Note 1—Business and Organization

 

Extraction Oil & Gas, Inc. (the “Company” or “Extraction”) is an independent oil and gas company focused on the acquisition, development and production of oil, natural gas and NGL reserves in the Rocky Mountain region, primarily in the Wattenberg Field of the Denver-Julesburg Basin (the “DJ Basin”) of Colorado.  The Company has nine subsidiaries, focused on the acquisition, development and production of oil, natural gas and NGL reserves in the Rocky Mountain region, as well as the design and support of midstream assets to gather and process crude oil and gas production focused in the DJ Basin of Colorado.

 

Extraction formerly known as Extraction Oil & Gas, LLC was converted from a Delaware limited liability company to a Delaware corporation, on October 12, 2016. In connection wih the initial public offering (the “IPO” or the “Offering”) on October 17, 2016, Extraction Oil & Gas Holdings, LLC (“Holdings”) was merged with and into Extraction, and Extraction was the surviving entity to the merger (the “Corporate Reorganization”). All equity holders in Holdings, other than the holders of the Series B Preferred Units (which were converted in connection with the closing of the IPO into shares of Series A Preferred Stock), but including the holders of restricted units and incentive units, received approximately 108.5 million shares of our common stock, with the allocation of such shares among our existing equity holders determined, pursuant to the terms of the limited liability company agreement of Holdings, by reference to an implied valuation based on the 10-day volume weighted average price of Extraction’s common stock following the closing of the IPO. Extraction is a public company listed for trading on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “XOG”. The merger was treated as a reorganization of entities under common control. As part of Holdings' merger with and into Extraction, all of Holdings' other subsidiaries, including Extraction Oil & Gas, LLC became direct or indirect subsidiaries of Extraction. Please refer to Note 9 — Members’ and Stockholders’ Equity for further information on the Corporate Reorganization and IPO.

 

On December 12, 2016, the Company entered into the Private Placement Subscription Agreement (“Private Placement”), pursuant to which the Company agreed to issue approximately 25.0 million shares of common stock, at a price of $18.25 per share. Please refer to Note 9 — Members’ and Stockholders’ Equity for further information on the Private Placement.

 

The historical consolidated financial statements are based on the financial statements of our accounting predecessor, Holdings, prior to the Corporate Reorganization.

 

Extraction Oil & Gas Holdings, LLC, a Delaware limited liability company was formed on May 29, 2014 by PRE Resources, LLC (“PRL”) as a holding company with no independent operations apart from its ownership of the subsidiaries described below. PRL was formed in May 2012 to invest in oil and gas properties in Michigan, California, Wyoming, North Dakota and Colorado.

 

Extraction Oil & Gas, LLC (“Extraction LLC”) (“Extraction”), formerly a wholly‑owned subsidiary of PRL, was a wholly‑owned subsidiary of Holdings. Extraction LLC was formed on November 14, 2012, as a Delaware limited liability company and was focused on the acquisition, development and production of oil, natural gas and NGL natural gas liquids (“NGL”) reserves in the Rocky Mountains, primarily in the Wattenberg Field of the Denver‑Julesburg Basin (the “DJ Basin”)DJ Basin of Colorado.

 

Concurrent with the formation of Holdings, PRL contributed all of its membership interests in Extraction LLC, to Holdings and distributed all of its interests in Holdings to its members in a pro rata distribution (the “Reorganization”). As all power and authority to control the core functions of Holdings and Extraction LLC were controlled by PRL, the Reorganization was accounted for as a reorganization of entities under common control and the assets and liabilities of Extraction LLC were recorded at Extraction LLC’s historical costs. Results of operations for the 2014 period include the results of operations from Extraction LLC, the previously separate entity, from January 1, 2014 to May 29, 2014, the date the transfer was completed.