UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37907


			EXTRACTION OIL & GAS, INC.
			(Exact name of registrant as specified in its charter)

Delaware		46-1473923
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
370 17th Street
Suite 5300
Suite 5200
Denver,	Colorado	80202
(Address of principal executive offices)		(Zip Code)

(720) 557-8300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, par value $0.01

XOG

NASDAQ Global Select Market

Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐ Accelerated Filer ☒☐ Non-Accelerated Filer ☐☒ Smaller Reporting Company ☒ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

~~Indicate~~The bytotal ~~check~~number ~~mark~~of ~~whether~~shares ~~the~~of ~~registrant~~common isstock, apar ~~shell~~value ~~company~~$0.01 ~~(as~~per ~~defined~~share, inoutstanding ~~Rule~~as ~~12b-2~~ of ~~the~~May 21, ~~Exchange~~2021 ~~Act)~~was 25,757,478. ~~Yes ☐ No ☒~~

The total number of shares of common stock, par value $0.01 per share, outstanding as of November 6, 2020 was 138,371,578.

Table of Contents

EXTRACTION OIL & GAS, INC.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019	3
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	4
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity and Noncontrolling Interest for the three and nine months ended September 30, 2020 and 2019	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4130
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6547
Item 4.	Controls and Procedures	6647
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	6748
Item 1A.	Risk Factors	6748
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6848
Item 3.	Defaults upon Senior Securities	6848
Item 4.	Mine Safety Disclosures	6948
Item 5.	Other Information	6948
Item 6.	Exhibits	6949
	Signatures	7051

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EXTRACTION OIL & GAS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Debtor-In-Possession)

(Unaudited)

	September 30,2020		December 31,2019
	Successor				Predecessor
ASSETS
	March 31, 2021				December 31, 2020
Current Assets:
ASSETS
Cash and cash equivalents	$	121,165	$	32,382
Current Assets:
Accounts receivable, net
Cash and cash equivalents	$	38,430			$	205,890
Trade	53,485		32,009
Restricted cash—Note 2	25,641				—
Oil, natural gas and NGL sales	54,349		105,103
Accounts receivable, net
Inventory, prepaid expenses and other	48,951		36,702
Trade	24,508				13,266
Commodity derivative asset	32,625		17,554
Oil, natural gas and NGL sales	64,893				63,429
Total Current Assets	310,575		223,750
Inventory, prepaid expenses and other	30,274				36,382
Property and Equipment (successful efforts method), at cost:
Commodity derivative asset	—				6,971
Proved oil and gas properties	4,718,471		4,530,934
Total Current Assets	183,746				325,938
Unproved oil and gas properties	334,971		524,214
Property and Equipment (successful efforts method), at cost:
Wells in progress	140,290		149,733
Proved oil and gas properties	969,594				4,743,463
Less: accumulated depletion, depreciation, amortization and impairment charges	(3,218,591)		(2,985,983)
Unproved oil and gas properties	136,679				220,380
Net oil and gas properties	1,975,141		2,218,898
Wells in progress	6,984				129,058
Gathering systems and facilities, net of accumulated depreciation	—		315,777
Less: accumulated depletion, depreciation, amortization and impairment charges	(36,233)				(3,459,689)
Other property and equipment, net of accumulated depreciation	71,379		72,542
Net oil and gas properties	1,077,024				1,633,212
Net Property and Equipment	2,046,520		2,607,217
Other property and equipment, net of accumulated depreciation and impairment charges	56,226				56,701
Non-Current Assets:
Net Property and Equipment	1,133,250				1,689,913
Commodity derivative asset	—		13,229
Non-Current Assets:
Other non-current assets	13,476		82,761
Commodity derivative asset	1,191				—
Total Non-Current Assets	13,476		95,990
Other non-current assets	13,936				9,348
Total Assets	$	2,370,571	$	2,926,957
Total Non-Current Assets	15,127				9,348
LIABILITIES AND STOCKHOLDERS' EQUITY
Total Assets	$	1,332,123			$	2,025,199
Current Liabilities:
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities	$	38,481	$	190,864
Current Liabilities:
Revenue payable	38,544		108,493
Accounts payable and accrued liabilities	$	115,550			$	80,082
Production taxes payable	2,503		115,489
Revenue payable	145,004				49,376
Commodity derivative liability	676		1,998
Production taxes payable	99,929				2,595
Accrued interest payable	5,369		20,625
Commodity derivative liability	26,674				2,147
Asset retirement obligations	—		27,058
Accrued interest payable	1,832				692
DIP Credit Facility—Note 6	110,000		—
Asset retirement obligations	9,942				—
Credit Facility—Note 6	453,746		—
DIP Credit Facility—Note 4	—				106,727
Total Current Liabilities	649,319		464,527
Prior Credit Facility—Note 4	—				453,747
Non-Current Liabilities:
Current tax liability	23,325				—
Credit Facility	—		470,000
Total Current Liabilities	422,256				695,366
Senior Notes, net of unamortized debt issuance costs	—		1,085,777
Non-Current Liabilities:
Production taxes payable	17,116		98,740
RBL Credit Facility—Note 4	93,746				—
Commodity derivative liability	—		108
Production taxes payable	83,197				33,627
Other non-current liabilities	—		54,579
Commodity derivative liability	132				—
Asset retirement obligations	—		68,850
Other non-current liabilities	19,204				—
Total Non-Current Liabilities	17,116		1,778,054
Asset retirement obligations	78,125				—
Liabilities Subject to Compromise	2,109,446		—
Total Non-Current Liabilities	274,404				33,627
Total Liabilities	2,775,881		2,242,581
Liabilities Subject to Compromise	—				2,143,497
Commitments and Contingencies—Note 14
Total Liabilities	696,660				2,872,490
Series A Convertible Preferred Stock, $0.01 par value; 50,000,000 shares authorized, 185,280 issued and outstanding	189,840		175,639
Commitments and Contingencies—Note 12
Stockholders' Equity (Deficit):
Series A Convertible Preferred Stock, $0.01 par value; 50,000,000 shares authorized, 185,280 issued and outstanding as of December 31, 2020	—				191,754
Common stock, $0.01 par value; 900,000,000 share authorized; 138,370,948 and 137,657,922 issued and outstanding, respectively	1,336		1,336
Stockholders' Equity (Deficit):
Treasury stock, at cost, 38,859,078 shares	(170,138)		(170,138)
Predecessor common stock, $0.01 par value; 900,000,000 shares authorized; 136,588,900 issued and outstanding as of December 31, 2020	—				1,336
Additional paid-in capital	2,140,364		2,156,383
Successor common stock, $0.01 par value; 900,000,000 shares authorized; 25,703,212 issued and outstanding as of March 31, 2021	257				—
Accumulated deficit	(2,566,712)		(1,743,208)
Predecessor treasury stock, at cost, 38,859,078 shares as of December 31, 2020	—				(170,138)
Total Extraction Oil & Gas, Inc. Stockholders' Equity (Deficit)	(595,150)		244,373
Additional paid-in capital	546,652				2,140,499
Noncontrolling interest	—		264,364
Retained earnings (accumulated deficit)	88,554				(3,010,742)
Total Stockholders' Equity (Deficit)	~~(595~~635,~~150)~~463		~~508,737~~		(1,039,045)
Total Liabilities and Stockholders' Equity	$	21,~~370~~332,~~571~~123	$	~~2,926,957~~	$	2,025,199

~~THE~~The ~~ACCOMPANYING~~accompanying ~~NOTES~~notes ~~ARE~~are ANan ~~INTEGRAL~~integral ~~PART~~part OFof these condensed consolidated financial statements.

THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

EXTRACTION OIL & GAS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Debtor-In-Possession)

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	Successor				Predecessor
	2020		2019				2020				2019
	For the Period from January 21 through March 31,				For the Period from January 1 through January 20,				For the Three Months Ended March 31,
Revenues:
	2021				2021				2020
Oil sales	$	111,072	$	151,042			$	271,581			$	501,591
Revenues:
Natural gas sales	24,413		16,801				62,734				74,385
Oil sales	$	100,547			$	27,137			$	124,219
NGL sales	22,741		9,099				50,753				44,940
Natural gas sales	117,336				7,806				22,302
Gathering and compression	—		—				1,473				—
NGL sales	31,559				8,099				17,193
Total Revenues	158,226		176,942				386,541				620,916
Gathering and compression	—				—				1,473
Operating Expenses:
Total Revenues	249,442				43,042				165,187
Lease operating expense	12,401		22,979				65,775				68,445
Operating Expenses:
Midstream operating expenses	—		—				3,935				—
Lease operating expense	10,655				2,555				30,390
Transportation and gathering	5023,~~166~~188		~~6,922~~		6,256		~~99,258~~		22,786		~~29,142~~
Production taxes	121,~~696~~440		~~9,711~~		3,294		~~19,828~~		13,454		~~46,419~~
Exploration and abandonment expenses	~~9,762~~759		~~13,245~~		316		~~184,903~~		112,480		~~32,725~~
Depletion, depreciation, amortization and accretion	8538,~~306~~575		~~114,996~~		16,133		~~243,977~~		76,051		~~352,134~~
Impairment of long lived assets	—		—				1,736				11,233
Impairment of long-lived assets	—				—				775
Gain on sale of property and equipment	—		(1,011)				—				(1,329)
General and administrative expense	7,541				2,211				10,596
General and administrative expense	11,605		27,445				47,350				85,835
Other operating expense	3,890				1,107				56,510
Other operating expenses	9,766		—				75,549				—
Total Operating Expenses	106,048				31,872				323,042
Total Operating Expenses	180,702		194,287				742,311				624,604
Operating Income (Loss)	143,394				11,170				(157,855)
Operating Loss	(22,476)		(17,345)				(355,770)				(3,688)
Other Income (Expense):
Other Income (Expense):
Commodity derivative gain (loss)	(28,487)				(12,586)				263,015
Commodity derivative gain (loss)	(9,673)		87,956				184,041				39,383
Loss on deconsolidation of Elevation Midstream, LLC	—				—				(73,139)
Loss on deconsolidation of Elevation Midstream, LLC	—		—				(73,139)				—
Reorganization items, net	—				873,908				—
Reorganization items, net	(501,073)		—				(527,992)				—
Interest expense(1)	(3,034)				(1,534)				(21,358)
Interest expense(1)	(7,388)		(23,224)				(49,059)				(54,791)
Other income	6				12				574
Other income	3		1,337				615				3,332
Total Other Income (Expense)	(31,515)				859,800				169,092
Total Other Income (Expense)	(518,131)		66,069				(465,534)				(12,076)
Income Before Income Taxes	111,879				870,970				11,237
Income (Loss) Before Income Taxes	(540,607)		48,724				(821,304)				(15,764)
Income tax expense	(23,325)				—				(2,200)
Income tax expense	—		(14,800)				(2,200)				(900)
Net Income	$	88,554			$	870,970			$	9,037
Net Income (Loss)	$	(540,607)	$	33,924			$	(823,504)			$	(16,664)
Net income attributable to noncontrolling interest	—				—				6,160
Net income attributable to noncontrolling interest	—		5,776				6,160				13,849
Net Income Attributable to Extraction Oil & Gas, Inc.	88,554				870,970				2,877
Net Income (Loss) Attributable to Extraction Oil & Gas, Inc.	(540,607)		28,148				(829,664)				(30,513)
Adjustments to reflect Series A Preferred Stock dividends and accretion of discount	—				(418)				(6,518)
Adjustments to reflect Series A Preferred Stock dividends and accretion of discount	(1,865)		(4,403)				(14,201)				(13,079)
Net Income (Loss) Available to Common Shareholders, Basic and Diluted	$	88,554			$	870,552			$	(3,641)
Net Income (Loss) Available to Common Shareholders, Basic and Diluted	$	(542,472)	$	23,745			$	(843,865)			$	(43,592)
Income (Loss) Per Common Share (Note 11)
Income (Loss) Per Common Share (Note 13)
Basic	$	3.47			$	6.37			$	(0.03)
Basic and diluted	$	(3.92)	$	0.17			$	(6.11)			$	(0.28)
Diluted	$	3.41			$	6.37			$	(0.03)
Weighted Average Common Shares Outstanding
Basic and diluted	138,348		137,789				138,080				155,847
Basic	25,497				136,589				137,726
Diluted	25,976				136,589				137,726

(1) Absent the automatic stay described in the Company’s December 31, 2020 Annual Report on Form 10-K in Note 6 8—Long-Term Debt, interest expense for the ~~three~~Predecessor ~~and~~period ~~nine~~January ~~months~~1 ~~ended~~to ~~September 30~~January 20, ~~2020~~2021 would have ~~been~~included an additional $243.67 million related to 2024 and ~~$69.2~~2026 ~~million,~~Senior ~~respectively~~Notes.

~~THE~~The ~~ACCOMPANYING~~accompanying ~~NOTES~~notes ~~ARE~~are ANan ~~INTEGRAL~~integral ~~PART~~part OFof these condensed consolidated financial statements.

THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

EXTRACTION OIL & GAS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Debtor-In-Possession)

(In thousands)

(Unaudited)

	For the Nine Months Ended September 30,
	Successor				Predecessor
	2020		2019
	For the Period from January 21 through March 31,				For the Period from January 1 through January 20,		For the Three Months Ended March 31,
Cash flows from operating activities:
	2021				2021		2020
Net loss	$	(823,504)	$	(16,664)
Cash flows from operating activities:
Reconciliation of net loss to net cash provided by operating activities:
Net income	$	88,554			$	870,970	$	9,037
Depletion, depreciation, amortization and accretion	243,977		352,134
Reconciliation of net income to net cash provided by operating activities:
Abandonment and impairment of unproved properties	179,022		26,166
Depletion, depreciation, amortization and accretion	38,575				16,133		76,051
Impairment of long lived assets	1,736		11,233
Abandonment and impairment of unproved properties	—				—		106,928
Gain on sale of property and equipment	—		(319)
Impairment of long-lived assets	—				—		775
Gain on sale of assets of unconsolidated subsidiary	—		(1,010)
Amortization of debt issuance costs	452				113		1,242
Gain on repurchase of 2026 Senior Notes	—		(10,486)
Non-cash lease expense	871				264		4,871
Amortization of debt issuance costs	3,345		3,799
Non-cash reorganization items, net	—				(902,653)		—
Non-cash lease expense	10,549		7,739
Non-cash discount on rights offering	1,792				—		—
Non-cash reorganization items, net	13,398		—
Contract asset	—				—		8,465
Contract asset	12,317		22,175
Commodity derivatives loss (gain)	28,487				12,586		(263,015)
Commodity derivatives gain	(184,041)		(39,383)
Settlements on commodity derivatives	(5,025)				542		24,932
Settlements on commodity derivatives	76,992		(18,527)
Earnings in unconsolidated subsidiaries	—				—		(480)
Premiums paid on commodity derivatives	—		(2,852)
Loss on deconsolidation of Elevation Midstream, LLC	—				—		73,139
Earnings in unconsolidated subsidiaries	(480)		(1,217)
Deferred income tax expense	—				—		2,200
Loss on deconsolidation of Elevation Midstream, LLC	73,139		—
Stock-based compensation	2,174				302		—
Distributions from unconsolidated subsidiaries	—		2,630
Changes in current assets and liabilities:
Deferred income tax expense	2,200		900
Accounts receivable—trade	(12,008)				(598)		(9,127)
Stock-based compensation	4,462		39,306
Accounts receivable—oil, natural gas and NGL sales	(195)				(1,269)		66,253
Changes in current assets and liabilities:
Inventory, prepaid expenses and other	8,182				(778)		584
Accounts receivable—trade	(19,384)		(1,395)
Accounts payable and accrued liabilities	(30,580)				16,192		(7,699)
Accounts receivable—oil, natural gas and NGL sales	50,754		16,293
Accounts payable and accrued liabilities - related party	—				—		46,777
Inventory, prepaid expenses and other	(26,868)		1,078
Revenue payable	17,251				18,529		(1,690)
Accounts payable and accrued liabilities	62,668		(6,469)
Production taxes payable	(13,534)				(13,750)		21,002
Accrued damages for rejected and settled contracts	494,398		—
Accrued interest payable	1,832				(692)		(2,583)
Revenue payable	(6,986)		(21,723)
Current tax liability	23,325				—		—
Production taxes payable	(16,311)		12,211
Asset retirement expenditures	(1,045)				(545)		(10,563)
Accrued interest payable	16,420		(4,977)
Net cash provided by operating activities	149,108				15,346		147,099
Asset retirement expenditures	(18,750)		(14,081)
Cash flows from investing activities:
Net cash provided by operating activities	149,053		356,561
Oil and gas property additions	(22,451)				(9,120)		(143,000)
Cash flows from investing activities:
Sale of property and equipment	—				—		12,117
Oil and gas property additions	(218,382)		(526,187)
Gathering systems and facilities additions, net of cost reimbursements	—				—		4,193
Sale of property and equipment	11,147		41,982
Other property and equipment additions	(248)				—		(2,980)
Gathering systems and facilities additions, net of cost reimbursements	4,193		(169,180)
Investment in unconsolidated subsidiaries	—				—		(10,033)
Other property and equipment additions	(3,574)		(32,575)
Net cash used in investing activities	(22,699)				(9,120)		(139,703)
Investment in unconsolidated subsidiaries	(10,033)		(22,487)
Cash flows from financing activities:
Distributions from unconsolidated subsidiary, return of capital	—		569
Borrowings under Prior Credit Facility—Note 4	—				—		70,000
Sale of assets of unconsolidated subsidiary	—		1,010
Repayments under Prior Credit Facility—Note 4	—				(453,872)		(70,000)
Net cash used in investing activities	(216,649)		(706,868)
Repayments under DIP Credit Facility—Note 4	—				(106,727)		—
Cash flows from financing activities:
Borrowings under RBL Credit Facility—Note 4	—				265,000		—
Borrowings under Credit Facility	200,500		375,000
Repayments under RBL Credit Facility—Note 4	(180,000)				—		—
Repayments under Credit Facility	(70,000)		(110,000)
Proceeds from issuance of common stock	7,000				200,473		—
Borrowings under DIP Credit Facility	35,000		—
Payment of employee payroll withholding taxes	—				—		(35)
Repurchase of 2026 Senior Notes	—		(39,325)
Debt issuance costs and other financing fees	—				(6,328)		(22)
Repurchase of common stock	—		(137,743)
Net cash used in financing activities	(173,000)				(101,454)		(57)
Payment of employee payroll withholding taxes	(120)		(1,164)
Effect of deconsolidation of Elevation Midstream, LLC	—				—		(7,728)
Dividends on Series A Preferred Stock	—		(8,164)
Decrease in cash and cash equivalents	(46,591)				(95,228)		(389)
Debt issuance costs and other financing fees	(1,273)		(2,055)
Cash, cash equivalents and restricted cash at beginning of period	110,662				205,890		32,382
Proceeds from issuance of Preferred Units	—		99,000
Cash, cash equivalents and restricted cash at end of the period	$	64,071			$	110,662	$	31,993
Preferred Unit issuance costs	—		(2,500)
Supplemental cash flow information:
Net cash provided by financing activities	164,107		173,049
Property and equipment included in accounts payable and accrued liabilities	$	17,192			$	16,320	$	99,602
Effect of deconsolidation of Elevation Midstream, LLC	(7,728)		—
Cash paid for interest	787				2,245		24,865
Increase (decrease) in cash and cash equivalents	88,783		(177,258)
Cash paid for reorganization items, net	15,029				6,545		—
Cash, cash equivalents at beginning of period	32,382		234,986
Accretion of beneficial conversion feature of Series A Preferred Stock	—				418		1,770
Cash, cash equivalents at end of the period	$	121,165	$	57,728
Preferred Units commitment fees and dividends paid-in-kind	—				—		6,160
Supplemental cash flow information:
Series A Preferred Stock dividends paid-in-kind	—				—		4,748
Property and equipment included in accounts payable and accrued liabilities	$	38,898	$	158,178
Draw on letter of credit increasing the RBL Credit Facility	8,746				—		—
Cash paid for interest	$	34,188	$	71,878
Draw on letter of credit increasing the Prior Credit Facility	—				125		—
Cash paid for reorganization items, net	$	10,454	$	—
General unsecured claim within accounts payable and accrued liabilities settled with common stock	11,088				—		—
Accretion of beneficial conversion feature of Series A Preferred Stock	$	5,452	$	4,915
Backstop Commitment Agreement premium within accounts payable and accrued liabilities settled with common stock	—				23,866		—
Preferred Units commitment fees and dividends paid-in-kind	$	6,160	$	13,849
Series A Preferred Stock dividends paid-in-kind	$	8,749	$	—
Derivative unwinds decreasing the Credit Facility	$	96,065	$	—
Draw on letter of credit increasing the Credit Facility	$	24,311	$	—

~~THE~~The ~~ACCOMPANYING~~accompanying ~~NOTES~~notes ~~ARE~~are ANan ~~INTEGRAL~~integral ~~PART~~part OFof these condensed consolidated financial statements.

THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

EXTRACTION OIL & GAS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND NONCONTROLLING INTEREST

STOCKHOLDERS’ EQUITY AND NONCONTROLLING INTEREST

(Debtor-In-Possession)

(In thousands)

(Unaudited)

	Common Stock			Treasury Stock			Additional Paid in Capital		Retained Earnings (Accumulated Deficit)		Extraction Oil & Gas, Inc. Stockholders' Equity (Deficit)		Noncontrolling Interest		Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Amount								Amount
Balance at January 1, 2020	176,517	$	1,336	38,859	$	(170,138)	$	2,156,383	$	(1,743,208)	$	244,373	$	264,364	$	508,737
Balance at January 1, 2020 (Predecessor)	176,517	$	1,336	38,859	$	(170,138)	$	2,156,383	$	(1,743,208)	$	244,373	$	264,364	$	508,737
Preferred Units commitment fees & dividends paid-in-kind	—	—		—	—		(6,160)		—		(6,160)		6,160		—
Series A Preferred Stock dividends	—	—		—	—		(4,748)		—		(4,748)		—		(4,748)
Accretion of beneficial conversion feature on Series A Preferred Stock	—	—		—	—		(1,770)		—		(1,770)		—		(1,770)
Restricted stock issued, net of tax withholdings and other	234	—		—	—		(35)		—		(35)		—		(35)
Net income	—	—		—	—		—		9,037		9,037		—		9,037
Effects of deconsolidation of Elevation Midstream, LLC	—	—		—	—		—		—		—		(270,524)		(270,524)
Balance at March 31, 2020	176,751	$	1,336	38,859	$	(170,138)	$	2,143,670	$	(1,734,171)	$	240,697	$	—	$	240,697
Balance at March 31, 2020 (Predecessor)	176,751	$	1,336	38,859	$	(170,138)	$	2,143,670	$	(1,734,171)	$	240,697	$	—	$	240,697
Stock-based compensation	—	—		—	—		2,560		—		2,560		—		2,560
Series A Preferred Stock dividends	—	—		—	—		(4,001)		—		(4,001)		—		(4,001)
Accretion of beneficial conversion feature on Series A Preferred Stock	—	—		—	—		(1,817)		—		(1,817)		—		(1,817)
Restricted stock issued, net of tax withholdings and other	452	—		—	—		(85)		—		(85)		—		(85)
Net loss	—	—		—	—		—		(291,934)		(291,934)		—		(291,934)
Balance at June 30, 2020	177,203	$	1,336	38,859	$	(170,138)	$	2,140,327	$	(2,026,105)	$	(54,580)	$	—	$	(54,580)
Stock-based compensation	—	—		—	—		1,902		—		1,902		—		1,902
Accretion of beneficial conversion feature on Series A Preferred Stock	—	—		—	—		(1,865)		—		(1,865)		—		(1,865)
Restricted stock issued, net of tax withholdings and other	27	—		—	—		—		—		—		—		—
Net loss	—	—		—	—		—		(540,607)		(540,607)		—		(540,607)
Balance at September 30, 2020	177,230	$	1,336	38,859	$	(170,138)	$	2,140,364	$	(2,566,712)	$	(595,150)	$	—	$	(595,150)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF


Balance at January 1, 2021 (Predecessor)	175,448	$	1,336	38,859	$	(170,138)	$	2,140,499	$	(3,010,742)	$	(1,039,045)	$	—	$	(1,039,045)
Stock-based compensation	—	—		—	—		302		—		302		—		302
Accretion of beneficial conversion feature on Series A Preferred Stock	—	—		—	—		(418)		—		(418)		—		(418)
Net income	—	—		—	—		—		870,970		870,970		—		870,970
Cancellation of Predecessor equity	(175,448)	(1,336)		(38,859)	170,138		(2,140,383)		2,139,772		168,191		—		168,191
Issuance of Successor equity	24,729	247		—	—		504,205		—		504,452		—		504,452
Issuance of Successor warrants	—	—		—	—		20,403		—		20,403		—		20,403
Balance at January 20, 2021 (Predecessor)	24,729	$	247	—	$	—	$	524,608	$	—	$	524,855	$	—	$	524,855


Balance at January 21, 2021 (Successor)	24,729	$	247	—	$	—	$	524,608	$	—	$	524,855	$	—	$	524,855
Stock-based compensation	—	—		—	—		2,174		—		2,174		—		2,174
Net income	—	—		—	—		—		88,554		88,554		—		88,554
Issuance of Successor equity for general unsecured claims	543	5		—	—		11,083		—		11,088		—		11,088
Issuance of Successor equity for rights offering	431	5		—	—		8,787		—		8,792		—		8,792
Balance at March 31, 2021 (Successor)	25,703	$	257	—	$	—	$	546,652	$	88,554	$	635,463	$	—	$	635,463

~~THESE~~The ~~CONDENSED~~accompanying ~~CONSOLIDATED~~notes ~~FINANCIAL~~are ~~STATEMENTS~~an integral part of these condensed consolidated financial statements.

Table of Contents

	Common Stock			Treasury Stock			Additional Paid in Capital		Accumulated Deficit		Extraction Oil & Gas, Inc. Stockholders' Equity		Noncontrolling Interest		Total Stockholders' Equity
	Shares	Amount		Shares	Amount								Amount
Balance at January 1, 2019	176,210	$	1,678	4,543	$	(32,737)	$	2,153,661	$	(375,788)	$	1,746,814	$	147,872	$	1,894,686
Preferred Units issuance costs	—	—		—	—		—		—		—		(10)		(10)
Preferred Units commitment fees & dividends paid-in-kind	—	—		—	—		(3,975)		—		(3,975)		3,975		—
Stock-based compensation	—	—		—	—		13,008		—		13,008		—		13,008
Series A Preferred Stock dividends	—	—		—	—		(2,721)		—		(2,721)		—		(2,721)
Accretion of beneficial conversion feature on Series A Preferred Stock	—	—		—	—		(1,596)		—		(1,596)		—		(1,596)
Repurchase of common stock	—	(77)		7,824	(32,135)		—		—		(32,212)		—		(32,212)
Restricted stock issued, net of tax withholdings	270	—		—	—		(454)		—		(454)		—		(454)
Net loss	—	—		—	—		—		(94,032)		(94,032)		—		(94,032)
Balance at March 31, 2019	176,480	$	1,601	12,367	$	(64,872)	$	2,157,923	$	(469,820)	$	1,624,832	$	151,837	$	1,776,669
Preferred Units issuance costs and discount	—	—		—	—		—		—		—		10		10
Preferred Units commitment fees & dividends paid-in-kind	—	—		—	—		(4,098)		—		(4,098)		4,098		—
Stock-based compensation	—	—		—	—		14,957		—		14,957		—		14,957
Series A Preferred Stock dividends	—	—		—	—		(2,722)		—		(2,722)		—		(2,722)
Accretion of beneficial conversion feature on Series A Preferred Stock	—	—		—	—		(1,637)		—		(1,637)		—		(1,637)
Repurchase of common stock	—	(217)		21,685	(84,067)		—		—		(84,284)		—		(84,284)
Restricted stock issued, net of tax withholdings	108	—		—	—		(128)		—		(128)		—		(128)
Net income	—	—		—	—		—		43,444		43,444		—		43,444
Balance at June 30, 2019	176,588	$	1,384	34,052	$	(148,939)	$	2,164,295	$	(426,376)	$	1,590,364	$	155,945	$	1,746,309
Preferred Units issued	—	—		—	—		—		—		—		99,000		99,000
Preferred Units issuance costs	—	—		—	—		—		—		—		(2,500)		(2,500)
Preferred Units commitment fees & dividends paid-in-kind	—	—		—	—		(5,776)		—		(5,776)		5,776		—
Stock-based compensation	—	—		—	—		11,387		—		11,387		—		11,387
Series A Preferred Stock dividends	—	—		—	—		(2,721)		—		(2,721)		—		(2,721)
Accretion of beneficial conversion feature on Series A Preferred Stock	—	—		—	—		(1,682)		—		(1,682)		—		(1,682)
Repurchase of common stock	—	(48)		4,807	(21,199)		—		—		(21,247)		—		(21,247)
Restricted stock issued, net of tax withholdings	344	—		—	—		(582)		—		(582)		—		(582)
Net income	—	—		—	—		—		33,924		33,924		—		33,924
Balance at September 30, 2019	176,932	$	1,336	38,859	$	(170,138)	$	2,164,921	$	(392,452)	$	1,603,667	$	258,221	$	1,861,888

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF

THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

EXTRACTION OIL & GAS, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(DEBTOR-IN-POSSESSION)

Note 1—Business and Organization

Extraction Oil & Gas, Inc. (the "“Company"” or "“Extraction")” is an independent oil and gas company focused on the acquisition, development and production of oil, natural gas and natural gas liquids (“NGLs”) reserves in the Rocky Mountain region, primarily in the Wattenberg Field of the Denver-Julesburg Basin (the "“DJ Basin"”) of Colorado~~, as well as the construction and support of midstream assets to gather crude oil, natural gas and water production~~. As described below in the section titled Voluntary Reorganization under Chapter 11 of the Bankruptcy Code ~~below~~, during the second quarter of 2020, the Company filed for bankruptcy and, as a result, was delisted from the NASDAQ Global Select Market on June 25, 2020 and began trading on the Pink Open Market under the symbol "“XOGAQ."” Also described below, on January 20, 2021 the Company emerged from bankruptcy as a reorganized entity and, as a result, was relisted on the NASDAQ Global Select Market on January 21, 2021 and began trading under the symbol “XOG.”

To facilitate our financial statement presentations, the Company refers to the post-emergence reorganized company in these condensed consolidated financial statements and footnotes as the Successor Company for periods subsequent to January 20, 2021 and to the pre-emergence company as the Predecessor Company for periods on or prior to January 20, 2021. This delineation between Predecessor Company periods and Successor Company periods is shown in the condensed consolidated financial statements, certain tables within the footnotes to the condensed consolidated financial statements and other parts of this Quarterly Report on Form 10-Q (“Quarterly Report”) through the use of a black line, calling out the lack of comparability between periods.

Bonanza Creek Energy, Inc. Merger

On May 9, 2021, Bonanza Creek Energy, Inc. (“Bonanza Creek”) and Extraction signed a merger agreement in an all-stock merger of equals. The merger is subject to customary closing conditions, and the Company currently expects it to close in the third quarter of 2021. Upon completion of the merger, the combined company will be named Civitas Resources, Inc. (“Civitas”). Bonanza Creek President and Chief Executive Officer, Eric Greager, will serve as President and CEO of Civitas. Other senior leadership positions will be filled by current executives of Bonanza Creek and Extraction. As designated in the merger agreement, of the six named officers, three will be from Bonanza Creek and three from Extraction. Extraction Chairman of the Board, Ben Dell, will serve as Chairman of Civitas, and Bonanza Creek and Extraction will each nominate four directors to Civitas’ diverse, eight-member Board.

Voluntary Reorganization under Chapter 11 of the Bankruptcy Code

As previously disclosed, on June 14, 2020 (the “Petition Date”), Extraction and its wholly owned subsidiaries (collectively, the “Debtors”), filed voluntary petitions for relief under chapter 11 ("“Chapter 11"”) of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The ~~Debtor's~~Debtors’ Chapter 11 cases (the “Chapter 11 Cases”) ~~are~~were ~~being~~ jointly administered under the caption In re Extraction Oil & Gas., et al. Case No. 20-11548 (CSS).

~~The~~On July 30, 2020, the Debtors ~~continue~~filed a proposed Plan of Reorganization (as amended, modified, or supplemented from time to ~~operate~~time, ~~their~~the ~~businesses~~“Plan”) and ~~manage~~related ~~their~~Disclosure ~~properties~~Statement (as amended or modified, the “~~debtors-in-possession~~Disclosure Statement”) ~~under~~describing the ~~jurisdiction~~Plan and the solicitation of votes to approve the ~~Bankruptcy~~same ~~Court~~from ~~and~~certain inof ~~accordance~~the Debtors’ creditors with respect to the ~~applicable~~Chapter ~~provisions~~11 ofCases. Subsequently on October 22, 2020 and November 5, 2020, the ~~Bankruptcy~~Debtors ~~Code~~filed first and ~~orders~~second amendments, respectively, to the Disclosure Statement. The hearing to consider approval of the Disclosure Statement was held on November 6, 2020. On November 6, 2020, the Bankruptcy Court. ~~The~~approved the adequacy of the Disclosure Statement and the Debtors ~~continue~~commenced a solicitation process to ~~operate~~obtain asvotes anon ~~ongoing~~the ~~business~~Plan. inThe ~~accordance~~Plan ~~with~~was ~~the~~confirmed ~~previously~~by ~~approved~~order of the Bankruptcy Court ~~orders.~~on December 23, 2020 (the “Confirmation Order”).

~~The~~On ~~commencement~~January of20, a2021 ~~voluntary proceeding in bankruptcy constituted an immediate event of default under the Credit Agreement~~ (~~as defined in Note 6—Long-Term Debt) and~~ the ~~indentures~~“Emergence ~~governing the Company’s Senior Notes (as defined below~~Date”), ~~resulting in the automatic and immediate acceleration of~~ all ofmaterial ~~the~~conditions ~~Company’s~~were ~~debt~~met, ~~outstanding under the Credit Agreement~~ and ~~Senior Notes. Accordingly,~~ the ~~Company~~Plan ~~has~~became ~~classified~~effective ~~its~~in ~~outstanding~~accordance ~~Senior~~with ~~Notes debt as liabilities subject to compromise on~~ its ~~condensed~~terms ~~consolidated~~and ~~balance~~the ~~sheet~~Company asemerged offrom ~~September~~Chapter ~~30, 2020~~11. ~~The~~Unless ~~Credit~~otherwise ~~Facility~~indicated, ~~(as~~capitalized ~~defined~~terms inused ~~Note~~but ~~6—Long-Term Debt) was~~ not ~~classified~~defined asherein ~~liabilities~~shall ~~subject~~have tothe ~~compromise~~meanings ~~because~~ascribed ~~it is fully secured and is expected~~ to bethem ~~unimpaired.~~in ~~Please~~the ~~refer to Note 4—Liabilities Subject to Compromise for more information~~Plan. ~~Pursuant~~On to the ~~Bankruptcy~~Emergence ~~Code~~Date and aspursuant ~~described in Note 6—Long-Term Debt, the filing of the Chapter 11 Cases automatically stayed most actions against the Debtors, including most actions~~ to ~~collect indebtedness incurred prior to~~ the ~~Petition Date or to exercise control over the Debtors’ property.~~Plan:

~~Restructuring Support Agreement~~6

AsTable ~~previously disclosed, on June 14, 2020, the Company entered into a Restructuring Support Agreement (the “RSA”) with (i) significant holders~~ of its 7.375% senior unsecured notes due 2024 (the “2024 Senior Notes”) issued pursuant to that certain indenture, dated as of August 1, 2017, by and among Extraction, as issuer, certain guarantors party thereto and Wilmington Savings Fund Society, FSB, as trustee (such trustee, “WSFS” and such indenture, the “2024 Senior Notes Indenture”) and (ii) significant holders (such holders, together with the foregoing significant holders under the 2024 Senior Notes, the “Consenting Stakeholders”) of its 5.625% senior unsecured notes due 2026 (the “2026 Senior Notes” and, together with the 2024 Senior Notes, the “Senior Notes”) issued pursuant to that certain indenture, dated as of January 25, 2018, by and among Extraction, the subsidiary guarantors party thereto and WSFS, as trustee (the “2026 Senior Notes Indenture” and, together with the 2024 Senior Notes Indenture, the “Senior Notes Indentures”). The RSA contemplates a financial restructuring of the existing indebtedness of, and equity interests in, the Company to be effectuated through a joint Chapter 11 plan of reorganization (as amended or modified, the “Restructuring Plan”). Contents

~~Restructuring~~•The ~~Plan,~~Company ~~Disclosure~~amended ~~Statement,~~ and ~~Backstop~~restated ~~Commitment~~its ~~Agreement~~certificate of incorporation and bylaws;

On•The ~~July~~Company ~~30,~~constituted ~~2020, the Debtors filed~~ a ~~proposed~~new ~~Restructuring~~board ~~Plan and related Disclosure Statement describing the Restructuring Plan and the solicitation~~ of ~~votes to approve the same from certain of the Debtors’ creditors with respect to the Chapter 11 Cases (as amended or modified, the “Disclosure Statement”). Subsequently on October 22,~~ directors;

•The Company appointed a new Chief Executive Officer, President and Chief Operating Officer, and Chief Financial Officer;

•The Successor Company issued new common stock (the “New Common Stock”) and New Warrants (as defined in Note 10—Equity) in reliance on exemptions from registration under Section 1145 of the Bankruptcy Code and Section 4(a)2 of the Securities Act, as applicable:

◦2,832,833 shares of New Common Stock pro rata to holders of the 2024 Senior Notes;

◦4,854,017 shares of New Common Stock pro rata to holders of the 2026 Senior Notes;

◦179,472 shares of New Common Stock, 1,452,773 Tranche A Warrants to purchase 1,452,773 shares of New Common Stock and 726,390 Tranche B Warrants to purchase 726,390 shares of New Common Stock pro rata to holders of the Predecessor Company’s Series A Preferred Stock (the “Predecessor Preferred Stock”) outstanding prior to the Emergence Date;

◦179,496 shares of New Common Stock, 1,452,794 Tranche A Warrants to purchase 1,452,794 shares of New Common Stock and 726,412 Tranche B Warrants to purchase 726,412 shares of New Common Stock pro rata to holders of the Predecessor Company’s existing common stock (the “Predecessor Common Stock”) outstanding prior to the Emergence Date;

◦11,909,430 shares of New Common Stock were issued to participants in the Equity Rights Offering extended by the Company to the applicable classes under the Plan (including to the commitment parties party to the Backstop Commitment Agreement) which includes 430,760 shares issued as part of the rights offering in February 2021;

◦844,760 shares of New Common Stock to the commitment parties under the Backstop Commitment Agreement in connection with their backstop obligation thereunder to purchase unsubscribed shares of New Common Stock;

◦13,392 shares of New Common Stock were issued to participants in rights offering extended by the Company to certain holders of general unsecured claims;

◦3,177,194 shares of New Common Stock to holders of the 2024 Senior Notes and 2026 Senior Notes in respect of claims purchased from general unsecured creditors;

◦1,169,322 shares of New Common Stock to commitment parties under the Backstop Commitment Agreement in respect of the commitment premium due thereunder; and

◦543,296 shares of New Common Stock were issued to general unsecured claims that settled in February 2021. See Note 10—Equity.

•The Company entered into the RBL Credit Facility (as defined in Note 4—Long-Term Debt—RBL Credit Facility);

•The Company repaid in full and terminated the Prior Credit Facility (as defined in Note 4—Long-Term Debt—Prior Credit Facility). All liens and security interests granted to secure such obligations under the Prior Credit Facility were automatically terminated and are of no further force and effect;

•The Company terminated the DIP Credit Facility (as defined in Note 4—Long-Term Debt), and the holders of claims under the DIP Credit Facility received payment in full, in cash, for allowed claims. All liens and security interests granted to secure such obligations under the DIP Credit Facility were automatically terminated and are of no further force and effect;

•The holders of certain trade claims, administrative claims, other secured claims and other priority claims that were allowed by the Bankruptcy Court received payment in full in cash upon emergence or through the ordinary course of business after the Emergence Date.

Table of Contents

~~2020~~Note 2—Basis ~~and November 5, 2020, the Debtors filed first and second amendments, respectively, to the Disclosure Statement. The hearing to consider approval~~ of ~~the Disclosure Statement was held on November 6~~Presentation, ~~2020.~~Significant OnAccounting ~~November~~Policies ~~6, 2020, the Bankruptcy Court approved the adequacy of the Disclosure Statement~~ and ~~the~~Recent ~~Debtors~~Accounting commenced solicitation process to receive votes on the Restructuring Plan. Pursuant to the terms of the Restructuring Plan and as described in the Disclosure Statement, the Debtors will also commence a rights offering, which has been backstopped by certain holders of the Senior Notes. On November 6, 2020, the Bankruptcy Court approved the Backstop Commitment Agreement, which provides a commitment of $200 million. The hearing on the confirmation of the Restructuring Plan has been scheduled to be held on or before December 21, 2020. Pronouncements

~~The~~Basis ~~Restructuring~~of ~~Plan contemplates, among other things, the following:~~ Presentation

~~•holders~~The ofunaudited ~~claims~~condensed ~~under~~consolidated ~~the~~financial ~~Amended~~statements ~~and~~include ~~Restated~~the ~~Credit~~accounts ~~Agreement~~of the Company, ~~dated~~including asits ofwholly ~~August~~owned ~~16,~~subsidiaries. ~~2017,~~Intercompany bybalances and ~~among~~transactions ~~Extraction,~~have ~~the~~been ~~subsidiary~~eliminated ~~guarantors~~in ~~party~~consolidation. ~~thereto,~~The ~~the~~financial ~~lenders~~statements included herein were prepared from ~~time~~the torecords ~~time~~of ~~thereto,~~the ~~and~~Company ~~Wells~~in ~~Fargo~~accordance ~~Bank,~~with ~~National~~accounting ~~Association,~~principles asgenerally ~~administrative~~accepted ~~agent~~in the United States of America (as“GAAP”) ~~may~~and bethe ~~amended,~~Securities ~~restated,~~and ~~supplemented,~~Exchange orCommission ~~otherwise~~rules ~~modified~~and ~~from~~regulation ~~time~~for tointerim ~~time,~~financial reporting. In the ~~“Credit~~opinion ~~Agreement”)~~of management, ~~except~~all toadjustments, ~~the~~consisting ~~extent~~primarily of normal recurring adjustments that are considered necessary for a ~~Holder~~fair statement of anthe ~~Allowed~~unaudited ~~Revolving~~condensed ~~Credit~~consolidated ~~Agreement~~financial ~~Claim~~information, ~~and~~have ~~the~~been ~~Debtors~~included. ~~against~~However, ~~which~~operating ~~such~~results ~~Allowed~~for ~~Revolving~~the ~~Credit~~period ~~Agreement~~presented ~~Claim~~are isnot ~~asserted~~necessarily ~~agree~~indicative toof athe ~~less~~results ~~favorable~~that ~~treatment~~may ~~for~~be ~~such~~expected ~~Holder,~~for ina full ~~and~~year. ~~final~~Interim ~~satisfaction,~~condensed ~~settlement,~~consolidated ~~release,~~financial statements and ~~discharge~~the year-end balance sheets do not include all of the information and innotes ~~exchange~~required by GAAP for ~~each~~audited ~~Allowed~~annual ~~Revolving~~consolidated ~~Credit~~financial ~~Agreement~~statements. ~~Claim,~~These ~~each~~unaudited ~~Holder~~condensed ofconsolidated ~~such~~financial ~~Allowed~~statements ~~Revolving~~should ~~Credit~~be ~~Agreement~~read ~~Claim~~in ~~shall~~conjunction ~~receive~~with the Company’s audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~either:~~2020 (“Annual Report”).

~~◦(i)~~Significant ifAccounting ~~such~~Policies Holder elects to participate in the Exit RBL Facility on a pro rata basis, determined on a ratable basis with respect to its percentage of the Obligations (as defined in the Revolving Credit Agreement) under the Revolving Credit Agreement, such Holder of an Allowed Revolving Credit Agreement Claim shall become an Exit RBL Facility Lender in accordance with the terms of the Exit RBL Facility Documents; or

~~◦(ii)~~The ifsignificant ~~such~~accounting ~~Holder~~policies ~~does~~followed ~~not~~by ~~elect~~the toCompany ~~participate~~are set forth in Note 2 to the ~~Exit~~Company’s ~~RBL~~consolidated ~~Facility~~financial asstatements ~~provided~~in ~~above~~its ~~(including~~Annual byReport ~~not~~and ~~making~~are ~~any~~supplemented ~~election~~by ~~with~~the ~~respect~~notes to the ~~Exit~~unaudited ~~RBL~~condensed ~~Facility~~consolidated financial statements in this report. As discussed in Note 3—Fresh Start Reporting, upon emergence from bankruptcy on ~~the~~January ~~ballot)~~20, ~~its~~2021, ~~Pro~~we ~~Rata~~recorded ~~Share~~our ofconsolidated ~~the~~balance ~~Exit~~sheet ~~Term~~accounts ~~Loans~~at fair value.

~~•holders~~The ofPredecessor ~~claims~~Company ~~under~~applied ASC Topic 852 — Reorganizations in preparing the ~~Senior~~condensed ~~Notes~~consolidated ~~Indentures~~financial ~~(“Senior~~statements. ~~Notes~~ASC ~~Claims”)~~852 ~~shall~~did ~~receive~~not apply to the Successor Company. ASC 852 requires the financial statements, infor ~~full~~periods subsequent to the Chapter 11 Cases’ filing date, to distinguish transactions and ~~final~~events ~~satisfaction~~that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, ~~compromise~~certain expenses incurred during the bankruptcy proceedings, including gain on settlement, ~~release,~~of debt and ~~discharge~~fresh-start ofvaluations, ~~and~~are inrecorded ~~exchange~~as reorganization items. In addition, for ~~such~~periods ~~Allowed~~after ~~Senior~~the ~~Notes~~Petition ~~Claim~~Date and through the Emergence Date, ~~its~~Predecessor ~~Pro~~Company ~~Rata~~pre-petition ~~share~~obligations ofthat ~~(A)~~may have been impacted by the ~~Claims~~Chapter ~~Equity~~11 ~~Allocation~~process ~~and~~have ~~(B)~~been classified on the ~~Senior~~condensed ~~Noteholder~~consolidated ~~Subscription~~balance ~~Rights;~~sheets as “Liabilities Subject to Compromise.” These liabilities are reported at the amounts the Predecessor Company anticipated would be allowed by the Bankruptcy Court as of that balance sheet date, even if they may be settled for lesser amounts. See below for more information regarding reorganization items.

~~•holders~~GAAP ofrequires ~~trade~~certain ~~claims~~additional ~~shall~~reporting ~~receive, in full and final satisfaction, compromise, settlement, release, and discharge of, and in exchange~~ for ~~such~~financial ~~Allowed~~statements ~~Trade~~prepared ~~Claim,~~between ~~payment in full of such Allowed Trade Claim on~~ the ~~Effective~~Petition Date orand ~~otherwise in~~ the ~~ordinary~~Emergence ~~course~~Date, ~~of the Debtors’ business;~~including:

•~~holders~~Reclassification of ~~claims arising from non~~pre-~~funded~~petition ~~debt~~liabilities ~~general~~that ~~unsecured~~are ~~obligations shall receive~~unsecured, inunder-secured ~~full~~or ~~and~~where ~~final~~it ~~satisfaction,~~cannot ~~compromise,~~be ~~settlement,~~determined ~~release,~~that ~~and~~the ~~discharge~~liabilities ~~of,~~are ~~and~~fully insecured ~~exchange~~to ~~for~~a ~~such~~separate ~~Allowed~~line ~~General~~item ~~Unsecured~~in ~~Claim,~~the ~~its~~condensed ~~Pro~~consolidated ~~Rata~~balance ~~share~~sheets ofcalled ~~the~~“Liabilities ~~Claims~~Subject ~~Equity~~to ~~Allocation~~Compromise”; and

•~~each~~Segregation ~~Existing Preferred Interest in the Company shall be canceled, released, and extinguished, and will be~~ of noreorganization ~~further~~items ~~force~~as ora ~~effect,~~separate ~~and~~line ~~each Holder of an Allowed Existing Preferred Interest shall receive,~~ in ~~full and final satisfaction, compromise, settlement, release, and discharge of, and in exchange for such Existing Preferred Interest, its Pro Rata share of (A) 50% of~~ the ~~Existing~~condensed ~~Interests~~consolidated ~~Equity~~statements ~~Allocation, (B) the Existing Preferred Interest Subscription Rights, (C) 50%~~ of ~~the~~operations ~~Tranche~~outside ~~A Warrants, and (D) 50%~~ of ~~the~~income ~~Tranche~~from Bcontinuing ~~Warrants;~~operations.

~~•each~~Accounting ~~Existing~~policies ~~Common~~for ~~Interest in~~ the ~~Company~~balance ~~shall~~sheet beaccounts ~~canceled,~~listed ~~released,~~below ~~and~~are ~~extinguished,~~disclosed ~~and~~in ~~will~~the beCompany’s ofAnnual noReport. ~~further~~As ~~force or effect, and each Holder~~ of anthe ~~Allowed~~Effective ~~Existing Common Interest shall receive~~Date, inthe ~~full~~amounts ~~and final satisfaction, compromise, settlement, release, and discharge of, and in exchange~~ for ~~such~~these ~~Existing~~accounts ~~Common~~have ~~Interest~~been ~~its~~recorded ~~Pro~~at ~~Rata~~fair ~~share~~value. ofAfter ~~(A) 50% of~~ the ~~Existing~~effective ~~Interests Equity Allocation~~date, ~~(B)~~ the ~~Existing~~Company ~~Common~~will ~~Interest~~continue ~~Subscription~~to ~~Rights,~~follow ~~(C) 50% of~~ the ~~Tranche~~accounting Apolicies ~~Warrants,~~within ~~and (D) 50% of~~ the ~~Tranche~~Company’s BAnnual ~~Warrants;~~Report.

•~~holders~~Cash ofand ~~claims~~Cash arising from the DIP Credit Facility (as defined in Note 6—Long-Term Debt) receiving cash or such other consideration as the DIP Lenders (as defined in Note 6—Long-Term Debt) agree in their sole discretion;Equivalents

•~~cash~~Accounts payment in full of all administrative expense claims, priority tax claims, other priority claims, and other secured claims or other such treatment rendering such claims unimpaired, including reinstatement pursuant to section 1124 of the Bankruptcy Code or delivery of the collateral securing any such secured claim and payment of any interest required under section 506(b) of the Bankruptcy Code; andReceivable

•Inventory, Prepaid Expenses and Other

•Oil and Gas Properties

•Other Property and Equipment

•Debt Issuance Costs

•Commodity Derivative Instruments

•Intangible Assets

•Asset Retirement Obligation

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~~•the~~Executory Restructuring Plan will provide for the establishment of a post-emergence management incentive plan to be adopted by the New Board (the “Management Incentive Plan”), which may include (a) restricted stock units, options, New Common Shares, or other rights exercisable, exchangeable, or convertible into New Common Shares representing up to 10% of the New Common Shares on a fully diluted and fully distributed basis (the “MIP Equity”) and (b) other terms and conditions customary for similar type equity plans.Contracts

~~Information~~Subject ~~contained~~to incertain ~~the~~exceptions, ~~Restructuring~~under ~~Plan~~the ~~and~~Bankruptcy Code, the ~~Disclosure~~Debtors ~~Statement~~may isassume, assign, or reject certain executory contracts and unexpired leases subject to ~~change~~the approval of the Bankruptcy Court and certain other conditions. Generally, ~~whether~~the rejection of an executory contract or unexpired lease is treated as a ~~result~~pre-petition breach of ~~amendments~~such executory contract or ~~supplements~~unexpired lease and, subject to certain exceptions, relieves the ~~Restructuring~~Debtors ~~Plan~~from performing their future obligations under such executory contract or ~~Disclosure~~unexpired ~~Statement,~~lease ~~third-party~~but ~~actions,~~entitles the contract counterparty or ~~otherwise,~~lessor ~~and~~to ~~should~~a ~~not~~pre-petition begeneral ~~relied~~unsecured ~~upon~~claim for damages caused by ~~any~~such ~~party~~deemed breach. ~~There~~Generally, isthe noassumption ~~guarantee~~of an executory contract or unexpired lease requires the ~~Restructuring~~Debtors ~~Plan~~to ~~can~~cure beexisting ~~implemented~~monetary defaults under such executory contract or unexpired lease and ~~the~~provide ~~Restructuring~~adequate ~~Plan~~assurance ~~approved~~of future performance.

The information presented in this section is not a solicitation to accept or reject the Restructuring Plan. Any such solicitation will be made pursuant to and in accordance with the Disclosure Statement and applicable law, including orders of the Bankruptcy ~~Court. Capitalized terms used but not specifically defined in this section have the meanings specified for such terms in the Restructuring Plan and Disclosure Statement, as applicable.~~ Claims

~~Tax~~The ~~Attributes~~Debtors have filed with the Bankruptcy Court schedules and ~~Net~~statements ~~Operating~~setting ~~Loss~~forth, ~~Carryforwards~~among other things, the assets and liabilities of each of the Debtors, subject to the assumptions filed in connection therewith. These schedules and statements may be subject to further amendment or modification after filing. Certain holders of pre-petition claims that are not governmental units were required to file proofs of claim by the bar date of August 14, 2020. As of May 12, 2021, the Debtors’ have received approximately 2,600 proofs of claim, primarily representing general unsecured claims, for an amount of approximately $5.8 billion. The Bankruptcy Court does not allow for claims that have been acknowledged as duplicates. Approximately 2,100 claims totaling approximately $4.2 billion have been withdrawn, disallowed or are pending approval to be disallowed. Differences in amounts recorded and claims filed by creditors are currently being investigated and resolved, including through filing objections with the Bankruptcy Court, where appropriate. The Company may ask the Bankruptcy Court to disallow claims that the Company believes are duplicative, have been later amended or superseded, are without merit, are overstated or should be disallowed for other reasons. In light of the substantial number of claims filed, the claims resolution process may take considerable time to complete and is continuing even after the Debtors emerged from bankruptcy.

~~The~~Divestiture Company has substantial tax net operating loss carryforwards and other tax attributes. Under the U.S. Internal Revenue Code of 1986, as amended (the “Code”), our ability to use these net operating losses and other tax attributes may be limited if the Company experiences an “ownership change”, as determined under Section 382 of the Code. Accordingly, on July 13, 2020, the Company obtained a final order from the Bankruptcy Court that is intended to prevent an ownership change during the pendency of the Chapter 11 Cases and therefore protect the Company's ability to use its tax attributes by imposing certain notice procedures and transfer restrictions on the trading of the Company’s existing common stock and preferred stock.

In ~~general,~~February ~~the~~2020 ~~order applies to any person or entity that, directly or indirectly, beneficially owns~~ (orthe ~~would~~“February ~~beneficially~~2020 ~~own as a result of a proposed transfer~~Divestiture”), ~~at least 4.5% of~~ the Company’s ~~common~~completed ~~stock or preferred stock. Such persons are required to notify~~ the ~~Company~~sale ~~and~~of ~~the~~certain ~~Bankruptcy~~non-operated ~~Court~~producing ~~before~~properties ~~effecting~~for aaggregate ~~transaction~~sales ~~involving~~proceeds ~~the~~of ~~Company's~~approximately ~~common stock or preferred stock~~$12.2 million, ~~and~~subject ~~the Company has the right~~ to ~~seek~~customary anpurchase ~~injunction~~price toadjustments. ~~prevent~~No ~~the~~gain ~~transaction~~or ifloss itwas ~~might~~recognized ~~adversely~~for ~~affect~~ the ~~Company's~~February ~~ability~~2020 ~~to use its tax attributes~~Divestiture. The ~~order also requires any person or entity that, directly or indirectly, beneficially owns at least 50% of the~~ Company’s ~~common~~continues ~~stock or preferred stock~~ to ~~notify~~explore ~~the~~divestitures ~~Company~~as ~~and~~part ~~the Bankruptcy Court prior to claiming any deduction for worthlessness~~ of ~~the~~our ~~Company's~~ongoing ~~common~~initiative ~~stock or preferred stock for a tax year ending before the Company’s emergence from chapter 11 protection and the Company has the right~~ to ~~seek~~divest annon-strategic ~~injunction to prevent the transaction if it might adversely affect the Company's ability to use its tax attributes~~assets.

Any purchase, sale or other transfer of, or any claim of a deduction for worthlessness with respect to, the Company's common stock or preferred stock in violation of the restrictions of the order is null and void ab initio as an act in violation of a Bankruptcy Court order and would therefore confer no rights on a proposed transferee or such holder, as applicable.Segments

~~Ability~~After toMarch ~~Continue~~31, as2020, the Company had a ~~Going~~single ~~Concern~~reportable segment. Beginning in the fourth quarter of 2018, the Company had two operating segments, (i) the exploration, development and production of oil, natural gas and NGL (the "exploration and production segment") and (ii) the construction of and support of midstream assets to gather and process crude oil and gas production (the "gathering and facilities segment"). Elevation Midstream, LLC comprised the gathering and facilities segment. Through March 16, 2020, the results of Elevation were included in the condensed consolidated financial statements of Extraction. Effective March 17, 2020, the results of Elevation Midstream, LLC were no longer consolidated in Extraction's results; however, the Company’s segment disclosures included the gathering and facilities segment because it was consolidated through March 16, 2020. Due to the immaterial nature of the revenues and expenses for the first quarter of 2020 and because these amounts are already disclosed in the Company's Annual Report on Form 10-K, the Company will no longer present segment metrics separately.

~~The condensed consolidated financial statements have been prepared on a going concern basis of accounting~~Cash, ~~which~~Cash ~~contemplates~~Equivalents ~~continuity of operations, realization of assets~~ and ~~satisfaction~~Restricted of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern.Cash

AsCash ~~discussed~~equivalents ~~above,~~consist ~~the~~of ~~filing~~demand ofdeposits ~~the~~and ~~Chapter~~highly 11liquid ~~Cases~~investments ~~constituted~~which have an ~~event~~original maturity of ~~default~~three ~~under~~months ~~the~~or ~~Company’s~~less. ~~outstanding~~Cash ~~debt~~and ~~agreements,~~cash ~~which~~equivalents ~~resulted~~potentially insubject the ~~automatic~~Company ~~and~~to ~~immediate~~a ~~acceleration~~concentration of credit risk as substantially all of ~~the~~its ~~Company’s~~deposits ~~debt~~held ~~outstanding~~in ~~under~~financial institutions were in excess of the ~~Credit~~Federal ~~Agreement~~Deposit Insurance Corporation (“FDIC”) insurance limits as of March 31, 2021 and ~~Senior~~December ~~Notes~~31, 2020. The Company ~~projects~~maintains ~~that~~its itunrestricted ~~will~~cash ~~not~~and ~~have sufficient~~ cash onequivalents ~~hand~~in orthe ~~available~~form ~~liquidity~~of tomoney ~~repay~~market ~~such~~and ~~debt.~~checking ~~These~~accounts ~~conditions~~with ~~and~~financial ~~events~~institutions ~~raise~~that ~~substantial~~are ~~doubt~~also ~~about~~lenders under the ~~Company~~Successor’s ~~ability~~credit toagreement. ~~continue~~The asCompany ahas ~~going~~not ~~concern~~experienced any losses on its deposits of cash and cash equivalents.

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~~The~~Restricted ~~Company’s~~cash ~~ability to continue~~ as aof ~~going concern is contingent upon~~March 31, ~~among~~2021 ~~other~~shown ~~things,~~in ~~its ability to, subject to~~ the ~~Bankruptcy~~table ~~Court’s~~below ~~approval,~~consists ~~implement~~of ~~the~~funds ~~Restructuring~~remaining ~~Plan,~~in ~~successfully emerge from the Chapter 11 Cases and generate sufficient liquidity from the Restructuring to meet its obligations and operating needs. As~~ a ~~result~~professional offee ~~risks~~escrow ~~and~~account ~~uncertainties~~that ~~related~~were toreserved ~~(i) the Company’s ability~~ to ~~obtain~~pay ~~requisite~~certain ~~support~~professional ~~for~~fees ~~the~~upon ~~Restructuring~~emergence ~~Plan~~ from ~~various stakeholders, and (ii)~~ the ~~effects of disruption from the~~ Chapter 11 Cases. ~~making~~The itfollowing ~~more~~table ~~difficult~~provides toa ~~maintain~~reconciliation ~~business,~~of ~~financing and operational relationships~~cash, ~~the~~cash ~~Company~~equivalents ~~has~~and ~~concluded~~restricted ~~that~~cash ~~management’s~~reported ~~plans~~within dothe ~~not~~condensed ~~alleviate~~consolidated ~~substantial~~balance ~~doubt~~sheets ~~regarding~~and ~~the~~condensed ~~Company’s~~consolidated ~~ability~~statements toof ~~continue~~cash asflows a(in ~~going concern.~~ thousands):

The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.


	Successor		Predecessor
	March 31, 2021		December 31, 2020
Cash and cash equivalents	$	38,430	$	205,890
Restricted cash	25,641		—
Total cash, cash equivalents and restricted cash	$	64,071	$	205,890

~~Deconsolidation~~Other ofOperating ~~Elevation Midstream, LLC~~Expenses

~~Elevation~~Other ~~Midstream,~~operating ~~LLC~~expenses ~~("Elevation"),~~for ~~a Delaware limited liability company, is focused on~~ the ~~construction~~periods ~~and~~shown ~~operation of gathering systems and facilities to serve the development of acreage in the Company’s Hawkeye and Southwest Wattenberg areas. Midstream assets of Elevation~~ are ~~represented~~ as ~~the~~follow ~~gathering~~(in ~~systems and facilities line item within the condensed consolidated balance sheets for any periods ended on or prior to December 31, 2019~~thousands).

During the first quarter of 2020, Elevation's then non-controlling interest owner, which owned 100% of Elevation's preferred stock, per contractual agreement, expanded Elevation's then five member board of managers by four seats and filled them with managers of their choosing (the "Board Expansion"). Because Extraction had the right to appoint only three of the managers of Elevation before and after Board Expansion, Extraction determined the Company had lost voting control of Elevation, and on March 16, 2020 deconsolidated Elevation and began accounting for the entity as an equity method investment. Though Extraction determined control of Elevation was lost under the voting interest model of consolidation, the Company also determined significant influence was not lost due to (1) Extraction owning 100% of the common stock, (2) Extraction appointing three of the nine managers of Elevation and (3) Extraction's continuing involvement in the day-to-day operation of Elevation through a management services agreement. Because Extraction also determined the Company is not the primary beneficiary, Elevation Midstream, LLC is not a variable interest entity.


	Successor		Predecessor
	For the Period from January 21 through March 31,		For the Period from January 1 through January 20,		For the Three Months Ended March 31,
	2021		2021		2020
Restructuring items(1)	$	3,739	$	—	$	5,798
Litigation expense(2)	—		153		46,777
Early termination penalties	—		373		—
Production tax interest expense	151		581		—
Midstream operating expenses(3)	—		—		3,935
Total	$	3,890	$	1,107	$	56,510

Extraction elected the fair value option to remeasure the Elevation equity method investment and determined it had no fair value. The Company recorded a $73.1 million loss on deconsolidation of the investment in the condensed consolidated statements of operations for the three months ended March 31, 2020. Also during the three months ended March 31, 2020, Elevation determined certain gathering systems and facilities were impaired by $50.3 million as a result of the abandonment of certain projects. In accordance with Accounting Standards Codification ("ASC") Topic 323-10-35-20: Investments—equity method and joint ventures, Extraction discontinued applying the equity method investment for Elevation as the impairment charge would have reduced the investment below zero._______________

~~On May~~ (1,) The ~~2020, Elevation's board of managers issued 1,530,000,000 common units at a price of~~ $05.018 million ~~per~~for ~~unit to certain of Elevation's members other than Extraction (~~the ~~"Capital~~three ~~Raise").~~months ~~The~~ended ~~Capital~~March ~~Raise~~31, ~~caused~~2020 ~~Extraction's~~was ~~ownership~~a ofcharge ~~Elevation~~ to beincome ~~diluted~~for toexpenses ~~less~~related ~~than~~to ~~0.01%. As~~ a ~~result~~workforce ofreduction ~~the Capital Raise, beginning~~ in ~~May~~February 2020. ~~Extraction~~The ~~began~~$3.7 million ~~accounting~~ for ~~Elevation under~~ the ~~cost~~period ~~method~~from ofJanuary ~~accounting.~~21, ~~The~~2021 ~~Company~~through ~~reserves~~March ~~all~~31, ~~rights~~2021 related primarily to ~~actions~~professional ~~taken~~fees bysurrounding ~~Elevation’s~~emergence ~~board~~from ~~of managers~~bankruptcy.

~~Note~~ (2~~—Basis~~) The of$46.8 million ~~Presentation,~~was ~~Significant~~a ~~Accounting~~loss ~~Policies~~contingency ~~and~~from ~~Recent~~an ~~Accounting~~alleged ~~Pronouncements~~breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020.

~~Basis~~(3) The $3.9 million was for midstream operating expenses previously reported on its own line item on the condensed consolidated statement of ~~Presentation~~operations but now consolidated in other operating expenses due to its relative immaterial amount and because the Company will not be incurring these expenses for the foreseeable future due to the deconsolidation of Elevation Midstream, LLC discussed in the Segments section above.

~~The~~Recent ~~unaudited~~Accounting condensed consolidated financial statements include the accounts of the Company, including its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The financial statements included herein were prepared from the records of the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the Securities and Exchange Commission rules and regulation for interim financial reporting. In the opinion of management, all adjustments, consisting primarily of normal recurring accruals that are considered necessary for a fair statement of the Pronouncements

Other than as disclosed in the Company’s Annual Report, there are no other accounting standards applicable to the Company as of March 31, 2021 and through the date of this filing that would have a material effect on the Company’s unaudited condensed consolidated financial statements and related disclosures that have been issued but not yet adopted by the Company.

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unaudited condensed consolidated financial information, have been included. However, operating results for the period presented are not necessarily indicative of the results that may be expected for a full year. Interim condensed consolidated financial statements and the year-end balance sheets do not include all of the information and notes required by GAAP for audited annual consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended DecemberNote ~~31,~~3—Fresh ~~2019~~Start ~~(“Annual Report”).~~Reporting

~~Significant~~Fresh ~~Accounting~~Start ~~Policies~~ Reporting

~~The~~In ~~significant~~connection ~~accounting~~with ~~policies~~the ~~followed~~Company’s byemergence from bankruptcy and in accordance with Accounting Standards Codification (“ASC”) Topic 852—Reorganizations (“ASC 852”), the Company ~~are~~qualified ~~set~~for ~~forth~~and inapplied ~~Note~~fresh 2start reporting on the Emergence Date. The Company was required to apply fresh start reporting because (i) the holders of existing voting shares of the Predecessor Company’s ~~consolidated~~received ~~financial~~less ~~statements~~than in50% ~~its~~of ~~Annual~~the ~~Report~~voting shares of the Successor and ~~are~~(ii) ~~supplemented~~the byreorganization value (defined below) of the ~~notes~~Company’s assets immediately prior to confirmation of the ~~unaudited~~Plan ~~condensed~~of ~~consolidated~~$1.4 billion ~~financial~~was ~~statements~~less inthan ~~this~~the ~~report~~$2.9 billion of post-petition liabilities and allowed claims.

~~Beginning~~Because ~~after~~ the ~~Petition Date, the~~ Company ~~has~~qualified ~~applied~~for ~~ASC~~fresh ~~Topic~~start ~~852~~reporting, —a ~~Reorganizations~~new inreporting ~~preparing~~entity ~~the~~was ~~condensed~~considered ~~consolidated financial statements. ASC 852 requires the financial statements, for periods subsequent~~ to ~~the~~have ~~Chapter~~been 11created; ~~Cases'~~as ~~filing~~a ~~date,~~result ~~to distinguish transactions~~ and ~~events~~in ~~that~~accordance ~~are~~with ~~directly~~ASC ~~associated~~852, ~~with~~ the ~~reorganization~~Company ~~from~~allocated the ~~ongoing~~reorganization ~~operations~~value of the ~~business.~~Company ~~Accordingly,~~to ~~certain~~its ~~expenses~~individual ~~incurred during the bankruptcy proceedings~~assets, including ~~unamortized~~property, ~~debt~~plant ~~issuance~~and ~~costs~~equipment, ~~associated~~based ~~with~~on ~~debt~~their ~~classified~~estimated asfair ~~liabilities~~values ~~subject~~in toconformity ~~compromise,~~with ~~are~~FASB ~~recorded~~ASC asTopic ~~reorganization~~820–Fair ~~items.~~Value InMeasurement ~~addition,~~(“ASC ~~pre-petition~~820”) ~~obligations~~and ~~that~~FASB ~~may~~ASC beTopic ~~impacted~~805–Business byCombinations ~~the~~(“ASC ~~chapter~~805”). 11As ~~process~~such, ~~have been classified on~~ the condensed consolidated ~~balance~~financial ~~sheets~~statements asafter ~~liabilities~~January ~~subject~~20, to2021 ~~compromise. These liabilities~~ are ~~reported~~not atcomparable ~~the~~with ~~amounts~~ the ~~Company~~condensed ~~anticipates~~consolidated ~~will~~financial bestatements ~~allowed~~as byof ~~the~~or ~~Bankruptcy~~prior ~~Court,~~to ~~even~~that ~~if they may be settled for lesser amounts~~date. ~~See below for more information regarding reorganization items.~~

~~GAAP~~Reorganization ~~requires certain additional reporting for financial statements prepared between the Petition Date and the date that the Company emerges from bankruptcy, including:~~Value

~~•Reclassification~~Reorganization value represents the fair value of ~~pre-petition~~the Successor Company’s assets before considering certain liabilities ~~that~~and ~~are~~is ~~unsecured~~intended to represent the approximate amount a willing buyer would pay for the Company’s assets immediately after reorganization. Reorganization value is derived from an estimate of enterprise value, ~~under~~or fair value of the Company’s interest-~~secured~~bearing ordebt ~~where~~and itstockholders’ ~~cannot~~equity. As set forth in the Plan and related disclosure statement, the enterprise value of the Successor Company was estimated to be ~~determined~~between ~~that~~$875.0 million to $1.275 billion. On the ~~liabilities~~Emergence ~~are~~Date, ~~fully~~the ~~secured~~Successor Company’s estimated enterprise value was $1.052 billion before the consideration of cash and cash equivalents on hand, which falls slightly below the midpoint of this range. The enterprise value was derived from an independent valuation using an income approach to aderive ~~separate~~the ~~line~~fair ~~item~~value inof the ~~condensed~~Company’s ~~consolidated~~assets ~~balance~~as ~~sheets~~of ~~called~~the ~~liabilities~~Emergence ~~subject~~Date. On the Emergence Date, pursuant to ~~compromise;~~the ~~and~~terms of the Plan, the Successor Company entered into a $1.0 billion reserve-based credit agreement with an initial borrowing base of $500.0 million. Please see Note 4—Long-Term Debt for discussion of the Successor Company’s debt.

~~•Segregation~~The Company’s principal assets are its oil and natural gas properties. The fair value of ~~reorganization~~proved ~~items~~reserves aswas estimated using a ~~separate~~discounted ~~line~~cash inflows approach, which was based on the ~~condensed~~anticipated ~~consolidated~~future ~~statements~~cash flows associated with those proved reserves, risked by reserve category and discounted using a weighted average cost of ~~operations~~capital ~~outside~~rate of ~~income~~11.0%. ~~from~~The ~~continuing~~proved ~~operations~~reserve locations included in this analysis were limited to wells included in the Company's five-year development plan. Future prices were based on forward strip price curves (adjusted for basis differentials). The fair value of the Company’s unproved reserves was estimated using a discounted cash flows approach. See further discussion below in “Fresh Start Adjustments.”

Debtor-In-Possession

The Debtors are currently operating as debtors in possession in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court has approved motions filed by the Debtors that were designed primarily to mitigate the impact of the Chapter 11 Cases on the Company’s operations, customers and employees. As a result, the Company is able to conduct normal business activities and pay all associated obligations for the period following its bankruptcy filing in the ordinary course of business and is authorized to pay and has paid certain pre-petition obligations, including, among other things, for employee wages and benefits and certain goods and services provided. During the Chapter 11 Cases, transactions outside the ordinary course of business require prior approval of the Bankruptcy Court.

Automatic Stay

Subject to certain specific exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically stayed most judicial or administrative actions against the Debtors and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to settlement under the Bankruptcy Code.

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~~Executory~~The ~~Contracts~~following table reconciles the Company’s enterprise value to the implied value of Successor equity as of January 20, 2021 (in thousands, except per share data):

Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign, or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors from performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance.


	Successor
	January 20, 2021
Enterprise value	$	1,052,000
Plus: Cash and cash equivalents	71,793
Plus: General unsecured claims to be satisfied through issuance of equity after Emergence	16,127
Less: Working capital adjustment(1)	(333,938)
Less: Interest bearing liabilities	(265,000)
Less: Fair value of warrants(2)	(20,403)
Implied value of Successor equity after satisfaction of general unsecured claims after Emergence	$	520,579
Less: General unsecured claims to be satisfied through issuance of equity after Emergence	(16,127)
Implied value of Successor equity as of January 20, 2021	$	504,452




Common shares of Successor equity as of January 20, 2021	24,729,681
Implied value per common share as of January 20, 2021	$	20.41

~~Potential~~(1) Represents ~~Claims~~current assets without cash and cash equivalents and restricted cash, current liabilities without the asset retirement obligation and the current liability related to the professional fee escrow accrual in accounts payable and accrued liabilities, other non-current liabilities, non-current production taxes, and the working capital deficit adjustment of $23.9 million utilized by the valuation specialist to determine enterprise value for the Plan. This adjustment considers the impact of liabilities in excess of normalized working capital to the enterprise value for purposes of calculating implied Successor equity.

~~The~~(2) Warrants Debtors have filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of each of the Debtors, subject to the assumptions filed in connection therewith. These schedules and statements may be subject to further amendment or modification after filing. Certain holders of pre-petition claims that are not governmental units were ~~required~~considered toas ~~file~~part ~~proofs~~ of ~~claim~~equity byon the bar date of August 14, 2020. As of November 2, 2020, the Debtors' have received approximately 2,545 proofs of claim, primarily representing general unsecured claims, for an amount of approximately $6.7 billion. These claims will be reconciled to amounts recorded in liabilities subject to compromise in the condensed consolidated balance sheet. ~~Differences~~but in amounts recorded and claims filed by creditors will be investigated and resolved, including through the filing of objections with the Bankruptcy Court, where appropriate. The Company may ask the Bankruptcy Court to disallow claims that the Company believes are ~~duplicative,~~broken ~~have~~out ~~been~~separately ~~later~~here ~~amended or superseded, are without merit, are overstated or should be disallowed~~ for ~~other~~presentation reasons. In addition, as a result of this process, the Company may identify additional liabilities that will need to be recorded or reclassified to liabilities subject to compromise. In light of the substantial number of claims filed, and ~~expected~~disclosure ~~to be filed, the claims resolution process may take considerable time to complete and likely will continue after the Debtors emerge from bankruptcy~~purposes.

~~Financial~~The ~~Statement~~following ~~Classification~~table ofreconciles ~~Liabilities~~the ~~Subject~~Company’s enterprise value to ~~Compromise~~its reorganization value as of January 20, 2021 (in thousands):

The accompanying condensed consolidated balance sheets as of September 30, 2020 includes amounts classified as liabilities subject to compromise, which represent liabilities the Company anticipates will be allowed as claims in the Chapter 11 Cases. These amounts represent the Debtors’ current estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases, and may differ from actual future settlement amounts paid. Differences between liabilities estimated and claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process. The Company will continue to evaluate these liabilities throughout the chapter 11 process and adjust amounts as necessary. Such adjustments may be material. Please refer to Note 4—Liabilities Subject to Compromise for more information.


	Successor
	January 20, 2021
Enterprise value	$	1,052,000
Plus: Normalized working capital liabilities(1)	176,976
Plus: Asset retirement obligations, current and non-current	87,199
Plus: Cash and cash equivalents	71,793
Reorganization value	$	1,387,968

~~Reorganization~~(1) Relates ~~Items,~~to ~~Net~~normalized working capital liabilities in the Predecessor ending balance sheet.

~~The~~Although ~~Debtors,~~the ~~have~~Company ~~incurred~~believes the assumptions and ~~will~~estimates ~~continue~~used to ~~incur~~develop ~~significant~~enterprise ~~costs~~value ~~associated~~and ~~with~~reorganization ~~the~~value ~~reorganization,~~are ~~primarily~~reasonable ~~from~~and ~~damages~~appropriate, ~~for~~different ~~rejected~~assumptions orand ~~settled~~estimates ~~contracts~~could ~~and~~materially ~~legal~~impact the analysis and ~~professional~~resulting ~~fees~~conclusions. The ~~amount~~assumptions ofused ~~these~~in ~~costs,~~estimating ~~which~~these ~~since~~values ~~the Petition Date,~~ are ~~being~~inherently ~~expensed~~uncertain asand ~~incurred,~~require ~~are~~judgment. ~~expected~~See tobelow ~~significantly~~under ~~affect~~ the ~~Company’s~~caption ~~results~~“Fresh ofStart ~~operations.~~Adjustments” Infor ~~accordance~~additional ~~with~~information ~~applicable~~regarding ~~guidance,~~assumptions ~~costs~~used ~~associated~~in ~~with~~ the ~~bankruptcy~~valuation ~~proceedings~~of ~~have been recorded as reorganization items within~~ the Company'’s ~~accompanying~~significant ~~condensed~~assets ~~consolidated statements of operations for the three~~ and ~~nine months ended September 30, 2020~~liabilities. ~~Please refer to Note 5—Reorganization Items, Net for more information.~~

Condensed Consolidated Balance Sheet at the Emergence Date (in thousands)

The adjustments set forth in the following condensed consolidated balance sheet as of January 20, 2021 reflect the consummation of transactions contemplated by the Plan (the “Reorganization Adjustments”) and the fair value adjustments as a result of applying fresh start reporting (the “Fresh Start Adjustments”). The explanatory notes highlight methods used to determine fair values or other amounts of the corresponding assets or liabilities, as well as significant assumptions.

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Revenue — Contract Balances


	Predecessor		Reorganization Adjustments			Fresh Start Adjustments			Successor
ASSETS
Current Assets:
Cash and cash equivalents	$	246,952	$	(175,159)	(a)	$	—		$	71,793
Restricted cash	—		38,869		(b)	—			38,869
Accounts receivable, net
Trade	12,500		—			—			12,500
Oil, natural gas and NGL sales	64,698		—			—			64,698
Inventory, prepaid expenses and other	33,524		—			3,470		(r)	36,994

Total Current Assets	357,674		(136,290)			3,470			224,854
Property and Equipment (successful efforts method), at cost:
Proved oil and gas properties	4,746,225		—			(3,800,981)		(s)	945,244
Unproved oil and gas properties	221,247		—			(75,647)		(s)	145,600
Wells in progress	136,247		—			(136,247)		(s)	—
Less: accumulated depletion, depreciation, amortization and impairment charges	(3,475,279)		—			3,475,279		(s)	—
Net oil and gas properties	1,628,440		—			(537,596)			1,090,844
Other property and equipment, net of accumulated depreciation and impairment charges	56,455		—			350		(t)	56,805
Net Property and Equipment	1,684,895		—			(537,246)			1,147,649
Non-Current Assets:
Commodity derivative asset	134		—			—			134
Other non-current assets	9,003		6,328		(c)	—			15,331
Total Non-Current Assets	9,137		6,328			—			15,465
Total Assets	$	2,051,706	$	(129,962)		$	(533,776)		$	1,387,968
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	93,036	$	58,792	(d)	$	3,469	(r)	$	155,297
Revenue payable	68,003		59,750		(e)	—			127,753
Production taxes payable	3,284		132,255		(f)	—			135,539
Commodity derivative liability	7,897		—			—			7,897
Accrued interest payable	2,236		(2,236)		(g)	—			—
Asset retirement obligations	—		13,937		(h)	(478)		(u)	13,459
DIP Credit Facility	106,727		(106,727)		(i)	—			—
Prior Credit Facility	453,872		(453,872)		(i)	—			—
Total Current Liabilities	735,055		(298,101)			2,991			439,945
Non-Current Liabilities:
RBL Credit Facility	—		265,000		(j)	—			265,000
Production taxes payable	38,716		22,405		(f)	—			61,121

Other non-current liabilities	—		23,307		(k)	—			23,307
Asset retirement obligations	—		80,620		(h)	(6,880)		(u)	73,740

Total Non-Current Liabilities	38,716		391,332			(6,880)			423,168
Liabilities Subject to Compromise	2,135,808		(2,135,808)		(l)	—			—
Total Liabilities	2,909,579		(2,042,577)			(3,889)			863,113

Commitments and Contingencies
Series A Convertible Preferred Stock	192,172		(192,172)		(m)	—			—
Stockholders' Equity (Deficit):
Predecessor common stock	1,336		(1,336)		(n)	—			—
Predecessor treasury stock	(170,138)		170,138		(o)	—			—
Predecessor additional paid-in capital	2,140,383		(2,140,383)		(n)(o)	—			—
Successor common stock	—		247		(p)	—			247
Successor warrants	—		20,403		(p)	—			20,403
Successor additional paid-in capital	—		504,205		(p)	—			504,205
Accumulated deficit	(3,021,626)		3,551,513		(q)	(529,887)		(v)	—
Total Stockholders' Equity (Deficit)	(1,050,045)		2,104,787			(529,887)			524,855
Total Liabilities and Stockholders' Equity (Deficit)	$	2,051,706	$	(129,962)		$	(533,776)		$	1,387,968

The Company had a certain revenue contract with an initial term beginning on November 1, 2016 and continuing until October 31, 2020 after which the contract was to begin an automatic month-to-month renewal unless terminated by either party giving notice at least six months prior to the effective termination date but in no event could either party give such notice earlier than November 1, 2020. Based on the accounting treatment pursuant to ASC 606 — Revenue from Contracts with Customers, the contract term would end on April 30, 2021 because it could be terminated by either party with no penalty effective as of such date. The contract term impacted the amount of consideration that could be included in the transaction price. The Company recognizes revenue and invoices customers once its performance obligations have been satisfied. When it becomes probable that the Company will not meet its performance obligations, the transaction price allocated to the performance obligation is constrained in the amount of the estimated unmet performance obligation and recognized as a reduction to revenue in the period in which the transaction price changes. On June 12, 2020, the Company and the counterparty to the contract mutually cancelled the contract effective June 30, 2020. As a result of the cancellation, for the three months ended September 30, 2020, no revenue was recorded as a reduction in the transaction price resulting from unsatisfied performance obligations in the period. For the nine months ended September 30, 2020, $12.3 million was recorded as a reduction in the transaction price resulting from unsatisfied performance obligations in the period. For the three and nine months ended September 30, 2019, the Company allocated $22.2 million to a satisfied performance obligation recognized within oil sales. As a result of the contract termination, the Company incurred an early termination fee of $13.2 million recorded in other operating expenses for the nine months ended September 30, 2020. This amount was settled during the third quarter of 2020, and there are no remaining amounts due to the counterparty.

Other Operating Expenses

Other operating expenses were $9.8 million and $75.5 million for the three and nine months ended September 30, 2020, respectively. There were no other operating expenses for the three and nine months ended September 30, 2019. The amounts in the current year are made up of the following:

•$46.8 million loss contingency from an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020. Please see Note 14—Commitments and Contingencies for further details.

•$2.9 million of accrued interest related to the aforementioned alleged breach in contract recorded in the third quarter of 2020.

•$13.2 million early termination penalty for the revenue contract terminated in June 2020. Please see the section Revenue — Contract Balance immediately above for further details.

•$7.5 million charge to income for expenses related to workforce reductions in February and May 2020.

•$2.4 million charge to income for expenses related to certain drilling rig standby charges during the second quarter of 2020.

•$2.4 million charge to income for interest expense on unpaid production taxes recorded in the third quarter of 2020.

•$0.3 million charge to income for other legal accruals recorded in the third quarter of 2020.

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~~Impairment~~Reorganization ~~of Oil and Gas Properties~~Adjustments

~~For~~(a) The ~~the~~table ~~three~~below ~~months~~reflects ~~ended September 30, 2020~~ the ~~Company~~sources ~~recognized no impairment expense on its proved oil~~ and ~~gas~~uses ~~properties, but for the nine months ended September 30, 2020 the Company recognized $1.6 million related to impairment~~ of ~~assets~~cash inand ~~its~~cash ~~northern~~equivalents ~~field. For the three months ended September 30, 2019, the Company recognized no impairment expense~~ on ~~its proved oil and gas properties, but for~~ the ~~nine~~Emergence ~~months~~Date ~~ended~~pursuant ~~September 30,~~to ~~2019,~~ the ~~Company~~terms ~~recognized $11.2 million related to impairment~~ of ~~assets in its northern field. The fair value did not exceed~~ the ~~Company's~~Plan ~~carrying amount associated with its proved oil and gas properties~~ (in ~~its northern field. For the three and nine months ended September 30, 2020 and 2019, the Company did not have any proved property impairment in its Core DJ Basin field.~~ thousands):

Of the Company's $9.8 million in exploration and abandonment expenses for the three months ended September 30, 2020, $9.5 million was lease abandonment expense. Of the Company's $184.9 million in exploration and abandonment expenses for the nine months ended September 30, 2020, $179.0 million was lease abandonment expense. Unproved oil and gas properties consist of costs to acquire unevaluated leases as well as costs to acquire unproved reserves. The Company evaluates significant unproved oil and gas properties for impairment based on remaining lease term, drilling results, reservoir performance, seismic interpretation or future plans to develop acreage. When successful wells are drilled on undeveloped leaseholds, unproved property costs are reclassified to proved properties and depleted on a unit-of-production basis. Impairment expense and lease extension payments for unproved properties are reported in exploration and abandonment expenses in the condensed consolidated statements of operations.


Sources:
Total cash received from the RBL Credit Facility	$	265,000
Total proceeds from backstopped rights offering	200,255
Total proceeds from the general unsecured claims rights offering	218
Total sources of cash	465,473
Uses:
Payment of DIP Credit Facility, Prior Credit Facility, and related interest	(562,834)
Funding of the professional fee escrow account	(38,869)
Payment of prepetition taxes classified as liabilities subject to compromise	(21,532)
Payment of debt issuance cost associated with the RBL Credit Facility	(6,329)
Payment of contract cure costs classified as liabilities subject to compromise	(5,374)
Payments to professionals at emergence	(5,102)
Payment of the general unsecured claim cash out election for claims classified as liabilities subject to compromise	(592)
Total uses of cash	(640,632)
Net uses of cash	$	(175,159)

~~Recent~~(b) Represents ~~Accounting~~the ~~Pronouncements~~funding of the professional fee escrow account.

~~In June 2016, the Financial Accounting Standards Board~~ (~~"FASB"~~c) Represents ~~issued Accounting Standards Update ("ASU") No~~$6.3 million ~~2016-13,~~of ~~Financial~~financing ~~Instruments—Credit~~costs ~~Losses.~~related ~~In May 2019, ASU No. 2016-13 was subsequently amended by ASU No. 2019-04, Codification Improvements~~ to ~~Topic~~the ~~326,~~RBL ~~Financial Instruments—~~Credit ~~Losses and ASU No. 2019-05~~Facility, ~~Financial~~which ~~Instruments—Credit~~were ~~Losses~~capitalized ~~(Topic 326): Targeted Transition Relief. ASU No. 2016-13,~~ as ~~amended,~~debt ~~affects~~issuance ~~trade~~costs ~~receivables, financial assets~~ and certain other instruments that are not measured at fair value through net income. This ASU replaced the incurred loss approach with an expected loss model for instruments measured at amortized cost and was effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. ASU No. 2016-13 will be ~~applied~~amortized ~~using a modified retrospective approach through a cumulative~~straight-~~effect~~line ~~adjustment~~ to ~~retained~~interest ~~earnings~~expense asthrough of the ~~beginning~~maturity date of ~~the~~July ~~first reporting period in which the guidance is effective. The Company adopted this ASU on January 1~~20, ~~2020, and the adoption did not have a material impact on the condensed consolidated financial statements and related disclosures~~2024.

In(d) Represents ~~August~~amounts ~~2018,~~shown ~~the~~in ~~FASB~~accounts ~~issued~~payable ~~ASU No. 2018-13, which removes or modifies current fair value disclosures~~ and ~~adds~~accrued ~~additional~~liabilities ~~disclosures.~~as ~~The~~reorganization ~~update~~adjustments ~~to the guidance is the result of the FASB's test of the principles developed~~ (in its disclosure effectiveness project, which is designed to improve the effectiveness of disclosures in the notes to the financial statements. The disclosures that have been removed or modified may be applied immediately with retrospective application. For public entities, the new guidance was effective for fiscal years beginning after December 15, 2019, including interim reporting periods within that reporting period. The Company adopted this ASU on January 1, 2020, and the adoption did not have a material impact on the condensed consolidated financial statements and related disclosures.thousands):

In August 2018, the FASB issued ASU No. 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. For public entities, the guidance is effective for fiscal years beginning after December 15, 2019, including interim reporting periods within that reporting period. The Company adopted this ASU on January 1, 2020 which did not have a material impact on the condensed consolidated financial statements and related disclosures as capitalized costs for internal-use software were not material as of September 30, 2020.


Reinstatements from liabilities subject to compromise:
Accounts payable and accrued liabilities	$	29,752
Current portion of a settlement liability	17,700
General unsecured claims to be satisfied through issuance of equity after Emergence	16,127
Other general unsecured claims to be satisfied after Emergence	8,746
Other adjustments:
Success fees	20,800
Backstop Commitment Agreement premium satisfied in common shares at Emergence	(29,231)
Professional fees paid at Emergence	(5,102)
Total accounts payable and accrued liabilities reorganization adjustments	$	58,792

~~Other~~(e) Represents ~~than~~revenue aspayables ~~disclosed~~formerly ~~above or~~ in ~~the~~“Liabilities ~~Company’s~~Subject ~~Annual Report, there are no other accounting standards applicable~~ to ~~the~~Compromise” ~~Company as of September 30, 2020 and through the date of this filing~~ that ~~would~~ have abeen ~~material~~reinstated ~~effect~~at onemergence ~~the Company’s unaudited condensed consolidated financial statements~~ and ~~related~~will ~~disclosures~~be ~~that~~paid ~~have~~out ~~been~~subsequent ~~issued~~to ~~but not yet adopted by the Company~~emergence.

(f) Represents production taxes payable formerly in “Liabilities Subject to Compromise” that have been reinstated at emergence and will be paid out subsequent to emergence.

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~~Note 3—Divestitures~~(g) Represents the satisfaction upon emergence of the Predecessor Company’s accrued interest payable for the Prior Credit Facility and DIP Credit Facility.

~~February~~(h) Represents ~~2020~~$13.9 million ~~Divestiture~~and $80.6 million of the current and non-current portions of asset retirement obligations, respectively, formerly in “Liabilities Subject to Compromise” that have been reinstated at emergence.

In(i) Reflects ~~February 2020,~~ the ~~Company~~payment ~~completed~~in ~~the~~full ~~sale~~ of ~~certain~~the ~~non-operated~~borrowings ~~producing~~outstanding ~~properties~~under ~~for aggregate sales proceeds of approximately $12.2 million, subject to customary purchase price adjustments. No gain or loss was recognized for~~ the ~~February~~Prior ~~2020~~Credit ~~Divestiture.~~Facility ~~The~~and ~~Company~~DIP ~~continues~~Credit ~~to explore divestitures as part of our ongoing initiative to divest non-strategic assets~~Facility.

~~December~~(j) Reflects ~~2019~~borrowings ~~Divestiture~~drawn under the RBL Credit Facility upon emergence.

In(k) Represents ~~December~~$19.3 million ~~2019,~~of the ~~Company completed the sale of certain~~ non-~~operated~~current ~~producing~~portion ~~properties~~of ~~for~~a ~~aggregate~~settlement ~~sales~~liability ~~proceeds~~and ~~of approximately~~ $104.0 million, ~~subject~~of other non-current liabilities formerly in “Liabilities Subject to ~~customary~~Compromise” ~~purchase~~that ~~price~~have ~~adjustments.~~been Noreinstated ~~gain~~at oremergence ~~loss~~and ~~was~~will ~~recognized~~be ~~for~~paid ~~the~~out ~~December~~subsequent ~~2019~~to ~~Divestiture~~emergence.

~~August~~(l) As ~~2019~~part ~~Divestiture~~of the Plan, the Bankruptcy Court approved the settlement of certain claims reported within “Liabilities Subject to Compromise” in the Company's consolidated balance sheet at their respective allowed claim amounts. The table below indicates the reinstatement or disposition of liabilities subject to compromise (in thousands):

In August 2019, the Company completed the sale of certain non-operated producing properties for aggregate sales proceeds of approximately $22.0 million, subject to customary purchase price adjustments. No gain or loss was recognized for the August 2019 Divestiture.


Liabilities subject to compromise pre-emergence	$	2,135,808
Amounts reinstated on the Emergence Date:
Production taxes payable	(154,660)
Asset retirement obligations	(94,557)
Revenue payable	(59,750)
Accounts payable and accrued liabilities	(72,860)
Other non-current liabilities	(23,307)
Total liabilities reinstated	(405,134)
Consideration provided to settle liabilities subject to compromise per the Plan
Issuance of Successor equity associated with the participation in the backstopped and general unsecured rights offerings	(251,795)
Less proceeds from issuance of Successor equity associated with the backstopped and general unsecured rights offerings	200,473
Issuance of Successor equity to 2024 and 2026 Senior Notes holders, incremental to the backstopped and general unsecured rights offerings, and backstop commitment premium	(156,889)
Issuance of Successor equity to general unsecured claim holders, incremental to the backstopped and general unsecured rights offerings, and backstop commitment premium	(64,857)
Cash payment in settlement of claims and other	(27,498)
Total consideration provided to settle liabilities subject to compromise per the Plan	(300,566)
Gain on settlement of liabilities subject to compromise	$	1,430,108

~~March~~(m) Pursuant ~~2019~~to ~~Divestiture~~the terms of the Plan, on the Emergence Date, all Predecessor preferred stock interests were cancelled.

In(n) Pursuant ~~March~~to ~~2019,~~ the ~~Company~~terms ~~completed the sale~~ of ~~its interests in approximately 5,000 net acres of leasehold and producing properties for aggregate sales proceeds of approximately $22.4 million. The effective date for~~ the ~~March 2019 Divestiture was July 1~~Plan, ~~2018~~on ~~with purchase price adjustments calculated as of~~ the ~~closing~~Emergence ~~date of $5.9 million~~Date, ~~resulting~~all inPredecessor ~~net~~common ~~proceeds~~stock ofinterests ~~$16.5~~were ~~million~~cancelled. ~~No gain or loss was recognized for the March 2019 Divestiture.~~

~~Note 4—Liabilities~~(o) Pursuant ~~Subject~~ to ~~Compromise~~the terms of the Plan, on the Emergence Date, all Predecessor treasury stock interests were cancelled.

~~The~~(p) Reflects ~~Company’s~~the ~~liabilities~~issuance ~~subject~~of Successor equity, including the issuance of 24,729,681 shares of common stock at a par value of $0.01 per share and warrants to ~~compromise~~purchase ~~consisted~~4,358,369 shares of common stock in exchange for claims against or interests in the ~~following~~Debtors pursuant to the Plan. Equity issued is detailed in the table below (in thousands):

	September 30,2020
Accounts payable and accrued liabilities	$	93,526
Revenue payable	63,841
Production taxes payable - current	155,894
Production taxes payable - non-current	22,405
Asset retirement obligations - current	18,306
Asset retirement obligations - non-current	71,798
Accrued interest on debt subject to compromise	31,676
2024 Senior Notes due May 15, 2024	400,000
2026 Senior Notes due February 1, 2026	700,189
Deferred liability	16,813
Deferred tax liability	2,200
Damages for rejected and settled contracts	494,398
Other liabilities	38,400
Total liabilities subject to compromise	$	2,109,446

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As discussed in Note 1—Business and Organization — Voluntary Reorganization under Chapter 11 of the Bankruptcy Code, since the Petition Date, the Company has been operating as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with provisions of the Bankruptcy Code. On the accompanying condensed consolidated balance sheets, the line item liabilities subject to compromise reflects the expected allowed amount of the prepetition claims that are not fully secured and that have at least a possibility of not being repaid at the full claim amount. Determination of the value at which liabilities will ultimately be settled cannot be made until the Bankruptcy Court approves the Restructuring Plan. In addition, the manner by which those liabilities are settled will ultimately be determined by the aforementioned Restructuring Plan and could include settlement in cash, Company equity or a combination. Liabilities subject to compromise includes amounts related to the rejection of various executory contracts and unexpired leases. Additional amounts may be included in liabilities subject to compromise in future periods if additional executory contracts and unexpired leases are rejected. The Company will continue to evaluate the amount and classification of its prepetition liabilities. Any additional liabilities that are subject to compromise will be recognized accordingly, and the aggregate amount of liabilities subject to compromise may change.


Issuance of Successor equity associated with the participation in the backstopped and general unsecured claims rights offerings	$	251,795
Issuance of Successor equity associated with the backstop commitment premium	23,584
Issuance of Successor equity to 2024 and 2026 Senior Notes holders, incremental to the backstopped and general unsecured rights offerings, and backstop commitment premium	156,889
Issuance of Successor equity to general unsecured claims holders, incremental to the backstopped and general unsecured rights offerings, and backstop commitment premium	64,857
Fair value of warrants (Tranche A and B) to Predecessor common and preferred stockholders	20,403
Issuance of Successor equity to Predecessor common stockholders	3,664
Issuance of Successor equity to Predecessor preferred stockholders	3,663
Total Successor equity as of January 20, 2021	$	524,855

~~Note 5—~~(q) The ~~Reorganization~~table ~~Items,~~below ~~Net~~reflects the cumulative net impact of the effects on accumulated deficit (in thousands):

The Company’s reorganization items, net consisted of the following (in thousands):


Reorganization items, net:
Gain on settlement of liabilities subject to compromise	$	(1,430,108)
Adjustment to Backstop Commitment Agreement premium	(5,365)
Acceleration of unvested stock compensation	3,468
Success fees	20,800
Impact on reorganization items, net	(1,411,205)
Cancellation of Predecessor equity	(2,140,308)
Net impact on accumulated (deficit)	$	(3,551,513)

	For the Three Months Ending		For the Nine Months Ending
	September 30,2020		September 30,2020
Professional fees	$	23,469	$	25,819
Professional services fees	—		2,200
Trustee fees	356		471
Damages for rejected and settled contracts	478,370		486,104
DIP Credit Facility fees	—		1,251
Write-off of debt issuance costs	272		13,541
Court approved vendor settlements	(1,394)		(1,394)
Total reorganization items, net	$	501,073	$	527,992

We have incurred and will continue to incur significant expenses, gains and losses associated with the reorganization, primarily adjustments for allowable claims related to executory contracts approved for rejection by the Bankruptcy Court, negotiated settlements on executory contracts, the write-off of unamortized debt issuance costs and professional fees incurred subsequent to the Chapter 11 filings for the restructuring process. The amount of these items, which are being incurred in reorganization items, net within our accompanying unaudited condensed consolidated statements of operations, are expected to significantly affect our results of operations. In future periods, we may also incur adjustments for allowable claims related to our legal proceedings and executory contracts approved for rejection by the Bankruptcy Court.

As of September 30, 2020, $505.4 million of reorganization costs, net consisting of professional fees, trustee fees and damages for rejected contracts are accrued and unpaid and are presented in either accounts payable and accrued liabilities or liabilities subject to compromise on the condensed consolidated balance sheets. The write-off of the Senior Notes debt issuance costs are included in reorganization items, net as the Company believes the underlying debt instruments will be impacted by the Chapter 11 Cases. The write-off of the Senior Notes debt issuance costs is a non-cash reorganization item. For the three and nine months ended September 30, 2020, the Company had cash charges related to reorganization items, net of $6.7 million and $10.5 million, respectively.

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~~Note 6—Long-Term~~Fresh ~~Debt~~Start Adjustments

~~The~~(r) Reflects the adjustment to fair value of the Company’'s ~~long-term~~line ~~debt~~fill ~~consisted~~inventory based on market prices as of the ~~following~~Emergence ~~(in thousands):~~Date.

	September 30,2020		December 31,2019
DIP Credit Facility	$	110,000	$	—
Credit Facility due August 16, 2022 (or an earlier time as set forth in the Credit Facility)	453,746		470,000
2024 Senior Notes due May 15, 2024	400,000		400,000
2026 Senior Notes due February 1, 2026	700,189		700,189
Total principal	1,663,935		1,570,189
Unamortized debt issuance costs on Senior Notes (1)	—		(14,412)
Total debt, prior to reclassification to liabilities subject to compromise	1,663,935		1,555,777
Less amounts reclassified to liabilities subject to compromise (2)	(1,100,189)		—
Total debt not subject to compromise (3)	563,746		1,555,777
Less current portion of long-term debt (4)	(563,746)		—
Total long-term debt	$	—	$	1,555,777

(s) Reflects the adjustments to fair value of the Company's oil and natural gas properties, proved and unproved, as well as the elimination of wells in progress and accumulated depletion, depreciation and amortization.

~~(1)~~For Aspurposes aof ~~result~~estimating the fair value of the ~~Chapter~~Company's 11proved ~~Cases~~oil and gas properties, a discounted cash flows approach was used that estimated the ~~adoption~~fair ofvalue ~~ASC~~based ~~852,~~on the anticipated future cash flows associated with the Company's ~~wrote~~proved ~~off~~reserves, ~~all~~risked ~~unamortized~~by ~~debt~~reserve ~~issuance~~category and discounted using a weighted average cost ~~balances~~of tocapital ~~reorganization~~rate ~~items,~~of ~~net~~11.0%. The proved reserve locations included in this analysis were limited to wells included in the ~~condensed~~Company's ~~consolidated~~five-year ~~statements~~development ofplan. Future ~~operations~~prices ~~during~~for the ~~nine~~income ~~months~~approach ~~ended~~were ~~September~~based ~~30,~~on ~~2020~~forward strip price curves (adjusted for basis differentials) as of the Emergence Date.

~~(2)~~In ~~Debt~~estimating ~~subject to compromise includes~~ the ~~principal~~fair ~~balances~~value of the Company’'s ~~Senior~~unproved ~~Notes~~properties, ~~which~~a ~~are~~discounted ~~unsecured~~cash ~~claims~~flows inapproach ~~the~~was ~~Chapter~~used. 11The ~~Cases~~approach ~~and~~utilized ~~where~~for ~~the~~proved ~~payments~~properties ~~are~~was ~~stayed~~also consistently utilized for properties that had positive future cash flows associated with reserve locations that did not qualify as proved reserves.

(3t) Reflects ~~Debt~~the ~~not~~fair ~~subject~~value adjustment to ~~compromise~~recognize ~~includes~~the ~~all~~Company’s ~~borrowings~~land ~~outstanding~~as ~~under~~of the ~~Credit~~Emergence ~~Facility~~Date ~~and~~based ~~DIP~~on ~~Credit~~assessed ~~Facility~~values ~~which~~provided ~~are~~to ~~fully~~management ~~secured~~by ~~claims~~a inlicensed appraiser. The appraisals utilized the ~~Chapter~~market 11approach ~~Cases~~for comparable properties, where there was market comparable data available or the appraiser’s knowledge of the market and ~~are~~the ~~expected~~property, to beprovide ~~unimpaired.~~an estimated market value where market comparable data was not available.

(4u) Reflects ~~Due~~the adjustment to ~~uncertainties~~fair ~~regarding~~value ~~the outcome~~ of the ~~Chapter 11 Cases, the~~ Company's ~~has~~asset ~~classified~~retirement ~~the~~obligations ~~borrowings~~including ~~outstanding~~using ~~under~~a ~~the~~credit-adjusted ~~Credit~~risk-free ~~Facility~~rate ~~and DIP Credit Facility~~ as ~~current~~of ~~liabilities on~~ the ~~condensed~~Emergence ~~consolidated balance sheets as of September 30, 2020~~Date.

~~Chapter~~(v) Reflects 11the ~~Cases~~net ~~and~~cumulative ~~Effect~~impact of ~~Automatic~~the ~~Stay~~fresh start adjustments on accumulated deficit.

OnReorganization ~~June 14~~Items, 2020, the Company filed for relief under Chapter 11 of the Bankruptcy Code. The commencement of a voluntary proceeding in bankruptcy constituted an immediate event of default under the Credit Agreement and the indentures governing the Company’s Senior Notes, resulting in the automatic and immediate acceleration of all of the Company’s outstanding debt under the Credit Agreement and Senior Notes. In conjunction with the filing of the Chapter 11 Cases, the Company did not make the $14.8 million interest payment on the Company’s 2024 Senior Notes (as defined below) due on May 15, 2020. Any efforts to enforce payment obligations related to the acceleration of the Company’s debt have been automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code. Please refer to Note 1—Business and Organization — Ability to Continue as a Going Concern for more information on the Chapter 11 Cases.Net

~~Debtor-~~Any expenses, gains and losses that were realized or incurred between the Petition Date and the Emergence Date and as a direct result of the Chapter 11 Cases were recorded in~~-Possession~~ ~~Financing~~reorganization items, net in the Company’s consolidated statements of operations. The following table summarizes the components of reorganization items, net for the periods presented (in thousands):

On June 16, 2020, in connection with the filing of the Chapter 11 Cases, the Debtors entered into a debtor-in-possession credit agreement on the terms set forth in a Superpriority Senior Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”), by and among the Company, as borrower, the Company’s subsidiaries party thereto, as guarantors, the lenders party thereto (the “DIP Lenders”), and Wells Fargo Bank, National Association, as DIP agent and issuing lender, pursuant to which, having been granted the approval of the Bankruptcy Court, the DIP Lenders agree to provide the Company with a superpriority senior secured debtor-in-possession credit facility (as amended, the “DIP Credit Facility”) with loans in an aggregate principal amount not to exceed $50.0 million that, among other things, will be used to finance the ongoing general corporate needs of the Debtors during the course of the Chapter 11 Cases. In addition to the $50.0 million of incremental loans, the DIP Credit Facility included $75.0 million in Credit Facility loans rolled over into the DIP Credit Facility during July 2020, for a total facility size of $125.0 million.


	Predecessor
	For the Period from January 1 through January 20,
	2021
Gain on settlement of liabilities subject to compromise	$	1,430,108
Adjustment to Backstop Commitment Agreement premium	5,365
Acceleration of unvested stock compensation	(3,468)
Professional fees	(7,410)
Success fees	(20,800)
Fresh start valuation adjustment	(529,887)
Total reorganization items, net	$	873,908

The maturity date of the DIP Credit Agreement is the earliest of (i) December 14, 2020, or the date that is six (6) months after the filing of the Chapter 11 Cases; provided, that such date may be extended to March 14, 2021 with the prior written approval of certain of the DIP Lenders; (ii) the consummation of a sale of all or substantially all of the assets of the Debtors; (iii) the effective date of a plan of reorganization or liquidation in the Chapter 11 Cases; (iv) the entry of an order by the Bankruptcy Court dismissing any of the Chapter 11 Cases or converting such Chapter 11 Cases to a case under chapter 7 of title 11 of the United States Bankruptcy Code; and (v) the date of termination of the DIP Lenders’ commitments and the acceleration of any outstanding extensions of credit, in each case, under the DIP Credit

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~~Agreement~~Note 4—Long-Term and in accordance with the interim and final orders entered by the Bankruptcy Court concerning the DIP Credit Agreement. Furthermore, the DIP Credit Facility's interest rate varies similar to the Company's Credit Agreement and was a LIBOR loan with a base interest rate of 1.00% and spread of 5.75% as of September 30, 2020. Debt

The ~~DIP Credit Agreement contains a requirement that the~~ Company’s ~~provide, on a monthly basis, a rolling thirteen~~long-~~week~~term ~~operating~~debt ~~budget~~consisted ~~and~~of ~~cash flow forecast (~~the ~~“Approved~~following ~~Budget”) and not vary from the Approved Budget, subject to a Permitted Variance~~ (~~defined below). The Approved Budget is, subject to certain exceptions, tested on a weekly basis to measure any variance, on an aggregate basis, for all disbursements made~~ in the prior four-week period. The disbursements actually made in such prior four week period compared to the budgeted aggregate disbursements for such four week period reflected in the most recently delivered Approved Budget may not vary by more than 10% (or a greater amount, to the extent agreed upon by the DIP Agentthousands) ~~(such variance, a “Permitted Variance”). As of September 30, 2020, the Company was in compliance with the covenants under the DIP Credit Facility.~~ :

The DIP Credit Agreement contains events of default customary to debtor-in-possession financings, including events related to the Chapter 11 Cases, the occurrence of which could result in the acceleration of the Debtors’ obligation to repay the outstanding indebtedness under the DIP Credit Agreement. The Debtors’ obligations under the DIP Credit Agreement will be secured by a security interest in, and lien on, substantially all present and after acquired property (whether tangible, intangible, real, personal or mixed) of the Debtors and will be guaranteed by all of the Company’s restricted subsidiaries.


	Successor		Predecessor
	March 31, 2021		December 31, 2020
RBL Credit Facility	$	93,746	$	—
DIP Credit Facility	—		106,727
Prior Credit Facility	—		453,747
2024 Senior Notes	—		400,000
2026 Senior Notes	—		700,189
Total principal	93,746		1,660,663
Unamortized debt issuance costs(1)	—		—
Total debt, prior to reclassification to “Liabilities Subject to Compromise”	93,746		1,660,663
Less amounts reclassified to “Liabilities Subject to Compromise”(2)	—		(1,100,189)
Total debt not subject to compromise(3)	93,746		560,474
Less current portion of long-term debt	—		(560,474)
Total long-term debt	$	93,746	$	—

On July 20, 2020, the Company, together with its subsidiaries party thereto, certain of the DIP Lenders and Wells Fargo Bank, National Association entered into an amendment to the DIP Credit Agreement to, among other things: (i) extend certain Milestones in the DIP Credit Agreement, (ii) modify the limitation on the amount of undrawn New Money Interim Loans and New Money Final Loans in any borrowing so that the amount permitted to be drawn in accordance with the Approved Budget gives effect to the Permitted Variance, (iii) provide for customary prohibitions against unreasonable withholding of approvals with respect to the Approved Budget and the Restructuring Plan on the part of the DIP Lenders and the DIP Agent, and (iv) reaffirm the Debtors’ liens, guaranties and representations and warranties under the DIP Credit Agreement.____________________

On(1) As ~~November~~a 2,result ~~2020, the Company, together with its subsidiaries party thereto, certain~~ of the ~~DIP~~Chapter ~~Lenders~~11 Cases and ~~Wells Fargo Bank, National Association entered into a second amendment to~~ the ~~DIP~~adoption ~~Credit~~of ~~Agreement~~ASC to852, ~~among other things: (i) extend certain “Milestones,” as defined in~~ the ~~DIP~~Company ~~Credit~~wrote ~~Agreement,~~off ~~(ii)~~all ~~extend~~unamortized ~~the~~debt ~~“Scheduled~~issuance ~~Maturity~~cost ~~Date,”~~balances ~~as defined in the DIP Credit Agreement,~~ to ~~January~~reorganization 31items, ~~2021~~net ~~and~~in ~~(iii) provide that~~ the ~~Scheduled~~consolidated ~~Maturity~~statements ~~Date may be further extended, at the request~~ of ~~the~~operations ~~Company,~~during ~~to a date that is on or before March 14, 2021 with~~ the ~~prior~~year ~~written~~ended ~~consent~~December ~~of the Majority Lenders~~31, ~~as defined in the DIP Credit Agreement~~2020.

(2) As of ~~September 30~~December 31, 2020, ~~the~~debt ~~Company's~~subject ~~DIP~~to ~~Credit~~compromise ~~Facility~~included ~~borrowings were $35.0 million and $75.0 million had been rolled over from~~ the ~~Credit~~principal ~~Facility~~balances ~~for a total outstanding balance~~ of ~~$110.0 million. The DIP Credit Facility is classified as a current liability on~~ the ~~condensed~~Predecessor consolidated balance sheets as of September 30, 2020 as it is fully secured and expected to be unimpaired. On July 20, 2020, the Bankruptcy Court entered the final order approving the DIP Credit Agreement and associated DIP Credit Facility (the “Final DIP Order”) and $52.5 million was rolled over from the Credit Agreement into the DIP Credit Facility. On July 27, 2020, the Company’s ~~drew~~Senior ~~an additional $20~~Notes.0 million on the DIP Credit Facility leaving $15.0 million of availability on the facility. However, this availability could be restricted by a minimum liquidity covenant of $10.0 million from unrestricted cash and DIP Credit Facility availability.

(3) Debt not subject to compromise includes all borrowings outstanding under the Prior Credit ~~Agreement~~Facility and DIP Credit Facility.

InRBL August 2017, the Company entered into an amendment and restatement of its existing credit facility to provide aggregate commitments of $1.5 billion with a syndicate of banks, which is subject to a borrowing base (as amended, the "Credit Facility"). The Credit Facility matures on the earlier of (a) August 16, 2022, (b) April 15, 2021, if (and only if) (i) the Series A Preferred Stock have not been converted into common equity or redeemed prior to April 15, 2021 (the Company can redeem the Series A Preferred Stock at any time), and (ii) prior to April 15, 2021, the maturity date of the Series A Preferred Stock has not been extended to a date that is no earlier than six months after August 16, 2022 or (c) the earlier termination in whole of the commitments under the Credit Facility. No principal payments are generally required until the Credit Facility matures or in the event that the borrowing base falls below the outstanding balance.

On the Emergence Date, pursuant to the terms of the Plan, the Successor Company entered into a $1.0 billion reserve-based credit agreement (“RBL Credit Agreement”) with Wells Fargo Bank, National Association (“RBL Credit Facility”) with an initial borrowing base of $500.0 million. The borrowing base is redetermined semiannually on or around May 1 and November 1 of each year, with one interim “wildcard” redetermination available to us and our administrative agent between scheduled redeterminations during any 12-month period. On May 6, 2021, our borrowing base was reaffirmed at $500.0 million. The next scheduled redetermination will be on or around November 1, 2021.

As of the date of this filing, the Company has drawn $153.7 million on the RBL Credit Facility. Total funds available for borrowing under the Company’s RBL Credit Facility, after giving effect to an aggregate of $0.5 million of undrawn letters of credit, were $345.8 million as of the date of this filing.

The RBL Credit Facility provides for a $50.0 million sublimit of the aggregate commitments that is available for the issuance of letters of credit. The RBL Credit Facility bears interest either at a rate equal to (a) LIBOR plus an applicable margin that varies from 3.00% to 4.00% per annum or (b) a base rate plus an applicable margin that varies from 2.00% to 3.00% per annum. The RBL Credit Facility matures on July 20, 2024. The grid below shows the base rate margin and Eurodollar margin depending on the applicable borrowing base utilization percentage as of the date of this filing:

RBL Credit Facility Borrowing Base Utilization Grid


					Base Rate		Eurodollar		Commitment
Borrowing Base Utilization Percentage	Utilization				Margin		Margin		Fee Rate
Level 1	<25%				2.00	%	3.00	%	0.50	%
Level 2	≥	25%	<	50%	2.25	%	3.25	%	0.50	%
Level 3	≥	50%	<	75%	2.50	%	3.50	%	0.50	%
Level 4	≥	75%	<	90%	2.75	%	3.75	%	0.50	%
Level 5	≥90%				3.00	%	4.00	%	0.50	%

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The ~~amount~~RBL ~~available~~Credit toFacility berequires ~~borrowed under~~ the Company’s ~~Credit~~to ~~Facility~~maintain is(i) ~~subject to~~ a ~~borrowing~~consolidated ~~base~~net ~~that~~leverage isratio ~~redetermined~~of ~~semiannually~~less onthan ~~each~~or ~~May~~equal 1to ~~and~~3.00 ~~November~~to 1,.00 and ~~will~~(ii) ~~depend~~a onconsolidated ~~the~~current ~~volumes~~ratio of ~~the~~greater ~~Company’s~~than ~~proved~~or ~~oil~~equal ~~and~~to ~~gas~~1.00 ~~reserves,~~to ~~commodity~~1.00. ~~prices,~~Per ~~estimated~~the ~~cash~~RBL ~~flows~~Credit ~~from~~Agreement, ~~these~~for ~~reserves~~the ~~and~~purpose ~~other~~of ~~information~~calculating ~~deemed relevant by~~ the ~~administrative~~current ~~agent~~ratio ~~under~~for ~~the~~fiscal ~~Company’s~~quarters ~~Credit~~ending ~~Facility.~~March ~~Additionally~~31, ~~the~~2021 ~~undrawn~~and ~~balance~~June ~~may~~30, be2021, ~~constrained~~all byad ~~the~~valorem, ~~Company's~~severance ~~quantitative~~or ~~covenants~~tax ~~under~~liabilities ~~the~~can ~~Credit~~be ~~Facility,~~excluded ~~including~~from ~~the~~ current ~~ratio~~liabilities ~~and~~in ~~ratio~~the calculation of ~~consolidated debt less cash balances to its consolidated EBITDAX, at~~ the ~~next~~current ~~required quarterly compliance date~~ratio.

OnThe ~~April~~Company ~~27,~~is ~~2020,~~required ~~the lenders under the Credit Facility provided notice~~ to ~~the~~pay ~~Company~~a ~~that~~commitment ~~they~~fee ~~had~~of ~~completed~~0.50% ~~the~~per ~~redetermination~~annum ~~scheduled to occur~~ on ~~May~~the 1,actual ~~2020,~~daily ~~and~~unused ~~via~~portion ~~this~~of ~~redetermination,~~ the ~~borrowing~~current ~~base~~aggregate ~~had~~commitments ~~been~~under ~~reduced~~the ~~from~~RBL ~~$950.0 million~~Credit ~~to $650~~Facility.0 ~~million.~~The ~~Following this redetermination, the~~ Company ~~had~~is ~~outstanding~~also ~~borrowings~~required ofto ~~$600.5~~pay ~~million~~customary ~~and~~letter ~~had standby letters~~ of credit ofand ~~$49.5~~fronting ~~million, which reduce the availability of the undrawn borrowing base~~fees.

The ~~commencement~~RBL ofCredit ~~the~~Agreement ~~Chapter~~also 11contains ~~Cases~~customary ~~constituted~~affirmative aand ~~termination~~negative ~~event~~covenants, ~~with~~including, ~~respect~~among toother ~~the Company’s derivative instruments~~things, ~~which~~as ~~permits the counterparties~~ to ~~such~~compliance ~~derivative~~with ~~instruments~~laws to(including ~~terminate~~environmental ~~their~~laws ~~outstanding~~and ~~hedges.~~anti-corruption ~~Such~~laws), ~~termination~~delivery ~~events~~of ~~are~~quarterly ~~not~~and ~~stayed~~annual ~~under~~financial ~~the~~statements ~~Bankruptcy~~and ~~Code.~~borrowing ~~During~~base ~~June 2020~~certificates, ~~certain~~conduct of ~~the~~business, ~~lenders~~maintenance ~~under~~of ~~the~~property, ~~Credit~~maintenance ~~Agreement~~of ~~elected~~insurance, torestrictions ~~terminate~~on ~~their International Swaps and Derivatives Association master agreements and outstanding hedges with~~ the ~~Company~~incurrence ~~for aggregate settlement proceeds~~ of ~~$96.1 million.~~liens, ~~The~~indebtedness, ~~proceeds~~asset ~~from~~dispositions, ~~these~~restricted ~~terminations~~payments, ~~were~~and ~~applied~~other tocustomary ~~the outstanding borrowings under the Credit Facility~~covenants.

~~As is described in the Debtor-in-Possession Financing section above~~Additionally, ~~$22.5 million rolled from~~ the ~~Credit~~RBL ~~Facility to the DIP~~ Credit ~~Facility~~Agreement oncontains ~~June~~customary ~~16,~~events ~~2020~~of default and anremedies ~~additional~~for ~~$52.5 million~~credit ~~rolled~~facilities ~~on July 20, 2020 upon court approval~~ of ~~the~~this ~~Final DIP Order~~nature. AsIf ~~of September 30, 2020,~~ the ~~Credit~~Company ~~Facility~~does ~~had~~not acomply ~~drawn~~with ~~balance~~the offinancial ~~$453.7~~and ~~million~~other ~~classified~~covenants asin ~~a current liability on~~ the ~~condensed~~RBL ~~consolidated~~Credit ~~balance~~Agreement, ~~sheet. During~~ the ~~third~~lenders ~~quarter~~may, ~~due~~subject to ~~the~~customary ~~cancellation~~cure ~~of a certain revenue contract discussed in Note 2—Basis of Presentation~~rights, ~~Significant~~require ~~Accounting~~immediate ~~Policies~~payment ~~and Recent Accounting Pronouncements — Revenue — Contract Balances, $24.3 million was drawn on a $40.0 million letter~~ of ~~credit~~all ~~secured~~amounts byoutstanding under the ~~Company's~~RBL Credit ~~Facility.~~Agreement ~~As of the date of this filing,~~ and ~~excluding~~ any ~~undrawn~~outstanding ~~amounts~~unfunded ~~under~~commitments ~~letters~~may ~~of credit, the available amount to~~ be ~~borrowed under the Credit Facility was zero~~terminated.

~~Principal~~Prior ~~amounts borrowed on the~~ Credit Facility will be payable on the maturity date. The Company can repay any amounts borrowed prior to the maturity date without any premium or penalty other than customary LIBOR breakage costs. Prior to the filing of the Chapter 11 Cases, ~~amounts~~DIP ~~repaid under the~~ Credit Facility ~~could be re-borrowed from time to time~~, ~~subject~~2024 toSenior ~~the~~Notes ~~terms~~& of2026 ~~the~~Senior ~~facility.~~ Notes

~~Interest~~Information onpertaining ~~the~~to ~~Credit~~these ~~Facility~~debt isfacilities ~~payable~~can atbe ~~one~~found ofin ~~the~~our ~~following~~Annual ~~two~~Report ~~variable~~on ~~rates~~Form as10-K ~~selected~~for by the ~~Company:~~year aended ~~base~~December ~~rate based on the Prime Rate or the Eurodollar rate~~31, ~~based on LIBOR~~2020. ~~Either~~Our ~~rate~~obligations isunder ~~adjusted~~our ~~upward~~Prior byCredit ~~an applicable margin~~Facility, ~~based~~DIP ~~on the utilization percentage of the facility as outlined in the pricing grid below. Additionally, the~~ Credit Facility ~~provides for a commitment fee of 0.375% to 0.50%~~, ~~depending~~2024 onSenior ~~borrowing~~Notes ~~base usage. Due to the bankruptcy filing on June 14, 2020, a default penalty of an additional 2.00% went into effect~~ and ~~increased~~2026 ~~the~~Senior ~~Credit~~Notes ~~Agreement~~were ~~interest~~settled ~~rates~~at ~~above those interest rates shown in~~ the ~~grid~~Effective ~~below~~Date. ~~The grid below shows the Base Rate Margin and Eurodollar Margin depending on the applicable Borrowing Base Utilization Percentage (as defined in the Credit Agreement) as of the date of this filing:~~

~~Borrowing~~Debt ~~Base~~Issuance ~~Utilization Grid~~ Costs

					Eurodollar		Base Rate		Commitment
Borrowing Base Utilization Percentage	Utilization				Margin		Margin		Fee Rate
Level 1	<25%				1.50	%	0.50	%	0.38	%
Level 2	≥	25%	<	50%	1.75	%	0.75	%	0.38	%
Level 3	≥	50%	<	75%	2.00	%	1.00	%	0.50	%
Level 4	≥	75%	<	90%	2.25	%	1.25	%	0.50	%
Level 5	≥90%				2.50	%	1.50	%	0.50	%

Predecessor Company debt issuance costs include origination, legal and other fees incurred in connection with the Predecessor Company’s Prior Credit Facility, DIP Credit Facility, 2024 Senior Notes and 2026 Senior Notes. As of January 20, 2021, the Predecessor Company had no debt issuance costs. For the period from January 1, 2021 to January 20, 2021, the Predecessor Company recorded amortization expense related to the debt issuance costs of $0.1 million, which has been reflected on the Predecessor Company’s condensed consolidated balance sheets within the line item “Other non-current assets.”

~~The~~Successor ~~Credit~~Company ~~Agreement~~debt ~~contains~~issuance ~~representations~~costs include origination, ~~warranties~~legal and other fees incurred in connection with the Successor Company’s RBL Credit Facility. As of March 31, ~~covenants~~2021, ~~conditions~~the ~~and~~Company ~~defaults~~had ~~customary~~debt ~~for~~issuance ~~transactions~~costs, net of ~~this~~accumulated ~~type~~amortization, ~~including~~of ~~but~~$5.9 million, ~~not~~which ~~limited~~has been reflected on the Successor Company's condensed consolidated balance sheets within the line item “Other non-current assets.” For the period from January 21, 2021 to: ~~(i)~~March ~~limitations~~31, on2021, ~~liens~~the ~~and~~Successor ~~incurrence~~Company ofrecorded amortization expense related to the debt ~~covenants;~~issuance costs of $0.5 million.

As of March 31, 2020, the Predecessor Company had debt issuance costs, net of accumulated amortization, of $16.0 million. For the three months ending March 31, 2020, Predecessor Company recorded amortization expense related to the debt issuance costs of $1.2 million.

Interest Incurred on Long-Term Debt

For the period from January 1, 2021 to January 20, 2021, the Predecessor Company incurred interest expense on long-term debt of $1.5 million and capitalized interest expense on long-term debt of $0.1 million. For the period from January 21, 2021 to March 31, 2021, the Successor Company incurred interest expense on long-term debt of $2.6 million and a de minimis amount of capitalized interest expense on long-term debt. For the three months ended March 31, 2020, the Predecessor Company incurred interest expense on long-term debt of $22.3 million and capitalized interest expense on long-term debt of $2.1 million.

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~~(ii)~~Note ~~limitations~~5—Commodity onDerivative dividends, distributions, redemptions and restricted payments covenants; (iii) limitations on investments, loans and advances covenants; and (iv) limitations on the sale of property, mergers, consolidations and other similar transactions covenants. Additionally, the Credit Agreement limits the Company entering into hedges in excess of 85% of its anticipated production volumes.Instruments

The ~~Credit Agreement also contains financial covenants requiring the~~ Company ~~to comply on the last day of each quarter with a current ratio of its restricted subsidiaries~~’s ~~current~~open ~~assets~~commodity ~~(includes availability under the revolving Credit Facility and unrestricted cash and excludes~~ derivative ~~assets)~~contracts toby its restricted subsidiaries’ current liabilities (excludes obligations under the revolving Credit Facility, senior notes and certain derivative liabilities), of not less than 1.0 to 1.0 and to maintain, on the last day of each quarter, ~~a ratio of its restricted subsidiaries’ debt less cash balances to its restricted subsidiaries EBITDAX (EBITDAX is defined~~ as net income adjusted for interest expense, income tax expense/benefit, DD&A, exploration and abandonment expenses as well as certain non-recurring cash and non-cash charges and income (such as stock-based compensation expense, unrealized gains/losses on commodity derivatives and impairment of ~~long-lived assets and goodwill)~~March 31, ~~subject~~2021 toare ~~pro~~summarized forma adjustments for non-ordinary course acquisitions and divestitures) for the four fiscal quarter periods most recently ended, of not greater than 4.0 to 1.0 as of the last day of such fiscal quarter. below:

The acceleration of the obligations under the Credit Agreement as of June 14, 2020 resulted in a cross-default and acceleration of the maturity of the Company’s other outstanding long-term debt. The Credit Facility is classified as a current liability on the condensed consolidated balance sheets as of September 30, 2020 as it is fully secured and expected to be unimpaired.


	6/30/2021		9/30/2021		12/31/2021		3/31/2022		6/30/2022		9/30/2022		12/31/2022		3/31/2023
NYMEX WTI Crude Swaps:
Notional volume (Bbl)	1,298,500		1,153,000		1,041,000		828,000		—		—		—		—
Weighted average fixed price ($/Bbl)	$	50.34	$	49.64	$	50.01	$	50.05	$	—	$	—	$	—	$	—
NYMEX WTI Crude Purchased Puts:
Notional volume (Bbl)	—		—		—		—		345,839		320,247		297,903		94,820
Weighted average purchased put price ($/Bbl)	$	—	$	—	$	—	$	—	$	40.00	$	40.00	$	40.00	$	40.00
NYMEX WTI Crude Sold Calls:
Notional volume (Bbl)	—		—		—		—		345,839		320,247		297,903		94,820
Weighted average sold call price ($/Bbl)	$	—	$	—	$	—	$	—	$	72.70	$	72.70	$	72.70	$	72.70
NYMEX HH Natural Gas Swaps:
Notional volume (MMBtu)	9,190,465		8,482,141		7,904,240		6,468,277		—		—		—		—
Weighted average fixed price ($/MMBtu)	$	2.94	$	2.93	$	2.93	$	3.00	$	—	$	—	$	—	$	—
NYMEX HH Natural Gas Purchased Puts:
Notional volume (MMBtu)	—		—		—		—		2,764,135		2,614,602		2,477,469		797,160
Weighted average fixed price ($/MMBtu)	$	—	$	—	$	—	$	—	$	2.00	$	2.00	$	2.00	$	2.00
NYMEX HH Natural Gas Sold Calls:
Notional volume (MMBtu)	—		—		—		—		2,764,135		2,614,602		2,477,469		797,160
Weighted average fixed price ($/MMBtu)	$	—	$	—	$	—	$	—	$	3.25	$	3.25	$	3.25	$	3.25

~~Any~~The ~~borrowings~~following ~~under~~tables detail the ~~Credit~~fair ~~Facility~~value ~~are collateralized by substantially all~~ of the ~~assets of the~~ Company’s ~~and~~derivative ~~certain of its subsidiaries~~instruments, including ~~oil and gas properties, personal property and~~ the ~~equity~~gross ~~interests~~amounts ~~of those subsidiaries of the Company. The Company has entered into oil~~ and ~~natural~~adjustments ~~gas~~made ~~hedging~~to ~~transactions~~net ~~with several counterparties that are also lenders under~~ the ~~Credit~~derivative ~~Facility.~~instruments ~~The~~for ~~Company’s obligations under these hedging contracts are secured by~~ the ~~collateral~~presentation ~~securing~~in the ~~Credit~~condensed ~~Facility. Elevation is an unrestricted subsidiary, which is no longer~~ consolidated orbalance ~~controlled~~sheets by(in ~~the Company, and the assets and credit of Elevation are not available to satisfy the debts and other obligations of the Company or its other subsidiaries.~~thousands):

2024 Senior Notes


Location on Balance Sheet	Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offsets in the Balance Sheet(1)		Net Amounts of Assets and Liabilities Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet(2)		Net Amounts(3)
	Successor as of March 31, 2021
Current assets	$	5,684	$	(5,684)	$	—	$	—	$	1,191
Non-current assets	—		1,191		1,191		—		—
Current liabilities	(32,358)		5,684		(26,674)		—		(26,806)
Non-current liabilities	(2,963)		2,831		(132)		—		—


	Predecessor as of December 31, 2020
Current assets	$	8,372	$	(1,401)	$	6,971	$	—	$	6,971
Non-current assets	—		—		—		—		—
Current liabilities	(3,548)		1,401		(2,147)		—		(2,147)
Non-current liabilities	—		—		—		—		—

In August 2017, the Company issued at par $400.0 million principal amount of 7.375% Senior Notes due May 15, 2024 (the "2024 Senior Notes" and the offering, the "2024 Senior Notes Offering"). The 2024 Senior Notes bear an annual interest rate of 7.375%. The interest on the 2024 Senior Notes is payable on May 15 and November 15 of each year which commenced on November 15, 2017. The Company received net proceeds of approximately $392.6 million after deducting fees.__________________

~~The~~(1) Agreements ~~Company's 2024 Senior Notes~~ are ~~its senior unsecured obligations and rank equally~~ in ~~right~~place of payment with all of its other senior indebtedness and senior to any of its subordinated indebtedness. The Company's 2024 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of the Company's current subsidiaries and by certain future restricted subsidiaries that ~~guarantees~~allow ~~its~~for ~~indebtedness under a Credit Facility (~~the ~~"2024~~financial ~~Senior~~right ~~Notes Guarantors"). The 2024 Senior Notes are effectively subordinated to all~~ of ~~the~~offset ~~Company's~~for ~~secured~~derivative ~~indebtedness~~assets ~~(including all borrowings~~ and ~~other~~derivative ~~obligations~~liabilities ~~under~~at ~~its~~settlement ~~Credit~~or ~~Facility)~~in to the ~~extent~~event of ~~the~~a ~~value~~default ofunder the collateral securing such indebtedness, and structurally subordinated in right of payment to all existing and future indebtedness and other liabilities (including trade payables) of any of its future subsidiaries that do not guarantee the 2024 Senior Notesagreements.

~~The~~(2) Netting ~~2024~~for ~~Senior~~balance ~~Notes~~sheet ~~also~~presentation ~~contain~~is ~~affirmative~~performed ~~and~~by ~~negative~~current ~~covenants that, among other things, limit the Company's~~ and ~~the~~non-current ~~2024~~classification. ~~Senior~~This ~~Notes~~adjustment ~~Guarantors'~~represents ~~ability~~amounts tosubject ~~make investments; declare or pay any dividend or make any other payment~~ to ~~holders~~an ofenforceable ~~the~~master ~~Company’s~~netting or any of its 2024 Senior Notes Guarantors’ equity interests; repurchase or redeem any equity interests of the Company; repurchase or redeem subordinated indebtedness; incur additional indebtedness or issue preferred stock; create liens; sell assets; enter into agreements that restrict dividends or other payments by restricted subsidiaries; consolidatearrangement, ~~merge~~which orare ~~transfer~~not ~~all~~netted oron ~~substantially all of~~ the ~~assets~~condensed ofconsolidated ~~the~~balance ~~Company; engage in transactions with the Company's affiliates; engage in any business other than the oil and gas business; and create unrestricted subsidiaries~~sheets. ~~The~~There ~~indenture~~are ~~governing~~no ~~the~~amounts ~~2024~~of ~~Senior~~related ~~Notes~~financial ~~also~~collateral ~~contains~~received ~~customary~~or ~~events of~~ pledged.

(3) Net amounts are not split by current and non-current. All counterparties in a net asset position are shown in the current asset line, and all counterparties in a net liability position are shown in the current liability line item.

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~~default.~~Commodity ~~Upon~~derivatives ~~the~~gain ~~occurrence~~(loss) ofare ~~events~~included ofunder ~~default~~the ~~arising~~“Other ~~from~~income ~~certain~~(expense)” ~~events~~line ofitem ~~bankruptcy~~in ~~or insolvency,~~ the ~~2024~~condensed ~~Senior~~consolidated ~~Notes~~statements ~~shall~~of ~~become~~operations. ~~due~~The ~~and~~table ~~payable~~below ~~immediately~~sets ~~without~~forth ~~any declaration or other act of~~ the ~~trustee~~commodity orderivatives ~~the~~gain ~~holders~~(loss) offor the ~~2024~~periods ~~Senior~~presented ~~Notes~~(in thousands).

The filing of the Chapter 11 Cases resulted in an event of default under and acceleration of the maturity of the Company’s 2024 Senior Notes.


	Successor		Predecessor
	For the Period from January 21 through March 31,		For the Period from January 1 through January 20,		For the Three Months Ended March 31,
	2021		2021		2020
Commodity derivatives gain (loss)	$	(28,487)	$	(12,586)	$	263,015

~~2026~~Note 6—Asset ~~Senior~~Retirement ~~Notes~~Obligations

InThe ~~January 2018, the~~ Company’s ~~issued~~asset atretirement ~~par~~obligations ~~$750.0~~(“ARO”) ~~million~~represent ~~principal~~the ~~amount~~present value of ~~5.625%~~estimated ~~Senior~~future ~~Notes~~costs ~~due~~associated ~~February~~with 1,the ~~2026~~plugging ~~(the~~and ~~"2026~~abandonment ~~Senior~~of ~~Notes"~~oil and ~~together~~gas ~~with~~wells, ~~the~~removal ~~2024~~of ~~Senior~~equipment ~~Notes,~~and ~~the~~facilities ~~"Senior~~from ~~Notes"~~leased acreage, and ~~the~~land ~~offering~~restoration ofin ~~the~~accordance ~~2026~~with ~~Senior~~applicable ~~Notes~~local, ~~the~~state ~~"2026~~and ~~Senior~~federal ~~Notes Offering")~~laws. The ~~2026~~current ~~Senior~~and ~~Notes~~non-current ~~bear~~portions anas ~~annual~~of ~~interest~~December ~~rate~~31, of2020 5(Predecessor) were $14.~~625%~~3 million and $80.5 million, ~~The~~respectively, ~~interest~~and onhave ~~the~~been ~~2026~~included ~~Senior~~in ~~Notes~~“Liabilities isSubject ~~payable~~to onCompromise” ~~February~~in 1the ~~and~~condensed ~~August~~consolidated 1balance ofsheets ~~each~~as ~~year~~of ~~commencing~~that onbalance ~~August 1,~~sheet ~~2018~~date. The ~~Company~~following ~~received~~table ~~net~~provides ~~proceeds~~a reconciliation of ~~approximately~~the ~~$737.9~~Company’s ~~million~~asset ~~after~~retirement ~~deducting~~obligations ~~fees.~~for the periods presented (in thousands):

The Company's 2026 Senior Notes are the Company's senior unsecured obligations and rank equally in right of payment with all of the Company's other senior indebtedness and senior to any of the Company's subordinated indebtedness. The Company's 2026 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of the Company's current subsidiaries and by certain future restricted subsidiaries that guarantee the Company's indebtedness under a Credit Facility (the "2026 Senior Notes Guarantors"). The 2026 Senior Notes are effectively subordinated to all of the Company's secured indebtedness (including all borrowings and other obligations under its Credit Facility) to the extent of the value of the collateral securing such indebtedness, and structurally subordinated in right of payment to all existing and future indebtedness and other liabilities (including trade payables) of certain of the Company's future restricted subsidiaries that do not guarantee the 2026 Senior Notes.


Asset retirement obligations at December 31, 2020 (Predecessor)	$	94,769
Liabilities settled	(545)
Accretion expense	333
Asset retirement obligations at January 20, 2021 (Predecessor)	94,557
Fresh start adjustment(1)	(7,358)
Asset retirement obligations at January 20, 2021 (Predecessor)	87,199


Asset retirement obligations at January 21, 2021 (Successor)	87,199
Additional liability incurred	81
Revisions in estimated cash flows	357
Liabilities settled	(1,045)
Accretion expense	1,475
Asset retirement obligations at March 31, 2021 (Successor)	$	88,067

The 2026 Senior Notes also contain affirmative and negative covenants that, among other things, limit the Company's and the 2026 Senior Notes Guarantors' ability to make investments; declare or pay any dividend or make any other payment to holders of the Company's or any of its 2026 Senior Notes Guarantors' equity interests; repurchase or redeem any equity interests of the Company; repurchase or redeem subordinated indebtedness; incur additional indebtedness or issue preferred stock; create liens; sell assets; enter into agreements that restrict dividends or other payments by restricted subsidiaries; consolidate, merge or transfer all or substantially all of the assets of the Company; engage in transactions with the Company’s affiliates; engage in any business other than the oil and gas business; and create unrestricted subsidiaries. The indenture governing the 2026 Senior Notes also contains customary events of default. Upon the occurrence of events of default arising from certain events of bankruptcy or insolvency, the 2026 Senior Notes shall become due and payable immediately without any declaration or other act of the trustee or the holders of the 2026 Senior Notes. _____________________________________________________________________________________________________________________________________________

~~The~~(1) Refer ~~filing~~to ofNote ~~the~~3—Fresh ~~Chapter~~Start 11Reporting ~~Cases~~for ~~resulted~~more ininformation anon ~~event~~fresh ofstart ~~default under and acceleration of the maturity of the Company’s 2026 Senior Notes~~adjustments.

~~Debt~~Note 7—Fair ~~Issuance~~Value ~~Costs~~Measurements

~~Debt~~The ~~issuance~~following ~~costs~~table ~~include origination, legal and other fees incurred~~ (in ~~connection~~thousands) ~~with~~presents the Company’s ~~Credit~~financial ~~Facility~~assets and ~~Senior~~liabilities ~~Notes.~~that Aswere ofaccounted ~~September 30,~~for ~~2020,~~at ~~the~~fair ~~Company~~value ~~had debt issuance costs, net of accumulated amortization, of $0.5 million related to its Credit Facility which has been reflected~~ on ~~the~~a ~~Company's~~recurring ~~condensed~~basis ~~consolidated~~by ~~balance~~level ~~sheets~~ within the ~~line~~fair ~~item~~value other non-current assets. As a result of the bankruptcy, the Company wrote-off $13.5 million in unamortized debt issuance costs on the 2024 and 2026 Senior Notes to reorganization items, net in the condensed consolidated statements of operations. For the three months ended September 30, 2020 and 2019, the Company recorded amortization expense related to the debt issuance costs of $0.2 million and $1.0 million, respectively. For the nine months ended September 30, 2020 and 2019, the Company recorded amortization expense related to the debt issuance costs of $3.3 million and $3.8 million, respectively.hierarchy:


	Successor								Predecessor
	Fair Value Measurement at March 31, 2021								Fair Value Measurement at December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Commodity derivative assets	$	—	$	1,191	$	—	$	1,191	$	—	$	6,971	$	—	$	6,971
Commodity derivative liabilities	—		26,806		—		26,806		—		2,147		—		2,147

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~~Interest~~The ~~Incurred~~following ontable ~~Long-Term~~(in ~~Debt~~thousands) presents the fair value of the Company’s financial instruments and carrying value. This table does not impact the Company's financial position, results of operations or cash flows.

For the three and nine months ended September 30, 2020, the Company incurred interest expense on long-term debt of $8.1 million and $50.6 million, respectively, as compared to $23.8 million and $66.9 million, respectively, for the three and nine months ended September 30, 2019. Absent the automatic stay, interest expense for the three and nine months ended September 30, 2020 would have been $24.6 million and $69.2 million, respectively. For the three and nine months ended September 30, 2020, the Company capitalized interest expense on long term debt of $0.9 million and $4.9 million, respectively, as compared to $1.6 million and $5.4 million, respectively, for the three and nine months ended September 30, 2019, which has been reflected in the Company’s condensed consolidated financial statements.


	Successor				Predecessor
	At March 31, 2021				At December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
RBL Credit Facility	$	93,746	$	93,746	$	—	$	—
Prior Credit Facility	—		—		453,747		453,747
DIP Credit Facility	—		—		106,727		106,727
2024 Senior Notes	—		—		400,000		70,732
2026 Senior Notes	—		—		700,189		123,408

~~Senior~~Non-Recurring ~~Note~~Fair ~~Repurchase~~Value ~~Program~~Measurements

OnThe ~~January~~Company 4,utilizes ~~2019,~~fair ~~the~~value ~~Board~~on ~~of Directors authorized~~ a ~~program~~non-recurring tobasis ~~repurchase up~~ to ~~$100.0~~review ~~million~~its ofproved ~~the~~oil ~~Company’s~~and ~~Senior~~gas ~~Notes~~properties ~~(the~~for ~~“Senior~~potential ~~Notes~~impairment ~~Repurchase~~when ~~Program”).~~events ~~The~~and ~~Company’s~~circumstances ~~Senior~~indicate ~~Notes~~a ~~Repurchase~~possible ~~Program~~decline isin ~~subject to restrictions under~~ the ~~Credit~~recoverability ~~Facility and does not obligate it to acquire any specific nominal amount~~ of ~~Senior Notes. For~~ the ~~three~~carrying ~~and~~value ~~nine months ended September 30, 2020, the Company did not repurchase any Senior Notes. As a result~~ of ~~the~~such ~~Chapter 11 Cases, the authorization to repurchase Senior Notes is no longer applicable~~property. ~~For~~The ~~the three months ended September 30, 2019, the~~ Company ~~did~~uses ~~not~~an ~~repurchase~~income ~~2026~~approach ~~Senior~~analysis ~~Notes.~~based ~~For~~on the ~~nine~~net ~~months~~discounted ~~ended September 30,~~future ~~2019,~~cash ~~the~~flows ~~Company repurchased a nominal value~~ of ~~$49.8 million~~producing ~~for $39~~property.~~3 million~~ inThe ~~connection~~future ~~with~~cash ~~the~~flows ~~Senior~~are ~~Notes~~based ~~Repurchase~~on ~~Program.~~management’s ~~Interest~~estimates ~~expense~~ for the ~~nine months ended September 30, 2019 contained a $10~~future.~~5 million~~ ~~gain~~The onunobservable ~~debt~~inputs ~~repurchase~~listed ~~related~~below toare ~~the~~Level ~~Company's~~3 ~~Senior~~inputs ~~Notes~~within ~~Repurchase Program. For~~ the ~~three~~fair ~~months~~value ~~ended~~hierarchy ~~September 30,~~and ~~2019,~~include: ~~this gain was zero.~~

~~Note 7—Commodity~~•estimates ~~Derivative~~of ~~Instruments~~oil and gas production, as the case may be, from the Company’s reserve reports;

~~The Company has entered into~~ •commodity ~~derivative~~prices ~~instruments,~~based ~~as described below. The Company has utilized swaps, put options and call options to reduce the effect of price changes~~ on ~~a portion of~~ the ~~Company’s~~sales ~~future~~contract ~~oil~~terms and ~~natural~~forward ~~gas~~price ~~production.~~curves;

A•operating ~~swap has an established fixed price. When the settlement price is below the fixed price, the counterparty pays the Company an amount equal to the difference between the settlement price~~ and ~~the~~development ~~fixed~~costs; ~~price multiplied by the hedged contract volume. When the settlement price is above the fixed price~~and, ~~the Company pays its counterparty an amount equal to the difference between the settlement price and the fixed price multiplied by the hedged contract volume.~~

~~A put option has an established floor price. The buyer of the put option pays the seller~~ •a ~~premium~~discount torate ~~enter~~based ~~into~~on the put option. When the settlement price is below the floor price, the seller pays the buyer an amount equal to the difference between the settlement price and the strike price multiplied by the hedged contract volume. When the settlement price is above the floor price, the put option expires worthless. Some of the Company’s purchased put options have deferred premiums. For the deferred premium puts, the Company agrees to pay a ~~premium~~market-based toweighted ~~the~~average ~~counterparty~~cost ~~at the time~~ of ~~settlement~~capital.

AFor ~~call~~both ~~option~~the ~~has~~periods anfrom ~~established~~January ~~ceiling~~1, ~~price.~~2021 ~~The~~to ~~buyer~~January of20, ~~the~~2021 ~~call~~and ~~option~~January ~~pays~~21, 2021 to March 31, 2021, the ~~seller~~Company arecognized ~~premium~~no toimpairment ~~enter~~expense ~~into~~on ~~the~~their ~~call~~proved ~~option~~oil and gas properties. ~~When~~For the ~~settlement~~three ~~price~~months isended ~~above~~March 31, 2020, the ~~ceiling~~Predecessor ~~price,~~Company ~~the~~recognized ~~seller~~$0.8 million ~~pays~~in ~~the~~impairment ~~buyer~~expense anon ~~amount~~its ~~equal~~proved tooil ~~the~~and ~~difference~~gas ~~between~~properties ~~the~~related ~~settlement~~to ~~price~~impairment ~~and~~of ~~the~~assets ~~strike~~in ~~price~~its ~~multiplied~~northern byfield as the ~~hedged~~fair ~~contract~~value ~~volume.~~did ~~When~~not exceed the ~~settlement~~Predecessor ~~price~~Company's iscarrying ~~below~~amount ~~the~~associated ~~ceiling~~with ~~price,~~its ~~the~~proved ~~call~~oil ~~option~~and ~~expires~~gas ~~worthless~~properties in its northern field.

~~The~~See ~~Company~~Note ~~combines~~3—Fresh ~~swaps,~~Start ~~purchased~~Reporting ~~put~~for ~~options,~~discussion ~~purchased~~of ~~call~~the ~~options,~~revaluation ~~sold put options and sold call options in order to achieve various hedging strategies. Some examples~~ of the Company’s ~~hedging~~oil ~~strategies are collars which include purchased put options~~ and ~~sold~~gas ~~call~~properties ~~options,~~upon ~~three-way~~emergence ~~collars~~from which include purchased put options, sold put options and sold call options, and enhanced swaps, which include either sold put options or sold call options with the associated premiums rolled into an enhanced fixed price swapbankruptcy. ~~The Company has historically relied on commodity derivative contracts to mitigate its exposure to lower commodity prices.~~

~~The~~Note 8—Income objective of the Company’s use of commodity derivative instruments is to achieve more predictable cash flows in an environment of volatile oil and natural gas prices and to manage its exposure to commodity price risk. While Taxes

The Company computes an estimated annual effective tax rate (“AETR”) each quarter based on the current and forecasted operating results. The income tax expense or benefit associated with the interim period is computed using the most recent estimated AETR applied to the year-to-date ordinary income or loss, plus the tax effect of any significant or infrequently occurring items recorded during the interim period. The computation of the estimated AETR at each interim period requires certain estimates and significant judgements including, but not limited to, the expected operating income (loss) for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent differences and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, and additional information becomes known or as the tax environment changes.

The effective combined U.S. federal and state income tax rate for the following periods were:

•For the period from January 1, 2021 to January 20, 2021: zero

•For the period from January 21, 2021 to March 31, 2021: 20.85%

•For the three months ended March 31, 2020: 19.60%

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The effective rate differs from the ~~use~~amount ofthat ~~these~~would ~~commodity~~be ~~derivative~~provided ~~instruments~~by ~~limits~~applying the ~~downside~~statutory ~~risk~~U.S. federal income tax rate of ~~adverse~~21% ~~price~~to ~~movements,~~pre-tax ~~such~~income ~~use~~due ~~may~~to ~~also~~(i) ~~limit~~the effect of a full valuation allowance in effect at March 31, 2021 and (ii) the ~~Company’s~~effects ~~ability~~of state taxes, permanent taxable differences, and income attributable to ~~benefit~~non-controlling ~~from~~interest ~~favorable~~for ~~price~~the ~~movements.~~three ~~The~~months ~~Company~~ended ~~may~~March 31, ~~from~~2020. ~~time~~Net tax expense for the period January 1, 2021 to ~~time~~January 20, ~~add~~2021 ~~incremental~~was ~~derivatives~~reduced to ~~hedge~~zero ~~additional~~due ~~production,~~to ~~restructure~~the ~~existing~~valuation ~~derivative~~allowance. ~~contracts~~Current ortax ~~enter~~expense ~~into~~for ~~new~~the ~~transactions~~period January 21, 2021 to ~~modify~~March ~~the~~31, ~~terms~~2021 was $23.3 million primarily as a result of ~~current~~net ~~contracts~~operating inloss ~~order~~(“NOL”) tocarryovers ~~realize~~limited ~~the~~under ~~current~~Section ~~value~~382 of the ~~Company’s~~Internal ~~existing~~Revenue ~~positions.~~Service ~~The~~Code ~~Company~~of ~~does~~1986, ~~not~~as ~~enter~~amended ~~into~~(“IRC”) ~~derivative~~due ~~contracts~~to ~~for~~the ~~speculative~~change ~~purposes~~in control as referenced in Note 3 – Fresh Start Reporting.

ToAs ~~reduce~~described ~~the~~in ~~impact~~Note of1 ~~fluctuations~~– inBusiness ~~oil~~ and ~~natural~~Organization, ~~gas~~Voluntary ~~prices~~Reorganization onunder Chapter 11 of the ~~Company's~~Bankruptcy ~~revenues~~Code above, in accordance with the Plan, the Company’s ~~has~~Senior ~~periodically~~Notes ~~entered~~were ~~into~~canceled ~~commodity~~and ~~derivative~~exchanged ~~contracts~~for ~~with~~new ~~respect~~common tostock. ~~certain~~Absent an exception, a debtor recognizes cancellation of ~~its~~indebtedness ~~oil~~income ~~and~~(“CODI”) ~~natural~~upon ~~gas~~discharge ~~production~~of ~~through~~its ~~various~~outstanding ~~transactions~~indebtedness for an amount of consideration that ~~limit~~is ~~the~~less ~~downside~~than ofits ~~future~~adjusted ~~prices~~issue ~~received~~price. The ~~Company~~IRC ~~plans~~provides tothat ~~continue~~a ~~its~~debtor ~~practice~~in ofa ~~entering~~Chapter ~~into~~11 ~~such~~bankruptcy ~~transactions~~case tomay ~~reduce~~exclude ~~the~~CODI ~~impact~~from oftaxable ~~commodity~~income ~~price~~but ~~volatility~~must onreduce certain of its ~~cash~~tax ~~flow~~attributes ~~from~~by ~~operations.~~the ~~Future~~amount ~~transactions~~of ~~may~~any ~~include~~CODI ~~price~~realized ~~swaps~~as ~~whereby~~a ~~the~~result ~~Company~~of ~~will~~the ~~receive~~consummation of a ~~fixed~~plan ~~price~~of ~~for~~reorganization. ~~its~~The ~~production~~amount ~~and~~of ~~pay~~CODI arealized ~~variable~~by ~~market~~a ~~price~~taxpayer tois ~~the~~determined ~~contract~~based ~~counterparty.~~on ~~Additionally,~~ the ~~Company~~fair ~~may~~market ~~enter~~value ~~into~~of ~~collars,~~the ~~whereby~~consideration itreceived ~~receives~~by the ~~excess,~~creditors ifin ~~any,~~settlement of ~~the~~outstanding ~~fixed~~indebtedness. ~~floor~~Upon ~~over~~emergence ~~the~~from ~~floating~~Chapter ~~rate~~11 orbankruptcy ~~pay~~proceedings, the ~~excess,~~CODI ifmay ~~any,~~reduce some or all of the ~~floating~~amount ~~rate~~of ~~over~~prior ~~the~~tax ~~fixed~~attributes, ~~ceiling~~which ~~price.~~can ~~These~~include ~~hedging~~net ~~activities~~operating ~~are~~losses, ~~intended~~capital tolosses, ~~support~~alternative ~~oil~~minimum ~~and~~tax ~~natural~~credits ~~gas~~and ~~prices~~tax atbasis ~~targeted~~in ~~levels~~assets. ~~and~~The toactual ~~manage~~reduction ~~the~~in ~~Company's~~tax ~~exposure~~attributes todoes ~~oil~~not ~~and~~occur ~~natural~~until ~~gas~~January ~~price~~1, ~~fluctuations~~2022.

The ~~use~~Company ofhas ~~derivatives~~evaluated ~~involves~~the impact of the ~~risk~~reorganization, ~~that~~including the ~~counterparties~~change toin ~~such~~control, ~~instruments~~resulting ~~will~~from beits ~~unable~~emergence tofrom ~~meet~~bankruptcy. ~~the~~From ~~financial~~an ~~terms~~income oftax ~~such~~perspective, ~~contracts.~~the ~~The~~most ~~Company’s~~significant ~~derivative~~impact ~~contracts~~is ~~are~~attributable ~~currently~~to ~~with~~our ~~two~~carryover ~~counterparties,~~tax ~~both~~attributes ofassociated ~~which~~with ~~are~~our ~~lenders~~net ~~under~~operating losses. On the ~~Credit~~date ~~Agreement~~of ~~and~~emergence, the ~~DIP~~estimated ~~Credit~~NOL ~~Facility~~was approximately $1.3 billion. The Company ~~has~~believes ~~netting~~that ~~arrangements~~the ~~with~~Successor ~~the~~Company ~~counterparty~~will ~~that~~be ~~provide~~able ~~for~~to fully absorb the ~~offset~~cancellation of ~~payables~~debt ~~against~~income ~~receivables~~realized ~~from~~by ~~separate~~the ~~derivative~~Predecessor ~~arrangements~~Company in connection with the ~~counterparties~~reorganization inwith ~~the~~its ~~event~~adjusted ofNOL ~~contract termination~~carryovers. The ~~derivative~~amount ~~contracts~~of ~~may~~the beremaining ~~terminated~~NOL bycarryovers awill ~~non-defaulting~~be ~~party~~limited inunder ~~the~~Section ~~event~~382 of ~~default~~the byIRC ~~one~~due ofto the ~~parties~~change toin ~~the~~control ~~agreement~~as referenced in Note 3 – Fresh Start Reporting. ~~There~~As isthe notax ~~credit~~basis ~~risk~~of ~~related~~the ~~contingent~~Company's ~~features~~assets, orprimarily ~~circumstances~~our oil and gas properties, is in ~~which~~excess of the ~~features~~carrying ~~could~~value, beas ~~triggered~~adjusted in ~~derivative~~the ~~instruments~~fresh-start ~~that~~accounting ~~are~~process, the Successor Company is in a net ~~liability~~deferred tax asset position. atPer authoritative guidance, historical results along with expected market conditions known on the ~~end~~date of measurement, it is more likely than not that the ~~reporting~~Company ~~period~~will not realize future income tax benefits from the additional tax basis and its remaining NOL carryovers. This is periodically reassessed and could change. Accordingly, the Company has provided for a full valuation allowance of the underlying deferred tax assets.

~~Effect~~Note 9—Stock-Based ~~of Chapter 11 Cases~~Compensation

~~The~~2021 ~~commencement~~Long ofTerm ~~the~~Incentive Chapter 11 Cases constituted a termination event with respect to the Company’s derivative instruments, which permits the counterparties to such derivative instruments to terminate their outstanding hedges. Such termination events are not stayed under the Bankruptcy Code. During June 2020, certain of the lenders under the Credit Agreement elected to terminate their International Swaps and Derivatives Association master agreements and outstanding hedges with the Company for aggregate settlement proceeds of $96.1 million. The proceeds from these terminations were applied to the outstanding borrowings under the Credit Facility. After the June 2020 terminations, the remaining active contracts consisted of the items shown in the table immediately below.Plan

On January 20, 2021, as part of the emergence from bankruptcy, the board of directors adopted the Extraction Oil & Gas, Inc. 2021 Long Term Incentive Plan (the “2021 LTIP”) with a share reserve equal to 3,038,657 shares of New Common Stock. The 2021 LTIP provides for the grant of restricted stock units, restricted stock awards, stock options, stock appreciation rights, performance awards and cash awards to the Company’s employees and non-employee board directors. At emergence, the Successor Company granted awards under the 2021 LTIP to its directors, officers and employees, including restricted stock units, performance stock units and deferred stock units.

2016 Long-Term Incentive Plan

In October 2016, the Predecessor Company’s board of directors adopted the Extraction Oil & Gas, Inc. 2016 Long-Term Incentive Plan (“2016 LTIP”), pursuant to which employees, consultants, and directors of the Predecessor Company and its affiliates performing services for the Predecessor Company were eligible to receive awards. The 2016 LTIP provided for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards, and performance awards intended to align the interests of participants with those of stockholders. In May 2019, the Predecessor Company’s stockholders approved the amendment and restatement of the 2016 LTIP. The amended and restated 2016 Long-Term Incentive Plan provided a total reserve of 32.2 million shares of Predecessor Common Stock for issuance pursuant to awards under the 2016 LTIP. Extraction granted awards under the 2016 LTIP to certain directors, officers and employees, including stock options, restricted stock units, performance stock awards, performance stock units,

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performance ~~The~~cash ~~Company’s~~awards ~~open~~and ~~commodity~~cash ~~derivative~~awards. ~~contracts~~Effective byJanuary 20, ~~quarter~~2021, as part of ~~September 30~~the emergence from bankruptcy, ~~2020~~the ~~are~~2016 ~~summarized~~LTIP ~~below:~~was terminated and no longer in effect and all outstanding awards were cancelled.

	12/31/2020		3/31/2021		6/30/2021
NYMEX WTI Crude Swaps:
Notional volume (Bbl)	1,875,000		750,000		450,000
Weighted average fixed price ($/Bbl)	$	47.59	$	60.07	$	60.07
NYMEX WTI Crude Purchased Puts:
Notional volume (Bbl)	—		150,000		150,000
Weighted average purchased put price ($/Bbl)	$	—	$	55.04	$	55.04
NYMEX WTI Crude Sold Calls:
Notional volume (Bbl)	—		150,000		150,000
Weighted average sold call price ($/Bbl)	$	—	$	65.00	$	65.00
NYMEX WTI Crude Sold Puts:
Notional volume (Bbl)	—		900,000		600,000
Weighted average sold put price ($/Bbl)	$	—	$	43.92	$	43.88
NYMEX HH Natural Gas Swaps:
Notional volume (MMBtu)	9,000,000		—		—
Weighted average fixed price ($/MMBtu)	$	2.53	$	—	$	—
CIG Basis Swaps
Notional volume (MMBtu)	3,000,000		—		—
Weighted average fixed basis price ($/MMBtu)	$	(0.40)	$	—	$	—

Successor Company Restricted Stock Units (“RSUs”)

~~The~~RSUs ~~following~~issued ~~tables~~under ~~detail~~the 2021 LTIP generally vest over a one or three-year service period, with 100% vesting in year one or one-third, one-third and one-third of the units vesting in year one, two and three, respectively. Grant date fair value ofwas determined based on the ~~Company~~value of Extraction’s ~~derivative~~New ~~instruments,~~Common ~~including~~Stock pursuant to the ~~gross~~terms ~~amounts~~of ~~and~~the ~~adjustments~~2021 ~~made~~LTIP. toThe ~~net~~Successor ~~the~~Company ~~derivative~~assumed ~~instruments~~a ~~for~~forfeiture ~~the~~rate ~~presentation~~of inzero as part of the ~~condensed~~grant ~~consolidated~~date ~~balance~~estimate ~~sheets~~of ~~(in~~compensation ~~thousands):~~cost.

	As of September 30, 2020
Location on Balance Sheet	Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offsets in the Balance Sheet(1)		Net Amounts of Assets and Liabilities Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet(2)		Net Amounts(3)
Current assets	$	40,595	$	(7,970)	$	32,625	$	—	$	32,625
Non-current assets	—		—		—		—		—
Current liabilities	(8,646)		7,970		(676)		—		(676)
Non-current liabilities	—		—		—		—		—
	As of December 31, 2019
Location on Balance Sheet	Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offsets in the Balance Sheet(1)		Net Amounts of Assets and Liabilities Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet(2)		Net Amounts(3)
Current assets	$	48,605	$	(31,051)	$	17,554	$	—	$	30,783
Non-current assets	38,034		(24,805)		13,229		—		—
Current liabilities	(33,049)		31,051		(1,998)		—		(2,106)
Non-current liabilities	(24,913)		24,805		(108)		—		—

The Successor Company recorded $1.4 million of stock-based compensation costs related to Successor Company RSUs for the period from January 21, 2021 through March 31, 2021. These costs were included in the condensed consolidated statements of operations within the “General and administrative expense” line item. As of March 31, 2021, there was $6.6 million of total unrecognized compensation cost related to the unvested Successor Company RSUs granted to certain directors, officers and employees that is expected to be recognized over a weighted average period of 1.2 years. The following table summarizes the Successor Company RSU activity for the period shown and provides information for Successor Company RSUs outstanding at the dates indicated.


	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested Successor Company RSUs at January 21, 2021	—	$	—
Granted	394,144	20.41
Forfeited	(4,589)	20.41
Vested	—	—
Non-vested Successor Company RSUs at March 31, 2021	389,555	$	20.41

Predecessor Company Restricted Stock Units

RSUs issued under the 2016 LTIP generally vested over either a one or three-year service period, with 100% vesting in year one or 25%, 25% and 50% of the units vesting in year one, two and three, respectively. Grant date fair value was determined based on the value of Extraction’s Predecessor Common Stock pursuant to the terms of the 2016 LTIP. The Predecessor Company assumed a forfeiture rate of zero as part of the grant date estimate of compensation cost.

The Predecessor Company recorded $0.2 million of stock-based compensation costs related to Predecessor Company RSUs for the period from January 1, 2021 through January 20, 2021, as compared to $0.8 million for the three months ended March 31, 2020. These costs were included in the condensed consolidated statements of operations within the “General and administrative expense” line item. The following table summarizes the Predecessor Company RSU activity for the period shown and provides information for Predecessor Company RSUs outstanding at the dates indicated.


	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested Predecessor Company RSUs at January 1, 2021	1,185,351	$	6.99
Vested	(4,500)	8.70
Cancelled at emergence from bankruptcy	(1,180,851)	6.98
Non-vested Predecessor Company RSUs at January 20, 2021	—	$	—

Successor Company Performance Unit Awards (“PSUs”)

Upon emergence from bankruptcy on January 20, 2021, the Successor Company granted PSUs to certain executives under the 2021 LTIP. The number of shares of the Successor Company's New Common Stock that may be

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~~(1)Agreements~~issued ~~are~~to insettle ~~place~~these ~~that~~various ~~allow~~PSUs ~~for~~ranges ~~the~~from ~~financial~~zero ~~right~~to two times the number of ~~offset~~PSUs awarded. Generally, the shares issued for ~~derivative~~PSUs ~~assets~~are determined based on the satisfaction of a time-based vesting schedule and ~~derivative~~absolute ~~liabilities~~total atstockholder ~~settlement~~return or("ATSR") measured over a three-year period and vest in their entirety at the ~~event~~end of the three-year measurement period. Any PSUs that have not vested at the end of the applicable measurement period are forfeited. As the ATSR vesting criterion are linked to the Successor Company's share price, it is considered a ~~default~~market ~~under~~condition for purposes of calculating the ~~agreements~~grant-date fair value of the awards.

~~(2)Netting~~The ~~for~~fair ~~balance~~value ~~sheet~~of ~~presentation~~the Successor PSUs was measured at the grant date with a stochastic process method using a Monte Carlo simulation. A stochastic process is ~~performed~~a mathematically defined equation that can create a series of outcomes over time. Those outcomes are not deterministic in nature, which means that by ~~current~~iterating ~~and~~the ~~non-current~~equations ~~classification~~multiple times, different results will be obtained for those iterations. ~~This~~In ~~adjustment~~the ~~represents~~case ~~amounts~~of ~~subject~~the toSuccessor anCompany's ~~enforceable~~PSUs, ~~master~~the ~~netting~~Company ~~arrangement~~cannot predict with certainty the path its stock price or the stock prices of its peers will take over the performance period. By using a stochastic simulation, ~~which~~the ~~are~~Company ~~not~~can ~~netted~~create onmultiple prospective stock pathways, statistically analyze these simulations, and ultimately make inferences regarding the ~~condensed~~most ~~consolidated~~likely ~~balance~~path ~~sheets~~the stock price will take. ~~There~~As such, because future stock prices are nostochastic, ~~amounts~~or probabilistic with some direction in nature, the stochastic method, specifically the Monte Carlo Model, is deemed an appropriate method by which to determine the fair value of ~~related~~the ~~financial~~PSUs. ~~collateral~~Significant ~~received~~assumptions orused ~~pledged~~in this simulation include the Company's expected volatility, risk-free interest rate based on U.S. Treasury yield curve rates with maturities consistent with the measurement period as well as the volatilities for each of the Company's peers.

~~(3)Net~~The ~~amounts~~Successor ~~are~~Company ~~not~~recorded ~~split~~$0.4 million byof ~~current~~stock-based ~~and~~compensation ~~non-current~~costs related to Successor Company PSUs for the period from January 21, 2021 through March 31, 2021. ~~All~~These ~~counterparties~~costs were included in athe ~~net~~condensed ~~asset~~consolidated ~~position~~statements ~~are~~of ~~shown~~operations inwithin the ~~current~~“General ~~asset~~and administrative expense” line item. As of March 31, ~~and~~2021, ~~all~~there ~~counterparties~~was in$6.1 million of total unrecognized compensation cost related to the unvested Successor Company PSUs granted to certain executives that is expected to be recognized over a ~~net~~weighted ~~liability~~average ~~position~~period ~~are~~of ~~shown~~2.8 inyears. The PSUs will be settled by issuing common stock. The following table summarizes the ~~current~~Successor ~~liability~~Company ~~line~~PSU ~~item~~activity for the period shown and provides information for Successor Company PSUs outstanding at the dates indicated.

The table below sets forth the commodity derivatives gain (loss) for the three and nine months ended September 30, 2020 and 2019 (in thousands). Commodity derivatives gain (loss) are included under the other income (expense) line item in the condensed consolidated statements of operations.


	Number of Shares(1)	Weighted Average Grant Date Fair Value
Non-vested Successor Company PSUs at January 21, 2021	—	$	—
Granted	230,850	28.11
Forfeited	—	—
Vested	—	—
Non-vested Successor Company PSUs at March 31, 2021	230,850	$	28.11

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Commodity derivatives gain (loss)	$	(9,673)	$	87,956	$	184,041	$	39,383

___________________

~~Note 8—Asset~~(1) The ~~Retirement~~number ~~Obligations~~of awards assumes that the associated maximum vesting condition is met at the target amount. The final number of shares of the Successor Company's New Common Stock issued may vary depending on the performance multiplier, which ranges from zero to two for the 2021 Successor PSU grants, depending on the level of satisfaction of the vesting condition.

~~The~~Predecessor Company ~~follows~~Performance ~~accounting~~Stock ~~for~~Awards asset retirement obligations in accordance with ASC 410 — Asset Retirement and Environmental Obligations, which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it was incurred if a reasonable estimate of fair value could be made. The Company’s asset retirement obligations primarily represent the estimated present value of the amounts expected to be incurred to plug, abandon and remediate producing and shut-in wells at the end of their productive lives in accordance with applicable local, state and federal laws, and applicable lease terms. The Company determines the estimated fair value of its asset retirement obligations by calculating the present value of estimated cash flows related to plugging and abandonment liabilities. The significant inputs used to calculate such liabilities include estimates of costs to be incurred, the Company’s credit adjusted discount rates, inflation rates and estimated dates of abandonment. The asset retirement liability is accreted to its present value each period and the capitalized asset retirement costs are depleted with proved oil and gas properties using the unit of production method. Asset retirement obligations are currently presented in the line item liabilities subject to compromise on the condensed consolidated balance sheets.(“PSAs”)

The ~~following~~Predecessor ~~table~~Company ~~summarizes~~granted PSAs to certain executives under the ~~activities~~2016 LTIP in October 2017, March 2018, April 2019 and March 2020. The number of shares of the Predecessor Company’'s ~~asset~~Predecessor ~~retirement~~Common ~~obligations~~Stock that may be issued to settle these various PSAs ranges from zero to two times the number of PSAs awarded. PSAs that settle in cash were presented as liability awards. Generally, the shares issued for PSAs were determined based on the ~~period~~satisfaction ~~indicated~~of a time-based vesting schedule and a weighting of one or more of the following: (ini) ~~thousands~~absolute total stockholder return ("ATSR"):, (ii) relative total stockholder return ("RTSR"), as compared to the Predecessor Company's peer group and (iii) cash return on capital invested ("CROCI") or return on invested capital ("ROIC") measured over a three-year period and vest in their entirety at the end of the three-year measurement period. Any PSAs that have not vested at the end of the applicable measurement period were forfeited. The vesting criterion that was associated with the RTSR was based on a comparison of the Predecessor Company's total shareholder return for the measurement period compared to that of a group of peer companies for the same measurement period. As the ATSR and RTSR vesting criteria were linked to the Predecessor Company's share price, they each were considered a market condition for

	For the Nine Months Ended September 30, 2020
Balance beginning of period	$	95,908
Liabilities incurred or acquired	332
Liabilities settled	(18,975)
Revisions in estimated cash flows	7,861
Accretion expense	4,978
Balance end of period	$	90,104

Note 9—Fair Value Measurements

ASC 820, Fair Value Measurement and Disclosure, establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

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~~•Level 1:~~purposes ~~Quoted~~of ~~prices~~calculating ~~are~~the ~~available~~grant-date infair ~~active~~value ~~markets~~of the awards. The vesting criterion that was associated with the CROCI and ROIC were considered a performance condition for ~~identical~~purposes ~~assets~~of orcalculating ~~liabilities;~~the grant-date fair value of the awards.

~~•Level 2:~~The ~~Quoted~~fair ~~prices~~value inof ~~active~~the ~~markets~~Predecessor ~~for~~PSAs ~~similar~~were ~~assets~~measured ~~and~~at ~~liabilities~~the grant date with a stochastic process method using a Monte Carlo simulation. A stochastic process is a mathematically defined equation that can create a series of outcomes over time. Those outcomes are ~~observable~~not deterministic in nature, which means that by iterating the equations multiple times, different results will be obtained for those iterations. In the ~~asset~~case of the Predecessor Company's PSAs, the Company cannot predict with certainty the path its stock price or ~~liability;~~the stock prices of its peer will take over the performance period. By using a stochastic simulation, the Company can create multiple prospective stock pathways, statistically analyze these simulations, and ultimately make inferences regarding the most likely path the stock price will take. As such, because future stock prices are stochastic, or probabilistic with some direction in nature, the stochastic method, specifically the Monte Carlo Model, is deemed an appropriate method by which to determine the fair value of the PSAs. Significant assumptions used in this simulation include the Company's expected volatility, risk-free interest rate based on U.S. Treasury yield curve rates with maturities consistent with the measurement period as well as the volatilities for each of the Company's peers.

~~•Level~~The Predecessor Company recorded $0.1 3:million ~~Unobservable~~of ~~pricing~~stock-based ~~inputs~~compensation ~~that~~costs ~~are~~related ~~generally~~to ~~less~~Predecessor ~~observable~~Company PSAs for the period from ~~objective~~January ~~sources~~1, ~~such~~2021 through January 20, 2021, as ~~discounted~~compared ~~cash~~to ~~flow~~$0.8 million ~~models~~of orstock-based ~~valuations~~compensation costs related to Predecessor Company PSAs for the three months ended March 31, 2020. These costs were included in the condensed consolidated statements of operations within the “General and administrative expense” line item. As of March 31, 2021, there was no unrecognized compensation cost related to the unvested Predecessor Company PSAs granted to certain executives as they were all cancelled at emergence. The following table summarizes the Predecessor Company PSA activity for the period shown and provides information for Predecessor Company PSAs outstanding at the dates indicated.

The financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. There were no transfers between levels during any periods presented below.


	Number of Shares(1)	Weighted Average Grant Date Fair Value
Non-vested Predecessor Company PSAs at January 1, 2021	1,196,279	$	5.32
Cancelled at emergence from bankruptcy	(1,196,279)	5.32
Non-vested Predecessor Company PSAs at January 20, 2021	—	$	—

The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 by level within the fair value hierarchy (in thousands):___________________

	Fair Value Measurement at September 30, 2020
	Level 1		Level 2		Level 3		Total
Financial Assets:
Commodity derivative assets	$	—	$	32,625	$	—	$	32,625
Financial Liabilities:
Commodity derivative liabilities	$	—	$	676	$	—	$	676

(1) The number of awards assumed that the associated maximum vesting condition is met at the target amount. The final number of shares of the Predecessor Company's New Common Stock issued would have varied depending on the performance multiplier, which ranged from zero to one for the 2017 and 2018 grants and ranged from zero to two for the 2019 and 2020 grants, which would have depended on the level of satisfaction of the vesting condition.

	Fair Value Measurement at December 31, 2019
	Level 1		Level 2		Level 3		Total
Financial Assets:
Commodity derivative assets	$	—	$	30,783	$	—	$	30,783
Financial Liabilities:
Commodity derivative liabilities	$	—	$	2,106	$	—	$	2,106

Successor Deferred Stock Units (“DSUs”)

~~The~~Upon ~~following~~emergence ~~methods~~from bankruptcy on January 20, 2021, a new board of directors was appointed and ~~assumptions~~each board member (except the CEO) were ~~used~~granted to16,800 ~~estimate~~Successor DSUs, which vest in quarterly installments over one year following the grant date. The DSUs will be settled in shares of New Common Stock upon the board member’s departure from the Company; thus, these DSUs may not be included in the Successor Company’s issued and outstanding shares for potentially several years. Grant date fair value was determined based on the value of Extraction’s New Common Stock pursuant to the ~~assets~~terms ~~and~~of ~~liabilities~~the in2021 LTIP. The Company assumed a forfeiture rate of zero as part of the ~~tables~~grant ~~above:~~date estimate of compensation cost.

~~Commodity~~The ~~Derivative~~Successor ~~Instruments~~Company recorded $0.4 million of stock-based compensation costs related to Successor Company DSUs for the period from January 21, 2021 through March 31, 2021, while the Predecessor Company incurred no costs for the three months ended March 31, 2020. These costs were included in the condensed consolidated statements of operations within the “General and administrative expense” line item. As of March 31, 2021, there was $1.7 million of total unrecognized compensation cost related to the unvested Successor Company DSUs granted to certain directors that is expected to be recognized over a weighted average period of 0.8 years. The following table summarizes the Successor Company DSU activity for the period shown and provides information for Successor Company DSUs outstanding at the dates indicated.

The Company determines its estimate of the fair value of derivative instruments using a market based approach that takes into account several factors, including quoted market prices in active markets, implied market volatility factors, quotes from third parties, the credit rating of each counterparty, and the Company's own credit rating. In consideration of counterparty credit risk, the Company assessed the possibility of whether each counterparty to the derivative would default by failing to make any contractually required payments. Additionally, the Company considers that it is of substantial credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions. Derivative instruments utilized by the Company consist of swaps, put options and, call options. The oil and natural gas derivative markets are highly active. Although the Company’s derivative instruments are valued using public indices, the instruments themselves are traded with third party counterparties and are not openly traded on an exchange. As such, the Company has classified these instruments as Level 2.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, commodity derivative instruments (discussed above) and long-term debt. As of September 30, 2020, the Senior Notes were reclassified to liabilities subject to compromise. The carrying values of cash and cash equivalents,

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accounts receivable and accounts payable are representative of their fair values due to their short-term maturities. The carrying amounts of the Company’s Credit Facility and DIP Credit Facility approximated fair value as it bears interest at variable rates over the term of the loan. The fair values of the 2024 Senior Notes and 2026 Senior Notes were derived from available market data. As such, the Company has classified the 2024 Senior Notes and 2026 Senior Notes as Level 2. Please refer to Note 6—Long-Term Debt for further information. The Company’s policy is to recognize transfers between levels at the end of the period. This disclosure (in thousands) does not impact the Company's financial position, results of operations or cash flows.


	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested Successor Company Deferred Stock Units at January 21, 2021	—	$	—
Granted	100,800	20.41
Forfeited	—	—
Vested	—	—
Non-vested Successor Company Deferred Stock Units March 31, 2021	100,800	$	20.41

	At September 30, 2020				At December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Credit Facility	$	453,746	$	453,746	$	470,000	$	470,000
DIP Credit Facility	$	110,000	$	110,000	$	—	$	—
2024 Senior Notes(1)	$	400,000	$	102,500	$	394,824	$	250,000
2026 Senior Notes(2)	$	700,189	$	178,548	$	690,953	$	420,113

Note 10—Equity

~~(1)The~~Common ~~carrying amount of the 2024 Senior Notes includes no unamortized debt issuance costs as of September 30, 2020 and $5.2 million as of December 31, 2019.~~Stock

On the Emergence Date, the Successor Company filed an amended and restated certificate of incorporation with the Delaware Secretary of State to provide for, among other things, the authority to issue a total of 950,000,000 shares of all classes of capital stock of which 900,000,000 shares are common stock, par value $0.01 per share (2the “New Common Stock”)~~The~~ ~~carrying~~and ~~amount~~50,000,000 shares are preferred stock, par value $0.01 per share. Upon emergence from the Chapter 11 Cases, all existing shares of the ~~2026~~Predecessor ~~Senior~~Company’s ~~Notes~~common ~~includes~~stock noand ~~unamortized~~preferred ~~debt~~stock ~~issuance~~were ~~costs~~cancelled, asand the Successor issued 25,703,212 shares of ~~September 30~~New Common Stock during the first quarter of 2021. As of March 31, ~~2020~~2021, the Company expects to issue an additional 256,390 shares of Successor Common Stock to settle general unsecured claims that are recorded in “Accounts payable and accrued liabilities” in the amount of $95.2 0 million. asSee ofNote 1—Business and Organization ~~December~~— Voluntary Reorganization under Chapter 11 of the Bankruptcy Code and Note ~~31,~~3—Fresh ~~2019~~Start Reporting for more information.

~~Non-Recurring~~Series ~~Fair~~A ~~Value~~Preferred ~~Measurements~~Stock

~~The~~ ~~Company~~In ~~applies~~connection ~~the~~with ~~provisions~~emergence offrom the ~~fair~~Chapter ~~value~~11 ~~measurement~~Cases ~~standard~~ on aJanuary ~~non-recurring~~20, ~~basis~~2021, pursuant to ~~its~~the ~~non-financial assets and liabilities~~Plan, ~~including~~each ~~proved~~share ~~property.~~of ~~These~~our ~~assets~~Series ~~and~~A ~~liabilities~~Convertible ~~are~~Preferred ~~not~~Stock ~~measured~~was atcanceled, ~~fair~~released, ~~value~~and ~~on a recurring basis~~extinguished, ~~but are subject to fair value adjustments when facts~~ and ~~circumstances~~is ~~arise~~of ~~that~~no ~~indicate~~further aforce ~~need~~or ~~for remeasurement~~effect.

The Company utilizes fair value on a non-recurring basis to review its proved oil and gas properties for potential impairment when events and circumstances indicate, and at least annually, a possible decline in the recoverability of the carrying value of such property. The Company uses an income approach analysis based on the net discounted future cash flows of producing property. The future cash flows are based on management’s estimates for the future. Unobservable inputs include estimates of oil and gas production, as the case may be, from the Company’s reserve reports, commodity prices based on the sales contract terms and forward price curves, operating and development costs and a discount rate based on a market-based weighted average cost of capital (all of which are Level 3 inputs within the fair value hierarchy). For the nine months ended September 30, 2020 and 2019, the Company recognized $1.6 million and $11.2 million, respectively in impairment expense on its proved oil and gas properties related to impairment of assets in its northern field. For the three months ended September 30, 2020 and 2019, the Company recognized no impairment expense on its proved oil and gas properties related to impairment of assets in its northern field. Warrants

~~Note 10—Income~~On ~~Taxes~~the Emergence Date and pursuant to the Plan, the Successor Company entered into warrant agreements with American Stock Transfer & Trust Company, LLC, as warrant agent, which provided for (i) the Successor Company’s issuance of up to an aggregate of 2,905,567 Tranche A Warrants to purchase the New Common Stock (the “Tranche A Warrants”) to certain former holders of the Predecessor Company’s common stock and (ii) the Successor Company’s issuance of up to an aggregate of 1,452,802 Tranche B warrants to purchase New Common Stock (the “Tranche B Warrants” and together with the Tranche A Warrants, the “Warrants”) to certain former holders of the Predecessor Company’s common stock.

The ~~Company~~Tranche ~~computes~~A anWarrants ~~estimated~~are ~~annual~~exercisable ~~effective~~from ~~tax rate (“AETR”) each quarter based on~~ the ~~current and forecasted operating results. The income tax expense or benefit associated with the interim period is computed using the most recent estimated AETR applied to the year-to-~~date ~~ordinary income or loss, plus the tax effect~~ of ~~any~~issuance ~~significant~~until ~~or infrequently occurring items recorded during~~ the ~~interim~~fourth ~~period.~~anniversary ~~The computation~~ of the ~~estimated~~Emergence ~~AETR~~Date, at ~~each~~which ~~interim~~time ~~period~~all ~~requires~~unexercised ~~certain~~Tranche ~~estimates~~A ~~and~~Warrants ~~significant~~will ~~judgements including~~expire, ~~but~~and ~~not limited to,~~ the ~~expected~~rights ~~operating income (loss) for the year, projections~~ of the ~~proportion~~holders of ~~income~~such ~~earned~~warrants ~~and~~to ~~taxed~~purchase inNew ~~various~~Common ~~jurisdictions,~~Stock ~~permanent~~will ~~differences and the likelihood of recovering deferred tax assets generated in the current year~~terminate. The ~~accounting~~Tranche ~~estimates~~A ~~used~~Warrants toare ~~compute~~initially ~~the~~exercisable ~~provision~~ for ~~income~~one ~~taxes~~share ~~may~~of ~~change~~New asCommon ~~new~~Stock ~~events~~per ~~occur,~~Tranche ~~more~~A ~~experience~~Warrant isat ~~obtained,~~an ~~and~~initial ~~additional~~exercise ~~information~~price ~~becomes~~of ~~known~~$107.64 orper asTranche A Warrant (the ~~tax~~“Tranche ~~environment~~A ~~changes~~Exercise Price”).

The ~~effective~~Tranche ~~combined~~B ~~U.S.~~Warrants ~~federal~~are ~~and~~exercisable ~~state~~from ~~income~~the ~~tax~~date ~~rate~~of ~~for~~issuance until the ~~nine~~fifth ~~months~~anniversary ~~ended~~of ~~September 30~~the Emergence Date, ~~2020~~at ~~and~~which ~~2019~~time ~~was~~all ~~(0.27)%~~unexercised ~~and~~Tranche ~~(5.7)%~~B Warrants will expire, ~~respectively~~and the rights of the holders of such warrants to purchase New Common Stock will terminate. The ~~effective~~Tranche ~~rate~~B Warrants are initially exercisable for ~~the~~one ~~nine~~share ~~months~~of ~~ended~~New ~~September 30,~~Common ~~2020~~Stock ~~and~~per ~~2019~~Tranche ~~differs~~B ~~from~~Warrant ~~the~~at ~~amount~~an ~~that~~initial ~~would~~exercise beprice ~~provided~~of by$122.32 ~~applying~~per Tranche B Warrant (the ~~statutory~~“Tranche ~~U.S.~~B ~~federal~~Exercise ~~income~~Price” ~~tax~~and ~~rate~~together ofwith ~~21%~~the toTranche A Exercise Price, the “Exercise Prices”).

Pursuant to the warrant agreements, no holder of a Warrant, by virtue of holding or having a beneficial interest in a Warrant, will have the right to vote, receive dividends, receive notice as stockholders with respect to any meeting of stockholders for the election of the Company’s directors or any other matter, or exercise any rights whatsoever as a stockholder of the Company unless, until and only to the extent such holders become holders of record of shares of New Common Stock issued upon settlement of the Warrants.

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~~pre-tax~~The ~~income~~number ~~due~~of toshares ~~(i) the effect~~ of aNew ~~full~~Common ~~valuation~~Stock ~~allowance~~for inwhich ~~effect~~a atWarrant ~~September 30~~is exercisable, ~~2020~~ and ~~(ii)~~ the ~~effects~~Exercise ~~of state taxes~~Prices, ~~permanent~~are ~~taxable~~subject ~~differences,~~to ~~and~~adjustment ~~income~~from ~~attributable~~time to ~~non-controlling~~time ~~interest~~upon ~~for~~ the ~~nine~~occurrence ~~months~~of ~~ended~~certain ~~September 30~~events, ~~2019. Before~~including ~~accounting~~stock ~~for a naked credit deferred tax liability~~splits, ~~net~~reverse ~~tax~~stock ~~expense~~splits ~~for~~or ~~the~~stock ~~three~~dividends ~~months ended September 30, 2020 was reduced~~ to ~~zero~~holders ~~due~~of toNew ~~the~~Common ~~valuation~~Stock ~~allowance. The~~or ~~naked~~a ~~credit~~reclassification ~~deferred tax liability results~~ in ~~tax~~respect ~~expense~~ of ~~$2.2 million~~New ~~for~~Common ~~the nine months ended September 30, 2020~~Stock.

~~The~~Note 11—Earnings ~~Company considers whether some portion, or all, of the deferred tax assets~~ (~~“DTAs”~~Loss) ~~will~~Per be realized based on a more likely than not standard of judgment. The ultimate realization of DTAs is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. At December 31, 2019, the Company had a valuation allowance totaling $246.1 million against its DTAs resulting from prior year cumulative financial losses, oil and gas impairments, and significant net operating losses for U.S. federal and state income tax. The Company assesses the appropriateness of its valuation allowance on a quarterly basis. As of September 30, 2020, there was no change in the Company’s assessment of the realizability of its DTAs, except for a naked credit deferred tax liability.Share

OnThe ~~July~~basic ~~13,~~weighted ~~2020~~average ~~the~~shares ~~Bankruptcy~~outstanding ~~Court~~calculation ~~entered~~is abased ~~final~~on order approving certain procedures (including notice requirements) that certain shareholders and potential shareholders must comply with regarding transfers of, or declarations of worthlessness with respect to, the ~~Company’s~~actual ~~common~~days ~~stock~~in ~~and preferred stock, as well as certain obligations with respect to notifying the Company with respect to current share ownership, each of~~ which ~~are intended to preserve~~ the ~~Company’s~~shares ~~ability~~were ~~to use its net operating losses to offset possible future U~~outstanding.S. ~~taxable~~The ~~income~~components ~~by reducing the likelihood~~ of anbasic ~~ownership~~and ~~change~~diluted ~~under~~EPS ~~Section~~were ~~382~~as offollows ~~the~~(in ~~Code~~thousands, ~~during~~except ~~the~~per ~~pendency~~share ~~of the Chapter 11 Cases.~~data):

Note 11—Stock-Based Compensation


	Successor		Predecessor
	For the Period from January 21 through March 31,		For the Period from January 1 through January 20,		For the Three Months Ended March 31,
	2021		2021		2020
Basic and Diluted Income (Loss) Per Share
Net income (loss)	$	88,554	$	870,970	$	9,037
Less: Noncontrolling interest	—		—		(6,160)
Less: Adjustment to reflect Series A Preferred Stock dividends	—		—		(4,748)
Less: Adjustment to reflect accretion of Series A Preferred Stock discount	—		(418)		(1,770)
Adjusted net income (loss) available to common shareholders, basic and diluted	$	88,554	$	870,552	$	(3,641)
Denominator
Weighted average common shares outstanding, basic(1)(2)	25,497		136,589		137,726
Weighted average common shares outstanding, diluted	25,976		136,589		137,726
Income (Loss) Per Common Share
Basic	$	3.47	$	6.37	$	(0.03)
Diluted	$	3.41	$	6.37	$	(0.03)

~~Extraction Long Term Incentive Plan~~_____________________

~~In October 2016, the Company’s board of directors adopted the Extraction Oil & Gas, Inc. 2016 Long Term Incentive Plan~~ (~~the “2016 Plan” or “LTIP”~~1), For ~~pursuant to which employees, consultants and directors of~~ the ~~Company~~period ~~and~~from ~~its~~January ~~affiliates~~1, ~~performing~~2021 ~~services for the Company are eligible~~ to ~~receive~~January ~~awards. The 2016 Plan provides for the grant of stock options~~20, ~~stock appreciation rights~~2021, ~~restricted stock~~7, ~~restricted stock units~~138,153 ~~bonus~~potentially ~~stock,~~dilutive ~~dividend equivalents~~shares, ~~other~~including restricted stock~~-based~~ awards, ~~substitute awards, annual incentive awards~~ and ~~performance~~stock ~~awards~~options ~~intended to align the interests of participants with those of stockholders. In May 2019~~outstanding, ~~the~~were ~~Company's~~not ~~stockholders~~included ~~approved~~in the ~~amendment~~calculation ~~and~~above, ~~restatement~~as ofthey ~~the~~had ~~Company's~~an ~~2016~~anti-dilutive ~~Long~~effect ~~Term~~on ~~Incentive Plan~~EPS. ~~The~~Additionally, ~~amended~~11,472,445 ~~and~~common ~~restated 2016 Long Term Incentive Plan provides a total reserve of 32.2 million~~ shares ofassociated ~~common~~with ~~stock for issuance pursuant to awards under~~ the ~~LTIP.~~assumed ~~Extraction~~conversion ~~has~~of ~~granted~~Series ~~awards~~A ~~under~~Preferred ~~the~~Stock ~~LTIP~~were toalso ~~certain directors~~excluded, ~~officers~~as ~~and~~they ~~employees,~~would ~~including~~have ~~stock~~had ~~options,~~an ~~restricted~~anti-dilutive ~~stock~~effect ~~units,~~on ~~performance stock awards, performance stock units, performance cash awards and cash awards~~EPS.

~~Restricted~~(2) For the three months ended March 31, 2020, 8,339,698 potentially dilutive shares, including restricted stock awards and stock options outstanding, were not included in the calculation above, as they had an anti-dilutive effect on EPS. Additionally, 11,472,445 common shares associated with the assumed conversion of Series A Preferred Stock ~~Units~~were also excluded, as they would have had an anti-dilutive effect on EPS.

~~Restricted~~Note 12—Commitments ~~stock units granted under the LTIP (“RSUs”) generally vest over either a one or three-year service period, with 100% vesting in year one or 25%, 25%~~ and 50% of the units vesting in year one, two and three, respectively. Grant date fair value was determined based on the value of Extraction’s common stock pursuant to the terms of the LTIP. The Company assumed a forfeiture rate of zero as part of the grant date estimate of compensation cost. Contingencies

The Company recorded $1.0 million and $3.4 million of stock-based compensation costs related to RSUs for the three and nine months ended September 30, 2020, respectively, as compared to $6.6 million and $20.6 million for the three and nine months ended September 30, 2019, respectively. These costs were included in the condensed consolidated statements of operations within the general and administrative expenses line item. As of September 30, 2020, there was $4.1 million of total unrecognized compensation cost related to the unvested RSUs granted to certain directors, officers and employees that is expected to be recognized over a weighted average period of 1.2 years.

The following table summarizes the RSU activity from January 1, 2020 through September 30, 2020 and provides information for RSUs outstanding at the dates indicated.

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	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested RSUs at January 1, 2020	2,635,765	$	8.32
Granted	1,409,765	$	0.75
Forfeited	(1,845,164)	$	2.99
Vested	(995,805)	$	9.03
Non-vested RSUs at September 30, 2020	1,204,561	$	7.05

Performance Stock Awards

The Company granted performance stock awards ("PSAs") to certain executives under the LTIP in October 2017, March 2018, April 2019 and March 2020. The number of shares of the Company's common stock that may be issued to settle these various PSAs ranges from zero to two times the number of PSAs awarded. PSA's that settle in cash are presented as liability awards. Generally, the shares issued for PSAs are determined based on the satisfaction of a time-based vesting schedule and a weighting of one or more of the following: (i) absolute total stockholder return ("ATSR"), (ii) relative total stockholder return ("RTSR"), as compared to the Company's peer group and (iii) cash return on capital invested ("CROCI") or return on invested capital ("ROIC") measured over a three-year period and vest in their entirety at the end of the three-year measurement period. Any PSAs that have not vested at the end of the applicable measurement period are forfeited. The vesting criterion that is associated with the RTSR is based on a comparison of the Company's total shareholder return for the measurement period compared to that of a group of peer companies for the same measurement period. As the ATSR and RTSR vesting criteria are linked to the Company's share price, they each are considered a market condition for purposes of calculating the grant-date fair value of the awards. The vesting criterion that is associated with the CROCI and ROIC are considered a performance condition for purposes of calculating the grant-date fair value of the awards.

The fair value of the PSAs was measured at the grant date with a stochastic process method using a Monte Carlo simulation. A stochastic process is a mathematically defined equation that can create a series of outcomes over time. Those outcomes are not deterministic in nature, which means that by iterating the equations multiple times, different results will be obtained for those iterations. In the case of the Company's PSAs, the Company cannot predict with certainty the path its stock price or the stock prices of its peer will take over the performance period. By using a stochastic simulation, the Company can create multiple prospective stock pathways, statistically analyze these simulations, and ultimately make inferences regarding the most likely path the stock price will take. As such, because future stock prices are stochastic, or probabilistic with some direction in nature, the stochastic method, specifically the Monte Carlo Model, is deemed an appropriate method by which to determine the fair value of the PSAs. Significant assumptions used in this simulation include the Company's expected volatility, risk-free interest rate based on U.S. Treasury yield curve rates with maturities consistent with the measurement period as well as the volatilities for each of the Company's peers.

The Company recorded $0.9 million and $1.0 million of stock-based compensation costs related to PSAs for the three and nine months ended September 30, 2020, respectively, as compared to $0.7 million and $6.8 million of stock-based compensation costs related to PSAs for the three and nine months ended September 30, 2019, respectively. These costs were included in the condensed consolidated statements of operations within the general and administrative expenses line item. As of September 30, 2020, there was $1.8 million of total unrecognized compensation cost related to the unvested PSAs granted to certain executives that is expected to be recognized over a weighted average period of 0.5 years.

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The following table summarizes the PSA activity from January 1, 2020 through September 30, 2020 and provides information for PSAs outstanding at the dates indicated.

	Number of Shares (1)	Weighted Average Grant Date Fair Value
Non-vested PSAs at January 1, 2020	2,863,190	$	7.72
Granted	5,952,700	$	0.29
Forfeited(2)	(5,881,200)	$	(0.29)
Vested	—	$	—
Non-vested PSAs at September 30, 2020	2,934,690	$	8.18

(1)The number of awards assumes that the associated maximum vesting condition is met at the target amount. The final number of shares of the Company's common stock issued may vary depending on the performance multiplier, which ranges from zero to one for the 2017 and 2018 grants and ranges from zero to two for the 2019 and 2020 grants, depending on the level of satisfaction of the vesting condition.

(2)The Company approved retention agreements on June 12, 2020 with certain executives and senior managers. These retention agreements, are subject to repayment upon a resignation without “good reason” or termination of employment for “cause” before specified dates and events. As a condition to participating in the revised compensation program, the equity compensation awards granted in 2020 were cancelled.

Stock Options

Expense on the stock options is recognized on a straight-line basis over the service period of the award less awards forfeited. The fair value of the stock options was measured at the grant date using the Black-Scholes valuation model. The Company utilizes the "simplified" method to estimate the expected term of the stock options granted as there is limited historical exercise data available in estimating the expected term of the stock options. Expected volatility is based on the volatility of the historical stock prices of the Company’s peer group. The risk-free rates are based on the yields of U.S. Treasury instruments with comparable terms. A dividend yield and forfeiture rate of zero were assumed. Stock options granted under the LTIP vest ratably over three years and are exercisable immediately upon vesting through the tenth anniversary of the grant date. To fulfill options exercised, the Company will issue new shares.

The Company recorded no stock-based compensation costs related to stock options for the three and nine months ended September 30, 2020, as compared to $4.0 million and $11.5 million for the three and nine months ended September 30, 2019, respectively. These costs were included in the condensed consolidated statements of operations within the general and administrative expenses line item. As of September 30, 2020, there are no remaining unrecognized compensation costs related to the stock options granted to certain executives.

There was no stock option activity from January 1, 2020 through September 30, 2020. However, as of September 30, 2020, there was approximately 5.2 million outstanding and exercisable stock options with a weighted-average exercise price of $18.50.

Incentive Restricted Stock Units

Officers of the Company contributed 2.7 million shares of common stock to Extraction Employee Incentive, LLC (“Employee Incentive”), which is owned solely by certain officers of the Company. Employee Incentive issued restricted stock units (“Incentive RSUs”) to certain employees. Incentive RSUs vested over a three year service period, with 25%, 25% and 50% of the units vesting in year one, two and three, respectively. On July 17, 2017, the partners of Employee Incentive amended the vesting schedule in which 25% vested immediately and the remaining Incentive RSUs vest 25%, 25% and 25% each six months thereafter, over the remaining 18-month service period. Grant date fair value was determined based on the value of the Company's common stock on the date of issuance. The Company assumed a forfeiture rate of zero as part of the grant date estimate of compensation cost.

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The Company recorded no stock-based compensation costs related to Incentive RSUs for the three and nine months ended September 30, 2020. The Company recorded no stock-based compensation costs related to Incentive RSUs for the three months ended September 30, 2019. The Company recorded $0.8 million of stock-based compensation costs related to Incentive RSUs for the nine months ended September 30, 2019. These costs were included in the condensed consolidated statements of operations within the general and administrative expenses line item. As of September 30, 2020, there are no remaining unrecognized compensation costs related to the Incentive RSUs granted to certain employees.

Note 12—Equity

Series A Preferred Stock

The holders of our Series A Preferred Stock (the "Series A Preferred Holders") are entitled to receive a cash dividend of 5.875% per year, payable quarterly in arrears, and the Company has the ability to pay such quarterly dividends in kind at a dividend rate of 10% per year (decreased proportionately to the extent such quarterly dividends are partially paid in cash). The Company has paid the quarterly dividends in kind from the fourth quarter of 2019 until the filing of the Chapter 11 Cases. Because certain provisions within the RSA and the DIP Credit Agreement restrict the Company's ability to declare a dividend, the Company has not made any dividend payments on the Series A Preferred Stock since the commencement of the Chapter 11 Cases. The Series A Preferred Stock is convertible into shares of our common stock at the election of the Series A Preferred Holders at a conversion ratio per share of Series A Preferred Stock of 61.9195. Until the three-year anniversary of the closing of the IPO, the Company could elect to convert the Series A Preferred Stock at a conversion ratio per share of Series A Preferred Stock of 61.9195, but only if the closing price of our common stock had traded at or above a certain premium to our initial offering price, such premium to decrease with time. On October 15, 2019, the three year anniversary had passed for the Series A Preferred Stock to convert into our common stock. Prior to the commencement of the Chapter 11 Cases, the Company could have redeemed the Series A Preferred Stock for the liquidation preference, which was $198.7 million on June 14, 2020. In certain situations, including a change of control, the Series A Preferred Stock may be redeemed for cash in an amount equal to the greater of (i) 135% of the liquidation preference of the Series A Preferred Stock and (ii) a 17.5% annualized internal rate of return on the liquidation preference of the Series A Preferred Stock. The Series A Preferred Stock matures on October 15, 2021, at which time they are mandatorily redeemable for cash at the liquidation preference to the extent there are legally available funds to do so. For more information, see the Company’s Annual Report.

Elevation Common Units

On May 1, 2020, Elevation's board of managers issued 1,530,000,000 common units at a price of $0.01 per unit to certain of Elevation's members other than Extraction through the Capital Raise. The Capital Raise caused Extraction's ownership of Elevation to be diluted to less than 0.01%. As a result of the Capital Raise, beginning in May 2020 Extraction began accounting for Elevation under the cost method of accounting. The Company reserves all rights related to actions taken by Elevation’s board of managers.

Elevation Preferred Units

In July 2018 and July 2019, respectively, Elevation sold 150,000 and 100,000 of Elevation Preferred Units at a price of $990 per unit to a third party (the "Purchaser"). The aggregate liquidation preference when the units were sold was $150.0 million and $100.0 million, respectively. These Preferred Units represent the noncontrolling interest presented on the condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of changes in stockholders' equity and noncontrolling interest for periods ended on or prior to December 31, 2019. As part of the July 2018 transaction, the Company committed to Elevation that it would drill at least 425 qualifying wells in the acreage dedicated to Elevation by December 31, 2023, subject to reductions if Elevation does not invest the full amount of capital as initially anticipated. Pursuant to the Fourth Amendment to the Elevation Gathering Agreements between Elevation and Extraction, this drilling commitment would be eliminated, if and only if all Elevation Preferred Units have been redeemed in full or are otherwise no longer outstanding. Please see Note 14—Commitments and Contingencies — Elevation Gathering Agreements for further details.

Upon deconsolidation of Elevation Midstream, LLC as discussed in Note 1—Business and Organization -Deconsolidation of Elevation Midstream, LLC, the $270.5 million Elevation preferred unit balance in the noncontrolling interest line item of the condensed consolidated balance sheets as of March 31, 2020 was removed. The amount

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comprises the line item effects of deconsolidation of Elevation Midstream, LLC on the condensed consolidated statements of changes in stockholders' equity and noncontrolling interest as of March 31, 2020.

During the twenty-eight months following the July 3, 2018 Preferred Unit closing date, Elevation is required to pay the Purchaser a quarterly commitment fee payable in cash or in kind of 1.0% per annum on any undrawn amounts of such additional $250.0 million commitment. For the three months ended September 30, 2020, due to the deconsolidation of Elevation during the first quarter of 2020, the Company's condensed consolidated statements excluded all commitment fees paid-in-kind from the Preferred Unit commitment fees and dividends paid-in-kind line item in the condensed consolidated statements of changes in stockholders' equity and noncontrolling interest. For the three months ended September 30, 2019, Elevation recognized $0.7 million of commitment fees paid-in-kind. For the nine months ended September 30, 2020 and 2019, respectively, Elevation recognized $0.6 million and $2.4 million of commitment fees paid-in-kind.

The Elevation Preferred Units entitle the Purchaser to receive quarterly dividends at a rate of 8.0% per annum. The Dividend is currently payable solely in cash. For the three months ended September 30, 2020, due to the deconsolidation of Elevation during the first quarter of 2020, the Company's condensed consolidated statements excluded all dividends paid-in-kind from the Preferred Unit commitment fees and dividends paid-in-kind line item in the condensed consolidated statements of changes in stockholders' equity and noncontrolling interest. For the three months ended September 30, 2019, Elevation recognized $5.2 million of dividends paid-in-kind. For the nine months ended September 30, 2020 and 2019, respectively, Elevation recognized $5.5 million and $11.5 million of dividends paid-in-kind.

Note 13—Earnings (Loss) Per Share

Basic earnings per share (“EPS”) includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS reflects the potential dilution of securities that could share in the earnings of the Company.

The Company uses the “if-converted” method to determine potential dilutive effects of the Company’s outstanding Series A Preferred Stock and the treasury method to determine the potential dilutive effects of outstanding restricted stock awards and stock options. The basic weighted average shares outstanding calculation is based on the actual days in which the shares were outstanding for the three and nine months ended September 30, 2020 and 2019.

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The components of basic and diluted EPS were as follows (in thousands, except per share data):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Basic and Diluted Income (Loss) Per Share
Net income (loss)	$	(540,607)	$	33,924	$	(823,504)	$	(16,664)
Less: Noncontrolling interest	—		(5,776)		(6,160)		(13,849)
Less: Adjustment to reflect Series A Preferred Stock dividends	—		(2,721)		(8,749)		(8,164)
Less: Adjustment to reflect accretion of Series A Preferred Stock discount	(1,865)		(1,682)		(5,452)		(4,915)
Adjusted net income (loss) available to common shareholders, basic and diluted	$	(542,472)	$	23,745	$	(843,865)	$	(43,592)
Denominator:
Weighted average common shares outstanding, basic and diluted (1) (2)	138,348		137,789		138,080		155,847
Income (Loss) Per Common Share
Basic and diluted	$	(3.92)	$	0.17	$	(6.11)	$	(0.28)

(1)For the three and nine months ended September 30, 2020, 6,448,989 potentially dilutive shares, including restricted stock awards and stock options outstanding, were not included in the calculation above, as they had an anti-dilutive effect on EPS. Additionally, 11,472,445 common shares associated with the assumed conversion of Series A Preferred Stock were also excluded, as they would have had an anti-dilutive effect on EPS.

(2)For the three and nine months ended September 30, 2019, 8,956,812 potentially dilutive shares, including restricted stock awards and stock options outstanding, were not included in the calculation above, as they had an anti-dilutive effect on EPS. Additionally, 11,472,445 common shares associated with the assumed conversion of Series A Preferred Stock were also excluded, as they would have had an anti-dilutive effect on EPS.

Note 14—Commitments and Contingencies

Chapter 11 Cases

On June 14, 2020, the Company filed the Chapter 11 Cases seeking relief under the Bankruptcy Code. The Company continues to operate its business and manage its properties in the ordinary course of business pursuant to the applicable provisions of the Bankruptcy Code. In addition, commencement of the Chapter 11 Cases automatically stayed all of the proceedings and actions against the Company (other than regulatory enforcement matters), including those noted below. Please refer to Note 1—Business and Organization for more information on the Chapter 11 Cases.

General

As is customary in the oil and gas industry, the Company may at times have commitments in place to reserve or earn certain acreage positions or wells. If the Company does not meet such commitments, the acreage positions or wells may be lost, or the Company may be required to pay damages if certain performance conditions are not met.

Drilling Rigs

As of March 31, 2021, the Company was subject to one drilling rig commitment on a 30-day rolling term to drill various pads during 2021.

Leases

The Company has entered into operating leases for certain ~~office facilities,~~ compressors and office ~~equipment.~~facilities In connection with the Chapter 11 Cases, the Company filed a motion to reject its drilling rig contracts effective June 14, 2020. For one of the contracts, the rejection resulted in the removal of the lease liability and ~~net right-of-use asset in the amount of $6~~equipment.~~7 million~~ ~~from the condensed consolidated balance sheets.~~ Maturities of operating lease liabilities associated with right-of-use assets and including imputed interest were as follows (in thousands):

3328

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			As of September 30,2020			As of December 31,2019
	Successor
2020 - remaining			$	836	2020	$	19,040
	As of March 31, 2021
2021			3,045		2021	5,247
2021 - remaining	$	4,235
2022	2,701		~~2,670~~		~~2022~~	~~2,211~~
2023	804		~~2,450~~		~~2023~~	~~2,246~~
2024	60		~~2,301~~		~~2024~~	~~2,301~~
Thereafter	—		~~8,273~~		~~Thereafter~~	~~8,273~~
Total lease payments	7,800		~~19,575~~		~~Total lease payments~~	~~39,318~~
Less imputed interest (1)			(2,347)		Less imputed interest (1)	(4,735)
Less imputed interest(1)	(359)
Present value of lease liabilities (2)			$	17,228	Present value of lease liabilities (2)	$	34,583
Present value of lease liabilities	$	7,441

____________________________

(1) Calculated using the estimated interest rate for each lease.

(2) Of the total present value of lease liabilities as of September 30, 2020 and December 31, 2019, $3.2 million and $17.4 million, respectively, were recorded in accounts payable and accrued liabilities and $14.0 million and $17.2 million, respectively, were recorded in other non-current liabilities on the condensed consolidated balance sheets.

Drilling Rigs

As of September 30, 2020, the Company was not subject to commitments on any drilling rigs. As part of Chapter 11, the Company filed a motion to reject its drilling rig contract. As such, the Company recorded $6.7 million in liabilities subject to compromise on the condensed consolidated balance sheets as of September 30, 2020 and in reorganization items, net on the condensed consolidated statements of operations.

Delivery Commitments

AsThe ~~part~~Predecessor ofCompany ~~the~~entered ~~Chapter~~into 11a ~~Cases,~~long-term gas gathering and processing agreement (the ~~Company~~“Gathering isAgreement”) ~~currently~~with a third-party midstream provider in ~~the~~February ~~process~~2019. ofThe ~~renegotiating~~Gathering ~~certain~~Agreement ~~contracts~~commenced ~~terms~~in ~~which~~January ~~include~~2020 and has a term of ten years with an annual minimum volume ~~commitments~~commitment of 13. If0 ~~mutual~~Bcf. ~~terms~~The ~~cannot~~Gathering beAgreement ~~reached~~also includes a commitment to sell take-in-kind NGLs from other processing agreements of 4,000 Bbl/d in the first year of the Gathering Agreement and 7,500 Bbl/d in years two through seven of the Gathering Agreement with the ability to roll forward up to a 10% shortfall in a given month to the subsequent month. On December 23, 2020, the Predecessor Company ~~under~~and ~~Chapter~~the 11counterparty ~~may~~entered ~~file~~into a ~~motion~~settlement and amended the Gathering Agreement (the “Settlement and Amendment”). No changes were made to ~~reject~~the Company’s annual minimum volume commitment as a result of the ~~contract~~settlement and amendment.

OnIn ~~November~~December 2,2016 ~~2020~~and August 2017, the ~~Bankruptcy~~Predecessor ~~Court~~Company ~~ruled~~agreed with several third-party producers and a midstream provider to expand natural gas gathering and processing capacity in ~~favor~~the DJ Basin, including through the addition of two new processing plants as well as the ~~Company~~expansion ~~rejecting~~of ~~several~~related ~~midstream~~gathering ~~contracts~~systems. AsThe afirst ~~result~~plant commenced operations in August 2018 and the second plant commenced operations in July 2019. The Company’s share of these ~~rejected~~commitments ~~contracts~~requires an incremental 51.5 and 20.6 MMcf per day, respectively, over a baseline volume of 65 MMcf per day for a period of seven years following the ~~Company~~in-service ~~accrued~~dates ~~$405~~of the plants.~~2 million~~ ~~within~~The ~~liabilities~~Company ~~subject~~may be required to ~~compromise~~pay ona ~~the~~shortfall ~~condensed~~fee ~~consolidated~~for ~~balance~~any ~~sheets~~incremental asvolume deficiencies under these commitments. These contractual obligations can be reduced by the Company’s proportionate share of ~~September~~the ~~30,~~collective ~~2020~~volumes ~~and~~delivered into ~~reorganization~~the ~~items,~~plants ~~net~~by onother third-party incremental volumes available to the ~~condensed~~midstream ~~consolidated~~provider ~~statements~~at the new facilities that are in excess of ~~operations~~the total commitments. The Company is also required for the first three ~~and~~years ~~nine~~of ~~months~~each ~~ended~~contract ~~September~~to ~~30,~~guarantee ~~2020~~a certain target profit margin on these volumes sold.

The Company was subject to a firm transportation agreement that commenced in November 2016 and had a ten-year term with a monthly minimum delivery commitment of 45,000 Bbl/d in year one, 55,800 Bbl/d in year two, 61,800 Bbl/d in years three through seven and 58,000 Bbl/d in years eight through ten. Until June 2020, these were obligations of the Company’s oil marketer, which reverted back to the Company when the oil marketing contract terminated in June 2020. In May 2017, the Company amended its agreement with its oil marketer that required it to sell all of its crude oil from an area of mutual interest in exchange for a make-whole provision that allowed the Company to satisfy any minimum volume commitment deficiencies incurred by its oil marketer with future barrels of crude oil in excess of their minimum volume commitment during the contract term. In May 2019, the Company extended the term of this agreement through October 31, 2020 subject to an evergreen provision thereafter where either party can provide a six month notice of termination beginning November 1, 2020. Due to the contract termination date, the amount of consideration recognized in revenue is reduced. Please see Note 2—Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements — Revenue — Contract Balances. On June 12, 2020, the Company and the transportation contract counterparty mutually terminated its contract with the Company's oil marketer effective June 30, 2020. The Company had posted a letter of credit for this agreement in the amount of $40.0 million and, as of September 30, 2020, the counterparty had drawn $24.3 million on the letter of credit.

After termination of the aforementioned contract with the oil marketer, the Company had a long-term crude oil delivery commitment agreement that commenced on July 1, 2020. As of September 30, 2020, the Company's long-term

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crude oil delivery commitment had a monthly minimum delivery commitment of 61,800 Bbl/d through October 2023 and then would reduce to 58,000 Bbl/d through October 2026. The Company was required to pay a shortfall fee for any volume deficiencies under these commitments. On November 2, 2020, the Bankruptcy Court ruled in favor of the Company rejecting this contract with an effective date as of June 14, 2020, and, therefore, the Company has no remaining minimum delivery commitments under this transportation contract. The counterparty to this contract has indicated that it plans on appealing the ruling approving of the rejection of the contract.

The Company had two long-term crude oil gathering commitments with two unconsolidated subsidiaries in which the Company has a de minimis minority ownership interest. Please see Note 1—Business and Organization for information related to the deconsolidation of Elevation Midstream, LLC. The first agreement commenced in November 2016 and had a term of ten years with a minimum volume commitment of an average of 9,167 Bbl/d in year one, 17,967 Bbl/d in year two, 18,800 Bbl/d for years three through five and 10,000 Bbl/d for years six through ten. The Company may have been required to pay a shortfall fee for any volume deficiencies under this commitment. The second agreement commenced in October 2019 and had a term of ten years for an average of 3,200 Bbl/d in year one, 8,000 Bbl/d in year two, 14,000 Bbl/d in year three, 16,000 Bbl/d in years four through eight, 12,000 Bbl/d in year nine and 10,000 Bbl/d in year ten. On November 2, 2020, the Bankruptcy Court ruled in favor of the Company rejecting both of these crude oil gathering contracts with an effective date as of June 14, 2020, and, therefore, the Company has no remaining minimum delivery commitments. The counterparties to these contracts have indicated that they plan on appealing the ruling approving of the rejection of these contracts.

In February 2019, the Company entered into two long-term gas gathering and processing agreements with third-party midstream providers. One of the agreements additionally includes a long-term NGL sales commitment for take-in-kind NGLs from other processing agreements. The first agreement commenced in November 2019 and has a term of twenty years with a minimum volume commitment of 251 Bcf to be delivered within the first seven years. The annual commitments over seven years are to be delivered on an average 85,000 Mcf/d in year one, 125,000 Mcf/d in year two, 140,000 Mcf/d in year three, 118,000 Mcf/d in year four, 98,000 Mcf/d in year five, 70,000 Mcf/d in year six and 52,000 Mcf/d in year seven. The aggregate remaining amount of estimated payments under this agreement is approximately $281.5 million. The second agreement commenced on January 2020 and has a term of ten years with an annual minimum volume commitment of 13.0 Bcf in years one through ten. The second agreement also includes a commitment to sell take-in-kind NGLs of 4,000 Bbl/d in year one and 7,500 Bbl/d in years two through seven with the ability to roll up to a 10% shortfall in a given month to the subsequent month.

The summary of these minimum volume commitments as of September 30, 2020, was as follows:

	Oil (MBbl)	Gas (MMcf)	Total (MBOE)
2020 - remaining	2,466	10,260	4,176
2021	9,797	46,540	17,554
2022	8,944	49,758	17,237
2023	9,490	41,850	16,465
2024	9,516	34,160	15,209
Thereafter	29,860	40,260	36,570
Total	70,073	222,828	107,211

In collaboration with several other producers and a midstream provider, on December 15, 2016 and August 7, 2017, the Company agreed to participate in expansions of natural gas gathering and processing capacity in the DJ Basin. The plan includes two new processing plants as well as the expansion of related gathering systems. The first plant commenced operations in August 2018 and the second plant commenced operations in July 2019. The Company’s share of these commitments will require an incremental 51.5 and 20.6 MMcf per day, respectively, over a baseline volume of 65 MMcf per day to be delivered after the plants' in-service dates for a period of seven years thereafter. The Company may be required to pay a shortfall fee for any incremental volume deficiency under these commitments. These contractual obligations can be reduced by the Company’s proportionate share of the collective volumes delivered to the plants by other third-party incremental volumes available to the midstream provider at the new facilities that are in excess of the total commitments. The Company is also required for the first three years of each contract to guarantee a certain target profit margin on these volumes sold.

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In July 2019, the Company entered into three long-term contracts to supply 125,000 dekatherms of residue gas per day for five years to a transportation company. The aggregate remaining amount of estimated commitment assuming no production is $27.5 million. The Company has posted a letter of credit for this agreement in the amount of $8.7 million.

The Company is considering rejecting certain midstream contracts with minimum volume commitments as part of the Chapter 11 Cases. The aggregate amount of estimated remaining payments under agreements that have not been rejected is $309.0 million.

Elevation Gathering Agreements

In July 2018, the Company entered into three long-term gathering agreements (the "Elevation Gathering Agreements") for gas, crude oil and produced water with Elevation. Under the agreements, the Company agreed to drill 100 wells in Broomfield and 325 wells in Hawkeye by December 31, 2023 if both facilities are to be built, subject to adjustments if less capital is spent. Elevation has alleged that if the Company fails to complete the wells by the applicable commitment deadline, then it would be in breach of the agreement and Elevation could attempt to assert damages against Extraction and its affiliates. During the first quarter of 2020, Elevation postponed indefinitely further development of gathering systems and facilities that were to be constructed to service the Company's acreage in Hawkeye and another project in the Southwest Wattenberg area. Due to the decision to not complete the Hawkeye facilities and based on the amount of capital invested, Elevation has asserted that the drilling commitment now consists of 297 wells in the Broomfield area of operations with a deadline of December 31, 2022.

In April 2019, the Elevation Gathering Agreements were amended to provide for, among other amendments, the inclusion of additional gathering facilities that would produce into Elevation’s Badger facility. Pursuant to this amendment, Elevation has asserted that the additional gathering facilities were required to be completed by April 1, 2020 or, within 30 days of such date, Elevation could assert that Extraction must make a payment to Elevation in the amount of 135% of all costs incurred by Elevation as of such date for the development and construction of such additional gathering facilities. As of September 30, 2020, the costs incurred by Elevation for these additional gathering facilities totaled $34.9 million. The Company did not cause the completion of these additional gathering facilities by April 1, 2020, and Elevation has alleged that Extraction is in breach of the Elevation Gathering Agreements. On April 2, 2020, Elevation demanded payment of $46.8 million due to an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020. While the Company disputes that these amounts are due to Elevation, under ASC Topic 450 - Contingencies, the Company recorded the amount in liabilities subject to compromise on the condensed consolidated balance sheet as of September 30, 2020 and in other operating expenses on the condensed consolidated statements of operations.

In December 2019, the Elevation Gathering Agreements were further amended to provide Elevation additional connection fees that are consistent with market terms (the "Connect Fees"). In the fourth quarter of 2019, the Company incurred and paid $19.5 million for Connect Fees pursuant to the Elevation Gathering Agreements, and in the first quarter of 2020 the Company incurred and paid $23.5 million. The Company does not expect to incur additional Connect Fees for the year ending December 31, 2020.

In March 2020, the Elevation Gathering Agreements were further amended to reset all gathering rates and eliminate existing minimum drilling commitment. This amendment will not become effective until after all Elevation Preferred Units have been redeemed in full or are otherwise no longer outstanding.

In November 2020, the Company and Elevation reached an agreement in principle regarding amendments to the gathering agreements and the settlement of outstanding claims. The Company anticipates finalizing the settlement in the fourth quarter of 2020, pending Bankruptcy Court approval. As part of the settlement, the Company will pay Elevation $38.4 million in cash over 24 months following the Company’s emergence from chapter 11 and both parties agreed Elevation will be allowed to submit an unsecured claim $80.0 million with the Bankruptcy Court. The agreement would also release certain areas from future dedication, provide a reduction in gathering fees, a reduction in the number of wells subject to the drilling commitment, and an extended term in order to satisfy the drilling commitment. The Company had previously accrued $46.8 million as discussed above and $2.9 million of accrued interest. Therefore, during the third quarter of 2020, the Company accrued $68.7 million within liabilities subject to compromise on the condensed

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consolidated balance sheets as of September 30, 2020 and in reorganization items, net on the condensed consolidated statements of operations for the three and nine months ended September 30, 2020.

Litigation and Legal Items

~~The~~From time to time, the Company is involved in various legal proceedings arising in the ordinary course of its business and reviews the status of these proceedings on an ongoing basis and, from time to time, may settle or otherwise resolve these matters on terms and conditions that management believes are in the Company’s best interests. The Company has provided the necessary estimated accruals in the condensed consolidated balance sheets where deemed appropriate for litigation and legal -related items that are ongoing and not yet concluded. Although the results cannot be known with certainty, the Company currently believes that the ultimate results of such proceedings will not have a material adverse effect on our business, financial position, results of operations or liquidity.

Environmental. Due to the nature of the ~~natural~~oil ~~gas~~ and ~~oil~~natural gas industry, the Company is exposed to environmental ~~risks~~liabilities in the ordinary course of its business. The Company has various policies and procedures in place to minimize and mitigate the risks from environmental contamination or with respect to environmental compliance issues. Liabilities are recorded when environmental damages resulting from past events are probable and the costs can be reasonably estimated. Except as ~~discussed~~disclosed herein, the Company is not aware of any material environmental claims existing as of ~~September~~March 3031, ~~2020~~2021 ~~which~~that have not been provided for or would otherwise have a material impact on ~~our~~the Company’s financial statements;. ~~however~~However, there can be no assurance that current regulatory requirements will not change or that unknown potential past non-compliance with environmental laws, compliance matters or other environmental liabilities will not be discovered on our properties. ~~Accrued environmental liabilities are recorded in accounts payable and accrued liabilities on the condensed consolidated balance sheets.~~ The liability ultimately incurred with respect to a matter may exceed the related accrual.

COGCC Notices of Alleged Violations (“NOAVs”). The Company has received NOAVs from the Colorado Oil and Gas Conservation Commission (the "“COGCC"”) for alleged compliance violations ~~that~~to which the Company has responded to. ~~At this time, the COGCC has not alleged any specific penalty amounts in these matters.~~ The Company does not believe ~~that any~~ penalties that could result from these NOAVs will have a material effect on ~~our~~its business, financial condition, results of operations or liquidity,. ~~but~~The ~~they~~Company ~~may~~is ~~exceed~~in negotiations with the COGCC to settle all of its outstanding NOAVs. We expect the settlement amount to approximate $~~100,000~~0.6 million.

Midstream Connections. The Company had dedicated the production from some acreage to a certain midstream service provider. However, the Company was unable to connect well pads to the provider due to the inability to secure right of way access for building the connection pipeline. Because the acreage’s production was dedicated to the midstream provider, they have invoiced the Company for oil and gas handled by other midstream providers. The Company disputes these invoices based on force majeure and may have other contractual or legal defenses. The Company’s maximum exposure as of September 30, 2020 was $19.5 million. As of September 30, 2020, no contingent liability has been recorded as it is not probable a loss has been incurred, and the amount of the loss cannot be reasonably estimated.29

Elevation Gathering. As discussed above under Elevation Gathering Agreements, on April 2, 2020, Elevation demanded payment of $46.8 million due to an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020. While the Company disputes that these amounts are due to Elevation, under ASC Topic 450 - Contingencies, the Company recorded the amount in liabilities subject to compromise on the condensed consolidated balance sheet as of September 30, 2020 and in other operating expenses on the condensed consolidated statements of operations.

Note 15—Related Party Transactions

Elevation Midstream, LLC

As discussed in Note 14—Commitments and Contingencies, on April 2, 2020, Elevation demanded payment of $46.8 million due to an alleged breach in contract stemming from a purported failure to complete the pipeline extensions connecting certain wells to the Badger central gathering facility prior to April 1, 2020. While the Company disputes that these amounts are due to Elevation, under ASC Topic 450 - Contingencies, the Company recorded the amount in liabilities subject to compromise on the condensed consolidated balance sheet as of September 30, 2020 and in other

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operating expenses on the condensed consolidated statements of operations. The Company also accrued $2.9 million of interest related to the aforementioned alleged breach in contract.

Note 16—Segment Information

Beginning in the fourth quarter of 2018, the Company had two operating segments, (i) the exploration, development and production of oil, natural gas and NGL (the "exploration and production segment") and (ii) the construction of and support of midstream assets to gather and process crude oil and gas production (the "gathering and facilities segment"). Elevation Midstream, LLC comprised the gathering and facilities segment. During the three and nine months ending September 30, 2019, the Company’s gathering and facilities segment was in the construction phase and no revenue generating activities had commenced. Through March 16, 2020, the results of Elevation were included in the condensed consolidated financial statements of Extraction. Effective March 17, 2020, the results of Elevation Midstream, LLC are no longer consolidated in Extraction's results; however, the Company’s prior quarter segment disclosures included the gathering and facilities segment because it was consolidated through March 16, 2020. Please see Note 1—Business and Organization — Deconsolidation of Elevation Midstream, LLC for further information related to the deconsolidation of Elevation Midstream, LLC. After March 31, 2020, the Company had a single reportable segment.

The following table presents a reconciliation of Adjusted EBITDAX by segment to the GAAP financial measure of income (loss) before income taxes for the three and nine months ended September 30, 2020 and 2019 (in thousands).

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Reconciliation of Adjusted EBITDAX to Income (Loss) Before Income Taxes
Exploration and production segment EBITDAX	$	98,308	$	138,491	$	334,986	$	406,539
Gathering and facilities segment EBITDAX	—		(622)		1,256		(1,168)
Subtotal of Reportable Segments	$	98,308	$	137,869	$	336,242	$	405,371
Less:
Depletion, depreciation, amortization and accretion	$	(85,306)	$	(114,996)	$	(243,977)	$	(352,134)
Impairment of long lived assets	—		—		(1,736)		(11,233)
Other operating expenses	(9,766)		—		(75,549)		—
Exploration and abandonment expenses	(9,762)		(13,245)		(184,903)		(32,725)
Gain on sale of property and equipment	—		1,011		—		1,329
Gain (loss) on commodity derivatives	(9,673)		87,956		184,041		39,383
Settlements on commodity derivative instruments	(14,045)		(16,101)		(180,770)		8,432
Premiums paid for derivatives that settled during the period	—		812		—		19,910
Stock-based compensation expense	(1,902)		(11,358)		(4,462)		(39,306)
Amortization of debt issuance costs	(155)		(974)		(3,345)		(3,799)
Gain on repurchase of 2026 Senior Notes	—		—		—		10,486
Interest expense	(7,233)		(22,250)		(45,714)		(61,478)
Loss on deconsolidation of Elevation Midstream, LLC	—		—		(73,139)		—
Reorganization items, net	(501,073)		—		(527,992)		—
Income (Loss) Before Income Taxes	$	(540,607)	$	48,724	$	(821,304)	$	(15,764)

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Financial information of the Company's reportable segments was as follows for the three months ended September 30, 2020 and 2019 (in thousands).

	For the Three Months Ended September 30, 2020
	Exploration and Production		Gathering and Facilities		Elimination of Intersegment Transactions		Consolidated Total
Revenues:
Revenues from third parties	$	158,226	$	—	$	—	$	158,226
Revenues from Extraction	—		—		—		—
Total Revenues	$	158,226	$	—	$	—	$	158,226
Operating Expenses and Other Income (Expense):
Direct operating expenses	$	(64,263)	$	—	$	—	$	(64,263)
Depletion, depreciation, amortization and accretion	(85,306)		—		—		(85,306)
Interest income	8		—		—		8
Interest expense	(7,388)		—		—		(7,388)
Earnings in unconsolidated subsidiaries	—		—		—		—
Subtotal Operating Expenses and Other Income (Expense):	$	(156,949)	$	—	$	—	$	(156,949)
Segment Assets	$	2,370,571	$	—	$	—	$	2,370,571
Capital Expenditures	(1,320)		—		—		(1,320)
Investment in Equity Method Investees	—		—		—		—
Segment EBITDAX	98,308		—		—		98,308

	For the Three Months Ended September 30, 2019
	Exploration and Production		Gathering and Facilities		Elimination of Intersegment Transactions		Consolidated Total
Revenues:
Revenues from third parties	$	176,942	$	—	$	—	$	176,942
Revenues from Extraction	—		—		—		—
Total Revenues	$	176,942	$	—	$	—	$	176,942
Operating Expenses and Other Income (Expense):
Direct operating expenses	$	—	$	—	$	—	$	—
Depletion, depreciation, amortization and accretion	(114,971)		(25)		—		(114,996)
Interest income	114		355		—		469
Interest expense	(23,224)		—		—		(23,224)
Earnings in unconsolidated subsidiaries	—		640		—		640
Subtotal Operating Expenses and Other Income (Expense):	$	(138,081)	$	970	$	—	$	(137,111)
Segment Assets	$	4,046,862	$	395,224	$	(619)	$	4,441,467
Capital Expenditures	134,998		65,098		—		200,096
Investment in Equity Method Investees	—		35,992		—		35,992
Segment EBITDAX	138,491		(622)		—		137,869

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	For the Nine Months Ended September 30, 2020
	Exploration and Production		Gathering and Facilities		Elimination of Intersegment Transactions		Consolidated Total
Revenues:
Revenues from third parties	$	385,068	$	1,473	$	—	$	386,541
Revenues from Extraction	—		4,513		(4,513)		—
Total Revenues	$	385,068	$	5,986	$	(4,513)	$	386,541
Operating Expenses and Other Income (Expense):
Direct operating expenses	$	(189,155)	$	(3,935)	$	4,294	$	(188,796)
Depletion, depreciation, amortization and accretion	(242,878)		(1,099)		—		(243,977)
Interest income	78		29		—		107
Interest expense	(49,059)		—		—		(49,059)
Earnings in unconsolidated subsidiaries	—		480		—		480
Subtotal Operating Expenses and Other Income (Expense):	$	(481,014)	$	(4,525)	$	4,294	$	(481,245)
Segment Assets	$	2,370,571	$	—	$	—	$	2,370,571
Capital Expenditures	168,382		(6,311)		—		162,071
Investment in Equity Method Investees	—		—		—		—
Segment EBITDAX	334,986		1,256		—		336,242

	For the Nine Months Ended September 30, 2019
	Exploration and Production		Gathering and Facilities		Elimination of Intersegment Transactions		Consolidated Total
Revenues:
Revenues from third parties	$	620,916	$	—	$	—	$	620,916
Revenues from Extraction	—		—		—		—
Total Revenues	$	620,916	$	—	$	—	$	620,916
Operating Expenses and Other Income (Expense):
Direct operating expenses	$	—	$	—	$	—	$	—
Depletion, depreciation, amortization and accretion	(352,062)		(72)		—		(352,134)
Interest income	372		1,286		—		1,658
Interest expense	(54,791)		—		—		(54,791)
Earnings in unconsolidated subsidiaries	—		1,179		—		1,179
Subtotal Operating Expenses and Other Income (Expense):	$	(406,481)	$	2,393	$	—	$	(404,088)
Segment Assets	$	4,046,862	$	395,224	$	(619)	$	4,441,467
Capital Expenditures	516,510		192,568		—		709,078
Investment in Equity Method Investees	—		35,992		—		35,992
Segment EBITDAX	406,539		(1,168)		—		405,371

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report ~~on Form 10-Q (“Quarterly Report”)~~ contains "forward-looking statements." All statements, other than statements of historical facts, included or incorporated by reference herein concerning, among other things, the Merger (as defined below), any statements regarding the expected timetable for completing the Merger, the results, effects, benefits and synergies of the Merger, future opportunities for the combined company, planned capital expenditures, increases in oil and gas production, the number of anticipated wells to be drilled or completed after the date hereof, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as ''may," "expect," "estimate," "project," "plan," "believe," "intend," "achievable," "anticipate," ''will," "continue," ''potential," "should," "could," and similar terms and phrases. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, among others:

•~~potential~~our ~~adverse~~ability ~~effects~~to ofexecute ~~the Chapter 11 Cases~~ on our ~~liquidity~~business ~~and~~strategy ~~results~~following ofemergence ~~operations;~~from bankruptcy;

•~~objections~~the toCOVID-19 ~~the~~pandemic, ~~confirmation~~including ofits ~~our~~effects ~~Restructuring~~on ~~Plan~~commodity orprices, ~~other~~downstream ~~pleadings~~capacity, weemployee ~~file~~health ~~that~~and ~~could~~safety, ~~protract~~business ~~the~~continuity ~~Chapter~~and 11regulatory ~~Cases~~matters;

•our ability to continue as a going concern;

•our ability to comply with the restrictions and other covenants imposed by our DIP Credit Agreement and other financial arrangements;

•the Bankruptcy Court’s rulings in the Chapter 11 Cases, and the outcome of the Chapter 11 Cases generally;

•the length of time that we will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the proceedings;

•federal and state regulations and laws;

•capital requirements and uncertainty of obtaining additional funding on terms acceptable to us;

•risks and restrictions related to our debt agreements;

•impact of political and regulatory developments in Colorado, particularly with respect to additional permit scrutiny;

•our ability to use derivative instruments to manage commodity price risk;

•realized oil, natural gas and NGL prices as well as the volatility and widening of differentials;

•a decline in oil, natural gas and NGL production, and the impact of general economic conditions on the demand for oil, natural gas and NGL and the availability of capital ~~to oil and natural gas producers~~;

•asset impairments from commodity price declines;

•the ~~outbreak~~willingness of ~~communicable~~the ~~diseases~~Organization ~~such~~of asPetroleum ~~coronavirus~~Exporting Countries (“OPEC”) to set and maintain production levels;

•the willingness of the Organization of Petroleum Exporting Countries (“OPEC”) and certain other oil and natural gas producing countries to set and maintain production levels;

•unsuccessful drilling and completion activities and the possibility of resulting write-downs;

•geographical concentration of our operations;

•constraints in the DJ Basin of Colorado with respect to gathering, transportation and processing facilities and marketing;

•lack of U.S. domestic storage;

•our ability to meet our proposed drilling schedule and to successfully drill wells that produce oil or natural gas in commercially viable quantities;

•seasonal weather conditions.

•shortages of oilfield equipment, supplies, services and qualified personnel and increased costs for such equipment, supplies, services and personnel;

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•adverse variations from estimates of reserves, production, production prices and expenditure requirements, and our inability to replace our reserves through exploration and development activities;

•incorrect estimates associated with properties we acquire relating to estimated proved reserves, the presence or recoverability of estimated oil and natural gas reserves and the actual future production rates and associated costs of such acquired properties;

•drilling operations associated with the employment of horizontal drilling techniques, and adverse weather and environmental conditions;

•limited control over non-operated properties;

•title defects to our properties and inability to retain our leases;

•our ability to successfully develop our large inventory of undeveloped operated and non-operated acreage;

•our ability to retain key members of our senior management and key technical employees;

•cost of pending or future litigation;

•risks relating to managing our growth, particularly in connection with the integration of significant acquisitions;

•impact of environmental, health and safety, and other governmental regulations, and of current or pending legislation;

•risks associated with a material weakness in our internal control over financial reporting;

•changes in tax laws;

•effects of competition; and

•~~seasonal~~the ~~weather~~outbreak ~~conditions~~of communicable diseases such as coronavirus.

Reserve engineering is a process of estimating underground accumulations of oil, natural gas, and NGL that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers and management. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil, natural gas and NGL that are ultimately recovered.

In addition to the other information and risk factors set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in Item 1A of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2019 (our “Annual Report”) and in our other filings with the Securities and Exchange Commission, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. 30

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this section and elsewhere in this Quarterly Report. Except as required by law, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial condition, results of operations, liquidity and certain other factors that may affect the Company’s operating results. MD&A should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes included in Part I, Item 1 of this Quarterly Report. The following information updates the discussion of the Company’s financial condition provided in our Annual Report and analyzes the changes in the results of operations between the three and nine months ended September 30, 2020 and 2019.

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significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil, natural gas and NGL that are ultimately recovered.

In addition to the other information and risk factors set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in Item 1A of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2020 (our “Annual Report”) and in our other filings with the Securities and Exchange Commission, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial condition, results of operations, liquidity and certain other factors that may affect the Company’s operating results. MD&A should be read in conjunction with the condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report. The following information updates the discussion of the Company’s financial condition provided in our Annual Report and analyzes the changes in the results of operations between the three months ended March 31, 2021 and 2020.

EXECUTIVE SUMMARY

We are an independent oil and gas company focused on the acquisition, development and production of oil, natural gas and NGL reserves, ~~as well as the construction and support of midstream assets to gather crude oil, natural gas and water production~~ in the Rocky Mountain region, primarily in the Wattenberg Field of the Denver-Julesburg Basin of Colorado. We have developed an oil, natural gas and NGL asset base of proved reserves, as well as a portfolio of development drilling opportunities on high resource-potential leasehold on contiguous acreage blocks in some of the most productive areas of what we consider to be the core of the DJ Basin.

Financial Results

~~For~~Our results of operations as reported in our condensed consolidated financial statements for the ~~three~~periods ~~and~~January ~~nine~~21, ~~months~~2021 ~~ended~~through ~~September 30~~March 31, ~~2020~~2021 (“Successor”), ~~crude~~January ~~oil~~1, ~~natural~~2021 ~~gas~~through January 20, 2021 (“Predecessor”) and ~~NGL~~the ~~sales~~three months ended March 31, ~~coupled~~2020 are in accordance with accounting principles generally accepted in the ~~impact~~United States of ~~settled~~America ~~derivatives,~~(“GAAP”). ~~decreased~~Although toGAAP ~~$172.3~~requires ~~million~~that we report on our results for the Successor and ~~$471.2~~Predecessor ~~million~~periods separately, ~~respectively~~management views our operating results for the three months ended March 31, as2021 ~~compared~~by tocombining ~~$192.3~~the ~~million~~results of the Predecessor and ~~$592~~Successor periods because management believes such presentation provides the most meaningful comparison of our results to prior periods.6 ~~million~~We are not able to compare the 20 days from January 1, ~~respectively~~2021 through January 20, 2021 operating results to any of the previous periods reported in the ~~same~~condensed ~~prior~~consolidated ~~year~~financial statements and do not believe reviewing this period ~~due~~in toisolation awould ~~decrease~~be ofuseful $4in identifying any trends in or reaching any conclusions regarding our overall operating performance.50 We believe the key performance indicators such as operating revenues and $7expenses for the Successor period combined with the Predecessor Period provide more meaningful comparisons to other periods and are useful in understanding operational trends.~~87,~~ ~~respectively~~Additionally, there were no changes in ~~realized~~policies ~~price~~between ~~per~~the ~~BOE,~~periods ~~including~~and ~~settled~~any ~~derivatives,~~material ~~partially~~impacts ~~offset~~as bya anresult ~~increase~~of infresh ~~sales~~start ~~volumes~~reporting were included within the discussion of ~~approximately~~these ~~620~~changes. ~~MBoe~~These combined results do not comply with GAAP and ~~2,742~~have ~~MBoe~~not been prepared as pro forma results under applicable regulations, ~~respectively~~but are presented because we believe they provide the most meaningful comparison of our results to prior periods.

For the combined three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021, wecrude ~~had~~oil, anatural ~~net~~gas ~~loss of $540.6 million~~ and ~~$823.5~~NGL ~~million~~sales, ~~respectively,~~coupled aswith ~~compared~~the toimpact ~~net income~~ of ~~$33.9~~settled ~~million~~derivatives, ~~and~~increased ato ~~net loss of~~ $16281.79 million, ~~respectively,~~as ~~for~~compared ~~the three and nine months ended September 30, 2019. The change~~ to ~~a net loss for the three months ended September 30, 2020 from net income for the three months ended September 30, 2019 was primarily driven by a decrease in sales revenues of~~ $18204.75 million, ~~a decrease~~ in ~~commodity~~the ~~derivative~~same ~~gains~~prior ofyear ~~$97.7~~period ~~million~~due ~~and~~to an increase ~~in reorganization items, net~~ of $~~501~~20.106 ~~million partially offset by a decrease~~ in ~~operating~~realized ~~expenses~~price ofper ~~$13.6 million~~BOE, aincluding ~~decrease~~settled ~~in interest expense of $15.8 million and a decrease in income tax expenses of $14.8 million. The increase in net loss for the nine months ended September 30~~derivatives, ~~2020~~partially asoffset ~~compared to the nine months ended September 30, 2019 was primarily driven~~ by a decrease in sales ~~revenues~~volumes of ~~$234.4~~approximately ~~million~~2,131 ~~an increase in the loss from deconsolidation of $73~~MBoe.1 million, an increase in reorganization items, net of $528.0 million and an increase in operating expenses of $117.7 million partially offset an increase in commodity derivative gains of $144.6 million.

Adjusted EBITDAX was $98.3 million and $336.2 million, respectively, for the three and nine months ended September 30, 2020 as compared to $137.9 million and $405.4 million, respectively, for the three and nine months ended September 30, 2019, reflecting a 28.7% and a 17.1% decrease, respectively. Adjusted EBITDAX is a non-GAAP financial measure. For a definition of Adjusted EBITDAX and a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP, please refer to “—Adjusted EBITDAX.”31

Operational Results

During the three months ended September 30, 2020, we suspended drilling and completions operations to reduce capital expenditures and did not incur significant drilling, completion or leasehold expenditures. During the nine months ended September 30, 2020, we incurred approximately $154.6 million in drilling 37 gross (26.5 net) wells with an average lateral length of 2.3 miles and completing 41 gross (31.7 net) wells with an average lateral length of 2.4 miles, all of which were horizontal wells in the DJ Basin. In addition, we incurred approximately $13.8 million of leasehold and surface acreage additions. We turned to sales 49 gross (36.6 net) wells with an average lateral length of approximately 2.4 miles.

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For the combined three months ended March 31, 2021, we had net income of $959.5 million as compared to net income of $9.0 million for the three months ended March 31, 2020. The change in net income for the combined three months ended March 31, 2021 from the three months ended March 31, 2020 was primarily driven by an increase in sales revenues of $127.3 million, reorganization gain of $873.9 million, a decrease in operating expenses of $185.1 million, no loss on deconsolidation of Elevation as compared to a loss of $73.1 million during the three months ended March 31, 2020, and a decrease in interest expenses of $17.7 million, offset by less commodity derivative gains of $304.1 million and an increase in income tax expense of $21.1 million.

Adjusted EBITDAX was $207.2 million, for the combined three months ended March 31, 2021 as compared to $123.9 million for the three months ended March 31, 2020, reflecting a 67% increase. Adjusted EBITDAX is a non-GAAP financial measure. For a definition of Adjusted EBITDAX and a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP, please refer to “—Adjusted EBITDAX.”

Operational Results

During the combined three months ended March 31, 2021, we focused on improving free cash flow and implemented op

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