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Earthstone Wraps Up 2020 Drilling, Releases Rig; Puts Curtailments Back Online

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   |    Thursday,July 16,2020

Earthstone Energy, Inc. has provided an update to its operations and 2020 production guidance.

Wraps Up 2020 Drilling, Releases Rig

In late May, Earthstone concluded its 2020 drilling program and released the contracted rig operating in the Midland Basin. During the first half of the year, we drilled a total of five wells in our Hamman Upton project along with six wells in Ratliff pad, all located in Upton County. The Company now has a total of 11 gross / 9.7 net operated wells drilled and waiting on completion, with no near-term completion plans.

Earthstone completed three wells in southeast Reagan County in late March and brought them online in April, prior to shutting the wells in for the duration of the month of May. The two Wolfcamp B Lower wells achieved average peak 27-day production rate of 1,617 Boepd (85% oil) prior to being shut-in (also previously disclosed). The Wolfcamp B Upper well, which was cleaning up when the wells were shut-in for the month of May, has averaged 1,483 Boepd (84% oil) over 27 days since having been brought back online in mid-June.

The Company's 2020 capital budget and Cash G&A guidance remain unchanged. Earthstone currently assume no additional operated or non-operated wells will be drilled or completed in 2020.

Curtailments Back Online

Following production curtailments for May 2020, beginning in June, Earthstone commenced returning all of its shut-in and curtailed operated wells to full production, which are currently producing at nearly 100% of capacity.

Earthstone estimates that total net production was curtailed by approximately 60% in May, with minimal volumes curtailed in April and June. The Company estimates average production for the second quarter of 2020 to be approximately 13,600 Boepd (65% oil). Assuming no further curtailments are warranted, average daily production for full year 2020 is expected to be 13,000 - 14,000 Boepd.

Robert J. Anderson, President and Chief Executive Officer of Earthstone, stated, "As oil prices improved considerably since we made the decision in late April to curtail significant operated production, we initiated a concentrated effort to return wells to full production in June. We are close to 100% of production capacity on our operated properties with very little non-operated production curtailed. We have seen no adverse effects from the short-term curtailment and have experienced no significant costs in restoring production. With production returned to full capacity, we are well positioned to start the second half of the year with strong production.

"We appreciate the dedication of our field staff efficiently returning wells to production with little to no incremental expense while adhering to our rigorous safety protocols. We are continuing to carefully manage costs and spending while closely monitoring the oil price outlook to drive our operating plans for the balance of the year. We expect to maintain approximately flat year over year production in 2020 compared to 2019 with no further drilling or completion activity this year. Further, depending on the timing, we anticipate the completion of our eleven drilled but uncompleted wells would enable us to hold production relatively flat again for full year 2021 with only the completion capital expenditures on these eleven wells.

"Our focus will remain on generating free cash flow(1), which we expect to be substantial in the second, third and fourth quarters of this year. This will allow us to further reduce debt and position us to achieve our objective of a leverage ratio below 1x Net Debt to Adjusted EBITDAX at year-end 2020. Given the strength of our hedge position, low cost operations, ability to maintain stable year-over-year production through 2021 with only a modest capital program, relatively low leverage and ample liquidity, we are confident in our ability to remain financially strong and take advantage of future consolidation opportunities as the distressed situations increase."

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