What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-04-28 · 155 added, 56 removed, 390 unchanged (35% of the section changed)

54 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Operating revenues and other income:

12 unchanged sentences

Interest expense ( 22,148 ) ( 35,496 ) ( 44,607 ) ( 74,883 )

Loss on extinguishment of debt — ( 67,226 ) — ( 67,605 )

Other non-operating income (expense), net 4,763 112 9,233 ( 233 )

12 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Net income $ 149,874 $ 323,485 $ 348,426 $ 372,249

18 unchanged sentences

Balances, March 31, 2023 120,517,918 $ 1,205 $ 1,743,567 $ 1,489,032 $ ( 4,009 ) $ 3,229,795

Net income — — — 149,874 — 149,874

Other comprehensive income — — — — 13 13

Cash dividends declared, $ 0.15 per share

— — — ( 17,704 ) — ( 17,704 )

Issuance of common stock under Employee Stock Purchase Plan 68,210 1 1,815 — — 1,816

Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings 774 — ( 7 ) — — ( 7 )

Stock-based compensation expense 56,872 1 4,162 — — 4,163

Purchase of shares under Stock Repurchase Program ( 2,550,706 ) ( 26 ) ( 69,457 ) — — ( 69,483 )

Other 19,037 — — — — —

Balances, June 30, 2023 118,112,105 $ 1,181 $ 1,680,080 $ 1,621,202 $ ( 3,996 ) $ 3,298,467

Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Stockholders’ Equity

9 unchanged sentences

Balances, March 31, 2022 121,864,177 $ 1,219 $ 1,844,478 $ 282,079 $ ( 12,667 ) $ 2,115,109

Net income — — — 323,485 — 323,485

Other comprehensive income — — — — 182 182

Issuance of common stock under Employee Stock Purchase Plan 65,634 1 1,644 — — 1,645

Stock-based compensation expense 29,471 — 4,479 — — 4,479

Balances, June 30, 2022 121,959,282 $ 1,220 $ 1,850,601 $ 605,564 $ ( 12,485 ) $ 2,444,900

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

2 unchanged sentences

(in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

6 unchanged sentences

Amortization of debt discount and deferred financing costs 2,743 7,607

Loss on extinguishment of debt — 67,605

Deferred income taxes 94,246 92,948

4 unchanged sentences

Capital expenditures ( 550,046 ) ( 365,745 )

Acquisition of proved and unproved oil and gas properties ( 88,834 ) —

Other, net 657 —

3 unchanged sentences

Repurchase of common stock ( 108,863 ) —

Net proceeds from sale of common stock 1,815 1,645

Dividends paid ( 36,367 ) ( 1,218 )

4 unchanged sentences

Cash, cash equivalents, and restricted cash at end of period $ 378,238 $ 267,089

Supplemental schedule of additional cash flow information:

Supplemental schedule of additional cash flow information and non-cash activities:

Operating activities:

Cash paid for interest, net of capitalized interest $ ( 42,680 ) $ ( 90,875 )

Net cash paid for income taxes $ ( 6,137 ) $ ( 10,502 )

Investing activities:

Increase in capital expenditure accruals and other $ 24,220 $ 37,780

Non-cash financing activities (1)

_______________________________________

(1) Please refer to Note 5 - Long-Term Debt for discussion of the debt transactions executed during the six months ended June 30, 2022.

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

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Operating results for the periods presented are not necessarily indicative of expected results for the full year.

In connection with the preparation of the Company’s unaudited condensed consolidated financial statements, the Company evaluated events subsequent to the balance sheet date of March 31, 2023, and through the filing of this report.

In connection with the preparation of the Company’s unaudited condensed consolidated financial statements, the Company evaluated events subsequent to the balance sheet date of June 30, 2023, and through the filing of this report.

Additionally, certain prior period amounts have been reclassified to conform to current period presentation in the accompanying unaudited condensed consolidated financial statements.

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Recently Issued Accounting Standards

As of March 31, 2023, and through the filing of this report, no Accounting Standards Updates have been issued and not yet adopted that are applicable to the Company and that would have a material effect on the Company’s unaudited condensed consolidated financial statements and related disclosures.

As of June 30, 2023, and through the filing of this report, no new accounting standards have been issued and not yet adopted that are applicable to the Company and that would have a material effect on the Company’s unaudited condensed consolidated financial statements and related disclosures.

Note 2 - Revenue from Contracts with Customers

The Company recognizes its share of revenue from the sale of produced oil, gas, and NGLs from its Midland Basin and South Texas assets.

Oil, gas, and NGL production revenue presented within the accompanying unaudited condensed consolidated statements of operations (“accompanying statements of operations”) is reflective of the revenue generated from contracts with customers.

The table below presents oil, gas, and NGL production revenue by product type for each of the Company’s operating areas for the three months ended March 31, 2023, and 2022:

Oil, gas, and NGL production revenue presented within the accompanying unaudited condensed consolidated statements of operations (“accompanying statements of operations”) reflects revenue generated from contracts with customers.

The tables below present oil, gas, and NGL production revenue by product type for each of the Company’s operating areas for the three and six months ended June 30, 2023, and 2022:

Midland Basin South Texas Total

Three Months Ended

March 31, Three Months Ended

June 30, Three Months Ended

2023 2022 2023 2022 2023 2022

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Relative percentage 62 % 68 % 38 % 32 % 100 % 100 %

Midland Basin South Texas Total

Six Months Ended

June 30, Six Months Ended

2023 2022 2023 2022 2023 2022

(in thousands)

Oil production revenue $ 623,009 $ 1,028,822 $ 221,222 $ 245,499 $ 844,231 $ 1,274,321

Gas production revenue 86,589 239,816 76,869 171,560 163,458 411,376

NGL production revenue 388 282 109,256 163,119 109,644 163,401

Total $ 709,986 $ 1,268,920 $ 407,347 $ 580,178 $ 1,117,333 $ 1,849,098

Relative percentage 64 % 69 % 36 % 31 % 100 % 100 %

The Company recognizes oil, gas, and NGL production revenue at the point in time when custody and title (“control”) of the product transfers to the purchaser, which differs depending on the applicable contractual terms.

Transfer of control drives the

presentation of transportation, gathering, processing, and other post-production expenses (“fees and other deductions”) within the accompanying statements of operations.

Fees and other deductions incurred by the Company prior to control transfer are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations.

When control is transferred at or near the wellhead, sales are based on a wellhead market price that is impacted by fees and other deductions incurred by the purchaser subsequent to the transfer of control.

Transfer of control drives the presentation of transportation, gathering, processing, and other post-production expenses (“fees and other deductions”) within the accompanying statements of operations.

Fees and other deductions incurred by the Company prior to transfer of control are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations.

When control is transferred at or near the wellhead, sales are based on a wellhead market price that is affected by fees and other deductions incurred by the purchaser subsequent to the transfer of control.

Revenue is recorded in the month when performance obligations are satisfied.

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Estimated revenue due to the Company is recorded within the accounts receivable line item on the accompanying unaudited condensed consolidated balance sheets (“accompanying balance sheets”) until payment is received.

The accounts receivable balances from contracts with customers within the accompanying balance sheets as of March 31, 2023, and December 31, 2022, were $ 146.2 million and $ 184.5 million, respectively.

The accounts receivable balances from contracts with customers within the accompanying balance sheets as of June 30, 2023, and December 31, 2022, were $ 162.5 million and $ 184.5 million, respectively.

To estimate accounts receivable from contracts with customers, the Company uses knowledge of its properties, historical performance, contractual arrangements, index pricing, quality and transportation differentials, and other factors as the basis for these estimates.

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The time period between production and satisfaction of performance obligations is generally less than one day, therefore there are no material unsatisfied or partially unsatisfied performance obligations at the end of the reporting period.

Please refer to Note 1 - Summary of Significant Accounting Policies and Note 2 - Revenue from Contracts with Customers in the 2022 Form 10-K for more information regarding the Company’s revenue recognition policy and the application of the guidance in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, and for more information regarding the types of contracts under which oil, gas, and NGL production revenue is generated.

Note 3 - Equity

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Please refer to Note 3 - Equity in the 2022 Form 10-K for additional information regarding the Company’s Stock Repurchase Program.

During the three months ended March 31, 2023, the Company utilized net cash provided by operating activities to repurchase and subsequently retire 1,413,758 shares of its common stock at a weighted-average share price of $ 28.32 for a total cost of $ 40.0 million, excluding taxes, commissions, and fees.

As of March 31, 2023, $ 402.8 million remained available for repurchases of the Company’s outstanding common stock under the Stock Repurchase Program.

During the three and six months ended June 30, 2023, the Company repurchased and subsequently retired 2,550,706 and 3,964,464 shares, respectively, of its common stock at a weighted-average share price of $ 26.95 and $ 27.44 , respectively, for a total cost of $ 68.7 million and $ 108.8 million, respectively, excluding excise taxes, commissions, and fees.

As of June 30, 2023, $ 334.0 million remained available for repurchases of the Company’s outstanding common stock under the Stock Repurchase Program.

Note 4 - Income Taxes

The provision for income taxes for the three months ended March 31, 2023, and 2022, consists of the following:

The provision for income taxes for the three and six months ended June 30, 2023, and 2022, consists of the following:

For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

(in thousands)

Current portion of income tax expense:

Current portion of income tax (expense) benefit:

Federal $ 2,189 $ ( 3,664 ) $ ( 2,809 ) $ ( 4,273 )

4 unchanged sentences

Recorded income tax expense or benefit differs from the amount that would be provided by applying the statutory United States federal income tax rate to income or loss before income taxes.

the cumulative effect of an enacted tax rate change, in the period of enactment, on the Company’s net deferred tax asset and liability balances.

These differences primarily relate to the effect of state income taxes, excess tax benefits and deficiencies from stock-based compensation awards, tax deduction limitations on the compensation of covered individuals, changes in valuation allowances, the cumulative effect of other smaller permanent differences, and can also reflect the cumulative effect of an enacted tax rate change, in the period of enactment, on the Company’s net deferred tax asset and liability balances.

The quarterly effective tax rate and the resulting income tax expense or benefit can also be affected by the proportional effects of forecast net income or loss and the correlative effect on the valuation allowance for each of the periods presented in the table above.

The Company commissioned a multi-year research and development (“R&D”) credit study in 2022, which is expected to be completed in late 2023, and is expected to favorably impact the Company’s effective tax rate and future tax obligations when the results are recorded.

The Company’s policy is to not record an R&D credit until it is claimed on a filed tax return, which had not occurred as of the filing of this report.

The Company’s policy is to not record an R&D credit until it is claimed on a filed tax return, which has not occurred as of the filing of this report.

The Company made $ 6.1 million of cash tax payments during the second quarter of 2023, primarily related to Texas franchise taxes.

For all years before 2019, the Company is generally no longer subject to United States federal or state income tax examinations by tax authorities.

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The Company’s Credit Agreement provides for a senior secured revolving credit facility with a maximum loan amount of $ 3.0 billion.

As of March 31, 2023, the borrowing base and aggregate lender commitments under the Credit Agreement were $ 2.5 billion and $ 1.25 billion, respectively.

Subsequent to March 31, 2023, the semi-annual borrowing base redetermination was completed, which reaffirmed both the Company’s borrowing base and aggregate lender commitments at existing amounts.

As of June 30, 2023, the borrowing base and aggregate lender commitments under the Credit Agreement were $ 2.5 billion and $ 1.25 billion, respectively.

The next scheduled borrowing base redetermination date is October 1, 2023.

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Commitment fees are accrued on the unused portion of the aggregate lender commitment amount at rates from the utilization grid.

The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement as of April 21, 2023, March 31, 2023, and December 31, 2022:

As of April 21, 2023 As of March 31, 2023 As of December 31, 2022

The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement as of July 21, 2023, June 30, 2023, and December 31, 2022:

As of July 21, 2023 As of June 30, 2023 As of December 31, 2022

(in thousands)

5 unchanged sentences

____________________________________________

(1) Unamortized deferred financing costs attributable to the revolving credit facility are presented as a component of the other noncurrent assets line item on the accompanying balance sheets and totaled $ 10.2 million and $ 10.8 million as of March 31, 2023, and December 31, 2022, respectively.

(1) Unamortized deferred financing costs attributable to the revolving credit facility are presented as a component of the other noncurrent assets line item on the accompanying balance sheets and totaled $ 9.6 million and $ 10.8 million as of June 30, 2023, and December 31, 2022, respectively.

These costs are being amortized over the term of the revolving credit facility on a straight-line basis.

(2) Letters of credit outstanding reduce the amount available under the revolving credit facility on a dollar-for-dollar basis.

The Company’s Senior Notes, net line item on the accompanying balance sheets as of March 31, 2023, and December 31, 2022, consists of the following (collectively referred to as “Senior Notes”):

As of March 31, 2023 As of December 31, 2022

The Company’s Senior Notes, net line item on the accompanying balance sheets as of June 30, 2023, and December 31, 2022, consists of the following (collectively referred to as “Senior Notes”):

As of June 30, 2023 As of December 31, 2022

Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net

14 unchanged sentences

Please refer to Note 5 - Long-Term Debt in the 2022 Form 10-K for additional detail on the Company’s Senior Notes.

The Company is subject to certain financial and non-financial covenants under the Credit Agreement and the indentures governing the Senior Notes that, among other terms, limit the Company’s ability to incur additional indebtedness, make restricted payments including dividends, sell assets, create liens that secure debt, enter into transactions with affiliates, and merge or consolidate with other entities.

The Company was in compliance with all financial and non-financial covenants as of March 31, 2023, and through the filing of this report.

Senior Secured Notes

On June 17, 2022, the Company redeemed all of the $ 446.7 million of aggregate principal amount outstanding of its 10.0 % Senior Secured Notes due 2025 (“2025 Senior Secured Notes”), with cash on hand, at a redemption price equal to 107.5 percent of the principal amount outstanding on the date of the redemption, plus accrued and unpaid interest.

Upon redemption, the Company recorded a net loss on extinguishment of debt of $ 67.2 million which included $ 33.5 million of premium paid, $ 26.3 million of accelerated expense recognition of the remaining unamortized debt discount, and $ 7.4 million of accelerated expense recognition of the remaining unamortized deferred financing costs.

The Company canceled all redeemed 2025 Senior Secured Notes upon settlement.

payments including dividends, sell assets, create liens that secure debt, enter into transactions with affiliates, and merge or consolidate with other entities.

The Company was in compliance with all financial and non-financial covenants as of June 30, 2023, and through the filing of this report.

Please refer to Note 5 - Long-Term Debt in the 2022 Form 10-K for additional detail on the Company’s covenants under the Credit Agreement and indentures governing the Senior Notes.

Capitalized Interest

Capitalized interest costs for the three months ended March 31, 2023, and 2022, totaled $ 5.5 million and $ 3.0 million, respectively.

Capitalized interest costs for the three months ended June 30, 2023, and 2022, totaled $ 5.9 million and $ 4.2 million, respectively, and totaled $ 11.4 million and $ 7.2 million for the six months ended June 30, 2023, and 2022, respectively.

The amount of interest the Company capitalizes generally fluctuates based on the amount borrowed, the Company’s capital program, and the timing and amount of costs associated with capital projects that are considered in progress.

4 unchanged sentences

Drilling Rig Service Contracts .

During the three months ended March 31, 2023, and through the filing of this report, the Company amended certain of its drilling rig contracts resulting in the increase of day rates and potential early termination fees, and the extension of contract terms.

As of the filing of this report, the Company’s drilling rig commitments totaled $ 30.3 million under contract terms extending through the second quarter of 2024.

During the six months ended June 30, 2023, and through the filing of this report, the Company amended certain of its drilling rig contracts to extend contract terms, which resulted in changes to day rates and potential early termination fees.

As of the filing of this report, the Company’s drilling rig commitments totaled $ 27.0 million under contract terms extending through the third quarter of 2024.

If all of these contracts were terminated as of the filing of this report, the Company would avoid a portion of the contractual service commitments;

however, the Company would be required to pay $ 18.7 million in early termination fees.

No early termination penalties or standby fees were incurred by the Company during the three months ended

March 31, 2023, and the Company does not expect to incur material penalties with regard to its drilling rig contracts during the remainder of 2023.

No early termination penalties or standby fees were incurred by the Company during the six months ended June 30, 2023, and the Company does not expect to incur material penalties with regard to its drilling rig contracts during the remainder of 2023.

Contingencies

4 unchanged sentences

Summary of Oil, Gas, and NGL Derivative Contracts in Place

The Company regularly enters into commodity derivative contracts to mitigate a portion of its exposure to oil, gas, and NGL price volatility and location differentials, and the associated impact on cash flows.

As of March 31, 2023, and through the filing of this report, all contracts were entered into for other-than-trading purposes.

All commodity derivative contracts that the Company enters into are for other-than-trading purposes.

The Company’s commodity derivative contracts consist of price swap and collar arrangements for oil and gas production, and price swap arrangements for NGL production.

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The Company has entered into fixed price oil and gas basis swaps in order to mitigate exposure to adverse pricing differentials between certain industry benchmark prices and the actual physical pricing points where the Company’s production is sold.

As of March 31, 2023, the Company had basis swap contracts with fixed price differentials between:

• NYMEX WTI and Argus WTI Midland for a portion of its Midland Basin oil production with sales contracts that settle at Argus WTI Midland prices;

• NYMEX WTI and Argus WTI Houston Magellan East Houston Terminal (“MEH”) for a portion of its South Texas oil production with sales contracts that settle at Argus WTI Houston MEH (“WTI Houston MEH”) prices;

• NYMEX HH and Inside FERC Houston Ship Channel (“IF HSC”) for a portion of its South Texas gas production with sales contracts that settle at IF HSC prices;

As of June 30, 2023, the Company had basis swap contracts with fixed price differentials between:

• NYMEX WTI and Argus WTI Midland (“WTI Midland”) for a portion of its Midland Basin oil production with sales contracts that settle at WTI Midland prices;

• NYMEX WTI and Argus WTI Houston Magellan East Houston Terminal (“WTI Houston MEH”) for a portion of its South Texas oil production with sales contracts that settle at WTI Houston MEH prices;

• NYMEX Henry Hub (“NYMEX HH”) and Inside FERC Houston Ship Channel (“IF HSC”) for a portion of its South Texas gas production with sales contracts that settle at IF HSC prices;

• NYMEX HH and Inside FERC West Texas (“IF Waha”) for a portion of its Midland Basin gas production with sales contracts that settle at IF Waha prices.

1 unchanged sentence

The weighted-average fixed price differential represents the amount of net addition (reduction) to delivery month prices for the notional volumes covered by the swap contracts.

As of March 31, 2023, the Company had commodity derivative contracts outstanding through the fourth quarter of 2025 as summarized in the table below:

As of June 30, 2023, the Company had commodity derivative contracts outstanding through the fourth quarter of 2025 as summarized in the table below:

Contract Period

Second Quarter 2023 Third Quarter 2023 Fourth Quarter 2023 2024 2025

Third Quarter 2023 Fourth Quarter 2023 2024 2025

Oil Derivatives (volumes in MBbl and prices in $ per Bbl):

8 unchanged sentences

WTI Midland-NYMEX WTI Volumes

1,414 1,294 2,961 —

Weighted-Average Contract Price $ 0.88 $ 0.88 $ 1.17 $ —

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Weighted-Average Contract Price $ 36.67 $ 36.66 $ — $ —

Commodity Derivative Contracts Entered Into Subsequent to March 31, 2023

Subsequent to March 31, 2023, the Company entered into NYMEX WTI price swap contracts for the fourth quarter of 2023 for a total of 0.3 MMBbl of oil production at a contract price of $ 77.00 per Bbl and NYMEX HH price swap contracts for 2025 for a total of 5,891 BBtu of gas production at a weighted-average contract price of $ 4.20 per MMBtu.

Commodity Derivative Contracts Entered Into Subsequent to June 30, 2023

Subsequent to June 30, 2023, and through July 21, 2023, the Company entered into the following commodity derivative contracts:

• NYMEX WTI oil collar contracts for the first and second quarters of 2024 for a total of 0.6 MMBbl of oil production at a weighted-average floor price of $ 62.38 per Bbl and a weighted-average ceiling price of $ 76.51 per Bbl;

• WTI Midland-NYMEX WTI basis swap contracts for 2024 for a total of 0.9 MMBbl of oil production at a contract price of $ 1.35 per Bbl;

• WTI Houston MEH-NYMEX WTI basis swap contract for 2024 for a total of 0.3 MMBbl of oil production at a contract price of $ 1.75 per Bbl;

• IF HSC-NYMEX HH basis swap contracts for 2024 for a total of 4,780 BBtu of gas production at a weighted-average contract price of $( 0.15 ) per MMBtu.

Derivative Assets and Liabilities Fair Value

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The Company does not designate its commodity derivative contracts as hedging instruments.

The fair value of the commodity derivative contracts was a net asset of $ 62.1 million and $ 15.8 million as of March 31, 2023, and December 31, 2022, respectively.

The fair value of the commodity derivative contracts was a net asset of $ 58.1 million and $ 15.8 million as of June 30, 2023, and December 31, 2022, respectively.

The following table details the fair value of commodity derivative contracts recorded in the accompanying balance sheets, by category:

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

(in thousands)

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Offsetting of Derivative Assets and Liabilities

As of March 31, 2023, and December 31, 2022, all derivative instruments held by the Company were subject to master netting arrangements with various financial institutions.

As of June 30, 2023, and December 31, 2022, all derivative instruments held by the Company were subject to master netting arrangements with various financial institutions.

In general, the terms of the Company’s agreements provide for offsetting of amounts payable or receivable between it and the counterparty, at the election of both parties, for transactions that settle on the same date and in the same currency.

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Derivative Assets as of Derivative Liabilities as of

2023 December 31, 2022 March 31,

2023 December 31, 2022 June 30,

2023 December 31, 2022

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The following table summarizes the commodity components of the derivative settlement (gain) loss, and the net derivative (gain) loss line items presented within the accompanying unaudited condensed consolidated statements of cash flows (“accompanying statements of cash flows”) and the accompanying statements of operations, respectively:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 2023 2022

(in thousands)

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Credit Related Contingent Features

As of March 31, 2023, all of the Company’s derivative counterparties were members of the Credit Agreement lender group.

As of June 30, 2023, all of the Company’s derivative counterparties were members of the Credit Agreement lender group.

The Company does not enter into derivative contracts with counterparties that are not part of the lender group.

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The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they are classified within the fair value hierarchy:

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

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The following table reflects the fair value of the Company’s Senior Notes obligations measured using Level 1 inputs based on quoted secondary market trading prices.

These notes were not presented at fair value on the accompanying balance sheets as of March 31, 2023, or December 31, 2022, as they were recorded at carrying value, net of any unamortized deferred financing costs.

These notes were not presented at fair value on the accompanying balance sheets as of June 30, 2023, or December 31, 2022, as they were recorded at carrying value, net of any unamortized deferred financing costs.

Please refer to Note 5 - Long-Term Debt above for additional information.

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

Principal Amount Fair Value Principal Amount Fair Value

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Diluted net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities.

Potentially dilutive securities for this calculation consist primarily of non-vested restricted stock units (“RSUs”) and contingent performance share units (“PSUs”), which were measured using the treasury stock method.

Please refer to Note 7 - Compensation Plans and Note 9 - Earnings Per Share in the 2022 Form 10-K for additional detail on these potentially dilutive securities.

Potentially dilutive securities for this calculation consist primarily of non-vested restricted stock units (“RSU” or “RSUs”) and contingent performance share units (“PSU” or “PSUs”), which were measured using the treasury stock method.

Please refer to Note 10 - Compensation Plans in this report and Note 9 - Earnings Per Share in the 2022 Form 10-K for additional detail on these potentially dilutive securities.

The following table sets forth the calculations of basic and diluted net income per common share:

For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

(in thousands, except per share data)

2 unchanged sentences

Dilutive effect of non-vested RSUs, contingent PSUs, and other

666 2,433 642 2,358

Diluted weighted-average common shares outstanding 120,074 124,343 121,175 124,267

1 unchanged sentence

Diluted net income per common share $ 1.25 $ 2.60 $ 2.88 $ 3.00

Note 10 - Compensation Plans

The Company may grant various types of both short-term and long-term incentive-based awards under its compensation plans, such as cash awards, performance-based cash awards, and equity awards to eligible employees.

Additionally, the Company grants stock-based compensation to its Board of Directors and provides an employee stock purchase plan.

As of June 30, 2023, approximately 3.7 million shares of common stock were available for grant under the Company’s Equity Incentive Compensation Plan (“Equity Plan”).

Performance Share Units

The Company has granted PSUs to eligible employees as part of its Equity Plan.

The number of shares of the Company’s common stock issued to settle PSUs ranges from zero to two times the number of PSUs awarded and is determined based on certain criteria over a three -year performance period.

PSUs generally vest on the third anniversary of the date of the grant or upon other triggering events as set forth in the Equity Plan.

For PSUs granted in 2022 and 2023, which the Company determined to be equity awards, settlement will be determined based on a combination of the following criteria measured over the three -year performance period:

the Company’s Total Shareholder Return (“TSR”) relative to the TSR of certain peer companies, the Company’s absolute TSR, free cash flow (“FCF”) generation, and the achievement of certain ESG targets, in each case as defined by the award agreement.

The Company initially records compensation expense associated with the issuance of PSUs based on the fair value of the awards as of the grant date.

As a portion of these awards depends on performance-based settlement criteria, compensation expense may be adjusted in future periods as the expected number of shares of the Company’s common stock issued to settle the units increases or decreases based on the Company’s expected FCF generation and achievement of certain ESG targets.

Compensation expense for PSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards.

Total compensation expense recorded for PSUs was $ 0.2 million and $ 0.7 million for the three months ended June 30, 2023, and 2022, respectively, and $ 0.8 million and $ 1.4 million for the six months ended June 30, 2023, and 2022, respectively.

As of June 30, 2023, there was $ 4.1 million of total unrecognized compensation expense related to non-vested PSUs, which is being amortized through mid-2025.

There were no material changes to the outstanding and non-vested PSUs during the six months ended June 30, 2023.

Subsequent to June 30, 2023, the Company granted a total of 256,633 PSUs with a grant date fair value of $ 7.7 million.

Restricted Stock Units

The Company has granted RSUs to eligible employees as part of its Equity Plan.

Each RSU represents a right to receive one share of the Company’s common stock upon settlement of the award at the end of the specified vesting period.

RSUs generally vest in one-third increments on each anniversary date of the grant over the applicable vesting period or upon other triggering events as set forth in the Equity Plan.

The Company records compensation expense associated with the issuance of RSUs based on the fair value of the awards as of the date of grant.

The fair value of an RSU is equal to the closing price of the Company’s common stock on the date of the grant.

Compensation expense for RSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards.

Total compensation expense recorded for RSUs was $ 3.4 million and $ 3.2 million for the three months ended June 30, 2023, and 2022, respectively, and $ 6.7 million and $ 6.5 million for the six months ended June 30, 2023, and 2022, respectively.

As of June 30, 2023, there was $ 17.4 million of total unrecognized compensation expense related to non-vested RSUs, which is being amortized through January 2026.

There were no material changes to the outstanding and non-vested RSUs during the six months ended June 30, 2023.

Subsequent to June 30, 2023, the Company settled RSUs upon the vesting of awards granted in previous years.

The Company and a majority of eligible recipients mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings, as provided for in the Equity Plan and applicable award agreements.

After withholding 248,963 shares to satisfy income and payroll tax withholding obligations, the Company issued 553,442 shares of common stock in accordance with the terms of the applicable award agreements.

Additionally, the Company granted to employees a total of 591,361 RSUs with a grant date fair value of $ 18.7 million.

Director Shares

During the second quarters of 2023, and 2022, the Company issued a total of 56,872 and 29,471 shares, respectively, of its common stock as compensation to its non-employee directors under the Equity Plan.

Shares issued during 2023 will fully vest on December 31, 2023, and shares issued during 2022 fully vested on December 31, 2022.

Employee Stock Purchase Plan

Under the Company’s Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15 percent of eligible compensation, subject to a maximum of 2,500 shares per offering period and a maximum of $ 25,000 in value related to purchases for each calendar year.

The purchase price of the common stock is 85 percent of the lower of the trading price of the common stock on either the first or last day of the six-month offering period.

The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

There were a total of 68,210 and 65,634 shares issued under the ESPP during the second quarters of 2023, and 2022, respectively.

Total proceeds to the Company for the issuance of these shares was $ 1.8 million and $ 1.6 million for the six months ended June 30, 2023, and 2022, respectively.

The fair value of ESPP grants is measured at the date of grant using the Black-Scholes option-pricing model.

Please refer to Note 7 - Compensation Plans in the 2022 Form 10-K for additional detail on the Company’s compensation plans.

Note 11 - Acquisitions

On June 30, 2023 , the Company acquired approximately 20,000 net acres of oil and gas properties located in Dawson and northern Martin Counties, Texas.

Total consideration paid after purchase price adjustments was $ 88.8 million.

Under authoritative accounting guidance, this transaction was considered to be an asset acquisition.

Therefore, the properties were recorded based on the total consideration paid after purchase price adjustments and the transaction costs were capitalized as a component of the cost of the assets acquired.

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-Q

Item 1. Financial Statements