Earthstone Energy Announces Acquisition of Bolt-On | Texas

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THE WOODS, Texas, October 4, 2021 / PRNewswire / – Earthstone Energy, Inc. (NYSE: ESTE) (“Earthstone”, the “Company”, “we”, “our” or “our”) today announced that it has entered into definitive agreements to acquire Private companies operating assets located in the Midland Basin (the “Bolt-on Acquisition”) from two vendors not affiliated with Earthstone. The overall purchase price of the Bolt-On acquisition is approximately $ 73.2 million made up of $ 49.2 million in cash, subject to customary purchase price adjustments, and approximately 2.6 million Class A common shares of Earthstone valued at $ 24.0 million based on a closing price of $ 9.20 to September 30, 2021. The Bolt-On acquisition is expected to be completed by the middle of the fourth quarter of 2021 with an effective date of July 1, 2021.

Highlights of the acquired asset base and operations include:

  • Average daily production of 4,400 bepd (26% oil, 52% liquids) during September 2021
  • Adjusted EBITDAX projected over the next twelve months of approximately $ 42 million (1)
  • $ 116.0 million PDP PV-10 from 7/1/21 with associated reserves of approximately 13.3 MMBoe (11% oil, 31% NGL, 58% natural gas) (2) based on the NYMEX strip price as of September 30, 2021
  • Low operating cost, high margin asset base with operating synergies when added to existing Earthstone assets

The expected impact on Earthstone includes:

  • Purchase price of approximately 1.7x estimated over the next twelve months Adjusted EBITDAX (1) based on the NYMEX strip price as of September 30, 2021
  • Acquisition of Bolt-On should be accretive on all key financial indicators
  • Earthstone maintains target of achieving less than 1.25x leverage by the end of 2021 (3)
  • Approximate impact of 4,000 boepd (17% petroleum, 47% liquids) on production from the close date (expected by the middle of the fourth quarter) until the end of 2021

Management comments

Sir. Robert J. AndersonEarthstone President and CEO commented, “This transaction will be our fourth acquisition this year as we continue to advance our consolidation strategy and improve our footprint in the Midland Basin with an additional scale. The acquisition of these low operating cost, high margin production assets at an attractive valuation is a good addition to our production and cash flow base. Irion County. We expect to benefit from additional operational synergies when production operations are combined with other assets in the region. As we have done in previous acquisitions, we look forward to applying our operational approach to these assets in order to reduce costs and maximize production and cash flow.

“The matching combination of cash and equity in line with our goal of maintaining a strong balance sheet positions us well to continue our consolidation efforts. We are happy to continue to add an additional scale on an accretive basis without sacrificing our balance sheet or available cash. flow generation. “

Acquisition consideration and sources

The consideration for the transaction consists of 2,611,111 Class A common shares of Earthstone, representing approximately 3.0% of the total outstanding Class A and Class B common shares on a pro forma basis, and approximately $ 49.2 million cash, subject to customary purchase price adjustments from the July 1, 2021 effective date at closing. Earthstone intends to fund the cash portion of the consideration and fees and expenses with cash on hand and borrowings under its revolving credit facility, which currently has a borrowing base of $ 650 million. From August 31, 2021, and taking into account the current borrowing base of $ 650 million, Earthstone had approximately $ 365 million based on $ 363.4 million unused basic borrowing capacity and $ 1.2 million in liquid.

About Earthstone Energy, Inc.

Earthstone Energy, Inc. is an independent, growth-oriented energy company engaged in the acquisition, development and operation of oil and gas properties. Its main assets are located in the West Midland Basin Texas and the Eagle Ford Trend from the south Texas. Earthstone is listed on the New York Stock Exchange under the symbol “ESTE”. For more information, visit the Company’s website at www.earthstoneenergy.com.

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(1)

Adjusted EBITDAX estimated at $ 42 million is measured from The effective date of the Bolt-On acquisition from 07/01/2021 to 06/30/2022 is based on Earthstone management’s estimates of proved reserves developed using the NYMEX strip price at 30 / 09/2021. As used in this “Adjusted EBITDAX” press release, a non-GAAP financial measure is defined by Earthstone as net income plus, if any, increased asset retirement obligations; impairment charge; depletion, depreciation and amortization; interest expense, net; transaction costs; loss (gain) on sale of oil and gas properties; (gain) unrealized loss on derivatives; stock-based compensation; and the income tax charge.

(2)

PV-10 is a non-GAAP measure that differs from a GAAP-compliant measure known as the “standardized measure of discounted future net cash flows” in that PV-10 is calculated without including future income taxes. Earthstone management’s estimate of the volumes and values ​​of proven production reserves developed as of 07/01/2021, discounting cash flows at a rate of 10% and using the prices of NYMEX strips as of 09/30 / 2021.

(3)

Earthstone defines leverage as total debt over Adjusted EBITDAX. The target includes adjusted EBITDAX adjusted for the impact of the 2021 acquisitions.

Forward-looking statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act ”). . Statements that are not strictly historical statements constitute forward-looking statements and can often, but not always, be identified by the use of words such as “expects”, “believes”, “intends to” , “Anticipates”, “plans”, “estimates”, “potential”, “possible” or “probable” or statements that certain actions, events or results “could”, “will”, “should” or “could” be undertaken, occur or be achieved. Forward-looking statements include statements about the expected benefits of the proposed Bolt-On acquisition to Earthstone and its shareholders, the expected completion or timing of the proposed Bolt-On acquisition, expected future reservations. , Earthstone’s production, financial condition, business, strategy, revenues, profits, costs, capital expenditures and debt levels, as well as management plans and objectives for future operations. Forward-looking statements are based on current expectations and assumptions and analyzes made by Earthstone and its management in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors. appropriate in the circumstances. However, the compliance of actual results and developments with expectations is subject to a number of significant risks and uncertainties, including, but not limited to: the ability to complete the proposed Bolt-On acquisition on the terms and conditions. and the planned timetable; Earthstone’s ability to successfully integrate the assets included in the Bolt-On Acquisition with its post-Acquisition operations and achieve the expected benefits; the possibility that various closing conditions of the Bolt-On Acquisition will not be met or waived; risks associated with any unforeseen liability related to the acquisition of Bolt-On; falling prices for petroleum, natural gas liquids or natural gas; the level of success of exploration, development and production activities; adverse weather conditions that may have a negative impact on development or production activities; the schedule of exploration and development expenditures; inaccuracies in reserve estimates or the underlying assumptions; revisions to reserve estimates due to changes in commodity prices; impacts on the financial statements resulting from impairments; risks relating to the level of indebtedness and periodic reassessments of the borrowing base under the Earthstone credit facility; Earthstone’s ability to generate sufficient operating cash flow to meet the internally funded portion of its capital expenditure budget; Earthstone’s ability to obtain external capital to finance exploration and development operations and acquisitions; the ability to complete any potential disposal of assets and the associated risks; the impacts of hedging on operating results; uninsured or underinsured losses resulting from oil and gas operations; Earthstone’s ability to replace oil and natural gas reserves; and any loss of senior management or technical personnel. Earthstone Annual Report on Form 10-K / A for the Year Ended December 31, 2020, the quarterly reports on Form 10-Q, recent current reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”) address some of the identified significant risk factors that may affect Earthstone’s business, results of operations and finances. state. Earthstone assumes no obligation to publicly review or update any forward-looking statements, except as required by law.

Contacts

Mark Lumpkin, Jr.

Executive Vice President – Chief Financial Officer

281-298-4246 / [email protected]

Scott Thelander

Vice President of Finance

281-298-4246 / [email protected]

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SOURCE Earthstone Energy, Inc.

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