, 2020, the Debtors filed a proposed Plan of Reorganization (as amended, modified, or supplemented from time to time, the “Plan”) and ~~its development into a pandemic in March 2020 have required that we take precautionary measures intended to help minimize~~related Disclosure Statement (as amended or modified, the ~~risk to our business, employees, customers, suppliers~~“Disclosure Statement”) describing the Plan and the ~~communities in which we operate. Our operational employees are currently still able~~solicitation of votes to ~~work on site. However, we have taken various precautionary measures~~approve the same from certain of the Debtors’ creditors with respect to such operational employees such as requiring them to verify they have not experienced any symptoms consistent with COVID-19, or been in close contact with someone showing such symptoms, before reportingthe Chapter 11 Cases. Subsequently on October 22, 2020 and November 5, 2020, the Debtors filed first and second amendments, respectively, to the ~~work site, quarantining any operational employees who have shown signs~~Disclosure Statement. The hearing to consider approval of ~~COVID-19 (regardless~~the Disclosure Statement was held on November 6, 2020. On November 6, 2020, the Bankruptcy Court approved the adequacy of ~~whether such employee has been~~the Disclosure Statement and the Debtors commenced a solicitation process to obtain votes on the Plan. The Plan was confirmed ~~to be infected) and imposing social distancing requirements~~by order of the Bankruptcy Court on ~~work sites, all~~December 23, 2020 (the “Confirmation Order”). On January 20, 2021 (the “Emergence Date”), the Plan became effective in accordance with its terms and the ~~guidelines released by~~Company emerged from the ~~Center for Disease Control.~~Chapter 11 Cases.

NASDAQ Delisting and Relisting

Our common stock was traded on the NASDAQ Global Select Market (the “NASDAQ”) under the symbol “XOG” prior to June 25, 2020. On June 16, 2020, we received a letter from NASDAQ notifying us that in accordance with NASDAQ rules, our securities would be delisted at the opening of business on June 25, 2020. On June 25, 2020, our common stock began trading on the Pink Open Market under the symbol “XOGAQ”. In ~~addition, most of~~connection with our ~~non-operational employees are now working remotely. We have not yet experienced any material operational disruptions (including disruptions~~emergence from the Chapter 11 Cases, our ~~suppliers~~common stock was relisted on the NASDAQ on January 21, 2021 and ~~service providers) as a result of~~began trading under the ~~COVID-19 outbreak, nor have we had any confirmed cases of COVID-19 on any of our work sites.~~symbol “XOG.”

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Due to the decline in crude oil prices and ongoing uncertainty regarding the oil supply-demand macro environment, we have recently reduced our operations in order to preserve capital. Specifically, we have renegotiated the terms of our drilling rig contracts as discussed in ~~Note 13—Commitments and Contingencies~~ ~~in Part I, Item 1. Financial Information of this Quarterly Report.~~

In addition, given the weakness in realized oil prices, we are actively evaluating whether to voluntarily curtail or shut-in a substantial portion of our current production volumes and will continue to evaluate such a measure on a regular basis in response to market conditions and contractual obligations. As substantially all of our revenues are generated by the production and sale of hydrocarbons, the curtailment or shut-in of our production could adversely affect our business, financial condition, results of operations, liquidity, and ability to finance planned capital expenditures.

~~Please also see Part II, Item 1A in our Annual Report and in this Quarterly Report for further information related to these matters.~~

~~Deconsolidation of Elevation Midstream, LLC~~

~~Please see~~ ~~Note 1—Business and Organization~~ ~~in Part I, Item 1. Financial Information of this Quarterly Report for information related to the deconsolidation of Elevation Midstream, LLC.~~

~~Reduction in Workforce~~

We recorded involuntary termination charges of $5.8 million in the first quarter of 2020 primarily related to one-time involuntary termination benefits, office closure and relocation benefits communicated to our workforce in February 2020. This plan was initiated to align the size and composition of our workforce with our expected future operating and capital plans.

~~February 2020 Divestiture~~

In February 2020, we completed the sale of certain non-operated producing properties for aggregate sales proceeds of approximately $12.2 million, subject to customary purchase price adjustments. No gain or loss was recognized for the February 2020 Divestiture. We continue to explore divestitures as part of our ongoing initiative to divest non-strategic assets.

~~Elevation Common Units~~Bonanza Creek Energy, Inc. Merger

On May ~~1, 2020, Elevation's board~~9, 2021, Bonanza Creek Energy, Inc. (“Bonanza Creek”) and Extraction signed a merger agreement in an all-stock merger of ~~managers issued 1,530,000,000 common units at a price of $0.01 per unit to certain of Elevation's members other than Extraction~~equals (the ~~"Capital Raise"~~“Merger”). The ~~Capital Raise caused our ownership~~merger is subject to customary closing conditions, and we currently expect it to close in the third quarter of ~~Elevation to be diluted to less than 0.01%. As a result~~2021. Upon completion of the ~~Capital Raise, beginning~~Merger, the combined company will be named Civitas Resources, Inc. (“Civitas”). Bonanza Creek President and Chief Executive Officer, Eric Greager, will serve as President and CEO of Civitas. Other senior leadership positions will be filled by current executives of Bonanza Creek and Extraction. As designated in ~~May 2020~~the merger agreement, of the six named officers, three will be from Bonanza Creek and three from Extraction. Extraction Chairman of the Board, Ben Dell, will serve as Chairman of Civitas, and Bonanza Creek and Extraction will ~~account for Elevation under the cost method of accounting. We reserve all rights related~~each nominate four directors to ~~actions taken by Elevation’s board of managers.~~

~~Midstream Projects~~

Primarily due to the significant decrease in oil and gas prices during March 2020, Elevation postponed indefinitely further development of gathering systems and facilities that were to be constructed to service our acreage in Hawkeye and another project in the Southwest Wattenberg area.

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~~Senate Bill 19-181 "Protect Public Welfare Oil and Gas Operations"~~

In April 2019, Senate Bill 19-181 ("SB181") became law, increasing the regulatory authority of local governments in Colorado over the surface impacts of oil and gas development in a reasonable manner, and in December 2019, Colorado's Air Quality Control Commission ("AQCC") adopted new rules targeting air emissions from upstream oil and gas operation. Among other things, SB181 (i) repeals a prior law restricting local government land use authority over oil and gas mineral extraction areas to areas designated by the COGCC, (ii) directs the AQCC to review its leak detection and repair rules and to adopt rules to minimize emissions of certain air pollutants, (iii) clarifies that local governments have authority to regulate the siting of oil and gas locations in a reasonable manner, including the ability to inspect oil and gas facilities, impose fines for leaks, spills, and emissions, and impose fees on operators or owners to cover regulation and enforcement costs, (iv) allows local governments or oil and gas operators to request a technical review board to evaluate the effect of the local government’s preliminary or final determination on the operator’s application, (v) repeals an exemption for oil and gas production from counties’ authority to regulate noise, (vi) alters forced pooling requirements by increasing the threshold to compel non-consenting individuals into statutory pooling agreements and (vii) elevates the protection of public health, safety, and welfare, the environment, and wildlife resources in the regulation of oil and gas development. Although industry trade associations opposed SB181, management believes that Extraction can continue to successfully operate our business. However, the enactment of SB181 and the development and implementation of related rules and regulations, which is under way, could lead to delays and additional costs to our business. For example, COGCC rulemaking on flowline safety (completed on November 21, 2019) and the Colorado AQCC and Air Pollution Control Division (“APCD”) rulemaking on air quality standards (completed December 20, 2019) – both pursuant to SB181 – could lead to such delays or costs. Certain interest groups in Colorado opposed to oil and natural gas development generally, and hydraulic fracturing in particular, have advanced various alternatives for ballot initiatives which would result in significantly limiting or preventing oil and natural gas development in the state. Proponents of such initiatives have begun the process of attempting to qualify several initiatives to appear on the ballot in November 2020.

~~Going Concern~~

~~Please see~~ ~~Note 4—Going Concern~~ ~~in Part I, Item 1. Financial Information and “Risk Factors” in Part II, Item 1A of this Quarterly Report, as well as “—Liquidity and Capital Resources” below.~~Civitas’ diverse, eight-member Board.

How We Evaluate Our Operations

We use ~~a variety of~~various financial and operational metrics to assess the performance of our ~~oil and gas~~ operations, including:

•Sources of revenue;

•Sales volumes;

•Realized prices on the sale of oil, natural gas and NGL, including the effect of our commodity derivative contracts;

•Lease operating ~~expenses (“LOE”);~~expenses;

•Capital expenditures;

•Adjusted EBITDAX (a ~~Non-GAAP~~non-GAAP measure); ~~and~~

•Free cash flow (a ~~Non-GAAP~~non-GAAP measure).; and

•Combined Predecessor period January 1, 2021 to January 20, 2021 and Successor period January 21, 2021 to March 31, 2021 (a non-GAAP measure) for comparison purposes in MD&A.

Sources of Revenues

Our revenues are derived from the sale of our oil and natural gas production, as well as the sale of NGLs that are extracted from our natural gas during processing. Our oil, natural gas and NGL revenues do not include the effects of derivatives. For the combined three months ended March 31, 2021, our revenues were derived 44% from oil sales, 43% from natural gas sales and 13% from NGL sales. For the three months ended March 31, 2020, our revenues were derived 75% from oil sales, 14% from natural gas sales and 11% ~~from NGL sales. For the three months ended March 31, 2019, our revenues were derived 75% from oil sales, 16% from natural gas sales and 9%~~ from NGL sales. Our revenues may vary significantly from period to period as a result of changes in volumes of production sold or changes in commodity prices.

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Sales Volumes

The following table presents historical sales volumes for the periods indicated:


		For the Three Months Ended				Successor		Predecessor	Non-GAAP	Predecessor
		March 31,				For the Period from January 21 through March 31,		For the Period from January 1 through January 20,	Combined Three Months Ended March 31,	For the Three Months Ended March 31,
		2020	2019		2021		2021	2021	2020
Oil (MBbl)	Oil (MBbl)	3,504	3,583	Oil (MBbl)	1,792		546	2,338	3,504
Natural gas (MMcf)	Natural gas (MMcf)	19,003	13,959	Natural gas (MMcf)	11,364		3,412	14,776	19,003
NGL (MBbl)	NGL (MBbl)	1,906	1,327	NGL (MBbl)	1,268		376	1,644	1,906
Total (MBoe)	Total (MBoe)	8,576	7,236	Total (MBoe)	4,953		1,492	6,445	8,576
Average net sales (BOE/d)	Average net sales (BOE/d)	94,247	80,401	Average net sales (BOE/d)	70,757		74,600	71,602	94,247

As reservoir pressures decline, production from a given well or formation decreases. Growth or maintenance in our future production and reserves will depend on our ability to continue to add or develop proved reserves in excess of our production. Our ability to add reserves through development projects and acquisitions is dependent on many factors, including takeaway capacity in our areas of operation and our ability to raise capital, obtain regulatory approvals, procure contract drilling rigs and personnel and successfully identify and consummate acquisitions. Please ~~read~~refer to “Risks

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Related to the Oil, Natural Gas and NGL Industry and Our Business” in Item 1A. of our Annual Report for a further description of the risks that affect us.

Realized Prices on the Sale of Oil, Natural Gas and NGL

Our results of operations depend upon many factors, particularly the price of oil, natural gas and NGL and our ability to market our production effectively. Oil, natural gas and NGL prices are among the most volatile of all commodity prices. For example, during the period from January 1, 2014 to March 31, ~~2020,~~2021, NYMEX West Texas Intermediate (“WTI”) oil prices ranged from a high of $107.26 per Bbl to a low of ~~$20.09~~negative $37.63 per Bbl. Average daily prices for NYMEX Henry Hub gas ranged from a high of $6.15 per MMBtu to a low of ~~$1.60~~$1.48 per MMBtu during the same period. ~~Declines~~Fluctuations in ~~and continued depression of,~~ the price of oil and natural gas occurring during 2015, 2019, 2020 and ~~2020~~2021 are due to a combination of factors including increased U.S. supply, global economic concerns stemming from COVID-19, ~~and~~ the price war between Russia and ~~Saudi Arabia.~~OPEC+, and the 2021 Texas Power crisis. These price ~~variations~~fluctuations can have a material impact on our financial results and capital expenditures.

Oil pricing is predominantly driven by ~~the physical market,~~fluctuations in supply and demand, including as a result of production and storage capacity, financial markets, and ~~national and international politics.~~geopolitical factors. The NYMEX WTI futures price is a widely used benchmark in the pricing of domestic and imported oil in the United States. The actual prices realized from the sale of oil differ from the quoted NYMEX WTI price as a result of quality and location differentials. In the DJ Basin, oil is sold under various purchase contracts with monthly pricing provisions based on NYMEX pricing, adjusted for differentials.

Natural gas prices vary by region and locality, depending upon the distance to markets, availability of pipeline capacity and supply and demand relationships in that region or locality. The NYMEX Henry Hub price of natural gas is a widely used benchmark for the pricing of natural gas in the United States. Similar to oil, the actual prices realized from the sale of natural gas differ from the quoted NYMEX Henry Hub price as a result of quality and location differentials. For example, wet natural gas with a high Btu content sells at a premium to dry natural gas with a low Btu content ~~dry natural gas~~ because it yields a greater quantity of NGL. Location differentials to NYMEX Henry Hub prices result from variances in transportation costs based on the natural gas’ proximity to the major consuming markets to which it is ultimately delivered. Also affecting the differential is the processing fee deduction retained by the natural gas processing plant, generally in the form of percentage of proceeds. The price we receive for our natural gas produced in the DJ Basin is based on CIG prices, adjusted for certain deductions.

Our price for NGL produced in the DJ Basin is based on a combination of prices from the Conway hub in Kansas and Mont Belvieu in Texas where this production is marketed.

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The following table provides the high and low prices for NYMEX WTI and NYMEX Henry Hub prompt month contract prices and our differential to the average of those benchmark prices for the periods indicated. The differential varies, but our oil, natural gas and ~~NGL~~NGLs normally ~~sells~~sell at a discount to the NYMEX WTI and NYMEX Henry Hub price, as applicable.

For the Three Months Ended
March 31,
2020 2019
Oil
NYMEX WTI High ($/Bbl) $ 63.27 $ 60.14
NYMEX WTI Low ($/Bbl) $ 20.09 $ 46.54
NYMEX WTI Average ($/Bbl) $ 45.78 $ 54.90
Average Realized Price ($/Bbl)⁽¹⁾
$ 35.45 $ 46.17
Average Realized Price, with derivative settlements ($/Bbl)⁽¹⁾
$ 45.50 $ 41.89
Average Realized Price as a % of Average NYMEX WTI 77.4 % 84.1 %
Differential ($/Bbl) to Average NYMEX WTI⁽²⁾
$ (7.91) $ (8.73)
Natural Gas
NYMEX Henry Hub High ($/MMBtu) $ 2.20 $ 3.59
NYMEX Henry Hub Low ($/MMBtu) $ 1.60 $ 2.55
NYMEX Henry Hub Average ($/MMBtu) $ 1.87 $ 2.87
NYMEX Henry Hub Average converted to a $/Mcf basis⁽³⁾
$ 2.06 $ 3.16
Average Realized Price ($/Mcf) $ 1.17 $ 2.57
Average Realized Price, with derivative settlements ($/Mcf) $ 1.39 $ 2.25
Average Realized Price as a % of Average NYMEX Henry Hub⁽³⁾
56.8 % 81.3 %
Differential ($/Mcf) to Average NYMEX Henry Hub⁽³⁾
$ (0.89) $ (0.59)
NGL
Average Realized Price ($/Bbl)⁽⁴⁾
$ 9.02 $ 15.53
Average Realized Price as a % of Average NYMEX WTI 19.7 % 28.3 %
BOE
Average Realized Price per BOE $ 19.09 $ 30.67
Average Realized Price per BOE with derivative settlements $ 23.67 $ 27.92

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	For the Three Months Ended
	March 31,
	2021			2020
Oil
NYMEX WTI High ($/Bbl)	$	66.09		$	63.27
NYMEX WTI Low ($/Bbl)	$	47.62		$	20.09
NYMEX WTI Average ($/Bbl)	$	58.14		$	45.78
Average Realized Price ($/Bbl)(1)	$	54.61		$	35.45
Average Realized Price, with derivative settlements ($/Bbl)(1)	$	49.94		$	45.50
Average Realized Price as a % of Average NYMEX WTI	93.9		%	77.4		%
Differential ($/Bbl) to Average NYMEX WTI(2)(3)	$	(3.53)		$	(7.91)
Natural Gas
NYMEX Henry Hub High ($/MMBtu)	$	3.22		$	2.20
NYMEX Henry Hub Low ($/MMBtu)	$	2.45		$	1.60
NYMEX Henry Hub Average ($/MMBtu)	$	2.72		$	1.87
NYMEX Henry Hub Average converted to a $/Mcf basis(4)	$	2.99		$	2.06
Average Realized Price ($/Mcf)(5)	$	8.47		$	1.17
Average Realized Price, with derivative settlements ($/Mcf)(5)	$	8.49		$	1.39
Average Realized Price as a % of Average NYMEX Henry Hub(4)(5)	283.3		%	56.8		%
Differential ($/Mcf) to Average NYMEX Henry Hub(4)(5)	$	5.48		$	(0.89)
NGL
Average Realized Price ($/Bbl)(5)	$	24.12		$	9.02
Average Realized Price as a % of Average NYMEX WTI(5)	41.5		%	19.7		%
BOE
Average Realized Price per BOE(1)	$	45.38		$	19.09
Average Realized Price per BOE with derivative settlements	$	43.73		$	23.67

(1)Includes non-cash amounts allocated to a satisfied performance obligation, recognized within oil sales for the three months ended March 31, 2020, pursuant to ASC 606, Revenue Recognition.

(2)Excludes non-cash amounts allocated to a satisfied performance obligation, recognized within oil sales for the three months ended March 31, 2020, pursuant to ASC 606, Revenue Recognition.

(3) During the first quarter of 2021, our renegotiated crude oil midstream contract was effective as of March 1, 2021, which resulted in a change in the accounting treatment under ASC 606. As a result, the crude oil differential is not reflective of our differential going forward.

(4) Based on the difference between our average realized price and the NYMEX Henry Hub Average as converted into Mcf using a conversion factor of 1.1 to 1.

~~(4)The decrease year over year is primarily due~~(5) During the first quarter of 2021, a large portion of our gas and NGL contracts were subject to ~~capacity constraints in transporting the wet gas associated with~~daily prices versus a monthly average price. As a result, our ~~production coupled with negative market conditions surrounding limited export capacity.~~realized prices benefited from several days of severe cold during February 2021.

Derivative Arrangements

To achieve more predictable cash flow and to reduce our exposure to adverse fluctuations in commodity prices, from time to time, we enter into derivative arrangements for our oil and natural gas production. By removing a significant portion of price volatility associated with our oil and natural gas production, we believe we will mitigate, but not eliminate, the potential negative effects of reductions in oil and natural gas prices on our cash flow from operations for those periods. However, in a portion of our current positions, our hedging activity may also reduce our ability to benefit from increases in oil and natural gas prices. We will sustain losses to the extent our derivatives contract prices are lower than market prices and, conversely, we will realize gains to the extent our derivatives contract prices are higher than market prices. In certain circumstances, ~~where we have unrealized gains in our derivative portfolio,~~ we may choose to restructure existing derivative contracts or enter into new transactions to modify the terms of current contracts in order to realize the current value of our existing positions. See “—Quantitative and Qualitative Disclosure About Market Risk—Commodity Price Risk” for information regarding our exposure to market risk, including the effects of changes in commodity prices, and our commodity derivative contracts.

~~Table of Contents~~

We will continue to use commodity derivative instruments to hedge our price risk in the future. Our hedging strategy and future hedging transactions will be determined at our discretion and may be different than what we have

Table of Contents

done on a historical basis. ~~As a result of recent volatility in the price of oil and natural gas, we~~We have relied on a variety of hedging strategies and instruments to hedge our future price risk. We have utilized swaps, put options and call options, which in some instances require the payment of a premium, to reduce the effect of price changes on a portion of our future oil and natural gas production. We expect to continue to use a variety of hedging strategies and instruments for the foreseeable future.

~~A swap has an established fixed price. When the settlement price is below the fixed price, the counterparty pays~~ The RBL Credit Agreement requires us ~~an amount equal~~ to the difference between the settlement price and the fixed price multiplied by the hedged contract volume. When the settlement price is above the fixed price, we pay our counterparty an amount equal to the difference between the settlement price and the fixed price multiplied by the hedged contract volume.

~~A put option has an established floor price. The buyer~~maintain commodity hedges covering a minimum of the put option pays the seller a premium to enter into the put option. When the settlement price is below the floor price, the seller pays the buyer an amount equal to the difference between the settlement price and the strike price multiplied by the hedged contract volume. When the settlement price is above the floor price, the put option expires worthless. Some65% of our ~~purchased put options have deferred premiums. For~~anticipated oil and gas production from PDP reserves for the ~~deferred premium puts, we agreed to pay a premium to~~succeeding twelve months and 50% of our anticipated oil and gas production from PDP reserves for the ~~counterparty~~next succeeding twelve months.

The hedge prices will depend on the commodity price environment at the time ~~of settlement.~~

~~We combine swaps, purchased put options, sold put options, and sold call options in order to achieve various hedging strategies. Some examples of our hedging strategies~~at which those hedge transactions are collars which include purchased put options and sold call options, three-way collars which include purchased put options, sold put options, and sold call options, and enhanced swaps, which include either sold put options or sold call options with the associated premiums rolled into an enhanced fixed price swap. We have historically relied on commodity derivative contracts to mitigate our exposure to lower commodity prices.

~~We have historically been able to hedge our oil and natural gas production at prices that are significantly higher than current strip prices. However, in~~entered. In the current commodity price environment, our ability to enter into ~~comparable~~ derivative arrangements at favorable prices may be ~~limited, and, we are not obligated to hedge a specific portion of our oil or natural gas production.~~limited.

For a description of our derivative instruments that we utilize and a summary of our commodity derivative contracts as of March 31, ~~2020,~~2021, please see Note 6—5—Commodity Derivative Instruments in Part I, Item 1. Financial Information of this Quarterly Report.

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The following table summarizes our historical derivative positions and the settlement amounts for each of the periods ~~indicated.~~indicated:

For the Three Months Ended
March 31,
2020 2019
NYMEX WTI Crude Swaps:
Notional volume (Bbl) 225,000 1,350,000
Weighted average fixed price ($/Bbl) $ 60.13 $ 54.58
NYMEX WTI Crude Purchased Puts:
Notional volume (Bbl) 3,650,000 4,725,000
Weighted average purchased put price ($/Bbl) $ 54.79 $ 46.05
NYMEX WTI Crude Purchased Calls:
Notional volume (Bbl) 600,000 5,100,000
Weighted average purchased call price ($/Bbl) $ 68.05 $ 63.40
NYMEX WTI Crude Sold Calls:
Notional volume (Bbl) 3,650,000 6,600,000

~~Table of Contents~~


							Successor		Predecessor		Predecessor
							For the Period from January 21 through March 31,		For the Period from January 1 through January 20,		For the Three Months Ended March 31,
							2021		2021		2020
NYMEX WTI Crude Swaps:						NYMEX WTI Crude Swaps:
Notional volume (Bbl)						Notional volume (Bbl)	1,489,700		—		225,000
Weighted average fixed price ($/Bbl)						Weighted average fixed price ($/Bbl)	$	50.34	$	—	$	60.13
NYMEX WTI Crude Purchased Puts:						NYMEX WTI Crude Purchased Puts:
Notional volume (Bbl)						Notional volume (Bbl)	—		—		3,650,000
Weighted average purchased put price ($/Bbl)						Weighted average purchased put price ($/Bbl)	$	—	$	—	$	54.79
NYMEX WTI Crude Purchased Calls:						NYMEX WTI Crude Purchased Calls:
Notional volume (Bbl)						Notional volume (Bbl)	—		—		600,000
Weighted average purchased call price ($/Bbl)						Weighted average purchased call price ($/Bbl)	$	—	$	—	$	68.05
NYMEX WTI Crude Sold Calls:						NYMEX WTI Crude Sold Calls:
Notional volume (Bbl)						Notional volume (Bbl)	—		—		3,650,000
Weighted average sold call price ($/Bbl)	Weighted average sold call price ($/Bbl)	$	63.34	$	62.17	Weighted average sold call price ($/Bbl)	$	—	$	—	$	63.34
NYMEX WTI Crude Sold Puts:	NYMEX WTI Crude Sold Puts:					NYMEX WTI Crude Sold Puts:
Notional volume (Bbl)	Notional volume (Bbl)	3,700,000		4,200,000		Notional volume (Bbl)	—		—		3,700,000
Weighted average sold put price ($/Bbl)	Weighted average sold put price ($/Bbl)	$	44.01	$	43.35	Weighted average sold put price ($/Bbl)	$	—	$	—	$	44.01
NYMEX HH Natural Gas Swaps:	NYMEX HH Natural Gas Swaps:					NYMEX HH Natural Gas Swaps:
Notional volume (MMBtu)	Notional volume (MMBtu)	8,400,000		5,400,000		Notional volume (MMBtu)	3,246,850		—		8,400,000
Weighted average fixed price ($/MMBtu)	Weighted average fixed price ($/MMBtu)	$	2.76	$	3.11	Weighted average fixed price ($/MMBtu)	$	2.94	$	—	$	2.76
NYMEX HH Natural Gas Purchased Puts:	NYMEX HH Natural Gas Purchased Puts:					NYMEX HH Natural Gas Purchased Puts:
Notional volume (MMBtu)	Notional volume (MMBtu)	600,000		3,600,000		Notional volume (MMBtu)	—		—		600,000
Weighted average purchased put price ($/MMBtu)	Weighted average purchased put price ($/MMBtu)	$	2.90	$	3.04	Weighted average purchased put price ($/MMBtu)	$	—	$	—	$	2.90
NYMEX HH Natural Gas Sold Calls:	NYMEX HH Natural Gas Sold Calls:					NYMEX HH Natural Gas Sold Calls:
Notional volume (MMBtu)	Notional volume (MMBtu)	600,000		3,600,000		Notional volume (MMBtu)	—		—		600,000
Weighted average sold call price ($/MMBtu)	Weighted average sold call price ($/MMBtu)	$	3.48	$	3.46	Weighted average sold call price ($/MMBtu)	$	—	$	—	$	3.48
NYMEX HH Natural Gas Sold Puts:
Notional volume (MMBtu)		—		3,000,000
Weighted average sold put price ($/MMBtu)		$	—	$	2.50
CIG Basis Gas Swaps:	CIG Basis Gas Swaps:					CIG Basis Gas Swaps:
Notional volume (MMBtu)	Notional volume (MMBtu)	11,400,000		9,400,000		Notional volume (MMBtu)	—		—		11,400,000
Weighted average fixed basis price ($/MMBtu)	Weighted average fixed basis price ($/MMBtu)	$	(0.61)	$	(0.75)	Weighted average fixed basis price ($/MMBtu)	$	—	$	—	$	(0.61)
Total Amounts Received/(Paid) from Settlement (in thousands)	Total Amounts Received/(Paid) from Settlement (in thousands)	$	39,295	$	(10,329)	Total Amounts Received/(Paid) from Settlement (in thousands)	$	(10,633)	$	—	$	39,295
Cash provided by changes in Accounts Receivable and Accounts Payable related to Commodity Derivatives		$	(14,363)	$	6,791
Cash Settlements on Commodity Derivatives per Condensed Consolidated Statements of Cash Flows		$	24,932	$	(3,538)
Cash provided by (used in) changes in Accounts Receivable and Accounts Payable related to Commodity Derivatives						Cash provided by (used in) changes in Accounts Receivable and Accounts Payable related to Commodity Derivatives	$	5,608	$	542	$	(14,363)
Settlements on Commodity Derivatives per Condensed Consolidated Statements of Cash Flows						Settlements on Commodity Derivatives per Condensed Consolidated Statements of Cash Flows	$	(5,025)	$	542	$	24,932

Lease Operating Expenses

All direct and allocated indirect costs of lifting hydrocarbons from a producing formation to the surface constitutes part of the current operating expenses of a working interest. Such costs include labor, superintendence, supplies, repairs, maintenance, water injection and disposal costs, allocated overhead charges, workover, insurance and other expenses incidental to production, but exclude lease acquisition or drilling or completion expenses.

Capital Expenditures

For the combined three months ended March 31, ~~2020,~~2021, we incurred approximately ~~$146.6~~$31.5 million in drilling and completion capital expenditures. For the combined three months ended March 31, ~~2020,~~2021, we drilled 3411 gross ~~(24.5~~(6.1 net) wells with an average lateral length of approximately ~~2.3~~2.2 miles and completed 2815 gross ~~(22.7 net) wells with an average lateral length of approximately 2.3 miles. We turned to sales 13 gross (12~~(10.5 net) wells with an average lateral length of approximately 2.1 miles. We did not turn any wells to sales during the combined three months ended March 31, 2021. In addition, we incurred approximately ~~$8.8~~$1.2 million of leasehold and surface acreage additions.

~~The amount and timing~~

Table of these capital expenditures is within our control and subject to our management’s discretion. We retain the flexibility to defer a portion of these planned capital expenditures depending on a variety of factors, including but not limited to the success of our drilling activities, prevailing and anticipated prices for oil, natural gas and NGL, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other interest owners. Any postponement or elimination of our development drilling program could result in a reduction of proved reserve volumes and related standardized measure. These risks could materially affect our business, financial condition and results of operations.Contents

Adjusted EBITDAX

Adjusted EBITDAX is not a measure of net income (loss) as determined by ~~United States~~ GAAP. Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income (loss) adjusted for certain cash and non-cash items ~~including depletion, depreciation, amortization and~~

~~Table~~shown in the table below, which presents a reconciliation of ~~Contents~~

accretion (DD&A), impairment of long lived assets, non-recurring charges in other operating expenses, exploration and abandonment expenses, gain on sale of property and equipment, (gain) loss on commodity derivatives, settlements on commodity derivative instruments, premiums paid for derivatives that settled during the period, stock-based compensation expense, amortization of debt issuance costs, gain on repurchase of senior notes, interest expense, income tax expense (benefit) and loss on deconsolidation of Elevation Midstream, LLC. Adjusted EBITDAX ~~is also used~~ to ~~evaluate~~ the ~~performance~~GAAP financial measure of ~~reportable segments. Please see~~ ~~Note 15—Segment Information~~ ~~in Part I, Item 1. Financial Information~~net income (loss) for each of ~~this Quarterly Report for more information regarding~~ the ~~EBITDAX of reportable segments.~~periods indicated (in thousands).


	Successor		Predecessor		Non-GAAP		Predecessor
	For the Period from January 21 through March 31,		For the Period from January 1 through January 20,		Combined Three Months Ended March 31,		For the Three Months Ended March 31,
	2021		2021		2021		2020
Reconciliation of Net Income to Adjusted EBITDAX:
Net income	$	88,554	$	870,970	$	959,524	$	9,037
Add back:
Depletion, depreciation, amortization and accretion	38,575		16,133		54,708		76,051
Impairment of long-lived assets	—		—		—		775
Other operating expenses	3,890		1,107		4,997		52,575
Exploration and abandonment expenses	759		316		1,075		112,480
(Gain) loss on commodity derivatives	28,487		12,586		41,073		(263,015)
Settlements on commodity derivative instruments	(10,633)		—		(10,633)		39,295
Stock-based compensation expense	2,174		302		2,476		—
Amortization of debt issuance costs	452		113		565		1,242
Interest expense	2,582		1,421		4,003		20,116
Income tax expense	23,325		—		23,325		2,200
Loss on deconsolidation of Elevation Midstream, LLC	—		—		—		73,139
Reorganization items, net	—		(873,908)		(873,908)		—
Adjusted EBITDAX	$	178,165	$	29,040	$	207,205	$	123,895

Management believes Adjusted EBITDAX is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP or as an indicator of our operating performance. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital, hedging strategy and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. Our computations of Adjusted EBITDAX may not be comparable to other similarly titled measure of other companies. We believe that Adjusted EBITDAX is a widely followed measure of operating performance. Additionally, our management team believes Adjusted EBITDAX is useful to an investor in evaluating our financial performance because this measure (i) is widely used by investors in the oil and natural gas industry to measure a company’s operating performance without regard to items excluded from the calculation of such term, among other factors; (ii) helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating structure; and (iii) is used by our management team for various purposes, including as a measure of operating performance, in presentations to our board of directors, as a basis for strategic planning and forecasting.

~~The following table presents a reconciliation of Adjusted EBITDAX to the GAAP financial measure of net income (loss) for each of the periods indicated (in thousands).~~

For the Three Months Ended
March 31,
2020 2019
Reconciliation of Net Income (Loss) to Adjusted EBITDAX:
Net income (loss) $ 9,037 $ (94,032)
Add back:
Depletion, depreciation, amortization and accretion 76,051 118,770
Impairment of long lived assets 775 8,248
Other operating expenses 52,575 —
Exploration and abandonment expenses 112,480 6,194
Gain on sale of property and equipment — (222)
(Gain) loss on commodity derivatives (263,015) 122,091
Settlements on commodity derivative instruments 39,295 (10,329)
Premiums paid for derivatives that settled during the period — (9,549)
Stock-based compensation expense — 13,008
Amortization of debt issuance costs 1,242 1,497
Gain on repurchase of 2026 Senior Notes — (7,317)
Interest expense 20,116 18,828
Income tax expense (benefit) 2,200 (29,000)
Loss on deconsolidation of Elevation Midstream, LLC 73,139 —
Adjusted EBITDAX $ 123,895 $ 138,187

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Free Cash Flow

Our Free Cash Flow is not a measure of net income (loss) as determined by GAAP. We define Free Cash Flow as Discretionary Cash Flow (non-GAAP) less Adjusted Cash Flow used in Investing (non-GAAP) adjusted for Other Non-Recurring Adjustments (non-GAAP). Discretionary Cash Flow is defined as net cash provided by operating activities (GAAP) ~~less~~before changes in working capital accounts (current assets and liabilities). Adjusted Cash Flow used in Investing is defined as cash flow used in investing activities (GAAP) adjusted for changes in accounts payable and accrued liabilities related to capital expenditures.

Free Cash Flow is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Free Cash Flow can provide additional transparency into the drivers of trends in our operating cash flows, such as production, realized sales prices and operating costs, as it disregards the timing of settlement of operating assets and liabilities. We believe Free Cash Flow provides additional information that may be useful in an analysis of our ability to generate cash to fund exploration and development activities ~~construct and support midstream assets,~~ and to return capital to stockholders.

The following tables present a reconciliation of Discretionary Cash Flow and Free Cash Flow to the GAAP financial measure of net cash provided by operating activities for each of the periods indicated.

Upstream Midstream Consolidated
For the Three Months Ended March 31, 2020
Cash Flow from Operating Activities
Net cash provided by operating activities $ 144,219 $ 2,880 $ 147,099
Changes in current assets and liabilities (101,047) (1,907) (102,954)
Discretionary Cash Flow 43,172 973 44,145
Cash Flow from Investing Activities
Net cash used in investing activities (133,863) (5,840) (139,703)
Change in accounts payable and accrued liabilities related to capital expenditures (10,477) 2,210 (8,267)
Adjusted Cash Flow used in Investing (144,340) (3,630) (147,970)
Other Non-Recurring Adjustments⁽¹⁾
1,170 — 1,170
Free Cash Flow $ (99,998) $ (2,657) $ (102,655)


	Successor		Predecessor		Non-GAAP
	For the Period from January 21 through March 31,		For the Period from January 1 through January 20,		Combined Three Months Ended March 31,
	2021		2021		2021
Cash Flow from Operating Activities
Net cash provided by operating activities	$	149,108	$	15,346	$	164,454
Changes in current assets and liabilities	6,772		(17,089)		(10,317)
Discretionary Cash Flow	155,880		(1,743)		154,137
Cash Flow from Investing Activities
Net cash used in investing activities	(22,699)		(9,120)		(31,819)
Change in accounts payable and accrued liabilities related to capital expenditures	(872)		(1,442)		(2,314)
Adjusted Cash Flow used in Investing	(23,571)		(10,562)		(34,133)
Free Cash Flow	$	132,309	$	(12,305)	$	120,004


	Predecessor
	Upstream		Midstream		Consolidated
	For the Three Months Ended
	March 31, 2020
Cash Flow from Operating Activities
Net cash provided by operating activities	$	144,219	$	2,880	$	147,099
Changes in current assets and liabilities	(101,047)		(1,907)		(102,954)
Discretionary Cash Flow	43,172		973		44,145
Cash Flow from Investing Activities
Net cash used in investing activities	(133,863)		(5,840)		(139,703)
Change in accounts payable and accrued liabilities related to capital expenditures	(10,477)		2,210		(8,267)
Adjusted Cash Flow used in Investing	(144,340)		(3,630)		(147,970)
Other Non-Recurring Adjustments(1)	1,170		—		1,170
Free Cash Flow	$	(99,998)	$	(2,657)	$	(102,655)

Upstream Midstream Consolidated
For the Three Months Ended March 31, 2019
Cash Flow from Operating Activities
Net cash provided by operating activities $ 131,121 $ 2,990 $ 134,111
Changes in current assets and liabilities 3,634 (447) 3,187
Discretionary Cash Flow 134,755 2,543 137,298
Cash Flow from Investing Activities
Net cash used in investing activities (184,719) (47,656) (232,375)
Change in accounts payable and accrued liabilities related to capital expenditures 8,350 (9,566) (1,216)
Adjusted Cash Flow used in Investing (176,369) (57,222) (233,591)
Other Non-Recurring Adjustments⁽¹⁾
1,582 — 1,582
Free Cash Flow $ (40,032) $ (54,679) $ (94,711)

_______________________

(1) Amount incurred for the construction of our field office that is included in other property and equipment in our condensed consolidated statements of cash flows.

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Items Affecting the Comparability of Our Financial Results

Our historical results of operations for the periods presented may not be comparable, either to each other or to our future results of operations, for the reasons described below:

•Upon emerging from bankruptcy on January 20, 2021, we recorded our consolidated balance sheet accounts at fair value. See Note 3—Fresh Start Reporting in Part I, Item 1. Financial Information of this Quarterly Report. Now, the Successor period January 21, 2021 to March 31, 2021 is less comparable to the Predecessor period from January 1, 2021 to January 20, 2021 and in relation to the first quarter of 2020. We illustrate this lack of comparability by using a black line in tables to separate Predecessor Company amounts from Successor Company amounts. We overcome this lack of comparability by combining the Predecessor and Successor periods so they can be viewed in relation to the first quarter of 2020.

•During the Chapter 11 Cases, our financial results were volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impacted our financial results. For the combined three months ended March 31, 2021, prior to emergence, we realized an $873.9 million reorganization items gain. As a result, our historical financial performance is likely not indicative of financial performance after the date of the bankruptcy filing. Despite the Company’s emergence from the Chapter 11 Cases, claim assessments will continue for the foreseeable future.

•For the combined three months ended March 31, 2021 compared to the three months ended March 31, 2020, ~~and 2019, respectively,~~ exploration and abandonment expenses ~~increased~~decreased primarily due to the abandonment of $106.9 million in unproved properties during the three months ended March 31, 2020. There were no abandoned properties for the three months ended March 31, 2021 as we had recently emerged from bankruptcy where we revalued our oil and ~~$3.9 million~~gas properties. See Note 3—Fresh Start Reporting in Part I, Item 1. Financial Information of ~~unproved properties.~~this Quarterly Report for information related to our asset and liability values upon emergence.

•Elevation Midstream, LLC was deconsolidated as of March 16, 2020 and accounted for as an equity method investment. We elected the fair value option to remeasure the Elevation Midstream, LLC equity method investment and determined it had no fair value. We recorded a $73.1 million loss on deconsolidation of Elevation Midstream, LLC in the condensed consolidated statements of operations for the three months ended March 31, 2020. Please see Note 1—Business and Organization — Deconsolidation of Elevation Midstream, LLC in Part I, Item 1. Financial Information of this Quarterly Report for information related to the deconsolidation of Elevation Midstream, LLC.

•On April 2, 2020, Elevation demanded payment of $46.8 million due to an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020. While the Company disputes that these amounts are due to Elevation, under ASC ~~Topic 450 - Contingencies, we recorded the amount in other operating expenses on the condensed consolidated statements of operations for the three months ended March 31, 2020.~~

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Historical Results of Operations and Operating Expenses

Oil, Natural Gas and NGL Sales Revenues, Operating Expenses and Other Income (Expense).

For components of our revenues, operating expenses, other income (expense) and net income (loss), please see our condensed consolidated statements of operations in Part I, Item 1. Financial Information of this Quarterly Report.

The following table provides a summary of our sales volumes, average prices and operating expenses on a per BOE basis for the periods indicated:


		For the Three Months Ended												Successor							Predecessor					Non-GAAP			Predecessor
		March 31,												For the Period from January 21 through March 31,							For the Period from January 1 through January 20,					For the Combined Three Months Ended March 31,			For the Three Months Ended March 31,
		2020			2019						2021					2021					2021					2020
Sales (MBoe)⁽¹⁾:		8,576			7,236
Sales (MBoe):(1)								Sales (MBoe):(1)			4,953					1,492					6,445					8,576
Oil sales (MBbl)	Oil sales (MBbl)	3,504			3,583			Oil sales (MBbl)			1,792					546					2,338					3,504
Natural gas sales (MMcf)	Natural gas sales (MMcf)	19,003			13,959			Natural gas sales (MMcf)			11,364					3,412					14,776					19,003
NGL sales (MBbl)	NGL sales (MBbl)	1,906			1,327			NGL sales (MBbl)			1,268					376					1,644					1,906
Sales (BOE/d)⁽¹⁾:		94,247			80,401
Sales (BOE/d):(1)								Sales (BOE/d):(1)			70,757					74,600					71,602					94,247
Oil sales (Bbl/d)	Oil sales (Bbl/d)	38,502			39,809			Oil sales (Bbl/d)			25,597					27,312					25,978					38,502
Natural gas sales (Mcf/d)	Natural gas sales (Mcf/d)	208,819			155,103			Natural gas sales (Mcf/d)			162,346					170,588					164,175					208,819
NGL sales (Bbl/d)	NGL sales (Bbl/d)	20,942			14,742			NGL sales (Bbl/d)			18,109					18,820					18,261					20,942
Average sales prices⁽²⁾:
Average sales prices:(2)								Average sales prices:(2)
Oil sales (per Bbl)⁽³⁾	Oil sales (per Bbl)⁽³⁾	$	35.45		$	46.17		Oil sales (per Bbl)(3)			$	56.12				$	49.68				$	54.61				$	35.45
Oil sales with derivative settlements (per Bbl)⁽³⁾	Oil sales with derivative settlements (per Bbl)⁽³⁾	45.50			41.89			Oil sales with derivative settlements (per Bbl)(3)			50.02					49.68					49.94					45.50
Natural gas sales (per Mcf)(4)	Natural gas sales (per Mcf)(4)	1.17			2.57			Natural gas sales (per Mcf)(4)	10.33					2.29					8.47					1.17
Natural gas sales with derivative settlements (per Mcf)		1.39			2.25
Natural gas sales with derivative settlements (Mcf)(4)								Natural gas sales with derivative settlements (Mcf)(4)			10.35					2.29					8.49					1.39
NGL sales (per Bbl)(4)	NGL sales (per Bbl)(4)	9.02			15.53			NGL sales (per Bbl)(4)	24.90					21.52					24.12					9.02
Average price (per BOE)⁽³⁾		19.09			30.67
Average price with derivative settlements (per BOE)⁽³⁾		23.67			27.92
Average price (per BOE)(4)(3)								Average price (per BOE)(4)(3)			50.36					28.85					45.38					19.09
Average price with derivative settlements (per BOE)(4)(3)								Average price with derivative settlements (per BOE)(4)(3)			48.21					28.85					43.73					23.67
Expense per BOE:	Expense per BOE:							Expense per BOE:
Lease operating expenses	Lease operating expenses	$	3.54		$	3.02		Lease operating expenses			$	2.15				$	1.71				$	2.05				$	3.54
Transportation and gathering	Transportation and gathering	2.66			1.43			Transportation and gathering			4.68					4.19					4.57					2.66
Production taxes	Production taxes	1.57			2.51			Production taxes			4.33					2.21					3.84					1.57
Exploration and abandonment expenses	Exploration and abandonment expenses	13.11			0.86			Exploration and abandonment expenses			0.15					0.21					0.17					13.11
Depletion, depreciation, amortization and accretion	Depletion, depreciation, amortization and accretion	8.87			16.41			Depletion, depreciation, amortization and accretion			7.79					10.81					8.49					8.87
General and administrative expenses	General and administrative expenses	1.24			3.82			General and administrative expenses			1.52					1.48					1.51					1.24
Cash general and administrative expenses⁽⁴⁾⁽⁵⁾	Cash general and administrative expenses⁽⁴⁾⁽⁵⁾	1.24			2.02			Cash general and administrative expenses⁽⁴⁾⁽⁵⁾	1.08					1.28					1.13					1.24
Stock-based compensation	Stock-based compensation	—			1.80			Stock-based compensation			0.44					0.20					0.38					—
Total operating expenses per BOE⁽⁵⁾⁽⁶⁾	Total operating expenses per BOE⁽⁵⁾⁽⁶⁾	$	30.99		$	28.05		Total operating expenses per BOE⁽⁵⁾⁽⁶⁾	$	20.62				$	20.61				$	20.63				$	30.99

Production taxes as a percentage of revenue	Production taxes as a percentage of revenue	8.1		%	8.2		%	Production taxes as a percentage of revenue			8.6		%			7.7		%			8.5		%			8.1		%

____________________

(1)One BOE is equal to six Mcf of natural gas or one Bbl of oil or NGL based on an approximate energy equivalency. This is an energy content correlation and does not reflect a value or price relationship between the commodities.

(2)Average prices shown in the table reflect prices both before and after the effects of our settlements of our commodity derivative contracts. Our calculation of such effects includes both gains and losses on settlements for commodity derivatives ~~and amortization of premiums paid or received~~ on ~~options~~swaps that settled during the period.

(3)Includes non-cash amounts allocated to a satisfied performance obligation, recognized within oil sales for the Predecessor three months ended March 31, 2020, pursuant to ASC 606, Revenue Recognition.

(4) During the first quarter of 2021, a large portion of our gas and NGL contracts were subject to daily prices versus a monthly average price. As a result, our realized prices benefited from several days of severe cold during February 2021.

(5) Cash general and administrative expenses for the Predecessor three months ended March 31, 2020 includes expense of $2.2 million related to the terms of a separation agreement with aone former executive officer. Excluding this one-time expense results in cash general and administrative expense per BOE of $0.97 for the Predecessor three months ended March 31, 2020.

~~(5)~~(6) Excludes ~~midstream operating expenses,~~ impairment of ~~long lived~~long-lived assets ~~gain on sale of property and equipment,~~ and other operating expenses.

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Combined Three Months Ended March 31, ~~2020~~2021 Compared to Three Months Ended March 31, ~~2019~~2020

Oil sales revenues. Crude oil sales revenues ~~decreased~~increased by ~~$41.2~~$3.5 million to $127.7 million for the combined three months ended March 31, 2021 as compared to crude oil sales of $124.2 million for the three months ended March 31, ~~2020 as compared to~~2020. An increase in crude oil ~~sales of $165.4~~prices contributed a $44.8 million ~~for the three months ended March 31, 2019. A~~positive impact, and a decrease in sales volumes between these periods contributed a ~~$3.7~~$41.3 million negative ~~impact, and a decrease in crude oil prices contributed a $37.5 million negative~~ impact. For the three months ended March 31, 2020, crude oil revenue decreased by approximately $8.5 million due to the impact of the increase in the forecasted deferral balance on one of our revenue contracts. Pursuant to ASC 606, the contract term impacts the amount of consideration that can be included in the transaction price, which reduced oil sales revenue.

For the combined three months ended March 31, ~~2020,~~2021, our crude oil sales averaged ~~38.5~~26.0 MBbl/d. Our crude oil sales volume decreased by ~~0.1~~1,166 to ~~3.5~~2,338 MBbl for the combined three months ended March 31, 2021 compared to 3,504 MBbl for the three months ended March 31, ~~2020 compared to 3.6 MBbl for the three months ended March 31, 2019.~~2020. The volume decrease is primarily due to the natural decline of our existing properties, partially offset by an increase in production from the completion of 2832 gross wells from ~~January~~April 1, 2020 to March 31, ~~2020.~~2021.

The average price we realized on the sale of crude oil was $54.61 per Bbl for the combined three months ended March 31, 2021 compared to $35.45 per Bbl for the three months ended March 31, ~~2020 compared to $46.17 per Bbl for~~2020. For the three months ended March 31, ~~2019, primarily due to changes in market prices for crude oil and the $8.5 million decrease of~~2020, crude oil revenue ~~explained above.~~decreased $8.5 million due to the contract term impacting the amount of consideration that can be included in the transaction price, which reduced oil sales revenue pursuant to ASC 606. For the combined three months ended March 31, 2021, no such decrease in crude oil revenue was recorded.

Natural gas sales revenues. Natural gas sales revenues ~~decreased~~increased by ~~$13.6~~$102.8 million to $125.1 million for the combined three months ended March 31, 2021 as compared to natural gas sales revenues of $22.3 million for the three months ended March 31, ~~2020 as compared to~~2020. An increase in natural gas ~~sales revenues of $35.9~~prices contributed a $107.8 million ~~for the three months ended March 31, 2019. An increase~~positive impact, while a decrease in sales volumes between these periods contributed a ~~$13.0 million positive impact, while a decrease in natural gas prices contributed a $26.6~~$5.0 million negative impact. During the first quarter of 2021, a large portion of our gas and NGL contracts were subject to daily prices versus a monthly average price. As a result, our realized prices benefited from several days of severe cold during February 2021.

For the combined three months ended March 31, ~~2020,~~2021, our natural gas sales averaged ~~208.8~~164.2 MMcf/d. Natural gas sales volumes ~~increased~~decreased by ~~5.0~~4,227 to ~~19.0~~14,776 MMcf for the combined three months ended March 31, 2021 as compared to 19,003 MMcf for the three months ended March 31, ~~2020 as compared to 14.0 MMcf for the three months ended March 31, 2019.~~2020. The volume ~~increase~~decrease is primarily due to ~~the completion of 28 gross wells from January 1, 2020 to March 31, 2020, partially offset by~~ the natural decline on existing producing ~~properties.~~properties, partially offset by the completion of 32 gross wells from April 1, 2020 to March 31, 2021.

The average price we realized on the sale of our natural gas was $8.47 per Mcf for the combined three months ended March 31, 2021 compared to $1.17 per Mcf for the three months ended March 31, 2020, primarily due to an increase in demand in February 2021 due to multiple days of severe cold as compared to ~~$2.57 per Mcf for~~ the three months ~~ended~~ending March 31, ~~2019, primarily due to capacity constraints in transporting the wet gas associated with crude oil production coupled with negative market conditions surrounding limited export capacity.~~2020.

NGL sales revenues. NGL sales revenues ~~decreased~~increased by ~~$3.4~~$22.5 million to $39.7 million for the combined three months ended March 31, 2021 as compared to NGL sales revenues of $17.2 million for the three months ended March 31, ~~2020 as compared to NGL sales revenues of $20.6 million for the three months ended March 31, 2019. An increase~~2020. A decrease in sales volumes between these periods contributed a ~~$8.9~~$2.5 million ~~positive~~negative impact, while ~~a decrease~~an increase in price contributed a ~~$12.3~~$25.0 million ~~negative~~positive impact.

For the combined three months ended March 31, ~~2020,~~2021, our NGL sales averaged ~~20.9~~18.3 MBbl/d. NGL sales volumes ~~increased~~decreased by ~~0.6~~262 to ~~1.9~~1,644 MBbl for the combined three months ended March 31, 2021 as compared to 1,906 MBbl for the three months ended March 31, ~~2020 as compared to 1.3 MBbl for the three months ended March 31, 2019.~~2020. The volume ~~increase~~decrease is primarily due to ~~the completion of 28 gross wells during the three months ended March 31, 2020, partially offset by~~ the natural decline on existing producing ~~properties.~~properties, partially offset by the completion of 32 gross wells from April 1, 2020 to March 31, 2021. Our NGL sales are directly associated with our natural gas sales because our natural gas volumes are processed by third parties for both residue natural gas sales and NGL sales.

The average price we realized on the sale of our NGL was $24.12 per Bbl for the combined three months ended March 31, 2021 compared to $9.02 per Bbl for the three months ended March 31, 2020, primarily due to an increase in demand in February 2021 due to multiple days of severe cold as compared to ~~$15.53 per Bbl~~the three months ending March 31, 2020.

Lease operating expenses (“LOE”). Our LOE decreased by $17.2 million to $13.2 million for the combined three months ended March 31, 2021, from $30.4 million for the three months ended March 31, ~~2019,~~2020. The decrease in LOE was primarily ~~due~~the result of a decrease in labor, rental equipment and workover repairs in an effort to ~~capacity constraints in transporting~~optimize our field cost structure during the ~~wet gas associated with crude oil production coupled with negative market conditions surrounding limited export capacity.~~

combined three months ended March 31, 2021. On a per unit basis, LOE decreased to

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~~Lease operating expenses.~~ ~~Our LOE increased by $8.5 million to $30.4 million~~$2.05 per BOE sold for the combined three months ended March 31, ~~2020,~~2021 from $21.9 million for the three months ended March 31, 2019. The increase in LOE was primarily the result of an increase in producing wells and an increase in workover repairs, partially offset by optimization of our field cost structure during the three months ended March 31, 2020. On a per unit basis, LOE increased to $3.54 ~~per BOE sold for the three months ended March 31, 2020 from $3.02~~ per BOE for the three months ended March 31, ~~2019.~~2020.

Transportation and gathering ("T&G"). Our T&G expense increased by ~~$12.4~~$6.6 million to $29.4 million for the combined three months ended March 31, 2021, from $22.8 million for the three months ended March 31, ~~2020, from $10.4 million for the three months ended March 31, 2019.~~2020. The increase in T&G was primarily due to an increase of volumes on a certain gathering system and a change in oil contracts during the combined three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019.~~2020. On a per unit basis, T&G increased to $4.57 per BOE sold for the combined three months ended March 31, 2021 compared to $2.66 per BOE sold for the three months ended March 31, ~~2020 compared to $1.43 per BOE sold for the three months ended March 31, 2019.~~2020.

Production taxes. Our production taxes ~~decreased~~increased by ~~$4.6~~$11.2 million to $24.7 million for the combined three months ended March 31, 2021 as compared to $13.5 million for the three months ended March 31, ~~2020 as compared to $18.1 million for the three months ended March 31, 2019.~~2020. The ~~decrease~~increase is primarily attributable to ~~decreased~~increased revenue as production taxes are calculated as a percentage of sales revenue. Production taxes as a percentage of sales revenue ~~was~~were 8.5% for the combined three months ended March 31, 2021 as compared to 8.1% for the three months ended March 31, ~~2020 as compared to 8.2% for the three months ended March 31, 2019.~~2020. The ~~consistency~~increase in production taxes as a percentage of sales revenue relates to ~~comparatively constant~~an increase in the estimated ad valorem and severance tax rates and an adjustment to the estimated ad valorem tax payable for the combined three months ended March 31, ~~2020.~~2021.

Exploration and abandonment expenses. Our exploration and abandonment expenses were ~~$112.5~~$1.1 million for the combined three months ended March 31, 2021. For the three months ended March 31, 2020, of which $106.9 million was lease abandonment expense. Due to the decrease in pricing, all of the unproved property in our northern field was abandoned and impaired. For the three months ended March 31, 2019, we recognized ~~$6.2~~$112.5 million in exploration and abandonment expenses.

Depletion, depreciation, amortization and accretion ~~expense.~~expense ("DD&A"). Our DD&A expense decreased ~~$42.7~~$21.4 million to $54.7 million for the combined three months ended March 31, 2021 as compared to $76.1 million for the three months ended March 31, ~~2020 as compared to $118.8 million for the three months ended March 31, 2019.~~2020. On a per unit basis, DD&A expense decreased to $8.49 per BOE for the combined three months ended March 31, 2021 from $8.87 per BOE for the three months ended March 31, ~~2020 from $16.41 per BOE for~~2020. These decreases are due to the ~~three months ended March 31, 2019. This decrease is due~~$326.0 million downward fair value adjustment to the depletable asset base upon adoption of fresh start reporting, as well as an impairment of ~~$1.3 billion~~$208.5 million of proved oil and gas properties that occurred during ~~the fourth quarter of 2019.~~

~~Impairment of long lived assets.~~ For the three months ended March 31, 2020 and 2019, impairment expense was $0.8 million and $8.2 million, respectively, related to impairment of the proved oil and gas properties in our northern field as the fair value did not exceed the carrying amount associated with the properties.2020.

General and administrative expenses ("G&A"). General and administrative expenses decreased by ~~$17.1~~$0.8 million to $9.8 million for the combined three months ended March 31, 2021 as compared to $10.6 million for the three months ended March 31, ~~2020 as compared to $27.7 million for the three months ended March 31, 2019.~~2020. This decrease is primarily due to ~~a one-time reduction~~reductions of workforce during ~~the first quarter of~~ 2020 and a decrease in stock-based compensation expense recognized for the combined three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019.~~2020. On a per unit basis, G&A expense ~~decreased~~increased to $1.51 per BOE sold for the combined three months ended March 31, 2021 from $1.24 per BOE sold for the three months ended March 31, ~~2020 from $3.82 per BOE sold for the three months ended March 31, 2019.~~2020.

Our G&A expenses for the three months ended March 31, 2020 includes $2.2 million related to the terms of a separation agreement with a former executive officer. No expenses of this nature were incurred during the combined three months ended March 31, ~~2019.~~2021.

Our G&A expenses include the non-cash expense for stock-based compensation for equity awards granted to our employees and directors. For the combined three months ended March 31, 2021, there was $2.5 million of stock-based compensation expense. For the three months ended March 31, 2020, there was no stock-based compensation expense primarily as a result of a true-up related to forfeitures in connection with the workforce reduction in February 2020. ~~For the three months ended March 31, 2019, stock-based compensation expense was $13.0 million.~~

Other operating expenses. Other operating expenses ~~were $52.6~~decreased by $51.5 million to $5.0 million for the combined three months ended March 31, 2021 as compared to $56.5 million for the three months ended March 31, 2020. This ~~amount~~decrease is primarily ~~made up~~due to a decrease in litigation expense of $46.6 million and a ~~$46.8~~decrease in restructuring expenses of $2.1 million, ~~loss contingency from~~partially offset by an ~~alleged breach~~increase in ~~contract stemming from a purported failure to complete~~early termination penalties of $0.4 million, and an increase in production tax interest expense of $0.7 million. Also included in the ~~pipeline extensions connecting certain wells~~decrease is $3.9 million of midstream operating expenses incurred during the first quarter of 2020, but not during the first quarter of 2021.

Commodity derivative gain (loss). Primarily due to the ~~Badger central gathering~~increase in NYMEX crude oil future prices at March 31, 2021 as compared to December 31, 2020 and change in fair value from the execution of new positions, we incurred a net

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~~facility prior to April 1, 2020. Also included in this amount is a $5.8~~loss on our commodity derivatives of $41.1 million ~~charge to income~~ for ~~expenses related to a workforce reduction in February 2020.~~

~~Commodity derivative gain (loss).~~the combined three months ended March 31, 2021. Primarily due to the decrease in NYMEX crude oil futures prices at March 31, 2020 as compared to December 31, 2019 and change in fair value from the execution of new positions, we incurred a net gain on our commodity derivatives of $263.0 million for the three months ended March 31, 2020. Primarily due to the increase in NYMEX crude oil futures prices at March 31, 2019 as compared to December 31, 2018 and change in fair value from the execution of new positions, we incurred a net loss on our commodity derivatives of $122.1 million for the three months ended March 31, 2019, including the amortization of premiums. These gains and losses are a result of our hedging program, which is used to mitigate our exposure to commodity price fluctuations. The fair value of the open commodity derivative instruments will continue to change in value until the transactions are settled and we will likely add to our hedging program in the future. Therefore, we expect our net income (loss) to reflect the volatility of commodity price forward markets. Our cash flow will only be affected upon settlement of the transactions at the current market prices at that time. During the combined three months ended March 31, 2021, we paid commodity derivatives totaling $10.6 million. During the three months ended March 31, 2020, we received ~~cash~~ settlements of commodity derivatives totaling $39.3 million. ~~During the three months ended March 31, 2019, we paid settlements of commodity derivatives totaling $10.3 million.~~

~~Loss on deconsolidation~~Reorganization items, net. Due to the commencement of ~~Elevation Midstream, LLC.~~ ~~On March 16,~~the Chapter 11 Cases during the second quarter of 2020, we ~~deconsolidated Elevation Midstream, LLC. Upon deconsolidation,~~have incurred significant costs associated with our reorganization, primarily from damages for rejected or settled contracts and legal and professional fees. For the Predecessor period from January 1, 2021 to January 20, 2021, we ~~elected~~recognized a $873.9 million gain in reorganization items due to emergence from bankruptcy and a gain on settlement of liabilities subject to compromise. No reorganization gain or loss was recognized during the ~~fair value option to remeasure the Elevation equity method investment and determined it had no fair value. The Company recorded a $73.1 million loss on deconsolidation~~first quarter of ~~Elevation Midstream, LLC in the condensed consolidated statements of operations for the three months ended March 31,~~ 2020.

Interest expense. Interest expense consists of interest expense on our long-term debt and amortization of debt issuance costs, net of capitalized interest. For the combined three months ended March 31, ~~2020,~~2021, we recognized interest expense of ~~$21.4~~$4.6 million as compared to ~~$13.0~~$21.4 million for the three months ended March 31, ~~2019, as a result of borrowings under our revolving credit facility,~~2020. Upon filing its petition for Chapter 11, we ceased accruing interest expense on our 2024 ~~Senior Notes, our~~and 2026 Senior ~~Notes~~Notes. We had outstanding debt of $93.7 million as of March 31, 2021. Average debt outstanding for the period from January 1 through January 20, 2021 and for the ~~amortization of debt issuance costs.~~three months ended March 31, 2020 was approximately $560 million and $1.6 billion, respectively.

We incurred interest expense for the combined three months ended March 31, 2021 of $4.2 million related to our RBL Credit Facility, Prior Credit Facility and DIP Credit Facility. We incurred interest expense for the three months ended March 31, 2020 of approximately $22.3 million related to our 2024 Senior Notes, 2026 Senior Notes, and revolving credit facility. We incurred interest expense for the three months ended March 31, 2019 of approximately $20.8 million related to our revolving credit facility,Prior Credit Facility, our 2024 Senior Notes, and our 2026 Senior Notes. Also included in interest expense for the combined three months ended March 31, 2021 and the three months ended March 31, 2020 ~~and 2019~~ was the amortization of debt issuance costs of ~~$1.2~~$0.6 million and ~~$1.5~~$1.2 million, respectively. For the combined three months ended March 31, 2021 and the three months ended March 31, 2020, ~~and 2019,~~ we capitalized interest expense of ~~$2.1~~$0.2 million and ~~$2.0~~$2.2 million, respectively. ~~Interest~~

Income tax expense. We recorded $23.3 million income tax expense for the combined three months ended March 31, 2021 and $2.2 million of income tax expense for the three months ended March 31, ~~2019 also includes $7.3 million of gain on debt extinguishment upon the repurchase of our 2026 Senior Notes.~~

~~Income tax (expense) benefit.~~ ~~We recorded an income tax expense and benefit of $2.2 million and $29.0 million, respectively, for the three months ended March 31, 2020 and 2019, respectively.~~2020. This resulted in an effective tax rate of approximately ~~19.6%~~20.85% and ~~23.6%~~19.60% for the combined three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Our effective tax rate for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 differs from the U.S. statutory income tax rates of 21.0% primarily due to the effects of state income taxes, estimated taxable permanent differences, and valuation allowance.

Gathering and facilities segment. Prior to March 31, 2020, we had two operating segments, (i) the exploration, development and production of oil, natural gas and NGL (the "exploration and production segment") and (ii) the construction, operation and support of midstream assets to gather and process crude oil and gas production (the "gathering and facilities segment"). Please see Note 1—Business and Organization — Deconsolidation of Elevation Midstream, LLC in our December 31, 2020 Annual Report on Form 10-K for further information. After March 31, 2020, Extraction began reporting as a single reportable segment.

Liquidity and Capital Resources

Sources of Liquidity and Capital Resources

Please see Note 1—Business and Organization—Voluntary Reorganization under Chapter 11 of the Bankruptcy Codein Part I, Item I, Financial Information of this Quarterly Report for ~~further~~ information ~~related to the deconsolidation of Elevation Midstream, LLC. After March 31, 2020, Extraction will report as a single operating segment.~~regarding our capital structure following emergence from bankruptcy on January 20, 2021.

In October 2019, Elevation commenced moving crude oil, natural gas and water through its Badger central gathering facility. Because Elevation had no revenue and insignificant operating expenses for the three months ended March 31, 2019, comparison to the three months ended March 31, 2020 is not relevant. For the three months ending March 31, 2020, our gathering and facilities segment had revenues of $5.9 million and direct operating expenses of $3.9

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million. General and administrative expenses were $1.1 million for both of the three months ended March 31, 2020 and 2019. For the three months ended March 31, 2020, depreciation expense was $1.1 million as the gathering facility was placed into service during the fourth quarter of 2019. Please see ~~Note 15—Segments~~ ~~in Part I, Item I, Financial Information of this Quarterly Report.~~

~~Liquidity and Capital Resources~~

~~Current Financial Condition and Liquidity~~

The market price for oil, natural gas and NGLs decreased significantly beginning in the first quarter of 2020, continuing into the second quarter of 2020. The decrease in the market price for our production directly reduces our cash flow from operations and indirectly impacts other potential sources of funds described above. Our ability to continue as a going concern is dependent upon attaining and maintaining profitable operations and, until that time, raising additional capital as needed, but there can be no assurance that we will be able to raise sufficient financing on terms that are acceptable to us, or at all. As discussed in ~~Note 4—Going Concern~~ in Part I, Item I, Financial Information of this Quarterly Report, on April 27, 2020 the lenders under the revolving credit facility elected to reduce the borrowing base and elected commitments to $650.0 million from $950.0 million, and we borrowed all of the remaining available capacity under the revolving credit facility. As a result of the reduction of the borrowing base and elected commitments, it is probable that we will not meet the financial covenants under the revolving credit facility for the three months ended June 30, 2020 when assuming our current financial forecast.

We may seek covenant relief from the lenders under the revolving credit facility, and if we do not obtain a waiver of financial covenants for the three months ended June 30, 2020, the lenders under the revolving credit facility will be able to declare all outstanding principal and interest to be due and payable, and the lenders under the credit agreement could terminate their commitments to loan money and could foreclose against the assets collateralizing their borrowings. Any acceleration of the obligations under the revolving credit facility would result in a cross-default and potential acceleration of the maturity of our other outstanding long-term debt. These potential defaults create uncertainty associated with our ability to repay outstanding long-term debt obligations as they become due and creates a substantial doubt over our ability to continue as a going concern.

As a result of the impacts to our financial position resulting from declining commodity price conditions and in consideration of the substantial amount of long-term debt and preferred stock outstanding, we have engaged advisors to assist with the evaluation of strategic alternatives, which may include, but not be limited to, seeking a restructuring, amendment or refinancing of existing debt through a private restructuring or reorganization under Chapter 11 of the Bankruptcy Code. However, there can be no assurances that we will be able to successfully restructure our indebtedness, improve our financial position or complete any strategic transactions. As a result of these uncertainties and the likelihood of a restructuring or reorganization, management has concluded that there is substantial doubt regarding our ability to continue as a going concern.

~~Sources of Liquidity and Capital Resources~~

Historically, our primary sources of liquidity have been borrowings under our ~~revolving~~ credit ~~facility,~~facilities, proceeds from ~~notes~~securities offerings and ~~preferred stock offerings, equity provided by investors, including~~cash proceeds from divestitures of our ~~management team, cash from issuance of preferred stock,~~oil and ~~cash flows from divestitures~~gas properties and from the sale of oil, gas and NGL production. Our primary uses of capital have been for the acquisition of oil and gas properties to increase our acreage position, as well as development and exploration of oil and gas properties. Our borrowings, net of unamortized debt issuance costs, were approximately $1,556.3 million and $1,555.8 million at March 31, 2020, and December 31, 2019, respectively. We also have other contractual commitments, which are described in ~~Note 13—Commitments and Contingencies~~ ~~in Part I, Item 1, Financial Information of this Quarterly Report~~.

We may from time to time seek to retire or purchase our outstanding notes through cash purchases and/or exchanges (including for equity securities), in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

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NGL production. During the first quarter of 2021, our primary sources of liquidity came from issuing New Common Stock and our new RBL Credit Facility. Our primary use of capital has been for the development of our oil and gas properties.

As of March 31, 2021, our RBL Credit Facility borrowings were $93.7 million. Our total available liquidity as of March 31, 2021 consisted of unrestricted cash on hand of $38.4 million and $405.8 million of availability on the RBL Credit Facility. As of the date of this filing, we had drawn $153.7 million on the RBL Credit Facility and total funds available for borrowing under our RBL Credit Facility, after giving effect to an aggregate of $0.5 million of undrawn letters of credit, were $345.8 million. With available borrowings under our RBL Credit Facility and cash flow from operations, we believe we have sufficient sources of cash to meet our obligations for the next twelve months.

We ~~plan to continue our practice of entering~~enter into hedging arrangements to reduce the impact of commodity price volatility on our cash flow from ~~operations. Under this strategy,~~operations, or alternatively, we ~~intend~~may decide to ~~enter~~unwind or restructure the hedging arrangements into ~~commodity derivative contracts at times and on terms desired~~which we previously entered. The RBL Credit Agreement requires us to maintain commodity hedges covering a ~~portfolio~~minimum of ~~commodity derivative contracts covering approximately 50% to 70%~~65% of our ~~projected~~anticipated oil and ~~natural~~ gas production ~~over a one to two year period at a given point in time, although we may~~ from ~~time to time hedge more or less than this approximate range.~~PDP reserves for the succeeding twelve months and 50% of our anticipated oil and gas production from PDP reserves for the next succeeding twelve months.

If cash flow from operations does not meet our expectations, we may further reduce our expected level of capital expenditures and/or fund a portion of our capital expenditures using borrowings under our revolving credit facility, issuances of debt and equity securities or from other sources, such as asset sales. We cannot assure you that necessary capital will be available on acceptable terms or at all. Our ability to raise funds through the incurrence of additional indebtedness could be limited by the covenants in our debt arrangements. If we are unable to obtain funds when needed or on acceptable terms, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to maintain our production or proved reserves.Material Cash Requirements

~~We had a Stock Repurchase Program that ended in 2019. During the three months ended March 31, 2019. Spending~~Our material short-term cash requirements include payments under this program was $60.0 million. We also have a Senior Notes Repurchase Program in place. Spending under this program during the three months ended March 31, 2019 was $28.5 million. No Senior Notes were repurchased during the three months ended March 31, 2020. We are authorizedour short-term lease agreements, recurring payroll and benefits obligations for our employees, capital and operating expenditures and other working capital needs. Working capital, defined as total current assets less total current liabilities, fluctuates depending on commodity pricing and effective management of receivables from our purchasers and working interest partners and payables to ~~repurchase up to $100.0 million of~~ our ~~Senior Notes.~~vendors. As commodity prices improve, our working capital requirements may increase as we spend additional capital, increase production and pay larger settlements on our outstanding commodity hedge contracts.

Our long-term material cash requirements from currently known obligations include repayment of outstanding borrowings and interest payment obligations under our RBL Credit Facility, settlements on our outstanding commodity hedge contracts, future obligations to plug, abandon and remediate our oil and gas properties at the end of their productive lives, and operating lease obligations. The following table summarizes our estimated material cash requirements for known obligations as of March 31, 2021 (in thousands). This table does not include repayments of outstanding borrowings on our RBL Credit Facility, or the associated interest payments, as the timing and amount of borrowings and repayments cannot be forecasted with certainty and are based on working capital requirements, commodity prices and acquisition and divestiture activity, among other factors. This table also does not include amounts payable under obligations where we cannot forecast with certainty the amount and timing of such payments, including any amounts we may be obligated to pay under our derivative contracts, as such payments are dependent on commodity prices in effect at the time of settlement.


	Payments Due by Period
Material Cash Requirements	Total		<1 Year		1-3 Years		3-5 Years		>5 Years
Asset retirement obligations(1)	$	88,067	$	9,942	$	44,630	$	15,173	$	18,322
Operating leases(2)	7,441		4,235		3,206		—		—
Total	$	95,508	$	14,177	$	47,836	$	15,173	$	18,322

___________________

(1) Asset retirement obligations represent the present value of estimated amounts expected to be incurred in the future to plug and abandon oil and gas wells, remediate oil and gas properties and dismantle their related plants and facilities.

(2) We have operating leases for certain compressors, office facilities and equipment. The obligations reported above represent our minimum financial commitments pursuant to the terms of these contracts, however our actual expenditures under these contracts may exceed the minimum commitments presented above. Refer to the “Leases” footnote in the notes to the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020 for more information.

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Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

For the Three Months Ended
March 31,
2020 2019
Net cash provided by operating activities $ 147,099 $ 134,111
Net cash used in investing activities $ (139,703) $ (232,375)
Net cash used in financing activities $ (57) $ (23,951)


	Successor		Predecessor
	For the Period from January 21 through March 31,		For the Period from January 1 through January 20,		For the Three Months Ended March 31,
	2021		2021		2020
Net cash provided by operating activities	$	149,108	$	15,346	$	147,099
Net cash used in investing activities	(22,699)		(9,120)		(139,703)
Net cash used in financing activities	(173,000)		(101,454)		(57)

~~Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019~~

Net cash provided by operating ~~activities.~~activities

~~For the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, our net~~

Net cash provided by operating activities ~~increased~~for the 2021 Successor period consisted of cash receipts and disbursements attributable to our normal operating cycle. The 2021 Predecessor period contained reorganization costs along with our normal operating receipts and disbursements. Net cash provided by ~~$13.0~~operating activities for the 2020 Predecessor period was primarily comprised of settlements on commodity derivatives of $24.9 million ~~primarily due to an increase of $59.4 million~~and collections on accounts receivable related to ~~changes in working capital~~oil, natural gas and ~~an increase~~NGLs of ~~$28.5 million in commodity derivative settlement payments offset by a decrease in operating revenues net of expenses of $76.9 million primarily as a result of a decrease in commodity prices.~~$66.3 million.

Net cash used in investing ~~activities.~~activities

Expenditures for the development of oil and natural gas properties, as well as a de minimis amount for additions to other property and equipment, were the sole uses of our capital resources in both the Successor and Predecessor periods in 2021. For the ~~three months ended March 31,~~ 2020 ~~net cash used in investing activities decreased by $92.7~~Predecessor period, we spent $143.0 million ~~compared to~~on the ~~three months ended March 31, 2019 primarily as a result~~exploration, development and acquisition of ~~$45.0 million less spent on~~ oil and gas ~~property additions, $53.4~~properties, partially offset by $4.2 million ~~less spent on~~of net reimbursements for gathering systems and facilities and $5.2 million less spent on other property and equipment offset by $5.1 million more spent on our investment in unconsolidated subsidiaries. Also, the proceeds from the sale of assets were $4.4 million less during the first quarter of 2020 than during the same period in 2019.additions.

Net cash used in financing ~~activities.~~ ~~For the three months ended March 31, 2020, net~~activities

Net cash used in financing activities ~~was $23.9 million less than~~ for the ~~three months ended March 31, 2019~~2021 Successor period consisted primarily ~~as a result~~ of ~~$28.5~~repayments under our RBL Credit Facility. Net cash used in financing activities for the 2021 Predecessor period consisted primarily of net repayments on our then-existing long-term debt of $295.6 million, ~~spent to repurchase 2026 Senior Notes and $32.2~~partially offset by $200.5 million ~~spent to repurchase~~ of ~~common stock during~~proceeds from the ~~first quarter~~issuance of ~~2019 which were not spent during first quarter of 2020. Also, net borrowings on~~ the ~~credit facility during the first quarter of 2019 were $40.0 million compared to none during the first quarter of 2020.~~Successor Company’s New Common Stock.

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Working Capital

Working capital is defined as total current assets less total current liabilities. Our working capital deficit was ~~$144.6~~$238.5 million and ~~$240.8~~$369.4 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. However, as of December 31, 2020, our current liabilities in the amount of $279.6 million were classified as “Liabilities Subject to Compromise” (excluding approximately $1.8 billion of debt, accrued interest, damages for rejected and settled contracts and other). Our unrestricted cash balances totaled ~~$32.0~~$38.4 million and ~~$32.4~~$205.9 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. We also had $25.6 million in restricted cash as of March 31, 2021.

Due to ~~the~~ amounts that we incur related to our drilling and completion program and the timing of such expenditures, we may incur working capital deficits in the future. We expect that our cash flows from operating activities and availability under our RBL Credit Facility will be sufficient to fund our working capital needs. We expect that our pace of development, production volumes, ~~commodity prices and differentials to NYMEX~~realized prices for our oil, natural gas and NGL production will be the largest variables affecting our working capital. Due to the oil, natural gas and NGL price declines during the first and second quarter of 2020, we modified our drilling rig contracts to have minimal drilling activity for the remainder of the year. Please see ~~Note 13—Commitments and Contingencies~~ ~~and~~ ~~Note 4—Going Concern~~ ~~in Part 1, Item 1. Financial Information of this Quarterly Report.~~

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Debt Arrangements

For details of our ~~debt arrangements including our credit facility, 2024 Senior Notes and 2026 Senior Notes,~~RBL Credit Facility, please see Note 5—4—Long-Term Debt in Part I, Item 1. Financial Information of this Quarterly Report. ~~Additional debt disclosures specific to this~~ ~~Management Discussion and Analysis~~ ~~section are as follows.~~

If we experience certain kinds of changes of control, holders of our 2024 and 2026 Senior Notes may have the right to require us to repurchase their notes at 101% of the principal amount of the notes, plus accrued and unpaid interest, if any, to the date of purchase.

Equity Arrangements

For details of our equity arrangements, ~~including our Series A Preferred Stock and Elevation Preferred Units,~~ please see Note ~~11—~~10—Equity in Part I, Item 1. Financial Information of this Quarterly Report.

Critical Accounting Policies and Estimates

Effective June 14, 2020 for the Predecessor Company, as a result of the filing of the Chapter 11 Cases, we began accounting and reporting according to ASC 852—Reorganizations, which specifies the accounting and financial reporting requirements for entities reorganizing through chapter 11 bankruptcy proceedings. These requirements include distinguishing transactions associated with the reorganization separate from activities related to ongoing operations of the business. ASC 852 did not apply to the Successor Company.

There were no other material changes to our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019 other than the deconsolidation of Elevation Midstream, LLC discussed in~~ ~~Note 1—Business and Organization~~ ~~in Part I, Item 1. Financial Information of this Quarterly Report.~~2020.

Recent Accounting Pronouncements

Please see Note 2—Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements in Part 1, Item 1 of this Quarterly Report for a detailed list of recent accounting pronouncements.

Impact of Inflation/Deflation and Pricing

All of our transactions are denominated in U.S. dollars. Typically, as prices for oil and natural gas increase, associated costs rise. Conversely, as prices for oil and natural gas decrease, costs decline. Cost declines tend to lag and may not adjust downward in proportion to declining commodity prices. Historically, field-level prices received for our oil and natural gas production have been volatile. During the ~~year ended December 31, 2019, commodity prices increased during the first, second and third quarter, and subsequently decreased in the fourth quarter. During the~~ three months ended March 31, 2020, commodity prices ~~decreased~~decreased. During the combined three months ended March 31, 2021, commodity prices increased during the quarter and compared to the same period in ~~2019.~~2020. Changes in commodity prices impact our revenues, estimates of reserves, assessments of any impairment of oil and natural gas properties, as well as values of properties being acquired or sold. Price changes have the potential to affect our ability to raise capital, borrow money, and retain personnel.

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Off-Balance Sheet Arrangements

As of March 31, ~~2020,~~2021, we did not have material off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are ~~exposed to market risk, including the effects of adverse changes in commodity prices and interest rates~~a smaller reporting company as ~~described below. The primary objective~~defined by Rule 12b-2 of the ~~following information is~~Exchange Act and are not required to provide ~~quantitative and qualitative~~the information about our potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in oil, natural gas and NGL prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. All of our market risk sensitive instruments were entered into for purposes other than speculative trading. LIBOR is used as a reference rate for certain of our financial instruments, such as our revolving credit facility. LIBOR is set to be phased out at the end of 2021. We are currently reviewing how the LIBOR phase-out will affect the Company, but we do not expect the impact to be material.required under this item.

~~Commodity Price Risk~~

Our major market risk exposure is in the pricing that we receive for our oil, natural gas and NGL production. Pricing for oil, natural gas and NGL has been volatile and unpredictable for several years and this volatility is expected to continue in the future. The prices we receive for our oil, natural gas and NGL production depend on many factors outside of our control, such as the strength of the global economy and global supply and demand for the commodities we produce.

To reduce the impact of fluctuations in oil and natural gas prices on our revenues, we have periodically entered into commodity derivative contracts with respect to certain of our oil and natural gas production through various transactions that limit the downside of future prices received. We plan to continue our practice of entering into such transactions to reduce the impact of commodity price volatility on our cash flow from operations. Future transactions may include price swaps whereby we will receive a fixed price for our production and pay a variable market price to the contract counterparty. Additionally, we may enter into collars, whereby we receive the excess, if any, of the fixed floor over the floating rate or pay the excess, if any, of the floating rate over the fixed ceiling price. These hedging activities are intended to support oil prices at targeted levels and to manage our exposure to oil price fluctuations.

~~For a summary of the Company’s commodity derivative contracts as of March 31, 2020, please see~~ ~~Note 6—Commodity Derivative Instruments~~ ~~in Part 1, Item 1 of this Quarterly Report.~~

As of March 31, 2020, the fair market value of our oil derivative contracts was a net asset of $236.4 million. Based on our open oil derivative positions at March 31, 2020, a 10% increase in the NYMEX WTI price would decrease our net oil derivative asset by approximately $34.2 million, while a 10% decrease in the NYMEX WTI price would increase our net oil derivative asset by approximately $30.6 million. As of March 31, 2020, the fair market value of our natural gas derivative contracts was a net asset of $16.0 million. Based upon our open commodity derivative positions at March 31, 2020, a 10% increase in the NYMEX Henry Hub price would decrease our net natural gas derivative asset by approximately $3.8 million, while a 10% decrease in the NYMEX Henry Hub price would increase our net natural gas derivative asset by approximately $3.9 million. Please see “—How We Evaluate Our Operations—Derivative Arrangements.”

~~Counterparty and Customer Credit Risk~~

Our cash and cash equivalents are exposed to concentrations of credit risk. We manage and control this risk by investing these funds with major financial institutions. We often have balances in excess of the federally insured limits.

We sell oil, natural gas and NGL to various types of customers, including pipelines and refineries. Credit is extended based on an evaluation of the customer’s financial conditions and historical payment record. The future availability of a ready market for oil, natural gas and NGL depends on numerous factors outside of our control, none of

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which can be predicted with certainty. For the three months ended March 31, 2020, we had certain major customers that exceeded 10% of total oil, natural gas and NGL revenues. We do not believe the loss of any single purchaser would materially impact our operating results because oil, natural gas and NGL are fungible products with well-established markets and numerous purchasers.

At March 31, 2020, we had commodity derivative contracts with 9 counterparties. We do not require collateral or other security from counterparties to support derivative instruments; however, to minimize the credit risk in derivative instruments, it is our policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive market makers. Additionally, we use master netting agreements to minimize credit risk exposure. The creditworthiness of our counterparties is subject to periodic review. For the three months ended March 31, 2020 and 2019, we did not incur any losses with respect to counterparty contracts. None of our existing derivative instrument contracts contain credit risk related contingent features.

~~Interest Rate Risk~~

At March 31, 2020, we had $470.0 million variable-rate debt outstanding. The impact on interest expense of a 1% increase or decrease in the average interest rate would be approximately $4.7 million per year. We may begin entering into interest rate swap arrangements on a portion of our outstanding debt to mitigate the risk of fluctuations in LIBOR if we have variable-rate debt outstanding in the future. Please see “—Liquidity and Capital Resources—Debt Arrangements.”

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to ensure that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were ~~not~~ effective as of March 31, ~~2020, due to the material weakness in internal control over financial reporting as described below.~~

~~Management's Material Weakness Remediation Plan~~

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management determined that the Company did not design and maintain effective controls to determine the appropriate contract termination date and evaluate the potential accounting implications of changes in termination dates of contracts with customers. This material weakness resulted in a restatement of the Company’s condensed consolidated financial statements as of and for the three and nine month periods ended September 30, 2019 and immaterial errors to the consolidated financial statements for the periods ended December 31, 2018, March 31, 2019 and June 30, 2019. The line items affected were oil sales, accounts payable and accrued liabilities, other non-current liabilities, inventory, prepaid expenses and other, and other non-current assets. Additionally, this material weakness could result in a misstatement of the aforementioned financial statement line items or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

The Company and its Board of Directors are committed to maintaining a strong internal control environment. Management has evaluated the material weakness described above and developed a remediation plan to address the material weakness. The remediation plan includes additional procedures around determining the contract termination date pursuant to the accounting treatment under ASC 606 - Revenue from Contracts with Customers. Management is committed to successfully implementing the remediation plan and plans to commence the evaluation of its updated design of internal controls for implementation expeditiously.2021.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding our legal proceedings can found in Note ~~13—~~12—Commitments and Contingencies — Litigation and Legal Items in Part I, Item 1. Financial Information in this Quarterly Report.

ITEM 1A. RISK FACTORS

Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our common stock are described ~~below and~~ under Item 1A "Risk ~~Factors",~~Factors," included in our Annual Report on Form 10-K filed with the SEC on March ~~12, 2020.~~18, 2021. The risks described ~~below and~~ in our annual ~~report~~and quarterly reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. This information should be considered carefully, together with other information in this report and other reports and materials we file with the SEC.

We have no additional borrowing capacity under our revolving credit facility. Unless we are able to successfully restructure our existing indebtedness, obtain further waivers or forbearance from our existing lenders or otherwise raise significant capital, it is unlikely that we will be able to meet our obligations as they become due, and we may not be able to continue as a going concern.

Our working capital deficit was $144.6 million and $240.8 million at March 31, 2020 and December 31, 2019, respectively, and our cash balances totaled $32.0 million and $32.4 million at March 31, 2020 and December 31, 2019, respectively. For the year ended December 31, 2019, the Company incurred net losses of approximately $1.4 billion. Our continuation as a going concern is dependent upon attaining and maintaining profitable operations and, until that time, raising additional capital as needed, but there can be no assurance that we will be able to obtain sufficient financing. Our ability to generate positive cash flow from operations is dependent upon generating sufficient revenues. To date, our operations have been funded by the sale of oil, gas and NGL production based on prevailing market prices, which decreased significantly in March and April 2020. Our operations have also been funded through availability on our credit facility. As discussed in ~~Note 4—Going Concern~~ in Part I, Item I, Financial Information of this Quarterly Report, on April 27, 2020 the lenders under the revolving credit facility elected to reduce the borrowing base and elected commitments to $650.0 million from $950.0 million, and we borrowed all of the remaining available capacity under the revolving credit facility. As a result of the reduction of the borrowing base and elected commitments, it is probable that the Company will not meet the financial covenants under the revolving credit facility for the three months ended June 30, 2020 when assuming the Company’s current financial forecast.

If the Company does not obtain a waiver of its financial covenants for the three months ended June 30, 2020, the lenders under the revolving credit facility will be able to accelerate maturity of the debt. Any acceleration of the obligations under the revolving credit facility would result in a cross-default and potential acceleration of the maturity of the Company’s other outstanding long-term debt. These defaults create uncertainty associated with the Company’s ability to repay its outstanding long-term debt obligations as they become due and creates a substantial doubt over the Company’s ability to continue as a going concern.

The accompanying Consolidated Financial Statements have been prepared on a going concern basis which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. The accompanying condensed consolidated financial statements do not reflect any adjustments that might result if we are unable to continue as a going concern. Our substantial indebtedness, liquidity issues and efforts to negotiate restructuring transactions may result in uncertainty about our business and cause, among other things:

•~~third parties to lose confidence in our ability to explore and produce oil and natural gas, resulting in a significant decline in our revenues, profitability and cash flow;~~

•~~difficulty retaining, attracting or replacing key employees;~~

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•~~employees to be distracted from performance of their duties or more easily attracted to other career opportunities; and~~

•~~our suppliers, vendors, hedge counterparties and service providers to renegotiate the terms of our agreements, terminate their relationship with us or require financial assurances from us.~~

~~These events may have a material adverse effect on our business and operations.~~

The excess supply of oil and natural gas resulting from the reduced demand caused by the COVID-19 pandemic and the effects of actions by, or disputes among or between, oil and natural gas producing countries may result in transportation and storage constraints, reduced production and shut-in of our wells, any of which would adversely affect our business, financial condition and results of operations.

The recent worldwide outbreak of COVID-19, the uncertainty regarding the impact of COVID-19 and various governmental actions taken to mitigate the impact of COVID-19, have resulted in an unprecedented decline in demand for oil and natural gas. At the same time, the decision by Saudi Arabia in March 2020 to drastically reduce export prices and increase oil production followed by curtailment agreements among OPEC and other countries such as Russia further increased uncertainty and volatility around global oil supply-demand dynamics. To the extent that the outbreak of COVID-19 continues to negatively impact demand and OPEC members and other oil exporting nations fail to implement production cuts or other actions that are sufficient to support and stabilize commodity prices, we expect there to be excess supply of oil and natural gas for a sustained period. This excess supply could, in turn, result in transportation and storage capacity constraints in the United States, including in the DJ Basin. If, in the future, our transportation or storage arrangements become constrained, we may incur significant operational costs if there is an increase in price for services or we may be required to shut-in or curtail production or flare our natural gas. If we were required to shut-in wells, we might also be obligated to pay certain demand charges for gathering and processing services and firm transportation charges for pipeline capacity we have reserved. Further, any prolonged shut-in of our wells may result in decreased well productivity once we are able to resume operations, and any cessation of drilling and development of our acreage could result in the expiration, in whole or in part, of our leases. All of these impacts resulting from the confluence of the COVID-19 pandemic and the price war between Saudi Arabia and Russia may adversely affect our business, financial condition and results of operations.

Due to the commodity price environment, we have postponed or eliminated a portion of our developmental drilling. A sustained period of weakness in oil, natural gas and NGLs prices, and the resultant effects of such prices on our drilling economics and ability to raise capital, will require us to reevaluate and further postpone or eliminate additional drilling. Such actions would likely result in the reduction of our PUDs and related PV-10 and a reduction in our ability to service our debt obligations. If we are required to further curtail our drilling program, we may be unable to continue to hold leases that are scheduled to expire, which may further reduce our reserves. As a result, if oil, natural gas and/or NGLs prices experience a sustained period of weakness, our future business, financial condition, results of operations, liquidity, and ability to finance planned capital expenditures may be materially and adversely affected.

~~The inability to renegotiate our transportation and marketing contracts may adversely affect our business and financial condition.~~

We enter into firm transportation, gas processing, gathering and compression service, water handling and treatment, or other agreements that require minimum volume delivery commitments in the normal course of our business. During the spring of 2020, in light of market conditions, we began renegotiating our transportation, gathering and marketing contracts to reduce, restructure or eliminate our minimum volume commitments to our transportation, gas processing and gathering and compression service providers. Any inability to renegotiate transportation and marketing contracts to reflect current market conditions increases our marketing and transportation costs, inclusive of costs related to unutilized transportation and/or processing capacity for previously planned volumes. Such increased costs decrease realized revenue at any notional commodity value, negatively impacting financial results, competitiveness, and our overall financial condition. If we are unable to modify our minimum volume commitments, we may not have sufficient production to fulfill them which would have an adverse effect on our business and financial condition.

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Failure to maintain the continued listing standards of NASDAQ could result in delisting of our common stock, which could negatively impact the market price and liquidity of our common stock and our ability to access the capital markets.

Our shares are listed on the NASDAQ Global Market (“NASDAQ”) and the continued listing of our shares on NASDAQ is subject to our ability to comply with NASDAQ’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per shares. On March 30, 2020, we received a letter from the Listing Qualifications Department of NASDAQ notifying us that our shares closed below the $1.00 per unit minimum bid price required by NASDAQ Listing Rule 5450(a)(1) for 30 consecutive business days and that we have a period of 180 calendar days in which to regain compliance.

We are considering options to regain compliance. If we are unable to regain compliance, however, any delisting from NASDAQ could result in even further reductions in our price per share, substantially limit the liquidity of our common stock, and materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all. Delisting from the NASDAQ could also have other negative results, including the potential loss of institutional investor interest and fewer business development opportunities.

There is no assurance that we will continue to maintain compliance with NASDAQ continued listing standards. Our business has been and may continue to be affected by worldwide macroeconomic factors, which include uncertainties in the credit and capital markets as well as with respect to commodity prices. External factors that affect our share price, such as liquidity requirements of our investors, as well as our performance, could impact our market capitalization, revenue and operating results, which, in turn, affect our ability to comply with the NASDAQ’s listing standards. The NASDAQ has the ability to suspend trading in our shares or remove our shares from listing on the NASDAQ if in the opinion of the exchange: (a) the financial condition and/or operating results of the Company appear to be unsatisfactory; (b) it appears that the extent of public distribution or the aggregate market value of our units has become so reduced as to make further dealings on the exchange inadvisable; (c) we have sold or otherwise disposed of our principal operating assets, or have ceased to be an operating company; (d) we have failed to comply with our listing agreements with the exchange; or (e) any other event shall occur or any condition shall exist which makes further dealings on the exchange unwarranted.

There is substantial risk that it may be necessary for us to seek protection under Chapter 11 of the United States Bankruptcy Code, which may have a material adverse impact on our business, financial condition, results of operations, and cash flows, would have a material adverse impact on the trading price of our securities, and could place our shareholders at significant risk of losing all of their investment in our shares.

We have engaged financial and legal advisors to assist us in, among other things, analyzing various strategic alternatives to address our liquidity and capital structure, including strategic and refinancing alternatives to restructure our indebtedness in private transactions. Due to our current financial constraints, there is a substantial risk that it may be necessary for us to seek protection under Chapter 11.

Seeking bankruptcy court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity. As long as a Chapter 11 proceeding continues, our senior management would be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing on our business operations. Bankruptcy court protection also may make it more difficult to retain management and other key personnel necessary to the success and growth of our business. In addition, during the period of time we are involved in a bankruptcy proceeding, our customers and suppliers might lose confidence in our ability to reorganize our business successfully and may seek to establish alternative commercial relationships.

Additionally, all of our indebtedness is senior to the existing common stock and preferred stock in our capital structure. As a result, we believe that seeking bankruptcy court protection under a Chapter 11 proceeding could cause the shares of our existing common stock to be canceled, result in a limited recovery, if any, for shareholders of our common stock, and would place shareholders of our common stock at significant risk of losing all of their investment in our shares.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~Information regarding our unregistered sales of equity securities can found in Note 1 — Business and Organization — Voluntary Reorganization under Chapter 11 of the Bankruptcy Code inPart I, Item 1. Financial Information in this Quarterly Report.

The 974,056 shares of New Common Stock issued on February 4, 2021 was issued pursuant to the exemption from the registration requirements of the Securities Act, under Section 1145 of the Bankruptcy Code.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None.~~Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

We are providing the following disclosure in lieu of filing a Current Report on Form 8-K relating to “Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements” of Form 8-K.

On May 8, 2020, the Company entered into an Indemnification Agreement (the “Indemnification Agreement”) with Marianella Foschi. The Indemnification Agreement requires the Company to indemnify Ms. Foschi to the fullest extent permitted under Delaware law against liability that may arise by reason of her service to the Company, and to advance certain expenses incurred as a result of any proceeding against her as to which she could be indemnified.

The foregoing description of the Indemnification Agreement is not complete and is qualified in its entirety by reference to the full text of the Indemnification Agreement, which is attached as Exhibit 10.10 to this Current Report on Form 10-Q and incorporated into this Item 5 by reference.None.

ITEM 6. EXHIBITS

(a) Exhibits:

The exhibits listed on the accompanying Exhibit Index are filed, furnished or incorporated by reference as part of this report, and such Exhibit Index is incorporated herein by reference.

5548

Table of Contents

INDEX TO EXHIBITS

Exhibit ~~Number~~#

Description

~~3.1~~2.1

Agreement and Plan of Merger, dated October 17, 2016, by and between Extraction Oil & Gas, Inc. and Extraction Oil & Gas Holdings, LLC. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on October 21, 2016).

2.2

Sixth Amended Joint Plan of Reorganization of Extraction Oil & Gas, Inc. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on December 30, 2020).

2.3

Agreement and Plan of Merger, dated as of May 9, 2021, by and among Bonanza Creek Energy, Inc., Raptor Eagle Merger Sub, Inc. and Extraction Oil & Gas, Inc.(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on May 10 ,2021 ).

3.1

Amended and Restated Certificate of Incorporation of Extraction Oil & Gas, Inc.~~, dated October 11, 2016 (incorporated~~(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~October 14, 2016)~~January 20, 2021).

3.2

Certificate of Designations of Series A Preferred Stock of Extraction Oil & Gas, Inc., filed with the Secretary of State of the State of Delaware on October 17, 2016 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on October 21, 2016).

~~3.3~~

Amended and Restated Bylaws of Extraction Oil & Gas, Inc.~~, dated October 11, 2016 (incorporated~~(incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~October 14, 2016)~~January 20, 2021).

†~~10.~~110.1

~~Restricted Stock Unit Award~~RBL Credit Agreement ~~(Thomas B. Tyree)~~dated as of January 20, 2021, among Extraction Oil & Gas, Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders and other parties party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~March 5, 2020)~~January 20, 2021).

†~~10.~~210.2

~~Employment~~Registration Rights Agreement dated as of ~~March 4, 2020~~January 20, 2021, by and among Extraction Oil & Gas, Inc. and the other parties signatory thereto ~~, betweenthe Company and Thomas B. Tyree (incorporated~~(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~March 5, 2020)~~January 20, 2021).

†~~10.~~310.3

~~Indemnification~~Tranche A Warrant Agreement ~~(Thomas B. Tyree)~~dated as of January 20, 2021, between Extraction Oil & Gas, Inc. and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 10.3 to the ~~Company's~~Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~March 5, 2020)~~January 20, 2021).

†~~10.~~410.4

~~Amended and Restated Employment~~Tranche B Warrant Agreement ~~effective~~dated as of ~~March 4, 2020~~January 20, 2021, between Extraction Oil & Gas, Inc. and American Stock Transfer & Trust Company, LLC ~~, betweenthe Company and Matt Owens~~ (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~March 5, 2020)~~January 20, 2021).

†~~10.~~510.5

~~Extraction Oil & Gas, Inc. Executive Severance~~ ~~Plan~~Form of Indemnification Agreement ~~(incorporated~~(incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~March 5, 2020)~~January 20, 2021).

†10.6

~~Form of~~ ~~Participation Agreement~~ (Ex ~~ecutive Severance Plan)(incorporated by reference to Exhibit 10.~~6 ~~to the Company’sCurrent Report on Form8-K (File No. 001-37907) filed with the Commission on March 5, 2020).~~

†~~10.~~7

~~Employment Transition Agreement, dated March 18, 2020, between~~ Extraction Oil & Gas, Inc.~~, XOG Services, LLC. and Mark A. Erickson~~ 2021 Long Term Incentive Plan (incorporated by reference to Exhibit ~~10.1~~10.6 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~March~~January 20, ~~2020)~~2021).

†~~10.~~810.7

Form of Restricted Stock Unit ~~Award~~(RSU) Agreement (Time and Performance Vesting)~~(Performance~~-~~Vesting, Share-Settled)~~ ~~(for Officers)~~ (incorporated by reference to Exhibit ~~10.~~2 10.7 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~March~~January 20, ~~2020)~~2021).

†~~10.~~910.8

Form of ~~Restricted~~ ~~Cash~~ ~~Award~~Deferred Stock Unit Agreement (~~Employees)~~(Directors) ~~(incorporated~~(incorporated by reference to Exhibit ~~10.~~3 10.8 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on ~~March~~ January 20,~~, 2020)~~ 2021).

†10.9

Employment Agreement, dated as of January 20, 2021, by and between Extraction Oil & Gas, Inc. and Thomas B. Tyree, Jr (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on January 20, 2021).

†10.10

Employment Agreement, dated as of January 20, 2021, by and between Extraction Oil & Gas, Inc. and Matthew B. Owens (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on January 20, 2021).

†10.11

Employment Agreement, dated as of January 20, 2021, by and between Extraction Oil & Gas, Inc. and Marianella Foschi (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on January 20, 2021).

†10.12

Employment Agreement, dated as of January 20, 2021, by and between Extraction Oil & Gas, Inc. and Tom L. Brock (incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on January 20, 2021).

Table of Contents

*†10.13~~†10.10~~

~~Indemnification~~Employment Agreement, (dated as of January 20, 2021, by and between Extraction Oil & Gas, Inc. and Eric J. Christ ~~Marianella Foschi~~) (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on January 20, 2021).

10.14

Amendment No. 1 to Credit Agreement, dated March 24, 2021, by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent for the Lenders and as issuing lender.

10.15

*~~31.1~~Amendment No. 2 to Credit Agreement, dated May 6, 2021, by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent for the Lenders and as issuing lender.

10.16

Voting Agreement, dated as of May 9, 2021, by and among Bonanza Creek Energy, Inc., Extraction Oil & Gas, Inc. and Kimmeridge Energy Management Company, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-37907) filed with the Commission on May 10 , 2021 ).

*31.1

Certification of Chief Executive Officer required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.

*31.2

Certification of Chief Financial Officer required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.

**32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*101

Interactive Data Files

†

Management contract or compensatory plan or agreement.

Filed herewith.

Furnished herewith.

5650

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May ~~11, 2020.~~24, 2021


			Extraction Oil & Gas, Inc.

			By:			/s/ Thomas B. Tyree Jr.
						Thomas B. Tyree Jr.
						Chief Executive Officer
						(Principal Executive Officer)

			By:			/~~S/ MATTHEW R. OWENS~~s/ Marianella Foschi
						~~Matthew R. Owens~~Marianella Foschi
						~~President and~~ Chief ~~Executive~~Financial Officer ~~(principal executive officer)~~

						(Principal Financial Officer)

			By:			/~~S/ TOM~~s/ Tom L. ~~BROCK~~Brock
						Tom L. Brock
						~~Vice President and~~ Chief Accounting Officer
						(~~principal financial officer)~~Principal Accounting Officer)

5751


	March 31, 2020		December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	31,993	$	32,382
Accounts receivable
Trade	49,878		32,009
Oil, natural gas and NGL sales	38,850		105,103
Inventory, prepaid expenses and other	34,494		36,702
Commodity derivative asset	164,330		17,554
Total Current Assets	319,545		223,750
Property and Equipment (successful efforts method), at cost:
Proved oil and gas properties	4,676,967		4,530,934
Unproved oil and gas properties	417,021		524,214
Wells in progress	154,981		149,733
Less: accumulated depletion, depreciation, amortization and impairment charges	(3,057,098)		(2,985,983)
Net oil and gas properties	2,191,871		2,218,898
Gathering systems and facilities, net of accumulated depreciation	—		315,777
Other property and equipment, net of accumulated depreciation	72,589		72,542
Net Property and Equipment	2,264,460		2,607,217
Non-Current Assets:
Commodity derivative asset	88,783		13,229
Other non-current assets	30,600		82,761
Total Non-Current Assets	119,383		95,990
Total Assets	$	2,703,388	$	2,926,957
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	163,057	$	190,864
Accounts payable and accrued liabilities, related party	46,777		—
Revenue payable	104,702		108,493
Production taxes payable	115,556		115,489
Commodity derivative liability	716		1,998
Accrued interest payable	18,042		20,625
Asset retirement obligations	15,328		27,058
Total Current Liabilities	464,178		464,527
Non-Current Liabilities:
Credit facility	470,000		470,000
Senior Notes, net of unamortized debt issuance costs	1,086,347		1,085,777
Production taxes payable	119,675		98,740
Commodity derivative liability	—		108
Other non-current liabilities	59,689		54,579
Asset retirement obligations	78,445		68,850
Deferred tax liability	2,200		—
Total Non-Current Liabilities	1,816,356		1,778,054
Total Liabilities	2,280,534		2,242,581
Commitments and Contingencies—Note 13
Series A Convertible Preferred Stock, $0.01 par value; 50,000,000 shares authorized, 185,280 issued and outstanding	182,157		175,639
Stockholders' Equity:
Common stock, $0.01 par value; 900,000,000 share authorized; 137,891,740 and 137,657,922 issued and outstanding, respectively	1,336		1,336
Treasury stock, at cost, 38,859,078 shares	(170,138)		(170,138)
Additional paid-in capital	2,143,670		2,156,383
Accumulated deficit	(1,734,171)		(1,743,208)
Total Extraction Oil & Gas, Inc. Stockholders' Equity	240,697		244,373
Noncontrolling interest	—		264,364
Total Stockholders' Equity	240,697		508,737
Total Liabilities and Stockholders' Equity	$	2,703,388	$	2,926,957


	March 31, 2020		December 31, 2019
Credit facility due August 16, 2022 (or an earlier time as set forth in the credit facility)	$	470,000	$	470,000
2024 Senior Notes due May 15, 2024	400,000		400,000
2026 Senior Notes due February 1, 2026	700,189		700,189
Unamortized debt issuance costs on Senior Notes	(13,842)		(14,412)
Total long-term debt	1,556,347		1,555,777
Less: current portion of long-term debt	—		—
Total long-term debt, net of current portion	$	1,556,347	$	1,555,777


	As of March 31, 2020
Location on Balance Sheet	Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offsets in the Balance Sheet⁽¹⁾		Net Amounts of Assets and Liabilities Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet⁽²⁾		Net Amounts⁽³⁾
Current assets	$	293,761	$	(129,431)	$	164,330	$	(716)	$	252,397
Non-current assets	127,705		(38,922)		88,783		—		—
Current liabilities	(130,147)		129,431		(716)		716		—
Non-current liabilities	(38,922)		38,922		—		—		—


	At March 31, 2020						At December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Credit Facility	$	470,000	$	470,000	$	470,000	$	470,000
2024 Senior Notes⁽¹⁾	$	395,075	$	68,000	$	394,824	$	250,000
2026 Senior Notes⁽²⁾	$	691,272	$	119,032	$	690,953	$	420,113


	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested RSUs at January 1, 2020	2,635,765	$	8.32
Granted	1,252,000	$	0.31
Forfeited	(351,679)	$	9.44
Vested	(356,008)	$	14.23
Non-vested RSUs at March 31, 2020	3,180,078	$	4.38


	Number of Shares ⁽¹⁾	Weighted Average Grant Date Fair Value
Non-vested PSAs at January 1, 2020	2,863,190	$	7.72
Granted	5,952,700	$	0.29
Forfeited	—	$	—
Vested	—	$	—
Non-vested PSAs at March 31, 2020	8,815,890	$	2.70


	As of March 31, 2020			As of December 31, 2019
2020 - remaining	13,653		2020	19,040
2021	5,247		2021	5,247
2022	2,211		2022	2,211
2023	2,246		2023	2,246
2024	2,301		2024	2,301
Thereafter	8,273		Thereafter	8,273
Total lease payments	33,931		Total lease payments	39,318
Less imputed interest ⁽¹⁾	(4,264)		Less imputed interest ⁽¹⁾	(4,735)
Present value of lease liabilities ⁽²⁾	$	29,667	Present value of lease liabilities ⁽²⁾	$	34,583


	Oil (MBbl)	Gas (MMcf)	Total (MBOE)
2020 - remaining	6,492	25,815	10,794
2021	9,797	46,540	17,554
2022	8,944	49,758	17,237
2023	9,490	41,850	16,465
2024	9,516	34,160	15,209
Thereafter	29,860	40,260	36,570
Total	74,099	238,383	113,829


	For the Three Months Ended March 31, 2020
	Exploration and Production		Gathering and Facilities		Elimination of Intersegment Transactions		Consolidated Total
Revenues:
Revenues from third parties	$	163,714	$	1,473	$	—	$	165,187
Revenues from Extraction	—		4,513		(4,513)		—
Total Revenues	$	163,714	$	5,986	$	(4,513)	$	165,187

Operating Expenses and Other Income (Expense):
Direct operating expenses	$	(70,924)	$	(3,935)	$	4,294	$	(70,565)
Depletion, depreciation, amortization and accretion	(74,952)		(1,099)		—		(76,051)
Interest income	61		29		—		90
Interest expense	(21,358)		—		—		(21,358)
Earnings in unconsolidated subsidiaries	—		480		—		480
Subtotal Operating Expenses and Other Income (Expense):	$	(167,173)	$	(4,525)	$	4,294	$	(167,404)

Segment Assets	$	2,703,388	$	—	$	—	$	2,703,388
Capital Expenditures	155,441		(6,311)		—		149,130
Investment in Equity Method Investees	—		—		—		—
Segment EBITDAX	122,639		1,256		—		123,895