Deals - Acquisition, Mergers, Divestitures

Earthstone Energy Wraps Up $575MM Permian Acquisition

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   |    Thursday,August 11,2022

Earthstone Energy, Inc. has closed the acquisition of the New Mexico assets of Titus Oil & Gas Production, LLC and Titus Oil & Gas Production II, LLC and their affiliates located in the northern Delaware Basin.

Consideration for the Titus Acquisition was $575 million in cash and approximately 3.9 million shares of Earthstone's Class A common stock, net of preliminary purchase price adjustments. At closing, Earthstone paid cash consideration of approximately $535 million net of the $40 million deposit payment made in June.

Robert J. Anderson, President and Chief Executive Officer of Earthstone, stated, "We are pleased to have expanded our operated position in the northern Delaware Basin with the acquisition of very high-quality assets from Titus. These assets complement our existing footprint in the northern Delaware Basin and add to our production base, which is now approaching 100,000 Boepd. Further, we have added highly economic drilling locations, further deepening our inventory, which sits at twelve years based on our anticipated pace of drilling. Our near-term focus will be to efficiently integrate these assets into our operations and expand our drilling program by deploying an additional rig later this quarter on our combined northern Delaware Basin assets.

"We continue to focus on building scale in a financially prudent manner through accretive acquisitions and organic activity. We intend to apply Free Cash Flow towards the repayment of debt under our Credit Facility. We achieved a 0.8x Debt / LQA Adjusted EBITDAX ratio during the second quarter of 2022 and expect to be able to maintain or reduce this leverage ratio throughout the remainder of the year based on recent strip prices. 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."

Balance Sheet and Liquidity Update

Contemporaneously with the closing of the Titus Acquisition, the Company entered into an amendment to its credit agreement, which included an increase in the borrowing base from $1.4 billion to $1.7 billion and an increase in commitments from $800 million to $1.2 billion. The amendment also established a fully funded $250 million Term Loan as a portion of the $1.2 billion of available commitments, with the remaining $950 million of commitments in the form of revolving commitments. The Term Loan is fully pre-payable and bears an interest rate of Term SOFR plus 3.25% plus a Term SOFR Adjustment Fee of 0.10%, as defined in the credit agreement.

As of July 31, 2022, the Company had $250 million funded under the Credit Facility. Adjusting for the closing of the Titus Acquisition, the Credit Facility balance as of July 31, 2022, would have been $785 million, leaving $415 million in available undrawn commitments.

2022 Guidance

In conjunction with the closing of the Titus Acquisition, the Company is reaffirming its recently updated guidance as shown below.