ACQUISITIONS & DIVESTITURES

9 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

HighPoint Acquisition

On April 1, 2021, Bonanza Creek completed its previously announced acquisition of HighPoint Resources Corporation, a Delaware corporation (“HighPoint”), pursuant to the terms of HighPoint’s prepackaged plan of reorganization under Chapter 11 of the United States Bankruptcy Code (the “Prepackaged Plan”), which was confirmed by the U.S. Bankruptcy Court for the District of Delaware on March 18, 2021 pursuant to a confirmation order, and went effective on April 1, 2021 (the “HighPoint Merger”).

The Prepackaged Plan implements the merger and restructuring transactions in accordance with the Agreement and Plan of Merger, dated as of November 9, 2020 (the “HighPoint Merger Agreement”), by and among Bonanza Creek, HighPoint and Boron Merger Sub, Inc., a wholly-owned subsidiary of Bonanza Creek (“Merger Sub”). Pursuant to the Prepackaged Plan and the HighPoint Merger Agreement, at the effective time of the HighPoint Merger (the “Effective Time”) and the effective date under the Prepackaged Plan, Merger Sub merged with and into HighPoint, with HighPoint continuing as the surviving corporation and wholly-owned subsidiary of Bonanza Creek. At the Effective Time, each eligible share of common stock, par value $0.001 per share, of HighPoint issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive 0.11464 shares of common stock, par value $0.01 per share, of Bonanza Creek (“Bonanza Creek Common Stock”), with cash paid in lieu of the issuance of any fractional shares. As a result, the Company issued approximately 487,952 shares of Bonanza Creek Common Stock to former HighPoint stockholders.

Concurrently with the HighPoint Merger and pursuant to the Prepackaged Plan, and in exchange for the $625 million in aggregate principal amount outstanding of 7.0% Senior Notes due 2022 of HighPoint Operating Corporation (“HighPoint OpCo”) and 8.75% Senior Notes due 2025 of HighPoint OpCo (collectively, the “HighPoint Senior Notes”), Bonanza Creek issued to all holders of HighPoint Senior Notes an aggregate of (i) 9,314,214 shares of Bonanza Creek Common Stock and (ii) $100 million aggregate principal amount of 7.5% Senior Notes due 2026 of Bonanza Creek (“Bonanza Creek 7.5% Senior Notes”). Please refer to Note 5 - Long-term Debt for further discussion of the Bonanza Creek 7.5% Senior Notes.

Immediately after the Effective Time, in connection with the HighPoint Merger, Bonanza Creek entered into the Second Amendment, dated April 1, 2021, to the Credit Facility. Please refer to Note 5 - Long-term Debt for further discussion.

The following tables present the HighPoint Merger consideration and purchase price allocation of the assets acquired and the liabilities assumed in the HighPoint Merger:


Merger Consideration (in thousands except per share amount)
Shares of Bonanza Creek Common Stock issued to existing holders of HighPoint Common Stock(1)	488
Shares of Bonanza Creek Common Stock issued to existing holders of HighPoint Senior Notes	9,314
Total additional shares of Bonanza Creek Common Stock issued as merger consideration	9,802

Closing price per share of Bonanza Creek Common Stock(2)	$	38.25

Merger consideration paid in shares of Bonanza Creek Common Stock	$	374,933
Aggregate principal amount of Bonanza Creek 7.5% Senior Notes	100,000
Total merger consideration	$	474,933

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(1) Based on the number of shares of HighPoint Common Stock issued and outstanding as of April 1, 2021 and the conversion ratio of 0.11464 per share of Bonanza Creek Common Stock.

(2) Based on the closing stock price of Bonanza Creek Common Stock on April 1, 2021.


Purchase Price Allocation (in thousands)
Assets Acquired
Cash and cash equivalents	$	49,827
Accounts receivable - oil and gas sales	26,343
Accounts receivable - joint interest and other	9,161
Prepaid expenses and other	3,608
Inventory of oilfield equipment	4,688
Proved properties	539,820
Other property and equipment, net of accumulated depreciation	2,769
Right-of-use assets	4,010
Deferred income tax assets	110,513
Other noncurrent assets	797
Total assets acquired	$	751,536

Liabilities Assumed
Accounts payable and accrued expenses	$	51,088
Oil and gas revenue distribution payable	20,786
Lease liability	744
Derivative liability	13,481
Current portion of long-term debt	154,000
Lease liability (long-term)	3,266
Ad valorem taxes	3,746
Derivative liability (long-term)	5,019
Asset retirement obligations for oil and gas properties	24,473
Total liabilities assumed	276,603
Net assets acquired	$	474,933

As part of the HighPoint Merger, the Company obtained net operating losses of $170.6 million. The HighPoint Merger was accounted for under the acquisition method of accounting for business combinations. Accordingly, we conducted assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition were expensed as incurred. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market, and therefore represent Level 3 inputs. The fair values of crude oil and natural gas properties and asset retirement obligations were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of proved oil and gas properties include estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, and a market-based weighted-average cost of capital rate of approximately 13%. These inputs require significant judgments and estimates by management at the time of the valuation.

The following unaudited pro forma financial information represents a summary of the consolidated results of operations for the nine months ended September 30, 2021 and for the three and nine months ended September 30, 2020, assuming the acquisition had been completed as of January 1, 2020. The financial information for the three months ended September 30, 2021 is included in our statement of operations and therefore does not require a pro forma disclosure. The pro forma financial information includes certain non-recurring pro forma adjustments that were directly attributable to the business combination. The pro forma financial information is not necessarily indicative of the results of operations that would have been achieved if the acquisition had been effective as of these dates, or of future results.


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020		2021		2020
	(in thousands, except per share data)
Total revenue	$	126,163	$	492,176	$	345,626
Net income (loss)	16,030		(26,058)		(1,007,643)

Net income (loss) per common share:
Basic	$	0.52	$	(0.84)	$	(32.98)
Diluted	$	0.52	$	(0.84)	$	(32.98)

Extraction Merger

On May 9, 2021, Bonanza Creek, Raptor Eagle Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Bonanza Creek, and Extraction Oil & Gas, Inc., a Delaware corporation (“XOG”), entered into an Agreement and Plan of Merger (the “XOG Merger Agreement”), providing for a merger of equals between Bonanza Creek and XOG (the “XOG Merger”). The XOG Merger is expected to close in November 2021, contingent upon a number of factors disclosed in the XOG Merger Agreement. Once closed, the Company intends to increase annual dividend payments to approximately $1.60 per share.

Crestone Peak Merger

On June 6, 2021, Bonanza Creek, Raptor Condor Merger Sub 1, Inc., a Delaware corporation and a wholly owned subsidiary of Bonanza Creek (“Merger Sub 1”), Raptor Condor Merger Sub 2, LLC, a Delaware limited liability company and a wholly owned subsidiary of BCEI (“Merger Sub 2”), Crestone Peak Resources LP, a Delaware limited partnership (“CPR”), CPPIB Crestone Peak Resources America Inc., a Delaware corporation (“Crestone Peak”), Crestone Peak Resources Management LP, a Delaware limited partnership (“CPR Management LP”), and, Extraction Oil & Gas, Inc., a Delaware corporation, entered into an Agreement and Plan of Merger (the “Crestone Peak Merger Agreement”).

The Crestone Peak Merger Agreement, among other things, provides for the Company's acquisition of Crestone Peak through (i) the merger of Merger Sub 1 with and into Crestone Peak (the “Merger Sub 1 Merger”), with Crestone Peak continuing its existence as the surviving corporation following the Merger Sub 1 Merger (the “Surviving Corporation”), and (ii) the subsequent merger of the Surviving Corporation with and into Merger Sub 2 (the “Merger Sub 2 Merger” and together with the Merger Sub 1 Merger, the “Crestone Peak Merger”), with Merger Sub 2 continuing as the surviving entity as a wholly owned subsidiary of Bonanza Creek.

The closing of the Crestone Peak Merger is expressly conditioned on the closing of the previously announced XOG Merger pursuant to the XOG Merger Agreement. The Crestone Peak Merger is expected to close in conjunction with the XOG merger in November 2021, contingent upon a number of factors disclosed in the Crestone Peak Merger Agreement. Once closed, the Company intends to increase annual dividend payments to approximately $1.85 per share.

Merger transaction costs of $5.6 million and $27.1 million related to the aforementioned mergers and acquisitions were accounted for separately from the assets and liabilities assumed and are included in merger transaction costs in the Company's statements of operations for the three and nine months ended September 30, 2021, respectively.