Exhibit 99.7
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial information and related footnotes (the “Pro Forma Financial Statements”) have been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information, which is herein referred to as Article 11. The Pro Forma Financial Statements of Civitas Resources, Inc., a Delaware corporation (“Civitas” or the “Company”) present the combination of the financial information and the pro forma effect with respect to the following transactions (collectively, the “Transactions”), further details of which are included within the footnotes to the Pro Forma Financial Statements.
On June 19, 2023, the Company entered into a membership interest purchase agreement (the “Hibernia Acquisition Agreement”) with Hibernia Energy III Holdings, LLC and Hibernia Energy III-B Holdings, LLC, pursuant to which the Company agreed to purchase all of the issued and outstanding equity interests of Hibernia Energy III, LLC (“HE3”) and Hibernia Energy III-B, LLC (“HE3-B” and, together with HE3, “Hibernia”).
On August 2, 2023 (the “Closing Date”), the Company completed the transactions contemplated by the Hibernia Acquisition Agreement (the “Hibernia Acquisition”) for aggregate consideration of $2.25 billion in cash, subject to certain customary purchase price adjustments set forth in the Hibernia Acquisition Agreement.
On June 19, 2023, the Company entered into a membership interest purchase agreement (as amended from time to time, the “Tap Rock Acquisition Agreement”) with Tap Rock Resources Legacy, LLC, a Delaware limited liability company (“Tap Rock I Legacy”), Tap Rock Resources Intermediate, LLC, a Delaware limited liability company (“Tap Rock I Intermediate” and, together with Tap Rock I Legacy, the “Tap Rock I Sellers”), Tap Rock Resources II Legacy, LLC, a Delaware limited liability company (“Tap Rock II Legacy”), Tap Rock Resources II Intermediate, LLC, a Delaware limited liability company (“Tap Rock II Intermediate” and, together with Tap Rock II Legacy, the “Tap Rock II Sellers”), Tap Rock NM10 Legacy Holdings, LLC, a Delaware limited liability company (“NM10 Legacy”), and Tap Rock NM10 Holdings Intermediate, LLC, a Delaware limited liability company (“NM10 Intermediate” and together with NM10 Legacy, the “NM10 Sellers”, and the NM10 Sellers, together with the Tap Rock I Sellers and Tap Rock II Sellers, the “Tap Rock Sellers”), solely in its capacity as “Sellers’ Representative” (as defined therein), Tap Rock I Legacy, and solely for the limited purposes set forth therein, Tap Rock Resources, LLC a Delaware limited liability company, pursuant to which the Company agreed to purchase all of the issued and outstanding equity interests of Tap Rock AcquisitionCo, LLC, a Delaware limited liability company, Tap Rock Resources II, LLC, a Delaware limited liability company, and Tap Rock NM10 Holdings, LLC, a Delaware limited liability company (collectively, “Tap Rock”), from the Tap Rock I Sellers, the Tap Rock II Sellers and the NM10 Sellers, respectively.
On the Closing Date, the Company completed the transactions contemplated by the Tap Rock Acquisition Agreement (the “Tap Rock Acquisition”) for aggregate consideration of approximately $2.49 billion, which was comprised of (i) $1.50 billion in cash, subject to certain customary purchase price adjustments set forth in the Tap Rock Acquisition Agreement and (ii) 13,538,472 shares of common stock, par value $0.01 per share, of the Company valued at approximately $990.2 million, subject to certain customary anti-dilution and purchase price adjustments.
The Pro Forma Financial Statements of Civitas present the combination of the financial information and the pro forma effects with respect to the Hibernia Acquisition and the Tap Rock Acquisition (collectively, the “Acquisitions”), further details of which are included within the notes to the Pro Forma Financial Statements. The Pro Forma Financial Statements have been prepared from the respective historical consolidated financial statements of Civitas, Hibernia and Tap Rock adjusted to give effect to the Acquisitions and exclude historical financial data from the HE3-B historical financial statements. The unaudited pro forma condensed combined balance sheet (the “Pro Forma Balance Sheet”) combines the historical condensed consolidated balance sheets of Civitas, Hibernia and Tap Rock as of June 30, 2023, giving effect to the Acquisitions as if they had been consummated on June 30, 2023.
The unaudited pro forma condensed combined statements of operations (the “Pro Forma Statements of Operations”) for the six months ended June 30, 2023 and the year ended December 31, 2022, have been prepared to give effect to the Acquisitions as if they had been consummated on January 1, 2022. The Pro Forma Financial Statements contain certain reclassification adjustments to conform the historical Hibernia and Tap Rock financial statement presentation to Civitas’ financial statement presentation.
1
The Pro Forma Financial Statements are presented to reflect the Acquisitions and do not represent what Civitas’ results of operations would have been had the Acquisitions occurred on the date noted above, nor do they project the results of operations of the combined company following the effective dates. The Pro Forma Financial Statements are intended to provide information about the continuing impact of the Acquisitions as if they had been consummated earlier. The transaction accounting adjustments are based on information and certain estimates and assumptions that management believes are reasonable based on currently available information. In the opinion of management, all adjustments necessary to present fairly the Pro Forma Financial Statements have been made.
The Acquisitions have been accounted for using the acquisition method of accounting, with Civitas identified as the acquirer. The acquisition method of accounting requires fair values to be estimated and determined for the merger consideration, as well as the assets acquired and liabilities assumed by Civitas. As of the date of this filing, the determination of these fair value estimates is still preliminary as Civitas continues to complete the detailed valuation analysis to arrive at the required final estimates, which will be completed as soon as practicable, and will not extend beyond the one-year measurement period from the close of the Transactions provided under Accounting Standards Codification 805, Business Combinations (“ASC 805”). Any increases or decreases in the fair values of assets acquired and liabilities assumed upon completion of the final valuation analysis may be materially different from the information reflected in the Pro Forma Financial Statements herein. The Pro Forma Financial Statement should be read in conjunction with:
● | the audited consolidated financial statements contained in Civitas’ Annual Report on Form 10-K as of and for the year ended December 31, 2022 filed with the Securities and Exchange Commission on February 22, 2023; |
● | the unaudited condensed consolidated financial statements contained in Civitas’ Quarterly Report on Form 10-Q as of and for the quarter ended June 30, 2023 filed with the Securities and Exchange Commission on February 22, 2023; |
● | the audited consolidated financial statements of HE3 as of and for the year ended December 31, 2022, which are included elsewhere in this filing; |
● | the unaudited consolidated financial statements and notes of HE3 as of and for the six months ended June 30, 2023, which are included elsewhere in this filing; |
● | the audited consolidated financial statements of Tap Rock AcquisitionCo, LLC as of and for the year ended December 31, 2022, which are included elsewhere in this filing; |
● | the unaudited consolidated financial statements of Tap Rock AcquisitionCo, LLC as of and for the six months ended June 30, 2023, which are included elsewhere in this filing; |
● | the audited consolidated financial statements of Tap Rock Resources II, LLC as of and for the year ended December 31, 2022, which are included elsewhere in this filing; and |
● | the unaudited consolidated financial statements and notes of Tap Rock Resources II, LLC as of and for the six months ended June 30, 2023, which are included elsewhere in this filing. |
2
CIVITAS RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of June 30, 2023
(in thousands)
Historical | Pro Forma Combined | |||||||||||||||||||||
Civitas Resources | Hibernia | Hibernia Reclass Adjustments (Note 2) | Hibernia Transaction Accounting Adjustments (Note 3) | Civitas Resources (Excluding Tap Rock) | ||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 2,702,897 | $ | 11,074 | $ | - | $ | (1,626,708 | ) | (a)(b)(c) | $ | 1,087,263 | ||||||||||
Accounts receivable, net: | ||||||||||||||||||||||
Oil and gas sales | 201,248 | - | 49,052 | - | 250,300 | |||||||||||||||||
Joint interest and other | 100,664 | - | 54,029 | - | 154,693 | |||||||||||||||||
Accounts receivable | - | 103,082 | (103,082 | ) | - | - | ||||||||||||||||
Accounts receivable, trade | - | - | - | - | - | |||||||||||||||||
Accounts receivable, affiliates | - | - | - | - | - | |||||||||||||||||
Derivative assets | 4,335 | - | - | - | 4,335 | |||||||||||||||||
Prepaid income taxes | 2,266 | - | - | - | 2,266 | |||||||||||||||||
Deposits for acquisitions | 352,500 | - | - | (168,750 | ) | (b) | 183,750 | |||||||||||||||
Prepaid assets and other | - | 389 | (389 | ) | - | - | ||||||||||||||||
Inventory | - | 778 | (778 | ) | - | - | ||||||||||||||||
Prepaid expenses and other | 49,297 | - | 1,168 | 3,127 | (c) | 53,592 | ||||||||||||||||
Total current assets | 3,413,207 | 115,323 | - | (1,792,331 | ) | 1,736,199 | ||||||||||||||||
Property and equipment (successful efforts method): | - | - | - | - | - | |||||||||||||||||
Proved properties | 7,390,897 | 1,160,700 | 78,977 | 918,625 | (d) | 9,549,199 | ||||||||||||||||
Less: accumulated depreciation, depletion, and amortization | (1,628,303 | ) | (212,306 | ) | (4,407 | ) | 216,713 | (d) | (1,628,303 | ) | ||||||||||||
Total proved properties, net | 5,762,594 | 948,394 | 74,570 | 1,135,338 | 7,920,896 | |||||||||||||||||
Proved oil and natural gas properties, net, full cost method | - | - | - | - | - | |||||||||||||||||
Unproved properties | 578,508 | 29,484 | - | 85,216 | (d) | 693,208 | ||||||||||||||||
Unevaluated oil and natural gas property | - | - | - | - | - | |||||||||||||||||
Wells in progress | 316,119 | - | - | - | 316,119 | |||||||||||||||||
Other property and equipment, at cost | - | 80,961 | (80,961 | ) | - | - | ||||||||||||||||
Less: Accumulated depreciation | - | (5,683 | ) | 5,683 | - | - | ||||||||||||||||
Other property and equipment, net | 49,619 | - | 708 | - | 50,327 | |||||||||||||||||
Total property and equipment, net | 6,706,840 | 1,053,156 | - | 1,220,554 | 8,980,550 | |||||||||||||||||
Long-term derivative assets | 1,800 | - | - | - | 1,800 | |||||||||||||||||
Debt issuance costs, net of accumulated amortization | - | 1,414 | (1,414 | ) | - | - | ||||||||||||||||
Deposits | - | 20 | (20 | ) | - | - | ||||||||||||||||
Right-of-use assets | 41,572 | 3,561 | - | - | 45,133 | |||||||||||||||||
Other noncurrent assets | 7,567 | - | 1,434 | 11,356 | (c)(e) | 20,357 | ||||||||||||||||
Total assets | $ | 10,170,986 | $ | 1,173,474 | $ | - | $ | (560,421 | ) | $ | 10,784,039 |
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”
3
CIVITAS RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (Continued)
As of June 30, 2023
(in thousands)
Historical | Pro Forma Combined | |||||||||||||||||||||
Civitas Resources | Hibernia | Hibernia Reclass Adjustments (Note 2) | Hibernia Transaction Accounting Adjustments (Note 3) | Civitas Resources (Excluding Tap Rock) | ||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 240,555 | $ | 33,643 | $ | 83,932 | $ | 9,726 | (e)(f) | $ | 367,856 | |||||||||||
Accounts payable, affiliates | - | - | - | - | - | |||||||||||||||||
Production taxes payable | 389,392 | - | 5,043 | - | 394,435 | |||||||||||||||||
Oil and gas revenue distribution payable | 522,308 | - | 78,941 | - | 601,249 | |||||||||||||||||
Oil and gas royalties payable | - | 78,941 | (78,941 | ) | - | - | ||||||||||||||||
Royalties payable | - | - | - | - | - | |||||||||||||||||
Interest payable | - | 1,248 | (1,248 | ) | - | - | ||||||||||||||||
Derivative liability | 21,438 | - | - | - | 21,438 | |||||||||||||||||
Obligations from commodity derivatives, current | - | - | - | - | - | |||||||||||||||||
Asset retirement obligations | 25,557 | - | - | - | 25,557 | |||||||||||||||||
Accrued liabilities | - | 87,727 | (87,727 | ) | - | - | ||||||||||||||||
Related party payable | - | - | - | - | - | |||||||||||||||||
Deferred revenue | - | - | - | - | - | |||||||||||||||||
Term loan, current portion | - | - | - | - | - | |||||||||||||||||
Lease liability | 21,841 | 2,487 | - | - | 24,328 | |||||||||||||||||
Other | - | - | - | - | - | |||||||||||||||||
Total current liabilities | 1,221,091 | 204,046 | - | 9,726 | 1,434,863 | |||||||||||||||||
Long-term liabilities: | - | - | - | - | - | |||||||||||||||||
Senior notes | 3,048,511 | - | - | - | 3,048,511 | |||||||||||||||||
Term loan, net | - | - | - | - | - | |||||||||||||||||
Long-term debt | - | 310,000 | (310,000 | ) | - | - | ||||||||||||||||
Credit facility | - | - | 310,000 | 90,000 | (e) | 400,000 | ||||||||||||||||
Ad valorem taxes | 153,371 | - | - | - | 153,371 | |||||||||||||||||
Derivative liability | 2,973 | - | - | - | 2,973 | |||||||||||||||||
Obligations from commodity derivatives, long-term | - | - | - | - | - | |||||||||||||||||
Deferred income taxes (franchise) | - | 4,601 | (4,601 | ) | - | - | ||||||||||||||||
Deferred income tax liabilities | 409,593 | - | 4,601 | (16,477 | ) | (g) | 397,717 | |||||||||||||||
Asset retirement obligations | 268,366 | 9,229 | - | - | 277,595 | |||||||||||||||||
Deferred Revenue | - | - | - | - | - | |||||||||||||||||
Lease liability | 20,394 | 1,004 | - | - | 21,398 | |||||||||||||||||
Total liabilities | 5,124,299 | 528,880 | - | 83,248 | 5,736,427 | |||||||||||||||||
Stockholders’ equity: | - | - | - | - | - | |||||||||||||||||
Preferred stock | - | - | ||||||||||||||||||||
Common stock | 4,869 | 4,869 | ||||||||||||||||||||
Members' equity | - | 39,902 | - | (39,902 | ) | (h) | - | |||||||||||||||
Net parent investment | - | - | - | - | - | |||||||||||||||||
Non-controlling interest | - | - | - | - | - | |||||||||||||||||
Capital contributions, net of management loan | - | - | - | - | - | |||||||||||||||||
Additional paid-in capital | 3,957,513 | - | - | - | 3,957,513 | |||||||||||||||||
Retained earnings | 1,084,305 | 604,692 | - | (603,768 | ) | (f)(h) | 1,085,229 | |||||||||||||||
Total stockholders’ equity | 5,046,687 | 644,594 | - | (643,670 | ) | 5,047,611 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 10,170,986 | $ | 1,173,474 | $ | - | $ | (560,421 | ) | $ | 10,784,039 |
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”
4
CIVITAS RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (Continued)
As of June 30, 2023
(in thousands)
Civitas Resources Pro Forma (Excluding Tap Rock) | Tap Rock AcquisitionCo Historical | Tap Rock II Historical | Tap Rock AcquisitionCo Reclass Adjustments (Note 2) | Tap Rock II Reclass Adjustments (Note 2) | Tap Rock Transaction Accounting Adjustments (Note 4) | Civitas Resources Pro Forma Combined | |||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 1,087,263 | $ | 6,682 | $ | 5,269 | $ | - | $ | - | $ | (988,304 | ) | (a)(b)(c) | $ | 110,910 | |||||||||||||
Accounts receivable, net: | |||||||||||||||||||||||||||||
Oil and gas sales | 250,300 | - | - | 69,195 | 28,602 | - | 348,097 | ||||||||||||||||||||||
Joint interest and other | 154,693 | - | - | 19,170 | 36,250 | (1,114 | ) | (d) | 208,999 | ||||||||||||||||||||
Accounts receivable | - | - | - | - | - | - | - | ||||||||||||||||||||||
Accounts receivable, trade | - | 88,365 | 64,852 | (88,365 | ) | (64,852 | ) | - | - | ||||||||||||||||||||
Accounts receivable, affiliates | - | - | 2,906 | - | - | (2,906 | ) | (e) | - | ||||||||||||||||||||
Derivative assets | 4,335 | - | 13,321 | - | - | (13,321 | ) | (d) | 4,335 | ||||||||||||||||||||
Prepaid income taxes | 2,266 | - | - | - | - | - | 2,266 | ||||||||||||||||||||||
Deposits for acquisitions | 183,750 | - | - | - | - | (183,750 | ) | (b) | - | ||||||||||||||||||||
Prepaid assets and other | - | - | - | - | - | - | - | ||||||||||||||||||||||
Inventory | - | - | - | - | - | - | - | ||||||||||||||||||||||
Prepaid expenses and other | 53,592 | 16,309 | 4,516 | - | - | 2,736 | (c) | 77,154 | |||||||||||||||||||||
Total current assets | 1,736,199 | 111,356 | 90,864 | - | - | (1,186,658 | ) | 751,761 | |||||||||||||||||||||
Property and equipment (successful efforts method): | |||||||||||||||||||||||||||||
Proved properties | 9,549,199 | - | - | 1,554,726 | 790,020 | (123,550 | ) | (f) | 11,770,394 | ||||||||||||||||||||
Less: accumulated depreciation, depletion, and amortization | (1,628,303 | ) | - | - | (430,765 | ) | (157,009 | ) | 587,774 | (f) | (1,628,303 | ) | |||||||||||||||||
Total proved properties, net | 7,920,896 | - | - | 1,123,961 | 633,011 | 464,224 | 10,142,091 | ||||||||||||||||||||||
Proved oil and natural gas property, net, full cost method | - | 1,123,961 | 633,011 | (1,123,961 | ) | (633,011 | ) | - | - | ||||||||||||||||||||
Unproved properties | 693,208 | - | - | 15,246 | 146 | 405,108 | (f) | 1,113,708 | |||||||||||||||||||||
Unevaluated oil and natural gas property | - | 15,246 | 146 | (15,246 | ) | (146 | ) | - | - | ||||||||||||||||||||
Wells in progress | 316,119 | - | - | - | - | - | 316,119 | ||||||||||||||||||||||
Other property and equipment, at cost | - | - | - | - | - | - | - | ||||||||||||||||||||||
Less: Accumulated depreciation | - | - | - | - | - | - | - | ||||||||||||||||||||||
Other property and equipment, net | 50,327 | 37,450 | - | - | - | - | 87,777 | ||||||||||||||||||||||
Total property and equipment, net | 8,980,550 | 1,176,657 | 633,157 | - | - | 869,332 | 11,659,695 | ||||||||||||||||||||||
Long-term derivative assets | 1,800 | - | 5,740 | - | - | (5,740 | ) | (d) | 1,800 | ||||||||||||||||||||
Debt issuance costs, net of accumulated amortization | - | - | - | - | - | - | - | ||||||||||||||||||||||
Deposits | - | - | - | - | - | - | - | ||||||||||||||||||||||
Right-of-use assets | 45,133 | 1,125 | - | - | - | - | 46,258 | ||||||||||||||||||||||
Other noncurrent assets | 20,357 | - | 1,426 | - | - | 11,174 | (c) | 32,957 | |||||||||||||||||||||
Total assets | $ | 10,784,039 | $ | 1,289,138 | $ | 731,187 | $ | - | $ | - | $ | (311,892 | ) | $ | 12,492,471 |
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”
5
CIVITAS RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (Continued)
As of June 30, 2023
(in thousands)
Civitas Resources Pro Forma (Excluding Tap Rock) | Tap Rock AcquisitionCo Historical | Tap Rock II Historical | Tap Rock AcquisitionCo Reclass Adjustments (Note 2) | Tap Rock II Reclass Adjustments (Note 2) | Tap Rock Transaction Accounting Adjustments (Note 4) | Civitas Resources Pro Forma Combined | ||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 367,856 | $ | 22,944 | $ | 13,929 | $ | 103,141 | $ | 106,163 | $ | 13,597 | (d)(g) | $ | 627,630 | |||||||||||||||
Accounts payable, affiliates | - | 2,896 | - | - | - | (2,896 | ) | (e) | - | |||||||||||||||||||||
Production taxes payable | 394,435 | - | - | - | - | - | 394,435 | |||||||||||||||||||||||
Oil and gas revenue distribution payable | 601,249 | - | - | 39,545 | 20,941 | - | 661,735 | |||||||||||||||||||||||
Oil and gas royalties payable | - | - | - | - | - | - | - | |||||||||||||||||||||||
Royalties payable | - | 39,545 | 20,941 | (39,545 | ) | (20,941 | ) | - | - | |||||||||||||||||||||
Interest payable | - | - | - | - | - | - | - | |||||||||||||||||||||||
Derivative liability | 21,438 | 3,448 | - | - | - | (3,448 | ) | (d) | 21,438 | |||||||||||||||||||||
Obligations from commodity derivatives, current | - | - | - | - | - | - | - | |||||||||||||||||||||||
Asset retirement obligations | 25,557 | - | - | - | - | - | 25,557 | |||||||||||||||||||||||
Accrued liabilities | - | 103,141 | 103,419 | (103,141 | ) | (103,419 | ) | - | - | |||||||||||||||||||||
Related party payable | - | - | - | - | - | - | - | |||||||||||||||||||||||
Deferred revenue | - | 4,501 | - | - | - | - | 4,501 | |||||||||||||||||||||||
Term loan, current portion | - | 7,000 | - | - | - | (7,000 | ) | (h) | - | |||||||||||||||||||||
Lease liability | 24,328 | 642 | - | - | - | - | 24,970 | |||||||||||||||||||||||
Other | - | - | 2,744 | - | (2,744 | ) | - | - | ||||||||||||||||||||||
Total current liabilities | 1,434,863 | 184,117 | 141,033 | - | - | 253 | 1,760,266 | |||||||||||||||||||||||
Long-term liabilities: | ||||||||||||||||||||||||||||||
Senior notes | 3,048,511 | - | - | - | - | - | 3,048,511 | |||||||||||||||||||||||
Term loan, net | - | 5,181 | - | - | - | (5,181 | ) | (h) | - | |||||||||||||||||||||
Long-term debt | - | - | - | - | - | - | - | |||||||||||||||||||||||
Credit facility | 400,000 | - | 215,000 | - | - | 135,000 | (h) | 750,000 | ||||||||||||||||||||||
Ad valorem taxes | 153,371 | - | - | - | - | - | 153,371 | |||||||||||||||||||||||
Derivative liability | 2,973 | - | - | - | - | - | 2,973 | |||||||||||||||||||||||
Obligations from commodity derivatives, long-term | - | - | - | - | - | - | - | |||||||||||||||||||||||
Deferred income taxes (franchise) | - | - | - | - | - | - | - | |||||||||||||||||||||||
Deferred income tax liabilities | 397,717 | - | - | - | - | 9,255 | (i) | 406,971 | ||||||||||||||||||||||
Asset retirement obligations | 277,595 | 6,387 | 1,596 | - | - | - | 285,578 | |||||||||||||||||||||||
Deferred revenue | - | 46,140 | - | - | - | - | 46,140 | |||||||||||||||||||||||
Lease liability | 21,398 | 483 | - | - | - | - | 21,881 | |||||||||||||||||||||||
Total liabilities | 5,736,427 | 242,308 | 357,629 | - | - | 139,327 | 6,475,691 | |||||||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||||||||||||
Preferred stock | - | - | - | - | - | - | - | |||||||||||||||||||||||
Common stock | 4,869 | - | - | - | - | 135 | (j) | 5,004 | ||||||||||||||||||||||
Members' equity | - | - | - | - | - | - | - | |||||||||||||||||||||||
Net parent investment | - | 1,022,652 | - | - | - | (1,022,652 | ) | (k) | - | |||||||||||||||||||||
Non-controlling interest | - | 24,178 | - | - | - | (24,178 | ) | (l) | - | |||||||||||||||||||||
Capital contributions, net of management loan | - | - | 215,706 | - | - | (215,706 | ) | (k) | - | |||||||||||||||||||||
Additional paid-in capital | 3,957,513 | - | 10,898 | - | - | 979,170 | (j) | 4,947,581 | ||||||||||||||||||||||
Retained earnings | 1,085,229 | - | 146,954 | - | - | (167,989 | ) | (g)(k) | 1,064,194 | |||||||||||||||||||||
Total stockholders’ equity | 5,047,611 | 1,046,830 | 373,558 | - | - | (451,219 | ) | 6,016,780 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 10,784,039 | $ | 1,289,138 | $ | 731,187 | $ | - | $ | - | $ | (311,892 | ) | $ | 12,492,471 |
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”
6
CIVITAS RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Six Months Ended June 30, 2023
(in thousands, except per share data)
Historical | Pro Forma Combined | |||||||||||||||||||||
Civitas Resources | Hibernia | Hibernia Reclass Adjustments (Note 2) | Hibernia Transaction Accounting Adjustments (Note 3) | Civitas Resources (Excluding Tap Rock) | ||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||
Operating net revenues: | ||||||||||||||||||||||
Oil and gas sales | $ | 1,316,548 | $ | - | $ | 373,409 | $ | - | $ | 1,689,957 | ||||||||||||
Oil | - | 311,896 | (311,896 | ) | - | - | ||||||||||||||||
Natural gas | - | 14,651 | (14,651 | ) | - | - | ||||||||||||||||
Natural gas liquids | - | 46,862 | (46,862 | ) | - | - | ||||||||||||||||
Realized gain on commodity derivatives | - | 22,910 | (22,910 | ) | - | - | ||||||||||||||||
Other | - | - | - | - | - | |||||||||||||||||
Operating expenses: | - | - | - | - | - | |||||||||||||||||
Lease operating expense | 97,068 | 29,417 | 1,796 | - | 128,281 | |||||||||||||||||
Midstream operating expense | 23,380 | - | - | - | 23,380 | |||||||||||||||||
Gathering, transportation, and processing | 132,225 | - | 18,819 | - | 151,044 | |||||||||||||||||
Production taxes, transportation, processing and gathering | - | - | - | - | - | |||||||||||||||||
Workover | - | 1,796 | (1,796 | ) | - | - | ||||||||||||||||
Severance and ad valorem taxes | 104,805 | - | 21,493 | - | 126,298 | |||||||||||||||||
Production, ad valorem and severance tax | - | 21,493 | (21,493 | ) | - | - | ||||||||||||||||
Production taxes | - | - | - | - | - | |||||||||||||||||
Revenue deductions | - | 18,819 | (18,819 | ) | - | - | ||||||||||||||||
Exploration | 1,117 | - | - | - | 1,117 | |||||||||||||||||
Depreciation, depletion, and amortization | 434,089 | 77,046 | - | 10,407 | (i) | 521,542 | ||||||||||||||||
Unused commitments | 754 | - | - | - | 754 | |||||||||||||||||
Bad debt expense | 583 | - | - | - | 583 | |||||||||||||||||
Merger transaction costs | 31,627 | - | - | - | 31,627 | |||||||||||||||||
General and administrative expense | 70,399 | 5,793 | 226 | - | 76,418 | |||||||||||||||||
Equity compensation expense | - | 226 | (226 | ) | - | - | ||||||||||||||||
Total operating expenses | 896,047 | 154,590 | - | 10,407 | 1,061,044 | |||||||||||||||||
Other income (expense): | ||||||||||||||||||||||
Derivative gain | 30,087 | - | 52,410 | (52,410 | ) | (j) | 30,087 | |||||||||||||||
Interest expense | (16,202 | ) | (15,427 | ) | - | (67,232 | ) | (k) | (98,861 | ) | ||||||||||||
Gain (loss) on property transactions, net | (254 | ) | 9 | - | 199 | (l) | (46 | ) | ||||||||||||||
Other income | 17,068 | 72 | - | - | 17,140 | |||||||||||||||||
Unrealized gain on commodity derivatives | - | 29,500 | (29,500 | ) | - | - | ||||||||||||||||
Total other income (expense) | 30,699 | 14,154 | 22,910 | (119,443 | ) | (51,680 | ) | |||||||||||||||
Income from operations before income taxes | 451,200 | 255,883 | - | (129,850 | ) | 577,233 | ||||||||||||||||
Income tax expense | (109,452 | ) | (1,729 | ) | - | (25,998 | ) | (g) | (137,179 | ) | ||||||||||||
Net income | $ | 341,748 | $ | 254,154 | $ | - | $ | (155,849 | ) | $ | 440,053 | |||||||||||
Net income attributable to non-controlling interest | - | - | - | - | - | |||||||||||||||||
Net Income attributable to controlling interest | $ | 341,748 | $ | 254,154 | $ | - | $ | (155,849 | ) | $ | 440,053 | |||||||||||
Net income per common share: | ||||||||||||||||||||||
Basic | $ | 4.22 | $ | 5.43 | ||||||||||||||||||
Diluted | $ | 4.18 | $ | 5.38 | ||||||||||||||||||
Weighted-average common shares outstanding: | - | |||||||||||||||||||||
Basic | 81,052 | 81,052.00 | ||||||||||||||||||||
Diluted | 81,824 | 81,824.00 |
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”
7
CIVITAS RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Continued)
Six Months Ended June 30, 2023
(in thousands, except per share data)
Civitas Resources Pro Forma (Excluding Tap Rock) | Tap Rock AcquisitionCo Historical | Tap Rock II Historical | Tap Rock AcquisitionCo Reclass Adjustments (Note 2) | Tap Rock II Reclass Adjustments (Note 2) | Tap Rock Transaction Accounting Adjustments (Note 4) | Civitas Resources Pro Forma Combined | ||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||||
Operating net revenues: | ||||||||||||||||||||||||||||||
Oil and gas sales | $ | 1,689,957 | $ | 332,995 | $ | 144,021 | $ | - | $ | - | $ | - | $ | 2,166,973 | ||||||||||||||||
Oil | - | - | - | - | - | - | - | |||||||||||||||||||||||
Natural gas | - | - | - | - | - | - | - | |||||||||||||||||||||||
Natural gas liquids | - | - | - | - | - | - | - | |||||||||||||||||||||||
Realized gain on commodity derivatives | - | - | - | - | - | - | - | |||||||||||||||||||||||
Other | - | 576 | - | (576 | ) | - | - | - | ||||||||||||||||||||||
Operating expenses: | - | - | ||||||||||||||||||||||||||||
Lease operating expense | 128,281 | 58,882 | 37,724 | - | - | - | 224,887 | |||||||||||||||||||||||
Midstream operating expense | 23,380 | - | - | - | - | - | 23,380 | |||||||||||||||||||||||
Gathering, transportation, and processing | 151,044 | 8,462 | - | - | 1,870 | - | 161,376 | |||||||||||||||||||||||
Production taxes, transportation, processing and gathering | - | - | 13,369 | - | (13,369 | ) | - | - | ||||||||||||||||||||||
Workover | - | - | - | - | - | - | - | |||||||||||||||||||||||
Severance and ad valorem taxes | 126,298 | - | - | 26,891 | 11,499 | - | 164,688 | |||||||||||||||||||||||
Production, ad valorem and severance tax | - | - | - | - | - | - | - | |||||||||||||||||||||||
Production taxes | - | 26,891 | - | (26,891 | ) | - | - | - | ||||||||||||||||||||||
Revenue deductions | - | - | - | - | - | - | - | |||||||||||||||||||||||
Exploration | 1,117 | - | - | - | - | - | 1,117 | |||||||||||||||||||||||
Depreciation, depletion, and amortization | 521,542 | 79,301 | 56,825 | - | - | 44,839 | (m) | 702,507 | ||||||||||||||||||||||
Unused commitments | 754 | - | - | - | - | - | 754 | |||||||||||||||||||||||
Bad debt expense | 583 | - | - | - | - | - | 583 | |||||||||||||||||||||||
Merger transaction costs | 31,627 | - | - | - | - | - | 31,627 | |||||||||||||||||||||||
General and administrative expense | 76,418 | 15,163 | 14,130 | - | - | - | 105,711 | |||||||||||||||||||||||
Equity compensation expense | - | - | - | - | - | - | - | |||||||||||||||||||||||
Total operating expenses | 1,061,044 | 188,699 | 122,048 | - | - | 44,839 | 1,416,630 | |||||||||||||||||||||||
Other income (expense): | - | - | - | - | - | - | - | |||||||||||||||||||||||
Derivative gain | 30,087 | 35,292 | 25,482 | - | - | (60,774 | ) | (f) | 30,087 | |||||||||||||||||||||
Interest expense | (98,861 | ) | (40,026 | ) | (7,861 | ) | - | - | (19,098 | ) | (n) | (165,846 | ) | |||||||||||||||||
Gain (loss) on property transactions, net | (46 | ) | - | - | - | - | - | (46 | ) | |||||||||||||||||||||
Other income | 17,140 | - | - | 576 | - | - | 17,716 | |||||||||||||||||||||||
Unrealized gain on commodity derivatives | - | - | - | - | - | - | - | |||||||||||||||||||||||
Total other income (expense) | (51,680 | ) | (4,734 | ) | 17,621 | 576 | - | (79,872 | ) | (118,089 | ) | |||||||||||||||||||
Income from operations before income taxes | 577,233 | 140,138 | 39,594 | - | - | (124,710 | ) | 632,254 | ||||||||||||||||||||||
Income tax expense | (137,179 | ) | - | - | - | - | (16,572 | ) | (i) | (153,752 | ) | |||||||||||||||||||
Net income | $ | 440,053 | $ | 140,138 | $ | 39,594 | $ | - | $ | - | $ | (141,283 | ) | $ | 478,503 | |||||||||||||||
Net income attributable to non-controlling interest | - | 7,264 | - | - | - | (7,264 | ) | (l) | - | |||||||||||||||||||||
Net Income attributable to controlling interest | $ | 440,053 | $ | 132,874 | $ | 39,594 | $ | - | $ | - | $ | (134,019 | ) | $ | 478,503 | |||||||||||||||
Net income per common share: | ||||||||||||||||||||||||||||||
Basic | $ | 5.43 | $ | 5.06 | ||||||||||||||||||||||||||
Diluted | $ | 5.38 | $ | 5.02 | ||||||||||||||||||||||||||
Weighted-average common shares outstanding: | - | |||||||||||||||||||||||||||||
Basic | 81,052 | 94,590 | ||||||||||||||||||||||||||||
Diluted | 81,824 | 95,362 |
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”
8
CIVITAS RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 2022
(in thousands, except per share data)
Historical | Pro Forma Combined | ||||||||||||||||||||
Civitas Resources | Hibernia | Hibernia Reclass Adjustments (Note 2) | Hibernia Transaction Accounting Adjustments (Note 3) | Civitas Resources (Excluding Tap Rock) | |||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||
Operating net revenues: | |||||||||||||||||||||
Oil and gas sales | $ | 3,791,398 | $ | - | $ | 647,983 | $ | - | $ | 4,439,381 | |||||||||||
Oil | - | 509,874 | (509,874 | ) | - | - | |||||||||||||||
Natural gas | - | 58,746 | (58,746 | ) | - | - | |||||||||||||||
Natural gas liquids | - | 79,363 | (79,363 | ) | - | - | |||||||||||||||
Realized loss on commodity derivatives | - | (111,712 | ) | 111,712 | - | - | |||||||||||||||
Other | - | - | - | - | - | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||
Lease operating expense | 169,986 | 32,576 | 3,018 | - | 205,580 | ||||||||||||||||
Midstream operating expense | 31,944 | - | - | - | 31,944 | ||||||||||||||||
Gathering, transportation, and processing | 287,474 | - | 22,980 | - | 310,454 | ||||||||||||||||
Workover | - | 3,018 | (3,018 | ) | - | - | |||||||||||||||
Severance and ad valorem taxes | 305,701 | - | 38,495 | - | 344,196 | ||||||||||||||||
Production, ad valorem and severance tax | - | 38,495 | (38,495 | ) | - | - | |||||||||||||||
Production taxes | - | - | - | - | - | ||||||||||||||||
Revenue deductions | - | 22,980 | (22,980 | ) | - | - | |||||||||||||||
Exploration | 6,981 | - | - | - | 6,981 | ||||||||||||||||
Depreciation, depletion, and amortization | 816,446 | 86,411 | - | 22,857 | (i) | 925,714 | |||||||||||||||
Abandonment and impairment of unproved properties | 17,975 | - | - | - | 17,975 | ||||||||||||||||
Unused commitments | 3,641 | - | - | - | 3,641 | ||||||||||||||||
Bad debt expense | (950 | ) | - | - | - | (950 | ) | ||||||||||||||
Merger transaction costs | 24,683 | - | - | 10,974 | (f) | 35,657 | |||||||||||||||
General and administrative expense | 143,477 | 7,455 | 2,102 | - | 153,034 | ||||||||||||||||
Equity compensation expense | - | 2,102 | (2,102 | ) | - | - | |||||||||||||||
Total operating expenses | 1,807,358 | 193,037 | - | 33,830 | 2,034,225 | ||||||||||||||||
Other income (expense): | |||||||||||||||||||||
Derivative loss | (335,160 | ) | - | (82,623 | ) | 82,623 | (j) | (335,160 | ) | ||||||||||||
Interest expense | (32,199 | ) | (11,255 | ) | - | (154,062 | ) | (k) | (197,516 | ) | |||||||||||
Gain on property transactions, net | 15,880 | 20 | - | (1,679 | ) | (l) | 14,221 | ||||||||||||||
Other income | 21,217 | 37 | - | - | 21,254 | ||||||||||||||||
Unrealized gain on commodity derivatives | - | 29,089 | (29,089 | ) | - | - | |||||||||||||||
Total other income (expense) | (330,262 | ) | 17,891 | (111,712 | ) | (73,118 | ) | (497,201 | ) | ||||||||||||
Income from operations before income taxes | 1,653,778 | 361,125 | - | (106,948 | ) | 1,907,955 | |||||||||||||||
Income tax expense | (405,698 | ) | (3,012 | ) | - | (44,716 | ) | (g) | (453,426 | ) | |||||||||||
Net income | $ | 1,248,080 | $ | 358,113 | $ | - | $ | (151,664 | ) | $ | 1,454,529 | ||||||||||
Net income attributable to non-controlling interest | - | - | - | - | - | ||||||||||||||||
Net income attributable to controlling interest | $ | 1,248,080 | $ | 358,113 | $ | - | $ | (151,664 | ) | $ | 1,454,529 | ||||||||||
Net income per common share: | |||||||||||||||||||||
Basic | $ | 14.68 | $ | 17.11 | |||||||||||||||||
Diluted | $ | 14.58 | $ | 16.99 | |||||||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||
Basic | 85,005 | 85,005 | |||||||||||||||||||
Diluted | 85,604 | 85,604 |
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”
9
CIVITAS RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Continued)
Year Ended December 31, 2022
(in thousands, except per share data)
Civitas Resources Pro Forma (Excluding Tap Rock) | Tap Rock AcquisitionCo Historical | Tap Rock II Historical | Tap Rock AcquisitionCo Reclass Adjustments (Note 2) | Tap Rock II Reclass (Note 2) | Tap Rock Transaction Accounting Adjustments (Note 4) | Civitas Resources Pro Forma Combined | ||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||||||
Operating net revenues: | ||||||||||||||||||||||||||||||
Oil and gas sales | $ | 4,439,381 | $ | 1,069,308 | $ | 322,702 | $ | - | $ | - | $ | - | $ | 5,831,391 | ||||||||||||||||
Oil | - | - | - | - | - | - | - | |||||||||||||||||||||||
Natural gas | - | - | - | - | - | - | - | |||||||||||||||||||||||
Natural gas liquids | - | - | - | - | - | - | - | |||||||||||||||||||||||
Realized loss on commodity derivatives | - | - | - | - | - | - | - | |||||||||||||||||||||||
Other | - | 2,051 | 15 | (2,051 | ) | (15 | ) | - | - | |||||||||||||||||||||
Operating expenses: | - | - | ||||||||||||||||||||||||||||
Lease operating expense | 205,580 | 138,410 | 60,326 | - | - | - | 404,316 | |||||||||||||||||||||||
Midstream operating expense | 31,944 | - | - | - | - | - | 31,944 | |||||||||||||||||||||||
Gathering, transportation, and processing | 310,454 | 20,859 | 3,916 | - | - | - | 335,229 | |||||||||||||||||||||||
Workover | - | - | - | - | - | - | - | |||||||||||||||||||||||
Severance and ad valorem taxes | 344,196 | - | - | 90,034 | 27,790 | - | 462,020 | |||||||||||||||||||||||
Production, ad valorem and severance tax | - | - | - | - | - | - | - | |||||||||||||||||||||||
Production taxes | - | 90,034 | 27,790 | (90,034 | ) | (27,790 | ) | - | - | |||||||||||||||||||||
Revenue deductions | - | - | - | - | - | - | - | |||||||||||||||||||||||
Exploration | 6,981 | - | - | - | - | - | 6,981 | |||||||||||||||||||||||
Depreciation, depletion, and amortization | 925,714 | 160,103 | 83,959 | - | - | 132,899 | (k) | 1,302,675 | ||||||||||||||||||||||
Abandonment and impairment of unproved properties | 17,975 | - | - | - | - | - | 17,975 | |||||||||||||||||||||||
Unused commitments | 3,641 | - | - | - | - | - | 3,641 | |||||||||||||||||||||||
Bad debt expense | (950 | ) | - | - | - | - | - | (950 | ) | |||||||||||||||||||||
Merger transaction costs | 35,657 | - | - | - | - | 11,781 | (e) | 47,437 | ||||||||||||||||||||||
General and administrative expense | 153,034 | 32,511 | 12,869 | - | - | - | 198,414 | |||||||||||||||||||||||
Equity compensation expense | - | - | - | - | - | - | - | |||||||||||||||||||||||
Total operating expenses | 2,034,225 | 441,917 | 188,860 | - | - | 144,680 | 2,809,682 | |||||||||||||||||||||||
Other income (expense): | - | - | ||||||||||||||||||||||||||||
Derivative loss | (335,160 | ) | (125,580 | ) | (28,610 | ) | - | - | 154,190 | (d) | (335,160 | ) | ||||||||||||||||||
Interest expense | (197,516 | ) | (23,759 | ) | (3,977 | ) | - | - | (106,234 | ) | (n) | (331,486 | ) | |||||||||||||||||
Gain on property transactions, net | 14,221 | - | - | - | - | - | 14,221 | |||||||||||||||||||||||
Other income | 21,254 | - | - | 2,051 | 15 | - | 23,320 | |||||||||||||||||||||||
Unrealized gain on commodity derivatives | - | - | - | - | - | - | - | |||||||||||||||||||||||
Total other income (expense) | (497,201 | ) | (149,339 | ) | (32,587 | ) | 2,051 | 15 | 47,956 | (629,104 | ) | |||||||||||||||||||
Income from operations before income taxes | 1,907,955 | 480,103 | 101,270 | - | - | (96,724 | ) | 2,392,604 | ||||||||||||||||||||||
Income tax expense | (453,426 | ) | - | - | - | - | (128,408 | ) | (g) | (581,834 | ) | |||||||||||||||||||
Net income | $ | 1,454,529 | $ | 480,103 | $ | 101,270 | $ | - | $ | - | $ | (225,132 | ) | $ | 1,810,771 | |||||||||||||||
Net income attributable to non-controlling interest | - | 19,792 | - | - | - | (19,792 | ) | (j) | - | |||||||||||||||||||||
Net Income attributable to controlling interest | $ | 1,454,529 | $ | 460,311 | $ | 101,270 | $ | - | $ | - | $ | (205,340 | ) | $ | 1,810,771 | |||||||||||||||
Net income per common share: | ||||||||||||||||||||||||||||||
Basic | $ | 17.11 | $ | 18.38 | ||||||||||||||||||||||||||
Diluted | $ | 16.99 | $ | 18.26 | ||||||||||||||||||||||||||
Weighted-average common shares outstanding: | ||||||||||||||||||||||||||||||
Basic | 85,005 | 98,543 | ||||||||||||||||||||||||||||
Diluted | 85,604 | 99,142 |
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”
10
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1 – BASIS OF PRESENTATION
The Civitas, Hibernia, and Tap Rock historical financial information has been derived from each respective company’s historical financial statements which have been filed by the Company with the Securities and Exchange Commission or included elsewhere in this filing, as applicable. Certain of Hibernia’s and Tap Rock’s historical amounts have been reclassified to conform to Civitas’ financial statement presentation, as discussed further in Note 2. The Pro Forma Financial Statements should be read in conjunction with each company’s historical financial statements and the notes thereto. The Pro Forma Balance Sheet gives effect to the Acquisitions as if they had been completed on June 30, 2023. The Pro Forma Statements of Operations for the six months ended June 30, 2023 and the year ended December 31, 2022 give effect to the Acquisitions as if they had been completed on January 1, 2022.
The Pro Forma Financial Statements do not purport to be indicative of the results of operations of the combined company that would have occurred if the Acquisitions had occurred on the date indicated, nor are they indicative of Civitas’ future results of operations. In addition, future results may differ significantly from those reflected in the Pro Forma Financial Statements. Further, the Pro Forma Financial Statements exclude historical financial data from HE3-B’s historical financial statements.
NOTE 2 - RECLASSIFICATION ADJUSTMENTS
The Pro Forma Financial Statements have been adjusted as follows to reflect reclassifications of Hibernia’s and Tap Rock’s historical financial statements to conform to Civitas’ financial statement presentation.
(a) | Hibernia Reclassification Adjustments |
Pro Forma Condensed Combined Balance Sheet as of June 30, 2023
● | Reclassification of approximately $49.1 million from Accounts receivable to Accounts receivable, net – Oil and gas sales; |
● | Reclassification of approximately $54.0 million from Accounts receivable to Accounts receivable, net – Joint interest and other; |
● | Reclassification of approximately $0.4 million from Prepaid assets and other and approximately $0.8 million from Inventory to Prepaid expenses and other; |
● | Reclassification of approximately $2.0 million from Other property and equipment, at cost and approximately $1.3 million from Accumulated depreciation to Other property and equipment, net of accumulated depreciation; |
● | Reclassification of approximately $79.0 from Other property and equipment, at cost and approximately $4.4 million of Accumulated depreciation to Proved properties and Accumulated depreciation, depletion, and amortization; |
● | Reclassification of approximately $1.4 million from Debt issuance costs, net of accumulated amortization and approximately $0.02 million from Deposits to Other noncurrent assets; |
● | Reclassification of approximately $78.9 million from Oil and gas royalties payable to Oil and gas revenue distribution payable; |
● | Reclassification of approximately $1.2 million from Interest payable and approximately $87.7 million from Accrued liabilities to Accounts payable and accrued expenses; |
● | Reclassification of approximately $5.0 million from Accrued liabilities to Production taxes payable; |
11
● | Reclassification of approximately $310.0 million from Long-term debt to Credit facility; and |
● | Reclassification of approximately $4.6 million from Deferred income taxes (franchise) to Deferred income tax liabilities. |
Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2023
● | Reclassification of approximately $311.9 million from Revenues – Oil, approximately $14.7 million from Revenues – Natural gas, and approximately $46.9 million from Revenues – Natural gas liquids to Oil and gas sales; |
● | Reclassification of approximately $29.5 million from Unrealized gain on commodity derivatives and approximately $22.9 million from Revenues – Realized gain on commodity derivatives to Derivative gain; |
● | Reclassification of approximately $1.8 million from Workover to Lease operating expense; |
● | Reclassification of approximately $21.5 million from Production, ad valorem and severance tax to Severance and ad valorem taxes; |
● | Reclassification of approximately $18.8 million from Revenue deductions to Gathering, transportation, and processing; and |
● | Reclassification of approximately $0.2 million from Equity compensation expense to General and administrative expense. |
Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022
● | Reclassification of approximately $509.9 million from Revenues – Oil, approximately $58.7 million from Revenues – Natural gas and approximately $79.4 million from Revenues – Natural gas liquids to Oil and gas sales; |
● | Reclassification of approximately $29.1 million from Unrealized gain on commodity derivatives and approximately $111.7 million Revenues – Realized loss on commodity derivatives to Derivative loss; |
● | Reclassification of approximately $3.0 million from Workover to Lease operating expense; |
● | Reclassification of approximately $38.5 million from Production, ad valorem and severance tax to Severance and ad valorem taxes; |
● | Reclassification of approximately $23.0 million from Revenue deductions to Gathering, transportation, and processing; and |
● | Reclassification of approximately $2.1 million from Equity compensation expense to General and administrative expense. |
(b) | Tap Rock AcquisitionCo Reclassification Adjustments |
Pro Forma Condensed Combined Balance Sheet as of June 30, 2023
● | Reclassification of approximately $69.2 million from Accounts receivable, trade to Accounts receivable – Oil and gas sales; |
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● | Reclassification of approximately $19.2 million from Accounts receivable, trade to Accounts receivable – Joint interest and other; |
● | Reclassification of approximately $1.6 billion from Proved oil and natural gas property, net, full cost method to Proved properties; |
● | Reclassification of approximately $430.8 million from Proved oil and natural gas property, net, full cost method to accumulated depreciation, depletion, and amortization; |
● | Reclassification of approximately $15.2 million from Unevaluated oil and natural gas property to Unproved properties; |
● | Reclassification of approximately $103.1 million from Accrued liabilities to Accounts payable and accrued expenses; and |
● | Reclassification of approximately $39.5 million from Royalties payable to Oil and gas revenue distribution payable. |
Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2023
● | Reclassification of approximately $0.6 million from Revenues – Other to Other Income; and |
● | Reclassification of approximately $26.9 million from Production taxes to Severance and ad valorem taxes. |
Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022
● | Reclassification of approximately $2.1 million from Revenues – Other to Other Income; and |
● | Reclassification of approximately $90.0 million from Production taxes to Severance and ad valorem taxes. |
(c) | Tap Rock Resources II, LLC Reclassification Adjustments |
Pro Forma Condensed Combined Balance Sheet as of June 30, 2023
● | Reclassification of approximately $28.6 million from Accounts receivable, trade to Accounts receivable – Oil and gas sales; |
● | Reclassification of approximately $36.3 million from Accounts receivable, trade to Accounts receivable – Joint interest and other; |
● | Reclassification of approximately $790.0 million from Proved oil and natural gas property, net, full cost method to Proved properties; |
● | Reclassification of approximately $157.0 million from Proved oil and natural gas property, net, full cost method to accumulated depreciation, depletion, and amortization; |
● | Reclassification of approximately $0.1 million from Unevaluated oil and natural gas property to Unproved properties; |
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● | Reclassification of approximately $20.9 million from Royalties payable to Oil and gas revenue distribution payable; and |
● | Reclassification of approximately $103.4 million from Accrued liabilities and approximately $2.7 million from Current liabilities - Other to Accounts payable and accrued expenses. |
Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2023
● | Reclassification of approximately $1.9 million from Production taxes, transportation, processing, and gathering to Gathering, transportation, and processing; and |
● | Reclassification of approximately $11.5 million from Production taxes, transportation, processing, and gathering to Severance and ad valorem taxes. |
Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022
● | Reclassification of approximately $0.02 million from Revenues – Other to Other Income; and |
● | Reclassification of approximately $27.8 million from Production taxes to Severance and ad valorem taxes. |
NOTE 3 – HIBERNIA PRELIMINARY ACQUISITION ACCOUNTING AND PRO FORMA ADJUSTMENTS
Civitas has determined it is the accounting acquirer for the Hibernia Acquisition which will be accounted for under the acquisition method of accounting for business combinations in accordance with ASC 805. The allocation of the preliminary purchase price with respect to the Hibernia Acquisition is based upon management’s estimates of and assumptions related to the fair values of assets acquired and liabilities assumed as of June 30, 2023, using currently available information. Due to the fact that the Pro Forma Financial Statements have been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on Civitas’ financial position and results of operations are subject to modification as additional information becomes available and additional analyses are performed.
The final purchase price allocation and the resulting effect on Civitas’ results of operations may differ significantly from the pro forma amounts included herein, which are based on preliminary estimates and assumptions. Civitas expects to finalize the purchase price allocation as soon as practicable subsequent to the Closing Date, which will not extend beyond the one-year measurement period provided under ASC 805.
The preliminary purchase price allocation is subject to change due to several factors, including, but not limited to:
● | changes in the estimated fair value of Hibernia’s identifiable assets acquired and liabilities assumed as of the Closing Date; and |
● | the tax bases of Hibernia’s identifiable assets and liabilities as of the Closing Date. |
The following tables present the merger consideration and preliminary purchase price allocation of the assets acquired and the liabilities assumed in the Hibernia Acquisition:
Preliminary Merger Consideration (in thousands ) | ||||
Merger consideration paid in cash | $ | 400,000 | ||
Draw on revolving credit facility | 350,000 | |||
Aggregate principal amount of 8.375% senior notes due 2028 | 750,000 | |||
Aggregate principal amount of 8.75% senior notes due 2031 | 750,000 | |||
Adjustment to purchase price | (70,439 | ) | ||
Total merger consideration | $ | 2,179,561 |
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Preliminary Purchase Price Allocation | ||||
(in thousands) | ||||
Assets Acquired | ||||
Cash and cash equivalents | $ | 11,074 | ||
Oil and gas sales | 49,052 | |||
Joint interest and other | 54,029 | |||
Prepaid expenses and other | 1,168 | |||
Proved properties, net | 2,158,302 | |||
Unproved properties | 114,700 | |||
Other property and equipment, net | 708 | |||
Right-of-use assets | 3,561 | |||
Other noncurrent assets | 20 | |||
Total assets acquired | $ | 2,392,614 | ||
Liabilities Assumed | ||||
Accounts payable and accrued expenses | $ | 116,327 | ||
Production taxes payable | 5,043 | |||
Oil and gas revenue distribution payable | 78,941 | |||
Lease liability | 2,487 | |||
Deferred income tax liabilities | 22 | |||
Asset retirement obligations | 9,229 | |||
Lease liability | 1,004 | |||
Total liabilities assumed | $ | 213,053 | ||
Net assets acquired | $ | 2,179,561 |
The purchase price allocation is preliminary, and Civitas is continuing to assess the fair values of certain of Hibernia’s assets acquired and liabilities assumed. In particular, assets and liabilities subject to potential adjustment in amounts that could be material to the Pro Forma Financial Statements include oil and gas properties of approximately $2.3 billion. Civitas expects that the fair value of the acquired oil and gas properties will range from approximately $2.2 billion to approximately $2.3 billion.
Hibernia Acquisition Accounting Adjustments
The Pro Forma Financial Statements have been adjusted to give effect to the Hibernia Acquisition as follows:
(a) | Reflect the pro forma change in cash and cash equivalents as follows (in thousands): |
Hibernia Transaction consideration payment in cash | $ | (2,081,250 | ) | |
Adjustment to purchase price | 70,439 | |||
Draw on the Civitas Credit Facility | 400,000 | |||
Payment of issuance costs for the Civitas Revolving Credit Facility | (15,897 | ) | ||
Pro forma change in cash and cash equivalents | $ | (1,626,708 | ) |
(b) | Reflect the application of the Hibernia cash deposit towards the aggregate cash consideration. |
(c) | Reflect the increase to debt issuance costs of approximately $15.9 million of which approximately $3.1 million is included within Prepaid expenses and other and $12.8 million within Other noncurrent assets related to the $350 million draw under the Civitas Credit Facility. |
(d) | Reflect the adjustment to recognize the preliminary estimated fair value of Proved and Unproved properties. |
(e) | Reflect the adjustment to remove liabilities not assumed which include: |
● | the decrease to long-term debt of $310.0 million within Credit Facility related to the Hibernia Credit Facility which will not convey with the Hibernia Acquisition. |
● | the elimination of the historical debt issuance costs of $1.4 million within Other noncurrent assets related to the Hibernia Credit Facility; and |
● | the elimination of interest payable of $1.2 million within Accounts payable and accrued expenses related to the Hibernia Credit Facility. |
(f) | Reflect the accrual of non-recurring costs of approximately $11.0 million related to the Hibernia Acquisition including, among others, fees paid for financial advisors, legal services, and professional accounting services. These costs are not reflected in the historical June 30, 2023 consolidated balance sheets of Civitas and Hibernia, but are reflected in the Pro Forma Condensed Combined Balance Sheet as of June 30, 2023 as an increase to Accounts payable and accrued expenses, and a decrease to Retained earnings, with a corresponding increase to Merger transaction costs in the Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022 as these are nonrecurring in nature. |
(g) | Reflect the pro forma tax adjustments based upon a statutory federal and blended state tax rate of 23.77% for the six months ended June 30, 2023 and the year ended December 31, 2022. The adjustments include: |
● | the decrease to deferred tax liabilities as a result of the Hibernia Acquisition, primarily related to a decrease in the overall blended tax rate of Civitas due to the change in state tax footprint; and |
● | the income tax expense effect of the Hibernia Acquisition accounting adjustments. |
(h) | Reflect the elimination of Hibernia’s historical equity balances in accordance with the acquisition method of accounting. |
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(i) | Reflect the pro forma adjustments to Depreciation, depletion, and amortization to calculate depletion expense based on the preliminary fair value of the proved properties acquired in accordance with the successful efforts method of accounting. |
(j) | Reflect the adjustment to remove the effect of derivatives not assumed with the Hibernia Acquisition. |
(k) | Reflect the following pro forma adjustments related to Interest expense for the six months ended June 30, 2023 and the year ended December 31, 2022, respectively: |
● | an increase to Interest expense of approximately $14.4 million and approximately $28.9 million, respectively related to the draw on the Civitas Credit Facility; |
● | an increase to Interest expense of approximately $64.2 million and approximately $128.4 million, respectively related to the issuance of $1.5 billion in Acquisition Senior Notes; |
● | an increase to Interest expense of approximately $1.5 million and approximately $3.0 million, respectively related to the amortization of the debt discount associated with the Acquisition Senior Notes; |
● | an increase to Interest expense of approximately $2.5 million and approximately $5.0 million, respectively related to the amortization of debt issuance costs associated with the Acquisition Senior Notes and borrowings on the Civitas Credit Facility; |
● | a decrease to Interest Expense of approximately $15.4 million and approximately $11.3 million related to the elimination of historical interest expense on the Hibernia Credit Facility; and |
● | a one-eighth percent increase or decrease in the interest rate would have changed interest expense related to the Civitas Credit Facility by $0.3 million and $0.5 million respectively. |
(l) | Reflect the pro forma adjustments to Gain on property transactions, net to reclassify certain amounts previously capitalized by Hibernia under the full cost method of accounting in order to conform to the presentation to the successful efforts method of accounting used by Civitas for oil and gas properties. |
NOTE 4 – TAP ROCK PRELIMINARY ACQUISITION ACCOUNTING AND PRO FORMA ADJUSTMENTS
Civitas has determined it is the accounting acquirer for the Tap Rock Acquisition which will be accounted for under the acquisition method of accounting for business combinations in accordance with ASC 805. The allocation of the preliminary purchase price with respect to the Tap Rock Acquisition is based upon management’s estimates of and assumptions related to the fair values of assets acquired and liabilities assumed as of June 30, 2023, using currently available information. Due to the fact that the Pro Forma Financial Statements have been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on Civitas’ financial position and results of operations are subject to modification as additional information becomes available and additional analyses are performed.
The final purchase price allocation and the resulting effect on Civitas’ results of operations may differ significantly from the pro forma amounts included herein, which are based on preliminary estimates and assumptions. Civitas expects to finalize the purchase price allocation as soon as practicable subsequent to the Closing Date, which will not extend beyond the one-year measurement period provided under ASC 805.
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The preliminary purchase price allocation is subject to change due to several factors, including, but not limited to:
● | changes in the estimated fair value of Tap Rock’s identifiable assets acquired and liabilities assumed as of the Closing Date; and |
● | the tax bases of Tap Rock’s identifiable assets and liabilities as of the Closing Date. |
The following tables present the merger consideration and preliminary purchase price allocation of the assets acquired and the liabilities assumed in the Tap Rock Acquisition:
Preliminary Merger Consideration (in thousands except per share amount) | ||||
Merger consideration paid in shares of Civitas Resources common stock | $ | 990,204 | ||
Draw on revolving credit facility | 300,000 | |||
Aggregate principal amount of 8.375% senior notes due 2028 | 600,000 | |||
Aggregate principal amount of 8.75% senior notes due 2031 | 600,000 | |||
Adjustment to purchase price | 8,143 | |||
Total merger consideration | $ | 2,498,347 |
Preliminary Purchase Price Allocation | ||||
(in thousands) | ||||
Assets Acquired | ||||
Cash and cash equivalents | $ | 11,951 | ||
Oil and gas sales | 97,797 | |||
Joint interest and other | 54,306 | |||
Prepaid expenses and other | 20,825 | |||
Proved properties | 2,221,196 | |||
Unproved properties | 420,500 | |||
Other property and equipment, net | 37,450 | |||
Right-of-use assets | 1,125 | |||
Other noncurrent assets | 1,426 | |||
Total assets acquired | $ | 2,866,576 | ||
Liabilities Assumed | ||||
Accounts payable and accrued expenses | 247,994 | |||
Oil and gas revenue distribution payable | 60,486 | |||
Deferred revenue | 4,501 | |||
Lease liability | 642 | |||
Asset retirement obligations | 7,983 | |||
Deferred revenue | 46,140 | |||
Lease liability | 483 | |||
Deferred income tax liabilities | - | |||
Total liabilities assumed | $ | 368,229 | ||
Net assets acquired | $ | 2,498,347 |
The purchase price allocation is preliminary, and Civitas is continuing to assess the fair values of certain of Tap Rock’s assets acquired and liabilities assumed. In particular, assets and liabilities subject to potential adjustment in amounts that could be material to the Pro Forma Financial Statements include oil and gas properties of approximately $2.6 billion. Civitas expects that the fair value of the acquired oil and gas properties will range from approximately $2.5 billion to approximately $2.7 billion.
Tap Rock Acquisition Accounting Adjustments
The Pro Forma Financial Statements have been adjusted to give effect to the Tap Rock Acquisition as follows:
(a) | Reflect the pro forma change in cash and cash equivalents as follows (in thousands): |
Tap Rock Transaction consideration payment | $ | (1,316,250 | ) | |
Adjustment to purchase price | (8,143 | ) | ||
Draw on the Civitas Credit Facility | 350,000 | |||
Payment of issuance costs for the Civitas Revolving Credit Facility | (13,910 | ) | ||
Pro forma change in cash and cash equivalents | $ | (988,304 | ) |
(b) | Reflect the application of the Tap Rock cash deposit towards the aggregate cash consideration. |
(c) | Reflect the increase to debt issuance costs of approximately $13.9 million of which approximately $2.7 million is included within Prepaid expenses and other and $11.2 million within Other noncurrent assets related to the draw under the Civitas Credit Facility. |
(d) | Reflect the adjustment to remove the effect of derivatives not assumed with the Tap Rock Acquisition. |
(e) | Reflect the adjustment to eliminate intercompany balances between Tap Rock AcquisitionCo, LLC and Tap Rock Resources II, LLC. |
(f) | Reflect the adjustment to recognize the preliminary estimated fair value of Proved and Unproved properties. |
(g) | Reflect the accrual of non-recurring costs of approximately $11.8 million related to the Tap Rock Acquisition including, among others, fees paid for financial advisors, legal services, and professional accounting services. These costs are not reflected in the historical June 30, 2023 consolidated balance sheets of Civitas and Tap Rock, but are reflected in the Pro Forma Condensed Combined Balance Sheet as of June 30, 2023 as an increase to Accounts payable and accrued expenses, and a decrease to Retained earnings, with a corresponding increase to Merger transaction costs in the Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022 as these are nonrecurring in nature. |
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(h) | Reflect the adjustment to remove liabilities not assumed which include: |
● | the decrease to Term loan, current portion of $7.0 million and Term loan, net of $5.2 million related to the Tap Rock Term Loan that will not convey with the Tap Rock Acquisition; and |
● | the decrease to long-term debt of $215.0 million within Credit Facility related to the Tap Rock Credit Facility which will not convey with the Tap Rock Acquisition. |
(i) | Reflect the pro forma tax adjustments based upon a statutory federal and blended state tax rate of 24.32% for the six months ended June 30, 2023 and the year ended December 31, 2022. The adjustments include: |
● | the increase to deferred tax liabilities as a result of the Tap Rock Acquisition, primarily related to an increase in the overall blended tax rate of Civitas due to the change in state tax footprint; and |
● | the income tax expense effect of the Tap Rock Acquisition accounting adjustments. |
(j) | Reflect the adjustment resulting from the issuance of shares of Civitas Common Stock to Tap Rock investors to effect the Tap Rock Acquisition. |
(k) | Reflect the elimination of Tap Rock’s historical equity balances in accordance with the acquisition method of accounting. |
(l) | Reflect the elimination of the non-controlling interests as Civitas acquired 100% of Tap Rock. |
(m) | Reflect the pro forma adjustments to Depreciation, depletion, and amortization to calculate depletion expense based on the preliminary fair value of the proved properties acquired in accordance with the successful efforts method of accounting. |
(n) | Reflect the following pro forma adjustments related to Interest expense for the six months ended June 30, 2023 and the year ended December 31, 2022, respectively: |
● | an increase to Interest expense of approximately $12.5 million and approximately $25.1 million, respectively related to the draw on the Civitas Credit Facility; |
● | an increase to Interest expense of approximately $51.4 million and approximately $102.8 million, respectively related to the issuance of $1.2 billion in Acquisition Senior Notes; |
● | an increase to Interest expense of approximately $1.2 million and approximately $2.4 million, respectively related to the amortization of the debt discount associated with the Acquisition Senior Notes; |
● | an increase to Interest expense of approximately $1.8 million and approximately $3.7 million, respectively related to the amortization of debt issuance costs associated with the Acquisition Senior Notes and borrowings on the Civitas Credit Facility; |
● | a decrease to Interest expense of approximately $47.9 million and approximately $27.7 million, respectively related to elimination of historical interest expense on the Tap Rock Term Loan and Credit Facility and |
● | a one-eighth percent increase or decrease in the interest rate would have changed interest expense related to the Civitas Credit Facility by $0.2 million and $0.4 million respectively. |
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NOTE 5 – SUPPLEMENTAL PRO FORMA OIL AND GAS RESERVES INFORMATION
The following tables present the estimated pro forma combined net proved developed and undeveloped oil and gas reserves information as of December 31, 2022, along with a summary of changes in quantities of net remaining proved reserves during the year ended December 31, 2022.
The following estimated pro forma combined oil and gas reserves information is not necessarily indicative of the results that might have occurred had the Transactions been completed on January 1, 2022 and is not intended to be a projection of future results.
Oil (MBbl) | ||||||||||||||||
Civitas | Hibernia | Tap Rock | Civitas Resources Pro Forma Combined | |||||||||||||
Balance-December 31, 2021 | 143,579 | 60,372 | 63,279 | 267,229 | ||||||||||||
Extensions, discoveries, and other additions | 12,408 | 25,601 | 13,315 | 51,324 | ||||||||||||
Production | (27,651 | ) | (5,192 | ) | (11,475 | ) | (44,318 | ) | ||||||||
Sales of minerals in place | - | (501 | ) | (197 | ) | (697 | ) | |||||||||
Removed from capital program | (105 | ) | - | - | (105 | ) | ||||||||||
Purchases of minerals in place | 17,479 | 4,131 | 8,888 | 30,498 | ||||||||||||
Revisions to previous estimates | 6,892 | (10,530 | ) | (3,516 | ) | (7,154 | ) | |||||||||
Balance-December 31, 2022 | 152,602 | 73,881 | 70,294 | 296,778 | ||||||||||||
Proved developed reserves: | ||||||||||||||||
December 31, 2021 | 104,078 | 20,385 | 40,042 | 164,505 | ||||||||||||
December 31, 2022 | 117,768 | 33,651 | 50,765 | 202,185 | ||||||||||||
Proved undeveloped reserves: | ||||||||||||||||
December 31, 2021 | 39,501 | 39,986 | 23,236 | 102,724 | ||||||||||||
December 31, 2022 | 34,834 | 40,230 | 19,529 | 94,593 |
Natural Gas (MMcf) | ||||||||||||||||
Civitas | Hibernia | Tap Rock | Civitas Resources Pro Forma Combined | |||||||||||||
Balance-December 31, 2021 | 888,499 | 213,891 | 156,670 | 1,259,060 | ||||||||||||
Extensions, discoveries, and other additions | 51,358 | 99,309 | 42,265 | 192,932 | ||||||||||||
Production | (112,478 | ) | (10,700 | ) | (34,219 | ) | (157,397 | ) | ||||||||
Sales of minerals in place | - | (5,835 | ) | (489 | ) | (6,324 | ) | |||||||||
Removed from capital program | (459 | ) | - | - | (459 | ) | ||||||||||
Purchases of minerals in place | 31,872 | 34,900 | 22,419 | 89,191 | ||||||||||||
Revisions to previous estimates | 8,708 | 10,829 | (6,007 | ) | 13,529 | |||||||||||
Balance-December 31, 2022 | 867,500 | 342,394 | 180,638 | 1,390,532 | ||||||||||||
Proved developed reserves: | ||||||||||||||||
December 31, 2021 | 748,762 | 88,702 | 81,206 | 918,670 | ||||||||||||
December 31, 2022 | 750,793 | 172,307 | 136,944 | 1,060,044 | ||||||||||||
Proved undeveloped reserves: | ||||||||||||||||
December 31, 2021 | 139,737 | 125,189 | 75,464 | 340,390 | ||||||||||||
December 31, 2022 | 116,707 | 170,088 | 43,694 | 330,488 |
NGLs (MBbl) | ||||||||||||||||
Civitas | Hibernia | Tap Rock | Civitas Resources Pro Forma Combined | |||||||||||||
Balance-December 31, 2021 | 106,028 | 46,426 | 26,147 | 178,602 | ||||||||||||
Extensions, discoveries, and other additions | 6,936 | 20,152 | 6,560 | 33,648 | ||||||||||||
Production | (15,666 | ) | (2,245 | ) | (3,308 | ) | (21,220 | ) | ||||||||
Sales of minerals in place | - | (1,059 | ) | (85 | ) | (1,143 | ) | |||||||||
Removed from capital program | (46 | ) | - | - | (46 | ) | ||||||||||
Purchases of minerals in place | 4,478 | 6,926 | 4,802 | 16,206 | ||||||||||||
Revisions to previous estimates | 17,104 | (2,974 | ) | (5,414 | ) | 8,716 | ||||||||||
Balance-December 31, 2022 | 118,834 | 67,227 | 28,702 | 214,763 | ||||||||||||
Proved developed reserves: | ||||||||||||||||
December 31, 2021 | 88,967 | 18,732 | 14,348 | 122,046 | ||||||||||||
December 31, 2022 | 102,004 | 33,473 | 22,115 | 157,592 | ||||||||||||
Proved undeveloped reserves: | ||||||||||||||||
December 31, 2021 | 17,061 | 27,695 | 11,799 | 56,555 | ||||||||||||
December 31, 2022 | 16,830 | 33,754 | 6,587 | 57,171 |
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserve Quantities
The following tables present the estimated pro forma discounted future net cash flows at December 31, 2022. The pro forma standardized measure information set forth below gives effect to the Transactions as if the Transactions had been completed on January 1, 2022. With respect to the disclosures below for Civitas, the amounts were determined by referencing the “Standardized Measure of Discounted Future Net Cash Flows” reported in Civitas’ Annual Report on Form 10-K for the year ended December 31, 2022. An explanation of the underlying methodology applied, as required by SEC regulations, can be found within the Annual Report on Form 10-K. With respect to the disclosures below for Hibernia and Tap Rock, the amounts were determined by referencing the “Unaudited Supplemental Oil and Gas Disclosures” reported in their respective annual financial statements for the year ended December 31, 2022, included elsewhere in this filing. The calculations assume the continuation of existing economic, operating and contractual conditions at December 31, 2022. Therefore, the following estimated pro forma standardized measure is not necessarily indicative of the results that might have occurred had the Transactions been completed on January 1, 2022 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected herein.
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Discounted Future Net Cash Flows
The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the year ended December 31, 2022 are as follows:
For the Year Ended December 31, 2022 | ||||||||||||||||
Civitas | Hibernia | Tap Rock | Civitas Resources Pro Forma Combined | |||||||||||||
Future cash flows | $ | 23,225,188 | $ | 10,729,509 | $ | 8,937,950 | $ | 42,892,647 | ||||||||
Future production costs | (6,490,522 | ) | (1,962,712 | ) | (3,176,506 | ) | (11,629,740 | ) | ||||||||
Future development costs | (1,337,494 | ) | (974,037 | ) | (479,302 | ) | (2,790,833 | ) | ||||||||
Future income tax expense | (2,870,178 | ) | (56,330 | ) | (3,646 | ) | (2,930,154 | ) | ||||||||
Future net cash flows | 12,526,994 | 7,736,429 | 5,278,496 | 25,541,919 | ||||||||||||
10% annual discount for estimated timing of cash flows | (4,599,504 | ) | (3,759,906 | ) | (2,122,079 | ) | (10,481,489 | ) | ||||||||
Standardized measure of discounted future net cash flows | $ | 7,927,490 | $ | 3,976,523 | $ | 3,156,417 | $ | 15,060,430 |
The changes in the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves areas follows (in thousands):
For the Year Ended December 31, 2022 | ||||||||||||||||
Civitas | Hibernia | Tap Rock | Civitas Resources Pro Forma Combined | |||||||||||||
Beginning of period | $ | 4,412,104 | $ | 1,812,275 | $ | 1,927,812 | $ | 8,152,191 | ||||||||
Sale of oil and gas produced, net of production costs | (2,980,527 | ) | (525,438 | ) | (1,026,217 | ) | (4,532,182 | ) | ||||||||
Net changes in prices and production costs | 5,016,678 | 883,321 | 1,185,485 | 7,085,484 | ||||||||||||
Net changes in extensions, discoveries, and other additions | 638,537 | 1,358,437 | 579,008 | 2,575,982 | ||||||||||||
Development costs incurred | 411,138 | 130,529 | 90,200 | 631,867 | ||||||||||||
Changes in estimated development cost | (87,466 | ) | (67,863 | ) | 18,236 | (137,093 | ) | |||||||||
Purchases of minerals in place | 627,833 | 267,980 | 315,890 | 1,211,703 | ||||||||||||
Sales of minerals in place | - | (21,561 | ) | (3,998 | ) | (25,559 | ) | |||||||||
Revisions of previous quantity estimates | 619,800 | (113,124 | ) | (185,658 | ) | 321,018 | ||||||||||
Net change in income taxes | (991,734 | ) | (15,257 | ) | - | (1,006,991 | ) | |||||||||
Accretion of discount | 532,716 | 182,659 | 192,781 | 908,156 | ||||||||||||
Changes in production rates and other | (271,589 | ) | 84,564 | 64,907 | (122,118 | ) | ||||||||||
End of period | $ | 7,927,490 | $ | 3,976,523 | $ | 3,158,446 | $ | 15,062,459 |
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