Deals - Acquisition, Mergers, Divestitures

Earthstone Energy FInalizes Bighorn Permian Acquisition

Share Print Bookmark    |    Monday,April 18,2022

Earthstone Energy, Inc. has closed the acquisition of assets of privately held Bighorn Permian Resources LLC in the Midland Basin.

The Company also announced the closing of a $550 million private offering of senior unsecured notes, a $280 million private placement of equity, and an amendment to the Company's revolving credit facility.

Further, the Company provided an update on key balance sheet metrics as of March 31, 2022, and as adjusted for the recent closings of the Bighorn Acquisition, the Notes Offering, the PIPE and the amendment to the Credit Facility. Additionally, the Company provided an estimate of daily production sales volumes for the first quarter of 2022.

Highlights:

• Closed the Bighorn Acquisition on April 14, 2022
• The cash consideration for the Bighorn Acquisition was reduced from the announced $770 million by approximately $131 million to $639 million and the equity consideration was reduced from the announced approximately 6.8 million shares of Class A Common Stock by approximately 1.2 million shares to 5.7 million shares, both based on preliminary purchase price adjustments
• Closed the $550 million Notes Offering comprised of 8.0% senior unsecured notes on April 12, 2022
• Closed the $280 million PIPE on April 14, 2022
• Closed on an amendment to the credit agreement governing the Credit Facility which, among other things, increased the borrowing base to $1.325 billion on April 14, 2022
• Voluntarily elected to reduce commitments under the borrowing base of the Credit Facility to $800 million on April 14, 2022
• Estimates that the Company had $337 million of undrawn availability on the $800 million of commitments under the $1.325 billion borrowing base on the Credit Facility as of March 31, 2022, as adjusted for the transactions described herein

Operations Update:

• Earthstone estimates its average daily production for the first quarter of 2022 to be approximately 35,500 Boepd (44% oil, 26% NGLs, 30% natural gas) which only includes 45 days of production from the assets we acquired in the northern Delaware Basin from Chisholm
• Earthstone continues to operate two drilling rigs in the Midland Basin and two drilling rigs in the northern Delaware Basin

Robert J. Anderson, President and Chief Executive Officer of Earthstone, stated, "We are pleased to have taken multiple significant steps in the ongoing transformation of Earthstone as we have closed on the Bighorn Acquisition and on significant debt and equity financings this week. Based on the purchase price adjustments at closing as a result of the significant cash flows from the effective date, we will have funded the Bighorn Acquisition with well over 50% equity in the form of direct consideration to the seller and the new equity investment from the PIPE, maintaining our conservative capital structure.

"Combining the recently closed Chisholm Acquisition and its high-quality inventory in the northern Delaware Basin with the Bighorn Acquisition and its low-decline, high free cash flow production base in the Midland Basin has created significant incremental scale for Earthstone. We believe that the balance of high return drilling inventory and strong free cash flow production base within Earthstone creates an optimal opportunity for value creation as we continue our 2022 operating and capital plan.

"Our near-term focus will be to continue integration efforts on both the northern Delaware Basin assets and the newly acquired Midland Basin assets. We expect to continue our pursuit of additional scale through accretive acquisitions that we believe will result in continued improved cost structure and creation of shareholder value, while always keeping our balance sheet strength as the top priority."

Liquidity Update

As of March 31, 2022, we had $1 million in cash and $624 million of long-term debt outstanding under our Credit Facility with a borrowing base of $825 million. Subsequent to March 31, 2022, Earthstone closed on its previously announced Bighorn Acquisition, closed the $550 million Notes Offering, closed the $280 million PIPE and paid the $70 million of deferred cash consideration for the Chisholm Acquisition. When adjusted to include the impact of these activities, we had estimated total debt outstanding of $1,013 million, comprised of $550 million of senior unsecured notes and $463 million of debt outstanding under our Credit Facility, leaving $337 million of undrawn availability on the $800 million of total commitments under our Credit Facility.

Board Appointment

In conjunction with the closing of the PIPE, the Earthstone Board of Directors has expanded to eleven members with the appointment of Mr. Frost Cochran. Mr. Cochran is a Managing Director and a founding partner of Post Oak Energy Capital, L.P.