Equity

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Shareholders' Equity and Noncontrolling Interest

Note 9—Shareholders' Equity and Noncontrolling Interest

On April 2, 2020, the legacy owners of CRP (the “Centennial Contributors”) converted all of their remaining 1,034,119 CRP Common Units (and corresponding shares of Class C Common Stock) into Class A Common Stock (the “Conversion”), which eliminated the noncontrolling interest ownership in CRP. No cash proceeds were received by the Company in connection with the Conversion, and deferred tax expense of $2.2 million was recorded in equity.

During 2019, the Centennial Contributors converted 10,969,064 of their CRP Common Units (and corresponding shares of Class C Common Stock) into Class A Common Stock. No cash proceeds were received by the Company and deferred tax expense of $17.5 million was recorded in equity as a result of the conversion of shares from the noncontrolling interest owner.

On March 7, 2018, Silver Run Sponsor, LLC (“Silver Run Sponsor”), affiliates of Riverstone Investment Group LLC (“Riverstone”) and the Centennial Contributors completed an underwritten public offering of 25,000,000 shares of Class A Common Stock. No cash proceeds were received by the Company in connection with this offering and 3,347,647 shares of CRP Common Units (and corresponding shares of Class C Common Units) were converted to shares of Class A Common Stock on a one-to-one basis. A tax benefit of $7.2 million was recorded in equity as a result of the conversion of shares from the noncontrolling interest owner.

Class A Common Stock

 Holders of the Company's Class A Common Stock are entitled to one vote for each share held on all matters submitted to a vote by the Company's stockholders, except as required by law. Unless specified in the Company’s second amended and restated certificate of incorporation (the “Charter”) (including any certificate of designation of preferred stock) or the Company’s second amended and restated bylaws, or as required by applicable provisions of the Delaware General Corporation Law or applicable stock exchange rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such matter voted on by the Company’s stockholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors. Subject to the rights of the holders of any outstanding series of preferred stock, the holders of the Class A Common Stock are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.

In the event of a liquidation, dissolution or winding up of the Company, the holders of the Class A Common Stock are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the Class A Common Stock. The holders of the Class A Common Stock have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the Class A Common Stock.

Class C Common Stock

The Company had no shares of Class C Common Stock outstanding as of December 31, 2020 as the remaining shares were converted on April 2, 2020 as part of the Conversion discussed above. The shares converted represented the remaining portion of the 20,000,000 shares of Class C Common Stock issued to the Centennial Contributors in connection with the acquisition of approximately 89% of the outstanding membership interests in CRP, consummated on October 11, 2016 (the “Business Combination”).

Prior to the Conversion, holders of Class C Common Stock, together with holders of the Class A Common Stock voting as a single class, had the right to vote on all matters properly submitted to a vote of the stockholders. In addition, the holders of Class C Common Stock, voting as a separate class, were entitled to approve any amendment, alteration or repeal of any provision of the Charter that would alter or change the powers, preferences or relative, participating, optional, other or special rights of the Class C Common Stock. Holders of Class C Common Stock were not entitled to any dividends from the Company and were not entitled to receive any of its assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of its affairs.

Shares of Class C Common Stock were only allowed to be issued to the Centennial Contributors, their respective successors and assigns, as well as any permitted transferees of the Centennial Contributors. Holders of Class C Common Stock had the right to cause CRP to redeem all or a portion of their CRP Common Units in exchange for shares of the Company’s Class A Common Stock or, at CRP’s option, an equivalent amount of cash.

Preferred Stock

In connection with the Business Combination, the Company issued one share of Series A Preferred Stock at par value, $0.0001 per share (the “Series A Preferred Stock”) to one of the Centennial Contributors. The Series A Preferred Stock provided the holder thereof with the right to nominate and elect one director to the Company’s Board of Directors, but it did not provide any other voting rights or rights with respect to dividends except distributions in liquidation in the amount of $0.0001 per share. In July 2020, the Company redeemed the one share of Series A Preferred Stock after NGP X US Holdings, L.P., the current holder of the share of Series A Preferred Stock and a former indirect equity owner of CRP, ceased to own, in the aggregate, at least 5,000,000 CRP Common Units and/or shares of Class A Common Stock.

Warrants

Simultaneously with the closing of the Company’s initial public offering, 8,000,000 warrants were purchased by Silver Run Sponsor in a private placement (the “Private Placement Warrants”). The Private Placement Warrants are non-redeemable so long as they are held by Riverstone or its permitted transferees. Each whole Private Placement Warrant is exercisable for one whole share of Class A Common Stock at a price of $11.50 per share. The Private Placement Warrants became exercisable on March 1, 2017 and will expire on October 11, 2021 (five years after the completion of the Business Combination) or earlier upon redemption or liquidation. As of December 31, 2020, 8,000,000 Private Placement Warrants remained outstanding.

Noncontrolling Interest

The noncontrolling interest relates to CRP Common Units that were issued to the Centennial Contributors in connection with the Business Combination. At the date of the Business Combination, the noncontrolling interest held 10.9% of the ownership in CRP. The noncontrolling interest percentage is affected by various equity transactions such as CRP Common Unit and Class C Common Stock exchanges and Class A Common Stock activities.

As of December 31, 2019 and 2018, the noncontrolling interest ownership of CRP decreased to 0.37% and 4.34%, respectively. The decreases were the result of the exchange of CRP Common Units (and corresponding shares of Class C Common Stock) for Class A Common Stock. As of December 31, 2020, the noncontrolling interest ownership of CRP was reduced to zero due to the Conversion discussed above and CRP has since been a wholly-owned subsidiary of Centennial.

The Company consolidated the results of operations and cash flows of CRP and reflected the portion retained by other holders of CRP Common Units as a noncontrolling interest through the date of the Conversion. Refer to the consolidated statements of shareholders’ equity for a summary of the activity attributable to the noncontrolling interest during the periods.