What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-12 compared with 2020-03-12 · 397 added, 566 removed, 1085 unchanged (47% of the section changed)

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The effectiveness of our Company’s internal control over financial reporting as of December 31, 2020, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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March 12, 2021

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Other Information

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Certain information required by this Part III is incorporated by reference from our definitive Proxy Statement for the Annual Meeting of Shareholders to be held in 2020 (the “Proxy Statement”), which we intend to file with the SEC pursuant to Regulation 14A within 120 days after December 31, 2019.

Certain information required by this Part III is incorporated by reference from our definitive Proxy Statement for the Annual Meeting of Stockholders to be held in 2021 (the “Proxy Statement”), which we intend to file with the SEC pursuant to Regulation 14A within 120 days after December 31, 2020.

Except for those portions specifically incorporated into this Annual Report on Form 10-K by reference to the Proxy Statement, no other portions of the Proxy Statement are deemed to be filed as part of this Annual Report on Form 10-K.

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Adam Dirlam 37 Chief Operating Officer

Michael Kelly 38 Executive Vice President, Finance

Michael Kelly 39 Chief Strategy Officer

Erik Romslo 43 Chief Legal Officer & Secretary

James Evans 37 Executive Vice President and Chief Engineer

Nicholas O’Grady has served as our Chief Executive Officer since January 2020.

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Thomas and a master’s degree from the University of Minnesota - Carlson School of Management.

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Michael Kelly has served as our Executive Vice President of Finance since January 2020.

Michael Kelly has served as our Chief Strategy Officer since February 2021.

Prior to that, he served as our Executive Vice President of Finance since January 2020.

Prior to joining our company, Mr.

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Olaf College and a law degree from the New York University School of Law.

James Evans has served as our Executive Vice President and Chief Engineer since February 2021.

Prior to that, he served as our Senior Vice President of Engineering since January 2020 and as Vice President of Engineering since June 2018, prior to which he had served as the Company’s Reservoir Engineering Manager since 2015.

Evans began his career as a Reservoir Engineer with Cabot Oil & Gas.

Between 2009 and 2012 he worked for Cornerstone Natural Resources.

More recently Mr.

Evans worked for Fidelity Exploration.

Evans holds a BS degree in Petroleum Engineering from Montana Tech.

Executive Compensation

The information appearing under the headings “Executive Compensation” and “Compensation Committee Report,” and the information regarding compensation committee interlocks and insider participation under the heading “Corporate Governance,” in the Proxy Statement is incorporated herein by reference.

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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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The information appearing under the headings “Registered Public Accountant Fees” and “Pre-Approval Policies and Procedures of Audit Committee” in the Proxy Statement is incorporated herein by reference.

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Exhibits and Financial Statement Schedules

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(b) Exhibits:

Unless otherwise indicated, all documents incorporated by reference into this report are filed with the SEC pursuant to the Securities and Exchange Act of 1934, as amended, under file number 001-33999.

Description Reference

Purchase and Sale Agreement, dated July 17, 2018, by and between Pivotal Williston Basin, LP and Northern Oil and Gas, Inc.

Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 20, 2018

Purchase and Sale Agreement, dated July 17, 2018, by and between Pivotal Williston Basin II, LP and Northern Oil and Gas, Inc.

Incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 20, 2018

Purchase and Sale Agreement, dated July 27, 2018, by and between WR Operating LLC and Northern Oil and Gas, Inc.

Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 31, 2018

First Amendment to Purchase and Sale Agreement, dated September 25, 2018, by and between WR Operating LLC and Northern Oil and Gas, Inc.

Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 1, 2018

Share Repurchase Agreement, dated November 7, 2018, by and between W Energy Partners LLC and Northern Oil and Gas, Inc.

Incorporated by reference to Exhibit 2.5 to the Amendment No.

1 to Registration Statement on Form S-3/A filed with the SEC on December 12, 2018 (file no.

Share Repurchase Agreement, dated November 1, 2018, by and between Pivotal Williston Basin, LP and Northern Oil and Gas, Inc.

Incorporated by reference to Exhibit 2.6 to the Amendment No.

1 to Registration Statement on Form S-3/A filed with the SEC on December 12, 2018 (file no.

Share Repurchase Agreement, dated November 1, 2018, by and between Pivotal Williston Basin II, LP and Northern Oil and Gas, Inc.

Incorporated by reference to Exhibit 2.7 to the Amendment No.

1 to Registration Statement on Form S-3/A filed with the SEC on December 12, 2018 (file no.

Purchase and Sale Agreement, dated April 18, 2019, by and between VEN Bakken, LLC and Northern Oil and Gas, Inc.

Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 22, 2019

Share Repurchase Agreement, dated January 4, 2019, by and between W Energy Partners LLC and Northern Oil and Gas, Inc.

Incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 10-Q filed with the SEC on May 10, 2019

Securities Purchase and Sale Agreement, dated December 30, 2019, by and among Northern Oil and Gas, Inc.

and Diameter Master Fund LP Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 6, 2020

Purchase and Sale Agreement, dated February 3, 2021, between Northern Oil and Gas, Inc.

and Reliance Marcellus, LLC Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 3, 2021

Restated Certificate of Incorporation of Northern Oil and Gas, Inc.

dated August 24, 2018 Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 27, 2018

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Certificate of Amendment to the Restated Certificate of Incorporation of Northern Oil and Gas, Inc.

dated September 18, 2020 Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 24, 2020

By-Laws of Northern Oil and Gas, Inc.

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Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 26, 2019

Certificate of Amendment to the Certificate of Designations of 6.500% Series A Perpetual Cumulative Convertible Preferred Stock of Northern Oil and Gas, Inc., dated January 2, 2020 Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 6, 2020

Certificate of Amendment to the Certificate of Designations of 6.500% Series A Perpetual Cumulative Convertible Preferred Stock of Northern Oil and Gas, Inc., dated January 17, 2020 Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 22, 2020

Description of Northern Oil and Gas, Inc.

Capital Stock Filed herewith

Indenture, dated May 18, 2012, between Northern Oil and Gas, Inc.

and Wilmington Trust, National Association, as trustee (including Form of 8.000% Senior Note due 2020) Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 18, 2012

Indenture, dated May 18, 2015, between Northern Oil and Gas, Inc.

Form of certificate for the 6.500% Series A Perpetual Cumulative Convertible Preferred Stock Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 26, 2019

Indenture, dated May 15, 2018, between Northern Oil and Gas, Inc.

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and Wilmington Trust, National Association, as trustee Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 26, 2019

Amended and Restated Credit Agreement, dated October 5, 2018, among Northern Oil and Gas, Inc., Royal Bank of Canada, as administrative agent, and the lenders from time to time party thereto Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 9, 2018

Corrective Amendment to Amended and Restated Credit Agreement, dated October 31, 2018, by and among Northern Oil and Gas, Inc.

and Royal Bank of Canada Incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 18, 2019

First Amendment to Amended and Restated Credit Agreement, dated December 31, 2018, by and among Northern Oil and Gas, Inc., Royal Bank of Canada, and the Lenders party thereto.

Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 4, 2019

Indenture, dated February 18, 2021, between the Company and Wilmington Trust, National Association, as trustee (including Form of 8.125% Senior Note due 2028) Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 23, 2021

Fourth Supplemental Indenture, dated February 18, 2021, among the Company and Wilmington Trust, National Association, as trustee and collateral agent Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 23, 2021

Letter Agreement, dated January 2, 2015 by and among Robert B.

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and Bahram Akradi Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 24, 2017

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Registration Rights Agreement, dated as of May 15, 2018, among Northern Oil and Gas, Inc.

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Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 1, 2018

Amended and Restated Employment Agreement, dated May 24, 2018, between Northern Oil and Gas, Inc.

and Michael Reger Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 31, 2018

Amended and Restated Employment Agreement, dated July 5, 2018, between Northern Oil and Gas, Inc.

and Michael Reger Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 6, 2018

Employment Agreement, dated May 24, 2018, between Northern Oil and Gas, Inc.

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and Adam Dirlam Incorporated by reference to Exhibit 10.14 to the Registrant’s Current Report on Form 10-Q filed with the SEC on August 9, 2018

Amended and Restated Employment Agreement, dated July 5, 2018, between Northern Oil and Gas, Inc.

and Brandon Elliott Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 6, 2018

Employment Agreement, dated December 17, 2019, between Northern Oil and Gas, Inc.

and Mike Kelly Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 10-Q filed with the SEC on May 11, 2020

Amended and Restated Employment Agreement, dated January 27, 2020, between Northern Oil and Gas, Inc.

and James Evans Filed herewith

Northern Oil and Gas, Inc.

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Incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement filed with the SEC on April 22, 2016

Form of Restricted Stock Award Agreement (Single Trigger) under the Northern Oil and Gas, Inc.

2013 Incentive Plan

Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 10-Q filed with the SEC on August 9, 2013

Form of Restricted Stock Award Agreement (Double Trigger) under the Northern Oil and Gas, Inc.

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Form of Restricted Stock Award Agreement (Performance Based) under the Northern Oil and Gas, Inc.

2013 Incentive Plan

Incorporated by reference to Exhibit 10.15 to the Registrant’s Current Report on Form 10-Q filed with the SEC on August 9, 2018

Form of Non-Qualified Stock Option Agreement for Non-Employee Director under the Northern Oil and Gas, Inc.

2013 Incentive Plan

Incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 3, 2016

2013 Incentive Plan Incorporated by reference to Exhibit 10.15 to the Registrant’s Current Report on Form 10-Q filed with the SEC on August 9, 2018

Northern Oil and Gas, Inc.

2018 Equity Incentive Plan Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 27, 2018

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Form of Restricted Stock Award Agreement (Time-Based Single Trigger) under the Northern Oil and Gas, Inc.

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Incorporated by reference to Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 18, 2019

Purchase Agreement, dated September 21, 2018, by and between Northern Oil and Gas, Inc.

and RBC Capital Markets, LLC, as representative of the initial purchasers named therein Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 25, 2018

Second Amendment to Amended and Restated Credit Agreement, dated January 14, 2019, by and among Northern Oil and Gas, Inc., Royal Bank of Canada, and the Lenders party thereto.

Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 10-Q filed with the SEC on May 10, 2019

Third Amendment to Amended and Restated Credit Agreement, dated April 18, 2019, by and among Northern Oil and Gas, Inc., Royal Bank of Canada, and the Lenders party thereto.

Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 22, 2019

Senior Unsecured Promissory Note, dated July 1, 2019, by and among Northern Oil and Gas, Inc.

and VEN Bakken, LLC Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 2, 2019

Separation and Release Agreement, dated July 31, 2019, by and between Northern Oil and Gas, Inc.

and Michael L.

Reger Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 2, 2019

Land Acquisition Consulting Agreement, dated July 31, 2019, by and between Northern Oil and Gas, Inc.

and Michael Reger Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 2, 2019

Backstop Commitment Agreement, dated October 21, 2019 by and among Northern Oil and Gas, Inc.

and the other signatories thereto Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 22, 2019

Fourth Amendment to Amended and Restated Credit Agreement, dated November 8, 2019, by and among Northern Oil and Gas, Inc., Royal Bank of Canada, and the Lenders party thereto.

Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 12, 2019

Preferred Stock Purchase and Sale Agreement, dated November 21, 2019, by and among Northern Oil and Gas, Inc.

and the other signatories thereto Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 26, 2019

Second Amended and Restated Credit Agreement, dated November 22, 2019, by and among Northern Oil and Gas, Inc., Wells Fargo Bank, National Association, as administrative agent, and the Lenders party thereto Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 26, 2019

Transition Agreement, dated December 17, 2019, by and between Northern Oil and Gas, Inc.

and Brandon Elliott Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 18, 2019

First Amendment to the Second Amended and Restated Credit Agreement, dated July 8, 2020, by and among Northern Oil and Gas, Inc., Wells Fargo Bank, National Association and the Lenders party thereto Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 13, 2020

Second Amendment to the Second Amended and Restated Credit Agreement, dated February 3, 2021, by and among Northern Oil and Gas, Inc.

and Wells Fargo Bank, National Association and the Lenders party thereto Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 3, 2021

Purchase Agreement, dated February 8, 2021, between Northern Oil and Gas, Inc.

and BofA Securities, Inc., as representative of the several initial purchasers listed in Schedule I thereto Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 11, 2021

Exchange Agreement, dated as of February 20, 2020 among Northern Oil and Gas, Inc., TRT Holdings, Inc.

and the other signatories thereto Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 21, 2021

Consent of Independent Registered Public Accounting Firm Deloitte & Touche LLP Filed herewith

Consent of Independent Registered Public Accounting Firm Grant Thornton LLP Filed herewith

Consent of Cawley, Gillespie & Associates, Inc.

Filed herewith

Powers of Attorney Filed herewith (included on signature page)

Powers of Attorney Filed herewith

Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith

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Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith

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* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this report.

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Form 10-K Summary

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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Principal Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints, Nicholas O’Grady and Chad Allen, or either of them, his/her true and lawful attorney-in-fact and agent, acting alone, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection wherewith, with the Commission, granting unto said attorney-in-fact and agent, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all said attorney-in-fact and agent, acting alone, or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated:

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/s/ Chad Allen Chief Financial Officer, Principal Financial & Accounting Officer March 12, 2021

/s/ Bahram Akradi Director March 12, 2020

* Director March 12, 2021

Bahram Akradi

/s/ Jack King Director March 12, 2020

/s/ Robert Grabb Director March 12, 2020

/s/ Lisa Bromiley Director March 12, 2020

* Director March 12, 2021

Lisa Bromiley

/s/ Roy Easley Director March 12, 2020

/s/ Michael Frantz Director March 12, 2020

* Director March 12, 2021

Michael Frantz

/s/ Michael Popejoy Director March 12, 2020

* Director March 12, 2021

Michael Popejoy

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* Director March 12, 2021

Stuart Lasher

* Nicholas O’Grady, by signing his name hereto, does hereby sign this document on behalf of each of the above-named directors of the registrant pursuant to Powers of Attorney duly executed by such persons.

By /s/ Nicholas O’Grady

Nicholas O’Grady

Attorney-in-fact

NORTHERN OIL AND GAS, INC.

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Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm F- 2

Report of Grant Thornton LLP, Independent Registered Public Accounting Firm F- 3

Balance Sheets as of December 31, 2020 and 2019 F- 4

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Notes to the Financial Statements F- 8

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have audited the accompanying balance sheets of Northern Oil and Gas, Inc.

(the “Company”) as of December 31, 2019 and 2018, the related statement of operations, statements of stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2020 and 2019, the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Proved Oil and Natural Gas Properties — Oil and Natural Gas Reserves and Impairment Expense — Refer to Note 2 to the financial statements

Critical Audit Matter Description

The Company follows the full cost method of accounting for crude oil and natural gas operations.

Therefore, the Company’s proved oil and natural gas properties are depleted using the units-of-production method based upon production and estimates of proved reserves and are evaluated for impairment by performing a ceiling test each quarter.

The ceiling test involves a comparison of net capitalized costs to the sum of the present value of the estimated future net cash flows from the Company’s oil and natural gas reserves.

The estimation of the Company’s oil and natural gas reserves and the related future net cash flows requires management to make significant estimates and assumptions since, as a non-operator, the Company has limited visibility into the timing of future production quantities associated with the five-year development plan.

The Company engages a third-party independent reserve engineering firm to fully engineer management’s oil and natural gas reserve quantities using these estimates and assumptions and engineering data.

Changes in these estimates, assumptions, or engineering data could have significant impact on the depletion calculation and proved oil and natural gas properties impairment evaluation.

The proved oil

and natural gas properties balance was $4,393.5 million as of December 31, 2020.

Depletion, depreciation, amortization, and accretion expense was $162.1 million and impairment expense was $1,066.7 million for the year ended December 31, 2020.

Given the significant judgments made by management, particularly relating to the estimates and assumptions required due to limited visibility as a non-operator regarding future production quantities associated with the five-year development plan, performing audit procedures to evaluate the Company’s oil and natural gas reserve quantities and the related future net cash flows required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s significant judgments and assumptions regarding oil and natural gas reserve quantities and the related future net cash flows included the following, among others:

• We tested the operating effectiveness of controls related to the Company’s estimation of oil and natural gas reserve quantities and the related future net cash flows, including controls associated with the five-year development plan.

• We evaluated the reasonableness of the future production quantities associated with management’s five-year development plan by comparing to:

– Historical conversions of proved undeveloped oil and natural gas reserves into proved developed oil and natural gas reserves.

– Internal communications to management and the Board of Directors.

– Authorization and approval for expenditures.

– External information regarding the ability of the operators of the oil and natural gas properties to develop proved undeveloped fields considering current and forecasted liquidity of the operators obtained from publicly available information, level of drilling activity by operators in areas where the Company holds leasehold interests, and length of time required to drill and complete groups of wells.

• We evaluated the experience, qualifications, and objectivity of management’s expert, a third-party independent reserve engineering firm engaged to fully engineer management’s oil and natural gas reserve quantities.

/s/ Deloitte & Touche LLP

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We have served as the Company’s auditor since 2018.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

NORTHERN OIL AND GAS, INC.

Opinion on the financial statements

We have audited the accompanying statements of operations, stockholders’ equity (deficit), and cash flows of Northern Oil and Gas, Inc.

(a Delaware corporation) (the “Company”) for the year ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We served as the Company’s auditor from 2015 to 2018.

Minneapolis, Minnesota

February 23, 2018

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NORTHERN OIL AND GAS, INC.

BALANCE SHEETS

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Total Assets $ 872,089 $ 1,905,465

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities and Stockholders' Equity (Deficit)

Current Liabilities:

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Accrued Interest 8,341 11,615

Debt Exchange Derivative — 18,183

Derivative Instruments 3,078 11,298

Contingent Consideration 493 —

Asset Retirement Obligations 795 554

Other Current Liabilities 1,087 795

Current Portion of Long-term Debt 65,000 —

Total Current Liabilities 182,475 203,477

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Commitments and Contingencies

STOCKHOLDERS’ EQUITY

Stockholders' Equity (Deficit)

Preferred Stock, Par Value $ 0.001 ;

5,000,000 Authorized (12/31/2019 – 1,500,000 Shares Outstanding and 12/31/2018 – No Shares Outstanding)

5,000,000 Authorized

2,218,732 Shares Outstanding at 12/31/2020

1,500,000 Shares Outstanding at 12/31/2019

Common Stock, Par Value $ 0.001 ;

675,000,000 Authorized (12/31/2019 – 406,085,183 Shares Outstanding and 12/31/2018 – 378,333,070 Shares Outstanding)

135,000,000 * Authorized;

45,908,779 Shares Outstanding at 12/31/2020

40,608,518 * Shares Outstanding at 12/31/2019

Additional Paid-In Capital 1,556,602 1,431,438

Retained Deficit ( 1,780,356 ) ( 873,203 )

Total Stockholders’ Equity 558,643 429,865

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,905,465 $ 1,503,645

Total Stockholders’ Equity (Deficit) ( 223,304 ) 558,643

Total Liabilities and Stockholders' Equity (Deficit) $ 872,089 $ 1,905,465

* Adjusted for the 1-for-10 reverse stock split effected on September 18, 2020.

The accompanying notes are an integral part of these financial statements.

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NORTHERN OIL AND GAS, INC.

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Impairment of Other Current Assets — 6,398 —

Total Expenses 416,893 246,296 148,825

Impairment Expense 1,066,668 — —

Total Operating Expenses 1,393,453 416,893 246,296

Income (Loss) From Operations ( 841,243 ) 55,509 432,628

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Write-off of Debt Issuance Costs ( 1,543 ) — —

Loss on Unsettled Interest Rate Derivatives ( 1,019 ) — —

Loss on the Extinguishment of Debt ( 3,718 ) ( 23,187 ) ( 173,430 )

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Financing Expense — ( 1,447 ) ( 884 )

Other Income 158 891 116

Other Income (Expense) ( 12 ) 158 891

Total Other Income (Expense) ( 64,964 ) ( 131,827 ) ( 288,994 )

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Net Income (Loss) $ ( 906,041 ) $ ( 76,318 ) $ 143,689

Cumulative Preferred Stock Dividend ( 15,266 ) ( 1,029 ) —

Net Income (Loss) Attributable to Common Shareholders $ ( 921,307 ) $ ( 77,347 ) $ 143,689

Net Income (Loss) Per Common Share – Basic* $ ( 21.55 ) $ ( 2.00 ) $ 6.08

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Weighted Average Shares Outstanding – Diluted* 42,744,639 38,708,460 23,677,391

* Adjusted for the 1-for-10 reverse stock split effected on September 18, 2020.

The accompanying notes are an integral part of these financial statements.

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NORTHERN OIL AND GAS, INC.

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Unrealized (Gain) Loss on Derivative Instruments ( 38,858 ) 173,214 ( 207,892 )

Legal Settlement — — 2,820

Loss on Debt Exchange Derivative — ( 1,390 ) 598

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Impairment of Other Current Assets — 6,398 —

Impairment Expense 1,066,668 — —

Other ( 234 ) ( 41 ) ( 120 )

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Restricted Stock Surrenders - Tax Obligations ( 439 ) ( 660 ) ( 680 )

Net Cash Provided By Financing Activities 243,088 130,431 141,970

Net Cash Provided (Used) By Financing Activities ( 62,399 ) 243,088 130,431

Net Increase (Decrease) in Cash and Cash Equivalents ( 14,640 ) 13,710 ( 99,825 )

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The accompanying notes are an integral part of these financial statements.

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NORTHERN OIL AND GAS, INC.

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Restricted Stock Surrenders - Tax Obligations ( 26,668 ) — — — ( 680 ) — ( 680 )

Net Loss — — — — — ( 9,194 ) ( 9,194 )

December 31, 2017 66,791,633 67 — — 449,666 ( 940,574 ) ( 490,841 )

Issuance of Common Stock 3,295,302 3 — — — — 3

Restricted Stock Forfeitures ( 910,086 ) ( 1 ) — — — — ( 1 )

Share Based Compensation — — — — 4,362 — 4,362

Restricted Stock Surrenders - Tax Obligations ( 266,683 ) — — — ( 680 ) — ( 680 )

Equity Offerings, Net of Issuance Costs 9,692,602 97 — — 141,577 — 141,674

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December 31, 2019 40,608,518 $ 406 1,500,000 $ 2 $ 1,431,438 $ ( 873,203 ) $ 558,643

Issuance of Common Stock 460,382 2 — — — — 2

Restricted Stock Forfeitures ( 107,071 ) — — — — — —

Share Based Compensation — — — — 4,612 — 4,612

Restricted Stock Surrenders - Tax Obligations ( 39,686 ) — — — ( 438 ) — ( 439 )

Issuance of Preferred Stock, Net of Issuance Costs — — 794,702 1 81,211 — 81,212

Debt Exchange Agreements 4,164,941 34 — — 37,135 — 37,169

Series A Preferred Exchange 526,695 5 ( 75,970 ) — 1,108 ( 1,113 ) —

Acquisition of Oil and Natural Gas Properties 295,000 — — — 1,537 — 1,537

Net Loss — — — — — ( 906,041 ) ( 906,041 )

December 31, 2020 45,908,779 $ 448 2,218,732 $ 2 $ 1,556,602 $ ( 1,780,357 ) $ ( 223,304 )

*Adjusted for the 1-for-10 reverse stock split effected on September 18, 2020.

The accompanying notes are an integral part of these financial statements.

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NOTES TO FINANCIAL STATEMENTS

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The Company’s common stock trades on the NYSE American market under the symbol “NOG”.

Northern’s principal business is crude oil and natural gas exploration, development, and production with operations that primarily target the Bakken and Three Forks formations in the Williston Basin of the United States.

The Company acquires leasehold interests that comprise of non-operated working interests in wells and in drilling projects within its area of operations.

Northern’s principal business is crude oil and natural gas exploration, development, and production with operations that primarily target the Williston and Permian Basins of the United States.

The Company’s primary strategy is investing in non-operated minority working and mineral interests in oil and gas properties in the United States.

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

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In connection with preparing the financial statements for the year ended December 31, 2020, the Company has evaluated subsequent events for potential recognition and disclosure through the date of this filing and determined that there were no subsequent events which required recognition or disclosure in the financial statements through the date of this filing.

Reverse Stock Split

On September 18, 2020, the Company effected a 1-for-10 reverse stock split of its common stock.

Unless otherwise noted, impacted amounts and share information included in the financial statements and notes thereto, and elsewhere in this Form 10-K, have been retroactively adjusted as if the reverse stock split occurred on the first day of the first period presented.

Certain amounts may be slightly different than previously reported due to the settlement of fractional shares as a result of the reverse stock split and rounding.

See Note 5 below for more information regarding the reverse stock split.

Use of Estimates

The preparation of financial statements under GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The most significant estimates relate to proved crude oil and natural gas reserves, estimates relating to certain crude oil and natural gas revenues and expenses, fair value of derivative instruments, fair value of contingent consideration, acquisition date fair values of assets acquired and liabilities assumed, impairment of oil and natural gas properties, asset retirement obligations and deferred income taxes.

The most significant estimates relate to proved crude oil and natural gas reserves, which includes limited control over future development plans as a non-operator, estimates relating to certain crude oil and natural gas revenues and expenses, fair value of derivative instruments, fair value of contingent consideration, acquisition date fair values of assets acquired and liabilities assumed, impairment of oil and natural gas properties, asset retirement obligations and deferred income taxes.

Actual results may differ from those estimates.

Reclassifications

Certain prior period balances in the balance sheets have been reclassified to conform to the current year presentation.

Such reclassifications had no impact on net income (loss), cash flows or stockholders’ equity (deficit) previously reported.

Correction of Presentation

Subsequent to the issuance of the Company’s financial statements as of and for the period ended December 31, 2018, the Company identified an immaterial error in the supplemental footnote disclosure of non-cash investing activities in which a “Change in Prepaid Expenses and Other” was improperly included in the amount of $ 29.4 million.

Accordingly, within the “Supplemental Cash Flow Information” section included in this Note 2 below, the Company has removed the line item previously reported as the amount of “Change in Prepaid Expenses and Other.” The error did not impact the Statement of Cash Flows.

The Company considered the impact of the novel coronavirus 2019 (“COVID-19”) pandemic on the assumptions and estimates used by management in the financial statements for the reporting periods presented.

As a result of significant fluctuations in commodity prices during the year, the Company recognized a material impairment charge during the year ended December 31, 2020 (see Note 3).

Management’s estimates and assumptions were based on historical data and consideration of future market conditions.

Given the uncertainty inherent in any projection, which is heightened by the possibility of unforeseen additional impacts from the COVID-19 pandemic, actual results may differ from the estimates and assumptions used, and conditions may change, which could materially affect amounts reported in the financial statements in the near term.

Cash and Cash Equivalents

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In addition, the Company is subject to Security Investor Protection Corporation (“SIPC”) protection on a vast majority of its financial assets.

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Accounts Receivable

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The Company regularly reviews all aged accounts receivable for collectability and establishes an allowance as necessary for individual balances.

Accounts receivable not expected to be collected within the next twelve months are included within Other Noncurrent Assets, Net on the balance sheets.

Accounts receivable not expected to be collected within the next twelve months are included within Other Noncurrent Assets, Net in the balance sheets.

As of December 31, 2020 and 2019, the allowance for doubtful accounts was $ 3.9 million and $ 4.6 million, respectively.

The amount charged to operations for doubtful accounts was zero , zero and $ 0.7 million for the years ended December 31, 2019, 2018 and 2017, respectively.

The amount charged to operations for doubtful accounts was $ 0.3 million, zero and zero for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020 and 2019, the amount charged against the allowance for doubtful accounts was $ 1.0 million and $ 0.7 million, respectively.

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Total $ 1,716 $ 1,638 $ 1,029

As of December 31, 2019, the Company held leasehold interests in the Williston Basin of the United States on acreage targeting the Bakken and Three Forks formations.

As of December 31, 2020, the Company held leasehold interests primarily in the Williston Basin of the United States on acreage targeting the Bakken and Three Forks formations.

Proceeds from property sales will generally be credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves attributable to these costs.

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In the years ended December 31, 2020, 2019 and 2018, there were no property sales that resulted in a significant alteration.

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Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter.

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Net capitalized costs are limited to the lower of unamortized cost net of deferred income taxes, or the cost center ceiling.

The cost center ceiling is defined as the sum of (a) estimated future net revenues, discounted at 10 % per annum, from proved reserves, based on the trailing twelve-month unweighted average of the first-day-of-the-month price, adjusted for any contract provisions or financial derivatives designated as hedges for accounting purposes, if any, that hedge the Company’s oil and natural gas revenue, and excluding the estimated abandonment costs for properties with asset retirement obligations recorded on the balance sheet, (b) the cost of properties not being amortized, if any, and (c) the lower of cost or market value of unproved properties included in the cost being amortized, including related deferred taxes for differences between the book and tax basis of the oil and natural gas properties.

The cost center ceiling is defined as the sum of (a) estimated future net revenues, discounted at 10 % per annum, from proved reserves, based on the trailing twelve-month unweighted average of the first-day-of-the-month price, adjusted for any contract provisions or financial derivatives designated as hedges for accounting purposes, if any, that hedge the Company’s oil and natural gas revenue, and excluding the estimated abandonment costs for properties with asset retirement obligations recorded in the balance sheet, (b) the cost of properties not being amortized, if any, and (c) the lower of cost or market value of unproved properties included in the cost being amortized, including related deferred taxes for differences between the book and tax basis of the oil and natural gas properties.

If the net book value, including related deferred taxes, exceeds the ceiling, an impairment or non-cash writedown is required.

The Company did not have any ceiling test impairment for the years ended December 31, 2019, 2018 and 2017.

The Company recorded a ceiling test impairment of $ 1,066.7 million for the year ended December 31, 2020.

The Company did no t have any ceiling test impairment for the years ended December 31, 2019 and 2018.

Impairment charges affect the Company’s reported net income but do not reduce the Company’s cash flow.

The Company computes the provision for depletion of oil and natural gas properties using the unit-of-production method based upon production and estimates of proved reserve quantities.

Unproved costs and related carrying costs are excluded from the depletion base until the properties associated with these costs are considered proved.

Unproved costs and related carrying costs are excluded from the depletion base until the properties associated with these costs are considered proved or impaired.

The following table presents depletion and depletion per BOE sold of the Company’s proved oil and natural gas properties for the periods presented:

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The depletion rate is determined by dividing the total unamortized cost base plus future development costs by net equivalent proved reserves at the beginning of the period.

The costs of unproved properties are withheld from the depletion base until such time as they are either developed or abandoned.

The costs of unproved properties are withheld from the depletion base until such time as they are either proved or impaired.

When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion and full cost ceiling calculations.

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The liability is accreted to its present value each period, and the capitalized cost is depreciated consistent with depletion of reserves.

Upon settlement of the liability or the sale of the well, the liability is reversed.

Upon settlement of the liability or the sale of the well, the liability is relieved.

These liability amounts may change because of changes in asset lives, estimated costs of abandonment or legal or statutory remediation requirements.

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Business Combinations

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Revenue Recognition

The Company adopted ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) and the series of related accounting standard updates that followed, on January 1, 2018 using the modified retrospective method of adoption.

Adoption of the ASU did not require an adjustment to the opening balance of equity and did not change the Company’s amount and timing of revenues.

The Company’s revenues are primarily derived from its interests in the sale of oil and natural gas production.

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At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are accrued in trade receivables, net in the balance sheets.

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between the Company’s estimated revenue and actual payments are recorded in the month the payment is received, however, differences have been and are insignificant.

Variances between the Company’s estimated revenue and actual payments are recorded in the month the payment is received, however, differences have been and are insignificant.

Accordingly, the variable consideration is not constrained.

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However, for the years ended December 31, 2020, 2019 and 2018, the Company’s natural gas production was in balance, meaning its cumulative portion of natural gas production taken and sold from wells in which it has an interest equaled its entitled interest in natural gas production from those wells.

The Company’s disaggregated revenue has two revenue sources, which are oil sales and natural gas and NGL sales, and the Company only operates in one geographic area, the Williston Basin in the United States, primarily in North Dakota and Montana.

The Company’s disaggregated revenue has two revenue sources, which are oil sales and natural gas and NGL sales, and substantially all of the Company’s revenue comes from one geographic area, the Williston Basin in the United States, primarily in North Dakota and Montana.

Oil sales for the years ended December 31, 2020, 2019 and 2018 were $ 305.2 million, $ 574.6 million and $ 450.1 million, respectively.

Natural gas and NGL sales for the years ended December 31, 2020, 2019 and 2018 were $ 18.8 million, $ 26.6 million and $ 43.8 million, respectively.

Concentrations of Market and Credit Risk

Concentrations of Market, Credit Risk and Other Risks

The future results of the Company’s crude oil and natural gas operations will be affected by the market prices of crude oil and natural gas.

The availability of a ready market for crude oil and natural gas products in the future will depend on numerous factors beyond the control of the Company, including weather, imports, marketing of competitive fuels, proximity and capacity of crude oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of crude oil, natural gas and liquid products, the regulatory environment, the economic environment, and other regional and political events, none of which can be predicted with certainty.

The availability of a ready market for crude oil and natural gas products in the future will depend on numerous factors beyond the control of the Company, including weather, imports, marketing of competitive fuels, proximity and capacity of crude oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of crude oil, natural gas and liquid products, economic disruptions resulting from the COVID-19 pandemic, the regulatory environment, the economic environment, and other regional and political events, none of which can be predicted with certainty.

The Company operates in the exploration, development and production sector of the crude oil and natural gas industry.

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While certain of these customers, as well as third-party operators of the wells, are affected by periodic downturns in the economy in general or in their specific segment of the crude oil or natural gas industry, the Company believes that its level of credit-related losses due to such economic fluctuations have been immaterial.

As a non-operator, 100% of the Company’s wells are operated by third-party operating partners.

As a result, the Company is highly dependent on the success of these third-party operators.

If they are not successful in the development, exploitation, production and exploration activities relating to the Company’s leasehold interests, or are unable or unwilling to perform, the Company’s financial condition and results of operation could be adversely affected.

These risks are heightened in the current low commodity price environment, which may present significant challenges to these third-party operators.

The Company’s third-party operators will make decisions in connection with their operations that may not be in the Company’s best interests,

and the Company may have little or no ability to exercise influence over the operational decisions of its third-party operators.

For the years ended December 31, 2020, 2019 and 2018, the Company’s top four operators made up 49 %, 51 % and 55 %, respectively, of total oil and gas sales.

The Company faces concentration risk due to the fact that substantially all of its oil and natural gas properties are located in the Williston Basin, primarily in North Dakota and Montana.

As a result, the Company is disproportionately exposed to risks affecting this geographic area of operations.

The Company manages and controls market and counterparty credit risk.

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For stock options, the Company uses the Black-Scholes option valuation model to calculate stock-based compensation at the date of grant.

Option pricing models require the input of highly

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subjective assumptions, including the expected price volatility.

Option pricing models require the input of highly subjective assumptions, including the expected price volatility.

Changes in these assumptions can materially affect the fair value estimate.

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The Company estimates for each interim reporting period the effective tax rate expected for the full fiscal year and uses that estimated rate in providing for income taxes on a current year-to-date basis.

The Company’s only taxing jurisdiction is the United States (federal and state).

The Company’s only taxing jurisdictions is the United States (federal and state).

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.

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The Company follows the provisions of FASB ASC 815, “Derivatives and Hedging” as amended.

It requires that all derivative instruments be recognized as assets or liabilities on the balance sheet, measured at fair value and marked-to-market at the end of each period.

It requires that all derivative instruments be recognized as assets or liabilities in the balance sheet, measured at fair value and marked-to-market at the end of each period.

Any realized gains and losses on settled derivatives, as well as mark-to-market gains or losses, are aggregated and recorded to gain (loss) on derivative instruments, net on the statements of operations.

See Note 12 for a description of the derivative contracts into which the Company has entered.

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Long-lived assets to be held and used are required to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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Net Income (Loss) Per Common Share

Basic earnings per share (“EPS”) are computed by dividing net income (loss) available to common stockholders (the numerator) by the weighted average number of common shares outstanding for the period (the denominator).

Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period.

Basic earnings per share (“EPS”) are computed by dividing net income (loss) attributable to common stockholders (the numerator) by the weighted average number of common shares outstanding for the period (the denominator).

Diluted EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period.

Potential common shares include shares issuable upon exercise of stock options and vesting of restricted stock awards, and shares issuable upon conversion of the Series A Preferred Stock (see Note 5).

The number of potential common shares outstanding are calculated using treasury stock or if-converted method.

The number of potential common shares outstanding are calculated using the treasury stock or if-converted method.

In those reporting periods in which the Company has reported net income available to common stockholders, anti-dilutive shares generally are comprised of the restricted stock that has average unrecognized stock compensation expense greater than the average stock price.

In those reporting periods in which the Company has a net loss, anti-dilutive shares are comprised of the impact of those number of shares that would have been dilutive had the Company had net income plus the number of common stock equivalents that would be anti-dilutive had the company had net income.

Restricted stock awards are excluded from the calculation of basic weighted average common shares outstanding until they vest.

For restricted stock awards that vest based on achievement of performance and/or market conditions, the number of contingently issuable common shares included in diluted weighted-average common shares outstanding is based on the number of common shares, if any, that would be issuable under the terms of the arrangement if the end of the reporting period were the end of the contingency period, assuming the result would be dilutive.

Supplemental Cash Flow Information

The following reflects the Company’s supplemental cash flow information for the years ended December 31, 2020, 2019 and 2018 :

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(In thousands) 2020 2019 2018

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Issuance of Preferred Stock in Exchange for 8.5 % Second Lien Notes due 2023

81,212 75,000 —

Debt Exchange Derivative Liability - fair value at issuance date — — 19,354

Issuance of 8.50 % Second Lien Notes due 2023 - PIK Interest

Issuance of Common Stock for 2L Notes Repurchase 37,169 — —

Issuance of Common Stock for Preferred Stock Exchange 1,113 — —

Debt Exchange Derivative Liability Settlements — 15,749 —

Contingent Considerations Settlements 17,822 — —

Contingent Consideration Settlements — 17,822 —

8.00 % Unsecured Senior Notes due 2020 - carrying value

— — ( 590,041 )

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New Accounting Pronouncements

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If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2016-02, Leases (“ASU 2016-02”).

The objective of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements.

FASB subsequently issued various ASUs which provided additional implementation guidance, and these ASUs collectively make up FASB ASC Topic 842 – Leases (“ASC 842”).

ASC 842 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

The standard permits retrospective application through recognition of a cumulative-effect adjustment at the beginning of either the earliest reporting period presented or the period of adoption.

ASC 842 does not apply to leases used in the exploration or use of minerals, oil, natural gas, or other similar non-regenerative resources.

The Company adopted ASC 842 effective January 1, 2019 using the modified retrospective method as of the adoption date.

The Company has completed the assessment of its existing accounting policies and enhancement of its internal controls.

The standard did not have a material impact on the Company’s condensed balance sheets, statement of operations or cash flows.

In June 2016 FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

This standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The standard will replace the currently required incurred loss approach with an expected loss model for instruments measured at amortized cost.

The standard is effective for interim and annual periods beginning after December 15, 2019 and shall be applied using a modified retrospective approach resulting in a cumulative effect adjustment to retained earnings upon adoption.

The Company is finalizing its evaluation of the new standard and does not expect it to have a material impact on its financial statements.

In August 2018, the FASB issued new guidance in ASC 820, Fair Value Measurement, to modify disclosure requirements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326), Measurement of credit losses on financial instruments, which requires a company immediately recognize management’s current estimated credit losses (“CECL”) for all financial instruments that are not accounted for at fair value through net income.

Previously, credit losses on financial assets were only required to be recognized when they were incurred.

The Company adopted ASU 2016-13 on January 1, 2020.

The guidance did not have a significant impact on the financial statements or notes accompanying the financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), to modify disclosure requirements.

The amendments in this ASU remove, modify, and add certain disclosure requirements as a part of the disclosure framework project, which primarily focus on improving the effectiveness of disclosures in the notes to the financial statements.

The guidance is effective for annual periods beginning after December 31, 2019, and interim periods within those annual periods.

The Company is currently assessing the impact of the guidance, however it does not expect any impact of this new guidance on its financial statements to be material.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as separate entity financial statements and interim recognition of enactment of tax laws or rate changes.

The Company adopted ASU 2018-13 on January 1, 2020.

The guidance did not have a significant impact on the financial statements or notes accompanying the financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as separate entity financial statements and interim recognition of enactment of tax laws or rate changes.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim reporting periods within those years.

The Company is currently evaluating the effect of ASU 2019-12, but does not expect the adoption of this guidance to have a material impact on its financial position, cash flows or result of operations.

The Company adopted the new standard on January 1, 2021 on a prospective basis, which did not have a material impact on its financial position, results of operations, or cash flows.

NOTE 3 CRUDE OIL AND NATURAL GAS PROPERTIES

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2020 Acquisitions

During 2020, the Company acquired oil and natural gas properties, through a number of independent transactions, for a total of $ 21.6 million, excluding the associated development costs.

2019 Acquisitions

During 2019, excluding the VEN Bakken Acquisition described below, the Company acquired oil and natural gas properties through a number of independent transactions for a total of $ 53.4 million.

This amount includes $ 22.6 million of development costs that occurred prior to the closings of the acquisitions.

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VEN Bakken Acquisition

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The VEN Bakken Acquisition was completed pursuant to the purchase and sale agreement between the Company and VEN Bakken, dated as of April 18, 2019.

The total estimated consideration paid by the Company was $ 315.9 million, consisting of (i) $ 175.5 million in cash, (ii) 5,602,147 shares of Company common stock valued at $ 11.7 million, based on the $ 2.09 per share closing price of Company common stock on the closing date of the acquisition and ( iii) $ 128.7 million of value attributable to a 6.0 % unsecured promissory note due July 1, 2022 issued by the Company to VEN Bakken in the aggregate principal amount of $ 130.0 million (the “Unsecured VEN Bakken Note”) .

The results of operations from the July 1, 2019 closing date through December 31, 2019, represented approximately $ 54.1 million of revenue and $ 16.1 million of income from operations.

Th e Company incurred $ 1.8 million o f transactions costs in connection with the acquisition, which are included in general and administrative expense in the condensed statement of operations.

The total estimated consideration paid by the Company was $ 315.3 million, consisting of (i) $ 174.9 million in cash, (ii) shares of Company common stock valued at $ 11.7 million, and ( iii) $ 128.7 million of value attributable to a 6.0 % unsecured promissory note due July 1, 2022 issued by the Company to VEN Bakken in the aggregate principal amount of $ 130.0 million (the “Unsecured VEN Bakken Note”) .

Th e Company incurred $ 1.8 million o f transactions costs in connection with the acquisition, which are included in general and administrative expense in the statement of operations.

The following table reflects the fair values of the net assets and liabilities as of the date of acquisition:

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Pro Forma Information

The following summarized unaudited pro forma statement of operations information for the years ended December 31, 2019 and 2018 assumes that the VEN Bakken Acquisition, W Energy Acquisition and Pivotal Acquisition each occurred as of January 1, 2018.

The Company prepared the following summarized unaudited pro forma financial results for comparative purposes only.

The summarized unaudited pro forma information may not be indicative of the results that would have occurred had the Company completed these acquisitions on the dates indicated, or that would be attained in the future.

Year Ended December 31,

(In thousands) 2019 2018

Revenues $ 500,728 $ 879,925

Net Income $ ( 95,812 ) $ 144,279

2018 Acquisitions

During 2018, excluding the W Energy, Pivotal and Salt Creek acquisitions described in more detail below, the Company acquired leasehold interests covering approximately 10,932 net acres.

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W Energy Acquisition

On July 27, 2018, the Company entered into a purchase and sale agreement, which was subsequently amended on September 25, 2018 (as amended, the “W Energy Purchase Agreement”), with WR Operating LLC (“W Energy”), to acquire, effective as of July 1, 2018, approximately 27.2 net producing wells and 5.9 net wells in progress, as well as approximately 10,633 net acres in North Dakota (the “W Energy Acquisition”).

On October 1, 2018, the Company closed on the acquisition for total estimated consideration of $ 341.6 million, consisting of (i) $ 97.8 million in cash (which reflects the $ 117.1 million in cash consideration under the W Energy Purchase Agreement, less $ 2.2 million of working capital adjustments made at closing and $ 17.0 million of additional estimated post-closing working capital adjustments), (ii) 51,476,961 shares of Company common stock valued at $ 220.8 million, based on the $ 4.29 per share closing price of Company common stock on the closing date of the acquisition, and (iii) $ 23.0 million in value attributable to potential additional contingent consideration in the future (described in more detail below).

No material transaction costs were incurred in connection with this acquisition.

The following table reflects the fair values of the net assets and liabilities as of the date of acquisition:

(In thousands)

Fair value of net assets:

Proved oil and natural gas properties $ 341,633

Asset retirement cost 939

Total assets acquired 342,572

Asset retirement obligations ( 939 )

Net assets acquired $ 341,633

Fair value of consideration paid for net assets:

Cash consideration $ 97,838

Issuance of common stock ( 51.5 million shares at $ 4.29 per share)

Contingent consideration 22,959

Total fair value of consideration transferred $ 341,633

A contingent consideration liability arising from potential additional consideration in connection with the W Energy Acquisition has been recognized at its fair value.

The amount of additional contingent consideration payable by the Company, if any, was dependent upon the performance of the Company’s share price over a thirteen month period ending with October 2019.

The acquisition date fair value of the potential additional consideration, totaling $ 23.0 million, was recorded within contingent consideration liabilities on the Company’s balance sheets.

Changes in the fair value of the liability (that were not accounted for as revisions of the acquisition date fair value) were recorded in other income (expense) on the Company’s statement of operations.

As of December 31, 2019, there was no remaining contingent consideration liability associated with the W Energy Acquisition.

Pivotal Acquisition

On July 17, 2018, the Company entered into purchase and sale agreements with Pivotal Williston Basin, LP and Pivotal Williston Basin II, LP, to acquire approximately 20.8 net producing wells and 2.2 net wells in process, as well as approximately 444 net acres in North Dakota (the “Pivotal Acquisition”).

On September 17, 2018, the Company closed on the acquisition for total estimated consideration of $ 146.1 million, consisting of (i) $ 48.2 million in cash (which reflects the $ 68.4 million of aggregate cash consideration provided for in the purchase agreements, less $ 7.8 million of working capital adjustments made at closing and $ 12.4 million of additional estimated post-closing working capital adjustments), (ii) 25,753,578 shares of the Company’s common stock valued at $ 88.6 million, based on the $ 3.44 per share closing price of the Company’s common stock on the closing date of the acquisition, and (iii) $ 9.4 million in value attributable to potential additional contingent consideration (described in more detail below).

No material transaction costs were incurred in connection with this acquisition.

The following table reflects fair values of the net assets and liabilities as of the date of acquisition:

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(In thousands)

Fair value of net assets:

Proved oil and natural gas properties $ 146,134

Asset retirement cost $ 644

Total assets acquired $ 146,778

Asset retirement obligations $ ( 644 )

Net assets acquired $ 146,134

Fair value of consideration paid for net assets:

Cash consideration $ 48,189

Issuance of common stock ( 25.8 million shares at $ 3.44 per share)

Contingent consideration $ 9,353

Total fair value of consideration transferred $ 146,134

A contingent consideration liability arising from potential additional consideration in connection with the Pivotal Acquisition has been recognized at its fair value.

The acquisition date fair value of the potential additional consideration, tot alin g $ 9.4 million, was recorded within contingent consideration liabilities on the Company’s balance sheets.

As of December 31, 2019, there was no remaining contingent consideration liability associated with the Pivotal Acquisition.

Salt Creek Acquisition

On April 25, 2018, the Company entered into a purchase and sale agreement with Salt Creek Oil and Gas, LLC, to acquire 64 gross, 5.5 net producing (PDP) wells, 31 gross, 1.5 net drilling and completing (PDNP) wells and 1,319 net acres located in McKenzie and Mountrail counties of North Dakota.

On June 4, 2018, the Company closed the transaction for consideration of $ 60.0 million which is comprised of $ 44.7 million of cash consideration and $ 15.2 million of common stock consideration.

No material transaction costs were incurred in connection with this acquisition.

The following table reflects the fair values of the net assets and liabilities as of the date of acquisition:

(In thousands)

Fair value of net assets:

Proved oil and natural gas properties $ 59,978

Asset retirement cost 154

Total assets acquired 60,132

Asset retirement obligations ( 154 )

Net assets acquired $ 59,978

Fair value of consideration paid for net assets:

Cash consideration $ 44,738

Issuance of common stock ( 6.0 million shares at $ 2.54 per share)

Total fair value of consideration transferred $ 59,978

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Pro Forma Information

The following summarized unaudited pro forma statement of operations information for the years ended December 31, 2018 and 2017 assumes that the W Energy Acquisition and Pivotal Acquisition each occurred as of January 1, 2017.

The following summarized unaudited pro forma statement of operations information for the year ended December 31, 2019 assumes that the VEN Bakken Acquisition occurred as of January 1, 2019.

There is no pro forma information included for the year ended December 31, 2020, because the Company’s actual financial results for such period fully reflect this acquisition.

The Company prepared the following summarized unaudited pro forma financial results for comparative purposes only.

The summarized unaudited pro forma information may not be indicative of the results that would have occurred had the Company completed this acquisition on the date indicated, or that would be attained in the future.

Year Ended December 31,

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Revenues $ 500,728

Net Income $ 174,070 $ 283

Net Loss $ ( 95,812 )

From time-to-time the Company may divest assets.

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Total $ 308 $ 4,302 $ 4,487 $ 934

All properties that are not classified as proved properties are considered unproved properties and, thus, the costs associated with such properties are not subject to depletion.

Once a property is classified as proved, all associated acreage and drilling costs are subject to depletion.

The Company historically has acquired unproved properties by purchasing individual or small groups of leases directly from mineral owners, landmen or lease brokers, which leases historically have not been subject to specified drilling projects, and by purchasing lease packages in identified project areas controlled by specific operators.

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During any period in which these factors indicate an impairment, the cumulative costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to depletion and amortization.

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NOTE 4 LONG-TERM DEBT

The Company’s long-term debt consists of the following:

December 31, 2019

(In thousands) Principal Balance Unamortized Net Premium (Discount Debt Issuance Costs, Net Long-term Debt, Net

Second Lien Notes due 2023 $ 417,733 $ 6,031 $ ( 14,283 ) $ 409,482

(In thousands) December 31, 2020 December 31, 2019

Revolving Credit Facility $ 532,000 $ 580,000

580,000 — — 580,000

Unsecured VEN Bakken Note 130,000 ( 1,172 ) ( 149 ) $ 128,679

Total $ 1,127,733 $ 4,860 $ ( 14,432 ) $ 1,118,161

December 31, 2018

Principal Balance Unamortized Net Premium Debt Issuance Costs, Net Long-term Debt, Net

Second Lien Notes due 2023 287,755 417,733

Revolving Credit Facility (1)

140,000 — — $ 140,000

Total $ 835,140 $ 13,237 $ ( 18,174 ) $ 830,203

Unsecured VEN Bakken Note 130,000 130,000

Total principal 949,755 1,127,733

Unamortized debt discounts and premiums 2,041 4,860

Unamortized debt issuance costs (1) ( 6,953 ) ( 14,432 )

Total debt 944,843 1,118,161

Less current portion of long-term debt ( 65,000 ) —

Total long-term debt $ 879,843 $ 1,118,161

_____________________

(1) Debt issuance costs related to the Company’s revolving credit facility of $ 9.8 million and $ 5.1 million as of December 31, 2019 and 2018, are recorded in “Other Noncurrent Assets, Net” on the balance sheets.

November 2019 Refinancing Transactions

During November 2019, the Company completed a series of refinancing transactions related to its debt arrangements, which are summarized as follows (with additional detail included below):

• Amended and restated the Company’s Revolving Credit Facility (defined below), with various changes including an increase in the borrowing base from $ 425.0 million to $ 800.0 million.

• Completed a cash tender offer to redeem and repay $ 200.0 million in principal amount of Second Lien Notes (defined below) for $ 212.0 million in cash, which was funded with borrowings under the Revolving Credit Facility and cash proceeds from the issuance of 750,000 shares of Series A Preferred Stock having an aggregate liquidation preference of $ 75.0 million (see Note 6 below).

• Redeemed and repaid $ 70.8 million of Second Lien Notes in exchange for the issuance of an additional 750,000 shares of Series A Preferred Stock having an aggregate liquidation preference of $ 75.0 million.

• Completed a consent solicitation to amend certain terms of our Second Lien Notes, including, among various other changes, to (a) allow for the expansion of the Revolving Credit Facility by increasing the Company’s debt capacity under the debt covenant, (b) remove certain restrictive covenants, and (c) provide for a customary restricted payments builder basket and other mechanics to facilitate the Company’s allocation of capital.

(1) Debt issuance costs related to the Company’s revolving credit facility of $ 6.5 million and $ 9.8 million as of December 31, 2020 and 2019, are recorded in “Other Noncurrent Assets, Net” in the balance sheets.

During the years ended December 31, 2020 and 2019, the Company recorded a $ 1.5 million and zero write-off of debt issuance costs as a result of the reduction in the borrowing base under the Revolving Credit Facility.

Revolving Credit Facility

On November 22, 2019, the Company entered into a Second Amended and Restated Credit Agreement (the “Revolving Credit Facility”) with Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto, which amended and restated the Company’s prior revolving credit facility that was entered into on October 5, 2018.

The Revolving Credit Facility is scheduled to mature on November 22, 2024, provided that the maturity date shall be 91 days prior to the scheduled maturity date of the earlier of (i) the Second Lien Notes (defined below) if any Second Lien Notes remain outstanding on such date or (ii) the Unsecured VEN Bakken Note if any principal amount of the Unsecured VEN Bakken Note remains outstanding on such date.

outstanding on such date or (ii) the Unsecured VEN Bakken Note if any principal amount of the Unsecured VEN Bakken Note remains outstanding on such date.

The Revolving Credit Facility is subject to a borrowing base with maximum loan value to be assigned to the proved reserves attributable to the Company and its subsidiaries’ (if any) oil and gas properties.

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The April 1st scheduled redetermination shall be based on a January 1st engineering report audited by a third party (reasonably acceptable by the Agent).

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At the Company’s option, borrowings under the Revolving Credit Facility shall bear interest at the base rate or LIBOR plus an applicable margin.

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The applicable margin for base rate loans ranges from 100 to 200 basis points, and the applicable margin for LIBOR loans ranges from 200 to 300 basis points, in each case depending on the percentage of the borrowing base utilized.

The Revolving Credit Facility contains negative covenants that limit the Company’s ability, among other things, to pay dividends, incur additional indebtedness, sell assets, enter into certain derivatives contracts, change the nature of its business or operations, merge, consolidate, or make certain types of investments.

The Revolving Credit Facility contains negative covenants that limit the Company’s ability, among other things, to pay dividends, incur additional indebtedness, maintain excess cash liquidity, sell assets, enter into certain derivatives contracts, change the nature of its business or operations, merge, consolidate, or make certain types of investments.

In addition, the Revolving Credit Facility requires that the Company comply with the following financial covenants:

(i) as of the date of determination, the ratio of total net debt to EBITDAX (as defined in the Revolving Credit Facility) shall be no more than 3.50 to 1.00, measured on a pro forma rolling four quarter basis, and (ii) the current ratio (defined as consolidated current assets including unused amounts of the total commitments, but excluding non-cash assets under FASB ASC 815, divided by consolidated current liabilities excluding current non-cash obligations under FASB ASC 815 and current maturities under the Revolving Credit Facility, the Second Lien Notes and the Unsecured VEN Bakken Note) shall not be less than 1.00 to 1.00 .

The Company is in compliance with these financial covenants as of December 31, 2020.

The Company’s obligations under the Revolving Credit Facility may be accelerated, subject to customary grace and cure periods, upon the occurrence of certain Events of Default (as defined in the Revolving Credit Facility).

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In May 2018, the Company issued 8.500 % senior secured second lien notes due 2023 (the “Second Lien Notes”) with an aggregate principal amount of $ 344.3 million (the “Original 2L Notes”) in exchange for certain previously outstanding 8.000 % senior unsecured notes due June 1, 2020 (the “Unsecured Notes”).

In October 2018, the Company issued an additional $ 350.0 million aggregate principal amount of Second Lien Notes (the “Additional 2L Notes”), the proceeds of which were used in connection with the retirement of the Company’s prior term loan credit agreement with TPG Specialty Lending, Inc., as administrative agent, and the lenders from time to time party thereto (the “TPG Term Loan Facility”).

In addition, as of and through December 31, 2020, the Company had issued another $ 4.3 million of additional aggregate principal amount of Second Lien Notes pursuant to the interest payment-in-kind provisions thereof.

In November 2019, the Company completed a cash tender offer to redeem and repay $ 200.0 million in principal amount of Second Lien Notes for $ 212.0 million in cash.

Also in November 2019, the Company redeemed and repaid $ 70.8 million in principal amount of Second Lien Notes in exchange for shares of Series A Preferred Stock.

In addition, during the year ended December 31, 2019, the Company repurchased and retired 10.1 million in aggregate principal amount of Second Lien Notes in open market transactions.

During 2019, the Company repurchased and retired $ 10.1 million in aggregate principal amount of Second Lien Notes in open market transactions.

In November 2019, the Company completed a cash tender offer to redeem and repay $ 200.0 million principal amount of Second Lien Notes.

Also in November 2019, the Company redeemed and repaid $ 70.8 million principal amount of Second Lien Notes in exchange for shares of Series A Preferred Stock.

During the year ended December 31, 2020, the Company repurchased and retired $ 13.5 million in aggregate principal amount of Second Lien Notes in open market transactions for cash.

During the year ended December 31, 2020, the Company also repurchased and retired $ 116.5 million in aggregate principal amount of Second Lien Notes pursuant to a number of independent, separately negotiated agreements in exchange for aggregate consideration consisting primarily of shares of Series A Preferred Stock and common stock.

The terms of the Second Lien Notes include those stated in the Indenture entered into on May 15, 2018 by the Company and Wilmington Trust, National Association, as trustee (the “Original 2L Indenture”), as amended by the First Supplemental Indenture, dated September 18, 2018 (the “First Supplemental 2L Indenture”), the Second Supplemental Indenture, dated October 5, 2018 (the “Second Supplemental 2L Indenture”), and the Third Supplemental Indenture, dated November 22, 2019 (the “Third Supplemental 2L Indenture” and, together with the Original 2L Indenture, the First Supplemental 2L Indenture, and the Second Supplemental 2L Indenture, the “2L Indenture”).

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The Second Lien Notes will mature on May 15, 2023.

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Interest on the Second Lien Notes accrues at a rate of 8.500 % per annum payable in cash quarterly in arrears on the first day of each calendar quarter.

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PIK Interest of 3.00 % per annum will accrue if the Company’s total debt to EBITDAX ratio is greater than or equal to 3.00 to 1.00.

No PIK has accrued since March 31, 2019.

Default interest will be payable in cash on demand at the then applicable interest rate plus 3.00 % per annum.

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(i) from and after May 15, 2018 until May 15, 2021, 104 %, (ii) on and after May 15, 2021 until May 15, 2022, 102 %, and (iii) on and after May 15, 2022, 100 %.

provided that any redemption of Second Lien Notes (or the acceleration of Second Lien Notes) prior to May 15, 2020 shall also be accompanied by a make whole premium.

Subject to the terms of an intercreditor agreement, the Company is also required to offer to prepay the Second Lien Notes with 100 % of the net cash proceeds of asset sales, casualty events and condemnations in excess of $ 20.0 million not required to be used to pay down the loans under the Revolving Credit Facility, subject to customary exclusions and reinvestment provisions.

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Events of Default include customary events for a capital markets debt financing of this type, including, without limitation, payment defaults, the inaccuracy of representations and warranties, defaults in the performance of affirmative or negative covenants, defaults on other indebtedness of the Company or its subsidiaries, bankruptcy or related defaults, defaults related to judgments and the occurrence of a Change of Control (as such term is defined in the 2L Indenture).

See Note 14 below regarding refinancing transactions that occurred subsequent to December 31, 2020.

Unsecured VEN Bakken Note

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In addition, the Unsecured VEN Bakken Note is subject to a mandatory prepayment offer in connection with a change of control.

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Overview of 2018 Refinancing Transactions

During 2018, the Company completed various refinancing transactions related to its debt arrangements, which are summarized as follows:

• In May 2018, closed an exchange transaction (the “May 2018 Exchange”) whereby the Company issued $ 344.3 million of Second Lien Notes and 103.2 million shares of common stock in exchange for the redemption of $ 496.7 million in principal amount of the Company’s previously outstanding 8.000 % senior unsecured notes due 2020 (the “Unsecured Notes”).

• During the second and third quarters of 2018, closed ten additional independent, separately negotiated exchange agreements with holders of the Company’s Unsecured Notes (the “Additional 2018 Exchanges”), whereby the Company issued shares of common stock in exchange for the redemption of $ 100.5 million in total principal amount of Unsecured Notes.

• In October 2018, (i) entered into the Revolving Credit Facility (which was subsequently amended and restated in November 2019), (ii) issued an additional $ 350.0 million aggregate principal amount of Second Lien Notes, (iii) repaid all $ 360.0 million in loans under, and retired in full, the Company’s prior TPG Term Loan Facility, and (iv) redeemed and repaid in full all remaining outstanding Unsecured Notes, which consisted of $ 102.8 million in principal amount as of the final redemption date.

See Note 14 below regarding refinancing transactions that occurred subsequent to December 31, 2020.

NOTE 5 COMMON AND PREFERRED STOCK

The Company is authorized to issue up to 675,000,000 shares of common stock, par value $ 0.001 per share.

On September 18, 2020, the Company effected a 1-for-10 reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”).

The Company’s common stock began trading on a split‑adjusted basis when the market opened on September 21, 2020.

As a result of the Reverse Stock Split, every ten shares of the Company’s issued and outstanding common stock automatically converted into one share of common stock, without any change in the par value per share.

A total of 44,663,990 shares of common stock were issued and outstanding immediately after the Reverse Stock Split became effective on September 18, 2020.

No fractional shares were outstanding following the Reverse Stock Split.

In connection with the Reverse Stock Split, the number of authorized shares of the Company’s common stock was reduced to 135,000,000 shares of common stock, par value $ 0.001 per share.

As of December 31, 2020 and 2019, the Company had 45,908,779 and 40,608,518 shares of common stock issued and outstanding, respectively.

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The Company is authorized to issue up to 5,000,000 shares of preferred stock, par value $ 0.001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors.

As of December 31, 2019 and 2018, the Company had 1,500,000 and zero shares of preferred stock issued and outstanding, respectively, all of which were shares of 6.500 % Series A Perpetual Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”).

As of December 31, 2020 and 2019, the Company had 2,218,732 and 1,500,000 shares of preferred stock issued and outstanding, respectively, all of which were shares of 6.500 % Series A Perpetual Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”).

The terms of the Series A Preferred Stock are set forth in the Certificate of Designations for the Series A Preferred Stock (the “Certificate of Designations”), as originally filed with the Delaware Secretary of State on November 22, 2019, and as amended thereafter.

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Holders of the Series A Preferred Stock are entitled to receive, when, as and if declared by the board of directors of the Company, cumulative dividends in cash, at a rate of 6.500 % per annum on the sum of (i) the $ 100 liquidation preference per share of Series A Preferred Stock (the “Liquidation Preference”) and (ii) all accumulated and unpaid dividends (if any), payable semi-annually in arrears on May 15 and November 15 of each year, commencing on May 15, 2020.

As of December 31, 2019, there were $ 1.0 million of undeclared accumulated dividends on the Series A Preferred Stock.

As of December 31, 2020, no dividends had been declared or paid, and there were $ 16.3 million of undeclared accumulated dividends on the Series A Preferred Stock.

The Reverse Stock Split did not affect the number of authorized or issued and outstanding shares of the Company’s preferred stock, nor the liquidation per share preference.

As a result of the Reverse Stock Split and per the terms of the Certificate of Designations, the conversion rate for the Company’s outstanding Series A Preferred Stock was automatically decreased to 4.363 shares of common stock for each share of Series A Preferred Stock (previously it was 43.63 shares of common stock).

The effect of the Reverse Stock Split resulted in the Company recalculating its historical, basic and diluted EPS to reflect the 1-for-10 reverse stock split, effective September 18, 2020.

The Series A Preferred Stock is convertible at the holders’ option (an “Optional Conversion”) into common stock at a conversion rate set forth in the Certificate of Designations, subject to customary adjustments as provided for therein.

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The occurrence of any Optional Conversion or Mandatory Conversion is subject to various terms and limitations set forth in the Certificate of Designations.

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The Certificate of Designations also sets forth additional information relating to the payment of dividends, voting, conversion rights, consent rights, liquidation rights, the ranking of the Series A Preferred Stock in comparison with the Company’s other securities, and other matters.

2019 Activity

Preferred Stock

In November 2019, the Company issued an aggregate of 1,500,000 shares of Series A Preferred Stock.

Of these shares, 750,000 shares of Series A Preferred Stock were issued in exchange for $ 70.8 million in aggregate principal amount of Second Lien Notes, and 750,000 shares of Series A Preferred Stock were issued for an aggregate cash purchase price of $ 75.0 million (before fees and expenses).

In July 2019, the Company issued 5.6 million shares of common stock as a part of the consideration for the VEN Bakken Acquisition (see Note 3).

In 2019, the Company elected to issue 10.2 million shares of common stock to satisfy contingent consideration owed in connection with the Pivotal Acquisition (see Note 3).

In 2019, the Company elected to issue 7.6 million shares of common stock to satisfy contingent consideration owed in connection with the W Energy Acquisition (see Note 3).

In 2019, the Company elected to issue 7.2 million shares of common stock to satisfy obligations owed in connection with the debt exchange derivative liabilities (see Note 11) related to the Additional 2018 Exchanges (see Note 4).

2018 Activity

Exchange Transactions

In May 2018, the Company issued 103.2 million shares of common stock at closing of the May 2018 Exchange (see Note 4).

In 2018, the Company issued 32.8 million shares of common stock as consideration in connection with the Additional 2018 Exchanges (see Note 4).

Equity Offerings

On April 10, 2018, the Company completed an underwritten public offering of common stock (the “Public Offering”) pursuant to which it issued 58.7 million shares of common stock and received net proceeds of $ 84.5 million after underwriting discounts, commissions, and offering expenses.

On April 16, 2018, the underwriters exercised their option to purchase an additional 3.6 million shares and the Company received additional net proceeds of $ 5.2 million after underwriting discounts.

In May 2018, the Company issued 34.7 million shares to various investors through subscription agreements for net proceeds of $ 52.0 million.

In June 2018, the Company issued 6.0 million shares of common stock as a part of the consideration for the Salt Creek Acquisition (see Note 3).

In September 2018, the Company issued 25.8 million shares of common stock as a part of the consideration for the Pivotal Acquisition (see Note 3).

In October 2018, the Company issued 51.5 million shares of common stock as a part of the consideration for the W Energy Acquisition (see Note 3).

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Stock Repurchase Program

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The stock repurchase program allows the Company to repurchase its shares from time to time in the open market, block transactions and in negotiated transactions.

In 2019, the Company repurchased 5.6 million shares of its common stock under the stock repurchase program at a total cost of $ 16.3 million.

Of the shares repurchased in 2019, 3.7 million were repurchased from W Energy at a total cost of approximately $ 11.1 million, of which $ 1.2 million was recorded as a settlement of contingent consideration liabilities.

In 2018, the Company repurchased 7.4 million shares of its common stock under the stock repurchase program from the Pivotal Entities and W Energy at a cost of approximately $ 23.9 million, of which $ 1.7 million was recorded as a settlement of contingent consideration liabilities.

In 2020, the Company did not repurchase shares of its common stock under the stock repurchase program.

In 2019, the Company repurchased 0.6 million shares of its common stock under the stock repurchase program at a total cost of $ 16.3 million.

Of the shares repurchased in 2019, $ 1.2 million was recorded as a settlement of contingent consideration liabilities in connection with a prior acquisition.

The Company’s accounting policy upon the repurchase of shares is to deduct its par value from common stock and to reflect any excess of cost over par value as a deduction from Additional Paid-in Capital.

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NOTE 6 STOCK-BASED COMPENSATION

The Company’s 2018 Equity Incentive Plan (the “2018 Plan”), which replaced the Company’s prior 2013 Incentive Plan (the “2013 Plan”), authorized 15,000,000 shares for grant under the 2018 Plan, plus the 769,775 shares remaining available for future grants under the 2013 Plan on the date the stockholders approved the 2018 Plan.

The Company maintains its 2018 Equity Incentive Plan (the “2018 Plan”), which replaced the Company’s prior 2013 Incentive Plan (the “2013 Plan”), for making equity-based awards to employees, directors and other eligible persons.

No future awards will be made under the 2013 Plan.

The 2013 Plan continues to govern awards that were made thereunder, which remain in effect pursuant to their terms.

As of December 31, 2019 there were 12.6 million shares available for future awards under the 2018 Plan.

As of December 31, 2020 there were 908,052 shares available for future awards under the 2018 Plan.

In connection with the Reverse Stock Split (see Note 5), the Company reduced the number of shares of common stock available for issuance under the Company’s equity incentive plans in proportion to the Reverse Stock Split ratio of 1-for-10.

The Reverse Stock Split also reduced the number of shares of common stock issuable upon the vesting of its RSAs in proportion to the Reverse Stock Split ratio of 1-for-10 and caused a proportionate increase in share-based performance criteria applicable to such awards.

The Reverse Stock Split has no impact on Net Income (Loss) or total Stockholders’ Equity as of, and for the years ended December 31, 2020, 2019 and 2018.

The Company recognizes the fair value of stock-based compensation awards expected to vest over the requisite service period as a charge against earnings, net of amounts capitalized.

The Company’s stock-based compensation awards are accounted for as equity instruments and are included in the “General and administrative” line item in the unaudited statements of operations.

The Company’s stock-based compensation awards are accounted for as equity instruments and are included in the “General and administrative expenses” line item in the statements of operations.

The Company capitalizes a portion of stock-based compensation for employees who are directly involved in the acquisition of oil and natural gas properties into the full cost pool.

Capitalized stock-based compensation is included in the “Oil and natural gas properties” line item on the unaudited balance sheets.

Capitalized stock-based compensation is included in the “Oil and natural gas properties” line item in the balance sheets.

The 2018 Plan and 2013 Plan award types are summarized as follows:

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The key assumptions used in valuing these market-based awards were as follows:

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Risk-free interest rate 2.57 %

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The weighted average grant date fair value of service-based RSAs was $ 9.15 per share, $ 21.40 per share and $ 26.70 per share for the years ended December 31, 2020, 2019, and 2018, respectively.

During 2018, RSAs subject to service and performance-based vesting conditions were granted to employees and executive officers under the 2013 Plan.

Vesting of these awards was contingent on the Company’s annualized Adjusted EBITDA as compared to specified targets for the fourth quarter of 2018 (“2018 Performance Award I”).

The Company assessed the probability of achieving the performance condition throughout the performance period using its internal financial forecasts.

The weighted average grant date fair value of these service and performance-based RSAs was $ 2.70 per share.

Also during 2018, RSAs subject to service and market-based vesting conditions were granted to employees, executive officers, and directors under the 2013 Plan.

Vesting of these awards was contingent on the Company’s stock price performance relative to specified targets (“2018 Performance Award II”).

The weighted average grant date fair value of these service and market-based RSAs was $ 1.67 per share.

During 2019, RSAs subject to service, market, and performance-based vesting conditions were granted to employees and executive officers under the 2018 Plan.

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The 2019 Performance Award II was modified (solely for executive officers and employees, not for directors) such that the shares subject thereto now vest contingent on the Company’s average closing stock price meeting specified targets for any consecutive twenty trading day period ending on or before December 31, 2020.

The fair value of the modified 2019

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Performance Award II was $ 1.04 per share and was estimated using a Monte Carlo simulation.

The fair value of the modified 2019 Performance Award II was $ 10.40 per share and was estimated using a Monte Carlo simulation.

This resulted in incremental compensation expense of $ 1.1 million as a result of the modification, which will be expensed over the requisite service periods.

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Expected volatility 85.00 % 65.00 % 65.00 %

In December 2018, the compensation committee of the board of directors modified the 2018 Performance Award II such that the shares subject thereto now vest contingent on the Company’s average closing stock price meeting specified targets for any consecutive twenty trading day period ending on or before December 31, 2019.

The grant date fair value of the modified 2018 Performance Award II shares was estimated using Monte Carlo simulations.

This resulted in incremental compensation expense of $ 1.8 million as a result of the modification to both employees’ and directors’ 2018 Performance Award II shares, which will be expensed over the requisite service periods.

The assumptions used to estimate the fair value of the 2018 Performance Award II granted as of the date presented are as follows:

Pre-Modification At Modification

June 1, 2018 December 19, 2018 December 19, 2018

Risk-free interest rate 2.10 % 2.35 % 2.62 %

Dividend yield — % — % — %

Expected volatility 100.00 % 80.00 % 85.00 %

NOTE 7 RELATED PARTY TRANSACTIONS

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(ii) an exchange offer (the “Exchange Offer”) to eligible holders of Second Lien Notes to exchange up to $ 70.8 million in aggregate principal amount of Second Lien Notes for shares of the Company’s newly issued Series A Preferred Stock;

(iii) a related solicitation of consents (the “Consent Solicitation”) to adopt certain proposed amendments to the Second Lien Indenture and (iv) an offer to eligible holders of Second Lien Notes to subscribe to purchase for up to $ 75.0 million in cash additional shares of Series A Preferred Stock (the “Subscription Offer”).

(iii) a related solicitation of consents (the “Consent Solicitation”) to adopt certain proposed amendments to the indenture for the Second Lien Notes, and (iv) an offer to eligible holders of Second Lien Notes to subscribe to purchase for up to $ 75.0 million in cash additional shares of Series A Preferred Stock (the “Subscription Offer”).

Parties affiliated with TRT Holdings, Inc.

(collectively, the “TRT Parties”) held Second Lien Notes and thus had the right to participate in the Tender Offer, Exchange Offer, Consent Solicitation and Subscription Offer on terms identical to the terms offered to all holders of Second Lien Notes.

These transactions closed on November 22, 2019, with the TRT Parties (i) exchanging $ 1.0 million aggregate principal amount of Second Lien Notes for 10,947 shares of Series A Preferred Stock pursuant to the Exchange Offer and (ii) acquiring 10,947 additional shares of Series A Preferred Stock for a purchase price of $ 1.1 million pursuant to the Subscription Offer.

The TRT Parties and their affiliates beneficially owned in excess of 10% of the Company’s outstanding common stock at the time of the transactions.

Share Repurchases

In November 2018, the Company repurchased 2.9 million shares of Company common stock from W Energy Partners LLC (“W Energy”) for cash consideration of $ 10.0 million.

In January 2019, the Company repurchased 3.7 million shares of Company common stock from W Energy for cash consideration of $ 11.1 million.

The repurchased shares were originally issued by the Company as partial consideration for the W Energy Acquisition described in Note 3 above.

On February 20, 2020, the Company entered into an exchange agreement (the “Exchange Agreement”) with the TRT Parties related to the Series A Preferred Stock, as follows.

The certificate of designations of the Series A Preferred Stock, as amended (the “Certificate of Designations”), contains limitations on the ability of the company or holders of Series A Preferred Stock to effect conversions of shares of Series A Preferred Stock for shares of the Company’s common stock if after a conversion a holder would beneficially own shares of common stock in excess of 9.99 % of the aggregate number of shares of the Company’s common stock outstanding immediately after giving pro forma effect to the issuance of shares upon such conversion (the “Conversion Cap”).

As of the date of the Exchange Agreement, the TRT Parties collectively beneficially owned a number of shares of the Company’s common stock in excess of the Conversion Cap.

The Exchange Agreement provides, notwithstanding anything to the contrary in the Certificate of Designations, including the Conversion Cap, for the TRT Parties to be able to exchange shares of Series A Preferred Stock for shares of the Company’s common stock in the manner otherwise contemplated by the Certificate of Designations.

As of the date hereof, the TRT Parties have not exchanged or converted any shares of Series A Preferred Stock into common stock.

Two of our directors, Mr.

Frantz and Mr.

Popejoy, are employed by the TRT Parties and the TRT Parties beneficially owned in excess of 10% of the Company’s outstanding common stock at the time of the transactions described in this paragraph.

In January 2019, the Company repurchased 0.4 million shares of Company common stock from W Energy Partners LLC (“W Energy”) for cash consideration of $ 11.1 million.

The repurchased shares were originally issued by the Company as partial consideration for an acquisition of oil and gas properties from W Energy during 2018.

W Energy beneficially owned in excess of 10% of the Company’s outstanding common stock at the time of the repurchase transactions.

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May 2018 Exchange and Related Transactions

Exchange Agreement

On January 31, 2018, the Company entered into an exchange agreement that was subsequently amended (as amended, the “Exchange Agreement”) with holders (the “Supporting Noteholders”) of approximately $ 496.7 million, or 71 %, of the aggregate principal amount of its outstanding 8.000 % senior unsecured notes due 2020 (the “Unsecured Notes”), pursuant to which the Supporting Noteholders agreed to exchange all of the Unsecured Notes held by each such Supporting Noteholder for approximately $ 155.0 million of its common stock and approximately $ 344.3 million in aggregate principal amount of new Second Lien Notes (such exchange, the “Exchange Transaction”).

Closing under the Exchange Agreement occurred on May 15, 2018.

Certain TRT Parties (together, the “TRT Noteholders”) were Supporting Noteholders and received, upon consummation of the Exchange Transaction, in the aggregate, approximately 54.6 million shares of the Company’s common stock and approximately $ 125.3 million aggregate principal amount of Second Lien Notes in exchange for the $ 204.7 million of Unsecured Notes that they exchanged.

Two of the Company’s directors, Michael Frantz and Mike Popejoy, are employed by TRT, and each of the TRT Noteholders individually beneficially owned in excess of 10% of the Company’s outstanding common stock when the Exchange Agreement was entered into.

The principal amounts of any Second Lien Notes held by the TRT Noteholders as of December 31, 2019 are included in the Company’s long-term debt balances, and the Company’s interest expense includes interest attributable to any Unsecured Notes and Second Lien Notes held by TRT during the applicable period.

The obligations of the Supporting Noteholders under the Exchange Agreement were subject to the conditions set forth in the Exchange Agreement, which were satisfied at or prior to closing, including (among others) the successful completion of an equity transaction (the “Equity Raise”) comprised of $ 140.0 million in gross proceeds from the sale of the Company’s common stock, including the funding of up to $ 52.0 million of commitments received under the Subscription Agreements (as defined below).

Subscription Agreements and Equity Raise

On January 31, 2018, and in connection with the Exchange Transaction, the Company and Bahram Akradi (the Chairman of its board of directors), Michael Reger (who subsequently joined the Company as an executive officer in May 2018), TRT and certain other investors each entered into subscription agreements (the “Subscription Agreements”) whereby such investors agreed to purchase up to $ 40.0 million of the Company’s common stock at a price per share equal to the lowest price per share in the Equity Raise, and subject to the closing of the Exchange Transaction.

Pursuant to their respective Subscription Agreements, Mr.

Akradi purchased $ 12.0 million of the Company’s common stock, Mr.

Reger purchased $ 10.0 million of the Company’s common stock, and TRT purchased $ 10.0 million of the Company’s common stock.

Based on the pricing of the Equity Raise, the lowest price of which was $ 1.50 per share, Mr.

Akradi purchased 8.0 million shares, Mr.

Reger purchased 6.7 million shares and TRT purchased 6.7 million shares.

The TRT Parties beneficially owned in excess of 10% of the Company’s outstanding common stock when their respective Subscription Agreements were entered into.

On April 10, 2018, to satisfy, in part, the Company’s obligation to complete the Equity Raise, the Company completed an underwritten public offering (the “Offering”), whereby it sold 58,666,667 shares of its common stock at a public offering price of $ 1.50 per share.

As part of the Offering, Mr.

Akradi purchased 1.0 million shares of the Company’s common stock from the underwriters of the Offering for an aggregate purchase price of $ 1.5 million.

Registration Rights

In accordance with the terms of the Exchange Agreement, at the closing of the Exchange Transaction, the Company entered into registration rights agreements with (i) the Supporting Noteholders, including the TRT Noteholders, pursuant to which the Company agreed to file with the SEC a registration statement registering for resale the shares of common stock and the Second Lien Notes issued in the Exchange Transaction, and (ii) the TRT Noteholders and an affiliate of TRT, pursuant to which the Company agreed to file with the SEC a registration statement registering for resale all of the shares of common stock held by the TRT Noteholders and such affiliate, excluding shares of common stock that the TRT Noteholders received pursuant to the Exchange Transaction.

The required registration statements were filed and declared effective by the SEC during 2018.

The Company’s Audit Committee is responsible for approving all transactions involving related parties, including each of the transactions identified above.

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NOTE 8 COMMITMENTS & CONTINGENCIES

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In the event the ongoing dispute results in a final judgment that is adverse to the Company’s interests, the Company would be required to reverse approximately $ 4.4 million in revenue (net of accrued taxes) that has been accrued since the first quarter of 2013 based on the Company’s purported interest in the crude oil and natural gas leases at issue.

Due to the long-term nature of this title dispute, the $ 4.7 million in accounts receivable is included in “Other Noncurrent Assets, Net” on the balance sheets.

Due to the long-term nature of this title dispute, the $ 4.4 million in accounts receivable is included in “Other Noncurrent Assets, Net” in the balance sheets.

The Company fully maintains the validity of its interests in the crude oil and natural gas leases.

NOTE 9 ASSET RETIREMENT OBLIGATION

NOTE 9 ASSET RETIREMENT OBLIGATIONS

The Company has asset retirement obligations associated with the future plugging and abandonment of proved properties and related facilities.

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(in thousands) 2020 2019

Beginning Asset Retirement Obligation $ 12,501 $ 9,128

Beginning Asset Retirement Obligations $ 17,299 $ 12,501

Liabilities Acquired During the Period — 2,680

Liabilities Incurred During the Period 688 1,361

Revision of Estimates 21 —

Accretion of Discount on Asset Retirement Obligations 1,192 973

Liabilities Settled During the Period ( 20 ) ( 216 )

Ending Asset Retirement Obligation $ 17,299 $ 12,501

Ending Asset Retirement Obligations $ 19,181 $ 17,299

NOTE 10 INCOME TAXES

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Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses and tax credit carry-forwards.

Under this method, deferred tax

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assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Under this method, deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income (loss) in the period that includes the enactment date.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law making several changes to the Internal Revenue Code.

The changes include, but are not limited to:

increasing the limitation on the amount of deductible interest expense, allowing companies to carryback certain net operating losses, and increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income.

The income tax provision (benefit) for the years ended December 31, 2020, 2019, and 2018 consists of the following:

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Share Based Compensation Tax Deficiency — 33 316

Federal Rate Reduction — — 124,493

Net Operating Loss Adjustment 12,494 — —

Section 382 Limitation — — 63,573

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Reported Tax Benefit $ ( 166 ) $ — $ ( 55 )

The Company’s May 15, 2018 closing under the Exchange Agreement and related transactions triggered an ownership change within the meaning of Section 382 of the Internal Revenue Code (“IRC”) due to the share issuances that resulted from the Exchange Agreement and related transactions.

The Company’s May 15, 2018 closing under an exchange agreement and related transactions triggered an ownership change within the meaning of Section 382 of the Internal Revenue Code (“IRC”) due to the share issuances related thereto.

In general, an ownership change, as defined in IRC Section 382, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50% of the outstanding stock of a company by certain stockholders or public groups.

Since the Company has experienced an ownership change, utilization of net operating losses (“NOL”) and other tax carryforward attributes are subject to an annual limitation.

Accordingly, the Company reduced its deferred tax assets and related valuation allowance by $ 63.6 million during 2018.

Since the Company has experienced an ownership change, utilization of net operating losses (“NOL”) and other tax carryforward attributes including, but are not limited to, interest expense limitations, are subject to an annual limitation.

Accordingly, the Company reduced its net operating loss deferred tax asset and related valuation allowance by $ 63.6 million during 2018.

In 2020, the Company further reduced its net operating loss deferred tax asset and related valuation allowance by $ 12.5 million due to changes from the CARES Act and the finalized IRC regulations, that increased the limitation on the amount of deductible interest expense.

A valuation allowance is established to reduce deferred tax assets if it is determined that it is more likely than not that the related tax benefit will not be realized.

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The determination of the state NOL carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and that can thereby impact the amount of such carryforwards.

If unutilized, the federal net operating losses will expire from 2031 to 2037 and the state net operating losses will expire from 2020 to 2037.

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If unutilized, all of the federal net operating losses will expire from 2031 to 2037, except for $ 161.7 million of federal net operating losses that have an indefinite life.

If unutilized, all of the state net operating losses will expire from 2020 to 2037, except for $ 104.6 million of state net operating losses that have an indefinite life.

The significant components of the Company’s deferred tax assets (liabilities) were as follows:

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The Company’s policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense.

For the years ended December 31, 2019, 2018 and 2017, the Company did no t recognize any interest or penalties in its statements of operations, no r did it have any interest or penalties accrued in its balance sheet at December 31, 2019 and 2018 relating to unrecognized benefits.

For the years ended December 31, 2020, 2019 and 2018, the Company did no t recognize any interest or

penalties in its statements of operations, no r did it have any interest or penalties accrued in its balance sheet at December 31, 2020 and 2019 relating to unrecognized benefits.

The tax years 2020, 2019, 2018, and 2017 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which the Company is subject.

Additionally, NOLs from 2011-2016 could be adjusted in the future when such NOLs are utilized.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) which made significant changes that affect the Company, resulting in significant modifications to existing law.

The Tax Act, among other things, (i) reduced the U.S.

corporate income tax rate, (ii) repealed the corporate alternative minimum tax, (iii) imposed new limitations on the utilization of net operating losses and (iv) provided for more general changes to the taxation of corporations, including changes to cost recovery rules and to the deductibility of interest expense.

The Company recognizes the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted.

The enactment date in the U.S.

is the date the bill becomes law, which is when the President signs the bill.

As a result of the Act, the Company is also subject to certain statutory restrictions on its current interest and debt loss deductions under IRC Section 163(j) which limits interest deductions to business interest income plus 30% of adjusted taxable income.

Deferred interest expense carryforwards do not expire, but can only be utilized in future years when adjusted taxable income provides excess limitation.

For the year ended December 31, 2019, the company generated a $ 8.4 million interest expense carryforward attribute, which has a full valuation allowance.

The Act also repeals the corporate alternative minimum tax for tax years beginning after December 31, 2017 and provides that prior alternative minimum tax credits will be refundable.

The Company has credits that are expected to be refunded between 2019 and 2021 as a result of the Act and monetization opportunities under current tax laws.

In 2019, the Company utilized $ 0.2 million of its alternative minimum tax credit.

The Company has an additional $ 0.2 million of alternative minimum tax credits that will be refunded in future years.

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NOTE 11 FAIR VALUE

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The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2020 and 2019.

Fair Value Measurements at Using

Fair Value Measurements at

December 31, 2020 Using

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(Level 2) Significant Unobservable Inputs

Commodity Derivatives – Current Asset (crude oil price swaps) $ — $ 5,628 $ —

Commodity Derivatives – Current Liabilities (crude oil price swaps) $ — $ ( 11,298 ) $ —

Commodity Derivatives – Noncurrent Asset (crude oil price swaps and crude oil price swaptions) — 8,554 —

Commodity Derivatives – Noncurrent Liabilities (crude oil price swaps and crude oil swaptions) — ( 8,079 ) —

Commodity Derivatives – Current Assets $ — $ 51,290 $ —

Commodity Derivatives – Noncurrent Assets $ — $ 111 $ —

Commodity Derivatives – Current Liabilities — ( 2,504 ) —

Commodity Derivatives – Noncurrent Liabilities — ( 14,214 ) —

Interest Rate Derivatives – Current Liabilities — ( 574 ) —

Interest Rate Derivatives – Noncurrent Liabilities — ( 445 ) —

Total $ — $ 33,664 $ —

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Fair Value Measurements at

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(Level 2) Significant Unobservable Inputs

Commodity Derivatives – Current Asset (crude oil price and basis swaps) $ — $ 115,870 $ —

Commodity Derivatives – Non-Current Asset (crude oil price swaps) — 61,843 —

Contingent Consideration - Current Liabilities — — ( 58,069 )

Debt Exchange Derivatives - Current Liabilities — — ( 18,183 )

Commodity Derivatives – Noncurrent Liabilities (crude oil price swaps) — — —

Commodity Derivatives – Current Assets $ — $ 5,628 $ —

Commodity Derivatives – Current Liabilities $ — $ ( 11,298 ) $ —

Commodity Derivatives – Noncurrent Assets — 8,554 —

Commodity Derivatives – Noncurrent Liabilities — ( 8,079 ) —

Total $ — $ ( 5,195 ) $ —

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The Level 2 instruments presented in the tables above consist of commodity derivative instruments (see Note 12).

The fair value of the Company’s derivative financial instruments is determined based upon future prices, volatility and time to maturity, among other things.

The fair value of the Company’s commodity derivative instruments is determined based upon future prices, volatility and time to maturity, among other things.

Counterparty statements are utilized to determine the value of the commodity derivative instruments and are reviewed and corroborated using various methodologies and significant observable inputs.

The Company’s and the counterparties’ nonperformance risk is evaluated.

The fair value of all derivative contracts is reflected on the balance sheet.

The fair value of commodity derivative contracts is reflected in the balance sheet.

The current derivative asset and liability amounts represent the fair values expected to be settled in the subsequent twelve months.

Contingent Consideration.

The fair value of the contingent consideration potentially payable by the Company in connection with both the Pivotal Acquisition and W Energy Acquisition, which in certain circumstances the Company was permitted to settle in either cash or shares of common stock, was determined using Monte Carlo simulation models.

Significant inputs used in the fair value measurements include (i) the Company’s common stock price, (ii) risk-free rates based on U.S.

Treasury rates, (iii) volatility of the Company’s common stock, and (iv) expected average daily trading volumes.

The expected volatility and average daily trading volumes used in the valuation were unobservable in the marketplace and significant to the valuation methodology, and the contingent consideration’s fair value was therefore designated as Level 3 in the valuation hierarchy.

Changes in the fair value of this liability are included in other income (expense) in the Company’s statements of operations.

As of December 31, 2019, there were no remaining outstanding contingent consideration liabilities.

Debt Exchange Derivatives.

During the second and third quarters of 2018, the Company entered into and closed a number of independent, separately negotiated exchange agreements with holders of the Company’s previously outstanding Unsecured Notes (described as the “Additional 2018 Exchanges” in Note 4 above).

Pursuant to each such exchange agreement, the Company agreed to issue the holder shares of its common stock in exchange for certain Unsecured Notes held by such holder.

The Company had embedded derivatives related to certain of these exchange agreements that contained provisions whereby if at the end of the applicable restricted sale period the Company’s common stock trades below specified levels, the Company would be required to pay additional consideration to the holder in the form of cash or additional shares of common stock.

The Company determined these provisions were not clearly and closely related to the shares of common stock issued under the exchange agreements and, therefore, bifurcated these embedded features and reflected them at fair value in the financial statements.

Prior to their settlements, the fair values of these embedded derivatives were determined using Monte Carlo simulations which considered various inputs including (i) the Company’s common stock price, (ii) risk-free rates based on U.S.

Treasury rates, (iii) volatility of the Company’s common stock, and (iv) expected average daily trading volumes.

The expected volatility and average daily trading volumes used in the valuation were unobservable in the marketplace and significant to the valuation methodology, and the embedded derivatives’ fair value was therefore designated as Level 3 in the valuation hierarchy.

Changes in the fair values of these liabilities are included in other income (expense) in the Company’s statements of operations.

As of December 31, 2019, there were no remaining outstanding debt exchange derivative liabilities.

The following table summarizes the changes in fair value of the Company’s financial instruments classified as Level 3 in the fair value hierarchy:

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(In thousands) Year Ended December 31, 2019

Beginning Balance $ ( 76,252 )

Debt exchange derivative liability settlements 16,793

Change in fair value of debt exchange derivative liability 1,390

Contingent consideration settlements 87,581

Change in fair value of contingent consideration ( 29,512 )

Ending Balance $ —

Interest Rate Derivatives.

The Level 2 instruments presented in the tables above consist of interest rate derivative instruments (see Note 11).

The fair value of the Company’s interest rate derivative instruments is determined based upon contracted notional amounts, active market-quoted LIBOR yield curves, and time to maturity, among other things.

Counterparty statements are utilized to determine the value of the interest rate derivative instruments and are reviewed and corroborated using various methodologies and significant observable inputs.

The Company’s and the counterparties’ nonperformance risk is evaluated.

The fair value of interest rate derivative contracts is reflected in the balance sheets.

The current derivative asset and liability amounts represent the fair values expected to be settled in the subsequent twelve months.

Fair Value of Other Financial Instruments

The carrying amounts of cash equivalents, receivables and payables approximate fair value due to the highly liquid or short-term nature of these instruments.

Long-term debt is not presented at fair value on the balance sheets, as it is recorded at carrying value, net of unamortized debt issuance costs and unamortized premium or discount (see Note 4).

Long-term debt is not presented at fair value in the balance sheets, as it is recorded at carrying value, net of unamortized debt issuance costs and unamortized premium or discount (see Note 4).

The fair value of the Company’s Second Lien Notes is $ 256.1 million and $ 434.4 million at December 31, 2020 and 2019.

The fair value of the Company’s Second Lien Notes are based on active market quotes, which represent Level 1 inputs.

There is not active market for the Revolving Credit Facility and the Unsecured VEN Bakken Note.

There is no active market for the Revolving Credit Facility or the Unsecured VEN Bakken Note.

The recorded value of the Revolving Credit Facility approximates its fair value because of its floating rate structure based on the LIBOR spread, secured interest, and the Company’s borrowing base utilization.

The recorded fair value of the VEN Bakken Note is based primarily on estimated current rates available to us for debt of the same remaining duration and adjusted for nonperformance risk and credit risk (see Note 3).

The fair value of the Unsecured VEN Bakken Note is $ 129.3 million and $ 130.0 million at December 31, 2020 and 2019, respectively.

The fair value measurements for the Revolving Credit Facility and the Unsecured VEN Bakken Note represent Level 2 inputs.

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Asset retirement obligations incurred and acquired during the year ended December 31, 2020 were approximately $ 0.7 million.

The Company accounts for acquisitions of oil and natural gas properties under the acquisition method of accounting.

Accordingly, the Company conducts assessments of net assets acquired and recognizes amounts for identifiable assets acquired and liabilities assumed at the estimated acquisition date fair values, while transaction costs associated with the acquisitions are expensed as incurred.

The Company makes various assumptions in estimating the fair values of assets acquired and liabilities assumed.

The most significant assumptions relate to the estimated fair value of oil and natural gas properties.

The fair value of these properties is measured using a discounted cash flow model that converts future cash flows to a single discounted amount.

These assumptions represent Level 3 inputs under the fair value hierarchy.

See Note 3 for additional discussion of the Company’s acquisitions of oil and natural gas properties during the year ended December 31, 2019 and discussion of the significant inputs to the valuations.

Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value.

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NOTE 12 DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT

The Company utilizes commodity price swaps, basis swaps, swaptions and collars (purchased put options and written call options) to (i) reduce the effects of volatility in price changes on the crude oil commodities it produces and sells, (ii) reduce commodity price risk and (iii) provide a base level of cash flow in order to assure it can execute at least a portion of its capital spending.

All derivative instruments are recorded on the Company’s balance sheet as either assets or liabilities measured at their fair value (see Note 11).

The Company utilizes commodity price swaps, basis swaps, swaptions and collars (purchased put options and written call options) to (i) reduce the effects of volatility in price changes on the crude oil and natural gas commodities it produces and sells, (ii) reduce commodity price risk and (iii) provide a base level of cash flow in order to assure it can execute at least a portion of its capital spending.

In addition, from time to time the Company utilizes interest rate swaps to mitigate exposure to changes in interest rates on the Company’s variable-rate indebtedness.

All derivative instruments are recorded in the Company’s balance sheet as either assets or liabilities measured at their fair value (see Note 11).

The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative trading purposes.

If a derivative does not qualify as a hedge or is not designated as a hedge, the changes in the fair value are recognized in the revenues section of the Company’s statements of operations as a gain

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or loss on derivative instruments.

If a derivative does not qualify as a hedge or is not designated as a hedge, the changes in the fair value are recognized in the Company’s statements of operations as a gain or loss on derivative instruments.

Mark-to-market gains and losses represent changes in fair values of derivatives that have not been settled.

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These cash settlements represent the cumulative gains and losses on the Company’s derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

The following table presents cash settlements on matured or liquidated derivative instruments and non-cash gains and losses on open derivative instruments for the periods presented.

Cash receipts and payments below reflect proceeds received upon early liquidation of derivative positions and gains or losses on derivative contracts which matured during the period, calculated as the difference between the contract price and the market settlement price of matured contracts.

Non-cash gains and losses below represent the change in fair value of derivative instruments which continue to be held at period-end and the reversal of previously recognized non-cash gains or losses on derivative contracts that matured or were liquidated during the period.

The Company has master netting agreements on individual derivative instruments with certain counterparties and therefore the current asset and liability are netted in the balance sheet and the non-current asset and liability are netted in the balance sheet for contracts with these counterparties.

Commodity Derivative Instruments

The following table presents settlements on commodity derivative instruments and unsettled gains and losses on open commodity derivative instruments for the periods presented which is recorded in the revenue section of our financial statements:

Year ended December 31,

(In thousands) 2020 2019 2018

Cash Received (Paid) on Settled Derivatives (1)

$ 44,377 $ ( 22,886 ) $ 3,776

Unrealized Gain (Loss) on Derivatives ( 173,214 ) 207,892 ( 18,443 )

Gain (Loss) on Settled Commodity Derivatives $ 188,264 $ 44,377 $ ( 22,886 )

Gain (Loss) on Unsettled Commodity Derivatives 39,878 ( 173,214 ) 207,892

Gain (Loss) on Derivative Instruments, Net $ 228,141 $ ( 128,837 ) $ 185,006

_____________

(1) The year ended December 31, 2019, includes approximately $ 12.4 million of net cash proceeds from crude oil derivative contracts that were restructured in 2019 prior to their contractual maturities.

The Company has master netting agreements on individual commodity contracts with certain counterparties and therefore the current asset and liability are netted on the balance sheet and the non-current asset and liability are netted on the balance sheet for contracts with these counterparties.

As of December 31, 2019, the Company had a total volume on open commodity price swaps of 17.3 million barrels at a weighted average price of approximately $ 56.77 per barrel.

The following table reflects the weighted average price of open commodity price swap derivative contracts as of December 31, 2019, by year with associated volumes.

Weighted Average Price

of Open Commodity Swap Contracts

Year Volumes (Bbl) Weighted

Average Price ($)

2020 9,815,844 57.98

The following table summarizes open commodity derivative positions as of December 31, 2020, for commodity derivatives that were entered into through December 31, 2020, for the settlement period presented:

2021 2022 2023

WTI NYMEX - Swaps:

Volume (Bbl) 7,545,124 816,250 —

Weighted-Average Price ($/Bbl) $ 55.06 $ 50.49 $ —

WTI NYMEX - Swaptions (1) :

Volume (Bbl) — 3,131,125 1,455,000

Weighted-Average Price ($/Bbl) $ — $ 52.68 $ 47.98

Bakken Crude UHC to WTI NYMEX - Basis Swaps:

Volume (Bbl) 1,523,750 — —

Weighted-Average Price ($/Bbl) $ ( 2.39 ) $ — $ —

Henry Hub NYMEX - Swaps:

Volume (MMBtu) 13,000,000 3,650,000 —

Weighted-Average Price ($/MMBtu) $ 2.50 $ 2.61 $ —

Waha Inside FERC to Henry Hub - Basis Swaps:

Volume (MMBtu) 69,000 — —

Weighted-Average Differential ($/MMBtu) $ ( 0.28 ) $ — $ —

______________

(1) The Company has entered into crude oil derivative contracts that give counterparties the option to extend certain current derivative contracts for additional periods.

Options covering a notional volume of 0.1 million barrels for 2021 are exercisable on or about December 31, 2020.

If the counterparties exercise all such options, the notional volume of the Company’s existing crude oil derivative contracts will increase by 0.1 million barrels at a weighted average price of $ 57.63 per barrel for 2021.

(2) The Company has entered into crude oil derivative contracts that give counterparties the option to extend certain current derivative contracts for additional periods.

Options covering a notional volume of 2.4 million barrels for 2022 are exercisable on or about December 31, 2021.

If the counterparties exercise all such options, the notional volume of the Company’s existing crude oil derivative contracts will increase by 2.4 million barrels at a weighted average price of $ 55.05 per barrel for 2022.

(1) Swaptions are crude oil derivative contracts that give counterparties the option to extend certain derivative contracts for additional periods.

The volumes and prices reflected as Swaptions in this table will only be effective if the options are exercised by the applicable counterparties.

Interest Rate Derivative Instruments

The Company uses interest rate swaps to effectively convert a portion of its variable rate indebtedness to fixed rate indebtedness.

As of December 31, 2020, the Company had interest rate swaps with a total notional amount of $ 200.0 million.

The settlement of these derivative instruments is recognized as a component of interest expense in the statements of operations.

The mark-to-market component of these derivative instruments is recognized in loss on unsettled interest rate derivatives, net in the statements of operations.

Other Information Regarding Derivative Instruments

The following table sets forth the amounts, on a gross basis, and classification of the Company’s outstanding derivative financial instruments at December 31, 2020 and 2019, respectively.

Certain amounts may be presented on a net basis on the financial statements when such amounts are with the same counterparty and subject to a master netting arrangement:

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Certain amounts may be presented on a net basis in the financial statements when such amounts are with the same counterparty and subject to a master netting arrangement:

Estimated Fair Value

Type of Crude Oil Contract Balance Sheet Location 2019 2018

Type of Commodity Derivative Contract Balance Sheet Location 2020 2019

Derivative Assets:

(In thousands)

Price Swap Contracts Current Assets $ 20,164 $ 108,514

Basis Swap Contracts Current Assets — 7,356

Price Swap Contracts Noncurrent Assets 16,069 61,843

Commodity Price Swap Contracts Current Assets $ 52,702 $ 20,164

Commodity Basis Swap Contracts Current Assets 37 —

Commodity Price Swap Contracts Noncurrent Assets 3,479 16,069

Total Derivative Assets $ 56,218 $ 36,233

Derivative Liabilities:

Price Swap Contracts Current Liabilities $ ( 25,834 ) $ —

Price Swap Contracts Noncurrent Liabilities ( 5,273 ) —

Price Swaptions Contracts Noncurrent Liabilities ( 10,321 ) —

Commodity Price Swap Contracts Current Liabilities $ ( 3,434 ) $ ( 25,834 )

Commodity Basis Swap Contracts Current Liabilities ( 519 ) —

Interest Rate Swap Contracts Current Liabilities ( 574 ) —

Commodity Price Swap Contracts Noncurrent Liabilities ( 399 ) ( 5,273 )

Interest Rate Swap Contracts Noncurrent Liabilities ( 445 ) —

Commodity Price Swaptions Contracts Noncurrent Liabilities ( 17,184 ) ( 10,321 )

Total Derivative Liabilities $ ( 22,554 ) $ ( 41,428 )

The use of derivative transactions involves the risk that the counterparties will be unable to meet the financial terms of such transactions.

When the Company has netting arrangements with its counterparties that provide for offsetting payables against receivables from separate derivative instruments these assets and liabilities are netted on the balance sheet.

The tables presented below provide reconciliation between the gross assets and liabilities and the amounts reflected on the balance sheet.

The tables presented below provide reconciliation between the gross assets and liabilities and the amounts reflected in the balance sheet.

The amounts presented exclude derivative settlement receivables and payables as of the balance sheet dates.

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Total Derivative Liabilities $ ( 22,554 ) $ 4,817 $ ( 17,737 )

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Estimated Fair Value at December 31, 2019

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Total Derivative Liabilities $ ( 41,428 ) $ 22,051 $ ( 19,377 )

All of the Company’s outstanding derivative instruments are covered by International Swap Dealers Association Master Agreements (“ISDAs”).

The Company’s obligations under the derivative instruments are secured pursuant to the Company’s Revolving Credit Facility, and no additional collateral had been posted by the Company as of December 31, 2019.

All of the Company’s outstanding derivative instruments are covered by International Swap Dealers Association Master Agreements (“ISDAs”) entered into with parties that are also lenders under the Company’s Revolving Credit Facility.

The Company’s obligations under the derivative instruments are secured pursuant to the Revolving Credit Facility, and no additional collateral had been posted by the Company as of December 31, 2020.

The ISDAs may provide that as a result of certain circumstances, such as cross-defaults, a counterparty may require all outstanding derivative instruments under an ISDA to be settled immediately.

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Cumulative Dividends on Preferred Stock

15,266 1,029 —

Net Income (Loss) Attributable to Common Stock $ ( 921,307 ) $ ( 77,347 ) $ 143,689

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Diluted* $ ( 21.55 ) $ ( 2.00 ) $ 6.07

*Adjusted for the 1-for-10 reverse stock split effected on September 18, 2020.

For the years ended December 31, 2020 and 2019, the Company’s potentially dilutive securities, which include stock options, restricted stock and convertible preferred shares, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.

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The following securities have been excluded from the calculation of diluted weighted average common shares outstanding as the inclusion of these securities would have an anti-dilutive effect:

2020 2019 2018

Stock Options and Restricted Stock 673,037 50,685 1,109,511

Preferred Shares 7,079,907 — —

Restricted Stock Awards* 98,595 67,304 5,069

Series A Preferred Stock (if converted)* 9,899,376 7,079,907 —

Total 9,997,971 7,147,211 5,069

*Adjusted for the 1-for-10 reverse stock split effected on September 18, 2020.

NOTE 14 SUBSEQUENT EVENTS

In January 2020, the Company closed four independent, separately negotiated securities purchase and sale agreements with holders of the Company’s Second Lien Notes.

Pursuant to these agreements, in the aggregate, the Company repurchased and retired $ 76.7 million in principal amount of Second Lien Notes.

In exchange, the Company paid aggregate consideration to the holders consisting of $ 2.5 million in cash and 794,702 newly-issued shares of Series A Preferred Stock having an aggregate liquidation preference of $ 79.5 million.

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Reliance Acquisition

On February 3, 2021, the Company entered into a purchase and sale agreement (the “Reliance PSA”) with Reliance Marcellus, LLC (“Reliance”) pursuant to which the Company agreed to acquire (the “Reliance Acquisition”) certain oil and gas properties, interests and related assets located in the Appalachian Basin (the “PSA Assets”) for an unadjusted aggregate purchase price of $ 250.0 million, plus warrants to purchase 3,250,000 shares of the Company’s common stock at an exercise price equal to $ 14.00 per share (the “Warrants”), subject to certain customary purchase price adjustments.

The Reliance PSA contains customary representations and warranties, covenants and indemnification provisions and has an effective date of July 1, 2020.

The obligations of the parties to complete the transactions contemplated by the Reliance PSA are subject to the satisfaction or waiver of customary closing conditions set forth therein.

The anticipated closing date under the Reliance PSA is April 1, 2021.

In connection with the pending Reliance Acquisition, on February 3, 2021, the Company also entered into a cooperation agreement (the “Cooperation Agreement”) with an unaffiliated third party, Arch Investment Partners, LLC (“Arch”).

Pursuant to the Cooperation Agreement, the Company expects to assign an undivided 30 % interest in and to the Reliance PSA, including the right to acquire an equivalent share of the PSA Assets transferred under the Reliance PSA, to Arch, with Arch assuming the obligation to fund 30 % of the aggregate cash purchase price payable to Reliance under the Reliance PSA.

As a result, if all of the PSA Assets were transferred at closing, the Company would acquire an undivided 70 % interest in those assets for an unadjusted aggregate purchase price payable by the Company comprised of $ 175.0 million in cash and the Warrants.

Certain of the PSA Assets to be purchased in connection with the pending Reliance Acquisition are subject to both preferential purchase and consent rights, which, if exercised or not obtained within certain periods of time designated in the Reliance PSA, would result in the exclusion of such assets from the pending Reliance Acquisition and a reduction of the purchase price thereunder.

Certain of the preferential purchase rights were exercised by third parties prior to the issuance of these financial statements, and as a result the related assets will be excluded from the assets transferred at closing.

The unadjusted cash purchase price payable by the Company will be reduced by an estimated $ 48.6 million to reflect these excluded assets, from $ 175.0 million to $ 126.4 million.

Additional adjustments are possible at or prior to closing.

Financing Transactions

Unsecured VEN Bakken Note Repayment

On January 4, 2021, the Company used borrowings under the Revolving Credit Facility to repay $ 65.0 million in aggregate principal amount under the Unsecured VEN Bakken Note, which was a scheduled repayment thereunder.

On February 18, 2021, the Company used proceeds from the 2028 Notes Offering (described below) to repay the remaining $ 65.0 million in aggregate principal amount outstanding under the Unsecured VEN Bakken Note, and as a result the note has been retired in full.

Amendment to Revolving Credit Facility

On February 3, 2021, in anticipation of the financing transactions described below, the Company entered into a second amendment (the “Amendment”) to its Revolving Credit Facility, which permits the Company to (i) issue unsecured senior debt securities in an aggregate principal amount not to exceed $ 600.0 million (which was used to issue the 2028 Notes described below) and (ii) repay the remaining outstanding balance of the Unsecured VEN Bakken Note and the Second Lien Notes.

The Amendment also amended certain other provisions of the Revolving Credit Facility.

Offering of Common Stock

On February 9, 2021, the Company closed an underwritten public offering (the “Equity Offering”) of 14,375,000 shares of its common stock at a price to the public of $ 9.75 per share.

The Company estimates that the Equity Offering resulted in net proceeds of approximately $ 132.4 million, after deducting underwriting discounts and commissions and estimated offering expenses.

The Company intends to use the net proceeds from the Equity Offering to fund a portion of the cash purchase price for the pending Reliance Acquisition.

Offering of Senior Notes due 2028

On February 18, 2021, the Company closed a private offering (the “2028 Notes Offering”) of $ 550.0 million in aggregate principal amount of new 8.125 % senior unsecured notes due 2028 (the “2028 Notes”), priced at par.

The Company estimates that the 2028 Notes Offering resulted in net proceeds of approximately $ 537.0 million, after deducting the initial purchasers’ discounts and estimated offering expenses.

The Company used a portion of the net proceeds on February 18, 2021, to (i) repay the remaining $ 65.0 million in aggregate principal amount outstanding under the Unsecured VEN Bakken Note, and (ii) redeem $ 272.1 million in aggregate principal amount of Second Lien Notes pursuant to the Tender Offer (defined below).

The Company intends to use the remaining net proceeds to (i) fund a portion of the cash purchase price for the pending Reliance Acquisition, (ii) repay borrowings under the Revolving Credit Facility, (iii) repurchase or redeem all remaining outstanding Second Lien Notes on or before May 15, 2021, and (iv) for general corporate purposes.

See “Indenture — Senior Notes due 2028” below for details regarding the terms of the 2028 Notes.

Second Lien Notes — Tender Offer, Consent Solicitation and Fourth Supplemental Indenture

In connection with the 2028 Notes Offering, the Company commenced a cash tender offer to purchase any and all of its outstanding Second Lien Notes (the “Tender Offer”).

As of February 17, 2021 (the “Early Tender and Consent Date”), an aggregate of $ 272.1 million principal amount (or 94.6 %) of the outstanding Second Lien Notes had been validly tendered pursuant to the Tender Offer and not validly withdrawn (the “Early Tendered Notes”).

On February 18, 2021, the Company purchased all of the Early Tendered Notes for an aggregate cost of approximately $ 283.3 million, including all premiums and accrued interest due in respect of such Early Tendered Notes pursuant to the Tender Offer.

Immediately thereafter, there was $ 15.7 million in aggregate principal amount of Second Lien Notes remaining outstanding.

In connection with the Tender Offer, the Company also solicited consents (the “Consent Solicitation”) to certain proposed amendments (the “Proposed Amendments”) to the 2L Indenture governing the Second Lien Notes.

The requisite consents were obtained as of the Early Tender and Consent Date.

As a result, on February 18, 2021, the Company entered into the Fourth Supplemental Indenture (the “Fourth Supplemental Indenture”) with Wilmington Trust, National Association, as trustee and as collateral agent.

The Fourth Supplemental Indenture implements the Proposed Amendments which, among other things, amends the 2L Indenture to eliminate substantially all restrictive covenants and certain of the default provisions contained therein.

Indenture — Senior Notes due 2028

On February 18, 2021, the Company and Wilmington Trust, National Association, as trustee, entered into an indenture (the “2028 Notes Indenture”), pursuant to which the Company issued $ 550.0 million in aggregate principal amount of the 2028 Notes.

The 2028 Notes will mature on March 1, 2028.

Interest on the 2028 Notes is payable semi-annually in arrears on each March 1 and September 1, commencing September 1, 2021, to holders of record on the February 15 and August 15 immediately preceding the related interest payment date, at a rate of 8.125 % per annum.

Prior to March 1, 2024, the Company may redeem all or a part of the 2028 Notes at a redemption price equal to 100 % of the principal amount of the 2028 Notes redeemed, plus an applicable make-whole premium and accrued and unpaid interest to the redemption date.

On or after March 1, 2024, the Company may redeem all or a part of the 2028 Notes at redemption prices (expressed as percentages of principal amount) equal to 104.063 % for the twelve-month period beginning on March 1, 2024, 102.031 % for the twelve-month period beginning on March 1, 2025, and 100 % beginning on March 1, 2026, plus accrued and unpaid interest to the redemption date.

The 2028 Notes Indenture contains covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries, if any, to:

(i) incur or guarantee additional indebtedness or issue certain types of preferred stock;

(ii) pay dividends or distributions in respect of equity interests or redeem, repurchase or retire equity securities or subordinated indebtedness;

(iii) transfer or sell certain assets;

(iv) make investments;

(v) create liens to secure indebtedness;

(vi) enter into

agreements that restrict dividends or other payments from any non-guarantor subsidiary to the Company;

(vii) consolidate with or merge with or into, or sell substantially all of the Company’s assets to, another person;

(viii) enter into transactions with affiliates;

and (ix) create unrestricted subsidiaries.

These covenants are subject to a number of important exceptions and qualifications, and many of these covenants will be terminated if the 2028 Notes achieve an investment grade rating from either Moody’s Investors Services, Inc.

or S&P Global Ratings.

The 2028 Notes Indenture contains customary events of default, including, but not limited to:

(i) default for 30 days in the payment when due of interest on the 2028 Notes;

(ii) default in payment when due of the principal of, or premium, if any, on the 2028 Notes;

(iii) failure by the Company or certain of its subsidiaries, if any, to comply with certain of their respective obligations, covenants or agreements contained in the 2028 Notes or the 2028 Notes Indenture, subject to certain notice and grace periods;

(iv) failure by the Company or any of its restricted subsidiaries to pay indebtedness within any applicable grace period or the acceleration of any such indebtedness if the total amount of such indebtedness exceeds $ 35.0 million;

(v) failure by the Company or any of its restricted subsidiaries that is a Significant Subsidiary (as defined in the 2028 Notes Indenture) to pay final non-appealable judgments aggregating in excess of $ 35.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;

(vi) except as permitted by the 2028 Notes Indenture, any guarantee of the 2028 Notes is held in any judicial proceeding to be unenforceable or invalid, or ceases for any reason to be in full force and effect, or is denied or disaffirmed by a Guarantor (as defined in the 2028 Notes Indenture);

and (vii) certain events of bankruptcy or insolvency described in the 2028 Notes Indenture with respect to the Company and its restricted subsidiaries that are Significant Subsidiaries.

SUPPLEMENTAL OIL AND GAS INFORMATION

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Information with respect to the Company’s crude oil and natural gas producing activities is presented in the following tables.

Reserve quantities, as well as certain information regarding future production and discounted cash flows, were determined by Cawley, Gillespie & Associates, Inc., independent petroleum consultants based on information provided by the Company.

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Reserve quantities, as well as certain information regarding future production and discounted cash flows, were determined by Cawley, Gillespie & Associates, Inc., third-party independent reserve engineers based on information provided by the Company.

Oil and Natural Gas Reserve Data

The following tables present the Company’s independent petroleum consultants’ estimates of its proved crude oil and natural gas reserves.

The following tables present the Company’s third-party independent reserve engineers estimates of its proved crude oil and natural gas reserves.

The Company emphasizes that reserves are approximations and are expected to change as additional information becomes available.

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Extensions, Discoveries and Other Additions 28,348 28,516 33,241

Purchases of Minerals in Place 37,397 25,965 32,198

Production ( 9,225 ) ( 7,790 ) ( 9,328 )

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Extensions, Discoveries and Other Additions 8,308 6,921 8,306

Purchases of Minerals in Place 53,969 25,611 34,606

Production ( 16,473 ) ( 9,361 ) ( 12,107 )

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Proved undeveloped reserves are included for reserves for which there is a high degree of confidence in their recoverability and they are scheduled to be drilled within the next five years.

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Notable changes in proved reserves for the year ended December 31, 2020 included the following:

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Included in these extensions and discoveries were 3.1 MMBOE as a result of successful drilling in the Williston Basin and 5.2 MMBOE as a result of additional proved undeveloped locations.

• Purchases of minerals in place .

In 2019, total purchases of minerals in place of 34.6 MMBOE were primarily attributable to acquisitions of oil and natural gas properties (see Note 3).

• Revisions to previous estimates .

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• Revisions to previous estimates .

In 2018, revisions to previous estimates increased proved developed and undeveloped reserves by a net amount of 3.5 MMBOE.

Included in these revisions were 1.4 MMBOE of upward adjustments caused by higher crude oil and natural gas prices and a 3.9 MMBOE upward adjustment attributable to well performance when comparing the Company’s reserve estimates at December 31, 2018 to December 31, 2017 which was partially offset by 4.4 MMBOE of downward adjustments related to the removal of undeveloped drilling locations related to the 5 year rule.

In 2019, revisions to previous estimates decreased proved developed and undeveloped reserves by a net amount of 16.4 MMBOE.

Included in these revisions were 9.8 MMBOE of downward adjustments caused by lower crude oil and natural gas prices, a 2.0 MMBOE downward adjustment attributable to well performance when comparing the Company’s reserve estimates at December 31, 2019 to December 31, 2018 and 4.6 MMBOE of downward adjustments related to the removal of undeveloped drilling locations related to the 5 year rule.

Notable changes in proved reserves for the year ended December 31, 2018 included the following:

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Included in these extensions and discoveries were 27.6 MMBOE as a result of successful drilling in the Williston Basin and 5.6 MMBOE as a result of additional proved undeveloped locations.

• Purchases of minerals in place .

In 2018, total purchases of minerals in place of 32.2 MMBOE were primarily attributable to acquisitions of oil and natural gas properties (see Note 3).

• Revisions to previous estimates .

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Included in these revisions were 1.4 MMBOE of upward adjustments caused by higher crude oil and natural gas prices and a 3.9 MMBOE upward adjustment attributable to well performance when comparing the Company’s reserve estimates at December 31, 2018 to December 31, 2017 which was partially offset by 2.8 MMBOE of downward adjustments related to the removal of undeveloped drilling locations related to the 5 year rule.

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Standardized Measure of Discounted Future Net Cash Inflows and Changes Therein

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As a result of available net operating loss carryforwards and the remaining tax basis of its assets at December 31, 2020, the Company’s future income taxes were significantly reduced.

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Changes in the Standardized Measure of Discounted Future Net Cash Flows at 10% per annum follow:

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End of Period $ 712,011 $ 1,678,061 $ 1,879,643

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QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Quarterly data for the years end December 31, 2019 and 2018 is as follows:

Quarter Ended

(In thousands, except per share data) March 31, June 30, September 30, December 31,

Total Revenues $ ( 6,934 ) $ 186,440 $ 233,883 $ 59,013

Gain (Loss) on Derivative Instruments, Net ( 139,623 ) 36,591 75,892 ( 101,697 )

Total Operating Expenses 88,371 94,200 112,784 121,538

Income (Loss) from Operations ( 95,305 ) 92,239 121,100 ( 62,525 )

Other Income (Expense) ( 11,857 ) ( 47,840 ) ( 26,719 ) ( 45,412 )

Income Tax Benefit — — — —

Net Income (Loss) ( 107,162 ) 44,399 94,381 ( 107,937 )

Net Income (Loss) Per Common Share – Basic ( 0.29 ) 0.12 0.24 ( 0.27 )

Net Income (Loss) Per Common Share – Diluted ( 0.29 ) 0.12 0.24 ( 0.27 )

Quarter Ended

March 31, June 30, September 30, December 31,

Total Revenues $ 66,613 $ 66,846 $ 102,269 $ 443,196

Gain (Loss) on Derivative Instruments, Net ( 20,271 ) ( 42,203 ) ( 43,148 ) 290,628

Total Operating Expenses 40,708 50,528 66,673 88,387

Income from Operations 25,905 16,318 35,597 354,809

Other Income (Expense) ( 22,940 ) ( 112,866 ) ( 16,618 ) ( 136,571 )

Income Tax Benefit — — — ( 55 )

Net Income (Loss) 2,965 ( 96,547 ) 18,979 218,292

Net Income (Loss) Per Common Share – Basic 0.05 ( 0.49 ) 0.06 0.58

Net Income (Loss) Per Common Share – Diluted 0.05 ( 0.49 ) 0.06 0.58

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures