Reserve and Related Financial Data (SMOG) - Unaudited | Acquisitions and Divestitures DJ Acquisition On November 3, 2021, the Company entered into a definitive purchase and sale agreement to acquire approximately 8,400 net royalty acres primarily in Weld County, Colorado, operated by PDC Energy, Inc., Chevron Corporation, Occidental Petroleum and Civitas Resources for 2.2 million shares of the Company’s common stock and $43.1 million of cash, net of $1.7 million of customary closing adjustments. The DJ Acquisition closed on December 15, 2021. The cash portion of the purchase price was funded through a combination of cash on hand and borrowings under the Company’s revolving credit facility. The following table presents the acquisition consideration paid in the DJ Acquisition (in thousands, except the number of shares and price per share): Consideration: Class A shares of Brigham Minerals, Inc. common stock issued at closing 2,180,128 Closing price per share of Brigham Minerals, Inc. common stock on the closing date $ 21.26 Fair Value of Brigham Minerals, Inc. common stock issued $ 46,349 Cash consideration 43,083 Total consideration (including fair value of Brigham Minerals, Inc. common stock issued) $ 89,432 The DJ Acquisition has been accounted for as an asset acquisition and the allocation of the purchase price was $17.9 million to unevaluated properties and $71.5 million to evaluated properties. Other Acquisitions During the years ended December 31, 2021 and 2020, Brigham Minerals entered into a number of acquisitions of mineral and royalty interests from various sellers in Texas, Oklahoma, Colorado, New Mexico, and North Dakota, as reflected in the table below. The change in the oil and natural gas property balance for the year ended December 31, 2021 is comprised of payments for acquisitions of minerals, land brokerage costs and capitalized general and administrative expenses that were funded with our retained operating cash flow, proceeds from asset sales and our revolving credit facility (hereinafter defined). The changes in the oil and natural gas property balance for the year ended December 31, 2020 were partially funded with proceeds from the December 2019 Offering as well as our retained cash flow and our revolving credit facility. Assets Acquired Cash Consideration Paid (In Thousands) Evaluated Unevaluated Year ended December 31, 2021 $ 26,822 $ 34,056 $ 60,878 Year ended December 31, 2020 $ 30,856 $ 35,725 $ 66,581 Divestitures During the year ended December 31, 2021, Brigham Minerals divested certain non-core, primarily undeveloped acreage in Oklahoma and received cash of $13.6 million. Oil and Natural Gas Reserves Proved reserves represent quantities of oil, natural gas and NGLs which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be recoverable in the future from known reservoirs under existing economic conditions, operating methods and government regulations. Proved developed reserves are proved reserves which can be expected to be recovered through existing wells with existing equipment, infrastructure and operating methods. Proved reserves were estimated in accordance with guidelines established by the SEC, which require that reserve estimates be prepared under existing economic and operating conditions based upon the 12-month unweighted average of the first-day-of-the-month prices. The reserves at December 31, 2021, 2020 and 2019 presented below were audited by CG&A. Estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development, price changes and other factors. The reserves are located in various fields in Texas, New Mexico, Oklahoma, Colorado, Wyoming, North Dakota, and Montana. All of the proved reserves are located in the continental United States. Crude Oil Natural Gas NGL Total Proved reserve quantities, December 31, 2018 12,991 51,796 5,117 26,741 Sales of minerals-in-place (182) (697) (110) (409) Extensions and discoveries 1,997 7,780 817 4,110 Acquisitions 4,256 13,053 1,218 7,651 Revisions of previous estimates (586) (5,495) (797) (2,299) Production (1,515) (4,707) (407) (2,706) Proved reserve quantities, December 31, 2019 16,961 61,730 5,838 33,088 Sales of minerals-in-place — (286) (1) (48) Extensions and discoveries 876 2,545 291 1,591 Acquisitions 1,235 3,652 331 2,174 Revisions of previous estimates (4,049) (18,188) (1,189) (8,271) Production (1,823) (5,809) (680) (3,471) Proved reserve quantities, December 31, 2020 13,200 43,644 4,590 25,063 Sales of minerals-in-place (71) (780) (73) (275) Extensions and discoveries 1,666 4,404 623 3,024 Acquisitions 2,739 14,683 1,662 6,849 Revisions of previous estimates 1,053 10,107 1,706 4,444 Production (1,677) (5,886) (642) (3,300) Proved reserve quantities, December 31, 2021 16,910 66,172 7,866 35,805 Proved reserve quantities at December 31, 2021 attributable to non-controlling interest 3,213 12,573 1,495 6,803 Proved developed reserve quantities: December 31, 2019 9,924 33,232 2,494 17,957 December 31, 2020 9,403 31,873 3,426 18,141 December 31, 2021 13,148 56,372 6,367 28,911 Proved developed reserves at December 31, 2021 attributable to temporary equity 2,498 10,711 1,210 5,493 Proved undeveloped reserve quantities: December 31, 2019 7,037 28,498 3,344 15,131 December 31, 2020 3,797 11,771 1,164 6,922 December 31, 2021 3,762 9,800 1,499 6,894 Proved undeveloped reserves at December 31, 2021 attributable to temporary equity 715 1,862 285 1,310 Changes in proved reserves that occurred during 2021 were primarily due to: • the acquisition of additional mineral interests located in the Permian, DJ and Williston Basins in multiple transactions. The acquired proved reserves of 6,849 MBoe throughout the year were offset by the divestiture of 275 MBoe of proved reserves; • well additions, extensions and discoveries of approximately 3,024 MBoe, as gross horizontal well locations were converted from probable, possible and contingent resources to proved, due to continuous activity and delineation of additional zones on our mineral and royalty interests; • positive revision of 3,591 MBoe attributable to an increase in SEC pricing; and • positive revision of 852 MBoe due to PDP outperformance, estimate ultimate recovery ("EUR") adjustments, refined gas and NGL processing assumptions, and unit configuration. Changes in proved reserves that occurred during 2020 were primarily due to: • the acquisition of additional mineral interests located in the Permian, Anadarko, DJ and Williston Basins in multiple transactions. The acquired proved reserves of 2,174 MBoe throughout the year were offset by the divestiture of 48 MBoe of proved reserves; • well additions, extensions and discoveries of approximately 1,591 MBoe, as approximately 342 gross horizontal well locations were converted from probable, possible and contingent resources to proved, due to continuous activity and delineation of additional zones on our mineral and royalty interests; • negative revisions of 2,645 MBoe attributable to reduction in SEC pricing; • as a result of decreased operator activity throughout 2020, a reclass of 7,036 MBoe to non-proved due to future locations falling outside the SEC five-year rule for PUDs; and • positive revision of 1,410 MBoe attributable to estimate ultimate recovery ("EUR") adjustments, refined gas and NGL processing assumptions, and unit configuration. Changes in proved reserves that occurred during 2019 were primarily due to: • the acquisition of additional mineral interests located in the Permian, Anadarko, DJ and Williston Basins in multiple transactions, which included 7,242 MBoe of additional proved reserves which is comprised of 7,651 MBoe of acquired proved reserves and divestiture of 409 MBoe of proved reserves within the year; • well additions extensions and discoveries of approximately 4,110 MBoe, as approximately 900 gross horizontal well locations were converted from probable, possible and contingent resources to proved, due to continuous activity and delineation of additional zones on our mineral and royalty interests; and • net volume revisions of approximately 2,299 MBoe. These revisions were comprised of 902 MBoe of negative revisions attributable to pricing as well as approximately 1,397 MBoe attributable to operator development timing, unit configuration and EUR adjustments to existing proved locations. Standardized Measure of Discounted Future Net Cash Flows Guidelines prescribed in FASB’s Accounting Standards Codification (“ASC”) Topic 932 Extractive Industries—Oil and Gas, have been followed for computing a standardized measure of future net cash flows and changes therein relating to estimated proved reserves. Future cash inflows are determined by applying prices and costs, including transportation, quality, and basis differentials, to the year-end estimated quantities of oil, natural gas and NGLs to be produced in the future. The resulting future net cash flows are reduced to present value amounts by applying a ten percent annual discount factor. The assumptions used to compute the standardized measure are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect Brigham Resources’ expectations of actual revenues to be derived from those reserves, nor their present value. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process. Reserve estimates are inherently imprecise and estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. The following summary sets forth the future net cash flows relating to proved oil and gas reserves based on the standardized measure prescribed in ASC Topic 932: For the Years Ended December 31, (In Thousands) 2021 2020 2019 Future crude oil, natural gas, and NGL sales $ 1,512,784 $ 562,545 $ 1,042,118 Future severance tax and ad valorem taxes (109,849) (39,318) (73,627) Future income tax expense (214,311) (46,908) (143,599) Future net cash flows 1,188,624 476,319 824,892 10% annual discount (549,768) (205,551) (359,258) Standardized measure of discounted future net cash flows $ 638,856 $ 270,768 $ 465,634 Standardized measure of discounted future net cash flows attributable to temporary equity $ 121,383 $ 62,853 $ 186,999 The following prices were used in the determination of standardized measure: For the Years Ended December 31, 2021 2020 2019 Oil (per Bbl) $ 64.46 $ 36.35 $ 51.01 Natural gas (per Mcf) 3.22 1.03 1.51 NGLs (per Bbl) 26.65 8.19 14.39 These prices were based on the 12-month arithmetic average first-of-month West Texas Intermediate (“WTI”) price of oil and Henry Hub price of natural gas. The NGL pricing varied by basin at 29% to 41% of WTI. All p rices have been adjusted for transportation, quality, basis differentials and post-production costs. The principal sources of change in the standardized measure of discounted future net cash flows are: For the Years Ended December 31, (In Thousands) 2021 2020 2019 Standardized measure of discounted future net cash flows, beginning of the year $ 270,768 $ 465,634 $ 443,459 Changes in the year resulting from: Sales, less production costs (140,561) (73,654) (86,492) Revisions of previous quantity estimates 106,664 (135,926) (41,539) Extensions, discoveries, and other additions 74,305 21,011 69,057 Net change in prices and production costs 268,687 (131,886) (99,660) Accretion of discount 23,763 54,741 51,949 Purchase of reserves in place 151,547 27,241 137,819 Divestitures of reserves in place (2,375) (250) (5,783) Net change in taxes (87,960) 53,786 (5,739) Timing differences and other (25,982) (9,929) 2,563 Standardized measure of discounted future net cash flows, end of the year $ 638,856 $ 270,768 $ 465,634 Capitalized oil and natural gas costs The aggregate amounts of costs capitalized for oil and natural gas producing activities and related aggregate amounts of accumulated depletion follow: For the Years Ended December 31, (In Thousands) 2021 2020 2019 Oil and gas properties, at cost, using full cost method of accounting: Unevaluated property $ 338,613 $ 325,091 $ 291,664 Evaluated property 633,138 488,301 449,061 Total oil and gas properties, at cost 971,751 813,392 740,725 Less accumulated depreciation, depletion, and amortization (239,612) (189,546) (61,103) Total oil and gas properties, net $ 732,139 $ 623,846 $ 679,622 Costs incurred in oil and natural gas activities The following costs were incurred in oil and natural gas producing activities: For the Years Ended December 31, (In Thousands) 2021 2020 2019 Acquisition of oil and gas properties Unevaluated $ 51,934 $ 35,725 $ 78,093 Evaluated 98,377 30,856 140,025 Total $ 150,311 $ 66,581 $ 218,118 |