SM Energy Co 10-Q

ITEM 1. FINANCIAL STATEMENTS SM ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share data) September 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 1,735,313 $ 616,164 Accounts receivable 226,604 231,165 Derivative assets 72,287 56,442 Prepaid expenses and other 10,224 12,668 Total current assets 2,044,428 916,439 Property and equipment (successful efforts method): Proved oil and gas properties 12,501,494 11,477,358 Accumulated depletion, depreciation, and amortization ( 7,370,881 ) ( 6,830,253 ) Unproved oil and gas properties, net of valuation allowance of $ 33,095 and $ 35,362 , respectively 287,311 335,620 Wells in progress 291,197 358,080 Other property and equipment, net of accumulated depreciation of $ 62,435 and $ 59,669 , respectively 45,149 35,615 Total property and equipment, net 5,754,270 5,376,420 Noncurrent assets: Acquisition deposit held in escrow 102,000 — Derivative assets 11,584 8,672 Other noncurrent assets 115,490 78,454 Total noncurrent assets 229,074 87,126 Total assets $ 8,027,772 $ 6,379,985 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 560,839 $ 611,598 Derivative liabilities 2,401 6,789 Other current liabilities 17,859 15,425 Total current liabilities 581,099 633,812 Noncurrent liabilities: Revolving credit facility — — Senior Notes, net 2,706,700 1,575,334 Asset retirement obligations 125,327 118,774 Net deferred tax liabilities 467,459 369,903 Derivative liabilities 448 1,273 Other noncurrent liabilities 85,193 65,039 Total noncurrent liabilities 3,385,127 2,130,323 Commitments and contingencies (note 6) Stockholders’ equity: Common stock, $ 0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 114,418,413 and 115,745,393 shares, respectively 1,144 1,157 Additional paid-in capital 1,492,778 1,565,021 Retained earnings 2,570,108 2,052,279 Accumulated other comprehensive loss ( 2,484 ) ( 2,607 ) Total stockholders’ equity 4,061,546 3,615,850 Total liabilities and stockholders’ equity $ 8,027,772 $ 6,379,985 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 SM ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 Operating revenues and other income: Oil, gas, and NGL production revenue $ 642,380 $ 639,699 $ 1,835,427 $ 1,757,032 Other operating income, net 1,233 1,202 2,611 8,128 Total operating revenues and other income 643,613 640,901 1,838,038 1,765,160 Operating expenses: Oil, gas, and NGL production expense 148,380 138,264 422,377 426,200 Depletion, depreciation, amortization, and asset retirement obligation liability accretion 202,942 189,353 548,781 501,374 Exploration 12,097 10,245 47,772 43,633 General and administrative 35,141 29,255 96,431 84,424 Net derivative (gain) loss ( 86,283 ) 75,355 ( 70,256 ) 12,352 Other operating expense, net 384 2,832 4,206 20,182 Total operating expenses 312,661 445,304 1,049,311 1,088,165 Income from operations 330,952 195,597 788,727 676,995 Interest expense ( 50,682 ) ( 23,106 ) ( 94,362 ) ( 67,713 ) Interest income 18,017 4,106 31,120 13,802 Other non-operating expense ( 637 ) ( 233 ) ( 684 ) ( 696 ) Income before income taxes 297,650 176,364 724,801 622,388 Income tax (expense) benefit ( 57,127 ) 45,979 ( 142,786 ) ( 51,619 ) Net income $ 240,523 $ 222,343 $ 582,015 $ 570,769 Basic weighted-average common shares outstanding 114,405 117,823 114,870 119,589 Diluted weighted-average common shares outstanding 114,993 118,328 115,701 120,165 Basic net income per common share $ 2.10 $ 1.89 $ 5.07 $ 4.77 Diluted net income per common share $ 2.09 $ 1.88 $ 5.03 $ 4.75 Net dividends declared per common share $ 0.20 $ 0.15 $ 0.56 $ 0.45 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 SM ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (in thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 Net income $ 240,523 $ 222,343 $ 582,015 $ 570,769 Other comprehensive income, net of tax: Pension liability adjustment 108 14 123 40 Total other comprehensive income, net of tax 108 14 123 40 Total comprehensive income $ 240,631 $ 222,357 $ 582,138 $ 570,809 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 SM ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (in thousands, except share data and dividends per share) Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Stockholders’ Equity Common Stock Retained Earnings Shares Amount Balances, December 31, 2023 115,745,393 $ 1,157 $ 1,565,021 $ 2,052,279 $ ( 2,607 ) $ 3,615,850 Net income — — — 131,199 — 131,199 Other comprehensive income — — — — 8 8 Net cash dividends declared, $ 0.18 per share — — — ( 20,707 ) — ( 20,707 ) Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings 1,147 — ( 22 ) — — ( 22 ) Stock-based compensation expense 1,839 — 5,018 — — 5,018 Purchase of shares under Stock Repurchase Program ( 712,235 ) ( 7 ) ( 33,088 ) — — ( 33,095 ) Balances, March 31, 2024 115,036,144 $ 1,150 $ 1,536,929 $ 2,162,771 $ ( 2,599 ) $ 3,698,251 Net income — — — 210,293 — 210,293 Other comprehensive income — — — — 7 7 Net cash dividends declared, $ 0.18 per share — — — ( 20,532 ) — ( 20,532 ) Issuance of common stock under Employee Stock Purchase Plan 56,006 1 1,843 — — 1,844 Stock-based compensation expense 35,691 1 5,787 — — 5,788 Purchase of shares under Stock Repurchase Program ( 1,058,956 ) ( 11 ) ( 51,700 ) — — ( 51,711 ) Balances, June 30, 2024 114,068,885 $ 1,141 $ 1,492,859 $ 2,352,532 $ ( 2,592 ) $ 3,843,940 Net income — — — 240,523 — 240,523 Other comprehensive income — — — — 108 108 Net cash dividends declared, $ 0.20 per share — — — ( 22,947 ) — ( 22,947 ) Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings 349,528 3 ( 6,819 ) — — ( 6,816 ) Stock-based compensation expense — — 6,587 — — 6,587 Purchase of shares under Stock Repurchase Program — — 151 — — 151 Balances, September 30, 2024 114,418,413 $ 1,144 $ 1,492,778 $ 2,570,108 $ ( 2,484 ) $ 4,061,546 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 SM ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (Continued) (in thousands, except share data and dividends per share) Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Stockholders’ Equity Common Stock Retained Earnings Shares Amount Balances, December 31, 2022 121,931,676 $ 1,219 $ 1,779,703 $ 1,308,558 $ ( 4,022 ) $ 3,085,458 Net income — — — 198,552 — 198,552 Other comprehensive income — — — — 13 13 Net cash dividends declared, $ 0.15 per share — — — ( 18,078 ) — ( 18,078 ) Stock-based compensation expense — — 4,318 — — 4,318 Purchase of shares under Stock Repurchase Program ( 1,413,758 ) ( 14 ) ( 40,454 ) — — ( 40,468 ) 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 Net 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 Net income — — — 222,343 — 222,343 Other comprehensive income — — — — 14 14 Net cash dividends declared, $ 0.15 per share — — — ( 17,543 ) — ( 17,543 ) Issuance of common stock under Employee Stock Purchase Plan ( 18 ) — — — — — Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings 553,442 6 ( 7,881 ) — — ( 7,875 ) Stock-based compensation expense — — 6,038 — — 6,038 Purchase of shares under Stock Repurchase Program ( 2,351,642 ) ( 24 ) ( 97,127 ) — — ( 97,151 ) Balances, September 30, 2023 116,313,887 $ 1,163 $ 1,581,110 $ 1,826,002 $ ( 3,982 ) $ 3,404,293 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 SM ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) For the Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net income $ 582,015 $ 570,769 Adjustments to reconcile net income to net cash provided by operating activities: Depletion, depreciation, amortization, and asset retirement obligation liability accretion 548,781 501,374 Stock-based compensation expense 17,393 14,519 Net derivative (gain) loss ( 70,256 ) 12,352 Net derivative settlement gain 46,288 20,398 Amortization of deferred financing costs 4,925 4,114 Deferred income taxes 116,522 43,171 Other, net ( 25,590 ) ( 11,489 ) Net change in working capital ( 15,433 ) ( 57,329 ) Net cash provided by operating activities 1,204,645 1,097,879 Cash flows from investing activities: Capital expenditures ( 957,156 ) ( 766,756 ) Acquisition of proved and unproved oil and gas properties ( 836 ) ( 109,318 ) Other, net 80 657 Net cash used in investing activities ( 957,912 ) ( 875,417 ) Cash flows from financing activities: Debt issuance costs related to credit facility ( 2,378 ) — Net proceeds from Senior Notes 1,477,032 — Cash paid to repurchase Senior Notes ( 349,118 ) — Repurchase of common stock ( 83,991 ) ( 205,246 ) Dividends paid ( 62,136 ) ( 54,167 ) Net proceeds from sale of common stock 1,844 1,815 Net share settlement from issuance of stock awards ( 6,837 ) ( 7,882 ) Net cash provided by (used in) financing activities 974,416 ( 265,480 ) Net change in cash, cash equivalents, and restricted cash 1,221,149 ( 43,018 ) Cash, cash equivalents, and restricted cash at beginning of period 616,164 444,998 Cash, cash equivalents, and restricted cash at end of period $ 1,837,313 $ 401,980 The accompanying notes are an integral part of these condensed consolidated financial statements. 9 SM ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued) (in thousands) For the Nine Months Ended September 30, 2024 2023 Supplemental schedule of additional cash flow information and non-cash activities: Operating activities: Cash paid for interest, net of capitalized interest (1) $ ( 83,130 ) $ ( 77,514 ) Net cash paid for income taxes $ ( 7,623 ) $ ( 6,176 ) Investing activities: Changes in capital expenditure accruals $ ( 33,187 ) $ 35,683 Non-cash financing activities (2) Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 1,735,313 $ 401,980 Restricted cash (3) 102,000 — Cash, cash equivalents, and restricted cash at end of period $ 1,837,313 $ 401,980 ____________________________________________ (1) Cash paid for interest, net of capitalized interest during the nine months ended September 30, 2024, does not include $ 9.0 million in fees paid to secure firm commitments for senior unsecured bridge term loans in connection with the Uinta Basin Acquisition discussed and defined in Note 11 - Acquisitions . (2) Please refer to Note 5 - Long-Term Debt for discussion of the debt transactions executed during the nine months ended September 30, 2024. (3) Represents a deposit held in a third-party escrow account related to the Uinta Basin Acquisition, as defined in Note 11 - Acquisitions, and is included in the acquisition deposit held in escrow line item on the accompanying unaudited condensed consolidated balance sheets (“accompanying balance sheets”). Please refer to Note 11 - Acquisitions for additional discussion. The accompanying notes are an integral part of these condensed consolidated financial statements. 10 SM ENERGY COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Summary of Significant Accounting Policies Description of Operations SM Energy Company, together with its consolidated subsidiaries (“SM Energy” or the “Company”), is an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in the state of Texas, and following the closing of the Uinta Basin Acquisition on October 1, 2024, in the state of Utah. Please refer to Note 11 - Acquisitions for discussion and the definition of the Uinta Basin Acquisition. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Regulation S-X. These financial statements do not include all information and notes required by GAAP for annual financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the 2023 Form 10-K . In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of interim financial information, have been included. 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 September 30, 2024, 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. Significant Accounting Policies The significant accounting policies followed by the Company are set forth in Note 1 - Summary of Significant Accounting Policies in the 2023 Form 10-K and are supplemented by the notes to the unaudited condensed consolidated financial statements included in this report. These unaudited condensed consolidated financial statements should be read in conjunction with the 2023 Form 10-K . Recently Issued Accounting Guidance Accounting Standards Updates. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) . ASU 2023-07 was issued to improve the disclosures about a public entity’s reportable segments and to provide additional, more detailed information about a reportable segment’s expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied on a retrospective basis to all prior periods presented in the financial statements. The Company is within the scope of this ASU and expects to adopt ASU 2023-07 and related guidance on December 31, 2024. Adoption of ASU 2023-07 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) . ASU 2023-09 was issued to improve the disclosures primarily related to rate reconciliations and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied on a prospective basis; however, retrospective application is permitted. The Company is within the scope of this ASU and expects to adopt ASU 2023-09 on January 1, 2025, on a prospective basis. Adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. SEC Final Rule to Enhance and Standardize Climate-Related Disclosures. On March 6, 2024, the SEC adopted final rules to require registrants to disclose certain climate-related information in registration statements and annual reports. On April 4, 2024, the SEC issued an order staying the final rules pending completion of judicial review of the petitions challenging the final rules. The order does not amend the compliance dates contemplated by the final rules, which are applicable to the Company for fiscal years beginning with the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2025. The Company is currently evaluating the potential impact of the final rules on its financial statements and related disclosures. As of September 30, 2024, and through the filing of this report, no other accounting guidance has been issued and not yet adopted that is applicable to the Company and that would have a material effect on the Company’s unaudited condensed consolidated financial statements and related disclosures. 11 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”) 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: Midland Basin South Texas Total Three Months Ended September 30, Three Months Ended September 30, Three Months Ended September 30, 2024 2023 2024 2023 2024 2023 (in thousands) Oil production revenue $ 386,915 $ 369,858 $ 144,912 $ 129,376 $ 531,827 $ 499,234 Gas production revenue 19,265 45,215 31,290 36,592 50,555 81,807 NGL production revenue 176 175 59,822 58,483 59,998 58,658 Total $ 406,356 $ 415,248 $ 236,024 $ 224,451 $ 642,380 $ 639,699 Relative percentage 63 % 65 % 37 % 35 % 100 % 100 % Midland Basin South Texas Total Nine Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 2024 2023 (in thousands) Oil production revenue $ 1,097,936 $ 992,867 $ 407,339 $ 350,598 $ 1,505,275 $ 1,343,465 Gas production revenue 82,636 131,804 80,948 113,461 163,584 245,265 NGL production revenue 394 563 166,174 167,739 166,568 168,302 Total $ 1,180,966 $ 1,125,234 $ 654,461 $ 631,798 $ 1,835,427 $ 1,757,032 Relative percentage 64 % 64 % 36 % 36 % 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 may differ depending on the applicable contractual terms. Transfer of control determines 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 may be 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. However, settlement statements from the purchasers of hydrocarbons and the related cash consideration are received 30 to 90 days after production has occurred. As a result, the Company must estimate the amount of production delivered to the customer and the consideration that will ultimately be received for sale of the product. Estimated revenue due to the Company is recorded within the accounts receivable line item on the accompanying balance sheets until payment is received. The accounts receivable balances from contracts with customers within the accompanying balance sheets as of September 30, 2024, and December 31, 2023, were $ 173.1 million and $ 175.3 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. Differences between estimates and actual amounts received for product sales are recorded in the month that payment is received from the purchaser. 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. Note 3 - Equity Stock Repurchase Program During the second quarter of 2024, the Company’s Board of Directors re-authorized the Company’s existing stock repurchase program to re-establish the Company’s authorization to repurchase up to $ 500.0 million in aggregate value of its common stock through December 31, 2027 (“Stock Repurchase Program”). The Stock Repurchase Program permits the Company to repurchase shares of its 12 common stock from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws and subject to certain provisions of the Credit Agreement and the indentures governing the Senior Notes, as defined in Note 5 - Long-Term Debt . Please refer to Note 3 - Equity in the 2023 Form 10-K for additional information regarding the Company’s Stock Repurchase Program. The following table presents activity under the Company’s Stock Repurchase Program: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands, except per share data) Shares of common stock repurchased (1) — 2,352 1,771 6,316 Weighted-average price per share (2) $ — $ 40.97 $ 47.40 $ 32.48 Cost of shares of common stock repurchased (2) (3) $ — $ 96,336 $ 83,955 $ 205,120 ____________________________________________ (1) All repurchased shares of the Company’s common stock were retired upon repurchase. (2) Amounts exclude excise taxes, commissions, and fees. (3) Amounts may not calculate due to rounding. As of September 30, 2024, $ 500.0 million remained available for repurchases of the Company’s outstanding common stock through December 31, 2027 , under the Stock Repurchase Program. Note 4 - Income Taxes The provision for income taxes consisted of the following: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Current portion of income tax expense: Federal $ ( 10,201 ) $ ( 3,923 ) $ ( 23,675 ) $ ( 6,732 ) State ( 1,311 ) ( 1,173 ) ( 2,589 ) ( 1,716 ) Deferred portion of income tax (expense) benefit ( 45,615 ) 51,075 ( 116,522 ) ( 43,171 ) Income tax (expense) benefit $ ( 57,127 ) $ 45,979 $ ( 142,786 ) $ ( 51,619 ) Effective tax rate 19.2 % ( 26.1 ) % 19.7 % 8.3 % Income tax expense or benefit differs from the amount that would be calculated by applying the statutory United States federal income tax rate to income or loss before income taxes. These differences primarily relate to the effect of federal tax credits, state income taxes, excess tax benefits and deficiencies from stock-based compensation awards, tax deduction limitations on 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 completed a multi-year research and development (“R&D”) credit study in 2023, which resulted in a favorable adjustment to the Company’s effective tax rate for the three and nine months ended September 30, 2023. The effective tax rates for the three and nine months ended September 30, 2024, reflect the benefit of current R&D credits claimed. The Company expects favorable adjustments to the Company’s effective tax rate to continue in the fourth quarter of 2024 resulting from qualifying R&D activity and anticipated credit claims. The Company complies with authoritative accounting guidance regarding uncertain tax positions. The entire amount of unrecognized tax benefit reported by the Company would affect its effective tax rate if recognized. The Company does not expect a significant change to the recorded unrecognized tax benefits in 2024, except for any potential changes related to the Company’s 2024 R&D credit claims. 13 For all years before 2020, the Company is generally no longer subject to United States federal or state income tax examinations by tax authorities. Note 5 - Long-Term Debt Credit Agreement The Company’s Credit Agreement provides for a senior secured revolving credit facility with a maximum loan amount of $ 3.0 billion, and as of September 30, 2024, the borrowing base and aggregate lender commitments under the Credit Agreement were $ 2.5 billion and $ 1.25 billion, respectively. Prior to the Second Amendment, as defined and discussed below, commitment fees on the unused portion of the aggregate lender commitment amount were accrued at rates from the borrowing base utilization grid set forth in the Credit Agreement, as presented in Note 5 - Long-Term Debt in the 2023 Form 10-K . The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement as of September 30, 2024, and December 31, 2023: As of September 30, 2024 As of December 31, 2023 (in thousands) Revolving credit facility (1) $ — $ — Letters of credit (2) 2,000 2,500 Available borrowing capacity 1,248,000 1,247,500 Total aggregate lender commitment amount $ 1,250,000 $ 1,250,000 ____________________________________________ (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 $ 8.9 million and $ 8.5 million as of September 30, 2024, and December 31, 2023, 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. First Amendment . On July 2, 2024, the Company and its lenders entered into the First Amendment to the Credit Agreement (“First Amendment”) to amend certain provisions of the Credit Agreement to facilitate financing for the Uinta Basin Acquisition, as defined in Note 11 - Acquisitions . Second Amendment . On October 1, 2024, the Company and its lenders entered into the Second Amendment to the Credit Agreement (“Second Amendment”) in conjunction with the closing of the Uinta Basin Acquisition, as defined in Note 11 - Acquisitions, to, among other things: (i) increase the aggregate revolving lender commitments available under the Credit Agreement from $ 1.25 billion to $ 2.0 billion; (ii) extend the maturity date of the Credit Agreement; and (iii) modify certain other provisions reflective of the increased aggregate revolving lender commitments, increased Company size and scale, and extended maturity date. The Credit Agreement is scheduled to mature on the earlier of (a) October 1, 2029 (“Stated Maturity Date”), or (b) 91 days prior to the maturity date of any of the Company’s outstanding Senior Notes, as defined below, to the extent that, on or before such date, the respective Senior Notes in an amount exceeding $ 50.0 million have not been repaid, exchanged, repurchased, refinanced, or otherwise redeemed in full, and, if refinanced or exchanged, with a scheduled maturity date that is not earlier than at least 180 days after the Stated Maturity Date. Under the Second Amendment, interest and commitment fees associated with the revolving credit facility are accrued based on a total revolving commitments utilization grid set forth in the Second Amendment, and as presented in the table below. At the Company’s election, borrowings under the Credit Agreement may be in the form of Secured Overnight Financing Rate (“SOFR”) revolving loans, Alternate Base Rate (“ABR”) revolving loans, or Swingline loans. SOFR revolving loans accrue interest at SOFR plus the applicable margin from the utilization grid, and ABR revolving loans and Swingline loans accrue interest at a market-based floating rate, plus the applicable margin from the utilization grid. Commitment fees are accrued on the unused portion of the aggregate revolving lender commitment amount at rates from the utilization grid. Total Revolving Commitments Utilization Percentage <25% ≥25% <50% ≥50% <75% ≥75% <90% ≥90% SOFR Revolving Loans 1.750 % 2.000 % 2.250 % 2.500 % 2.750 % ABR Revolving Loans or Swingline Loans 0.750 % 1.000 % 1.250 % 1.500 % 1.750 % Commitment Fee Rate 0.375 % 0.375 % 0.500 % 0.500 % 0.500 % 14 The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement as of October 24, 2024: As of October 24, 2024 (in thousands) Revolving credit facility $ 159,000 Letters of credit (1) 2,000 Available borrowing capacity 1,839,000 Total aggregate lender revolving commitment amount $ 2,000,000 ____________________________________________ (1) Letters of credit outstanding reduce the amount available under the revolving credit facility on a dollar-for-dollar basis. On October 11, 2024, the Company’s lenders completed the semi-annual borrowing base redetermination, which resulted in an increase to the Company’s borrowing base to $ 3.0 billion and reaffirmed the aggregate revolving lender commitment at the existing amount of $ 2.0 billion. The next borrowing base redetermination date is scheduled to occur on April 1, 2025. Senior Notes The Company’s Senior Notes, net line item on the accompanying balance sheets as of September 30, 2024, and December 31, 2023, consisted of the following (collectively referred to as “Senior Notes”): As of September 30, 2024 As of December 31, 2023 Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net (in thousands) 5.625 % Senior Notes due 2025 $ — $ — $ — $ 349,118 $ 896 $ 348,222 6.75 % Senior Notes due 2026 419,235 1,343 417,892 419,235 1,868 417,367 6.625 % Senior Notes due 2027 416,791 1,813 414,978 416,791 2,395 414,396 6.5 % Senior Notes due 2028 400,000 3,890 396,110 400,000 4,651 395,349 6.75 % Senior Notes due 2029 750,000 11,061 738,939 — — — 7.0 % Senior Notes due 2032 750,000 11,219 738,781 — — — Total $ 2,736,026 $ 29,326 $ 2,706,700 $ 1,585,144 $ 9,810 $ 1,575,334 On July 25, 2024 , the Company issued $ 750.0 million in aggregate principal amount of its 6.75 % Senior Notes at par with a maturity date of August 1, 2029 (“2029 Senior Notes”). The Company received net proceeds of $ 738.5 million after deducting fees of $ 11.5 million, which are being amortized as deferred financing costs over the life of the 2029 Senior Notes. Also on July 25, 2024 , the Company issued $ 750.0 million in aggregate principal amount of its 7.0 % Senior Notes at par with a maturity date of August 1, 2032 (“2032 Senior Notes”). The Company received net proceeds of $ 738.5 million after deducting fees of $ 11.5 million, which are being amortized as deferred financing costs over the life of the 2032 Senior Notes. On August 26, 2024 (“Redemption Date”), the Company redeemed the $ 349.1 million of aggregate principal amount outstanding of its 5.625 % Senior Notes due June 1, 2025 (“2025 Senior Notes”), pursuant to the terms of the indenture governing the 2025 Senior Notes which provided for a redemption price equal to 100 percent of the principal amount outstanding of the 2025 Senior Notes on the Redemption Date, plus accrued and unpaid interest. Upon redemption, the Company recorded a loss on extinguishment of debt of $ 0.5 million related to the accelerated expense recognition of the remaining unamortized deferred financing costs. The Company canceled all redeemed 2025 Senior Notes upon settlement. The Senior Notes are unsecured senior obligations and rank equal in right of payment with all of the Company’s existing and any future unsecured senior debt and are senior in right of payment to any future subordinated debt. The Company may redeem some or all of its Senior Notes prior to their maturity at redemption prices that may include a premium, plus accrued and unpaid interest as described in the indentures governing the Senior Notes. Covenants 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 15 payments including dividends, sell assets, create liens that secure debt, enter into transactions with affiliates, make certain investments, or merge or consolidate with other entities. The Company was in compliance with all financial and non-financial covenants as of September 30, 2024, and through the filing of this report. Please refer to Note 5 - Long-Term Debt in the 2023 Form 10-K , the First Amendment to the Credit Agreement, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2024, and the Second Amendment to the Credit Agreement, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 2, 2024, 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 September 30, 2024, and 2023, totaled $ 5.4 million and $ 4.9 million, respectively, and totaled $ 17.6 million and $ 16.3 million for the nine months ended September 30, 2024, and 2023, 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. Capitalized interest costs are included in total costs incurred. Note 6 - Commitments and Contingencies Commitments Other than those items discussed below, there have been no changes in commitments through the filing of this report that differ materially from those disclosed in the 2023 Form 10-K . Drilling Rig Service Contracts . During the nine months ended September 30, 2024, the Company entered into new drilling rig contracts. As of September 30, 2024, the Company’s drilling rig commitments totaled $ 19.2 million under contract terms extending through the second quarter of 2025. If all of the drilling rig contracts were terminated as of September 30, 2024, the Company would avoid a portion of the contractual service commitments; however, the Company would be required to pay $ 10.4 million in early termination fees. No early termination penalties or standby fees were incurred by the Company during the nine months ended September 30, 2024, and the Company does not expect to incur material penalties with regard to its drilling rig contracts during the remainder of 2024. Drilling and Completion Commitments . During the nine months ended September 30, 2024, the Company entered into an agreement that includes minimum drilling and completion footage requirements on certain existing leases. If these minimum requirements are not satisfied by March 31, 2026, the Company will be required to pay liquidated damages based on the difference between the actual footage drilled and completed and the minimum requirements. As of September 30, 2024, the liquidated damages could range from zero to a maximum of $ 55.0 million, with the maximum exposure assuming no additional development activity occurs prior to March 31, 2026. As of the filing of this report, the Company expects to meet its drilling and completion footage obligations under this agreement. Subsequent Events. As part of the Uinta Basin Acquisition, certain contracts and leases containing both short-term and long-term commitments were assigned to the Company effective as of the closing date of October 1, 2024. The Company is evaluating the minimum commitments, terms and conditions, and operational plans related to activities under these contracts and leases, as well as the expected financial statement impact. Please see Note 11 - Acquisitions for discussion and the definition of the Uinta Basin Acquisition. Certain contracts assigned to the Company include material, long-term oil gathering, processing, transportation throughput, and delivery commitments with various third-parties, under which the Company would be required to make periodic deficiency payments for any shortfalls in delivering specified minimum volume commitments. As of October 1, 2024 , if the Company failed to deliver any product under these contracts, the aggregate undiscounted deficiency payments would total approximately $ 135.8 million. One of these contracts does not have a minimum volume commitment associated with it, however, as of October 1, 2024, the Company would owe a cancellation fee of $ 4.9 million if the agreement was terminated. Contingencies The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. As of the filing of this report, in the opinion of management, the anticipated results of any pending litigation and claims are not expected to have a material effect on the results of operations, the financial position, or the cash flows of the Company. 16 Note 7 - Derivative Financial Instruments 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 effect on cash flows. 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. In a typical commodity swap agreement, if the agreed upon published third-party index price (“index price”) is lower than the swap price, the Company receives the difference between the index price and the agreed upon swap price. If the index price is higher than the swap price, the Company pays the difference. For collar arrangements, the Company receives the difference between an agreed upon index price and the floor price if the index price is below the floor price. The Company pays the difference between the agreed upon ceiling price and the index price if the index price is above the ceiling price. No amounts are paid or received if the index price is between the floor and ceiling prices. 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 September 30, 2024, 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 (“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; and • 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. The Company has also entered into oil swap contracts to fix the differential in pricing between the NYMEX calendar month average and the physical crude oil delivery month (“Roll Differential”) in which the Company pays the periodic variable Roll Differential and receives a weighted-average fixed price differential. 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. 17 As of September 30, 2024, the Company had commodity derivative contracts outstanding through the fourth quarter of 2026 as summarized in the table below: Contract Period Fourth Quarter 2024 2025 2026 Oil Derivatives (volumes in MBbl and prices in $ per Bbl): Swaps NYMEX WTI Volumes 1,906 1,973 — Weighted-Average Contract Price $ 74.25 $ 72.36 $ — Collars NYMEX WTI Volumes 1,917 4,515 — Weighted-Average Floor Price $ 69.93 $ 65.69 $ — Weighted-Average Ceiling Price $ 82.27 $ 81.65 $ — Basis Swaps WTI Midland-NYMEX WTI Volumes 1,230 4,556 — Weighted-Average Contract Price $ 1.21 $ 1.18 $ — WTI Houston MEH-NYMEX WTI Volumes 309 2,130 1,546 Weighted-Average Contract Price $ 1.82 $ 1.86 $ 2.02 Roll Differential Swaps NYMEX WTI Volumes 2,334 — — Weighted-Average Contract Price $ 0.66 $ — $ — Gas Derivatives (volumes in BBtu and prices in $ per MMBtu): Swaps NYMEX HH Volumes 1,569 7,321 4,645 Weighted-Average Contract Price $ 3.03 $ 3.97 $ 3.73 IF Waha Volumes — — 1,548 Weighted-Average Contract Price $ — $ — $ 3.26 Collars NYMEX HH Volumes 7,328 29,920 13,438 Weighted-Average Floor Price $ 3.38 $ 3.23 $ 3.25 Weighted-Average Ceiling Price $ 4.97 $ 4.70 $ 4.90 Basis Swaps IF Waha-NYMEX HH Volumes 5,240 20,501 — Weighted-Average Contract Price $ ( 0.73 ) $ ( 0.66 ) $ — IF HSC-NYMEX HH Volumes 5,750 946 — Weighted-Average Contract Price $ ( 0.38 ) $ 0.0025 $ — NGL Derivatives (volumes in MBbl and prices in $ per Bbl): Swaps OPIS Propane Mont Belvieu Non-TET Volumes 434 396 — Weighted-Average Contract Price $ 31.85 $ 32.86 $ — OPIS Normal Butane Mont Belvieu Non-TET Volumes 97 45 — Weighted-Average Contract Price $ 39.84 $ 39.48 $ — OPIS Isobutane Mont Belvieu Non-TET Volumes 28 25 — Weighted-Average Contract Price $ 41.58 $ 41.58 $ — 18 Commodity Derivative Contracts Entered Into Subsequent to September 30, 2024 Subsequent to September 30, 2024, and through the filing of this report, the Company entered into the following commodity derivative contracts: • NYMEX WTI price swap contracts for the first through third quarters of 2025 for a total of 1.9 MMBbl of oil production at a weighted-average contract price of $ 71.72 per Bbl; and • NYMEX HH price swap contract for the second quarter of 2026 for a total of 1,430 BBtu of gas production at a weighted-average contract price of $ 3.25 per MMBtu. Derivative Assets and Liabilities Fair Value The Company’s commodity derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities, with the exception of derivative instruments that meet the “normal purchase normal sale” exclusion. The Company does not designate its commodity derivative contracts as hedging instruments. The fair value of commodity derivative contracts at September 30, 2024, and December 31, 2023, was a net asset of $ 81.0 million and $ 57.1 million, respectively. The following table details the fair value of commodity derivative contracts recorded in the accompanying balance sheets, by category: As of September 30, 2024 As of December 31, 2023 (in thousands) Derivative assets: Current assets $ 72,287 $ 56,442 Noncurrent assets 11,584 8,672 Total derivative assets $ 83,871 $ 65,114 Derivative liabilities: Current liabilities $ 2,401 $ 6,789 Noncurrent liabilities 448 1,273 Total derivative liabilities $ 2,849 $ 8,062 Offsetting of Derivative Assets and Liabilities As of September 30, 2024, and December 31, 2023, 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. The Company’s agreements also provide that in the event of an early termination, the counterparties have the right to offset amounts owed or owing under that and any other agreement with the same counterparty. The Company’s accounting policy is to not offset these positions in its accompanying balance sheets. The following table provides a reconciliation between the gross assets and liabilities reflected on the accompanying balance sheets and the potential effects of master netting arrangements on the fair value of the Company’s commodity derivative contracts: Derivative Assets as of Derivative Liabilities as of September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023 (in thousands) Gross amounts presented in the accompanying balance sheets $ 83,871 $ 65,114 $ ( 2,849 ) $ ( 8,062 ) Amounts not offset in the accompanying balance sheets ( 2,849 ) ( 7,362 ) 2,849 7,362 Net amounts $ 81,022 $ 57,752 $ — $ ( 700 ) 19 The following table summarizes the commodity components of the net 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 September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Net derivative settlement (gain) loss: Oil contracts $ 487 $ 13,446 $ ( 877 ) $ 20,144 Gas contracts ( 16,735 ) ( 11,643 ) ( 46,639 ) ( 37,495 ) NGL contracts ( 243 ) ( 1,489 ) 1,228 ( 3,047 ) Total net derivative settlement (gain) loss $ ( 16,491 ) $ 314 $ ( 46,288 ) $ ( 20,398 ) Net derivative (gain) loss: Oil contracts $ ( 65,633 ) $ 77,857 $ ( 29,805 ) $ 31,172 Gas contracts ( 15,291 ) ( 4,437 ) ( 41,624 ) ( 14,655 ) NGL contracts ( 5,359 ) 1,935 1,173 ( 4,165 ) Total net derivative (gain) loss $ ( 86,283 ) $ 75,355 $ ( 70,256 ) $ 12,352 Credit Related Contingent Features As of September 30, 2024, and through the filing of this report, all of the Company’s derivative counterparties were members of the Company’s Credit Agreement lender group. The Company does not enter into derivative contracts with counterparties that are not part of the lender group. Under the Credit Agreement, the Company is required to provide mortgage liens on assets having a value equal to at least 85 percent of the total PV-9, as defined in the Credit Agreement, of the Company’s proved oil and gas properties evaluated in the most recent reserve report. Collateral securing indebtedness under the Credit Agreement also secures the Company’s derivative agreement obligations. Note 8 - Fair Value Measurements The Company follows fair value measurement accounting guidance for all assets and liabilities measured at fair value. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The fair value hierarchy for grouping these assets and liabilities is based on the significance level of the following inputs: • Level 1 – quoted prices in active markets for identical assets or liabilities • Level 2 – quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable • Level 3 – significant inputs to the valuation model are unobservable 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 September 30, 2024 As of December 31, 2023 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 (in thousands) Assets: Derivatives (1) $ — $ 83,871 $ — $ — $ 65,114 $ — Liabilities: Derivatives (1) $ — $ 2,849 $ — $ — $ 8,062 $ — __________________________________________ (1) This represents a financial asset or liability that is measured at fair value on a recurring basis. 20 Both financial and non-financial assets and liabilities are categorized within the above fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used by the Company as well as the general classification of such instruments pursuant to the above fair value hierarchy. Derivatives The Company uses Level 2 inputs to measure the fair value of oil, gas, and NGL commodity derivative instruments. Fair values are based upon interpolated data. The Company derives internal valuation estimates taking into consideration forward commodity price curves, counterparties’ credit ratings, the Company’s credit rating, and the time value of money. These valuations are then compared to the respective counterparties’ mark-to-market statements. The considered factors result in an estimated exit price that management believes provides a reasonable and consistent methodology for valuing derivative instruments. The commodity derivative instruments utilized by the Company are not considered by management to be complex, structured, or illiquid. The oil, gas, and NGL commodity derivative markets are highly active. Please refer to Note 7 - Derivative Financial Instruments for more information regarding the Company’s derivative instruments. Long-Term Debt 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 September 30, 2024, or December 31, 2023, as they were recorded at carrying value, net of any unamortized deferred financing costs. Please refer to Note 5 - Long-Term Debt for additional information. As of September 30, 2024 As of December 31, 2023 Principal Amount Fair Value Principal Amount Fair Value (in thousands) 5.625 % Senior Notes due 2025 $ — $ — $ 349,118 $ 348,189 6.75 % Senior Notes due 2026 $ 419,235 $ 419,759 $ 419,235 $ 420,660 6.625 % Senior Notes due 2027 $ 416,791 $ 417,362 $ 416,791 $ 416,549 6.5 % Senior Notes due 2028 $ 400,000 $ 400,240 $ 400,000 $ 401,372 6.75 % Senior Notes due 2029 $ 750,000 $ 753,750 $ — $ — 7.0 % Senior Notes due 2032 $ 750,000 $ 753,780 $ — $ — Note 9 - Earnings Per Share Basic net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the basic weighted-average number of common shares outstanding for the respective period. 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 (“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 2023 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 September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands, except per share data) Net income $ 240,523 $ 222,343 $ 582,015 $ 570,769 Basic weighted-average common shares outstanding 114,405 117,823 114,870 119,589 Dilutive effect of non-vested RSUs, contingent PSUs, and other 588 505 831 576 Diluted weighted-average common shares outstanding 114,993 118,328 115,701 120,165 Basic net income per common share $ 2.10 $ 1.89 $ 5.07 $ 4.77 Diluted net income per common share $ 2.09 $ 1.88 $ 5.03 $ 4.75 21 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 time-based 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 September 30, 2024, approximately 2.3 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 grant date or upon other triggering events as set forth in the Equity Plan. For PSUs granted in 2024, 2023, and 2022, 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 $ 1.1 million and $ 1.0 million for the three months ended September 30, 2024, and 2023, respectively, and $ 3.5 million and $ 1.8 million for the nine months ended September 30, 2024, and 2023, respectively. As of September 30, 2024, there was $ 6.0 million of total unrecognized compensation expense related to non-vested PSUs, which is being amortized through mid-2026. There were no material changes to the outstanding and non-vested PSUs during the nine months ended September 30, 2024. Subsequent to September 30, 2024, the Company granted a total of 231,120 PSUs with a grant date fair value of $ 9.9 million. Employee 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 of the applicable grant date 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 grant date. The fair value of an RSU is equal to the closing price of the Company’s common stock on the grant date. Compensation expense for RSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. During the nine months ended September 30, 2024, the Company granted a total of 490,481 RSUs with a grant date fair value of $ 21.3 million, and the Company settled RSUs upon the vesting of awards granted in previous years. The Company and all 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 158,252 shares to satisfy income and payroll tax withholding obligations, the Company issued 350,675 shares of common stock in accordance with the terms of the applicable award agreements. Total compensation expense recorded for RSUs was $ 4.5 million and $ 4.1 million for the three months ended September 30, 2024, and 2023, respectively, and $ 12.0 million and $ 10.8 million for the nine months ended September 30, 2024, and 2023, respectively. As of September 30, 2024, there was $ 33.8 million of total unrecognized compensation expense related to non-vested RSUs, which is being amortized through mid-2027. 22 A summary of activity during the nine months ended September 30, 2024, is presented in the following table: RSUs Weighted-Average Grant-Date Fair Value (1) Non-vested at beginning of year 1,080,544 $ 31.49 Granted 490,481 $ 43.42 Vested ( 507,171 ) $ 30.18 Forfeited ( 36,906 ) $ 32.87 Non-vested at end of quarter 1,026,948 $ 37.79 ____________________________________________ (1) Amounts represent price per unit. Director Shares During the nine months ended September 30, 2024, and 2023, the Company issued a total of 37,530 and 56,872 shares, respectively, of its common stock to its non-employee directors under the Equity Plan. Shares issued to non-employee directors that were elected at the Company’s 2024 annual meeting of stockholders will fully vest on December 31, 2024, and shares issued to non-employee directors that were elected at the Company’s 2023 annual meeting of stockholders fully vested on December 31, 2023. 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 their 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 56,006 and 68,192 shares issued under the ESPP during the nine months ended September 30, 2024, and 2023, respectively. Total proceeds to the Company for the issuance of these shares was $ 1.8 million during each of the nine months ended September 30, 2024, and 2023. The fair value of ESPP grants is measured at the date of grant using the Black-Scholes option-pricing model. Please refer to Note 10 - Compensation Plans in the 2023 Form 10-K for additional detail on the Company’s compensation plans. Note 11 - Acquisitions 2024 Acquisition Activity On June 27, 2024 , the Company entered into a Purchase and Sale Agreement (“XCL Acquisition Agreement”) with XCL AssetCo, LLC, XCL Marketing, LLC, Wasatch Water Logistics, LLC, XCL Resources, LLC, and XCL SandCo, LLC, (collectively referred to as the “XCL Sellers”) and, for the limited purposes described therein, Northern Oil and Gas, Inc. (“NOG”). Pursuant to the XCL Acquisition Agreement, the Company agreed to purchase all of the rights, titles and interests in the Uinta Basin oil and gas assets owned by the XCL Sellers (“XCL Assets”). Concurrently with the execution of the XCL Acquisition Agreement, the Company entered into an Acquisition and Cooperation Agreement (“Cooperation Agreement”) with NOG, pursuant to which the Company and NOG agreed to cooperate in connection with the XCL Acquisition Agreement and NOG agreed to acquire an undivided 20 percent interest in the assets acquired pursuant to the XCL Acquisition Agreement. Upon execution of the XCL Acquisition Agreement, the Company deposited with an escrow agent a cash deposit of $ 102.0 million (“Cash Deposit”), which is presented in the acquisition deposit held in escrow line item on the accompanying balance sheets as of September 30, 2024. Pursuant to the terms of the XCL Acquisition Agreement, the Company had the option to acquire certain additional assets adjacent to the XCL Assets (“Altamont Option Assets”) from the XCL Sellers for a purchase price equal to the XCL Sellers’ cost to acquire the Altamont Option Assets plus the XCL Sellers’ related out of pocket expenses. On August 5, 2024 , the Company exercised the option to acquire the Altamont Option Assets. On October 1, 2024 (“Closing Date”), immediately prior to the closing of the transactions contemplated by the XCL Acquisition Agreement, and as permitted by the XCL Acquisition Agreement and Cooperation Agreement, the Company assigned an undivided 20 percent interest in the XCL Acquisition Agreement to NOG and caused the XCL Sellers to directly assign an undivided 20 percent interest in both the XCL Assets and the Altamont Option Assets to NOG. Accordingly, on the Closing Date, the Company completed the acquisition of an undivided 80 percent interest in both the XCL Assets and the Altamont Option Assets, with an effective date of May 1, 2024 (“Uinta Basin Acquisition”). The Company’s undivided 80 percent interest in the assets acquired in the Uinta Basin Acquisition consists of approximately 63,300 net acres. On the Closing Date, the unadjusted purchase price, net to the Company’s 80 percent undivided interest in the Uinta Basin Acquisition, was approximately $ 2.1 billion. The Company paid approximately $ 1.9 billion in cash to the XCL Sellers, using a portion of 23 the net proceeds from the issuance of the 2029 Senior Notes and 2032 Senior Notes discussed in Note 5 - Long-Term Debt , cash on hand, and borrowings under the Company’s revolving credit facility. Additionally, a majority of the Cash Deposit was disbursed to the XCL Sellers on the Closing Date. The remaining portion of the Cash Deposit will remain in escrow pending the completion of post-closing purchase price adjustments, which are expected to occur in the first quarter of 2025. Final purchase accounting for the Uinta Basin Acquisition was not complete at the time that this report was filed. The Company expects to account for the Uinta Basin Acquisition as an asset acquisition and will include any required disclosures and information related to the Uinta Basin Acquisition in its 2024 Annual Report on Form 10-K or earlier filed Current Reports on Form 8-K, as applicable, pursuant to the rules and regulations of the SEC and authoritative accounting guidance. 2023 Acquisition Activity 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 during the nine months ended September 30, 2023, was $ 88.9 million. Under authoritative accounting guidance, this transaction was accounted for as 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. Additionally, during the third quarter of 2023, the Company acquired additional working interests in certain wells located in the Midland Basin for approximately $ 20.4 million. 24