United States securities and exchange commission logo
July 7, 2022
William M. Hickey
Co-Chief Executive Officer
Centennial Resource Development, Inc.
1001 Seventeenth St., Suite 1800
Denver, CO 80202
Re: Centennial Resource
Development, Inc.
Proxy Statement on
Schedule 14A
Filed June 10, 2022
File No. 001-37697
Dear Mr. Hickey:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Proxy Statement on Schedule 14A filed June 10, 2022
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR SHAREHOLDERS, page 5
1. Please include a
question and answer that explains the rationale for structuring the merger
to utilize an "Up-C
structure." Additionally, highlight any resulting conflicts of interest.
2. We note your disclosure
in this section that each Surviving Company Unit is redeemable,
together with the
surrender for cancellation of one share of Class C Common Stock, for
Class A Common Stock on
a one-for-one basis pursuant to the terms of the Surviving
Company LLC Agreement.
Please revise to disclose all material terms of the Surviving
Company LLC Agreement
relating to the redemption rights of a member and exchange
rights of Centennial
Resource Development, Inc.
William M. Hickey
FirstName
Centennial LastNameWilliam M. Hickey
Resource Development, Inc.
Comapany
July 7, 2022NameCentennial Resource Development, Inc.
July 7,2 2022 Page 2
Page
FirstName LastName
Registration Rights Agreement, page 14
3. Please revise to disclose the amount of shares of common stock which
will be subject to
the Registration Rights Agreement.
Financial Analyses
Colgate Analyses
Selected Public Companies Analysis, page 86
4. We note that Citi reviewed certain financial information of Colgate
and publicly available
financial and stock market information of six selected companies that
Citi viewed as
generally relevant for purposes of analysis as publicly traded oil and
gas exploration and
production companies with operations primarily in the Permian basin.
Please revise to
state any additional criteria, beyond having operations primarily in
the Permian basin,
which the advisor used to select comparable companies. If any
companies were excluded
from the selection criteria, please state as much and disclose the
reason for excluding such
companies.
Proposal 2: Approval of the A&R Charter Proposal, page 104
5. We note the proposed amendments to your charter in connection with the
A&R Charter
Proposal, as described on page 104, including the proposed changes to
authorized capital,
action by written consent, and the exclusive forum provision. Please
provide your
analysis as to why you are not required to unbundle this proposal and
provide
shareholders with separate votes regarding these changes. Please refer
to Rule 14a-4(a)(3)
of Regulation 14A and Question 101.02 to Exchange Act Rule 14a-4(a)(3)
Questions and
Answers of General Applicability (Unbundling under Rule 14a-4(a)(3)
Generally),
available on our website.
6. Please revise to clarify the impact of the proposed amendment to your
charter regarding
action by written consent. For example, please clarify whether this
amendment would
permit shareholder action by written consent until Riverstone Holdings
LLC, Pearl Energy
Investments and NGP Energy Capital cease to collectively have
beneficial ownership
(directly or indirectly) of more than 50% of your outstanding common
stock.
7. We note your disclosure that subject to the limitations set forth
therein, the proposed
charter will designate the Court of Chancery of the State of Delaware
as the sole and
exclusive forum for substantially all actions and proceedings that may
be initiated by
shareholders. Please describe in this section all material terms of
the proposed exclusive
forum provision as set forth in Article XI of the proposed charter.
For example, we note
that Article XI provides that subject to the preceding provisions of
Article XI, the federal
district courts of the United States of America shall be the exclusive
forum for the
resolution of any complaint asserting a cause or causes of action
arising under the
Securities Act, including all causes of action asserted against any
defendant to such
complaint. In addition, please revise your disclosure to state that
there is uncertainty as to
William M. Hickey
FirstName
Centennial LastNameWilliam M. Hickey
Resource Development, Inc.
Comapany
July 7, 2022NameCentennial Resource Development, Inc.
July 7,3 2022 Page 3
Page
FirstName LastName
whether a court would enforce such provision. Please make
corresponding changes to
your risk factor disclosure regarding the exclusive forum provision on
page 30.
Information About Colgate
Summary of Oil and Gas Reserves, page 111
8. Disclosure on page 112 indicates the estimates of proved reserves as
of December 31,
2021 presented on a historical basis were prepared by Colgate s
independent reservoir
engineers, Netherland, Sewell & Associates, Inc. However, disclosure
on page F-25
indicates that the comparable estimates were prepared by the Company
s reserves
engineers. Please revise the disclosure to resolve this inconsistency
or tell us why a
revision is not needed.
Summary of Reserves as of December 31, 2021 Based on SEC Pricing, page 112
9. Please expand the presentation to include the dollar amounts for the
Standardized Measure
and PV-10 relating to the Recent Divestitures, the Parkway Acquisition
and Pro Forma for
the total proved reserves.
10. Please expand the disclosure of reserves expressed as barrels of oil
equivalent to clarify
the basis for converting natural gas volumes to equivalent barrels of
oil, e.g. the number of
cubic feet of natural gas per barrel of oil equivalent.
11. Please expand the discussion in footnote (4) to include cautionary
language clarifying that
estimates of probable and possible reserves have not been adjusted for
risk due to
uncertainty, and therefore may not be comparable and should not be
summed either
together or with estimates of proved reserves. Refer to question
105.01 in the Compliance
and Disclosure Interpretations ( C&DIs ) regarding Oil and Gas
Rules.
12. Please expand the presentation on page 113 to include a reconciliation
of Colgate s Pro
Forma PV-10 dollar amounts to the GAAP financial measure of the
Standardized
Measure.
Colgate Management's Discussion and Analysis of Financial Condition and Results
of
Operations, page 118
13. Please disclose any material impacts of inflation on Colgate's results
of operations,
including the principal factors contributing to any such inflationary
pressures, and identify
actions planned or taken, if any, to mitigate such inflationary
pressures. Please include a
related risk factor, if applicable.
Colgate Managements Discussion and Analysis of Financial Condition and Results
of Operations
How we evaluate our operations, page 122
14. You disclose Free Cash Flow is a non-GAAP financial measure and refer
to the Non-
GAAP Financial Measure section for the definition and
reconciliation to the closest
comparable GAAP measure. The Non-GAAP Financial Measure section
does not
William M. Hickey
Centennial Resource Development, Inc.
July 7, 2022
Page 4
appear to not be included in the filing. Please revise this
disclosure, as necessary.
Unaudited Pro Forma Combined Financial Informaiton
Notes to the Unaudited Pro Forma Combined Financial Statements
Note 3. Preliminary Accounting and Pro Forma Adjustments, page 147
15. You disclose in footnote (b) cash consideration to be paid to Colgate
Unitholders will
consist of cash and cash equivalents of $86.4 million and borrowings
of $438.6 million
under Centennial s credit facility. However, on page 26 we note the
disclosure states you
plan to incur approximately $525 million of additional debt under CRP
s revolving credit
facility to fund the Cash Consideration. Please revise your disclosure
to address this
inconsistency.
16. Please expand disclosures in footnote (j) to state the interest rate
used to calculate the pro
forma interest expense for the additional borrowings under the credit
facility. In addition,
disclose if the rate is based on your committed rate or prevailing
interest rates at the time
covered by the pro forma information. If the interest rates can vary
from the amount
disclosed, disclose the effect on income of a 1/8 percent variance in
the interest rates.
17. In footnote (k) you state the pro forma adjustment related to income
tax expense is based
on the transaction accounting adjustments and the Luxe Acquisition pro
forma
adjustments (where presented) at the blended federal and state
statutory tax rate of 22.6%,
which has been further adjusted to reflect income attributable to
noncontrolling interest
that is not taxable to the c-corporation. Please expand your
disclosure to further describe
the calculation of the blended rate.
Index to Consolidated Financial Information
Colgate Energy Partners III, LLC
Consolidated Balance Sheets, page F-3
18. We note you recorded a current liability for revenue payable as of
December 31, 2021 and
March 31, 2022. Please explain what this balance represents and
provide reference to the
technical guidance that supports your accounting and presentation.
Notes to Consolidated Financial Statements
Note 4. Acquisitions and Divestitures, page F-12
19. We note you have not provided financial statements or pro forma
financial information for
your acquisition of proved and unproved oil and gas properties and
equipment from
FirstName LastNameWilliam M. Hickey
Occidental Petroleum (the Oxy Acquisition). Please provide us with the
significance tests
Comapany NameCentennial
you performed Resource
to determine thatDevelopment, Inc.was not required
under Rule 3-05 and
this information
July 7, Article 11 of
2022 Page 4 Regulation S-X.
FirstName LastName
William M. Hickey
FirstName
Centennial LastNameWilliam M. Hickey
Resource Development, Inc.
Comapany
July 7, 2022NameCentennial Resource Development, Inc.
July 7,5 2022 Page 5
Page
FirstName LastName
Colgate Energy Partners III, LLC
Notes to Consolidated Financial Statements
(16) Supplemental Disclosure of Oil and Natural Gas Operations (Unaudited)
Reserve Quantity Information, page F-25
20. Please expand the presentation of the standardized measure to clarify,
if true, that future
cash flows take into account the estimated abandonment costs for the
proved properties.
This comment also applies to the comparable disclosure provided on
page F-70. Refer to
FASB ASC 932-235-50-36.
If the abandonment costs, including such costs related to proved
undeveloped locations,
have not been included for each of the periods presented, e.g. as of
December 31, 2021
and 2020, respectively, please explain to us the rationale for
excluding these costs from
the calculation of the standardized measure.
Luxe Energy LLC and Subsidiaries
Report of Independent Auditors, page F-52
21. The accountant's report is missing the accounting firm's signature and
city and state where
issued. Please obtain and file a revised accountant s report that
complies with Rule 2-
02(a) of Regulation S-X.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Brian McAllister, Staff Accountant, at (202) 551-3341 or
Myra
Moosariparambil, Staff Accountant, at (202) 551-3796 if you have questions
regarding
comments on the financial statements and related matters. For questions
regarding engineering
comments, please contact John Hodgin, Petroleum Engineer, at (202) 551-3699.
Please contact
Liz Packebusch, Staff Attorney, at (202) 551-8749 or Laura Nicholson, Special
Counsel, at (202)
551-3584 with any other questions.
Sincerely,
Division of
Corporation Finance
Office of Energy
& Transportation
cc: John M. Greer