Earthstone agreed on March 31, 2021 to buy Irion County, Texas oil and gas assets from Tracker Resource Development III for $29.6 million cash plus 4.7 million new Class A shares, and well-bore interests from Sequel for $52.0 million cash plus 1.5 million new Class A shares. Closing is expected in Q3 2021 and needs shareholder approval of the share issuance (including a majority excluding EnCap and management); Warburg Pincus entities, holding 13,238,110 Class A shares, agreed to vote in favour. The share issuance would dilute existing holders, and the Sequel deal only closes if the Tracker deal does.
13 Jan 2021asset acquisition disposition● NeutralMajor
On Jan 7, 2021 Earthstone closed the Independence acquisition announced in December, paying about $131.2 million cash (a bit under the ~$135.2 million expected) and issuing 12,719,594 new Class A shares to Independence. It also signed a registration rights agreement (resale registration statement due within 60 days), a voting agreement, and a 120-day lock-up with the Warburg parties. David S. Habachy of Warburg Pincus joined the board as a Class II director, and the ethics code was amended to waive certain corporate opportunities for Warburg. The filing says Independence also acquired Class A shares from EnCap and affiliates on Jan 7, 2021, which bears on the earlier EnCap holding.
22 Dec 2020capital raising announcement● NeutralMajor
On Dec 17, 2020 Earthstone agreed to buy the subsidiaries of Independence Resources Holdings and Independence Resources Manager (unaffiliated sellers, principally owned by Warburg Pincus) for about $135.2 million cash (mostly paying off the sellers' credit facility, estimated $132.7 million) plus about 12.7 million newly issued Class A shares, which would dilute existing holders. Closing was expected in Q1 2021. Warburg would get a right to appoint one director and a 120-day lock-up on its shares. A credit agreement amendment, effective only if the deal closes, would raise the borrowing base from $240.0 million to $360.0 million and raise the interest rate.
On Sept 28, 2020 Earthstone amended its Nov 2019 credit agreement. The borrowing base was cut from $275 million to $240 million at the scheduled redetermination, the interest rate went up, acquisition financing got more flexible, and dividend/distribution restrictions were tightened. The company said debt fell 23% to an estimated $130.0 million at Sept 30, 2020 from $168.6 million at June 30, 2020. The $275 million figure differs from the $325 million initial base in the Nov 2019 agreement; the filing does not explain the intervening change.
On Nov 21, 2019 Earthstone's subsidiary EEH signed a new credit agreement with Wells Fargo as agent, replacing the May 2017 BOKF-led facility, which was terminated. The new facility has a $325.0 million initial borrowing base (same as the May 2019 level) and matures Nov 21, 2024, versus May 2022 for the old one, and is secured by substantially all of EEH's assets. It requires a current ratio of at least 1.0 to 1.0 and a leverage ratio of no more than 4.0 to 1.0.
Earthstone's lenders raised the borrowing base on its credit facility from $275 million to $325 million on May 1, 2019, following the regular review. Same-day first-quarter 2019 results: production averaged 11,209 Boepd, revenue was $40.7 million, and there was a net loss of $38.4 million including a $47.9 million loss on derivative contracts. As of March 31 it had $120.8 million of debt drawn, with about $205 million of liquidity after the increase.
24 Dec 2018material agreement termination▼ BadMajor
Earthstone and Sabalo Holdings mutually terminated the Sabalo acquisition on Dec 21, 2018, and the Jan 3, 2019 special meeting was cancelled. The company cited the recent significant decline in commodity prices and its effect on debt and equity markets. This ends the thread opened Oct 17: no new shares go to Sabalo Holdings, the EIG preferred deal and the bank bridge commitment also ended, and the EnCap voting support agreement lapsed. Costs: EEH reimburses Sabalo Holdings at least $1.6 million of expenses (up to $500,000 more) plus $1.0 million paid to Shad Permian; Earthstone owes EIG a $3.4 million termination fee plus up to $750,000 expenses, and about $600,000 to the banks. For 12 months it also agreed not to acquire Sabalo's assets or sell preferred stock.
Earthstone filed the final proxy statement for the Sabalo deal, now setting the special stockholder meeting for January 3, 2019. Terms are unchanged from the preliminary version; it notes Class A closed at $8.00 on Nov 5, 2018 versus $9.38 on Oct 17, before the deal was announced.
Earthstone filed a preliminary proxy statement asking stockholders to vote on the Sabalo acquisition announced Oct 17, 2018 (about $950 million: about $650 million cash plus 32,315,695 EEH units and Class B shares) and on the related $225 million EIG preferred stock sale. The board unanimously recommends voting for it, and Sabalo Holdings is expected to own about 33.5% of Class Aon a fully diluted basis after closing; the meeting date was still blank.
17 Oct 2018capital raising announcement● NeutralMajor
On Oct 17, 2018 Earthstone agreed to acquire Sabalo Energy's Midland Basin assets (about 20,800 net acres) for about $950 million: roughly $650 million cash and roughly $300 million in new EEH units and Class B shares (32,315,695 each) issued to Sabalo Holdings. It also agreed to sell EIG $225 million of Series A convertible preferred stock plus up to $30 million of Class A stock, to close alongside the acquisition. Closing needs stockholder approvals (EnCap, with about 61.2% of votes, agreed to vote yes) and is expected in Q4 2018 or Q1 2019. A $16 million termination fee applies in certain cases. Existing holders face dilution from the new shares, and the cash portion is to be funded partly by a bridge loan or notes and revolver borrowings.
On May 23, 2018 the credit facility amendment raised the borrowing base from $185.0 million to $225.0 million and cut the interest rate on loans by 50 basis points. It also loosens hedging limits and adds a swingline for short-term borrowing. This continues the facility's step-ups from $150 million at the May 2017 Bold closing.
On March 29, 2018 the audit committee dismissed Grant Thornton and appointed Moss Adams as auditor for the year ending Dec 31, 2018. The filing says Grant Thornton's 2016 and 2017 reports had no adverse opinions and there were no disagreements or reportable events.
27 Dec 2017asset acquisition disposition● NeutralMajor
The Bakken sale to Statoil closed Dec 20, 2017 for net proceeds of about $26.7 million after $0.3 million of adjustments. $25.0 million went to repay credit facility borrowings and $1.7 million was kept as cash. This resolves the sale agreed in November. The filing also includes pro forma financial statements reflecting the sale and the Bold transaction, and re-files earlier Bold financial statements by reference, closing out that open item.
On Dec 1, 2017 the lenders raised the borrowing base on the May 2017 credit facility from $150.0 million to $185.0 million, and the company amended the agreement. The amendment also allows sales of oil and gas property above 5% of proved developed producing reserves (subject to a borrowing base redetermination) and gives more hedging flexibility. The press release says the $185 million base will not be reduced when the Bakken sale closes.
A subsidiary agreed on Nov 16, 2017 to sell all of its Bakken assets to Statoil Oil & Gas LP for about $27.0 million, effective Dec 1, 2017, with closing expected by year-end 2017. These are the non-operated North Dakota assets in the Williston Basin; management says it is shifting emphasis to the Midland Basin.
On October 18, 2017, Earthstone priced an underwritten offering of 4,500,000 Class A shares at $9.25 each (closed October 23, 2017), with net proceeds of about $39.2 million. The money is to repay borrowings on its revolving credit facility, the one set up at the Bold closing. Underwriters also have a 30-day option for up to 675,000 more shares, and the company agreed not to sell more stock for 60 days without consent; this adds shares for existing holders.
15 May 2017asset acquisition disposition● NeutralMajor
On May 9, 2017, Earthstone closed the Bold Energy deal: existing common stock converted one-for-one into Class A, Earthstone and Lynden put their assets into Earthstone Energy Holdings (EEH), and Bold Holdings received 36,070,828 EEH units plus 36,070,828 Class B shares. This resolves the main open thread; the proxy had said Bold holders would own about 61% on a fully diluted basis. Earthstone also signed a new credit agreement with a $150.0 million initial borrowing base maturing May 9, 2022 (replacing the 2014 facility, which had a $75.0M base), a registration rights agreement for Bold's shares, and a voting agreement with EnCap, Oak Valley and Bold Holdings. The board went to nine members. Legacy holders keep their shares as Class A but are now a minority.
On May 8, 2017 the board approved moving the stock's listing from the NYSE MKT to the NYSE; the Class A shares (existing stock converted one-for-one) began trading on the NYSE on May 10, 2017 under the same symbol, ESTE. This follows the Bold closing and changes only where the shares trade; the company plans to file Form 25 around May 22, 2017 to withdraw the old listing.
Earthstone filed its final proxy statement on April 7, 2017, setting a special stockholder meeting for May 9, 2017 to vote on the Bold Energy deal (the meeting date was blank in the December preliminary version). The board unanimously recommends approval; Bold Holdings is expected to own about 61.0% of Class A stock on a fully diluted, as-converted basis, and the stock closed at $14.51 on April 6, 2017 versus $8.98 before the deal was announced. The vote needs a majority of all outstanding shares plus a majority of votes cast not held by Oak Valley or executive officers.
On March 21, 2017, Earthstone and the other parties to the Bold Energy contribution agreement signed an amendment moving the termination date from March 31, 2017 to June 30, 2017. This continues the pending Bold deal, which had been due to end on March 31, and gives it three more months to close; the filing gives no reason for the extension.
Earthstone filed a preliminary proxy statement (dated Dec 20, 2016, meeting date still blank) asking holders to vote on the Bold Energy contribution agreement signed in November 2016. Votes also cover transferring substantially all Earthstone assets into the new holding company, increasing authorized shares from 100M to 250M (200M Class A, 50M Class B), converting existing stock one-for-one into Class A, and a plan amendment. The board unanimously recommends approval after a special committee (Joliat and Urban, advised by Stephens) reviewed the deal; the stock closed at $8.98 on Nov 7, 2016, and the fee table values the deal at about $452.5M using a $13.62 price on Dec 15. This continues the Bold thread, which is still pending and subject to the vote; Bold holders are expected to own about 61%.
8 Nov 2016capital raising announcement● NeutralMajor
On November 7, 2016, Earthstone signed a contribution agreement with Bold Energy (Midland Basin properties); Bold and Earthstone are both affiliates of funds controlled by EnCap. Under an 'Up-C' structure, Earthstone and Lynden would put their assets into a new holding company, Earthstone Energy Holdings, and Bold would get 36,070,828 units plus voting Class B shares; existing Earthstone holders would own about 39% and Bold holders about 61% on a fully diluted, as-converted basis. Oak Valley (41.1% of the stock) has agreed to vote in favor, closing needs a stockholder vote (including a majority of holders other than Oak Valley and executives) and NYSE MKT listing, and it is expected in Q1 2017 with an outside date of March 31, 2017. Earthstone may owe Bold a $5.5M termination fee in certain alternative-deal cases. The board would be nine members, four designated by EnCap. This opens a major new thread that would heavily dilute current holders and shift control to EnCap.
On July 13, 2016, Earthstone dismissed its auditor Weaver and Tidwell and appointed Grant Thornton to audit the 2016 financial statements; the audit committee approved the change. The filing says there were no disagreements and no adverse or qualified opinions, but Weaver had reported a material weakness in internal controls at Dec 31, 2015 (segregation of duties, review and approval, verification, and system access), which was already disclosed in the 10-K. The filing does not state why the auditor was changed.
On June 16, 2016, Earthstone sold 4,500,000 new shares at $10.50 each in an underwritten public offering (SunTrust Robinson Humphrey and Seaport Global), closed June 21, with net proceeds of about $44.7M. Underwriters have a 30-day option for up to 675,000 more shares. Proceeds are meant to repay revolver debt, which rose after the Lynden deal, and for general purposes including completing 12 gross (5.3 net) wells awaiting completion. This adds new shares, diluting existing holders further.
On May 18, 2016, Earthstone completed the Lynden Energy acquisition announced in December 2015, issuing about 3.7 million shares at 0.02842 Earthstone share per Lynden share; Lynden is now a wholly owned subsidiary and Lynden stock has stopped trading on the TSX Venture Exchange. Lynden holders approved on May 12 and the BC court gave its final order on May 13. Former Lynden holders now own 21% of 17.535 million Earthstone shares, so existing holders are diluted to 79%, as expected. The same day Earthstone amended its Bank of Texas credit agreement (second amendment): borrowing base set at $75.0M (down from $80.0M), higher interest margins, hedging required within 60 days, and the Lynden properties mortgaged as security. Press release says about $47.8M of debt and $0.2M of letters of credit were in use, with about $12.0M of cash. Audited Lynden financials and pro formas are still to be filed by amendment.
On March 29, 2016, Earthstone, Lynden and Merger Sub amended the December 2015 Arrangement Agreement. The changes clarify the mechanics so that Merger Sub acquires Lynden's shares and amalgamates with Lynden, which survives as an Earthstone subsidiary, and they extend Lynden's deadline to hold its special meeting to May 27, 2016. The deal terms in the text are otherwise unchanged and it is still pending.
On December 16, 2015, Earthstone agreed to buy Lynden Energy Corp., a British Columbia company, by issuing about 3.7 million Earthstone shares at 0.02842 of a share per Lynden share (about $0.52 per Lynden share at the Dec 16 close). After closing, Earthstone and Lynden holders are expected to own about 79% and 21% of the combined company. Oak Valley, with about 66% of Earthstone, has consented in writing to the deal. Closing needs Lynden holder approval, a British Columbia court order and NYSE MKT listing approval, and either side can terminate if it is not done by September 30, 2016. This opens a new acquisition thread, and existing holders will be diluted to about 79% (the filing gives these percentages on a fully diluted basis).
On December 1, 2015, Earthstone amended its December 2014 Bank of Texas credit agreement, changing the interest margin rates, the EBITDAX definition and the commitment fee. The lenders reaffirmed the borrowing base at $80.0M, with $11.2M of debt and $0.3M of letters of credit used, and the facility matures December 19, 2018. This continues the Bank of Texas facility set up at the 2014 closing.
