On July 1, 2025, the Company completed the acquisition of 100% of the ownership interests of Silverback Exploration II, LLC and its subsidiaries ("Silverback") which owns oil and natural gas assets and operations located primarily in the Yeso trend of the Permian Basin in Eddy County, New Mexico for approximately $123 million, which included approximately $120 million paid in cash and approximately $3 million of estimated fair value related to potential earnout payments ("Silverback Acquisition"). The purchase price is subject to change pending final purchase price adjustments including the release of $1.2 million remaining in escrow, until one year from the closing date.

The Silverback Acquisition qualified as a business combination using the acquisition method of accounting. The assets acquired and liabilities assumed were recognized at fair value as of the acquisition date. The preliminary purchase price allocation is subject to change for up to one year subsequent to the closing date of the acquisition due to final customary purchase price adjustments. The assets acquired and liabilities assumed were recognized on the consolidated balance sheet at fair value as of the acquisition date. The fair value measurements of the oil and natural gas properties acquired and ARO assumed were derived utilizing an income approach and based, in part, on significant inputs not observable in the market. These inputs represent Level 3 measurements in the fair value hierarchy and include, but are not limited to, estimates of reserves, future development, future operating costs, future cash flows and the use of weighted average cost of capital. These inputs required the use of significant judgments and estimates at the date of valuation, and use of different estimates and judgments could yield different results.


Preliminary purchase price allocation as of June 30, 2026 (in thousands):

Consideration:
Cash consideration paid to sellers upon closing	$	119,559
Preliminary estimated fair value of earnout payments	3,100
Total consideration transferred	$	122,659

Fair value of assets acquired:
Cash	$	1,857
Accounts receivable	7,889
Prepaid expenses	313
Inventory	5,371
Current derivative assets	1,029
Oil and gas properties	140,047
Other property and equipment	602
Other non-current assets	1,421
Amount attributable to assets acquired	$	158,529

Fair value of liabilities assumed:
Accounts payable	$	364
Accrued liabilities	1,851
Revenue payable	14,371
Asset retirement obligations	19,284
Amount attributable to liabilities assumed	$	35,870

Net assets acquired	$	122,659

Cash consideration included deposits into escrow of $14.2 million at signing and $6.9 million at closing for title defects. As of June 30, 2026, $4.6 million of the closing escrow was returned to the Company, $1.1 million was paid to the sellers and $1.2 million remains in escrow and is reflected as funds held in escrow in our condensed consolidated balance sheets.

The Company may potentially pay the sellers quarterly earnout payments of up to $1.9 million per fiscal quarter during calendar years 2026 and 2027 if the NYMEX WTI quarterly average exceeds certain stated amounts set forth in the Purchase Agreement, ranging from $70 to $75 per barrel or higher. For the three months ended June 30, 2026, the average WTI was $92.70. The Company remeasured the fair value of its earnout payment liability at June 30, 2026, for the remaining 6 quarters and, as a result of the decrease in the WTI forward strip pricing, a $0.6 million remeasurement gain was reflected in gain (loss) on acquisitions and divestitures, net in our condensed consolidated statements of operations, inclusive of the payout of $1.9 million, which was realized in the second quarter and subsequently paid in July 2026. For the six months ended June 30, 2026, the Company has made $0.9 million in earnout payments and recognized a remeasurement loss of $3.5 million. See additional information on the fair value measurement of the earnout payments in Note 7 - Fair Value Measurements.


	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(In thousands)

Gain on sale of oil and natural gas properties(1)	$	—	$	—	$	1,446	$	—
Gain (loss) on earnout liabilities - Silverback Acquisition	635		—		(3,485)		—
Other	326		—		303		—
Total gain (loss) on acquisitions and divestitures, net	$	961	$	—	$	(1,736)	$	—

The results of operations attributable to the Silverback Acquisition since the closing date of the acquisition have been included in the condensed consolidated statements of operations and include $12.9 million and $27.0 million of total revenues and $5.2 million and $13.6 million of earnings, which represents total revenues less production taxes and lease operating expenses ("LOE"), for the three and six months ended June 30, 2026, respectively.

The results of operations of the Silverback Acquisition have been included in the Company's condensed consolidated financial statements since the closing date of the acquisition. The following supplemental, unaudited pro forma combined financial information for the three and six months ended June 30, 2025, reflect the consolidated results of operations of the Company as if the Silverback Acquisition had occurred on January 1, 2024. The information below reflects pro forma adjustments based on available information and certain assumptions that the Company believes are factual and supportable. The unaudited pro forma information includes adjustments for (i) transaction costs being reclassified to the first quarter of 2024 instead of being recorded in the year ended December 31, 2025, (ii) depletion, depreciation and amortization expense and (iii) interest expense related to the financing for the Silverback Acquisition. In addition, the pro forma information has been effected for income taxes with a blended statutory rate of 25.7% for the three and six months ended June 30, 2025.


	Three Months Ended		Six Months Ended
	June 30, 2025		June 30, 2025
	(In thousands, except per share amounts)
Total revenues	$	101,474	$	224,445
Net income	$	33,609	$	65,240
Basic net income per common share	$	1.59	$	3.09
Diluted net income per common share	$	1.59	$	3.09

The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations that the Company would have reported had the Silverback Acquisition been completed as of January 1, 2024, and should not be taken as indicative of the Company's future combined results of operations. The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma combined financial information and actual results.