Oil & Gas 360General form for quarterly reports under Section 13 or 15(d) - Form 10-Q

cpe-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 001-14039

Callon Petroleum Company


			(Exact Name of Registrant as Specified in Its Charter)


Delaware		64-0844345
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

One Briarlake Plaza
2000 W. Sam Houston Parkway S., Suite 2000
Houston,	Texas	77042
Address of Principal Executive Offices		Zip Code


			(281)						589-5200
			Registrant’s Telephone Number, Including Area Code

			Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.01 par value

CPE

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The Registrant had 55,850,147 shares of common stock outstanding as of October 29, 2021.

Table of Contents


Part I. Financial Information

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets			5

Consolidated Statements of Operations			6

Consolidated Statements of Stockholders’ Equity			7

Consolidated Statements of Cash Flows			8

Notes to Consolidated Financial Statements			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30

Item 3. Quantitative and Qualitative Disclosures about Market Risk			42

Item 4. Controls and Procedures			44

Part II. Other Information

Item 1. Legal Proceedings			44

Item 1A. Risk Factors			44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			44

Item 3. Defaults Upon Senior Securities			44

Item 4. Mine Safety Disclosures			44

Item 5. Other Information			44

Item 6. Exhibits			45

GLOSSARY OF CERTAIN TERMS

All defined terms under Rule 4-10(a) of Regulation S-X shall have their prescribed meanings when used in this report. As used in this document:

•ASU: accounting standards update.

•Bbl: barrel or barrels of oil or natural gas liquids.

•Boe: barrel of oil equivalent, determined by using the ratio of one Bbl of oil or NGLs to six Mcf of natural gas. The ratio of one barrel of oil or NGLs to six Mcf of natural gas is commonly used in the industry and represents the approximate energy equivalence of oil or NGLs to natural gas, and does not represent the economic equivalency of oil and NGLs to natural gas. The sales price of a barrel of oil or NGLs is considerably higher than the sales price of six Mcf of natural gas.

•Boe/d: Boe per day.

•Btu: a British thermal unit, which is a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.

•Completion: the process of treating a drilled well followed by the installation of permanent equipment for the production of oil or natural gas or, in the case of a dry hole, the reporting of abandonment to the appropriate agency.

•Cushing: an oil delivery point that serves as the benchmark oil price for West Texas Intermediate.

•FASB: Financial Accounting Standards Board.

•GAAP: Generally Accepted Accounting Principles in the United States.

•Henry Hub: a natural gas pipeline delivery point that serves as the benchmark natural gas price underlying NYMEX natural gas futures contracts.

•Horizontal drilling: a drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at an angle within a specified interval.

•LOE: lease operating expense.

•MBbls: thousand barrels of oil.

•MBoe: thousand Boe.

•Mcf: thousand cubic feet of natural gas.

•MEH: Magellan East Houston, a delivery point in Houston, Texas that serves as a benchmark for crude oil.

•MMBoe: million Boe.

•MMBtu: million Btu.

•MMcf: million cubic feet of natural gas.

•NGL or NGLs: natural gas liquids, such as ethane, propane, butane and natural gasoline that are extracted from natural gas production streams.

•NYMEX: New York Mercantile Exchange.

•Oil: includes crude oil and condensate.

•OPEC: Organization of Petroleum Exporting Countries.

•Proved reserves: Those reserves which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain that it will commence the project, within a reasonable time.

The area of the reservoir considered as proved includes all of the following:

a.The area identified by drilling and limited by fluid contacts, if any, and

b.Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

Reserves that can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when both of the following occur:

a.Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based, and

b.The project has been approved for development by all necessary parties and entities, including governmental entities.

Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12‑month period before the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

•Realized price: the cash market price less all expected quality, transportation and demand adjustments.

•RSU: restricted stock units.

•SEC: United States Securities and Exchange Commission.

•Waha: a delivery point in West Texas that serves as the benchmark for natural gas.

•Working interest: an operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and receive a share of production and requires the owner to pay a share of the costs of drilling and production operations.

•WTI: West Texas Intermediate grade crude oil, used as a pricing benchmark for sales contracts and NYMEX oil futures contracts.

With respect to information relating to our working interest in wells or acreage, “net” oil and gas wells or acreage is determined by multiplying gross wells or acreage by our working interest therein. Unless otherwise specified, all references to wells and acres are gross.

Part I. Financial Information

Item 1. Financial Statements

Callon Petroleum Company

Consolidated Balance Sheets

(In thousands, except par and share amounts)

(Unaudited)


	September 30, 2021	December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$3,699	$20,236
Accounts receivable, net	216,116	133,109
Fair value of derivatives	18,605	921
Other current assets	30,110	24,103
Total current assets	268,530	178,369
Oil and natural gas properties, full cost accounting method:


Evaluated properties, net	2,565,601	2,355,710
Unevaluated properties	1,712,428	1,733,250
Total oil and natural gas properties, net	4,278,029	4,088,960

Other property and equipment, net	30,591	31,640

Deferred financing costs	19,274	23,643

Other assets, net	89,992	40,256
Total assets	$4,686,416	$4,362,868
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$442,053	$341,519


Fair value of derivatives	324,682	97,060
Other current liabilities	61,641	58,529
Total current liabilities	828,376	497,108
Long-term debt	2,809,610	2,969,264

Asset retirement obligations	58,703	57,209

Fair value of derivatives	15,250	88,046
Other long-term liabilities	41,448	40,239
Total liabilities	3,753,387	3,651,866
Commitments and contingencies
Stockholders’ equity:

Common stock, $0.01 par value, 78,750,000 and 52,500,000 shares authorized; 46,290,611 and 39,758,817 shares outstanding, respectively	463	398
Capital in excess of par value	3,365,121	3,222,959
Accumulated deficit	(2,432,555)	(2,512,355)
Total stockholders’ equity	933,029	711,002
Total liabilities and stockholders’ equity	$4,686,416	$4,362,868

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

Callon Petroleum Company

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Operating Revenues:
Oil	$409,293	$231,654	$1,009,780	$627,934
Natural gas	36,519	15,034	84,819	33,305
Natural gas liquids	58,097	23,025	124,079	55,627
Sales of purchased oil and gas	48,653	20,313	134,164	21,469
Total operating revenues	552,562	290,026	1,352,842	738,335

Operating Expenses:
Lease operating	42,706	45,870	129,619	149,091
Production and ad valorem taxes	26,070	16,110	66,467	46,151
Gathering, transportation and processing	20,875	22,200	58,887	56,615
Cost of purchased oil and gas	49,392	21,282	139,558	22,450
Depreciation, depletion and amortization	89,890	114,201	244,005	384,594
General and administrative	9,503	8,224	37,367	26,573
Impairment of evaluated oil and gas properties	—	684,956	—	1,961,474
Merger, integration and transaction	3,018	2,465	3,018	26,362

Other operating	—	4,425	3,366	8,548
Total operating expenses	241,454	919,733	682,287	2,681,858
Income (Loss) From Operations	311,108	(629,707)	670,555	(1,943,523)

Other (Income) Expenses:
Interest expense, net of capitalized amounts	27,736	24,683	76,786	67,843
(Gain) loss on derivative contracts	107,169	27,038	512,155	(97,966)
Gain on extinguishment of debt	(2,420)	—	(2,420)	—
Other (income) expense	4,305	(1,044)	3,217	(149)
Total other (income) expense	136,790	50,677	589,738	(30,272)

Income (Loss) Before Income Taxes	174,318	(680,384)	80,817	(1,913,251)
Income tax expense	(2,416)	—	(1,017)	(115,299)
Net Income (Loss)	$171,902	($680,384)	$79,800	($2,028,550)

Net Income (Loss) Per Common Share:
Basic	$3.71	($17.12)	$1.77	($51.09)
Diluted	$3.65	($17.12)	$1.69	($51.09)

Weighted Average Common Shares Outstanding:
Basic	46,290	39,746	45,063	39,707
Diluted	47,096	39,746	47,119	39,707

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

Callon Petroleum Company

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Common		Capital in		Total
	Stock		Excess	Accumulated	Stockholders’
	Shares	$	of Par	Deficit	Equity
Balance at December 31, 2020	39,759	$398	$3,222,959	($2,512,355)	$711,002
Net loss	—	—	—	(80,407)	(80,407)
Restricted stock	13	—	2,609	—	2,609
Warrant exercises	6,385	64	134,754	—	134,818

Balance at March 31, 2021	46,157	$462	$3,360,322	($2,592,762)	$768,022
Net loss	—	—	—	(11,695)	(11,695)
Restricted stock	132	1	960	—	961

Balance at June 30, 2021	46,289	$463	$3,361,282	($2,604,457)	$757,288
Net income	—	—	—	171,902	171,902
Restricted stock	2	—	3,839	—	3,839

Balance at September 30, 2021	46,291	$463	$3,365,121	($2,432,555)	$933,029


				Retained
	Common		Capital in	Earnings	Total
	Stock		Excess	(Accumulated	Stockholders’
	Shares (1)	$	of Par	Deficit)	Equity
Balance at December 31, 2019	39,659	$3,966	$3,198,076	$21,266	$3,223,308
Net income	—	—	—	216,565	216,565
Restricted stock	14	1	3,141	—	3,142
Other	—	—	(112)	—	(112)
Balance at March 31, 2020	39,673	$3,967	$3,201,105	$237,831	$3,442,903
Net loss	—	—	—	(1,564,731)	(1,564,731)
Restricted stock	66	7	3,205	—	3,212

Balance at June 30, 2020	39,739	$3,974	$3,204,310	($1,326,900)	$1,881,384
Net loss	—	—	—	(680,384)	(680,384)
Restricted stock	11	1	3,008	—	3,009
Reverse stock split	—	(3,578)	3,578	—	—
Other	—	—	95	—	95
Balance at September 30, 2020	39,750	$397	$3,210,991	($2,007,284)	$1,204,104

(1) All share amounts have been retroactively adjusted for the Company’s 1-for-10 reverse stock split effective August 7, 2020. See “Note 11 - Stockholders’ Equity” of the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2020 for additional information.

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

Callon Petroleum Company

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
Cash flows from operating activities:	2021	2020
Net income (loss)	$79,800	($2,028,550)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	244,005	384,594
Impairment of evaluated oil and gas properties	—	1,961,474
Amortization of non-cash debt related items, net	7,166	1,582
Deferred income tax expense	—	115,299
(Gain) loss on derivative contracts	512,155	(97,966)
Cash received (paid) for commodity derivative settlements, net	(238,378)	101,754
Gain on extinguishment of debt	(2,420)	—


Non-cash expense (benefit) related to share-based awards	11,984	(305)


Other, net	11,006	5,740
Changes in current assets and liabilities:
Accounts receivable	(83,227)	96,110
Other current assets	(8,701)	(6,556)
Accounts payable and accrued liabilities	74,443	(107,979)

Net cash provided by operating activities	607,833	425,197
Cash flows from investing activities:
Capital expenditures	(427,552)	(555,222)
Acquisition of oil and gas properties	(7,119)	(12,524)
Deposit for acquisition of oil and gas properties	(60,117)	—
Proceeds from sale of assets	35,415	149,818
Cash paid for settlements of contingent consideration arrangements, net	—	(40,000)
Other, net	4,206	8,261
Net cash used in investing activities	(455,167)	(449,667)
Cash flows from financing activities:
Borrowings on Credit Facility	1,236,500	5,087,500
Payments on Credit Facility	(1,498,500)	(5,347,500)

Redemption of 6.25% Senior Notes	(542,755)	—

Issuance of 8.00% Senior Notes due 2028	650,000	—
Issuance of 9.00% Second Lien Senior Secured Notes due 2025	—	300,000
Discount on the issuance of 9.00% Second Lien Senior Secured Notes due 2025	—	(35,270)
Issuance of September 2020 Warrants	—	23,909



Payment of deferred financing costs	(12,168)	(6,312)
Tax withholdings related to restricted stock units	(2,280)	(495)

Other, net	—	(203)
Net cash provided by (used in) financing activities	(169,203)	21,629
Net change in cash and cash equivalents	(16,537)	(2,841)
Balance, beginning of period	20,236	13,341
Balance, end of period	$3,699	$10,500

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

Index to the Notes to the Consolidated Financial Statements


1.	Description of Business and Basis of Presentation	9.	Income Taxes
2.	Revenue Recognition	10.	Share-Based Compensation
3.	Acquisitions and Divestitures	11.	Stockholders’ Equity
4.	Property and Equipment, Net	12.	Accounts Receivable, Net
5.	Earnings Per Share	13.	Accounts Payable and Accrued Liabilities
6.	Borrowings	14.	Supplemental Cash Flow
7.	Derivative Instruments and Hedging Activities	15.	Subsequent Events
8.	Fair Value Measurements

Note 1 - Description of Business and Basis of Presentation

Description of Business

Callon Petroleum Company is an independent oil and natural gas company focused on the acquisition, exploration and development of high-quality assets in the leading oil plays of South and West Texas. As used herein, the “Company,” “Callon,” “we,” “us,” and “our” refer to Callon Petroleum Company and its predecessors and subsidiaries unless the context requires otherwise.

The Company’s activities are primarily focused on horizontal development in the Midland and Delaware Basins, both of which are part of the larger Permian Basin in West Texas, as well as the Eagle Ford in South Texas. The Company’s primary operations in the Permian reflect a high-return, oil-weighted drilling inventory with multiple prospective horizontal development intervals and are complemented by a well-established and repeatable cash flow-generating business in the Eagle Ford.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the accounts of the Company after elimination of intercompany transactions and balances. These financial statements have been prepared pursuant to the rules and regulations of the SEC and therefore do not include all disclosures required for financial statements prepared in conformity with U.S. GAAP. In the opinion of management, these financial statements include all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly, in all material respects, the Company’s interim financial position, results of operations and cash flows. However, the results of operations for the periods presented are not necessarily indicative of the results of operations that may be expected for the full year. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. Such reclassifications did not have a material impact on prior period financial statements.

Significant Accounting Policies

The Company’s significant accounting policies are described in “Note 2 - Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Annual Report”) and are supplemented by the notes included in this Quarterly Report on Form 10-Q. The financial statements and related notes included in this report should be read in conjunction with the Company’s 2020 Annual Report.

Recently Adopted Accounting Standards

Income Taxes. In December 2019, the FASB released ASU No. 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes, which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The amended standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of ASU 2019-12 did not have a material impact to the Company’s consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) followed by ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), issued in January 2021 to provide clarifying guidance regarding the scope of Topic 848. ASU 2020-04 was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Generally, the guidance is to be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. As of September 30, 2021, the Company has not elected to use the optional guidance and continues to evaluate the options provided by ASU 2020-04 and ASU 2021-01. Please refer to “Note 6 – Borrowings”

for discussion of the use of the adjusted LIBO rate in connection with borrowings under the Company’s senior secured revolving credit facility.

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 was issued to reduce the complexity associated with accounting for certain financial instruments with characteristics of liabilities and equity. The guidance is to be applied using either a modified retrospective or a fully retrospective method. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. As of September 30, 2021, the Company has not elected to early adopt and is evaluating the impact on the Company’s accompanying consolidated financial statements and related disclosures.

Subsequent Events

The Company evaluates subsequent events through the date the financial statements are issued. See “Note 15 - Subsequent Events” for further discussion.

Note 2 - Revenue Recognition

Revenue from Contracts with Customers

The Company recognizes oil, natural gas, and NGL production revenue at the point in time when control of the product transfers to the purchaser, which differs depending on the applicable contractual terms. Transfer of control also drives the presentation of gathering, transportation and processing in the consolidated statements of operations. See “Note 3 - Revenue Recognition” of the Notes to Consolidated Financial Statements in the 2020 Annual Report for more information regarding the types of contracts under which oil, natural gas, and NGL production revenue is generated.

Accounts Receivable from Revenues from Contracts with Customers

Net accounts receivable include amounts billed and currently due from revenues from contracts with customers of our oil and natural gas production, which had a balance at September 30, 2021 and December 31, 2020 of $168.1 million and $100.3 million, respectively, and are presented in “Accounts receivable, net” in the consolidated balance sheets.

Transaction Price Allocated to Remaining Performance Obligations

For the Company’s product sales that have a contract term greater than one year, it has utilized the practical expedient in Accounting Standards Codification 606-10-50-14, which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation, therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

Prior Period Performance Obligations

The Company records revenue in the month production is delivered to the purchaser. However, settlement statements for sales may not be received for 30 to 90 days after the date production is delivered, and as a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. The Company records the differences between estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. The Company has existing internal controls for its revenue estimation process and related accruals, and any identified differences between its revenue estimates and actual revenue received historically have not been significant.

Note 3 - Acquisitions and Divestitures

Primexx Acquisition

On August 3, 2021, the Company entered into purchase and sale agreements with Primexx Resource Development, LLC and BPP Acquisition, LLC (collectively, the “Primexx PSAs”) to purchase, effective as of July 1, 2021, certain producing oil and gas properties, undeveloped acreage and associated infrastructure assets in the Delaware Basin for total consideration of $440.0 million in cash and 9.19 million shares of the Company’s common stock, subject to customary purchase price adjustments (the “Primexx Acquisition”). Upon signing the Primexx PSAs, the Company paid approximately $60.1 million as a deposit into third-party escrow accounts, which is classified as cash flows from investing activities in the consolidated statements of cash flows.

On October 1, 2021, the Company closed the Primexx Acquisition for an adjusted purchase price of approximately $453.7 million in cash, inclusive of the deposit paid at signing, and 8.84 million shares of the Company’s common stock for total consideration of $864.6 million, subject to post-closing adjustments. The Company funded the cash portion of the total consideration with borrowings under its Credit Facility, as defined below. Of the 8.84 million shares of the Company’s common stock issued upon closing, 2.6 million shares were held in escrow pursuant to the Primexx PSAs. Additionally, 50% of the shares held in escrow will be released six months after the closing date, and the remaining shares will be released twelve months after the closing date, in each case subject to holdback for the satisfaction of any applicable indemnification claims that may be made under the Primexx PSAs. Also, pursuant to

the Primexx PSAs, certain interest owners exercised their option to sell their interest in the properties included in the Primexx Acquisition to the Company for consideration structured similarly to the Primexx Acquisition, for an incremental purchase price totaling approximately $37.5 million, net of customary purchase price adjustments.

The Primexx Acquisition will be accounted for as a business combination. The Company has not completed its initial allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated acquisition date fair values. The Company will disclose the preliminary allocation of the purchase price as well as other related disclosures in its Annual Report on Form 10-K for the year ended December 31, 2021.

Non-Core Asset Divestitures

On September 27, 2021, the Company entered into a purchase and sale agreement for the divestiture of certain non-core assets in the Eagle Ford Shale. The transaction, which is comprised of producing properties as well as an undeveloped acreage position, has an agreed upon purchase price of approximately $100.0 million, subject to customary purchase price adjustments, and is expected to close during the fourth quarter of 2021. Upon signing the purchase and sale agreement, the purchaser paid $10.0 million as a deposit into a third-party escrow account which will be applied against the purchase price to be paid upon closing. The net proceeds will be recognized in the fourth quarter of 2021 as a reduction of evaluated oil and gas properties with no gain or loss recognized.

During the second quarter of 2021, the Company completed its divestitures of certain non-core assets in the Delaware Basin for aggregate net cash proceeds of $29.6 million. The divestitures were primarily comprised of natural gas producing properties in the Western Delaware Basin as well as a small undeveloped acreage position. The net proceeds were recognized as a reduction of evaluated oil and gas properties with no gain or loss recognized.

Note 4 - Property and Equipment, Net

As of September 30, 2021 and December 31, 2020, total property and equipment, net consisted of the following:


	September 30, 2021	December 31, 2020
Oil and natural gas properties, full cost accounting method	(In thousands)
Evaluated properties	$8,341,434	$7,894,513
Accumulated depreciation, depletion, amortization and impairments	(5,775,833)	(5,538,803)
Evaluated properties, net	2,565,601	2,355,710
Unevaluated properties
Unevaluated leasehold and seismic costs	1,453,255	1,532,304
Capitalized interest	259,173	200,946
Total unevaluated properties	1,712,428	1,733,250
Total oil and natural gas properties, net	$4,278,029	$4,088,960

Other property and equipment	$60,396	$60,287
Accumulated depreciation	(29,805)	(28,647)
Other property and equipment, net	$30,591	$31,640

The Company capitalized internal costs of employee compensation and benefits, including share-based compensation, directly associated with acquisition, exploration and development activities totaling $10.4 million and $10.3 million for the three months ended September 30, 2021 and 2020, respectively, and $33.7 million and $26.7 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company capitalized interest costs to unproved properties totaling $26.1 million and $20.7 million for the three months ended September 30, 2021 and 2020, respectively, and $74.0 million and $65.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Impairment of Evaluated Oil and Gas Properties

For the three and nine months ended September 30, 2021, the capitalized costs of oil and gas properties did not exceed the cost center ceiling. As a result, the Company did not recognize an impairment in the carrying value of evaluated oil and gas properties for the three and nine months ended September 30, 2021.

Primarily due to declines in the average realized prices for sales of oil on the first calendar day of each month during the trailing 12-month period (“12-Month Average Realized Price”) prior to September 30, 2020, the capitalized costs of oil and gas properties exceeded the cost center ceiling, resulting in an impairment in the carrying value of evaluated oil and gas properties for the three and nine months ended September 30, 2020.

Details of the 12-Month Average Realized Price of crude oil for the three and nine months ended September 30, 2021 and 2020 are summarized in the table below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Impairment of evaluated oil and gas properties (in thousands)	$—		$684,956		$—		$1,961,474
Beginning of period 12-Month Average Realized Price ($/Bbl)	$48.06		$45.87		$37.44		$53.90
End of period 12-Month Average Realized Price ($/Bbl)	$56.47		$41.71		$56.47		$41.71
Percent increase (decrease) in 12-Month Average Realized Price	17	%	(9	%)	51	%	(23	%)

Note 5 - Earnings Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding for the periods presented. The calculation of diluted earnings per share includes the potential dilutive impact of non-vested restricted shares and unexercised warrants outstanding during the periods presented, as calculated using the treasury stock method, unless their effect is anti-dilutive. For the three and nine months ended September 30, 2020, the Company reported a net loss. As a result, the calculation of diluted weighted average common shares outstanding excluded all potentially dilutive common shares outstanding.

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
	(In thousands, except per share amounts)



Net Income (Loss)	$171,902	($680,384)	$79,800	($2,028,550)
Basic weighted average common shares outstanding	46,290	39,746	45,063	39,707
Dilutive impact of restricted stock	305	—	244	—
Dilutive impact of warrants (1)	501	—	1,812	—
Diluted weighted average common shares outstanding	47,096	39,746	47,119	39,707

Net Income (Loss) Per Common Share
Basic	$3.71	($17.12)	$1.77	($51.09)
Diluted	$3.65	($17.12)	$1.69	($51.09)

Restricted stock (2)	8	703	28	506
Warrants (2)	481	560	481	508

(1) See “Note 15 - Subsequent Events” for discussion of warrants exercised.

(2) Shares excluded from the diluted earnings per share calculation as their effect would be anti-dilutive.

Note 6 - Borrowings

The Company’s borrowings consisted of the following:


	September 30, 2021	December 31, 2020
	(In thousands)
6.25% Senior Notes due 2023	$—	$542,720
6.125% Senior Notes due 2024	460,241	460,241
Senior Secured Revolving Credit Facility due 2024	723,000	985,000
9.00% Second Lien Senior Secured Notes due 2025	516,659	516,659
8.25% Senior Notes due 2025	187,238	187,238
6.375% Senior Notes due 2026	320,783	320,783
8.00% Senior Notes due 2028	650,000	—
Total principal outstanding	2,857,921	3,012,641
Unamortized premium on 6.25% Senior Notes	—	2,917
Unamortized premium on 6.125% Senior Notes	2,589	3,236
Unamortized discount on Second Lien Notes	(33,524)	(41,820)
Unamortized premium on 8.25% Senior Notes	2,668	3,240
Unamortized deferred financing costs for Second Lien Notes	(3,142)	(3,931)
Unamortized deferred financing costs for Senior Notes	(16,902)	(7,019)
Total carrying value of borrowings (1)	$2,809,610	$2,969,264

(1) Excludes unamortized deferred financing costs related to the Company’s senior secured revolving credit facility of $19.3 million and $23.6 million as of September 30, 2021 and December 31, 2020, respectively, which are classified in “Deferred financing costs” in the consolidated balance sheets.

Senior Secured Revolving Credit Facility

The Company has a senior secured revolving credit facility with a syndicate of lenders (the “Credit Facility”) that, as of September 30, 2021, had a borrowing base and elected commitment amount of $1.6 billion, with borrowings outstanding of $723.0 million at a weighted-average interest rate of 2.35%, and letters of credit outstanding of $24.0 million. The credit agreement governing the Credit Facility provides for interest-only payments until December 20, 2024 (subject to remaining springing maturity dates of (i) July 2, 2024 if the 6.125% Senior Notes due 2024 (the “6.125% Senior Notes”) are outstanding at such time and (ii) if the 9.00% Second Lien Senior Secured Notes due 2025 (the “Second Lien Notes”) are outstanding at such time, the date which is 182 days prior to the maturity of any of the 6.125% Senior Notes, to the extent a principal amount of more than $100.0 million with respect to each such issuance is outstanding as of such date), when the credit agreement matures and any outstanding borrowings are due. The borrowing base under the credit agreement is subject to regular redeterminations in the spring and fall of each year, as well as special redeterminations described in the credit agreement, which in each case may reduce the amount of the borrowing base. The Credit Facility is secured by first preferred mortgages covering the Company’s major producing properties.

On November 1, 2021, the Company entered into the fifth amendment to its credit agreement governing the Credit Facility which, among other things, reaffirmed the borrowing base and elected commitment amount of $1.6 billion as a result of the fall 2021 scheduled redetermination.

Borrowings outstanding under the credit agreement bear interest at the Company’s option at either (i) a base rate for a base rate loan plus a margin between 1.00% to 2.00%, where the base rate is defined as the greatest of the prime rate, the federal funds rate plus 0.50% and the adjusted LIBO rate plus 1.00%, or (ii) an adjusted LIBO rate for a Eurodollar loan plus a margin between 2.00% to 3.00%. The Company also incurs commitment fees at rates ranging between 0.375% to 0.500% on the unused portion of lender commitments, which are included in “Interest expense, net of capitalized amounts” in the consolidated statements of operations.

Issuance of 8.00% Senior Notes and Redemption of 6.25% Senior Notes

On June 21, 2021, the Company entered into a Purchase Agreement pursuant to which it agreed to issue and sell $650.0 million in aggregate principal amount of 8.00% senior unsecured notes due 2028 (the “8.00% Senior Notes”) in a private placement, which closed on July 6, 2021, for proceeds of approximately $638.1 million, net of underwriting discounts and commissions and offering costs. The 8.00% Senior Notes mature on August 1, 2028 and interest is payable semi-annually each February 1 and August 1, commencing on February 1, 2022.

At any time prior to August 1, 2024, the Company may, from time to time, redeem up to 35% of the aggregate principal amount of the 8.00% Senior Notes in an amount of cash not greater than the net cash proceeds from certain equity offerings at the redemption price of 108.00% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption, if at least 65% of the aggregate principal amount of the 8.00% Senior Notes remains outstanding after such redemption and the redemption occurs within 180 days of the closing date of such equity offering. Prior to August 1, 2024, the Company may, at its option, on any one or

more occasions, redeem all or a portion of the 8.00% Senior Notes at 100.00% of the principal amount plus an applicable make-whole premium and accrued and unpaid interest. On or after August 1, 2024, the Company may redeem all or a portion of the 8.00% Senior Notes at redemption prices decreasing annually from 104.00% to 100.00% of the principal amount redeemed plus accrued and unpaid interest. Upon the occurrence of certain kinds of change of control, the Company must make an offer to repurchase all or a portion of each holder’s 8.00% Senior Notes for cash at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest.

Also on June 21, 2021, the Company delivered a redemption notice with respect to all $542.7 million of its outstanding 6.25% Senior Notes due 2023 (the “6.25% Senior Notes”), which became redeemable on July 21, 2021. The Company used a portion of the net proceeds from the 8.00% Senior Notes to redeem all of its outstanding 6.25% Senior Notes and the remaining proceeds to partially repay amounts outstanding under the Credit Facility. The Company recognized a gain on extinguishment of debt of approximately $2.4 million in its consolidated statements of operations, which was primarily related to writing off the remaining unamortized premium associated with the 6.25% Senior Notes.

Second Lien Notes Exchange

On August 3, 2021, the Company entered into an agreement with Chambers Investments, LLC (“Kimmeridge”), a private investment vehicle managed by Kimmeridge Energy Management, LLC, to exchange $197.0 million of its outstanding Second Lien Notes for a notional amount of approximately $223.1 million of the Company’s common stock (the “Exchange”). The value of equity to be delivered is based on the optional redemption language in the indenture for the Second Lien Notes. The price of the Company’s common stock used to calculate the shares issued is based on the 10-day volume-weighted average price as of August 2, 2021 and equates to 5.5 million shares.

The Exchange was contingent upon, among other things, (i) the closing of the Primexx Acquisition, which occurred on October 1, 2021, and (ii) the approval of the Company’s shareholders, as required under New York Stock Exchange rules, of the issuance of approximately 5.5 million shares of the Company’s common stock to Kimmeridge in the Exchange. A special meeting of shareholders was held on November 3, 2021, at which time the requisite shareholder approval for the issuance was obtained. The exchange is anticipated to close on November 5, 2021. See “Note 15 - Subsequent Events” for further discussion.

Restrictive Covenants

The Company’s credit agreement governing the Credit Facility contains certain covenants including restrictions on additional indebtedness, payment of cash dividends and maintenance of certain financial ratios.

Under the credit agreement, the Company must maintain the following financial covenants determined as of the last day of the quarter: (1) a Secured Leverage Ratio (as defined in the credit agreement governing the Credit Facility) of no more than 3.00 to 1.00 and (2) a Current Ratio (as defined in the credit agreement governing the Credit Facility) of not less than 1.00 to 1.00. The Company was in compliance with these covenants at September 30, 2021.

The credit agreement governing the Credit Facility and the indentures governing the Company’s 6.125% Senior Notes, 8.25% Senior Notes due 2025, 6.375% Senior Notes due 2026 and 8.00% Senior Notes due 2028 (together with the 6.25% Senior Notes, the “Senior Unsecured Notes”) also place restrictions on the Company and certain of its subsidiaries with respect to additional indebtedness, liens, dividends and other payments to shareholders, repurchases or redemptions of the Company’s common stock, redemptions of senior notes, investments, acquisitions, mergers, asset dispositions, transactions with affiliates, hedging transactions and other matters.

The credit agreement and indentures are subject to customary events of default. If an event of default occurs and is continuing, the holders or lenders may elect to accelerate amounts due (except in the case of a bankruptcy event of default, in which case such amounts will automatically become due and payable).

Note 7 - Derivative Instruments and Hedging Activities

Objectives and Strategies for Using Derivative Instruments

The Company is exposed to fluctuations in oil, natural gas and NGL prices received for its production. Consequently, the Company believes it is prudent to manage the variability in cash flows on a portion of its oil, natural gas and NGL production. The Company utilizes a mix of collars, swaps, and put and call options to manage fluctuations in cash flows resulting from changes in commodity prices. The Company does not use these instruments for speculative or trading purposes.

Counterparty Risk and Offsetting

The Company typically has numerous commodity derivative instruments outstanding with a counterparty that were executed at various dates, for various contract types, commodities and time periods. This often results in both commodity derivative asset and liability positions with that counterparty. The Company nets its commodity derivative instrument fair values executed with the same counterparty to a single asset or liability pursuant to International Swap Dealers Association Master Agreements (“ISDA Agreements”), which provide for net settlement over the term of the contract and in the event of default or termination of the contract.

In general, if a party to a derivative transaction incurs an event of default, as defined in the applicable agreement, the other party will have the right to demand the posting of collateral, demand a cash payment transfer or terminate the arrangement.

As of September 30, 2021, the Company has outstanding commodity derivative instruments with fifteen counterparties to minimize its credit exposure to any individual counterparty. All of the counterparties to the Company’s commodity derivative instruments are also lenders under the Company’s credit agreement. Therefore, each of the Company’s counterparties allow the Company to satisfy any need for margin obligations associated with commodity derivative instruments where the Company is in a net liability position with the collateral securing the credit agreement, thus eliminating the need for independent collateral posting.

Because each of the Company’s counterparties has an investment grade credit rating, the Company believes it does not have significant credit risk and accordingly does not currently require its counterparties to post collateral to support the net asset positions of its commodity derivative instruments. Although the Company does not currently anticipate nonperformance from its counterparties, it continually monitors the credit ratings of each counterparty.

While the Company monitors counterparty creditworthiness on an ongoing basis, it cannot predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in its ability to mitigate an increase in counterparty credit risk. Should one of these counterparties not perform, the Company may not realize the benefit of some of its derivative instruments under lower commodity prices while continuing to be obligated under higher commodity price contracts subject to any right of offset under the agreements. Counterparty credit risk is considered when determining the fair value of a derivative instrument. See “Note 8 - Fair Value Measurements” for further discussion.

Financial Statement Presentation and Settlements

Settlements of the Company’s commodity derivative instruments are based on the difference between the contract price or prices specified in the derivative instrument and a benchmark price, such as the NYMEX price. To determine the fair value of the Company’s derivative instruments, the Company utilizes present value methods that include assumptions about commodity prices based on those observed in underlying markets. See “Note 8 - Fair Value Measurements” for additional information regarding fair value.

Contingent Consideration Arrangements

Ranger Divestiture. In the second quarter of 2019, the Company completed its divestiture of certain non-core assets in the southern Midland Basin (the “Ranger Divestiture”). The Company’s Ranger Divestiture provided for potential contingent consideration to be received by the Company if commodity prices exceed specified thresholds. See “Note 8 - Fair Value Measurements” for further discussion. This contingent consideration arrangement is summarized in the table below (in thousands except for per Bbl amounts):

Year

Threshold (1)

Contingent Receipt - Annual

Threshold (1)

Contingent Receipt - Annual

Period Cash Flow Occurs

Statement of Cash Flows Presentation

Remaining Contingent Receipt - Aggregate Limit

Remaining Potential Settlement

2021

Greater than $60/Bbl, less than $65/Bbl

$9,000

Equal to or greater than $65/Bbl

$20,833

(2)

$20,833

(1) The price used to determine whether the specified thresholds have been met is the average of the final monthly settlements for each month during each annual period end for NYMEX Light Sweet Crude Oil Futures, as reported by the CME Group.

(2) Cash received for settlements of contingent consideration arrangements are classified as cash flows from financing activities up to the divestiture date fair value with any excess classified as cash flows from operating activities. If either of the commodity price thresholds is reached in 2021, $8.5 million of the contingent receipt will be presented in cash flows from financing activities with the remainder presented in cash flows from operating activities in the first quarter of 2022.

Contingent ExL Consideration. As a result of the acquisition of Carrizo Oil & Gas, Inc. (“Carrizo”) in late 2019 (the “Carrizo Acquisition”), the Company assumed all contingent consideration arrangements previously entered into by Carrizo. As of September 30, 2021, the Contingent ExL Consideration, as summarized below, is the only contingent consideration arrangement remaining from the Carrizo Acquisition.


	Year	Threshold (1)	Period Cash Flow Occurs	Statement of Cash Flows Presentation	Contingent Payment - Annual	Remaining Contingent Payments - Aggregate Limit
					(In thousands)
Remaining Potential Settlement	2021	$50.00	(2)	(2)	($25,000)	($25,000)

(1) The price used to determine whether the specified threshold for the year has been met is the average daily settlement price of the front month NYMEX WTI futures contract as published by the CME Group.

(2) Cash paid for settlements of contingent consideration arrangements are classified as cash flows from investing activities up to the acquisition date fair value with any excess classified as cash flows from operating activities. If the commodity price threshold is reached in 2021, $19.2 million of the contingent payment will be presented in cash flows from investing activities with the remainder presented in cash flows from operating activities in the first quarter of 2022.

Warrants

On September 30, 2020, the Company issued $300.0 million in aggregate principal amount of its Second Lien Notes and warrants for 7.3 million shares of the Company’s common stock exercisable only on a net share settlement basis (the “September 2020 Warrants”). The Company determined that the September 2020 Warrants were required to be accounted for as a derivative instrument. The Company recorded the September 2020 Warrants as a liability on its consolidated balance sheet measured at fair value as a component of “Fair value of derivatives” with gains and losses as a result of changes in the fair value of the September 2020 Warrants recorded as “(Gain) loss on derivative contracts” in the consolidated statements of operations in the period in which the changes occur. See “Note 8 - Fair Value Measurements” for additional details.

In February 2021, holders of the September 2020 Warrants provided notice and exercised all of their outstanding warrants. As a result of this exercise, the Company issued 5.6 million shares of its common stock in exchange for all of the outstanding September 2020 Warrants. The exercise of the September 2020 Warrants resulted in settlement of the associated derivative liability, which was $134.8 million at the time of exercise, and the fair value of the September 2020 Warrants at exercise, less the par value of the shares of common stock issued in the exercise, was reclassified to “Capital in excess of par value” in the consolidated balance sheets.

Derivatives Not Designated as Hedging Instruments

The Company records its derivative instruments at fair value in the consolidated balance sheets and records changes in fair value as “(Gain) loss on derivative contracts” in the consolidated statements of operations. Settlements are also recorded as “(Gain) loss on derivative contracts” in the consolidated statements of operations. As previously discussed, the Company’s commodity derivative contracts are subject to master netting arrangements. The Company’s policy is to present the fair value of derivative contracts on a net basis in the consolidated balance sheets. The following presents the impact of this presentation to the Company’s recognized assets and liabilities for the periods indicated:


	As of September 30, 2021
	Presented without		As Presented with
	Effects of Netting	Effects of Netting	Effects of Netting
	(In thousands)
Assets
Commodity derivative instruments	$64,151	($64,113)	$38
Contingent consideration arrangements	18,567	—	18,567
Fair value of derivatives - current	$82,718	($64,113)	$18,605
Commodity derivative instruments	$7,278	($7,278)	$—
Contingent consideration arrangements	—	—	—
Other assets, net	$7,278	($7,278)	$—

Liabilities
Commodity derivative instruments (1)	($364,107)	$64,113	($299,994)
Contingent consideration arrangements	(24,688)	—	(24,688)
Fair value of derivatives - current	($388,795)	$64,113	($324,682)
Commodity derivative instruments	($22,528)	$7,278	($15,250)
Contingent consideration arrangements	—	—	—
Fair value of derivatives - non-current	($22,528)	$7,278	($15,250)

(1) Includes approximately $6.6 million of deferred premiums, which the Company will pay as the applicable contracts settle.


	As of December 31, 2020
	Presented without		As Presented with
	Effects of Netting	Effects of Netting	Effects of Netting
	(In thousands)
Assets
Commodity derivative instruments	$21,156	($20,235)	$921
Contingent consideration arrangements	—	—	—
Fair value of derivatives - current	$21,156	($20,235)	$921
Commodity derivative instruments	$—	$—	$—
Contingent consideration arrangements	1,816	—	1,816
Other assets, net	$1,816	$—	$1,816

Liabilities
Commodity derivative instruments (1)	($117,295)	$20,235	($97,060)
Contingent consideration arrangements	—	—	—
Fair value of derivatives - current	($117,295)	$20,235	($97,060)
Commodity derivative instruments	$—	$—	$—
Contingent consideration arrangements	(8,618)	—	(8,618)
September 2020 Warrants liability	(79,428)	—	(79,428)
Fair value of derivatives - non-current	($88,046)	$—	($88,046)

(1) Includes approximately $11.2 million of deferred premiums, which the Company will pay as the applicable contracts settle.

The components of “(Gain) loss on derivative contracts” are as follows for the respective periods:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
	(In thousands)
(Gain) loss on oil derivatives	$67,198	$16,606	$393,792	($118,348)
(Gain) loss on natural gas derivatives	33,026	7,296	48,539	18,819
(Gain) loss on NGL derivatives	10,242	2,421	15,114	2,418
(Gain) loss on contingent consideration arrangements	(3,297)	715	(680)	(855)
(Gain) loss on September 2020 Warrants liability	—	—	55,390	—
(Gain) loss on derivative contracts	$107,169	$27,038	$512,155	($97,966)

The components of “Cash received (paid) for commodity derivative settlements, net” and “Cash paid for settlements of contingent consideration arrangements, net” are as follows for the respective periods:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
	(In thousands)
Cash flows from operating activities
Cash received (paid) on oil derivatives	($98,752)	$2,130	($221,112)	$100,823
Cash received (paid) on natural gas derivatives	(9,592)	(1,677)	(12,867)	931
Cash received (paid) on NGL derivatives	(2,463)	—	(4,399)	—
Cash received (paid) for commodity derivative settlements, net	($110,807)	$453	($238,378)	$101,754

Cash flows from investing activities
Cash paid for settlements of contingent consideration arrangements, net	$—	$—	$—	($40,000)

Derivative Positions

Listed in the tables below are the outstanding oil, natural gas and NGL derivative contracts as of September 30, 2021:


	For the Remainder		For the Full Year		For the Full Year
Oil contracts (WTI)	2021		2022		2023
Swap contracts
Total volume (Bbls)	1,748,000		3,240,000		—
Weighted average price per Bbl	$56.87		$64.00		$—
Collar contracts
Total volume (Bbls)	2,290,450		7,097,500		—
Weighted average price per Bbl
Ceiling (short call)	$46.97		$67.70		$—
Floor (long put)	$39.37		$56.15		$—
Long put contracts
Total volume (Bbls)	414,000		—		—
Weighted average price per Bbl	$62.50		$—		$—
Short call contracts
Total volume (Bbls)	1,216,240	(1)	—		—
Weighted average price per Bbl	$63.62		$—		$—
Short call swaption contracts
Total volume (Bbls)	—		1,825,000	(2)	1,825,000	(2)
Weighted average price per Bbl	$—		$52.18		$72.00

Oil contracts (Brent ICE) (3)



Collar contracts
Total volume (Bbls)	184,000		—		—
Weighted average price per Bbl
Ceiling (short call)	$50.00		$—		$—
Floor (long put)	$45.00		$—		$—

Oil contracts (Midland basis differential)
Swap contracts
Total volume (Bbls)	892,400		—		—
Weighted average price per Bbl	$0.33		$—		$—

Oil contracts (Argus Houston MEH)
Collar contracts
Total volume (Bbls)	—		452,500		—
Weighted average price per Bbl
Ceiling (short call)	$—		$63.15		$—
Floor (long put)	$—		$51.25		$—

(1) Premiums from the sale of call options were used to increase the fixed price of certain simultaneously executed price swaps and three-way collars.

(2) The 2022 and 2023 short call swaption contracts have exercise expiration dates of December 31, 2021 and December 30, 2022, respectively.

(3) In February 2021, the Company entered into certain offsetting ICE Brent swaps to reduce its exposure to rising oil prices. Those offsetting swaps resulted in a locked-in loss of approximately $2.9 million, of which $1.6 million settled in the third quarter of 2021 with the remaining $1.3 million to be settled in the fourth quarter of 2021.


	For the Remainder		For the Full Year
Natural gas contracts (Henry Hub)	2021		2022
Swap contracts
Total volume (MMBtu)	4,357,000		7,320,000
Weighted average price per MMBtu	$2.96		$3.08
Collar contracts
Total volume (MMBtu)	1,840,000		5,740,000
Weighted average price per MMBtu
Ceiling (short call)	$2.80		$3.64
Floor (long put)	$2.50		$2.83
Short call contracts
Total volume (MMBtu)	1,840,000	(1)	—
Weighted average price per MMBtu	$3.09		$—

Natural gas contracts (Waha basis differential)
Swap contracts
Total volume (MMBtu)	4,140,000		5,475,000
Weighted average price per MMBtu	($0.42)		($0.21)

(1) Premiums from the sale of call options were used to increase the fixed price of certain simultaneously executed price swaps and three-way collars.


	For the Remainder	For the Full Year
NGL contracts (OPIS Mont Belvieu Purity Ethane)	2021	2022
Swap contracts
Total volume (Bbls)	460,000	378,000
Weighted average price per Bbl	$7.62	$15.70

NGL contracts (OPIS Mont Belvieu Propane)
Swap contracts
Total volume (Bbls)	266,800	252,000
Weighted average price per Bbl	$52.15	$48.43

NGL contracts (OPIS Mont Belvieu Butane)
Swap contracts
Total volume (Bbls)	101,200	99,000
Weighted average price per Bbl	$59.43	$54.39

NGL contracts (OPIS Mont Belvieu Isobutane)
Swap contracts
Total volume (Bbls)	55,200	54,000
Weighted average price per Bbl	$58.96	$54.29

Note 8 - Fair Value Measurements

Accounting guidelines for measuring fair value establish a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:

Level 1 – Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Other inputs that are observable directly or indirectly such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities.

Fair Value of Financial Instruments

Cash, cash equivalents, and restricted investments. The carrying amounts for these instruments approximate fair value due to the short-term nature or maturity of the instruments.

Debt. The carrying amount of borrowings outstanding under the Credit Facility approximates fair value as the borrowings bear interest at variable rates and are reflective of market rates. The following table presents the principal amounts of the Company’s Second Lien Notes and Senior Unsecured Notes with the fair values measured using quoted secondary market trading prices which are designated as Level 2 within the valuation hierarchy. See “Note 6 - Borrowings” for further discussion.


	September 30, 2021		December 31, 2020
	Principal Amount	Fair Value	Principal Amount	Fair Value
	(In thousands)
6.25% Senior Notes	$—	$—	$542,720	$344,627
6.125% Senior Notes	460,241	456,789	460,241	260,036
9.00% Second Lien Notes	516,659	561,867	516,659	470,160
8.25% Senior Notes	187,238	185,366	187,238	100,172
6.375% Senior Notes	320,783	311,160	320,783	161,995
8.00% Senior Notes	650,000	651,625	—	—
Total	$2,134,921	$2,166,807	$2,027,641	$1,336,990

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are reported at fair value on a recurring basis in the consolidated balance sheets. The following methods and assumptions were used to estimate fair value:

Commodity Derivative Instruments. The fair value of commodity derivative instruments is derived using a third-party income approach valuation model that utilizes market-corroborated inputs that are observable over the term of the commodity derivative contract. The Company’s fair value calculations also incorporate an estimate of the counterparties’ default risk for commodity derivative assets and an estimate of the Company’s default risk for commodity derivative liabilities. As the inputs in the model are substantially observable over the term of the commodity derivative contract and there is a wide availability of quoted market prices for similar commodity derivative contracts, the Company designates its commodity derivative instruments as Level 2 within the fair value hierarchy. See “Note 7 - Derivative Instruments and Hedging Activities” for further discussion.

Contingent Consideration Arrangements - embedded derivative financial instruments. The embedded options within the contingent consideration arrangements are considered financial instruments under ASC 815. The Company engages a third-party valuation specialist using an option pricing model approach to measure the fair value of the embedded options on a recurring basis. The valuation includes significant inputs such as forward oil price curves, time to expiration, and implied volatility. The model provides for the probability that the specified pricing thresholds would be met for each settlement period, estimates undiscounted payouts, and risk adjusts for the discount rates inclusive of adjustments for each of the counterparty’s credit quality. As these inputs are substantially observable for the full term of the contingent consideration arrangements, the inputs are considered Level 2 inputs within the fair value hierarchy. See “Note 7 - Derivative Instruments and Hedging Activities” for further discussion.

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020:


	September 30, 2021
	Level 1	Level 2	Level 3
	(In thousands)
Assets
Commodity derivative instruments	$—	$38	$—
Contingent consideration arrangements	—	18,567	—
Liabilities
Commodity derivative instruments (1)	—	(315,244)	—
Contingent consideration arrangements	—	(24,688)	—
Total net assets (liabilities)	$—	($321,327)	$—

	December 31, 2020
	Level 1	Level 2	Level 3
	(In thousands)
Assets
Commodity derivative instruments	$—	$921	$—
Contingent consideration arrangements	—	1,816	—
Liabilities
Commodity derivative instruments (2)	—	(97,060)	—
Contingent consideration arrangements	—	(8,618)	—
September 2020 Warrants	—	—	(79,428)
Total net assets (liabilities)	$—	($102,941)	($79,428)

(1) Includes approximately $6.6 million of deferred premiums which the Company will pay as the applicable contracts settle.

(2) Includes approximately $11.2 million of deferred premiums which the Company will pay as the applicable contracts settle.

September 2020 Warrants. The fair value of the September 2020 Warrants was calculated using a Black Scholes-Merton option pricing model. As historical volatility is a significant input into the model, the September 2020 Warrants were designated as Level 3 within the valuation hierarchy.

In February 2021, holders of the September 2020 Warrants provided notice and exercised all of their outstanding warrants. The exercise of the September 2020 Warrants resulted in settlement of the associated derivative liability of $134.8 million. See “Note 7 - Derivative Instruments and Hedging Activities” for additional details.

The following table presents a reconciliation of the change in the fair value of the liability related to the September 2020 Warrants, which was designated as Level 3 within the valuation hierarchy, for the nine months ended September 30, 2021.


						Nine Months Ended September 30, 2021
						(In thousands)
Beginning of period						$79,428
(Gain) loss on changes in fair value (1)						55,390
Transfers into (out of) Level 3						(134,818)
End of period						$—

(1) Included in “(Gain) loss on derivative contracts” in the consolidated statements of operations.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Asset retirement obligations. The Company measures the fair value of asset retirement obligations as of the date a well begins drilling or when production equipment and facilities are installed using a discounted cash flow model based on inputs that are not observable in the market and therefore are designated as Level 3 within the valuation hierarchy. Significant inputs to the fair value measurement of asset retirement obligations include estimates of the costs of plugging and abandoning oil and gas wells, removing production equipment and facilities, restoring the surface of the land as well as estimates of the economic lives of the oil and gas wells and future inflation rates.

Note 9 - Income Taxes

The Company provides for income taxes at the statutory rate of 21%. Reported income tax benefit (expense) differs from the amount of income tax benefit (expense) that would result from applying domestic federal statutory tax rates to pretax income (loss). These differences primarily relate to non-deductible executive compensation expenses, restricted stock windfalls, changes in valuation allowances, and state income taxes.

For the three months ended September 30, 2021 and 2020, the Company’s effective income tax rates were 1% and 0%, respectively, and for the nine months ended September 30, 2021 and 2020, the Company’s effective income tax rates were 1% and 6%, respectively. The primary differences between the effective tax rates for the three and nine months ended September 30, 2021 and 2020 and the statutory rate resulted from the valuation allowance recorded against the Company’s net deferred tax assets beginning in the second quarter of 2020 and the effect of state income taxes.

Deferred Tax Asset Valuation Allowance

Management monitors company-specific, oil and natural gas industry and worldwide economic factors and assesses the likelihood that

the Company’s net deferred tax assets will be utilized prior to their expiration. A significant item of objective negative evidence considered was the cumulative historical three year pre-tax loss and a net deferred tax asset position at September 30, 2021, driven primarily by the impairments of evaluated oil and gas properties recognized beginning in the second quarter of 2020 and continuing through the fourth quarter of 2020. This limits the ability to consider other subjective evidence such as the Company’s potential for future growth. Since the second quarter of 2020, based on the evaluation of the evidence available, the Company concluded that it is more likely than not that the net deferred tax assets will not be realized. As a result, the Company has recorded a valuation allowance, reducing the net deferred tax assets as of September 30, 2021 to zero. As long as the Company continues to conclude that the valuation allowance against its net deferred tax assets is necessary, the Company will have no significant deferred income tax expense or benefit.

Note 10 - Share-Based Compensation

RSU Equity Awards

The following table summarizes activity for restricted stock units that may be settled in common stock (“RSU Equity Awards”) for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,
	2021		2020
	RSU Equity Awards (in thousands)	Weighted Average Grant Date Fair Value	RSU Equity Awards (in thousands)	Weighted Average Grant Date Fair Value
Unvested, beginning of the period	1,035	$35.88	719	$39.99
Granted (1)	—	$—	6	$9.35
Vested (2)	(2)	$61.84	(14)	$99.88
Forfeited	(10)	$30.98	(12)	$46.51
Unvested, end of the period	1,023	$35.86	699	$38.46

	Nine Months Ended September 30,
	2021		2020
	RSU Equity Awards (in thousands)	Weighted Average Grant Date Fair Value	RSU Equity Awards (in thousands)	Weighted Average Grant Date Fair Value
Unvested, beginning of the period	677	$34.57	269	$102.48
Granted (1)	636	$38.46	562	$21.07
Vested (2)	(207)	$39.51	(120)	$100.19
Forfeited	(83)	$36.18	(12)	$46.51
Unvested, end of the period	1,023	$35.86	699	$38.46

(1)Includes zero target performance-based RSU Equity Awards granted during both the three and nine months ended September 30, 2021 and zero and 111.2 thousand during the three and nine months ended September 30, 2020, respectively.

(2)The fair value of shares vested was $0.1 million during both the three months ended September 30, 2021 and 2020, and $7.9 million and $1.4 million for the nine months ended September 30, 2021 and 2020, respectively.

Grant activity for the nine months ended September 30, 2021 and 2020 primarily consisted of RSU Equity Awards granted to executives and employees as part of the annual grant of long-term equity incentive awards.

No performance-based RSU Equity Awards were granted during the nine months ended September 30, 2021. For the performance-based RSU Equity Awards granted in the first half of 2020, the number of outstanding performance-based RSU Equity Awards that can vest is based on a calculation that compares the Company’s total shareholder return (“TSR”) to the same calculated return of a group of peer companies selected by the Company and can range between 0% and 300% of the target units for the awards granted. These awards include an absolute TSR modifier, which was added as a second factor in the calculation, which could increase the number of awards that vest or reduce the number of awards that vest if the absolute TSR is less than 5% over the performance period.

The Company recognizes expense for performance-based RSU Equity Awards based on the fair value of the awards at the grant date. Awards with a performance-based provision do not allow for the reversal of previously recognized expense, even if the market metric is not achieved and no shares ultimately vest. The grant date fair value of performance-based RSU Equity Awards, calculated using a Monte Carlo simulation, was zero and $3.4 million for the three and nine months ended September 30, 2020, respectively. The following table summarizes the assumptions used to calculate the grant date fair value of the performance-based RSU Equity Awards granted during the nine months ended September 30, 2020:


Performance-Based Awards	June 29, 2020		January 31, 2020
Expected term (in years)	2.5		2.9
Expected volatility	113.2	%	54.8	%
Risk-free interest rate	0.2	%	1.3	%
Dividend yield	—	%	—	%

As of September 30, 2021, unrecognized compensation costs related to unvested RSU Equity Awards were $25.4 million and will be recognized over a weighted average period of 2.2 years.

Cash-Settled RSU Awards

The table below summarizes the activity for restricted stock units that may be settled in cash (“Cash-Settled RSU Awards”) for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,
	2021		2020
	Cash-Settled RSU Awards (in thousands)	Weighted Average Grant Date Fair Value	Cash-Settled RSU Awards (in thousands)	Weighted Average Grant Date Fair Value
Unvested, beginning of the period	174	$45.93	208	$67.20
Granted	—	$—	—	$—
Vested	—	$—	(1)	$131.54
Did not vest at end of performance period	—	$—	(2)	$133.95
Forfeited	—	$—	—	$—
Unvested, end of the period	174	$45.93	205	$66.28

	Nine Months Ended September 30,
	2021		2020
	Cash-Settled RSU Awards (in thousands)	Weighted Average Grant Date Fair Value	Cash-Settled RSU Awards (in thousands)	Weighted Average Grant Date Fair Value
Unvested, beginning of the period	196	$47.56	86	$124.22
Granted (1)	3	$36.71	125	$29.76
Vested	(1)	$110.48	(3)	$130.12
Did not vest at end of performance period	(1)	$110.48	(3)	$148.81
Forfeited	(23)	$54.57	—	$—
Unvested, end of the period	174	$45.93	205	$66.28

(1)Includes 3.2 thousand and 13.7 thousand units for the nine months ended September 30, 2021 and 2020, respectively, associated with deferrals of certain non-employee director compensation pursuant to the terms of the Amended and Restated Deferred Compensation Plan for Outside Directors.

No Cash-Settled RSU Awards were granted to employees during the nine months ended September 30, 2021. Grant activity in the first half of 2020 primarily consisted of Cash-Settled RSU Awards to executives as part of the annual grant of long-term equity incentive awards. These awards cliff vest after an approximate three-year performance period.

The Company’s outstanding Cash-Settled RSU Awards include the same performance-based vesting conditions as the performance-based RSU Equity Awards, which are described above. Additionally, the assumptions used to calculate the grant date fair value per

Cash-Settled RSU Award granted during the nine months ended September 30, 2020 are the same as the performance-based RSU Equity Awards presented above.

The following table summarizes the Company’s liability for Cash-Settled RSU Awards and the classification in the consolidated balance sheets for the periods indicated:


	September 30, 2021	December 31, 2020
	(In thousands)
Other current liabilities	$661	$182
Other long-term liabilities	6,780	1,336
Total Cash-Settled RSU Awards	$7,441	$1,518

As of September 30, 2021, unrecognized compensation costs related to unvested Cash-Settled RSU Awards were $3.7 million and will be recognized over a weighted average period of 1.2 years.

Cash SARs

As a result of the Carrizo Acquisition, cash-settled stock appreciation rights (“Cash SARs”) previously granted by Carrizo that were outstanding at closing were canceled and converted into a Cash SAR covering shares of the Company’s common stock, with the conversion calculated as prescribed in the agreement governing the Carrizo Acquisition. The liabilities for Cash SARs as of September 30, 2021 and December 31, 2020 were $8.2 million and $1.7 million, respectively, all of which were classified as “Other current liabilities” in the consolidated balance sheets in the respective periods. Changes in the fair value of the Cash SARs are included in “General and administrative” in the consolidated statements of operations.

Share-Based Compensation Expense (Benefit), Net

Share-based compensation expense associated with the RSU Equity Awards, Cash-Settled RSU Awards, Cash SARs, net of amounts capitalized, is included in “General and administrative” in the consolidated statements of operations. The following table presents share-based compensation expense (benefit), net for each respective period:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
	(In thousands)
RSU Equity Awards	$3,839	$3,009	$9,689	$10,169
Cash-Settled RSU Awards	(1,344)	(566)	6,105	(1,966)
Cash SARs	(2,006)	(1,005)	6,536	(4,646)
	489	1,438	22,330	3,557
Less: amounts capitalized to oil and gas properties	(1,392)	(1,532)	(10,346)	(3,862)
Total share-based compensation expense (benefit), net	($903)	($94)	$11,984	($305)

See “Note 10 - Share-Based Compensation” of the Notes to Consolidated Financial Statements in the 2020 Annual Report for details of the Company’s equity-based incentive plans.

Note 11 - Stockholders’ Equity

Warrant Exercises

During the nine months ended September 30, 2021, certain holders of the September 2020 Warrants and warrants issued in conjunction with the exchange of Senior Unsecured Notes on November 2, 2020 (the “November 2020 Warrants”) provided notice and exercised all of their outstanding warrants. As a result of the exercises, the Company issued a total of 6.4 million shares of its common stock in exchange for 8.4 million outstanding warrants determined on a net share settlement basis. See “Note 7 - Derivative Instruments and Hedging Activities” and “Note 8 - Fair Value Measurements” for additional details regarding the September 2020 Warrants. As of September 30, 2021, 0.6 million November 2020 Warrants were outstanding. See “Note 15 - Subsequent Events” for discussion of the exercise of the remaining November 2020 Warrants.

Note 12 - Accounts Receivable, Net


	September 30, 2021	December 31, 2020
	(In thousands)
Oil and natural gas receivables	$168,109	$100,257
Joint interest receivables	8,607	11,530
Other receivables	42,266	24,191
Total	218,982	135,978
Allowance for credit losses	(2,866)	(2,869)
Total accounts receivable, net	$216,116	$133,109

Note 13 - Accounts Payable and Accrued Liabilities


	September 30, 2021	December 31, 2020
	(In thousands)
Accounts payable	$74,881	$101,231
Revenues payable	259,842	162,762
Accrued capital expenditures	48,029	32,493
Accrued interest	59,301	45,033
Total accounts payable and accrued liabilities	$442,053	$341,519

Note 14 - Supplemental Cash Flow


	Nine Months Ended September 30,
	2021	2020
	(In thousands)
Supplemental cash flow information:
Interest paid, net of capitalized amounts	$62,638	$62,414
Income taxes paid	3,231	1,250
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$20,224	$35,919
Investing cash flows from operating leases	13,852	16,956
Non-cash investing and financing activities:
Change in accrued capital expenditures	$17,087	($72,782)
Change in asset retirement costs	3,381	1,208
ROU assets obtained in exchange for lease liabilities:
Operating leases	$9,710	$10,475

Note 15 - Subsequent Events

Fifth Amendment to the Credit Agreement

On November 1, 2021, the Company entered into the fifth amendment to its credit agreement governing the Credit Facility. See “Note 6 - Borrowings” for additional details.

Primexx Acquisition

On October 1, 2021, the Company closed the Primexx Acquisition. See “Note 3 - Acquisitions and Divestitures” for additional details.

Non-Core Asset Divestitures

On October 6, 2021, the Company entered into a purchase and sale agreement for the divestiture of certain non-core assets in the Midland Basin. The transaction, which is comprised of producing properties as well as an undeveloped acreage position, has an agreed upon purchase price of approximately $38.2 million, subject to customary purchase price adjustments, and is expected to close during the fourth quarter of 2021.

On October 28, 2021, the Company entered into an agreement to sell certain non-core water infrastructure for $30.0 million, subject to customary purchase price adjustments, as well as up to $18.0 million of contingent consideration.

Exercise of Warrants

On October 13, 2021, certain entities that were issued November 2020 Warrants provided notice and exercised all of their outstanding warrants. As a result of this exercise, the Company issued 0.5 million shares of its common stock in exchange for 0.6 million

outstanding warrants determined on a net share settlement basis. Subsequent to this exercise, there are no remaining outstanding November 2020 Warrants.

Second Lien Notes Exchange

On November 3, 2021, at a special meeting of shareholders, the Company obtained the requisite shareholder approval for the issuance of approximately 5.5 million shares of the Company’s common stock in the Exchange. The Exchange is expected to close on November 5, 2021. See “Note 6 - Borrowings” for additional details.

Special Note Regarding Forward Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements in this Form 10-Q by words such as “anticipate,” “project,” “intend,” “estimate,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “plan,” “forecast,” “target” or similar expressions.

All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements, including such things as:

•our oil and natural gas reserve quantities, and the discounted present value of these reserves;

•the amount and nature of our capital expenditures;

•our future drilling and development plans and our potential drilling locations;

•the timing and amount of future capital and operating costs;

•production decline rates from our wells being greater than expected;

•commodity price risk management activities and the impact on our average realized prices;

•business strategies and plans of management;

•our ability to consummate and efficiently integrate recent acquisitions; and

•prospect development and property acquisitions.

We caution you that the forward-looking statements contained in this Form 10-Q are subject to all of the risks and uncertainties, many of which are beyond our control, incident to the exploration for and development, production and sale of oil and natural gas. These and other risks include, but are not limited to, the risks described in Part I, Item 1A of our 2020 Annual Report and in all quarterly reports on Form 10-Q filed subsequently thereto. These factors include:

•volatility of oil, natural gas and NGL prices or a prolonged period of low oil, natural gas or NGLs prices;

•general economic conditions including the availability of credit and access to existing lines of credit;

•changes in the supply of and demand for oil and natural gas, including as a result of the COVID-19 pandemic and various governmental actions taken to mitigate its impact or actions by, or disputes among, members of OPEC and other oil and natural gas producing countries, such as Russia, with respect to production levels or other matters related to the price of oil;

•the uncertainty of estimates of oil and natural gas reserves;

•impairments;

•the impact of competition;

•the availability and cost of seismic, drilling and other equipment, waste and water disposal infrastructure, and personnel;

•operating hazards inherent in the exploration for and production of oil and natural gas;

•difficulties encountered during the exploration for and production of oil and natural gas;

•the potential impact of future drilling on production from existing wells;

•difficulties encountered in delivering oil and natural gas to commercial markets;

•the uncertainty of our ability to attract capital and obtain financing on favorable terms;

•compliance with, or the effect of changes in, the extensive governmental regulations regarding the oil and natural gas business including those related to climate change and greenhouse gases;

•the impact of government regulation, including regulation of hydraulic fracturing and water disposal wells;

•any increase in severance or similar taxes;

•the financial impact of accounting regulations and critical accounting policies;

•the comparative cost of alternative fuels;

•credit risk relating to the risk of loss as a result of non-performance by our counterparties;

•cyberattacks on the Company or on systems and infrastructure used by the oil and natural gas industry; and

•weather conditions.

In addition, there are risks and uncertainties related to the Primexx Acquisition, which include the following:

•the Primexx Acquisition may not be accretive, and may be dilutive, to the Company’s earnings per share, which may negatively affect the market price of the Company’s common stock; and

•the ultimate timing, outcome, and results of integrating the assets acquired in the Primexx Acquisition.

Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. Additional risks or uncertainties that are not currently known to us, that we currently deem to be immaterial, or that could apply to any company could also materially adversely affect our business, financial condition, or future results. Any forward-looking statement speaks only as of the date of which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

In addition, we caution that reserve engineering is a process of estimating oil and natural gas accumulated underground and cannot be measured exactly. Accuracy of reserve estimates depend on a number of factors including data available at the point in time, engineering interpretation of the data, and assumptions used by the reserve engineers as it relates to price and cost estimates and recoverability. New results of drilling, testing, and production history may result in revisions of previous estimates and, if significant, would impact future development plans. As such, reserve estimates may differ from actual results of oil and natural gas quantities ultimately recovered.

Except as required by applicable law, all forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following management’s discussion and analysis describes the principal factors affecting the Company’s results of operations, liquidity, capital resources and contractual cash obligations. This discussion should be read in conjunction with the accompanying unaudited consolidated financial statements and our 2020 Annual Report on Form 10-K, which include additional information about our business practices, significant accounting policies, risk factors, and the transactions that underlie our financial results. Our website address is www.callon.com. All of our filings with the SEC are available free of charge through our website as soon as reasonably practicable after we file them with, or furnish them to, the SEC. Information on our website does not form part of this Quarterly Report on Form 10-Q.

We are an independent oil and natural gas company with roots that go back over 70 years to our establishment in 1950. We are focused on the acquisition, exploration and development of high-quality assets in the leading oil plays of South and West Texas. Our activities are primarily focused on horizontal development in the Midland and Delaware Basins, both of which are part of the larger Permian Basin in West Texas, as well as the Eagle Ford in South Texas.

Our operating culture is centered on responsible development of hydrocarbon resources, safety and the environment, which we believe strengthens our operational performance. Our drilling activity is predominantly focused on the horizontal development of several prospective intervals in the Permian, including multiple levels of the Wolfcamp formation and the Lower Spraberry shales, and the Eagle Ford. We have assembled a multi-year inventory of potential horizontal well locations and intend to add to this inventory through delineation drilling of emerging zones on our existing acreage and through acquisition of additional locations through working interest acquisitions, leasing programs, acreage purchases, joint ventures and asset swaps.

Recent Developments and Overview

Primexx Acquisition

On October 1, 2021, we closed the Primexx Acquisition for total consideration of $864.6 million, subject to post-closing adjustments, comprised of approximately $453.7 million in cash and 8.84 million shares of the Company’s common stock. Additionally, pursuant to the Primexx PSAs, certain interest owners exercised their option to sell their interest in the properties included in the Primexx Acquisition to us for consideration structured similarly to the Primexx Acquisition. This incremental purchase price totaled approximately $37.5 million, net of customary purchase price adjustments, and provided an increase in the acreage included in the Primexx Acquisition to approximately 36,500 net acres. See “Note 3 - Acquisitions and Divestitures” for additional details.

Second Lien Notes Exchange

On November 3, 2021, at a special meeting of shareholders, we obtained the requisite shareholder approval for the issuance of approximately 5.5 million shares of our common stock in exchange for $197.0 million in aggregate principal amount of our Second Lien Notes. The Exchange is anticipated to close on November 5, 2021. See “Note 6 - Borrowings” and “Note 15 - Subsequent Events” for further discussion.

Non-Core Asset Divestitures

On September 27, 2021, we entered into a purchase and sale agreement for the divestiture of certain non-core assets in the Eagle Ford Shale. The transaction, which is comprised of producing properties as well as an undeveloped acreage position, has an agreed upon purchase price of approximately $100.0 million, subject to customary purchase price adjustments, and is expected to close during the fourth quarter of 2021.

On October 6, 2021, we entered into a purchase and sale agreement for the divestiture of certain non-core assets in the Midland Basin. The transaction, which is comprised of producing properties as well as an undeveloped acreage position, has an agreed upon purchase price of approximately $38.2 million, subject to customary purchase price adjustments, and is expected to close during the fourth quarter of 2021.

On October 28, 2021, we entered into an agreement to sell certain non-core water infrastructure for $30.0 million, subject to customary purchase price adjustments, as well as up to $18.0 million of contingent consideration.

Fifth Amendment to the Credit Facility

On November 1, 2021, we entered into the fifth amendment to our credit agreement governing the Credit Facility which, among other things, reaffirmed the borrowing base and elected commitment amount of $1.6 billion as a result of the fall 2021 scheduled redetermination. See “Note 6 - Borrowings” for additional details.

Third Quarter 2021 Highlights

•Total production for the three months ended September 30, 2021 was 99.7 MBoe/d, an increase of 12% from the three months ended June 30, 2021, primarily due to new wells placed on production during the third quarter of 2021 partially offset by normal production decline. Total production for the nine months ended September 30, 2021 was 89.9 MBoe/d, a decrease

of 13% from the nine months ended September 30, 2020, primarily due to the divestitures that occurred during the nine months ended September 30, 2021 as well as normal production decline partially offset by new wells placed on production during 2021.

•Operated drilling and completion activity for the three months ended September 30, 2021 along with our drilled but uncompleted and producing wells as of September 30, 2021 are summarized in the table below.


	Three Months Ended September 30, 2021				As of September 30, 2021
	Drilled		Completed		Drilled But Uncompleted		Producing
Region	Gross	Net	Gross	Net	Gross	Net	Gross	Net
Permian	15	13.5	16	12.8	13	11.6	867	755.7
Eagle Ford	—	—	6	6.0	—	—	695	627.1
Total	15	13.5	22	18.8	13	11.6	1,562	1,382.8

•Operational capital expenditures, exclusive of leasehold and seismic, for the third quarter of 2021 were $115.0 million, of which approximately 82% were in the Permian with the remaining balance in the Eagle Ford. See “—Liquidity and Capital Resources—2021 Capital Budget and Funding Strategy” for additional details.

•On July 6, 2021, we closed on the issuance and sale of $650.0 million in aggregate principal amount of 8.00% Senior Notes in a private placement for proceeds of approximately $638.1 million, net of underwriting discounts and commissions and offering costs. On July 21, 2021, we used a portion of the net proceeds from the 8.00% Senior Notes to redeem all $542.7 million of our outstanding 6.25% Senior Notes due 2023 and the remaining proceeds to partially repay amounts outstanding under our Credit Facility.

•As of September 30, 2021, borrowings outstanding under our Credit Facility was $723.0 million compared to $875.0 million as of June 30, 2021. As discussed above, the cash portion of the total consideration for the Primexx Acquisition was funded by borrowings under our Credit Facility.

•Recorded net income for the three months ended September 30, 2021 of $171.9 million, or $3.65 per diluted share, compared to net loss for the three months ended September 30, 2020 of $680.4 million, or $17.12 per diluted share. The variance between the respective periods was driven primarily by the impairment of evaluated properties of $685.0 million during the third quarter of 2020 as well as an increase in operating revenues in the third quarter of 2021 driven by an approximate 91% increase in the total average realized sales price compared to the third quarter of 2020. This increase was partially offset by an increase in the loss on derivative contracts to approximately $107.2 million during the third quarter of 2021 compared to approximately $27.0 million during the third quarter of 2020. See “—Results of Operations” below for further details.

Results of Operations

The following table sets forth certain operating information with respect to the Company’s oil and natural gas operations for the periods indicated:


	Three Months Ended							Nine Months Ended September 30,
	September 30, 2021		June 30, 2021		Change	% Change		2021		2020		Change	% Change
Total production
Oil (MBbls)
Permian	3,428		3,232		196	6	%	9,748		10,668		(920)	(9	%)
Eagle Ford	2,447		1,870		577	31	%	5,910		7,450		(1,540)	(21	%)
Total oil (MBbls)	5,875		5,102		773	15	%	15,658		18,118		(2,460)	(14	%)

Natural gas (MMcf)
Permian	7,153		7,138		15	—	%	20,499		24,613		(4,114)	(17	%)
Eagle Ford	2,242		1,745		497	28	%	5,614		6,451		(837)	(13	%)
Total natural gas (MMcf)	9,395		8,883		512	6	%	26,113		31,064		(4,951)	(16	%)

NGLs (MBbls)
Permian	1,315		1,216		99	8	%	3,606		4,059		(453)	(11	%)
Eagle Ford	417		299		118	39	%	940		1,107		(167)	(15	%)
Total NGLs (MBbls)	1,732		1,515		217	14	%	4,546		5,166		(620)	(12	%)

Total Production (MBoe)
Permian	5,936		5,637		299	5	%	16,771		18,829		(2,058)	(11	%)
Eagle Ford	3,237		2,460		777	32	%	7,785		9,632		(1,847)	(19	%)
Total barrels of oil equivalent (MBoe)	9,173		8,097		1,076	13	%	24,556		28,461		(3,905)	(14	%)

Total daily production (Boe/d)	99,703		88,981		10,722	12	%	89,949		103,873		(13,924)	(13	%)
Oil as % of total daily production	64	%	63	%				64	%	64	%

Benchmark prices (1)
WTI (per Bbl)	$70.50		$66.06		$4.44	7	%	$64.83		$38.30		$26.53	69	%
Henry Hub (per Mcf)	4.31		2.97		1.34	45	%	3.34		1.92		1.42	74	%

Average realized sales price (excluding impact of settled derivatives)
Oil (per Bbl)
Permian	$69.60		$65.08		$4.52	7	%	$64.00		$36.00		$28.00	78	%
Eagle Ford	69.76		65.83		3.93	6	%	65.29		32.73		32.56	99	%
Total oil (per Bbl)	69.67		65.36		4.31	7	%	64.49		34.66		29.83	86	%

Natural gas (per Mcf)
Permian	3.78		2.68		1.10	41	%	3.20		0.86		2.34	272	%
Eagle Ford	4.22		2.82		1.40	50	%	3.44		1.87		1.57	84	%
Total natural gas (per Mcf)	3.89		2.71		1.18	44	%	3.25		1.07		2.18	204	%

NGL (per Bbl)
Permian	34.41		24.71		9.70	39	%	27.64		10.90		16.74	154	%
Eagle Ford	30.81		22.00		8.81	40	%	25.96		10.29		15.67	152	%
Total NGLs (per Bbl)	33.54		24.17		9.37	39	%	27.29		10.77		16.52	153	%


	Three Months Ended					Nine Months Ended September 30,
	September 30, 2021	June 30, 2021	$ Change	% Change		2021	2020	$ Change	% Change
Total average realized sales price (per Boe)
Permian	$52.37	$46.04	$6.33	14	%	$47.05	$23.88	$23.17	97	%
Eagle Ford	59.63	54.72	4.91	9	%	55.18	27.75	27.43	99	%
Total (per Boe)	$54.93	$48.68	$6.25	13	%	$49.63	$25.19	$24.44	97	%



Average realized sales price (including impact of settled derivatives)
Oil (per Bbl)	$54.00	$46.82	$7.18	15	%	$48.77	$40.36	$8.41	21	%
Natural gas (per Mcf)	2.21	2.25	(0.04)	(2	%)	2.42	1.09	1.33	122	%
NGLs (per Bbl)	31.71	23.21	8.50	37	%	26.04	10.77	15.27	142	%
Total (per Boe)	$42.84	$36.31	$6.53	18	%	$38.50	$28.83	$9.67	34	%

Revenues (in thousands)
Oil
Permian	$238,582	$210,340	$28,242	13	%	$623,889	$384,092	$239,797	62	%
Eagle Ford	170,711	123,102	47,609	39	%	385,891	243,842	142,049	58	%
Total oil	409,293	333,442	75,851	23	%	1,009,780	627,934	381,846	61	%

Natural gas
Permian	27,065	19,152	7,913	41	%	65,507	21,255	44,252	208	%
Eagle Ford	9,454	4,928	4,526	92	%	19,312	12,050	7,262	60	%
Total natural gas	36,519	24,080	12,439	52	%	84,819	33,305	51,514	155	%

NGLs
Permian	45,249	30,047	15,202	51	%	99,672	44,237	55,435	125	%
Eagle Ford	12,848	6,578	6,270	95	%	24,407	11,390	13,017	114	%
Total NGLs	58,097	36,625	21,472	59	%	124,079	55,627	68,452	123	%

Total Revenues
Permian	310,896	259,539	51,357	20	%	789,068	449,584	339,484	76	%
Eagle Ford	193,013	134,608	58,405	43	%	429,610	267,282	162,328	61	%
Total revenues	$503,909	$394,147	$109,762	28	%	$1,218,678	$716,866	$501,812	70	%

Additional per Boe data
Lease operating
Permian	$4.19	$4.60	($0.41)	(9	%)	$4.36	$4.80	($0.44)	(9	%)
Eagle Ford	5.51	8.34	(2.83)	(34	%)	7.25	6.10	1.15	19	%
Total lease operating	$4.66	$5.74	($1.08)	(19	%)	$5.28	$5.24	$0.04	1	%

Production and ad valorem taxes
Permian	$2.80	$2.53	$0.27	11	%	$2.56	$1.56	$1.00	64	%
Eagle Ford	2.89	3.12	(0.23)	(7	%)	3.01	1.75	1.26	72	%
Total production and ad valorem taxes	$2.84	$2.71	$0.13	5	%	$2.70	$1.62	$1.08	67	%

Gathering, transportation and processing
Permian	$2.70	$2.75	($0.05)	(2	%)	$2.67	$2.24	$0.43	19	%
Eagle Ford	1.49	1.84	(0.35)	(19	%)	1.82	1.49	0.33	22	%
Total gathering, transportation and processing	$2.28	$2.47	($0.19)	(8	%)	$2.40	$1.99	$0.41	21	%

(1) Reflects calendar average daily spot market prices.

Revenues

The following table is intended to reconcile the change in oil, natural gas, NGLs, and total revenue for the respective period presented by reflecting the effect of changes in volume and in the underlying commodity prices:


	Three Months Ended
	Oil		Natural Gas		NGLs		Total
	(In thousands)
Revenues for the period ended in June 30, 2021 (1)	$333,442		$24,080		$36,625		$394,147
Volume increase (decrease)	50,520		1,387		5,246		57,153
Price increase (decrease)	25,331		11,052		16,226		52,609
Net increase (decrease)	75,851		12,439		21,472		109,762
Revenues for the period ended in September 30, 2021 (1)	$409,293		$36,519		$58,097		$503,909

Percent of total revenues	81	%	7	%	12	%

(1) Excludes sales of oil and gas purchased from third parties.


	Nine Months Ended September 30,
	Oil		Natural Gas		NGLs		Total
	(In thousands)
Revenues for the period ended in 2020 (1)	$627,934		$33,305		$55,627		$716,866
Volume increase (decrease)	(85,259)		(5,308)		(6,676)		(97,243)
Price increase (decrease)	467,105		56,822		75,128		599,055
Net increase (decrease)	381,846		51,514		68,452		501,812
Revenues for the period ended in 2021 (1)	$1,009,780		$84,819		$124,079		$1,218,678

Percent of total revenues	83	%	7	%	10	%

(1) Excludes sales of oil and gas purchased from third parties.

Revenues for the three months ended September 30, 2021 of $503.9 million increased $109.8 million, or 28%, compared to revenues of $394.1 million for the three months ended June 30, 2021. The increase was primarily attributable to a 13% increase in the average realized sales price which rose to $54.93 per Boe from $48.68 per Boe as well as a 12% increase in production as discussed above.

Revenues for the nine months ended September 30, 2021 of $1.2 billion increased $501.8 million, or 70%, compared to revenues of $716.9 million for the same period of 2020. The increase was primarily attributable to a 97% increase in the average realized sales price which rose to $49.63 per Boe from $25.19 per Boe. The increase in the average realized sales price was partially offset by a 13% decrease in production as discussed above.

Operating Expenses


	Three Months Ended
	September 30, 2021	Per	June 30, 2021	Per	Total Change			Boe Change
		Boe		Boe	$	%		$	%
	(In thousands, except per Boe and % amounts)
Lease operating	$42,706	$4.66	$46,460	$5.74	($3,754)	(8	%)	($1.08)	(19	%)
Production and ad valorem taxes	26,070	2.84	21,958	2.71	4,112	19	%	0.13	5	%
Gathering, transportation and processing	20,875	2.28	20,031	2.47	844	4	%	(0.19)	(8	%)
Depreciation, depletion and amortization	89,890	9.80	83,128	10.27	6,762	8	%	(0.47)	(5	%)
General and administrative	9,503	1.04	11,065	1.37	(1,562)	(14	%)	(0.33)	(24	%)

Merger, integration and transaction	3,018	0.33	—	—	3,018	100	%	0.33	100	%


	Nine Months Ended September 30,
		Per		Per	Total Change			Boe Change
	2021	Boe	2020	Boe	$	%		$	%
	(In thousands, except per Boe and % amounts)
Lease operating	$129,619	$5.28	$149,091	$5.24	($19,472)	(13	%)	$0.04	1	%
Production and ad valorem taxes	66,467	2.71	46,151	1.62	20,316	44	%	1.09	67	%
Gathering, transportation and processing	58,887	2.40	56,615	1.99	2,272	4	%	0.41	21	%
Depreciation, depletion and amortization	244,005	9.94	384,594	13.51	(140,589)	(37	%)	(3.57)	(26	%)
General and administrative	37,367	1.52	26,573	0.93	10,794	41	%	0.59	63	%
Impairment of evaluated oil and gas properties	—	—	1,961,474	68.92	(1,961,474)	(100	%)	(68.92)	(100	%)
Merger, integration and transaction	3,018	0.12	26,362	0.93	(23,344)	(89	%)	(0.81)	(87	%)

Lease Operating Expenses. These are daily costs incurred to extract oil, natural gas and NGLs and maintain our producing properties. Such costs also include maintenance, repairs, salt water disposal, insurance and workover expenses related to our oil and natural gas properties.

Lease operating expenses for the three months ended September 30, 2021 decreased to $42.7 million compared to $46.5 million for the three months ended June 30, 2021, primarily due to a reduction in workover expenses as well as a reduction in certain operating expenses such as saltwater disposal and compression. Lease operating expense per Boe for the three months ended September 30, 2021 decreased to $4.66 compared to $5.74 for the three months ended June 30, 2021, primarily due to the distribution of fixed costs spread over higher production volumes as well as a reduction in certain operating expenses as discussed above.

Lease operating expenses for the nine months ended September 30, 2021 decreased to $129.6 million compared to $149.1 million for the same period of 2020, primarily due to a reduction in certain operating expenses such as repairs and maintenance and equipment rentals. Lease operating expense per Boe for the nine months ended September 30, 2021 increased to $5.28 compared to $5.24 for the same period of 2020, primarily due to the distribution of fixed costs spread over lower production volumes, partially offset by a reduction in certain operating expenses as discussed above.

Production and Ad Valorem Taxes. In general, severance taxes are based upon current year commodity prices whereas ad valorem taxes are based upon prior year commodity prices. Severance taxes are paid on produced oil and natural gas based on a percentage of revenues from products sold at fixed rates established by federal, state or local taxing authorities. In the counties where our production is located, we are also subject to ad valorem taxes, which are generally based on the taxing jurisdictions’ valuation of our oil and gas properties.

For the three months ended September 30, 2021, production and ad valorem taxes increased 19% to $26.1 million compared to $22.0 million for the three months ended June 30, 2021, which is primarily related to a 28% increase in total revenues which increased production taxes. The impact of the increase in production taxes was partially offset by a decrease in ad valorem taxes due to lower property tax valuations received during the third quarter of 2021. Production and ad valorem taxes as a percentage of total revenues decreased to 5.2% for the third quarter of 2021 as compared to 5.6% of total revenues for the three months ended June 30, 2021, primarily due to a decrease in ad valorem taxes during the third quarter of 2021 as discussed above.

For the nine months ended September 30, 2021, production and ad valorem taxes increased 44% to $66.5 million compared to $46.2 million for the same period of 2020, which is primarily related to a 70% increase in total revenues which increased production taxes. The impact of the increase in production taxes was partially offset by a decrease in ad valorem taxes due to lower property tax valuations for 2021 as a result of lower commodity prices during 2020 compared to higher property tax valuations for 2020 as a result of higher commodity prices during 2019. Production and ad valorem taxes as a percentage of total revenues decreased to 5.5% for the

nine months ended September 30, 2021, as compared to 6.4% of total revenues for the same period of 2020, primarily due to lower property tax valuations for 2021 as a result of lower commodity prices during 2020.

Gathering, Transportation and Processing Expenses. For the three months ended September 30, 2021, gathering, transportation and processing expenses increased 4% to $20.9 million compared to $20.0 million for the three months ended June 30, 2021, which is primarily related to the 12% increase in production volumes between the two periods.

For the nine months ended September 30, 2021, gathering, transportation and processing expenses increased 4% to $58.9 million compared to $56.6 million for the same period of 2020, which was primarily related to new oil transportation agreements which were executed subsequent to the six months ended June 30, 2020, partially offset by a 13% decrease in production volumes between the two periods.

Depreciation, Depletion and Amortization (“DD&A”). Under the full cost accounting method, we capitalize costs within a cost center and then systematically amortize those costs on an equivalent unit-of-production method based on production and estimated proved oil and gas reserve quantities. Depreciation of other property and equipment is computed using the straight line method over their estimated useful lives, which range from three to twenty years. The following table sets forth the components of our depreciation, depletion and amortization for the periods indicated:


	Three Months Ended				Nine Months Ended September 30,
	September 30, 2021		June 30, 2021		2021		2020
	Amount	Per Boe	Amount	Per Boe	Amount	Per Boe	Amount	Per Boe
	(In thousands, except per Boe)
DD&A of evaluated oil and gas properties	$87,492	$9.54	$80,833	$9.98	$237,030	$9.65	$377,353	$13.26
Depreciation of other property and equipment	472	0.05	489	0.06	1,477	0.06	2,908	0.10
Amortization of other assets	962	0.10	883	0.11	2,684	0.11	1,832	0.06
Accretion of asset retirement obligations	964	0.11	923	0.12	2,814	0.12	2,501	0.09
DD&A	$89,890	$9.80	$83,128	$10.27	$244,005	$9.94	$384,594	$13.51

For the three months ended September 30, 2021, DD&A increased to $89.9 million from $83.1 million for the three months ended June 30, 2021. The increase in DD&A was primarily attributable to a production increase of 12%.

For the nine months ended September 30, 2021, DD&A decreased to $244.0 million from $384.6 million for the same period in 2020. The decrease in DD&A was primarily attributable to a production decrease of 13% and as a result of the impairments of evaluated oil and gas properties that were recognized during 2020.

General and Administrative, Net of Amounts Capitalized (“G&A”). G&A for the three months ended September 30, 2021 decreased to $9.5 million compared to $11.1 million for the three months ended June 30, 2021, primarily due to the decrease in share-based compensation expense, net as the fair value of Cash-Settled RSU Awards and Cash SARs decreased in the third quarter of 2021.

G&A for the nine months ended September 30, 2021 increased to $37.4 million compared to $26.6 million for the same period in 2020 primarily due to an increase in the fair value of Cash-Settled RSU Awards and Cash SARs, partially offset by lower compensation costs.

Impairment of Evaluated Oil and Gas Properties. We did not recognize an impairment of evaluated oil and gas properties for the three or nine months ended September 30, 2021. An impairment of evaluated oil and gas properties of $685.0 million and $2.0 billion was recognized for the three and nine months ended September 30, 2020, respectively, which was due primarily to declines in the 12-Month Average Realized Price of crude oil. See “Note 4 - Property and Equipment, Net” for further discussion.

Merger, Integration and Transaction Expense. For the three and nine months ended September 30, 2021, we incurred $3.0 million of merger, integration and transaction expenses, which were related to the Primexx Acquisition, compared to $26.4 million for the nine months ended September 30, 2020, which were related to the Carrizo Acquisition. We did not incur any merger, integration and transaction expenses during the three months ended June 30, 2021.

Other Income and Expenses

Interest Expense, Net of Capitalized Amounts. We finance a portion of our capital expenditures, acquisitions and working capital requirements with borrowings under our Credit Facility or with term debt. We incur interest expense that is affected by both fluctuations in interest rates and our financing decisions. We reflect interest paid to our lender in interest expense, net of capitalized amounts. In addition, we include the amortization of deferred financing costs (including origination and amendment fees),

commitment fees and annual agency fees, and interest from our financing leases in interest expense. The following table sets forth the components of our interest expense, net of capitalized amounts for the periods indicated:


	Three Months Ended			Nine Months Ended September 30,
	September 30, 2021	June 30, 2021	$ Change	2021	2020	$ Change
	(In thousands)
Interest expense on Credit Facility	$7,247	$7,970	($723)	$23,034	$37,501	($14,467)
Interest expense on Second Lien Notes	11,625	11,625	—	34,875	—	34,875
Interest expense on Senior Unsecured Notes	29,758	24,502	5,256	78,762	92,625	(13,863)
Amortization of debt issuance costs, premiums and discounts	5,158	4,438	720	14,074	3,149	10,925
Other interest expense	38	26	12	96	152	(56)
Capitalized interest	(26,090)	(23,927)	(2,163)	(74,055)	(65,584)	(8,471)
Interest expense, net of capitalized amounts	$27,736	$24,634	$3,102	$76,786	$67,843	$8,943

Interest expense, net of capitalized amounts, incurred during the three months ended September 30, 2021 increased $3.1 million to $27.7 million compared to $24.6 million for the three months ended June 30, 2021. The increase is primarily due to the issuance of the 8.00% Senior Notes in the third quarter of 2021, offset by the reduction in interest expense associated with the redemption of the 6.25% Senior Notes in the third quarter of 2021, an increase in capitalized interest and lower borrowings on the Credit Facility compared to the three months ended June 30, 2021.

Interest expense, net of capitalized amounts, incurred during the nine months ended September 30, 2021 increased $8.9 million to $76.8 million compared to $67.8 million for the same period of 2020. The increase is primarily due to the issuance of the Second Lien Notes at the end of the third quarter of 2020 as well as amortization of the discount associated with those Second Lien Notes, offset by the reduction in Senior Unsecured Notes outstanding as a result of the exchange which occurred during the fourth quarter of 2020 and lower borrowings on the Credit Facility compared to the same period of 2020.

(Gain) Loss on Derivative Contracts. We utilize commodity derivative financial instruments to reduce our exposure to fluctuations in commodity prices. (Gain) loss on derivative contracts represents the (i) (gain) loss related to fair value adjustments on our open derivative contracts and (ii) (gains) losses on settlements of derivative contracts for positions that have settled within the period. The net (gain) loss on derivative instruments for the periods indicated includes the following:


	Three Months Ended		Nine Months Ended September 30,
	September 30, 2021	June 30, 2021	2021	2020
	(In thousands)
(Gain) loss on oil derivatives	$67,198	$177,033	$393,792	($118,348)
(Gain) loss on natural gas derivatives	33,026	12,816	48,539	18,819
(Gain) loss on NGL derivatives	10,242	3,734	15,114	2,418
(Gain) loss on contingent consideration arrangements	(3,297)	(3,120)	(680)	(855)
(Gain) loss on September 2020 Warrants liability	—	—	55,390	—
(Gain) loss on derivative contracts	$107,169	$190,463	$512,155	($97,966)

See “Note 7 - Derivative Instruments and Hedging Activities” and “Note 8 - Fair Value Measurements” for additional information.

Income Tax Expense. We use the asset and liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for the future tax consequences of (1) temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and (2) operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are based on enacted tax rates applicable to the future period when those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the rate change is enacted. When appropriate, based on our analysis, we record a valuation allowance for deferred tax assets when it is more likely than not that the deferred tax assets will not be realized.

We recorded income tax expense of $2.4 million compared to income tax benefit of $0.5 million for the three months ended September 30, 2021 and June 30, 2021, respectively. Since the second quarter of 2020, we have concluded that it is more likely than not that the net deferred tax assets will not be realized and have recorded a full valuation allowance against our deferred tax assets. As long as we continue to conclude that the valuation allowance is necessary, we will not have significant deferred tax expense or benefit.

We recorded income tax expense of $1.0 million and $115.3 million for the nine months ended September 30, 2021 and 2020, respectively. The income tax expense for the nine month period in 2020 is due to the recording of the valuation allowance during the three months ended June 30, 2020, which still remained as of September 30, 2021. See “Note 9 - Income Taxes” for further discussion.

Liquidity and Capital Resources

2021 Capital Budget and Funding Strategy. Our primary uses of capital are for the exploration and development of our oil and natural gas properties. Primarily as a result of the Primexx Acquisition, our 2021 capital budget has been updated from $430.0 million to $515.0 million. For the fourth quarter of 2021, the majority of our remaining 2021 capital budget is allocated towards development in the Permian. As part of our updated 2021 operated horizontal drilling program, we expect to drill approximately 70 to 72 gross operated wells and complete approximately 103 to 105 gross operated wells.

During the three months ended September 30, 2021, we drilled 15 gross (13.5 net) wells, all in the Permian, and completed 22 gross (18.8 net) wells, with 6.0 net wells completed in Eagle Ford and 12.8 net wells completed in the Permian. We expect to operate six drilling rigs and an average of 1.5 completion crews during the fourth quarter of 2021, reflecting the incorporation of capital activity related to the recent Primexx Acquisition.

The following table is a summary of our capital expenditures(1) for the three and nine months ended September 30, 2021:


	Three Months Ended			Nine Months Ended
	March 31, 2021	June 30, 2021	September 30, 2021	September 30, 2021
	(In millions)
Operational capital	$95.6	$138.3	$115.0	$348.9
Capitalized interest	24.0	23.9	26.1	74.0
Capitalized G&A	11.2	12.1	10.4	33.7
Total	$130.8	$174.3	$151.5	$456.6

(1) Capital expenditures, presented on an accrual basis, includes drilling, completions, facilities, and equipment, but excludes land, seismic, and asset retirement costs.

We continually evaluate our capital expenditure needs and compare them to our capital resources. Because we are the operator of a high percentage of our properties, we can control the amount and timing of our capital expenditures. We can choose to defer or accelerate a portion of our planned capital expenditures depending on various factors, including, but not limited to, depressed commodity prices, market conditions, our available liquidity and financing, acquisitions and divestitures of oil and gas properties, the availability of drilling rigs and completion crews, the cost of completion services, success of drilling programs, land and industry partner issues, weather delays, the acquisition of leases with drilling commitments, and other factors. We plan to execute a more moderated capital expenditure program through reduced reinvestment rates and balanced capital deployment for a more consistent cash flow generation and will be focused to further enhance our multi-zone, scaled development program while leveraging our drilled, but uncompleted backlog to drive capital efficiency.

Historically, our primary sources of capital have been cash flows from operations, borrowings under our Credit Facility, proceeds from the issuance of debt securities and public equity offerings, and non-core asset dispositions. We regularly consider which resources, including debt and equity financings, are available to meet our future financial obligations, planned capital expenditures and liquidity requirements. In addition, depending upon our actual and anticipated sources and uses of liquidity, prevailing market conditions and other factors, we may, from time to time, seek to retire or repurchase our outstanding debt or equity securities through cash purchases in the open market or through privately negotiated transactions or otherwise. The amounts involved in any such transactions, individually or in aggregate, may be material.

We may continue to consider divesting certain properties or assets that are not part of our core business or are no longer deemed essential to our future growth or enter into joint venture agreements, provided we are able to divest such assets or enter into joint venture agreements on terms that are acceptable to us.

Overview of Cash Flow Activities. For the nine months ended September 30, 2021, cash and cash equivalents decreased $16.5 million to $3.7 million compared to $20.2 million at December 31, 2020.


	Nine Months Ended September 30,
	2021	2020
	(In thousands)
Net cash provided by operating activities	$607,833	$425,197
Net cash used in investing activities	(455,167)	(449,667)
Net cash provided by (used in) financing activities	(169,203)	21,629
Net change in cash and cash equivalents	($16,537)	($2,841)

Operating Activities. For the nine months ended September 30, 2021, net cash provided by operating activities was $607.8 million compared to $425.2 million for the same period in 2020. The change in net cash provided by operating activities was predominantly attributable to the following:

•An increase in revenue primarily driven by a 86% increase in realized oil price, partially offset by a 13% decrease in production volumes, and

•An offsetting decrease in the cash received from commodity derivative settlements.

Production, realized prices, and operating expenses are discussed in Results of Operations. See “Note 7 - Derivative Instruments and Hedging Activities” and “Note 8 - Fair Value Measurements” for a reconciliation of the components of our derivative contracts and disclosures related to derivative instruments including their composition and valuation.

Investing Activities. For the nine months ended September 30, 2021, net cash used in investing activities was $455.2 million compared to $449.7 million for the same period in 2020. The increase in net cash used in investing activities was primarily attributed to the following:

•A decrease in cash received from the sale of assets, and

•An increase in deposits paid for the acquisition of oil and gas properties, partially offset by

•A decrease in operational capex, and

•A decrease in cash paid for the settlement of contingent consideration agreements as net cash payments of $40.0 million were paid in January 2020 related to contingent considerations acquired in the Carrizo Acquisition.

Financing Activities. We finance a portion of our capital expenditures, acquisitions and working capital requirements with borrowings under the Credit Facility, term debt and equity offerings. For the nine months ended September 30, 2021, net cash used in financing activities was $169.2 million compared to net cash provided by financing activities of $21.6 million for the same period of 2020. This change was primarily attributable to repayment of approximately $262.0 million on the Credit Facility during the nine months ended September 30, 2021, which reflects our continued commitment and focus on deleveraging as well as the redemption of all of the outstanding 6.25% Senior Notes, partially offset by the issuance of the 8.00% Senior Notes.

See “Note 6 - Borrowings” for additional information on our debt transactions.

Contractual Obligations. Our contractual obligations primarily consist of long-term debt, operating leases, asset retirement obligations, produced water disposal commitments, and gathering, processing and transportation service commitments. Since December 31, 2020, there have been no material changes to our contractual obligations other than the changes to the borrowings under our Credit Facility as well as the issuance of our 8.00% Senior Notes and the redemption of all of our 6.25% Senior Notes as discussed further in “Note 6 - Borrowings.”

Credit Facility. As of September 30, 2021, our Credit Facility had a borrowing base of $1.6 billion, with an elected commitment amount of $1.6 billion, borrowings outstanding of $723.0 million at a weighted average interest rate of 2.35%, and $24.0 million in letters of credit outstanding. The borrowing base under the credit agreement is subject to regular redeterminations in the spring and fall of each year, as well as special redeterminations described in the credit agreement, which in each case may reduce the amount of the borrowing base. The Credit Facility is secured by first preferred mortgages covering our major producing properties. Upon a redetermination, if any borrowings in excess of the revised borrowing base were outstanding, we could be forced to immediately repay a portion of the borrowings outstanding under the credit agreement.

Our Credit Facility contains certain covenants including restrictions on additional indebtedness, payment of cash dividends and maintenance of certain financial ratios. Under the Credit Facility, we must maintain the following financial covenants determined as of the last day of the quarter, each as described above: (1) a Secured Leverage Ratio of no more than 3.00 to 1.00 and (2) a Current Ratio of not less than 1.00 to 1.00. We were in compliance with these covenants at September 30, 2021. If we are unable to remain in compliance with our restrictive financial covenants, we could be subject to lender elections for default resolution. However, we expect to have sufficient liquidity to pay interest on our Credit Facility (as well as on the Second Lien Notes and our Senior Unsecured Notes and to fund our development program).

The Credit Facility also places restrictions on us and certain of our subsidiaries with respect to additional indebtedness, liens, dividends and other payments to shareholders, repurchases or redemptions of our common stock, redemptions of senior notes, investments, acquisitions, mergers, asset dispositions, transactions with affiliates, hedging transactions and other matters.

See “Note 6 – Borrowings” for additional information related to the Credit Facility.

Hedging. As of October 29, 2021, the Company had the following outstanding oil, natural gas and NGL derivative contracts:


	For the Remainder		For the Full Year			For the Full Year
Oil contracts (WTI)	2021 (1)		2022 (1)			2023
Swap contracts
Total volume (Bbls)	1,748,000		4,066,000			315,000
Weighted average price per Bbl	$56.87		$65.84			$70.01
Collar contracts
Total volume (Bbls)	2,290,450		7,097,500			—
Weighted average price per Bbl
Ceiling (short call)	$46.97		$67.70			$—
Floor (long put)	$39.37		$56.15			$—
Long put contracts
Total volume (Bbls)	414,000		—			—
Weighted average price per Bbl	$62.50		$	—		$	—
Short call contracts
Total volume (Bbls)	1,216,240	(2)	—			—
Weighted average price per Bbl	$63.62		$—			$—
Short call swaption contracts
Total volume (Bbls)	—		1,825,000		(3)	1,825,000		(3)
Weighted average price per Bbl	$—		$52.18			$72.00

Oil contracts (Brent ICE) (4)



Collar contracts
Total volume (Bbls)	184,000		—			—
Weighted average price per Bbl
Ceiling (short call)	$50.00		$—			$—
Floor (long put)	$45.00		$—			$—

Oil contracts (Midland basis differential)
Swap contracts
Total volume (Bbls)	892,400		—			—
Weighted average price per Bbl	$0.33		$—			$—

Oil contracts (Argus Houston MEH)
Collar contracts
Total volume (Bbls)	—		452,500			—
Weighted average price per Bbl
Ceiling (short call)	$—		$63.15			$—
Floor (long put)	$—		$51.25			$—

(1) We have approximately $6.6 million of deferred premiums, of which $3.7 million are associated with contracts that will settle in 2021 and $2.9 million for contracts that will settle in 2022.

(2) Premiums from the sale of call options were used to increase the fixed price of certain simultaneously executed price swaps and three-way collars.

(3) The 2022 and 2023 short call swaption contracts have exercise expiration dates of December 31, 2021 and December 30, 2022, respectively.

(4) In February 2021, we entered into certain offsetting ICE Brent swaps to reduce our exposure to rising oil prices. Those offsetting swaps resulted in a locked-in loss of approximately $2.9 million, of which $1.6 million settled in the third quarter of 2021 with the remaining $1.3 million to be settled in the fourth quarter of 2021.


	For the Remainder		For the Full Year
Natural gas contracts (Henry Hub)	2021		2022
Swap contracts
Total volume (MMBtu)	4,357,000		7,320,000
Weighted average price per MMBtu	$2.96		$3.08
Collar contracts
Total volume (MMBtu)	1,840,000		5,740,000
Weighted average price per MMBtu
Ceiling (short call)	$2.80		$3.64
Floor (long put)	$2.50		$2.83
Short call contracts
Total volume (MMBtu)	1,840,000	(1)	—
Weighted average price per MMBtu	$3.09		$—

Natural gas contracts (Waha basis differential)
Swap contracts
Total volume (MMBtu)	4,140,000		5,475,000
Weighted average price per MMBtu	($0.42)		($0.21)

(1) Premiums from the sale of call options were used to increase the fixed price of certain simultaneously executed price swaps and three-way collars.


	For the Remainder	For the Full Year
NGL contracts (OPIS Mont Belvieu Purity Ethane)	2021	2022
Swap contracts
Total volume (Bbls)	460,000	378,000
Weighted average price per Bbl	$7.62	$15.70

NGL contracts (OPIS Mont Belvieu Propane)
Swap contracts
Total volume (Bbls)	266,800	252,000
Weighted average price per Bbl	$52.15	$48.43

NGL contracts (OPIS Mont Belvieu Butane)
Swap contracts
Total volume (Bbls)	101,200	99,000
Weighted average price per Bbl	$59.43	$54.39

NGL contracts (OPIS Mont Belvieu Isobutane)
Swap contracts
Total volume (Bbls)	55,200	54,000
Weighted average price per Bbl	$58.96	$54.29

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods reported. Certain of such estimates and assumptions are inherently unpredictable and will differ from actual results. We have identified the following critical accounting policies and estimates used in the preparation of our financial statements: oil and gas properties, oil and gas reserve estimates, derivative instruments, contingent consideration arrangements, income taxes, and commitments and contingencies. These policies and estimates are described in “Note 2 - Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in our 2020 Annual Report. See “Note 7 - Derivative Instruments and Hedging Activities” and “Note 8 - Fair Value Measurements” for details of the contingent consideration arrangements. We evaluate subsequent events through the date the financial statements are issued.

The table below presents various pricing scenarios to demonstrate the sensitivity of our September 30, 2021 cost center ceiling to changes in 12-month average benchmark crude oil and natural gas prices underlying the 12-month average realized prices. The sensitivity analysis is as of September 30, 2021 and, accordingly, does not consider drilling and completion activity, acquisitions or dispositions of oil and gas properties, production, changes in crude oil and natural gas prices, and changes in development and operating costs occurring subsequent to September 30, 2021 that may require revisions to estimates of proved reserves. See also “Part

I, Item 1A. Risk Factors—If oil and natural gas prices remain depressed for extended periods of time, we may be required to make significant downward adjustments to the carrying value of our oil and natural gas properties” in our 2020 Annual Report.


	12-Month Average Realized Prices		Excess (deficit) of cost center ceiling over net book value, less related deferred income taxes	Increase (decrease) of cost center ceiling over net book value, less related deferred income taxes
Full Cost Pool Scenarios	Crude Oil ($/Bbl)	Natural Gas ($/Mcf)	(In millions)	(In millions)
September 30, 2021 Actual	$56.47	$2.51	$2,429

Crude Oil and Natural Gas Price Sensitivity
Crude Oil and Natural Gas +10%	$62.24	$2.81	$3,172	$743
Crude Oil and Natural Gas -10%	$50.70	$2.22	$1,689	($740)

Crude Oil Price Sensitivity
Crude Oil +10%	$62.24	$2.51	$3,114	$685
Crude Oil -10%	$50.70	$2.51	$1,745	($684)

Natural Gas Price Sensitivity
Natural Gas +10%	$56.47	$2.81	$2,487	$58
Natural Gas -10%	$56.47	$2.22	$2,373	($56)

Income taxes

The amount of income taxes recorded requires interpretations of complex rules and regulations of federal and state tax jurisdictions. We recognize current tax expense based on estimated taxable income for the current period and the applicable statutory tax rates. We routinely assess potential uncertain tax positions and, if required, estimate and establish accruals for such amounts. We have recognized deferred tax assets and liabilities for temporary differences, operating losses and other tax carryforwards.

Management monitors company-specific, oil and natural gas industry and worldwide economic factors and assesses the likelihood that

our net deferred tax assets will be utilized prior to their expiration. A significant item of objective negative evidence considered was the cumulative historical three year pre-tax loss and a net deferred tax asset position at September 30, 2021, driven primarily by impairments of evaluated oil and gas properties recognized beginning in the second quarter of 2020 and continuing through the fourth quarter of 2020, which limits the ability to consider other subjective evidence such as our potential for future growth. Since the second quarter of 2020, based on the evaluation of the evidence available, we concluded that it is more likely than not that the net deferred tax assets will not be realized. As a result, we recorded a valuation allowance, reducing the net deferred tax assets as of September 30, 2021 to zero.

We will continue to evaluate whether the valuation allowance is needed in future reporting periods. The valuation allowance will remain until we can conclude that the net deferred tax assets are more likely than not to be realized. Future events or new evidence which may lead us to conclude that it is more likely than not our net deferred tax assets will be realized include, but are not limited to, cumulative historical pre-tax earnings, improvements in crude oil prices, and taxable events that could result from one or more transactions. The valuation allowance does not preclude us from utilizing the tax attributes if we recognize taxable income. As long as we continue to conclude that the valuation allowance against our net deferred tax assets is necessary, we will have no significant deferred income tax expense or benefit. See “Note 9 - Income Taxes” for additional discussion.

Recently Adopted and Recently Issued Accounting Pronouncements

See “Note 1 - Description of Business and Basis of Presentation” for discussion.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to a variety of market risks including commodity price risk, interest rate risk and counterparty and customer credit risk. We mitigate these risks through a program of risk management including the use of commodity derivative instruments.

Commodity price risk

Our revenues are derived from the sale of our oil, natural gas and NGL production. The prices for oil, natural gas and NGLs remain volatile and sometimes experience large fluctuations as a result of relatively small changes in supply, government actions, economic conditions, and weather conditions.

The following tables set forth oil, natural gas and NGL revenues for the three and nine months ended September 30, 2021 as well as the impact on the oil, natural gas and NGL revenues assuming a 10% increase or decrease in our average realized sales prices for oil, natural gas and NGLs, excluding the impact of commodity derivative settlements:


	Three Months Ended September 30, 2021
	Oil	Natural Gas	NGLs	Total
	(In thousands)
Revenues	$409,293	$36,519	$58,097	$503,909

Impact of a 10% fluctuation in average realized prices	$40,929	$3,652	$5,810	$50,391

	Nine Months Ended September 30, 2021
	Oil	Natural Gas	NGLs	Total
	(In thousands)
Revenues	$1,009,780	$84,819	$124,079	$1,218,678

Impact of a 10% fluctuation in average realized prices	$100,978	$8,482	$12,408	$121,868

From time to time, we enter into derivative financial instruments to manage oil, natural gas and NGL price risk, related both to NYMEX benchmark prices and regional basis differentials. The total volumes we hedge through use of our derivative instruments varies from period to period. Generally our objective is to hedge approximately 60% of our anticipated internally forecasted production for the next 12 to 24 months, subject to the covenants under our Credit Facility. Our hedge policies and objectives may change significantly with movements in commodities prices or futures prices.

We may utilize fixed price swaps, which reduce our exposure to decreases in commodity prices, but limits the benefit we might otherwise have received from any increases in commodity prices. Swap contracts may also be enhanced by the simultaneous sale of call or put options to effectively increase the effective swap price as a result of the receipt of premiums from the option sales.

We also may utilize price collars to reduce the risk of changes in oil and natural gas prices. Under these arrangements, no payments are due by either party as long as the applicable market price is above the floor price (purchased put option) and below the ceiling price (sold call option) set in the collar. If the price falls below the floor, the counterparty to the collar pays the difference to us, and if the price rises above the ceiling, the counterparty receives the difference from us. Additionally, we may sell put options at a price lower than the floor price in conjunction with a collar (three-way collar) and use the proceeds to increase either or both the floor or ceiling prices. In a three-way collar, to the extent that realized prices are below the floor price of the sold put option (or above the ceiling price of the sold call option), our net realized benefit from the three-way collar will be reduced on a dollar-for-dollar basis.

We may purchase put options, which reduce our exposure to decreases in oil and natural gas prices while allowing realization of the full benefit from any increases in oil and natural gas prices. If the price falls below the floor, the counterparty pays the difference to us.

We enter into these various agreements from time to time to reduce the effects of volatile oil, natural gas and NGL prices and do not enter into derivative transactions for speculative or trading purposes. Presently, none of our derivative positions are designated as hedges for accounting purposes.

Interest rate risk

We are subject to market risk exposure related to changes in interest rates on our indebtedness under our Credit Facility. As of September 30, 2021, we had $723.0 million outstanding under the Credit Facility with a weighted average interest rate of 2.35%. An increase or decrease of 1.00% in the interest rate would have a corresponding increase or decrease in our annual interest expense of approximately $7.2 million, based on the balance outstanding as of September 30, 2021. See “Note 6 - Borrowings” for more information on our Credit Facility.

Counterparty and customer credit risk

Our principal exposures to credit risk are through receivables from the sale of our oil and natural gas production, joint interest receivables and receivables resulting from derivative financial contracts.

We market our oil, natural gas and NGL production to energy marketing companies and are subject to credit risk due to the concentration of our oil, natural gas and NGL receivables with several significant customers. The inability of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. In order to mitigate potential exposure to credit risk, we may require from time to time for our customers to provide financial security. At September 30, 2021, our total receivables from the sale of our oil, natural gas and NGL production were approximately $168.1 million.

Joint interest receivables arise from billings to entities that own partial interests in the wells we operate. These entities participate in our wells primarily based on their ownership in leases on which we have or intend to drill. We have little ability to control whether

these entities will participate in our wells. We generally have the right to withhold future revenue distributions to recover past due receivables from joint interest owners. The allowance for credit losses related to our joint interest receivables is immaterial. At September 30, 2021, our joint interest receivables were approximately $8.6 million.

Our oil, natural gas and NGL commodity derivative arrangements expose us to credit risk in the event of nonperformance by counterparties. All of the counterparties of our commodity derivative instruments currently in place are lenders under our Credit Facility. We are likely to enter into additional commodity derivative instruments with these or other lenders under our Credit Facility, representing institutions with investment grade ratings. We have existing ISDA Agreements with our commodity derivative counterparties. The terms of the ISDA Agreements provide us and the counterparties with rights of offset upon the occurrence of defined acts of default by either us or a counterparty to a commodity derivative, whereby the party not in default may offset all commodity derivative liabilities owed to the defaulting party against all commodity derivative asset receivables from the defaulting party. At September 30, 2021, we had a net commodity derivative liability position of $315.2 million.

Item 4. Controls and Procedures

Disclosure controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive and principal financial officers have concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2021.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the third quarter of 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

We are not currently a party to, nor is our property currently subject to, any material legal proceedings other than ordinary routine litigation incidental to the business, and we are not aware of any such proceedings contemplated by governmental authorities.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth under the heading “Part I, Item 1A. Risk Factors” included in our 2020 Annual Report on Form 10-K. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Pursuant to the closing of the Primexx Acquisition, the Company issued 8.84 million shares of the Company’s common stock as a portion of the total consideration for the assets acquired. The shares were issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act as sales by an issuer not involving any public offering. The issuance of such shares did not involve a public offering for purposes of Section 4(a)(2) because of, among other things, its being made only to the sellers in the Primexx Acquisition, such persons’ status as accredited investors and the manner of the issuance, including that the Company did not, and will not, engage in general solicitation or advertising with regard to the issuance of such shares.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed as part of this Form 10-Q.

Incorporated by reference (File No. 001-14039, unless otherwise indicated)

Exhibit Number

Description

Form

Exhibit

Filing Date

2.1

(c)

Purchase and Sale Agreement by and among Callon Petroleum Company, Callon Petroleum Operating Company, and Primexx Resource Development, LLC dated August 3, 2021

8-K

10.1

8/5/2021

2.2

(c)

Purchase and Sale Agreement by and among Callon Petroleum Company, Callon Petroleum Operating Company, and BPP Acquisition, LLC dated August 3, 2021

8-K

10.2

8/5/2021

3.1

Certificate of Incorporation of the Company, as amended through May 12, 2016

10-Q

3.1

11/03/2016

3.2

Certificate of Amendment to the Certificate of Incorporation of Callon, effective December 20, 2019

8-K

3.1

12/20/2019

3.3

Certificate of Amendment to the Certificate of Incorporation of Callon, effective August 7, 2020

8-K

3.1

8/7/2020

3.4

Certificate of Amendment to the Certificate of Incorporation of Callon, effective May 14, 2021

8-K

3.1

5/14/2021

3.5

Amended and Restated Bylaws of the Company

10-K

3.2

2/27/2019

4.1

Indenture, dated as of July 6, 2021, by and among the Company, Callon Petroleum Operating Company, Callon (Eagle Ford) LLC, Callon (Niobrara) LLC, Callon (Permian) LLC, Callon (Permian) Minerals LLC, Callon (Utica) LLC, Callon Marcellus Holding, Inc. and U.S. Bank National Association, as trustee.

8-K

4.1

7/7/2021

10.1

(a)

Separation Agreement, dated July 22, 2021, by and between James “Jim” Ulm, II and Callon Petroleum Company .

10.2

(a)

Consulting Agreement, dated July 22, 2021, by and between James “Jim” Ulm, II and Callon Petroleum Company .

10.3

(a)

Fifth Amendment, dated November 1, 2021, to the Credit Agreement by and between Callon Petroleum Company and JP Morgan Chase Bank N.A., as administrative agent, and the lender parties thereto.

10.4

Exchange Agreement, among the Company and Chambers Investments, LLC, dated August 3, 2021.

8-K

10.1

8/5/2021

10.5

Form of Voting Agreement between the Company and the executive officer or director named therein, dated as of August 3, 2021.

8-K

10.2

8/5/2021

31.1

(a)

Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)

31.2

(a)

Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)

32.1

(b)

Section 1350 Certifications of Chief Executive and Financial Officers pursuant to Rule 13(a)-14(b)

101.INS

(a)

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

(a)

Inline XBRL Taxonomy Extension Schema Document

101.CAL

(a)

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

(a)

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

(a)

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

(a)

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

(a)

Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

(a)Filed herewith.

(b)Furnished herewith. Pursuant to SEC Release No. 33-8212, this certification will be treated as “accompanying” this report and not “filed” as part of such report for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of Section 18 of the Exchange Act, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act, except to the extent that the registrant specifically incorporates it by reference.

(c)Certain schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Callon agrees to furnish a supplemental copy of any omitted schedule or attachment to the SEC upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Callon Petroleum Company


Signature	Title	Date

/s/ Joseph C. Gatto, Jr.	President and	November 4, 2021
Joseph C. Gatto, Jr.	Chief Executive Officer


/s/ Kevin Haggard	Senior Vice President and	November 4, 2021
Kevin Haggard	Chief Financial Officer

Document

Exhibit 10.1

SEPARATION AGREEMENT

This Separation Agreement (this “Agreement”) is entered into by and between, and shall inure to the benefit of and be binding upon, the following parties (sometimes collectively referred to herein as the “Parties”):

JAMES P. ULM, II, hereinafter referred to as “Employee”; and

CALLON PETROLEUM COMPANY, a Delaware corporation (collectively with its subsidiaries, the “Company”).

W I T N E S S E T H:

WHEREAS, Employee previously served as an officer and employee of the Company;

WHEREAS, the Parties mutually agree that the Employee ceased to serve as an officer of the Company and its direct and indirect subsidiaries effective as of May 17, 2021, and further agree that the Employee’s employment with the Company ended effective May 31, 2021 (the “Resignation Date”);

WHEREAS, Employee and the Company mutually desire to establish and agree on the terms and conditions of Employee’s separation from service;

NOW, THEREFORE, in consideration of the premises and the mutual agreements, covenants and obligations set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Employee and the Company hereby agree as follows:

Section 1.Separation Benefits and Payments. Following the Resignation Date, all entitlement to compensation and benefits as an employee will cease except as required by applicable law or provided below. Employee will be entitled to (i) a lump-sum payment in an amount equal to Employee’s accrued but unused vacation days and (ii) reimbursement for unpaid business expenses incurred in the ordinary course of business, properly and timely submitted, and consistent with Company policy. In addition, following the Effective Date, Employee shall be entitled to receive the following payments and benefits, to which Employee would not otherwise be entitled, subject to the terms and conditions set forth in this Agreement:

(a)Employee shall receive a prorated bonus for second quarter 2021 under the Company’s 2020 Officer Cash Incentive Award program as set forth in the agreement between the Company and Employee as of September 30, 2020, calculated based on the quarterly bonus that would have been payable to Employee notwithstanding the separation multiplied by a fraction the numerator of which is the number of days employed during the quarter and denominator of which is the total number of calendar days in the quarter, which will be paid, subject to Employee’s continued compliance with the terms of this Agreement, no later than August 31, 2021.

(b)Company shall transfer to Employee the title to the Company vehicle currently used by Employee within ten (10) days following the Effective Date.

(c)provided that Employee is otherwise eligible for and timely elects such coverage, Callon shall, at its expense, maintain COBRA continuation coverage for Employee’s and family member’s continued benefit for eighteen (18) months after the Resignation Date for all medical, dental, and vision insurance coverage to which Employee was entitled immediately prior to the Resignation Date; provided, further, that in the event that the Employee obtains other employment that offers group health benefits or begins to receive health benefits through the health benefit plans offered by his spouse’s employer, the Employee agrees to notify the Company promptly following the occurrence of an event (and in no case later than fifteen (15) days following and such events), and Company payment of the COBRA payments shall immediately cease. The continued coverage under this Section 1(c) shall be provided in a manner that is intended to satisfy an exception to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and therefore not treated as an arrangement providing for nonqualified deferred compensation that is subject to taxation under Code Section 409A.

All payments made or benefits bestowed pursuant to this Section 1 shall be subject to requisite tax withholding and are subject to all the terms and conditions of this Agreement.

Section 2.Release of Claims.

(a)General Release by Employee. In consideration of the foregoing, which Employee hereby expressly acknowledges as good and sufficient consideration for the releases provided below, Employee hereby unconditionally and irrevocably releases, acquits and forever discharges, to the fullest extent permitted by applicable law, the Company and each of its subsidiaries, divisions, Affiliates, operating companies, predecessors and successors, as well as all of the current and former employees, officers, directors, owners, shareholders, partners, representatives, agents and Affiliates of each of them (collectively, the “Released Parties”), from any and every action, cause of action, complaint, claim, demand, administrative charge, legal right, compensation, promise, agreement, contract, obligation, damages (including consequential, exemplary and punitive damages), liability, cost or expense (including attorney’s fees) that Employee has, may have or may be entitled to from or against any of the Released Parties, whether legal, equitable or administrative, whether known or unknown, which arises directly or indirectly out of, or is based on or related in any way to, Employee’s employment with, compensation and benefits from, termination of employment from, service for or other affiliation with the Company, including any such matter arising from the negligence, gross negligence or reckless, willful or wanton misconduct of any of the Released Parties (together, the “Released Claims”); provided, however, that this release does not apply to, and the Released Claims do not include: (i) any claim for indemnification under the Company’s organizational documents or insurance policies (and subject to the terms and conditions thereof) arising in connection with an action instituted by a third party against the Company or any of its affiliates or Employee, in his capacity as an officer,

director, manager, employee, agent or other representative of the Company or any of its affiliates; (ii) any claims for vested benefits under the Company’s 401(k) plan (in accordance with the Company’s books and records for such plan); (iii) any claims relating to Employee’s eligibility to continue participating in health coverage currently available to Employee in accordance with COBRA, subject to the terms, conditions and restrictions of that Act; (iv) any claim arising from any breach of this Agreement or the Consulting Agreement (defined below); or (v) any claim for worker’s compensation benefits or any other claim that cannot be waived by a general release. “Affiliate” of any specified person or entity means any other person or entity directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified person or entity. “Control,” “Controlling” or “Controlled by” means, when used with respect to any specified person or entity, the power to direct the management and policies of such person or entity, directly or indirectly, whether through the ownership of voting securities.

(b)Release to be Full and Complete; Waiver of Claims, Rights and Benefits. The Parties intend this release to cover any and all such Released Claims, whether they are contract claims, equitable claims, fraud claims, tort claims, discrimination claims, harassment claims, whistleblower or retaliation claims, personal injury claims, constructive or wrongful discharge claims, emotional distress claims, pain and suffering claims, public policy claims, claims for debts, claims for expense reimbursement, wage claims, claims with respect to any other form of compensation, claims for attorneys’ fees, other claims or any combination of the foregoing, and whether they may arise under any employment contract (express or implied), policies, procedures, practices or by any acts or omissions of any of the Released Parties or whether they may arise under any state, local or federal law, statute, ordinance, rule or regulation, including all Texas employment discrimination laws, Chapter 21 of the Texas Labor Code, the Texas Payday Act, all U.S. federal discrimination laws, the U.S. Age Discrimination in Employment Act of 1967, the U.S. Employee Retirement Income Security Act of 1974, Title VII of the U.S. Civil Rights Act of 1964, the U.S. Civil Rights Act of 1991, the U.S. Rehabilitation Act of 1973, the U.S. Americans with Disabilities Act of 1990, the U.S. Equal Pay Act, the U.S. National Labor Relations Act, the U.S. Older Workers Benefit Protection Act, the U.S. Worker Adjustment and Retraining Notification Act, the U.S. Family and Medical Leave Act, the U.S. Sarbanes-Oxley Act of 2002 or common law, without exception. As such, it is expressly acknowledged and agreed that this release is a general release, representing a full and complete disposition and satisfaction of all of the Company’s and any Released Party’s real or alleged legal obligations to Employee except as explicitly provided for herein. Employee understands and agrees, in compliance with any law, statute, ordinance, rule or regulation which requires a specific release of unknown claims or benefits, that this Agreement includes a release of unknown claims, and Employee hereby expressly waives and relinquishes any and all Released Claims and any associated rights or benefits that Employee may have, including any that are unknown to Employee at the time of the execution this Agreement.

(c)Certain Representations of Employee. Employee represents and warrants that: (i) Employee is the sole and lawful owner of all rights, titles and interests in and to all Released Claims; and (ii) Employee has the fully legal right, power, authority and capacity to execute and deliver this Agreement.

(d)Covenant Not to Sue. Employee expressly agrees that neither Employee nor any person acting on Employee’s behalf will file or bring or permit to be filed or brought any lawsuit or other action before any court, agency or other governmental authority for legal or equitable relief against any of the Released Parties involving any of the Released Claims. In the event that such an action is filed against any of the Released Parties, Employee agrees that such Released Parties are entitled to legal and equitable remedies against Employee, including an award of attorney’s fees. However, it is expressly understood and agreed that the foregoing sentence shall not apply to any action filed by Employee that is narrowly limited to seeking a determination as to the validity of this Agreement and enforcement thereof.

(e)Protected Disclosures. Notwithstanding the foregoing or any other provision in this Agreement to the contrary, including any provision in Sections 4, 5 or 6, the Company and Employee further agree that nothing in this Agreement (i) limits Employee’s ability to file a charge or complaint with the EEOC, the NLRB, OSHA, the SEC or any other federal, state or local governmental agency or commission (“Government Agencies”); (ii) limits Employee’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information and reporting possible violations of law or regulation or other disclosures protected under the whistleblower provisions of applicable law or regulation, without notice to the Company; or (iii) limits Employee’s right to receive an award for information provided to the U.S. Securities and Exchange Commission. Should Employee file a charge or complaint with any Government Agency, or should any governmental entity, agency or commission file a charge, action, complaint or lawsuit against any of the Released Parties based on any Released Claim, Employee agrees not to seek or accept any resulting payment from the Released Parties.

Section 3.Return of Materials, Nondisparagement, Noncompetition, Nonsolicitation, Confidentiality and Other Undertakings.

(a)Return of Materials. On or promptly after the Resignation Date, Employee shall return to the Company with no request being required of the Company: (i) any and all information, property, documents, records, files, reports, memoranda, plans, letters and any other data in Employee’s possession regardless of the medium maintained, held or stored that relate in any way to the business or operations of the Company; and (ii) any credit cards, keys, access cards, calling cards, computer equipment and software, telephone, facsimile or other equipment or property of the Company; provided, however, that Employee shall be entitled to keep his laptop computer and iPad

after the Company has had a reasonable opportunity to remove any Confidential Information (as defined below).

(b)Nondisparagement.

(i) Employee shall refrain from making, directly or indirectly, in any public or private communication any criticisms or negative or disparaging comments about the Company or any of the other Released Parties, or about any aspect of the respective businesses, operations, financial results or prospects of the Company, including comments relating to Employee’s separation from employment.

(iii) Notwithstanding the foregoing, it is understood and agreed that nothing in this Section 3(b) is intended to prevent Employee from (x) testifying truthfully in any legal proceeding brought by any governmental authority or other third party or interfere with any obligation to cooperate with or provide information to any government agency or commission, (y) consulting with legal counsel with respect to the interpretation or enforcement of this Agreement, or (z) communicating with his Employee’s spouse and immediate family members.

(c)Noncompetition. Employee agrees that during the term of the Employee’s employment with the Company and for a period of one (1) year following the Resignation Date, he shall not, directly or indirectly, compete with the Company personally or by providing services to any other person, partnership, association, corporation, or other entity that is an Oil and Gas Business in the Permian Basin or Eagle Ford Shale. As used herein, an “Oil and Gas Business” means owning, managing, acquiring, attempting to acquire, soliciting the acquisition of, operating, controlling, or developing Oil and Gas interests, or engaging in or being connected with, as a principal, owner, officer, director, employee, shareholder, promoter, consultant, contractor, partner, member, joint venture, agent, equity owner or in any other capacity whatsoever, any of the foregoing activities of the oil and gas exploration and production business; provided, however, that Employee shall be permitted to, either directly or indirectly, (i) acquire and own not more than five percent (5%) of any class of securities of any entity listed on a national securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System or over-the-counter; and (ii) perform his obligations under this Agreement or the Consulting Agreement. The Parties agree that the above restrictions on competition are completely severable and independent agreements supported by good and valuable consideration and, as such, shall survive the termination of this Agreement for whatever reason. The Parties further agree that any invalidity or unenforceability of any one or more of such restrictions on competition shall not render invalid or unenforceable any remaining restrictions on competition. Additionally, should a court of competent jurisdiction determine that the scope of any provision of this Section 3(c) is too broad to be enforced as written, the Parties intend that the court reform the provision to such narrower scope as it determines to be reasonable and enforceable.

(d)Nonsolicitation. During the term of Employee’s employment with the Company and for a period of two (2) years following the Resignation Date, Employee shall not, on his own behalf or on behalf of any other person, partnership, association, corporation, or other entity: (a) directly, indirectly, or through a third party hire or cause to be hired; (b) directly, indirectly, or through a third party solicit; or (c) in any manner attempt to influence or induce any employee of the Company or its subsidiaries or Affiliates to leave the employment of the Company or its subsidiaries or Affiliates, nor shall he use or disclose to any person, partnership, association, corporation, or other entity any information obtained concerning the names and addresses the Company’s employees; provided, however, that for the one year period between the first and second anniversaries of the Resignation Date, this paragraph shall not apply to any such employee who responds to general solicitations through the use of media advertisements, professional search firms, LinkedIn or otherwise. The Parties agree that the above restrictions on hiring and solicitation are completely severable and independent agreements supported by good and valuable consideration and, as such, shall survive the termination of this Agreement for whatever reason. The Parties further agree that any invalidity or unenforceability of any one or more such restrictions on hiring and solicitation shall not render invalid or unenforceable any remaining restrictions on hiring and solicitation. Additionally, should a court of competent jurisdiction determine that the scope of any provision of this Section 3(d) is too broad to be enforced as written, the Parties intend that the court reform the provision to such narrower scope as it determines to be reasonable and enforceable.

(e)Cooperation. Employee agrees to be reasonably available to the Company or its representatives (including their attorneys) to provide information and assistance as requested by the Company. Such information and assistance may include testifying (and preparing to testify) as a witness in any proceeding or otherwise providing information or reasonable assistance to the Company in connection with any investigation, claim or suit. The Employee further agrees not to voluntarily assist any non-governmental adverse party in an action or claim against the Company. Any cooperation required of Employee shall not unreasonably interfere with Employee’s other business endeavors.

(f)Confidentiality and Trade Secrets. The Employee promises not to use in any way or disclose any of the Trade Secrets (as such term is defined in the 2019 Change in Control Severance Compensation Agreement between Employee and the Company, effective as of January 1, 2019 (hereinafter the “2019 Change in Control Agreement”)) or any other confidential and proprietary information that is not generally known to the public (collectively, and including Trade Secrets, “Confidential Information”) directly or indirectly, after the Resignation Date, except if required in connection with a judicial or administrative proceeding, or if the information becomes public knowledge other than as a result of an unauthorized disclosure by the Employee. All files, records, documents, information, data, and similar items relating to the business of Company, whether prepared by the Employee or otherwise coming into his possession, will remain the exclusive property of Company and may not be removed from the premises of Company under any circumstances without the prior written consent of Company (except as may be

reasonably required to render service under the Consulting Agreement), and in any event must be promptly delivered to Company upon termination of the Employee’s employment with Company or, if applicable, the Consulting Agreement. The Employee agrees that upon his receipt of any subpoena, process, or other requests to produce or divulge, directly or indirectly, any Confidential Information to any entity, agency, tribunal, or person, whether received during or after the term of the Employee’s employment with Company, the Employee shall timely notify and promptly deliver a copy of the subpoena, process, or other request to Company. For this purpose, the Employee irrevocably nominates and appoints Company (including any attorney retained by Company), as his true and lawful attorney-in-fact, to act in the Employee’s name, place, and stead to perform any act that the Employee might perform to defend and protect against any disclosure of any Confidential Information. The Parties agree that the above restrictions on confidentiality and disclosure are completely severable and independent agreements supported by good and valuable consideration and, as such, shall survive the termination of this Agreement for whatever reason. The Parties further agree that any invalidity or unenforceability of any one or more of such restrictions on confidentiality and disclosure shall not render invalid or unenforceable any remaining restrictions on confidentiality and disclosure. Additionally, should a court of competent jurisdiction determine that the scope of any provision of this Section 3(f) is too broad to be enforced as written, the Parties intend that the court reform the provision to such narrower scope as it determines to be reasonable and enforceable.

(g)Enforcement of Covenants. Employee acknowledges that the injury that could be suffered by the Company as a result of a breach or threatened breach of the provisions of this Section 3 could be immediate and irreparable and that, because of the difficulty of measuring economic loss of any such breach or threatened breach, an award of monetary damages to the Company for any such breach could be an inadequate remedy. Accordingly, in the event that the Company determines that Employee has breached or attempted to breach or is threatening to breach any provision of this Section 3, in addition to any other remedies at law or in equity that any of the Company may have available to it, it is agreed that the Company shall be entitled to seek, upon application to any court of proper jurisdiction, temporary or permanent restraining orders or injunctions against Employee prohibiting such breach or attempted or threatened breach, without the necessity of: (i) proving immediate or irreparable harm; or (ii) establishing that monetary damages are inadequate or that the Company does not have an adequate remedy at law.

(h)Repayment and Forfeiture. Employee agrees that in the event that Employee breaches or challenges any term of Sections 2 or 3 hereof, and all or any part of Sections 2 or 3 are found invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction or an arbitrator in a proceeding between Employee and Company, in addition to any other remedies at law or in equity the Company may have available to it, the Company shall not be obligated to make any of the payments and may cease to make such payments or to provide for any of the benefits specified in Section 1(a) hereof, and shall be entitled to recoup from Employee any and all of the value of the

payments and benefits provided pursuant to Section 1(a) hereof that have vested or been paid pursuant to that Section.

Section 4.Entire Agreement; Amendment; Third-Party Beneficiaries. Employee and the Company agree and acknowledge that this Agreement contains and comprises the entire agreement and understanding between the Parties with respect to the subject matter hereof, that no other representation, promise, covenant or agreement of any kind whatsoever has been made to cause either Party to execute this Agreement, that all agreements and understandings between the Parties with respect to the subject matter hereof are embodied and expressed in this Agreement and that this Agreement supersedes all prior agreements, negotiations, discussions, understandings and commitments, written or oral, between the Parties with respect to such subject matter including, without limitation, the 2019 Change in Control Agreement. The Parties acknowledge and agree that they are executing and delivering a Consulting Agreement of even date herewith, which is not superseded by, by rather is in addition to, this Agreement. The Parties also agree that the terms of this Agreement shall not be amended or changed except in writing and signed by Employee and a duly authorized agent of the Company. The Parties further agree that this Agreement shall be binding on and inure to the benefit of Employee and the Company and the Company’s successors. Except to the extent that each Released Party is expressly intended to be a third-party beneficiary, the provisions of this Agreement shall not confer upon any third party any remedy, claim, liability, reimbursement or other right in excess of those existing without reference to this Agreement.

Section 5.Timing and Consultation with Counsel. Employee acknowledges that (i) he has been given a reasonable period of time, not less than twenty-one (21) days, to consider, and to request changes to, this Agreement and that if he signs this Agreement prior to the end of the 21-day time period he knowingly and voluntarily elected to do so; (ii) he has been advised to discuss the terms of this Agreement with legal counsel of his own choosing; (iii) he was advised that, if accepted, the Agreement could be revoked, in writing, for up to seven (7) days following the date of such acceptance; and (iv) if he revokes this Agreement, his separation from employment as of the Resignation Date shall nevertheless remain effective and he will not be entitled to any of the payments or benefits set forth in Sections 1(a), (b) or (c) hereof.

Section 6.Revocation; Effectiveness. Notwithstanding any other provision in this Agreement to the contrary, Employee may revoke this Agreement, in writing, for up to seven (7) days following the date of Employee’s execution of this Agreement, by delivering a written notice of Employee’s revocation of this Agreement to the Company. Any such notice of revocation must be received during such period and shall be delivered via email and certified mail to the General Counsel of the Company at One Briarlake Plaza, 2000 W. Sam Houston Parkway S., Suite 2000 Houston, TX 77042 (email address: mecklund@callon.com). If no such revocation occurs, this Agreement will become fully binding, enforceable, and irrevocable on the eighth (8th) day after Employee executes this Agreement and delivers it to the Company, provided that it has also been executed by an officer of the Company and delivered to Employee (the “Effective Date”).

Section 7.Applicable Law; Venue. This Agreement shall be interpreted and construed in accordance with the substantive laws of the State of Texas, without giving effect to any conflicts of laws provisions thereof that would result in the application of the laws of any other jurisdiction. THE EXCLUSIVE VENUE FOR THE RESOLUTION OF ANY DISPUTE RELATING TO THIS AGREEMENT OR EMPLOYEE’S EMPLOYMENT (EXCEPT FOR ANY DISPUTE THAT MAY BE SUBJECTED TO ARBITRATION BY MUTUAL AGREEMENT OF THE PARTIES HERETO AFTER THE DATE HEREOF) SHALL BE IN THE STATE AND FEDERAL COURTS LOCATED IN HARRIS COUNTY, TEXAS AND THE PARTIES HEREBY EXPRESSLY CONSENT TO THE JURISDICTION OF THOSE COURTS.

Section 8.Section 409A; Other Tax Matters. This Agreement is intended to provide payments that are exempt from or compliant with the provisions of Section 409A of the Code and related regulations and Treasury pronouncements (“Section 409A”), and the Agreement shall be interpreted accordingly. Notwithstanding anything herein to the contrary, if on the date of Employee’s separation from service Employee is a “specified employee,” as defined in Section 409A, then all or a portion of any separation payments, or benefits under this Agreement that would be subject to the additional tax provided by Section 409A(a)(1)(B) of the Code if not delayed as required by Section 409A(a)(2)(B)(i) of the Code shall be delayed until the first day of the seventh (7th) month following Employee’s separation from service date (or, if earlier, Employee’s date of death) and shall be paid as a lump sum (without interest) on such date. For purposes of this Agreement, a termination of Employee’s employment must be a “separation from service” for purposes of Section 409A. For purposes of the application of Section 409A, each payment in a series of payments will be deemed a separate payment. Employee acknowledges and agrees that Employee has obtained no advice from the Company, or any of their respective officers, directors, employees, attorneys or other representatives, and that none of such persons or entities have made any representation regarding the tax consequences, if any, of Employee’s receipt of the payments, benefits and other consideration provided for in this Agreement. Employee further acknowledges and agrees that Employee is personally responsible for the payment of all of Employee’s share of federal, state and local taxes that are due, or may be due, for any payments and other consideration received by Employee under this Agreement. Employee agrees to indemnify the Company and hold the Company harmless for any and all taxes, penalties or other assessments that Employee is, or may become, obligated to pay on account of any payments made and other consideration provided to Employee under this Agreement (including, without limitation, any amounts relating to or imposed by the operation of Section 409A of the Code).

Section 9.Miscellaneous Provisions.

(a)Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party entitled to the benefit thereof. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if, as to either Party, it is in writing signed by such Party or an authorized representative thereof. Failure on the part of the Company or Employee at any time to insist on strict compliance by the other Party with any provisions of this Agreement shall

not constitute a waiver of the obligations of either Party in respect thereof, or of either such Party’s right hereunder to require strict compliance therewith in the future. No waiver of any breach of this Agreement shall be deemed to constitute a waiver of any other or subsequent breach.

(b)Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under applicable law, that provision shall be severable and this Agreement shall be construed and enforced as if that illegal, invalid or unenforceable provision never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision, and there shall be added automatically as part of this Agreement a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

(c)Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

[Signature page follows]

I HAVE READ THE FOREGOING SEPARATION AGREEMENT, I FULLY UNDERSTAND ITS TERMS AND THAT I MAY BE WAIVING SIGNIFICANT LEGAL RIGHTS BY EXECUTING IT, AND I HAVE VOLUNTARILY EXECUTED IT ON THE DATE WRITTEN BELOW, SIGNIFYING THEREBY MY ASSENT TO AND WILLINGNESS TO BE BOUND BY, ITS TERMS:


By:			/s/ James P. Ulm, II
Name:			James P. Ulm, II

Date:			7/22/2021

CALLON PETROLEUM COMPANY


By:			/s/ Joseph C. Gatto, Jr.
Name:			Joseph C. Gatto, Jr.
Title:			President & Chief Executive Officer

Date:			7/22/2021

Signature Page
to
Separation Agreement

Document

Exhibit 10.2

CONSULTING AGREEMENT

This Consulting Agreement (this “Agreement”) is made as of June 1, 2021 (the “Effective Date”), by and between Callon Petroleum Company, a Delaware corporation (the “Company”) and James P. Ulm, II (the “Consultant”).

WHEREAS, the Company desires to retain the services of the Consultant to provide consulting services to the Company; and

WHEREAS, the Company and the Consultant wish to enter into an agreement to govern the provision of services by the Consultant for the benefit of the Company from and after the Effective Date upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Consultant hereby agree as follows:

1.Term. This Agreement will be effective as of the Effective Date and will continue until December 31, 2021 (the “Consulting Term”); provided, however, that (1) in the event the Consultant obtains employment or commences or joins a business venture in a principal role, Consultant shall promptly notify the Company and the Consulting Term shall immediately cease no later than the commencement of Consultant’s employment or service to such business venture. Either party hereto may terminate the Consulting Term at any time by providing the other party with at least thirty (30) days’ advance written notice; (2) if the Company terminates the Consulting Term prior to December 31, 2021, the Company’s obligation to pay the Consulting Fee shall survive such termination and the Consulting Fee shall be paid as provided in Section 3 as if the Consulting Term had continued until December 31, 2021, and (3) Company may terminate this Agreement immediately if Consultant breaches the Agreement.

2.Duties. During the Consulting Term, the Consultant will assist the Company in transitioning the duties of the Chief Financial Officer position and otherwise provide such other consulting services as are reasonably requested by the Company and its affiliates (the “Services”). The Consultant agrees to keep the Company or its designees reasonably informed of the Consultant’s activities relating to this Agreement.

3.Consulting Fees. During the Consulting Term, the Consultant will receive a monthly fee of $50,000 for each full month during the Consulting Term, which will be paid monthly in arrears (the “Consulting Fee”).

4.Reimbursement of Expenses. The Company will reimburse the Consultant for all reasonable and necessary expenses incurred by the Consultant while performing the Services under this Agreement in accordance with the Company’s policies and procedures applicable to consultants, subject to provision by the Consultant of documentation reasonably satisfactory to the Company.

5.Restrictive Covenants. In consideration for receipt of the Consulting Fee and the provision of Confidential Information (as defined below) to the Consultant, the Consultant agrees to comply with the restrictive covenants set forth below:

(a)Confidentiality.

(i)During the Consulting Term, the Consultant will have access to confidential and proprietary information that is not generally known to the public (“Confidential Information”). The Consultant promises not to use in any way or disclose Confidential Information, directly or indirectly, either during or after the Consulting Term, except as required in the course of his services with the Company, if required in connection with a judicial or administrative proceeding, or if the information becomes public knowledge other than as a result of an unauthorized disclosure by the Consultant. All files, records, documents, information, data, and similar items relating to the business of Company, whether prepared by the Consultant or otherwise coming into his possession, will remain the exclusive property of Company and may not be removed from the premises of Company under any circumstances without the prior written consent of Company (except in the ordinary course of business during the Consulting Term), and in any event must be promptly delivered to Company upon termination of the Consulting Term. The Consultant agrees that upon his receipt of any subpoena, process, or other requests to produce or divulge, directly or indirectly, any Confidential Information to any entity, agency, tribunal, or person, whether received during or after the Consulting Term, the Consultant shall timely notify and promptly deliver a copy of the subpoena, process, or other request to Company. For this purpose, the Consultant irrevocably nominates and appoints Company (including any attorney retained by Company), as his true and lawful attorney-in-fact, to act in the Consultant’s name, place, and stead to perform any act that the Consultant might perform to defend and protect against any disclosure of any Confidential Information. The parties agree that the above restrictions on confidentiality and disclosure are completely severable and independent agreements supported by good and valuable consideration and, as such, shall survive the termination of this Agreement for whatever reason. The parties further agree that any invalidity or unenforceability of any one or more of such restrictions on confidentiality and disclosure shall not render invalid or unenforceable any remaining restrictions on confidentiality and disclosure. Additionally, should a court of competent jurisdiction determine that the scope of any provision of this Section 5(a)(i) is too broad to be enforced as written, the parties intend that the court reform the provision to such narrower scope as it determines to be reasonable and enforceable.

(ii) In addition, 18 U.S.C. § 1833(b) states: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (1) in confidence to

a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Accordingly, the parties to this Agreement have the right to disclose in confidence trade secrets to Federal, State, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The parties to this Agreement also have the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).

(b)Return of Company Property. The Consultant acknowledges that all information, notes, memoranda, specifications, devices, formulas, records, files, lists, drawings, documents, models, equipment, property, computer, software or intellectual property relating to the businesses of the Company and its subsidiaries and affiliates, in whatever form (including electronic), and all copies thereof, that are received or created by the Consultant while engaged hereunder by the Company or its subsidiaries or affiliates (including but not limited to Confidential Information) and inventions are and will remain the property of the Company and its subsidiaries and affiliates, and the Consultant will immediately return such property to the Company, or at the Company’s election, destroy such property, upon the termination of the Consultant’s engagement hereunder and, in any event, at the Company’s request; provided, however, that Consultant shall be entitled to keep his laptop computer and iPad after the Company has had a reasonable opportunity to remove any Confidential Information (as defined above).

(c)The Consultant further agrees that any property situated on the premises of, and owned by, the Company or its subsidiaries or affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Company’s personnel at any time with or without notice.

(d)Whistleblower Protection. Notwithstanding anything to the contrary contained herein, no provision of this Agreement will be interpreted so as to impede the Consultant (or any other individual) from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures under the whistleblower provisions of federal law or regulation. The Consultant does not need the prior authorization of the Company to make any such reports or disclosures and the Consultant will not be not required to notify the Company that such reports or disclosures have been made.

6.Limits of Authority. The Consultant has no right or authority, express or implied, to act on behalf of, assume, or create any obligation or responsibility, or otherwise bind, the

Company or any of its affiliates in any way. The Consultant shall not make any contrary representation to any third party.

7.Compliance with Policies. As an independent contractor of the Company, the Consultant will perform his duties and responsibilities diligently, loyally, in accordance with the terms of this Agreement, and in compliance with applicable law and all of the Company’s policies, practices, and procedures that apply to the Company’s independent contractors, as they may be adopted or amended from time to time in the Company’s sole discretion.

8.Indemnity. The Consultant agrees to indemnify the Company, and hold it harmless, from and against any and all claims, liabilities, and expenses (including attorneys’ and accountants’ fees, costs, and expenses) resulting from, arising out of, or relating to any uncured breach of this Agreement by Consultant. The Consultant’s indemnification obligations include any losses or expenses incurred by the Company (including reasonable attorneys’ and accountants’ fees, costs, and expenses).

9.WAIVER OF CONSEQUENTIAL DAMAGES. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE LEGAL OR EQUITABLE BASIS OF ANY CLAIM, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR, AND EACH PARTY HEREBY RELEASES THE OTHER PARTY FROM, ANY FORM OF DAMAGES OTHER THAN DIRECT DAMAGES, INCLUDING, WITHOUT LIMITATION, SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT.

10.Remedies. The Consultant understands and agrees that money damages might not be a sufficient remedy for any breach of this Agreement by the Consultant and that the Company could be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies will not be deemed to be the exclusive remedies for a breach by the Consultant of this Agreement but will be in addition to all other remedies available at law or equity to the Company.

11.Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement will be in writing and be deemed to have been duly given (a) on the date of delivery, if delivered by hand, (b) on the date of transmission, if delivered by confirmed facsimile or electronic mail, (c) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Consultant:

To the address provided by the Consultant on the signature page attached hereto.

If to the Company:

To the Company:    Callon Petroleum Company
One Briarlake Plaza
2000 W. Sam Houston Parkway S., Suite 2000
Houston, TX 77042
Attn:    General Counsel
E-mail:    mecklund@callon.com

With a copy to: legal@callon.com

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address will only be effective upon receipt.

12.Assignment. The rights and obligations of the Company and the Consultant hereunder will inure to the benefit of and be binding upon their respective successors and permitted assigns. Neither this Agreement nor any rights or interests in this Agreement or created by this Agreement may be assigned or otherwise transferred voluntarily or involuntarily by the Consultant.

13.Representations. The Consultant represents and warrants that the Consultant’s acceptance of this offer, and the Consultant’s performance of the obligations under this Agreement, do not conflict with or violate the terms of (a) any agreement by which the Consultant is bound, including any covenants or obligations to any other employer, entity or person; or (b) any order, rule, law, regulation, or other legal requirement or obligation applicable to the Consultant.

14.Independent Contractor Status. This Agreement will not be construed to create any association, partnership, joint venture, employee, or agency relationship between the Consultant and the Company for any purpose. The Consultant’s relationship to the Company will only be that of an independent contractor and the Consultant will perform the Services pursuant to this Agreement as an independent contractor. The Consultant will not have any right or authority to assume or create any obligation or responsibility, express or implied, on behalf of, or in the name of, the Company, or to bind the Company in any manner. The Consultant will not be entitled to, and will make no claim to, any rights or fringe benefits afforded to employees of the Company, including, without limitation, disability or unemployment insurance, workers’ compensation insurance, pension and retirement benefits, profit-sharing, or rights under any other benefit plan or program applicable to employees of the Company; provided, however, that Consultant and the Company are executing and delivering a Separation Agreement of even date herewith, which is in addition to this Agreement and provides Consultant with certain rights as expressly provided therein. Neither the Company nor any of its affiliates will have responsibility to provide any such benefits to the Consultant. The Consultant hereby agrees to make the Consultant’s own arrangements for any of such benefits as the Consultant may desire and to indemnify and hold the Company and its affiliates harmless from any and all liabilities or costs related thereto. The manner, means, details or methods by which the Consultant performs the services under this Agreement will be solely within the Consultant’s discretion. The Company

makes no representation to Consultant concerning the tax consequences of the payments to be made under this Agreement. The Consultant is responsible for paying all federal, state and local income or business taxes, including estimated taxes, self-employment and any other taxes, fees, additions to tax, interest or penalties that may be assessed or imposed on him, or incurred by him, as a result of the payment of the Consulting Fee, or any other amounts paid by the Company to the Consultant, and agrees to indemnify and hold the Company and its affiliates harmless from any and all liabilities or costs related thereto.

15.Amendment. This Agreement will not be changed or altered, except by an agreement in writing signed by the Consultant and the Company.

16.Governing Law. This Agreement shall be governed by and be construed under the laws of the State of Texas, without regard to conflict of laws principles. Venue of any litigation arising from or relating to this Agreement shall be in a state or federal district court in Harris County, Houston, State of Texas, or United States District Court, Southern District of Texas, Houston Division.

17.Counterparts. This Agreement may be signed in counterparts, each of which will be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[Signature page follows.]

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first written above.

CALLON PETROLEUM COMPANY


By:			/s/ Joseph C. Gatto, Jr.
			Joseph C. Gatto, Jr.
			President & Chief Executive Officer

Date:			7/22/2021

CONSULTANT


By:			/s/ James P. Ulm, II
			James P. Ulm, II
			3611 Bellefontaine Street
			Houston, Texas 77025

Date:			7/22/2021

Signature Page
to
Consulting Agreement

Document

Exhibit 10.3

Execution Version

FIFTH AMENDMENT TO CREDIT AGREEMENT

dated as of November 1, 2021

among

CALLON PETROLEUM COMPANY
as Borrower,

JPMORGAN CHASE BANK, N.A.
as Administrative Agent,

The Guarantors Party Hereto,

and

The Consenting Lenders Party Hereto

______________________________

JPMORGAN CHASE BANK, N.A. and BOFA SECURITIES, INC.,
Joint Lead Arrangers and Joint Bookrunners

BANK OF AMERICA, N.A.,
as Syndication Agent,

and

CAPITAL ONE, NATIONAL ASSOCIATION, CITIBANK, N.A., REGIONS BANK, THE BANK OF NOVA SCOTIA, HOUSTON BRANCH,

and

WELLS FARGO BANK, N.A.,
as Documentation Agents

Fifth Amendment to Credit Agreement

This Fifth Amendment to Credit Agreement (this “Fifth Amendment”), dated as of November 1, 2021 (the “Fifth Amendment Effective Date”), is among Callon Petroleum Company, a Delaware corporation (the “Borrower”); each of the undersigned guarantors (the “Guarantors”, and together with the Borrower, the “Credit Parties”); each of the Revolving Credit Lenders under the Credit Agreement (as defined below) party hereto (the “Consenting Lenders”); and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”).

R E C I T A L S:

A. The Borrower, the Administrative Agent and the Consenting Lenders are parties to that certain Credit Agreement dated as of December 20, 2019, as amended by that certain First Amendment to Credit Agreement dated as of May 7, 2020, as amended by that certain Second Amendment to Credit Agreement dated as of September 30, 2020, as amended by that certain Third Amendment to Credit Agreement dated as of September 30, 2020, as amended by that certain Fourth Amendment to Credit Agreement dated as of May 3, 2021 and as may be further amended, restated, supplemented or modified (the “Credit Agreement”), pursuant to which the financial institutions party thereto have, subject to the terms and conditions set forth therein, made certain credit available to and on behalf of the Borrower.

B. Pursuant to the terms of that certain Purchase and Sale Agreement (together with all appendices, exhibits and schedules thereto, collectively, the “Acquisition Agreement”) dated as of August 3, 2021 among the Borrower, Callon Petroleum Operating Company (the “Buyer”) and Primexx Resource Development, LLC (the “Seller”), the Buyer purchased from the Seller, and the Seller sold to the Buyer, certain Oil and Gas Properties identified as the “Assets” in the Acquisition Agreement (the “Acquired Assets”).

C. The parties hereto desire to enter into this Fifth Amendment to amend certain provisions of the Credit Agreement upon the terms and conditions as set forth herein, to be effective upon satisfaction of the conditions set forth in Section 4 of this Fifth Amendment.

D. The Administrative Agent and the Consenting Lenders have agreed, subject to the terms and conditions set forth herein, to enter into this Fifth Amendment to reaffirm the Borrowing Base at $1,600,000,000.00, which reaffirmation of the Borrowing Base shall constitute the Scheduled Redetermination of the Borrowing Base which is scheduled to occur on or about November 1, 2021.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.Defined Terms. Each capitalized term which is defined in the Credit Agreement, but which is not defined in this Fifth Amendment, shall have the meaning ascribed such term in the Credit Agreement, as amended by this Fifth Amendment. Unless otherwise indicated, all section references in this Fifth Amendment refer to the corresponding section in the Credit Agreement.

Page 1

Section 2.Amendments to Credit Agreement. In reliance on the representations, warranties, covenants and agreements contained in this Fifth Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 4 of this Fifth Amendment, the Credit Agreement, but excluding the Annexes, Schedules and Exhibits thereto (which shall remain unchanged), shall be amended in its entirety to read as set forth on the attached Annex I hereto.

Section 3.Borrowing Base Reaffirmation. Subject to the satisfaction of the conditions set forth in Section 4 of this Fifth Amendment, the Consenting Lenders (which constitute at least the Required Revolving Credit Lenders) hereby agree that for the period from and including the Fifth Amendment Effective Date, but until the next Scheduled Redetermination Date, the next Interim Redetermination Date or the next adjustment to the Borrowing Base under Section 2.06(e), Section 8.13(c) or Section 9.11, whichever occurs first, the amount of the Borrowing Base shall remain $1,600,000,000.00. This Borrowing Base redetermination shall be deemed to constitute the Scheduled Redetermination of the Borrowing Base which is scheduled to occur on or about November 1, 2021. The parties hereto hereby agree that this Section 3 constitutes the New Borrowing Base Notice for the Scheduled Redetermination of the Borrowing Base which is scheduled to occur on or about November 1, 2021 and the Borrower hereby confirms receipt of the New Borrowing Base Notice pursuant to Section 2.07(d).

Section 4.Conditions Precedent. The effectiveness of this Fifth Amendment is subject to the following:

4.1Counterparts. The Administrative Agent shall have received counterparts of this Fifth Amendment from the Credit Parties and each of the Consenting Lenders constituting at least the Required Revolving Credit Lenders (which may, subject to Section 12.06, include any Electronic Signatures transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page).

4.2No Default or Borrowing Base Deficiency. No Default or Event of Default shall have occurred which is continuing and no Borrowing Base deficiency shall exist (immediately after giving effect to this Fifth Amendment).

4.3Representations and Warranties True and Correct. Each representation and warranty of the Borrower and/or such Guarantor contained in the Credit Agreement and the other Loan Documents shall be true and correct in all material respects (unless already qualified by materiality or Material Adverse Effect in which case such applicable representation and warranty shall be true and correct) as of the Fifth Amendment Effective Date and after giving effect to the transactions contemplated hereby, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (unless already qualified by materiality or Material Adverse Effect in which case such applicable representation and warranty shall be true and correct) as of such specified earlier date.

4.4Fees and Expenses. The Administrative Agent shall have received all fees and other amounts due and payable in accordance with Section 12.03 on or prior to the Fifth Amendment Effective Date that have been invoiced at least one (1) Business Day prior to the Fifth Amendment Effective Date, including the reasonable and documented fees and expenses of Simpson Thacher & Bartlett LLP, counsel to the Administrative Agent in connection with the preparation, negotiation and execution of this Fifth Amendment.

Page 2

Section 5.Representations and Warranties. To induce the Lenders and the Administrative Agent to enter into this Fifth Amendment, each Credit Party hereby represents and warrants to the Revolving Credit Lenders and the Administrative Agent as follows as of the Fifth Amendment Effective Date (unless otherwise specified below):

5.1Representations and Warranties. Each representation and warranty of such Credit Party contained in the Credit Agreement and the other Loan Documents is true and correct in all material respects (unless already qualified by materiality or Material Adverse Effect in which case such applicable representation and warranty are true and correct) as of the Fifth Amendment Effective Date and after giving effect to the transactions contemplated hereby, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties are true and correct in all material respects (unless already qualified by materiality or Material Adverse Effect in which case such applicable representation and warranty are true and correct) as of such specified earlier date.

5.2Due Authorization; No Conflict. The execution, delivery and performance by such Credit Party of this Fifth Amendment are within such Credit Party’s company powers, have been duly authorized by all necessary company action, do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority (other than with respect to the recording and filing of any Security Instruments being delivered in connection with this Fifth Amendment) and do not violate or constitute a default under any provision of applicable law or material agreement binding upon such Credit Party or result in the creation or imposition of any Lien upon any of the assets of such Credit Party except Excepted Liens or Liens created by the Loan Documents.

5.3Validity and Enforceability. This Fifth Amendment constitutes the valid and binding obligation of such Credit Party enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditor’s rights generally, and the application of general principles of equity, regardless of whether considered in a proceeding in equity or at law.

5.4No Default, Event of Default, Borrowing Base Deficiency. No Default or Event of Default has occurred which is continuing and no Borrowing Base Deficiency exists (immediately after giving effect to this Fifth Amendment).

Section 6.Mortgages and Title Materials. Within thirty (30) days after the Fifth Amendment Effective Date (or such later time as the Administrative Agent may agree), the Borrower shall deliver to the Administrative Agent (a) title information in form and substance reasonably acceptable to the Administrative Agent covering enough of the proved Oil and Gas Properties so that (taking into account the Acquired Assets) the Administrative Agent shall have received together with satisfactory title information previously delivered to the Administrative Agent, satisfactory title information on at least 90% of the total value of the proved Oil and Gas Properties (taking into account the Acquired Assets) and (b) Security Instruments that shall, when properly recorded (or when the applicable financing statements related thereto are properly filed or such other actions needed to perfect are taken) grant the Administrative Agent a first priority perfected Lien on at least 90% of the total value of the proved Oil and Gas Properties of the Credit Parties (taking into account the Acquired Assets).

Page 3

Section 7.Miscellaneous.

7.1Reaffirmation of Loan Documents. Any and all of the terms and provisions of the Credit Agreement and the other Loan Documents shall, except as amended and modified hereby, remain in full force and effect and each Credit Party acknowledges that it has no defense to its obligation to pay the Obligations when due. Each Credit Party hereby agrees that the amendments and modifications herein contained shall not limit or impair any Liens securing the indebtedness or such Credit Party’s obligation to pay the Obligations when due, each of which is hereby ratified and affirmed.

7.2Parties in Interest. All of the terms and provisions of this Fifth Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.

7.3Counterparts. This Fifth Amendment may be executed in counterparts, and all parties need not execute the same counterpart. Subject to Section 12.06(d), delivery of this Fifth Amendment by Electronic Signature shall be effective as delivery of a manually executed original counterpart hereof.

7.4Complete Agreement. THIS FIFTH AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES HERETO.

7.5Headings. The headings, captions and arrangements used in this Fifth Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Fifth Amendment, nor affect the meaning thereof.

7.6Governing Law. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

7.7Jurisdiction; Consent to Service of Process; Waiver of Trial by Jury. Section 12.09 is hereby incorporated by reference and shall apply to this Fifth Amendment, mutatis mutandis, as if it had been fully set forth herein.

7.8Loan Document. This Fifth Amendment shall constitute a Loan Document.

7.9No Waiver. The execution, delivery and effectiveness of this Fifth Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or any Revolving Credit Lender under the Credit Agreement or any Loan Document, or constitute a waiver or amendment of any provision of the Credit Agreement or any Loan Document. Section 12.02(a) remains in full force and effect and is hereby ratified and confirmed by the Borrower and each Guarantor.

[Signature Pages Follow.]

Page 4

The parties hereto have caused this Fifth Amendment to be duly executed as of the day and year first above written.

BORROWER: Callon Petroleum Company


By:						/s/ Joseph C. Gatto, Jr.
Name:						Joseph C. Gatto, Jr.
Title:						President and Chief Executive Officer

[Signature Page to Fifth Amendment - Callon Petroleum Company]

GUARANTORS: Callon Petroleum Operating Company


By:						/s/ Joseph C. Gatto, Jr.
Name:						Joseph C. Gatto, Jr.
Title:						President and Chief Executive Officer

Callon (Permian) LLC


By:						/s/ Joseph C. Gatto, Jr.
Name:						Joseph C. Gatto, Jr.
Title:						President and Chief Executive Officer

Callon (Permian) Minerals LLC


By:						/s/ Joseph C. Gatto, Jr.
Name:						Joseph C. Gatto, Jr.
Title:						President and Chief Executive Officer

Callon (Eagle Ford) LLC


By:						/s/ Joseph C. Gatto, Jr.
Name:						Joseph C. Gatto, Jr.
Title:						President and Chief Executive Officer

Callon (Niobrara) LLC


By:						/s/ Joseph C. Gatto, Jr.
Name:						Joseph C. Gatto, Jr.
Title:						President and Chief Executive Officer

Callon (Utica) LLC


By:						/s/ Joseph C. Gatto, Jr.
Name:						Joseph C. Gatto, Jr.
Title:						President and Chief Executive Officer

Callon Marcellus Holding Inc.


By:						/s/ Joseph C. Gatto, Jr.
Name:						Joseph C. Gatto, Jr.
Title:						President and Chief Executive Officer

[Signature Page to Fifth Amendment - Callon Petroleum Company]

ADMINISTRATIVE AGENT AND

A LENDER: JPMorgan Chase Bank, N.A.,

as Administrative Agent and a

Lender


By:						/s/ Anson Williams
Name:						Anson Williams
Title:						Authorized Signatory

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	BANK OF AMERICA, N.A., as Consenting lender


	By:	/s/ Ajay Prakash
	Name:	Ajay Prakash
	Title:	Director

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	PNC Bank, National Association, as Consenting lender


	By:	/s/ John Engel
	Name:	John Engel
	Title:	Senior Vice President

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	The Bank of Nova Scotia, Houston Branch, as Consenting lender


	By:	/s/ Marc Graham
	Name:	Marc Graham
	Title:	Managing Director

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	Citibank, N.A., as Consenting lender


	By:	/s/ Jeff Ard
	Name:	Jeff Ard
	Title:	Vice President

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	CAPITAL ONE, NATIONAL ASSOCIATION, as Consenting lender


	By:	/s/ Matthew Brice
	Name:	Matthew Brice
	Title:	Duly Authorized Signatory

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	Wells Fargo Bank, N.A., as Consenting lender


	By:	/s/ Edward Pak
	Name:	Edward Pak
	Title:	Director

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	BARCLAYS BANK PLC, as Consenting lender


	By:	/s/ Sydney G. Dennis
	Name:	Sydney G. Dennis
	Title:	Director

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK BRANCH, as Consenting lender


	By:	/s/ Donovan C. Broussard
	Name:	Donovan C. Broussard
	Title:	Authorized Signatory


	By:	/s/ Kevin A. James
	Name:	Kevin A. James
	Title:	Authorized Signatory

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Consenting lender


	By:	/s/ Nupur Kumar
	Name:	Nupur Kumar
	Title:	Authorized Signatory


	By:	/s/ Daniel Kogan
	Name:	Daniel Kogan
	Title:	Authorized Signatory

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	Goldman Sachs Bank USA, as Consenting lender


	By:	/s/ Mahesh Mohan
	Name:	Mahesh Mohan
	Title:	Authorized Signatory

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	ROYAL BANK OF CANADA, as Consenting Lender


	By:	/s/ Emilee Scott
	Name:	Emilee Scott
	Title:	Authorized Signatory

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	REGIONS BANK, as Consenting lender


	By:	/s/ Cody Chance
	Name:	Cody Chance
	Title:	Director

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	Truist Bank, (as successor by merger to SunTrust Bank), as Consenting lender


	By:	/s/ Samantha Sanford
	Name:	Samantha Sanford
	Title:	Vice President

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	Fifth Third Bank, N.A., as Consenting lender


	By:	/s/ Larry Hayes
	Name:	Larry Hayes
	Title:	Executive Director

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	YORKSHIRE INVESTMENTS III, LC, as Consenting lender


	By:	/s/ Joshua Peck
	Name:	Joshua Peck
	Title:	Vice President

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	OCM AB HOLDINGS I, LLC, as Consenting lender


	By:	/s/ Allen Li
	Name:	Allen Li
	Title:	Authorized Signatory

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	IBERIABANK, a division of First Horizon Bank, as Consenting Lender


	By:	/s/ W. Bryan Chapman
	Name:	W. Bryan Chapman
	Title:	Market President-Energy Lending

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	ING CAPITAL LLC, as Consenting lender


	By:	/s/ Lauren Gutterman
	Name:	Lauren Gutterman
	Title:	Vice President


	By:	/s/ Scott Lamoreaux
	Name:	Scott Lamoreaux
	Title:	Director

[Signature Page to Fifth Amendment - Callon Petroleum Company]


CONSENTING LENDER:	KeyBank, N.A., as Consenting lender


	By:	/s/ Dale Conder
	Name:	Dale Conder
	Title:	Senior Vice President

[Signature Page to Fifth Amendment - Callon Petroleum Company]

Annex I

[Please see attached]

CREDIT AGREEMENT

dated as of December 20, 2019

as Amended as of May 7, 2020

as Amended as of September 30, 2020

as Amended as of May 3, 2021

as Amended as of November 1, 2021

among

CALLON PETROLEUM COMPANY,
as Borrower,

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent,

and

The Lenders Party Hereto

________________________________________

JPMORGAN CHASE BANK, N.A. and BOFA SECURITIES, INC.,
as Joint Lead Arrangers and Joint Bookrunners

BANK OF AMERICA, N.A.,
as Syndication Agent,

and

CAPITAL ONE, NATIONAL ASSOCIATION, CITIBANK, N.A.,
REGIONS BANK, THE BANK OF NOVA SCOTIA, HOUSTON BRANCH,

and

WELLS FARGO BANK, N.A.,
as Documentation Agents

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01

Terms Defined Above

Section 1.02

Certain Defined Terms

Section 1.03

Types of Loans and Borrowings

Section 1.04

Terms Generally; Rules of Construction

Section 1.05

Accounting Terms and Determinations; GAAP

Section 1.06

Limited Condition Transactions

Section 1.07

Divisions

ARTICLE II

THE REVOLVING CREDIT FACILITY

Section 2.01

Commitments

Section 2.02

Revolving Credit Loans and Borrowings

Section 2.03

Requests for Revolving Credit Borrowings

Section 2.04

Funding of Revolving Credit Borrowings

Section 2.05

Termination and Reduction of Aggregate Maximum Credit Amounts

Section 2.06

Borrowing Base

Section 2.07

Letters of Credit

Section 2.08

Swing Line

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST ON REVOLVING CREDIT LOANS AND SWING LINE LOANS; PREPAYMENTS OF REVOLVING CREDIT LOANS; FEES

Section 3.01

Repayment of Revolving Credit Loans and Swing Line Loans

Section 3.02

Interest on Revolving Credit Loans and Swing Line Loans

Section 3.03

Prepayments of Revolving Credit Loans and Swing Line Loans

Section 3.04

Fees

ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

Section 4.01

Payments Generally; Pro Rata Treatment; Sharing of Set-offs

Section 4.02

Deductions by the Administrative Agent; Defaulting Lender

Section 4.03

Disposition of Proceeds

ARTICLE V

INCREASED COSTS; REIMBURSEMENT OF PREPAYMENT COSTS;
TAXES; LIBO RATE AVAILABILITY

Section 5.01

Increased Costs

Section 5.02

Reimbursement of Prepayment Costs

Section 5.03

Taxes

Section 5.04

Mitigation Obligations; Designation of Different Lending Office

Section 5.05

Replacement of Lenders

Section 5.06

Circumstances Affecting LIBO Rate Availability

Section 5.07

Laws Affecting LIBO Rate Availability

Section 5.08

Eurodollar Lending Office

Section 5.09

Right of Lenders to Fund through Branches and Affiliates

ARTICLE VI

CONDITIONS PRECEDENT

Section 6.01

Effectiveness

Section 6.02

Each Credit Event

Section 6.03

Additional Conditions to Credit Events

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

Section 7.01

Organization; Powers

Section 7.02

Authority; Enforceability

Section 7.03

Approvals; No Conflicts

Section 7.04

Financial Condition; No Material Adverse Change

Section 7.05

Litigation

Section 7.06

Environmental Matters

Section 7.07

Compliance with the Laws and Agreements; No Defaults

Section 7.08

Investment Company Act

Section 7.09

Taxes

Section 7.10

ERISA

Section 7.11

Disclosure; No Material Misstatements; Beneficial Ownership

Section 7.12

Insurance

Section 7.13

Restriction on Liens

Section 7.14

Subsidiaries

Section 7.15

[Reserved]

Section 7.16

Properties; Titles, Etc

Section 7.17

Maintenance of Properties

Section 7.18

Gas Imbalances, Prepayments

Section 7.19

Marketing of Production

Section 7.20

Swap Agreements

Section 7.21

Use of Loans and Letters of Credit

Section 7.22

Solvency

Section 7.23

Anti-Corruption Laws and Sanctions

Section 7.24

EEA Financial Institutions

Section 7.25

Security Instruments

ARTICLE VIII

AFFIRMATIVE COVENANTS

Section 8.01

Financial Statements; Other Information

Section 8.02

Notices of Material Events

Section 8.03

Existence; Conduct of Business

Section 8.04

Payment of Obligations

Section 8.05

[Reserved]

Section 8.06

Operation and Maintenance of Properties

Section 8.07

Insurance

Section 8.08

Books and Records; Inspection Rights

Section 8.09

Compliance with Laws

Section 8.10

Environmental Matters

Section 8.11

Further Assurances

Section 8.12

Reserve Reports

Section 8.13

Title Information

Section 8.14

Agreement to Pledge; Additional Guarantors

Section 8.15

ERISA Compliance

Section 8.16

Marketing Activities

Section 8.17

Unrestricted Subsidiaries

Section 8.18

Account Control Agreements

Section 8.19

[Reserved]

Section 8.20

Minimum Hedged Volume

Section 8.21

Consolidated Cash Balance

ARTICLE IX

NEGATIVE COVENANTS

Section 9.01

Financial Covenants

Section 9.02

Debt

Section 9.03

Liens

Section 9.04

Restricted Payments

100

Section 9.05

Investments, Loans and Advances

101

Section 9.06

Nature of Business; Organizational Changes

102

Section 9.07

Proceeds of Loans

102

Section 9.08

ERISA Compliance

103

Section 9.09

Sale or Discount of Receivables

103

Section 9.10

Mergers, Etc

103

Section 9.11

Sale of Properties

104

Section 9.12

Transactions with Affiliates

105

Section 9.13

[Reserved]

106

Section 9.14

Negative Pledge Agreements; Dividend Restrictions

106

iii

Section 9.15

Gas Imbalances

106

Section 9.16

Swap Agreements

106

Section 9.17

Designation and Conversion of Subsidiaries and Unrestricted Subsidiaries; Debt of Unrestricted Subsidiaries

107

Section 9.18

Junior Debt

107

Section 9.19

Use of Proceeds and Letters of Credit

108

Section 9.20

Changes in Fiscal Periods; Accounting Change

108

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

Section 10.01

Events of Default

108

Section 10.02

Remedies

110

ARTICLE XI

THE AGENTS

Section 11.01

Appointment of Administrative Agent

111

Section 11.02

[Reserved]

112

Section 11.03

Scope of Administrative Agent’s Duties

112

Section 11.04

Successor Administrative Agent

112

Section 11.05

Credit Decisions

113

Section 11.06

Authority of Administrative Agent to Enforce This Agreement

113

Section 11.07

Indemnification of Administrative Agent

113

Section 11.08

Knowledge of Default

114

Section 11.09

Administrative Agent’s Authorization; Action by Lenders

114

Section 11.10

Enforcement Actions by Administrative Agent

115

Section 11.11

Collateral Matters

115

Section 11.12

Credit Bidding

115

Section 11.13

Agents in their Individual Capacities

116

Section 11.14

Administrative Agent’s Fees

117

Section 11.15

Syndication Agent, Documentation Agent or other Titles

117

Section 11.16

No Reliance on Administrative Agent’s Customer Identification Program

117

Section 11.17

Certain ERISA Matters

117

Section 11.18

Acknowledgments of Lenders and Issuing Banks

119

ARTICLE XII

MISCELLANEOUS

Section 12.01

Notices

120

Section 12.02

Waivers; Amendments

121

Section 12.03

Expenses, Indemnity; Damage Waiver

123

Section 12.04

Successors and Assigns

125

Section 12.05

Survival; Revival; Reinstatement

128

Section 12.06

Counterparts; Integration; Effectiveness; Electronic Execution

129

Section 12.07

Severability

130

Section 12.08

Right of Setoff

130

Section 12.09

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER OF TRIAL BY JURY

130

Section 12.10

Headings

131

Section 12.11

Confidentiality

131

Section 12.12

Interest Rate Limitation

133

Section 12.13

EXCULPATION PROVISIONS

133

Section 12.14

Collateral Matters; Swap Agreements; Cash Management

135

Section 12.15

No Third Party Beneficiaries

135

Section 12.16

USA Patriot Act Notice

135

Section 12.17

Keepwell

135

Section 12.18

Acknowledgement and Consent to Bail-In of Affected Financial Institutions

135

Section 12.19

Flood Insurance

136

Section 12.20

Acknowledgement Regarding Any Supported QFCs

136

Schedules and Exhibits


Schedule 1.1			Applicable Margin
Schedule 1.2			Allocations
Schedule 7.04(c)			Material Debt and Liabilities
Schedule 7.05			Litigation
Schedule 7.06			Environmental Matters
Schedule 7.14			Subsidiaries
Schedule 7.19			Marketing Agreements
Schedule 7.20			Swap Agreements
Schedule 9.02			Existing Debt
Schedule 9.03			Existing Liens
Schedule 9.05			Investments
Schedule 12.01			Notices

Exhibit A			Form of Revolving Credit Note
Exhibit B			Form of Revolving Credit Borrowing Request
Exhibit C			Form of Compliance Certificate
Exhibit D			Security Instruments
Exhibit E			Form of Assignment and Assumption
Exhibit F			Form of Request for Swing Line Loan
Exhibit G			Form of Swing Line Note
Exhibit H			Form of Swing Line Participation Certificate
Exhibit I			Form of Notice of Issuance of Letter of Credit
Exhibit J-1			Form of U.S. Tax Compliance Certificate (Foreign Lenders; not partnerships)
Exhibit J-2			Form of U.S. Tax Compliance Certificate (Foreign Participants; not partnerships)
Exhibit J-3			Form of U.S. Tax Compliance Certificate (Foreign Participants; partnerships)
Exhibit J-4			Form of U.S. Tax Compliance Certificate (Foreign Lenders; partnerships)
Exhibit K			Form of Additional Lender Certificate
Exhibit L			Form of Elected Commitment Increase Certificate
Exhibit M			Form of Solvency Certificate
Exhibit N			Form of Intercreditor Agreement

CREDIT AGREEMENT

THIS CREDIT AGREEMENT dated as of December 20, 2019, is among CALLON PETROLEUM COMPANY, a Delaware corporation (the “Borrower”), each of the Lenders from time to time party hereto, and JPMORGAN CHASE BANK, N.A. as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”).

RECITALS

A. Pursuant to that certain Agreement and Plan of Merger, dated as of July 14, 2019 (including all schedules and exhibits thereto as amended from time to time, the “Merger Agreement”), among the Borrower and Carrizo Oil & Gas, Inc. (“Carrizo”), and upon terms and conditions set forth in the Merger Agreement, Carrizo will merge with and into the Borrower, with the Borrower surviving (the “Acquisition”).

B. The Borrower has requested that the Lenders and each Issuing Bank provide certain loans to and extensions of credit on behalf of the Borrower on and after the Effective Date as provided herein.

C. The Lenders and the Issuing Banks have agreed to make such loans and extensions of credit subject to the terms and conditions of this Agreement.

D The proceeds of such loans and extensions of credit will be used by the Borrower for the payment of fees and expenses incurred in connection with the Transactions on the Effective Date and, after the Effective Date for general corporate or partnership purposes, including, without limitation, capital expenditures, investments and acquisitions, in each case, subject to the terms and conditions of this Agreement.

E. In consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01 Terms Defined Above. As used in this Agreement, each term defined above has the meaning indicated above.

Section 1.02 Certain Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“2023 Senior Notes” means those certain senior unsecured notes due 2023 issued pursuant to that certain Senior Indenture dated as of May 28, 2008, among Carrizo, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as trustee (such senior indenture, as amended and supplemented by the Sixteenth Supplemental Indenture thereto dated as of April 28, 2015, among the Carrizo, the subsidiary guarantors named therein, and the trustee; the Eighteenth Supplemental Indenture thereto dated as of May 20, 2015, among the Carrizo, the subsidiary guarantors named therein, and the trustee; the Twentieth Supplemental Indenture thereto dated as of July 14, 2017, among the Carrizo, the subsidiary guarantors named therein, and the trustee; and as further amended, supplemented, or otherwise modified from time to time).

“2024 Senior Notes” means those certain senior unsecured notes due 2024 issued pursuant to that certain Indenture dated as of October 3, 2016, among Borrower, the subsidiary guarantors named therein

and U.S. Bank National Association, as trustee (such indenture, as amended, supplemented or otherwise modified from time to time).

“2025 Second Lien Notes” means those certain senior second lien secured notes due 2025 issued pursuant to that certain Indenture dated as of September 30, 2020, among the Borrower, as issuer, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee and collateral agent (such indenture, as amended, supplemented or otherwise modified from time to time).

“2025 Senior Notes” means those certain senior unsecured notes due 2025 issued pursuant to that certain Senior Indenture dated as of May 28, 2008, among Carrizo, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as trustee (such senior indenture, as amended and supplemented by the Twentieth Supplemental Indenture thereto dated as of July 14, 2017, among Carrizo, the subsidiary guarantors named therein, and the trustee; and as further amended, supplemented or otherwise modified from time to time).

“2026 Senior Notes” means those certain senior unsecured notes due 2026 issued pursuant to that certain Indenture dated June 7, 2018, among the Borrower, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (such indenture, as amended and supplemented by the First Supplemental Indenture thereto dated as of December 20, 2019 among the Borrower, the subsidiary guarantors named therein and the trustee; and as further amended, supplemented or otherwise modified from time to time).

“ABR,” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“Additional Debt Conditions” has the meaning assigned to such term in Section 9.02(h).

“Additional Lender” has the meaning assigned to such term in Section 2.01(b)(i).

“Additional Lender Certificate” has the meaning assigned to such term in Section 2.01(b)(ii)(E).

“Adjusted EBITDAX” means for each fiscal quarter ending on or after December 31, 2019, the consolidated EBITDAX of the Borrower and the other Credit Parties for the twelve month period most recently then ended, provided that (i) EBITDAX for the three month period ended March 31, 2019, shall be deemed to be $254,807,281, (ii) EBITDAX for the three month period ended June 30, 2019, shall be deemed to be $306,462,121, (iii) EBITDAX for the three month period ended September 30, 2019, shall be deemed to be $303,854,286 and (iv) EBITDAX for the three month period ended December 31, 2019, shall be deemed to be $300,115,299.

“Adjusted LIBO Rate” means with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agency Fee Letter” means the agency fee letter dated as of July 14, 2019, among the Borrower, and JPMorgan Chase Bank, N.A., as amended, restated, supplemented or otherwise modified from time to time.

“Aggregate Elected Commitment Amount” at any time shall equal the sum of the Elected Commitments, as the same may be increased, reduced or terminated pursuant to Section 2.01(b). As of the Third Amendment Effective Date, the Aggregate Elected Commitment Amount is $1,600,000,000.

“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the Maximum Credit Amounts, as the same may be reduced or terminated pursuant to Section 2.05. As of the Effective Date, the Aggregate Maximum Credit Amounts of the Revolving Credit Lenders is $5,000,000,000.

“Agreement” means this Credit Agreement, as the same may from time to time be amended, amended and restated, modified, supplemented or restated.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period beginning on such day (or if such day is not a Business Day, on the immediately preceding Business Day) plus 1%, provided that, the Adjusted LIBO Rate for any day shall be based on the LIBO Rate at approximately 11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate, respectively; provided further, that if the Alternate Base Rate shall be less than 1%, such rate shall be deemed to be 1% for purposes of this Agreement. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 5.06, then the Alternate Base Rate shall be the greater of clause (a) and (b) above and shall be determined without reference to clause (c) above.

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption.

“Applicable Hedge Percentage” means (a) for each month of the twelve (12) month period from the date such Swap Agreement is executed, ninety-five percent (95%), and (b) for each month of the forty-eight (48) month period immediately following the first anniversary of the date such Swap Agreement is executed, eighty-five percent (85%).

“Applicable Margin” means, for any period, with respect to any ABR Revolving Credit Loan, ABR Swing Line Loan, Eurodollar Revolving Credit Loan or Letters of Credit, as the case may be, the rate per annum set forth in the Commitment Utilization Grid set forth on Schedule 1.1 and based upon the Commitment Utilization Percentage then in effect.

“Applicable Revolving Credit Percentage” means, with respect to any Revolving Credit Lender, the percentage of the Aggregate Maximum Credit Amounts represented by such Revolving Credit Lender’s Maximum Credit Amount as such percentage (which may be carried out to the seventh decimal place) is set forth on Schedule 1.2, provided that if the Commitments have terminated or expired, each Revolving Credit Lender’s Applicable Revolving Credit Percentages shall be determined based upon the Commitments most recently in effect.

“Approved Counterparty” means (a) any Secured Swap Party and (b) any other Person if such Person has (or the credit support provider of such Person has) a long term senior unsecured debt rating at the time of entry into the applicable Swap Agreement of BBB-/Baa3 by S&P or Moody’s (or their equivalent) or higher.

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in revolving bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by a Lender, an Affiliate of a Lender or an entity or an Affiliate of an entity that administers or manages a Lender.

“Approved Petroleum Engineers” means (a) W. D. Van Gonten & Co. Petroleum Engineering, (b) Netherland, Sewell & Associates, Inc., (c) Ryder Scott Company Petroleum Consultants, L.P., (d) DeGolyer and MacNaughton, (e) Cawley, Gillespie & Associates, Inc. and (f) at the option of the Borrower, any other independent petroleum engineers selected by the Borrower and reasonably acceptable to the Administrative Agent.

“Arrangers” means JPMorgan Chase Bank, N.A. and BofA Securities, Inc., in their capacities as the joint lead arrangers and joint bookrunners hereunder.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 12.04(b)), and accepted by the Administrative Agent, in the form of Exhibit E or any other form approved by the Administrative Agent.

“Assumed Debt” has the meaning assigned to such term in Section 9.02(j).

“Availability Period” means the period from and including the Effective Date to but excluding the Termination Date.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code that is subject to Section 4975 of the Code, or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for

purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan.”

“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America or any successor Governmental Authority.

“Borrowing” means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans (as defined herein), as to which a single Interest Period is in effect.

“Borrowing Base” means at any time an amount equal to the amount determined in accordance with Section 2.06, as the same may be adjusted from time to time pursuant to the Borrowing Base Adjustment Provisions. As of the Fourth Amendment Effective Date the Borrowing Base is $1,600,000,000.

“Borrowing Base Adjustment Provisions” means Section 2.06(e), Section 8.13(c) and Section 9.11 in each case which may adjust (as opposed to redetermine) the amount of the Borrowing Base.

“Borrowing Base Deficiency Notice” has the meaning assigned to such term in Section 3.03(c)(ii).

“Borrowing Base Properties” means the Oil and Gas Properties constituting Proved Reserves of the Credit Parties included in the Reserve Report most recently delivered pursuant to Section 8.12 to which credit is given in determining the Borrowing Base.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Capital Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP as in effect as of December 31, 2018, recorded as capital leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder.

“Capital Markets Account” means any deposit account maintained with the Administrative Agent or any Lender (or any Affiliate of any Lender) which (a) only holds proceeds from any Permitted Unsecured Notes, any issuance or incurrence of other Debt by the Borrower or any other Credit Party (including, without limitation, convertible Debt, but excluding any Debt issued or incurred under this Agreement or any other Loan Document), and any issuance of Equity Interests by the Borrower or any other Credit Party, in each case which is not prohibited under the terms of this Agreement, and (b) all of such proceeds will be used for a specific pending acquisition of Oil and Gas Properties or otherwise in accordance with Section 8.18(c).

“Carrizo Credit Agreement” means that certain Credit Agreement, dated as of January 27, 2011, among Carrizo, as borrower, Wells Fargo Bank, National Association, as administrative agent and the lenders and other parties from time to time party thereto, as amended from time to time prior to the Effective Date.

“Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent (as a first priority, perfected security interest), for the benefit of the Issuing Bank and the Revolving Credit Lenders, cash in Dollars, at a location and pursuant to documentation in form and substance satisfactory to the Administrative Agent.

“Cash Management Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card, electronic funds transfer and other cash management arrangements.

“Cash Management Bank” means any Person that, at the time it enters into a Cash Management Agreement, is a Lender or an Affiliate of a Lender, in its capacity as a party to such Cash Management Agreement.

“CERCLA” has the meaning assigned to such term in the definition of Environmental Laws.

“CFC” means a “controlled foreign corporation” within the meaning of Section 957(a) of the Code.

“Change in Control” means:

(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of Equity Interests of the Borrower representing more than 40% of the ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower; or

(b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body.

“Change in Law” has the meaning ascribed to such term in Section 5.01(b).

“CIP Regulations” has the meaning ascribed to such term in Section 11.16(a).

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.

“Collateral” means all Property which is subject to a Lien under one or more Security Instruments. For the avoidance of doubt, Collateral does not include any Excluded Asset.

“Commitment” means, with respect to each Revolving Credit Lender, the commitment of such Revolving Credit Lender to make Revolving Credit Loans and to acquire participations in Letters of Credit and Swing Line Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Revolving Credit Lender’s Revolving Credit Exposure hereunder, as such commitment may be modified from time to time pursuant to Section 2.01(b) and Section 2.05 and modified from time to time pursuant to assignments by or to such Revolving Credit Lender pursuant to Section 12.04(b). The

amount representing each Revolving Credit Lender’s Commitment shall at any time be the least of such Revolving Credit Lender’s (a) Maximum Credit Amount, (b) Applicable Revolving Credit Percentage of the then effective Borrowing Base and (c) Elected Commitment.

“Commitment Fee” has the meaning ascribed to such term in Section 3.04(a).

“Commitment Fee Rate” means a rate per annum set forth in the Commitment Utilization Grid on Schedule 1.1.

“Commitment Utilization Percentage” means, as of any day, the fraction expressed as a percentage, the numerator of which is the sum of the Revolving Credit Exposures of the Revolving Credit Lenders on such day, and the denominator of which is the least of the Borrowing Base, the Aggregate Elected Commitment Amount, and the Aggregate Maximum Credit Amounts, in each case, in effect on such day.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

“Company Disclosure Schedule” has the meaning assigned to such term in the Merger Agreement.

“Company Material Adverse Effect” has the meaning assigned to such term in the Merger Agreement.

“Company SEC Documents” has the meaning assigned to such term in the Merger Agreement.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Consolidated Cash Balance” means, at any time, (a) the aggregate amount of cash and cash equivalents, marketable securities, treasury bonds and bills, certificates of deposit, investments in money market funds and commercial paper, in each case, held or owned by (either directly or indirectly), credited to the account of, or that would otherwise be required to be reflected as an asset on the balance sheet of the Borrower and its Restricted Subsidiaries (all of the foregoing, collectively for purposes of this definition, “Cash”) less (b) (i) any Cash permitted to be paid by the Borrower or its Restricted Subsidiaries in accordance with this Agreement and the other Loan Documents for amounts then (or within five (5) Business Days will become) due and owing for which the Borrower or a Restricted Subsidiary either (x) has issued checks or has initiated wires or ACH transfers (but which amounts have not, as of such time, been subtracted from the balance in the relevant account of the Borrower or such Restricted Subsidiary) or (y) reasonably anticipates in good faith that it will issue checks or initiate wires or ACH transfers within five (5) Business Days thereafter, (ii) any Cash used to Cash Collateralize Letter of Credit Obligations, (iii) any Cash constituting purchase price deposits pursuant to a binding and enforceable purchase and sale agreement with a third party containing customary provisions regarding the payment and refunding of such deposits, and (iv) Cash to be used within five (5) Business Days to pay the purchase price for an acquisition by the Borrower or a Restricted Subsidiary pursuant to a binding and enforceable purchase and sale agreement with an unaffiliated third party containing customary provisions regarding the payment of such purchase price.

“Consolidated Cash Balance Sweep Period” means (a) in the case of the initial Consolidated Cash Balance Sweep Period, the period starting on May 11, 2020 and ending on May 15, 2020 and (b) in the case of any other Consolidated Cash Balance Sweep Period, the one week period ending on the first

Business Day of each week; provided that at any time during the existence and continuation of an Event of Default, “Consolidated Cash Balance Sweep Period” shall mean any Business Day.

“Consolidated Cash Balance Threshold” means, as of any time, the lesser of (a) $125,000,000 and (b) seven and a half percent (7.5%) of the Borrowing Base in effect as of such time.

“Consolidated Cash Measurement Date” means the last day of any Consolidated Cash Balance Sweep Period.

“Consolidated Net Income” means with respect to the Borrower and the other Credit Parties, for any period, the aggregate of the net income (or loss) of the Borrower and the other Credit Parties determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which the Borrower or any other Credit Party has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower and the other Credit Parties in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to the Borrower or to any other Credit Party, as the case may be; (b) the net income (but not loss) during such period of any Credit Party to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Credit Party is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Credit Party or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) any extraordinary gains or losses during such period; (d) any non-cash gains or losses or positive or negative adjustments under ASC 815 (and any statements replacing, modifying or superseding such statement) as a result of changes in the fair market value of derivatives; (e) any gains or losses attributable to writeups or writedowns of assets, including but not limited to impairments to oil and gas properties; (f) any net after-tax effect of gains or losses on (i) disposal, abandonment (including asset retirement costs) or discontinuance of disposed, abandoned or discontinued operations, (ii) asset dispositions or (iii) the sale or other disposition of any equity interests of any person, as applicable, in each case, other than in the ordinary course of business, as determined in good faith by the Borrower; provided that any exclusion for the discontinuance of discontinued operations held for sale shall be at the option of the Borrower pending the consummation of such sale; (g) any net after-tax effect of income (loss) from the early extinguishment or conversion of indebtedness; (h) any non-cash equity or phantom equity based or non-cash compensation charge or expense, including any such charge or expense arising from grants of stock appreciation rights, equity incentive programs or similar rights, stock options, restricted stock or other rights to, and any cash charges associated with the rollover, acceleration, or payout of, equity interests by management of such person or of a restricted subsidiary or any of its direct or indirect parent companies; (i) accruals and reserves that are established or adjusted within twelve months after the Effective Date that are so required to be established or adjusted as a result of the Transactions (or within twelve months after the closing of any acquisition that are so required to be established as a result of such acquisition) in accordance with GAAP; (j) any expenses, charges or losses to the extent covered by insurance (including business interruption insurance) or indemnity and actually reimbursed, or, so long as such Person has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer or indemnifying party and only to the extent that such amount is in fact reimbursed within 365 days of the date of such determination (net of any amount so added back in any prior period to the extent not so reimbursed within the applicable 365-day period); (k) any fees, expenses or charges incurred during such period, or any amortization thereof for such period, in connection with the novation of any swap agreements entered into in connection with the closing; (l) contingent consideration obligations (including to the extent accounted for as bonuses or otherwise); and (m) the cumulative effect of a change in accounting principles and changes as a result of the adoption or modification of accounting policies during such period whether effected through a cumulative effect adjustment or a retroactive application,

in each case in accordance with GAAP. For the purposes of calculating Consolidated Net Income for any period of four (4) consecutive fiscal quarters in connection with any determination of the Leverage Ratio and the Secured Leverage Ratio (the “Reference Period”), and without duplication of any additions to or subtractions from EBITDAX for the same items set forth in the definition thereof, (i) if at any time during such Reference Period the Borrower or any other Credit Party shall have made any Material Disposition, the Consolidated Net Income for such Reference Period shall be reduced by an amount equal to the Consolidated Net Income (if positive) attributable to the Property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated Net Income (if negative) attributable thereto for such Reference Period and (ii) if during such Reference Period the Borrower or any other Credit Party shall have made a Material Acquisition, the Consolidated Net Income for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period.

“Consolidated Total Assets” means, as of any date of determination, the amount that would, in conformity with GAAP, be set forth opposite the caption “total assets” (or any like caption) on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries at such date.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Control Agreement” means a deposit account control agreement or securities account control agreement (or similar agreement), as applicable, in form and substance reasonably satisfactory to the Administrative Agent, executed by the applicable Credit Party, the Administrative Agent and the relevant financial institution party thereto, which establishes the Administrative Agent’s control (within the meaning of Section 9-104 of the UCC) with respect to the applicable Deposit Account or Securities Account covered thereby.

“Covered Entity” means (a) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b), (b) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b), or (c) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

“Covered Party” has the meaning assigned to such term in Section 12.20.

“Credit Parties” means the Borrower and the Guarantors, and “Credit Party” means any one of them, as the context indicates or otherwise requires.

“Current Assets” means, as of any date of determination, without duplication, the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a consolidated balance sheet of the Borrower and the other Credit Parties at such date, plus the unused Commitments then available to be borrowed, but excluding all non-cash assets under ASC 815.

“Current Liabilities” means, as of any date of determination, without duplication, the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) on a consolidated balance sheet of the Borrower and the other Credit Parties on such date, but excluding (a) all non-cash obligations under ASC 815, (b) the current portion of income taxes, (c) the current portion of any Loans, Letters of Credit, hedging obligations and other Debt for borrowed money, (d) current liabilities consisting of deferred revenue, (e) any non-cash liabilities recorded in connection with stock-based or similar incentive-based compensation awards or

arrangements, (f) liabilities to the extent resulting from non-cash losses or charges required under ASC 410 and (g) current portion of lease liabilities recognized under ASC 842.

“Customary Intercreditor Agreement” means a customary intercreditor agreement substantially in the form attached as Exhibit N hereto or otherwise in form and substance reasonably acceptable to the Administrative Agent and the Borrower, which agreement shall provide that the Liens on the Collateral securing such Debt shall rank junior to the Liens on the Collateral securing the Obligations.

“Debt” means, for any Person, the sum of the following (without duplication):

(a) all obligations of such Person for borrowed money or evidenced by bankers’ acceptances, debentures, notes, bonds or other similar instruments;

(b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bank guarantees and similar instruments;

(c) all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property;

(d) all obligations under Capital Leases or Synthetic Leases;

(e) all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person to the extent of the value of the Property of such Person which is subject to a Lien securing such Debt, whether or not such Debt is assumed by such Person;

(f) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made, including by means of obligations to pay for goods or services even if such goods or services are not actually taken, received or utilized or by means of) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss;

(g) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability;

(h) all Disqualified Capital Stock;

(i) all obligations of such Person under take/ship or pay contracts if any goods or services are not actually received or utilized by such Person; and

(j) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment.

The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP; provided, however, that “Debt” does not include (i) obligations with respect to surety, performance or appeal bonds and similar instruments not incurred in respect of debt for borrowed money or (ii) accounts payable that are not greater than one year past the date of invoice or delinquent or that are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

“Defaulting Lender” means any Lender that (a) has failed to (i) fund all or any portion of its Applicable Revolving Credit Percentage of any Revolving Credit Loans within two (2) Business Days of the date such Revolving Credit Loans were required to be funded hereunder, unless the subject of a good faith dispute, or (ii) pay to the Administrative Agent, the Issuing Bank, any Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Loans) within two (2) Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent, the Issuing Bank or the Swing Line Lender in writing that it does not intend or expect to comply with its funding obligations hereunder or has made a public statement to that effect (unless such writing or public statement is based on a good faith dispute specifically identified in such writing or public statement), (c) has failed, within three (3) Business Days after written request by the Administrative Agent, the Issuing Bank, any Swing Line Lender or any other Lender, acting in good faith, to confirm in writing that it will comply with its prospective funding obligations hereunder (and is financially able to meet such obligations); provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt by the requesting party and the Administrative Agent of such written confirmation in form and substance satisfactory to such requesting party and the Administrative Agent, or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under the any liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (iii) has become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority, so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Lender; provided, further, that the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator with respect to a Lender or a direct or indirect parent company under the Dutch Financial Supervision Act 2007 (as amended from time to time and including any successor legislation) shall not be deemed to result in an event described in clause (d) hereof so long as such appointment does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from enforcement of judgments or writs of attachment on its assets or permit such Lender (or such administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official or Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender upon delivery of written notice of such determination to the Borrower, the Issuing Bank, each Swing Line Lender and each Lender.

“Defaulting Lender’s Unfunded Portion” means such Defaulting Lender’s Applicable Revolving Credit Percentage of the Aggregate Maximum Credit Amount minus the sum of (a) the aggregate

principal amount of all Revolving Credit Loans funded by the Defaulting Lender, plus (b) such Defaulting Lender’s Applicable Revolving Credit Percentage of the aggregate outstanding principal amount of all Swing Line Loans and Letter of Credit Obligations.

“Delaware Water Services Assets” means those certain water handling and recycling assets (to none of which any Proved Reserves of oil or natural gas are attributed) owned by the Credit Parties as of the Fifth Amendment Effective Date and listed on Annex IV to the Fifth Amendment.

“Deposit Account” has the meaning assigned to such term in the UCC.

“Disqualified Capital Stock” means (a) any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable (other than customary redemption provisions in connection with a change of control or asset sale to the extent the terms of such Equity Interest provide that such Equity Interest shall not be required to be repurchased or redeemed until the Revolving Credit Maturity Date has occurred, the repayment in full of the Obligations has occurred or such repurchase or redemption is otherwise permitted by or subject to compliance with this Agreement (including as a result of a waiver hereunder)) for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part (but if in part only with respect to such amount that meets the criteria set forth in this definition), on or prior to the date that is one year after the Revolving Credit Maturity Date and (b) any preferred Equity Interest that does not constitute Refinancing Preferred Stock; provided that, if such Equity Interests are issued to any plan for the benefit of employees of the Borrower or its Subsidiaries or by any such plan to such employees, such Stock or Stock Equivalents shall not constitute Disqualified Capital Stock solely because it may be required to be repurchased by the Borrower or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations; provided, further, that any Equity Interests held by any future, present or former employee, director, manager or consultant of the Borrower, any of its Subsidiaries or any of its direct or indirect parent companies or any other entity in which the Borrower or a Restricted Subsidiary has an Investment and is designated in good faith as an “affiliate” by the board of directors or managers of the Borrower, in each case pursuant to any equity holders’ agreement, management equity plan or stock incentive plan or any other management or employee benefit plan or agreement shall not constitute Disqualified Capital Stock solely because it may be required to be repurchased by the Borrower or its Subsidiaries.

“Disqualified Institution” means (a) an Industry Competitor as identified to the Administrative Agent in writing on or prior to the Effective Date (which writing has been shared with the Lenders), and (b) affiliates of such Persons set forth in clause (a) that are reasonably identifiable solely on the basis of the similarity of such Affiliate’s name; provided that (A) the Borrower shall be permitted to remove a Person as a Disqualified Institution by providing written notice to the Administrative Agent and (B) no Person shall retroactively become a Disqualified Institution if such Person that has previously (x) become a Lender or a Participant or committed to (or been approached to) become a Lender or a Participant or (y) entered into a trade to become a Lender or a Participant.

“Documentation Agents” means, collectively, Capital One, National Association, Citibank, N.A., Regions Bank, The Bank of Nova Scotia, Houston Branch and Wells Fargo Bank, N.A., as Documentation Agents, and “Documentation Agent” means any of them.

“Dollars” or “$” refers to lawful money of the United States of America.

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of the United States of America or any state thereof or the District of Columbia.

“E&P Credit Party” shall have the meaning set forth in Section 9.11.

“EBITDAX” means, for any period, Consolidated Net Income for such period plus the following expenses or charges to the extent deducted from Consolidated Net Income in such period: the sum of (a) interest, income taxes, depreciation, depletion, amortization, exploration and abandonment expenses and accretion expenses related to FAS 143 (superseded primarily by ASC 410) and expenses recognized under FAS 123(r) and FAS 133 (superseded primarily by ASC 718 and ASC 815, respectively), (b) extraordinary, unusual and non-recurring items provided that, any items falling within the scope of clause (e) shall be subject to the add back provided in clause (e) below with respect thereto and shall not be permitted to be added back pursuant to this clause (b), (c) one-time transaction costs, expenses and charges incurred in connection with the Transactions and other costs, expenses and charges incurred with respect to any equity or Debt offerings or issuances, acquisitions, Investments, Transfers, refinancings or replacements in whole or in part of, or any amendments, waivers, consents, supplements or other modifications in respect of, the Revolving Credit Loan, any Specified Additional Debt, any unsecured notes or any other indebtedness for borrowed money (in the case of each of the foregoing, whether or not consummated and only to the extent reducing Consolidated Net Income), (d) any other non-cash gains or charges, including any write-offs or write-downs, in each case, increasing or reducing Consolidated Net Income for such period with gains reflected as a negative number (provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, (A) the Borrower may determine not to add back such non-cash charge in the current period and (B) to the extent the Borrower does decide to add back such non-cash charge, the cash payment in respect thereof in such future period shall be subtracted from EBITDAX to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period), (e) restructuring expenses and the amount of “run rate” cost savings, operating expense reductions and savings from synergies related to acquisitions, Transfers, restructurings, cost savings initiatives and other similar initiatives that are reasonably identifiable, factually supportable and certified by the Borrower to result from actions that have been taken or with respect to which substantial steps have been taken or are expected to be taken (in the good faith determination of the Borrower) within eighteen (18) months after such restructuring, acquisition, Transfer, cost saving initiative or other similar initiative; provided that (i) the aggregate amount added-back pursuant to this clause (e) in such period shall not exceed 15% of EBITDAX for such period and (ii) no amount shall be added pursuant to this clause (e) to the extent duplicative of any expenses or charges otherwise added to EBITDAX, whether through a pro forma adjustment or otherwise, for such period and (f) any costs or expenses incurred pursuant to any management equity plan, stock option plan or any other management or employee benefit plan, agreement or any stock subscription or stockholders agreement, to the extent that such costs or expenses are funded with (A) cash proceeds contributed to the capital of such Person or (B) the Net Cash Proceeds of an issuance of Equity Interests of such Person (other than Disqualified Capital Stock) and, in each case not used for any other purposes. For the purposes of calculating EBITDAX for any Reference Period pursuant to any determination of the Leverage Ratio or the Secured Leverage Ratio, and without duplication of any additions to or subtractions from Consolidated Net Income for the same items set forth in the definition thereof, (i) if at any time during such Reference Period any Credit Party shall have made any Material Disposition, the EBITDAX for such Reference Period shall be reduced by an amount equal to the EBITDAX (if positive) attributable to the Property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the EBITDAX (if negative) attributable thereto for such Reference Period and (ii) if during such Reference Period any Credit Party shall have made a Material Acquisition, the EBITDAX for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period.

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

“Effective Date” means the date on which the conditions specified in Section 6.01 are satisfied (or waived in accordance with Section 12.02).

“Elected Commitment” means, as to each Lender, the amount set forth opposite such Lender’s name on Schedule 1.2 under the caption “Elected Commitment,” as the same may be increased, reduced or terminated from time to time in connection with an increase, reduction or termination of the Aggregate Elected Commitment Amount pursuant to Section 2.01(b) or Section 2.05.

“Elected Commitment Increase Certificate” has the meaning assigned to such term in Section 2.01(b)(ii)(D).

“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.

“Engineering Reports” has the meaning assigned to such term in Section 2.06(c)(i).

“Environmental Laws” means any and all Governmental Requirements pertaining in any way to public health (to the extent relating to exposure to Hazardous Materials), pollution or protection of the environment, the preservation or reclamation of natural resources, or the management, Release or threatened Release of any Hazardous Materials, in effect in any and all jurisdictions in which the Borrower or any of its Subsidiaries is conducting, or at any time has conducted, business, or where any Property of the Borrower or any of its Subsidiaries is located, including, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended (to the extent relating to exposure to Hazardous Materials), the Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Law, as amended.

“Environmental Permit” means any permit, registration, license, approval, consent, exemption, variance, or other authorization required under applicable Environmental Laws.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person,

and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means each trade or business (whether or not incorporated) which together with any Credit Party would be deemed to be a “single employer” within the meaning of Section 4001(b)(1) of ERISA or Section 414(b) or (c) of the Code, or solely with respect to Section 412 of the Code, Section 414 (m) or (o) of the Code.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

“Eurodollar” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Section 10.01.

“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental charges or levies which are not delinquent or which (provided foreclosure, sale, or other similar proceedings shall have not been initiated) are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (b) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (c) landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens of law arising in the ordinary course of business each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) Liens which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are entered into in the ordinary course of business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair the use of any Property covered by such Lien for the purposes for which such Property is held by any Credit Party or materially impair the value of any Property subject thereto; provided, further that all of such Liens are taken into account in computing the net revenue interests and working interests of the Borrower or any other Credit Party warranted herein or in the Security Instruments; (e) easements, restrictions, servitudes, permits, conditions, covenants, exceptions, reservations, zoning and land use requirements and other title defects in any Property of any Credit Party, that in each case are customarily accepted in the oil and gas financing industry, do not secure Debt and that do not materially impair the use of such Property for the purposes of which such Property is held by any Credit Party, interfere with the ordinary conduct of the business of the Borrower and any other Credit Party, or materially impair the value of such Property subject thereto; (f) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds,

government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business; (g) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired and no action to enforce such Lien has been commenced; (h) licenses of intellectual property, none of which, in the aggregate, interfere in any material respect with the business of the Borrower or its Subsidiaries or materially detract from the value of the relevant assets of the Borrower or its Subsidiaries; (i) Liens, titles and interests of lessors (including sublessors) of property leased by such lessors to Borrower or any Subsidiary, restrictions and prohibitions on encumbrances and transferability with respect to such property and any Credit Party’s interests therein imposed by such leases, and Liens and encumbrances encumbering such lessors’ titles and interests in such property and to which any Credit Party’s leasehold interests may be subject or subordinate, in each case, whether or not evidenced by UCC financing statement filings or other documents of record, provided that such Liens do not secure Debt of any Credit Party and do not encumber Property of any Credit Party other than the Property that is the subject of such leases and items located thereon; and (j) Liens on the Equity Interests of Unrestricted Subsidiaries. Provisions in the Loan Documents allowing Excepted Liens or other Permitted Liens on any item of Property shall be construed to allow such Excepted Liens and other Permitted Liens also to cover any improvements, fixtures or accessions to such Property and the proceeds of such Property, improvements, fixtures or accessions. No intention to subordinate any Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied or expressed by the permitted existence of any Excepted Liens.

“Exchange Notes” means the Borrower’s Junior Lien notes issued at any time during fiscal year 2020 or 2021 in exchange for any Permitted Unsecured Notes, in an original aggregate stated principal amount up to $400,000,000.

“Excluded Account” means (a) each account all or substantially all of the deposits in which consist of amounts utilized to fund payroll, employee benefit or tax obligations of the Credit Parties, (b) fiduciary, trust or escrow accounts, (c) “zero balance” accounts, (d) any account that is pledged to a third party to the extent such Lien is permitted by the Loan Documents, (e) accounts all or substantially all of the deposits in which consist of monies of third parties, including working interest owners, royalty owners and the like, (f) subject to Section 8.18(b), any Capital Markets Account, and (g) other accounts so long as the average daily maximum balance in any such other account over a 30-day period does not at any time exceed $25,000,000; provided that the aggregate daily maximum balance for all such bank accounts excluded pursuant to this clause (g) on any day shall not exceed $50,000,000 in the aggregate.

“Excluded Assets” has the meaning in the Security Agreement.

“Excluded Subsidiary” means (a) any Subsidiary that is not a direct or indirect wholly owned Subsidiary of the Borrower or a Guarantor, (b) any Immaterial Subsidiary, (c) any Subsidiary that is prohibited by applicable Law (whether on the Effective Date or thereafter) or contractual obligations existing on the Effective Date (or, in the case of any newly acquired Subsidiary, in existence at the time of acquisition but not entered into in contemplation thereof) from guaranteeing the Obligations or if guaranteeing the Obligations would require governmental (including regulatory) or other third party (other than the Borrower) consent, approval, license or authorization (unless such consent, approval, license or authorization has been obtained), (d) any direct or indirect Foreign Subsidiary of the Borrower, (e) any direct or indirect Domestic Subsidiary (x) that is a direct or indirect Subsidiary of a CFC or (y) substantially all of whose assets consist of capital stock and/or indebtedness of one or more CFCs (any Subsidiary described in this clause (e)(y), an “FSHCO”), (f) any Subsidiary with respect to which the provision of a guarantee by it would result in material adverse tax consequences to the Borrower or any of

the Borrower’s direct or indirect Subsidiaries, in each case, as reasonably determined by the Administrative Agent and the Borrower, (g) any not-for-profit Subsidiaries, (h) any Unrestricted Subsidiaries, (i) any special purpose securitization vehicle (or similar entity) or (j) any Subsidiary with respect to which, in the reasonable judgment of Administrative Agent and the Borrower, the cost or other consequences of providing a guarantee would be excessive in relation to the benefits to be obtained by the lenders therefrom.

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to Section 12.17 and any other “keepwell, support or other agreement” for the benefit of such Guarantor and any and all guarantees of such Guarantor’s Swap Obligations by other Credit Parties) at the time the Guaranty of such Guarantor, or a grant by such Guarantor of a security interest, becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guaranty or security interest is or becomes excluded in accordance with the first sentence of this definition.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of any Credit Party hereunder or under any other Loan Document, (a) Taxes imposed on or measured by net income (however denominated), franchise taxes (including Texas margin tax), and branch profits Taxes, in each case, (i) imposed as a result of such recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office is located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender (other than an assignee pursuant to a request by the Borrower under Section 5.05), any United States federal withholding tax that is imposed on amounts payable to such Lender pursuant to a law in effect at the time such Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 5.03(a) or Section 5.03(c), (c) taxes attributable to such recipient’s failure to comply with Section 5.03(e) and (d) any withholding Taxes imposed under FATCA.

“Existing Carrizo Preferred Stock” mean the Series A Preferred Stock, par value $0.01, issued pursuant to that certain Statement of Resolutions of 8.875% Redeemable Preferred Stock of Carrizo Oil & Gas, Inc. dated June 28, 2017, as amended from time to time.

“Existing Credit Agreement” means that certain Sixth Amended and Restated Credit Agreement, dated as of May 25, 2017, among the Borrower, as borrower, JPMorgan Chase Bank, N.A., as administrative agent and the lender and other parties from time to time party thereto as amended from time to time prior to the Effective Date.

“Existing Secured Swap Agreements” means (a) those certain Hedge Contracts entered into with Swap Counterparties under the Existing Credit Agreement (as such terms are defined therein) and (b) those certain Swap Agreements entered into with Hedge Banks under the Carrizo Credit Agreement (as such term s are defined therein).

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement, (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreement, treaty or convention among Governmental Authorities entered into in connection with the implementation of any of the foregoing and any fiscal or regulatory legislation, rules or official administrative practices adopted pursuant to any of the foregoing.

“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions (as determined in such manner as the NYFRB shall set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as the federal funds effective rate; provided that if such rate shall be less than zero, such rate shall be deemed to be zero for all purposes of this Agreement.

“Fee Letter” means the fee letter dated as of July 14, 2019, among the Borrower, JPMorgan Chase Bank, N.A., and Bank of America, N.A. as amended, restated, supplemented or otherwise modified from time to time.

“Fifth Amendment” means that certain Fifth Amendment to Credit Agreement, dated as of November 1, 2021, among the Borrower, the Administrative Agent and the Lenders party thereto.

“Fifth Amendment Effective Date” has the meaning assigned to such term in the Fifth Amendment.

“Financial Officer” means, for any Person, the chief executive officer, chief financial officer, principal accounting officer, vice president - finance, general counsel, treasurer, controller or other natural person principally responsible for the financial matters of such Person. Unless otherwise specified, all references herein to a Financial Officer means a Financial Officer of the Borrower.

“Financial Statements” means the financial statement or statements of the Borrower and its consolidated Subsidiaries referred to in Section 7.04(a).

“First Amendment” means that certain First Amendment to Credit Agreement, dated as of May 7, 2020, among the Borrower, the Administrative Agent and the Lenders party thereto.

“First Amendment Effective Date” has the meaning assigned to such term in the First Amendment.

“Foreign Lender” means any Lender that is not a U.S. Person.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Fourth Amendment” means that certain Fourth Amendment to Credit Agreement, dated as of May 3, 2021, among the Borrower, the Administrative Agent and the Lenders party thereto.

“Fourth Amendment Effective Date” has the meaning assigned to such term in the Fourth Amendment.

“Free Cash Flow” shall mean, for any period, the amount of (a) cash that the Borrower and its Restricted Subsidiaries receive during such period (the “Inflows”) (other than any cash (i) contributed to the Borrower or its Restricted Subsidiaries by any holders of its Equity Interests, (ii) received by the Borrower or its Restricted Subsidiaries from the incurrence or issuance of Debt permitted under Section

9.02 (excluding pursuant to any Swap Agreements), (iii) set aside to pay royalty obligations, working interest obligations, production payments and similar obligations of the Borrower or any Restricted Subsidiary which are then due and owing to third parties and (iv) constituting purchase price deposits while held in escrow by or on behalf of the Borrower or any Restricted Subsidiary pursuant to a binding and enforceable purchase and sale agreement with an unaffiliated third party containing customary provisions regarding the payment and refunding of such deposits), in each case as reasonably calculated by the Borrower in good faith, minus (b) the sum, without duplication, of the amounts expended by the Borrower and its Restricted Subsidiaries during such period with respect to (i) general and administrative costs (excluding non-cash stock-based compensation) of the Borrower and its Restricted Subsidiaries, (ii) operating expenses of the Borrower and its Restricted Subsidiaries, (iii) operational capital expenditures of the Borrower and its Restricted Subsidiaries, (iv) interest expense of the Borrower and its Restricted Subsidiaries, and (v) Taxes owed by the Borrower and its Restricted Subsidiaries (clauses (i), (ii), (iii), (iv) and (v) collectively, the “Outflows”), in each case as reasonably calculated by the Borrower in good faith. For purposes of this definition and for the avoidance of doubt, Free Cash Flow for any period shall be the amount of the Inflows minus the Outflows with respect to such period.

“Fronting Fee” has the meaning assigned such term in Section 2.07(d)(i)(B).

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time subject to the terms and conditions set forth in Section 1.05.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including without limitation any supranational bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

“Governmental Requirement” means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, rules of common law, authorization or other directive or requirement, whether now or hereinafter in effect, of any Governmental Authority.

“Guarantors” means the Borrower and each Subsidiary of the Borrower that guarantees the Obligations pursuant to Section 8.14(b) and each other Person executing a Guarantee Agreement.

“Guarantee Agreement” means an agreement executed by the Guarantors in form and substance satisfactory to the Administrative Agent unconditionally guarantying on a joint and several basis, payment of the Obligations, as the same may be amended, modified or supplemented from time to time.

“Hazardous Material” means any substance regulated or as to which liability might arise under any applicable Environmental Law due to its dangerous or deleterious properties or characteristics, including: (a) any chemical, compound, material, product, byproduct, substance or waste defined as or included in the definition or meaning of “hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar meaning or import found in any applicable Environmental Law; (b) Hydrocarbons, petroleum products, petroleum substances, natural gas, oil, oil and gas waste, crude oil,

and any components, fractions, or derivatives thereof; and (c) radioactive materials, explosives, asbestos or asbestos containing materials, polychlorinated biphenyls, radon, infectious or medical wastes.

“Highest Lawful Rate” means, with respect to each Lender, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on other Obligations under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws allow as of the date hereof.

“Hydrocarbon Interests” means all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature. Unless otherwise indicated herein, each reference to the term “Hydrocarbon Interests” means Hydrocarbon Interests of the Credit Parties.

“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined or separated therefrom.

“Immaterial Subsidiary” means any Subsidiary that is not a Material Subsidiary.

“Impacted Interest Period” has the meaning given to such term in the definition of “LIBO Rate.”

“Increased Costs” has the meaning ascribed to such term in Section 5.01(b).

“Increasing Lender” has the meaning assigned such term in Section 2.01(b).

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Industry Competitor” means any Person (other than any Credit Party or any of their Affiliates or Subsidiaries) that is (or one or more of whose Affiliates are readily identifiable on the basis of its name) actively engaged as one of its principal businesses in the exploration, development or production of Oil and Gas Properties; provided, the term “Industry Competitor” is deemed to exclude any Lender, any Approved Fund or any of their respective Affiliates, in each case that is actively engaged in the making of revolving loans.

“Interest Payment Date” means with respect to any ABR Revolving Credit Loan, the first day of each March, June, September and December and with respect to any Eurodollar Revolving Credit Loan, the last day of the Interest Period applicable to the Revolving Credit Borrowing of which such Revolving Credit Loan is a part; provided, however, that if any Interest Period applicable to the Revolving Credit Borrowing of which such Revolving Credit Loan is a part exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates.

“Interest Period” means (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three, six or, if then available to all Lenders, twelve months thereafter, in each case, as the Borrower may elect and (b) with respect to a Swing Line Loan carried at the Quoted Rate, an interest period of 30 days (or any lesser number of days agreed to in advance by the Borrower, the Administrative Agent and the Swing Line Lender); provided, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such

next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“Interim Redetermination” has the meaning assigned to such term in Section 2.06(b).

“Interim Redetermination Date” means the date on which a Borrowing Base that has been redetermined pursuant to an Interim Redetermination becomes effective as provided in Section 2.06(d).

“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate is available) that is shorter than the Impacted Interest Period and (b) the LIBO Screen Rate for the shortest period (for which the LIBO Screen Rate is available) that exceeds the Impacted Interest Period, in each case, at such time; provided that, if the Interpolated Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.

“Investment” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities, or otherwise) of Equity Interests of any other Person or any agreement to make any such acquisition (including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any advance, loan or capital contribution to, assumption of Debt of, purchase or other acquisition of any other Debt or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding one hundred twenty (120) days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of transactions) of Property of another Person that constitutes a business unit; or the entering into of any guarantee of, or other surety obligation (including the deposit of any Equity Interests to be sold) with respect to, Debt of any other Person.

“Issuing Bank” means (a) JPMorgan Chase Bank, N.A., in its capacity as issuer of one or more Letters of Credit hereunder, (b) any other Lender designated in writing, from time to time, to the Administrative Agent by the Borrower (and consented to by such Lender), as an issuer of one or more Letters of Credit hereunder, and (c) any successor that agrees to act in such capacity and is designated by Borrower and the Majority Revolving Credit Lenders.

“Issuing Office” means such office as the Issuing Bank shall designate as its Issuing Office.

“Joint Venture” means general or limited partnerships, limited liability companies, or other types of entities engaged principally in oil and gas exploration, development, production, processing and related activities, including gathering, processing and transportation.

“Junior Debt” means any Permitted Unsecured Notes, any Specified Additional Debt (including the Exchange Notes), any Assumed Debt and any Permitted Refinancing Debt in respect of any of the foregoing.

“Junior Liens” means Liens on the Collateral (other than Liens securing the Obligations) that are subordinated in all respects to the Liens granted under the Loan Documents pursuant to a Customary Intercreditor Agreement (it being understood that Junior Liens are not required to be pari passu with other Junior Liens, and that Debt secured by Junior Liens may have Liens that are senior in priority to, or pari passu with, or junior in priority to, other Liens constituting Junior Liens).

“L/C Indemnified Amounts” has the meaning ascribed to such term in Section 2.07(i).

“L/C Indemnified Person” has the meaning ascribed to such term in Section 2.07(i).

“Lenders” means the Persons listed on Schedule 1.2, any Person that shall have become a party hereto pursuant to an Assignment and Assumption, and any Person that shall have become a party hereto as an Additional Lender pursuant to Section 2.01(b), other than, in each case, any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption, and shall include the Revolving Credit Lenders and the Swing Line Lenders.

“Letter(s) of Credit” means any standby letters of credit issued by the Issuing Bank at the request of the Borrower pursuant to Section 2.07.

“Letter of Credit Agreement” means, collectively, the letter of credit application and related documentation executed and/or delivered by the Borrower in respect of each Letter of Credit, in each case satisfactory to the Issuing Bank, as amended, restated, amended and restated, supplemented or otherwise modified from time to time.

“Letter of Credit Documents” shall have the meaning ascribed to such term in Section 2.07(g)(i) and (ii).

“Letter of Credit Fees” means the fees payable in connection with Letters of Credit pursuant to Section 2.07(d)(i)(A) and (B).

“Letter of Credit Maximum Amount” means Two Hundred Million Dollars ($200,000,000).

“Letter of Credit Obligations” means at any date of determination, the sum of (a) the aggregate undrawn amount of all Letters of Credit then outstanding, and (b) the aggregate amount of Reimbursement Obligations which remain unpaid as of such date.

“Letter of Credit Payment” means any amount paid or required to be paid by the Issuing Bank in its capacity hereunder as issuer of a Letter of Credit as a result of a draft or other demand for payment under any Letter of Credit.

“Leverage Ratio” has the meaning ascribed to such term in Section 9.01(b).

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for U.S. Dollars for a period equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that

publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion; in each case the “LIBO Screen Rate”)) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; provided that if the LIBO Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement; provided further that if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) then the LIBO Rate shall be the Interpolated Rate.

“LIBO Screen Rate” has the meaning assigned to such term in the definition of “LIBO Rate.”

“Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to the lien or security interest arising from a mortgage, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purposes of this Agreement, the Credit Parties shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing.

“Limited Condition Acquisition” means a Permitted Acquisition or other Investment not prohibited hereunder by Borrower or one or more of its Restricted Subsidiaries, the consummation of which is not conditioned on the availability of, or on obtaining, third party financing.

“Liquid Investments” means any Investment of the type described in Sections 9.05(c) through (f).

“Liquidity” means the aggregate of the unused Commitments plus any unrestricted cash and Liquid Investments of the Credit Parties.

“Loan Documents” means this Agreement, the Notes, the Letter of Credit Agreements, the Letters of Credit, the Security Instruments, the Fee Letter, and each other agreement, instrument, or document executed by the Borrower, any Guarantor, or any Subsidiary of the Borrower or a Guarantor or any of their officers at any time in connection with this Agreement. For the avoidance of doubt, “Loan Documents” does not include Secured Swap Agreements or participation or similar agreements between any Lender and any other lender or creditor with respect to any Obligations pursuant to this Agreement.

“Loans” means, collectively, the Revolving Credit Loans and the Swing Line Loans.

“Majority Revolving Credit Lenders” means at any time (a) so long as the Aggregate Maximum Credit Amounts have not been terminated, the Non-Defaulting Lenders holding more than fifty percent (50%) of the aggregate Commitments and (b) if the Aggregate Maximum Credit Amounts have been terminated (whether by maturity, acceleration or otherwise), the Non-Defaulting Lenders holding more than fifty percent (50%) of the aggregate principal amount then outstanding under the Revolving Credit Loans; provided that, for purposes of determining Majority Revolving Credit Lenders hereunder, the Reimbursement Obligations and Swing Line Loans shall be allocated among the Revolving Credit Lenders based on their respective Applicable Revolving Credit Percentages; provided further that, such calculations shall be made without regard to any sale by a Non-Defaulting Lender of a participation in any Loan under Section 12.04(b)(vi).

“Material Acquisition” means any acquisition of Property or series of related acquisitions of Property that involves the payment of consideration by any Credit Party in excess of a dollar amount

equal to ten percent (10%) of the lesser of the then effective Borrowing Base or the Aggregate Elected Commitment Amount, as applicable.

“Material Adverse Effect” means a material adverse change in, or material adverse effect on the business, operations, Property, prospects or condition (financial or otherwise) of the Credit Parties taken as a whole, the ability of any Credit Party to perform any of its obligations under any Loan Document, the validity or enforceability of any Loan Document or the rights and remedies of or benefits available to the Administrative Agent, any other Agent, the Issuing Bank or any Lender under any Loan Document.

“Material Disposition” means any Transfer of Property or series of related Transfers of property that yields gross proceeds to any Credit Party in excess of a dollar amount equal to ten percent (10%) of the lesser of the then effective Borrowing Base or the Aggregate Elected Commitment Amount, as applicable.

“Material Indebtedness” means, as of any date of determination, Debt (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and its Restricted Subsidiaries in an aggregate principal amount exceeding $100,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower and its Restricted Subsidiaries in respect of any Swap Agreement at any time shall be the Swap Termination Value.

“Material Subsidiary” means, at any date of determination, each Restricted Subsidiary of the Borrower (a) which is liable, as a borrower or surety, for any Junior Debt, or (b) either (i) whose Total Assets (when combined with the assets of such Subsidiary’s Restricted Subsidiaries, after eliminating intercompany obligations) at the last day of the Reference Period for which Section 8.01 Financial Statements have been delivered were equal to or greater than 5.0% of the Consolidated Total Assets of the Borrower and the Restricted Subsidiaries at such date or (ii) whose revenues (when combined with the revenues of such Subsidiary’s Restricted Subsidiaries, after eliminating intercompany obligations) during such Reference Period were equal to or greater than 5.0% of the consolidated revenues of the Borrower and the Restricted Subsidiaries for such period, in each case determined in accordance with GAAP; provided that if, at any time and from time to time after the Effective Date, Restricted Subsidiaries that are not Material Subsidiaries have, in the aggregate, (1) Total Assets (when combined with the assets of such Subsidiary’s Restricted Subsidiaries, after eliminating intercompany obligations) at the last day of such Reference Period equal to or greater than 10.0% of the Consolidated Total Assets of the Borrower and the Restricted Subsidiaries at such date or (2) revenues (when combined with the revenues of such Subsidiary’s Restricted Subsidiaries, after eliminating intercompany obligations) during such Reference Period equal to or greater than 10.0% of the consolidated revenues of the Borrower and the Restricted Subsidiaries for such period, in each case determined in accordance with GAAP, then the Borrower shall, on the date on which financial statements for such quarter are delivered pursuant to this Agreement, designate in writing to the Administrative Agent one or more of such Restricted Subsidiaries as “Material Subsidiaries.”

“Maximum Credit Amount” means, as to each Revolving Credit Lender, the amount set forth opposite such Revolving Credit Lender’s name on Schedule 1.2 under the caption “Maximum Credit Amount,” as the same may be reduced or terminated from time to time in connection with a reduction or termination of the Aggregate Maximum Credit Amounts pursuant to Section 2.05(b) or modified from time to time pursuant to any assignment permitted by Section 12.04(b).

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency.

“Mortgaged Property” means any real or immovable Property owned by the Credit Parties which is subject to the Liens existing and to exist under the terms of the Security Instruments.

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA.

“Net Cash Proceeds” means the aggregate cash payments received by any of the Credit Parties from any Transfer, the issuance of Equity Interests or the issuance of Debt, as the case may be, net of (a) the ordinary and customary direct costs incurred in connection with such Transfer or issuance, as the case may be, such as legal, accounting and investment banking fees, sales commissions, and other third party charges, (b) property taxes, transfer taxes and any other taxes paid or payable by the Credit Parties in respect of any Transfer or issuance and (c) Debt (other than the Obligations) which is secured by a Lien upon any of the assets subject to such Transfer and which must be repaid as a result of such Transfer.

“New Borrowing Base Notice” has the meaning assigned to such term in Section 2.06(d).

“Non-Core Eagle Ford Assets” means those certain non-core assets located in Texas owned by the Credit Parties as of the Fifth Amendment Effective Date and listed on Annex II to the Fifth Amendment.

“Non-Core Midland Assets” means those certain non-core assets located in Texas owned by the Credit Parties as of the Fifth Amendment Effective Date and listed on Annex III to the Fifth Amendment.

“Non-Core West Texas Assets” means those certain non-core assets located in Texas owned by the Credit Parties as of the Fourth Amendment Effective Date and listed on Annex II to the Fourth Amendment.

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

“Notes” means, collectively, the Revolving Credit Notes and the Swing Line Note.

“NYFRB” means the Federal Reserve Bank of New York.

“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. on such day received to the Administrative Agent from a Federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Obligations” means any and all amounts owing or to be owing by the Credit Parties (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising): (a) to the Administrative Agent, the Issuing Bank, any Lender or any Affiliate of any Lender under any Loan Document; (b) to any Secured Swap Party under any Secured Swap Agreement; (c) to any Cash Management Bank under any Secured Cash Management Agreement including interest and fees that accrue after the commencement by or against any Credit Party or Affiliate thereof under any Federal, state, foreign bankruptcy, insolvency, receivership, or similar law naming such Person as the debtor in such proceeding, regardless of whether such interests and fees are allowed claims in such proceeding; and (d) all renewals, extensions and/or rearrangements of any of the above; provided that the “Obligations” shall exclude any Excluded Swap Obligations.

“Oil and Gas Properties” means (a) all Hydrocarbon Interests, (b) all Properties now or hereafter pooled or unitized with Hydrocarbon Interests, (c) all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby (including without limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests, (d) all operating agreements, contracts and other agreements, including production sharing contracts and agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests; (g) the Water Services Assets and the Delaware Water Services Assets and (h) all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment, rental equipment or other personal Property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings (subject to Section 12.19), structures (subject to Section 12.19), fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing. Unless otherwise indicated herein, each reference to the term “Oil and Gas Properties” means Oil and Gas Properties of the Credit Parties.

“OPA” has the meaning assigned to such term in the definition of Environmental Laws.

“Other Connection Taxes” means, with respect to (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, as applicable, Taxes imposed as a result of a present or former connection between such Person and the jurisdiction imposing such Tax (other than connections arising from such Person having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“Other Taxes” means any and all present or future stamp, court or documentary, intangible, recording, filing or similar taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, this Agreement and any other Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 5.05).

“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight Eurodollar borrowings by U.S.-managed banking offices of depository institutions (as such composite rate shall be determined by the NYFRB as set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate (from and after such date as the NYFRB shall commence to publish such composite rate).

“Participant” has the meaning set forth in Section 12.04(b)(vi).

“Participant Register” has the meaning assigned to such term in Section 12.04(b)(viii).

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“Permitted Acquisition” means any acquisition by a Borrower or a Restricted Subsidiary that meets the following requirements (in the case of clause (e) below, subject to Section 1.06 with respect to any Limited Condition Acquisition):

(a) the proposed acquisition has been approved by the Board of Directors of the Person whose assets or Equity Interests are being acquired and such acquisition and all transactions related thereto shall be consummated in accordance with applicable Governmental Requirements;

(b) with respect to any Person or newly formed or acquired Subsidiary that is a wholly-owned Subsidiary of the Borrower or a Restricted Subsidiary, the Borrower or such Restricted Subsidiary shall have taken, or shall cause to be taken, such actions necessary for such newly formed or acquired wholly-owned Subsidiary to become a Guarantor as set forth in (and within the time periods required by) Section 8.14; provided, that in the case of an acquisition of the Equity Interests of a Person pursuant to this clause (b) that does not become a Borrower or a Guarantor within the time periods required by Section 8.14, such acquisition shall only be permitted to be made to the extent there is available aggregate capacity for Investments in Subsidiaries that are not Guarantors pursuant to Section 9.05;

(c) such acquisition shall result in the Administrative Agent, for the benefit of the Secured Parties, being granted a security interest in any assets so acquired by a Borrower or a Restricted Subsidiary to the extent required by (and within the time periods required by) Section 8.14 (it being agreed that, in the case of an acquisition of Equity Interests, the Borrower or applicable Guarantor shall only be required to pledge such Equity Interests that are owned by a Borrower or a Guarantor);

(d) the Person or business to be acquired shall be in a line of business permitted pursuant to Section 9.06; and

(e) immediately before and immediately after giving pro forma effect to such acquisition, no Event of Default shall have occurred and be continuing (or, in the case of a Limited Condition Acquisition, no Event of Default shall have occurred and be continuing on the date the definitive agreement for such acquisition is entered into).

“Permitted Lien” means any Lien permitted under Section 9.03.

“Permitted Refinancing Debt” means Debt (for purposes of this definition, “new Debt”) incurred in exchange for, or proceeds of which are used to extend, refinance, renew, replace, defease, discharge, refund or otherwise retire for value, in whole or in part, any other Debt (the “Refinanced Debt”): provided that (a) such new Debt is in an aggregate principal amount not in excess of the sum of (i) the aggregate principal amount then outstanding of the Refinanced Debt (or, if the Refinanced Debt is exchanged or acquired for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount) and (ii) an amount necessary to pay all accrued (including, for the purposes of defeasance, future accrued) and unpaid interest on the Refinanced Debt and any fees and expenses, including premiums, related to such exchange or refinancing; (b) such new Debt has a stated maturity no earlier than the sooner to occur of (i) the date that is 91 days after the Revolving Credit Maturity Date (as in effect on the date of incurrence of such new Debt) and (ii) so long as the Refinanced Debt is not the 2023 Senior Notes (or any part thereof) or the 2024 Senior Notes (or any part thereof), the stated maturity date of the Refinanced Debt; (c) such new Debt has an average weighted life to maturity at the time such new Debt is incurred that is no shorter than the shorter of (i) the period beginning on the date of incurrence of such new Debt and ending on the date that is 91 days after the Revolving Credit

Maturity Date (as in effect on the date of incurrence of such new Debt) and (ii) so long as the Refinanced Debt is not the 2023 Senior Notes (or any part thereof) or the 2024 Senior Notes (or any part thereof), the average life of the Refinanced Debt at the time such new Debt is incurred; (d) such new Debt is not incurred or guaranteed by a non-Guarantor Restricted Subsidiary if the Borrower or a Guarantor is the issuer or is otherwise an obligor on the Refinanced Debt; and (e) if the Refinanced Debt was subordinated in right of payment to the Obligations or the guarantees under the Guarantee Agreement, such new Debt is (and any guarantees thereof are) subordinated in right of payment to the Obligations (or, if applicable, the guarantees under the Guarantee Agreement) to at least the same extent as the Refinanced Debt.

“Permitted Unsecured Notes” means the unsecured notes existing on the Effective Date that are reflected on Schedule 9.02 (and any Permitted Refinancing Debt issued or incurred to refinance such Debt) and any guaranty of such unsecured notes permitted in Section 9.02(e).

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan, as defined in Section 3(2) of ERISA (but other than a Multiemployer Plan), which is subject to Title IV of ERISA or Section 412 of the Code and which is sponsored, maintained or contributed to by a Credit Party or an ERISA Affiliate, or was at any time during the six calendar years preceding the date hereof sponsored, maintained or contributed to by a Credit Party or an ERISA Affiliate if a liability to a Credit Party remains.

“Preferred Redemption” has the meaning assigned to such term in the Merger Agreement.

“Preferred Stock” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its office located at 270 Park Avenue, New York, New York; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, cash, securities, accounts and contract rights.

“Proposed Borrowing Base” has the meaning assigned to such term in Section 2.06(c)(i).

“Proposed Borrowing Base Notice” has the meaning assigned to such term in Section 2.06(c)(ii).

“Proved Developed Producing Reserves” shall mean oil and gas mineral interests that, in accordance with Petroleum Industry Standards, are classified as both “Proved Reserves” and “Developed Producing Reserves.”

“Proved Reserves” means oil and gas mineral interests that, in accordance with Petroleum Industry Standards, are classified as both “Proved Reserves” and one of the following: (a) “Developed Producing Reserves,” (b) “Developed Non-Producing Reserves” or (c) “Undeveloped Reserves.”

“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

“Purchase Money Indebtedness” means Debt, the proceeds of which are used to finance the acquisition, construction, or improvement of inventory, equipment or other Property in the ordinary course of business.

“QFC” means a “qualified financial contract” has the meaning set forth in, and interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

“QFC Credit Support” has the meaning set forth in Section 12.20.

“Qualified ECP Guarantor” means, at any time, each Credit Party with total assets exceeding $10,000,000 or that qualifies at such time as an “eligible contract participant” under the Commodity Exchange Act and can cause another person to qualify as an “eligible contract participant” at such time under § 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“Qualified Preferred Stock” means any Preferred Stock of the Borrower that is not Disqualified Capital Stock and any Refinancing Preferred Stock in respect of the foregoing.

“Qualified Professional Asset Manager” has the meaning set forth in Section 11.17(a)(iii).

“Quoted Rate” means the rate of interest per annum offered by the Swing Line Lender in its sole discretion with respect to a Swing Line Loan and accepted by the Borrower.

“Quoted Rate Loan” means any Swing Line Loan which bears interest at the Quoted Rate.

“RCRA” has the meaning assigned to such term in the definition of Environmental Laws.

“Redemption” means with respect to any Debt, the repurchase, redemption, prepayment, repayment, defeasance or any other acquisition or retirement for value (or the segregation of funds with respect to any of the foregoing) of such Debt. “Redeem” has the correlative meaning thereto.

“Reference Period” has the meaning assigned to such term in the definition of Consolidated Net Income.

“Refinanced Debt” has the meaning assigned such term in the definition of “Permitted Refinancing Debt.”

“Refinancing Preferred Stock” means preferred Equity Interests of the Borrower that (a) are unsecured and do not prohibit the repayment or prepayment of any Obligations, (b) do not have a maturity date or other mandatory redemption date that is on or earlier than the date one year after the Revolving Credit Maturity Date, (c) do not have any sinking fund payments, scheduled dividend payments, or mandatory redemption obligations (other than customary redemption provisions in connection with changes in control that also constitute an Event of Default hereunder or certain asset dispositions) that are due on or prior to the date one year after the Revolving Credit Maturity Date, (d) do not impose representations, warranties, covenants, conditions, mandatory prepayments, events of default, remedies or other provisions similar to the foregoing that are materially more restrictive or burdensome as a whole than the terms and provisions of the Indenture for the 2024 Senior Notes as in effect on the Effective Date, (e) do not impose any representation, warranty, covenant, condition, mandatory prepayment, event of default, remedy or other provision similar to the foregoing that is more restrictive or burdensome than the comparable terms and provisions of this Agreement, (f) do not impose a cash dividend rate that exceeds a rate equal to 10% per annum, and (g) permit the Borrower to defer payment of cash dividends thereon in the Borrower’s discretion.

“Refunded Swing Line Loans” has the meaning ascribed to such term in Section 2.08(e)(i).

“Register” has the meaning assigned to such term in Section 12.04(b)(iv).

“Regulation D” means Regulation D of the Board, as the same may be amended, supplemented or replaced from time to time.

“Reimbursement Obligation(s)” means the aggregate amount of all unreimbursed drawings under all Letters of Credit (excluding for the avoidance of doubt, reimbursement obligations that are deemed satisfied pursuant to a deemed disbursement under Section 2.07(f)(iii)).

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors (including attorneys, accountants and experts) of such Person and such Person’s Affiliates.

“Release” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping, or disposing.

“Relevant Debt” has the meaning assigned to such term in Section 8.17(d).

“Remedial Work” has the meaning assigned to such term in Section 8.10(a).

“Removal Effective Date” has the meaning assigned to such term in Section 11.04.

“Request for Swing Line Loan” means a request for a Swing Line Loan issued by the Borrower under Section 2.08(c) of this Agreement in the form attached hereto as Exhibit F.

“Required Repayment Amount” has the meaning assigned to such term in Section 8.21.

“Required Revolving Credit Lenders” means at any time (a) so long as the Aggregate Maximum Credit Amounts have not been terminated, the Non-Defaulting Lenders holding more than sixty-six and two-thirds percent (66⅔%) of the aggregate Commitments and (b) if the Aggregate Maximum Credit Amounts have been terminated (whether by maturity, acceleration or otherwise), the Non-Defaulting Lenders holding more than sixty-six and two-thirds percent (66⅔%) of the aggregate principal amount then outstanding under the Revolving Credit Loans; provided that, for purposes of determining Required Revolving Credit Lenders hereunder, the Reimbursement Obligations and Swing Line Loans shall be allocated among the Revolving Credit Lenders based on their respective Applicable Revolving Credit Percentages; provided further that, such calculations shall be made without regard to any sale by a Non-Defaulting Lender of a participation in any Loan under Section 12.04(b)(vi).

“Reserve Report” means a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, on the dates required in Section 8.12 (or such other date in the event of an Interim Redetermination) the estimated proved oil and gas reserves attributable to the Oil and Gas Properties of the Credit Parties, together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the pricing assumptions consistent with the Administrative Agent’s lending requirements at the time.

“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

“Responsible Officer” means, as to any Person, the President, any Financial Officer or any Vice President of such Person. Unless otherwise specified, all references to a Responsible Officer herein means a Responsible Officer of the Borrower.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other Property) with respect to any Equity Interests in any Credit Party, or any payment (whether in cash, securities or other Property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in any Credit Party or any option, warrant or other right to acquire any such Equity Interests in any Credit Party.

“Restricted Subsidiary” means any Domestic Subsidiary of the Borrower that is not an Unrestricted Subsidiary.

“Revolving Credit Borrowing” means a Borrowing of a Revolving Credit Loan.

“Revolving Credit Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03.

“Revolving Credit Exposure” means, with respect to any Revolving Credit Lender at any time, the sum of the outstanding principal amount of such Revolving Credit Lender’s Revolving Credit Loans and its Applicable Revolving Credit Percentage of any outstanding Swing Line Loans and Letter of Credit Obligations.

“Revolving Credit Lenders” means the financial institutions from time to time parties hereto as lenders of Revolving Credit Loans.

“Revolving Credit Loan” means a Borrowing requested by the Borrower and made by the Revolving Credit Lenders under Section 2.01 of this Agreement, including without limitation any re-advance, refunding or conversion of such borrowing and any deemed disbursement of a Loan in respect of a Letter of Credit under Section 2.07(f)(iii), and may include, subject to the terms hereof, Eurodollar Loans and ABR Loans.

“Revolving Credit Maturity Date” means the earliest of (a) December 20, 2024, (b) in the event the 2023 Senior Notes are still outstanding on the 91st day prior to the maturity of the 2023 Senior Notes, the date that falls 91 days prior to the maturity of the 2023 Senior Notes, (c) in the event the 2024 Senior Notes are still outstanding on the 91st day prior to the maturity of the 2024 Senior Notes, the date that falls 91 days prior to the maturity of the 2024 Senior Notes, (d) in the event that any 2025 Second Lien Notes are outstanding and the 2023 Senior Notes having an aggregate principal amount greater than $100,000,000 are still outstanding on the 182nd day prior to the maturity of the 2023 Senior Notes, the date that falls 182 days prior to the maturity of the 2023 Senior Notes, (e) in the event that any 2025 Second Lien Notes are outstanding and the 2024 Senior Notes having an aggregate principal amount greater than $100,000,000 are still outstanding on the 182nd day prior to the maturity of the 2024 Senior Notes, the date that falls 182 days prior to the maturity of the 2024 Senior Notes, (f) in the event any Exchange Notes mature prior to 91st day following December 20, 2024 and such Exchange Notes are still outstanding on the 91st day prior to the maturity of such Exchange Notes, the date that falls 91 days prior to the maturity of such Exchange Notes, (g) in the event that any 2025 Second Lien Notes are outstanding and any Exchange Notes in an aggregate principal amount greater than $100,000,000 mature prior to 182nd day following December 20, 2024 and such Exchange Notes are still outstanding on the 182nd day prior to the maturity of such Exchange Notes, the date that falls 182 days prior to the maturity of such Exchange Notes, (h) in the event any other unsecured notes mature prior to 91st day following December 20, 2024 and such unsecured notes are still outstanding on the 91st day prior to the maturity of such

unsecured, the date that falls 91 days prior to the maturity of such unsecured and (i) in the event that any 2025 Second Lien Notes are outstanding and any unsecured notes in an aggregate principal amount greater than $100,000,000 mature prior to 182nd day following December 20, 2024 and such unsecured notes are still outstanding on the 182nd day prior to the maturity of such unsecured notes, the date that falls 182 days prior to the maturity of such unsecured notes.

“Revolving Credit Notes” means the promissory notes of the Borrower described in Section 2.02(d) and being substantially in the form of Exhibit A, together with all amendments, modifications, replacements, extensions and rearrangements thereof.

“Riptide Entities” means Riptide Midstream, LLC and/or any other Subsidiary of the Borrower or any other Person in which the Borrower directly or indirectly owns Equity Interests that primarily holds Water Services Assets (and property incidental thereto), together, in each case, with their respective subsidiaries.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc., and any successor thereto that is a nationally recognized rating agency.

“Sanctioned Country” means, at any time, a country, region or territory which is the subject or target of any Sanctions (as of the Effective Date, Cuba, Iran, North Korea, Sudan, Syria and Crimea).

“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).

“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State.

“Scheduled Redetermination” has the meaning assigned to such term in Section 2.06(b).

“Scheduled Redetermination Date” means the date on which a Borrowing Base that has been redetermined pursuant to a Scheduled Redetermination becomes effective as provided in Section 2.06(d).

“SEC” means the Securities and Exchange Commission or any successor Governmental Authority.

“Second Amendment” means that certain Second Amendment to Credit Agreement, dated as of September 30, 2020, among the Borrower, the Administrative Agent and the Lenders party thereto.

“Second Amendment Effective Date” has the meaning assigned to such term in the Second Amendment.

“Secured Cash Management Agreement” means any Cash Management Agreement that is entered into by and between any Credit Party and any Cash Management Bank.

“Secured Leverage Ratio” has the meaning ascribed to such term in Section 9.01(c).

“Secured Parties” means, collectively, the Administrative Agent, the Lenders, Cash Management Banks and each Secured Swap Party.

“Secured Swap Agreement” means any Swap Agreement between any Credit Party and any Person that was, on the date such Swap Agreement was entered into, or became, at any time after such Swap Agreement was entered into, a Lender or an Affiliate of a Lender, even if such Person subsequently ceases to be a Lender (or an Affiliate thereof) for any reason and for purposes herein shall include Existing Secured Swap Agreements (each such Person, a “Secured Swap Party”); provided that, for the avoidance of doubt, the term “Secured Swap Agreement” shall not include any Swap Agreement or transactions under any Swap Agreement entered into after the time that such Secured Swap Party ceases to be a Lender or an Affiliate of a Lender.

“Secured Swap Party” has the meaning assigned to such term in the definition of “Secured Swap Agreement.”

“Securities Account” has the meaning assigned to such term in the UCC.

“Security Agreement” means that certain security agreement executed by the Credit Parties on the Effective Date, in form and substance satisfactory to the Administrative Agent.

“Security Instruments” means the mortgages, deeds of trust, pledge agreements, security agreements, including without limitation the Security Agreement, control agreements, and other agreements, instruments, supplements or certificates described or referred to in Exhibit D, and any and all other agreements, instruments, supplements, consents or certificates (including the Guarantee Agreement) now or hereafter executed and delivered by the Credit Parties or any other Person (other than Secured Swap Agreements or participation or similar agreements between any Lender and any other lender or creditor with respect to any Obligations pursuant to this Agreement) as security for the payment or performance of the Obligations, the Notes, this Agreement, or Reimbursement Obligations, as such agreements may be amended, modified, supplemented or restated from time to time.

“Specified Additional Debt” means the Exchange Notes, the 2025 Second Lien Notes and any secured or unsecured senior, senior subordinated, subordinated loans or notes or other funded debt issued or incurred by the Borrower or a Restricted Subsidiary pursuant to Section 9.02(h) (or any Permitted Refinancing Debt in respect thereof to the extent constituting Specified Additional Debt); provided that (i) such new Debt has a stated maturity no earlier than the date that is 91 days after December 20, 2024 (other than (A) Exchange Notes which may not have a stated maturity earlier than the 2023 Senior Notes and (B) any springing maturity contained in the terms of the 2025 Second Lien Notes as in effect on the Third Amendment Effective Date), (ii) such new Debt (other than the 2025 Second Lien Notes) has an average weighted life to maturity at the time such new Debt is incurred that is no shorter than the period beginning on the date of incurrence of such new Debt and ending on the date that is 91 days after the Revolving Credit Maturity Date (as in effect on the date of incurrence of such new Debt), (iii) such new Debt is not incurred or guaranteed by a non-Guarantor Restricted Subsidiary if the Borrower or a Guarantor is the issuer or is otherwise an obligor on the Specified Additional Debt, and (iv) if secured, secured by Junior Liens subject to the representative of such Debt becoming party to a Customary Intercreditor Agreement.

“Specified Credit Party” means any Credit Party that is not an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 12.17).

“Specified Merger Agreement Representations” means such of the representations and warranties made by Carrizo in the Merger Agreement as are material to the interests of the Lenders, but only to the extent that the Borrower or its Affiliates have the right to terminate its obligations under the Merger Agreement, or to decline to consummate the Acquisition as a result of a breach of such representations and warranties.

“Specified Representations” means those representations and warranties of the Borrower in Section 7.01 (as to the execution, delivery and performance under the Loan Documents), Section 7.02, Section 7.03 (limited to the execution, delivery and performance under the Loan Documents), Section 7.08, Section 7.21, Section 7.22, Section 7.23 and Section 7.25.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentage shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any other Person the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other Person of which Equity Interests representing more than 50% of the equity or more than 50% of the ordinary voting power (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) or, in the case of a partnership, any general partnership interests are, as of such date, owned, controlled or held, or that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

“Subsidiary” means any subsidiary of the Borrower.

“Successor Administrative Agent” has the meaning assigned to such term in Section 11.04.

“Supported QFC” has the meaning assigned to such term in Section 12.20.

“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of any Credit Party shall be a Swap Agreement.

“Swap Obligations” means with respect to any Credit Party any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

“Swap Termination Value” means, in respect of any one or more Swap Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Agreements, for any date on or after the date such Swap Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and for any date prior to the date referenced above, the amount(s) determined as the mark-to-market value(s) for such Swap Agreements, as reasonably determined by the counterparties (other than any Credit Party) to such Swap Agreements.

“Sweep Agreement” means any agreement relating to the “Sweep to Loan” automated system of the Administrative Agent or any other cash management arrangement which the Borrower and the Administrative Agent have executed for purposes of effecting the borrowing and repayment of Swing Line Loans.

“Swing Line” means the revolving credit loans to be advanced to the Borrower by the Swing Line Lender pursuant to Section 2.08, in an aggregate amount (subject to the terms hereof), not to exceed, at any one time outstanding, the Swing Line Maximum Amount.

“Swing Line Lender” means (a) JPMorgan Chase Bank, N.A. in its capacity as a lender of one or more Swing Line Loans under Section 2.08 of this Agreement, (b) any other Lender designated in writing, from time to time, to the Administrative Agent by the Borrower (and consented to by such Lender), as a lender of one or more Swing Line Loans under Section 2.08 of this Agreement, and (c) any successor that agrees to act in such capacity as subsequently designated hereunder.

“Swing Line Loan” means a borrowing requested by the Borrower and made by a Swing Line Lender pursuant to Section 2.08 and may include, subject to the terms hereof, Quoted Rate Loans and ABR Loans.

“Swing Line Maximum Amount” means Fifty Million and No/100 Dollars ($50,000,000).

“Swing Line Note” means the swing line note which may be issued by the Borrower to each Swing Line Lender pursuant to Section 2.08(b)(ii) in the form attached hereto as Exhibit G, as such note may be amended or supplemented from time to time, and any note or notes issued in substitution, replacement or renewal thereof from time to time.

“Swing Line Participation Certificate” means the Swing Line Participation Certificate delivered by the Administrative Agent to each Revolving Credit Lender pursuant to Section 2.08(e)(ii) in the form attached hereto as Exhibit H.

“Syndication Agent” means Bank of America, N.A.,

“Synthetic Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, treated as operating leases on the financial statements of the Person liable (whether contingently or otherwise) for the payment of rent thereunder and which were properly treated as indebtedness for borrowed money for purposes of U.S. federal income taxes, if the lessee in respect thereof is obligated to either purchase for an amount in excess of, or pay upon early termination an amount in excess of, 80% of the residual value of the Property subject to such operating lease upon expiration or early termination of such lease.

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Termination Date” means the earlier of the Revolving Credit Maturity Date and the date of termination of the Commitments.

“Termination Event” means (a) the occurrence of a “reportable event” described in Section 4043 of ERISA and the regulations issued thereunder with respect to a Plan (other than a reportable event not subject to the provision for 30 day notice to the PBGC under such regulations), (b) the failure with respect to any Plan to make the “minimum required contribution” (as defined in Section 430 of the Code or Section 303 of ERISA), (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA

of an application for a waiver of the minimum funding standard with respect to any Plan, (d) the withdrawal of any Credit Party or any ERISA Affiliate from a Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, (e) the termination of a Plan, the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (f) the institution of proceedings to terminate, or the appointment of a trustee with respect to, a Plan by the PBGC, (g) the occurrence of any other event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, (h) the imposition of a Lien on the assets of any Credit Party pursuant to Section 430(k) of the Code or Section 303(k) of ERISA, (i) the determination that any Plan is considered an at-risk plan within the meaning of Section 430 of the Code or Section 303 of ERISA or any Multiemployer Plan is in endangered or critical status within the meaning of Section 432 of the Code or Section 305 of ERISA, (j) the partial or complete withdrawal of any Credit Party or any ERISA Affiliate from a Multiemployer Plan, (k) the receipt by any Credit Party or any ERISA Affiliate from a Multiemployer Plan of any notice concerning the imposition of withdrawal liability or a determination that a Multiemployer Plan is, or is expected to be, “insolvent” (within the meaning of Section 4245 of ERISA), (l) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a Multiemployer Plan, or (m) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Credit Party or any ERISA Affiliate.

“Third Amendment” means that certain Third Amendment to Credit Agreement, dated as of September 30, 2020, among the Borrower, the Administrative Agent and the Lenders party thereto.

“Third Amendment Effective Date” has the meaning assigned to such term in the Third Amendment.

“Total Assets” means, as of any date of determination with respect to any Person, the amount that would, in conformity with GAAP, be set forth opposite the caption “total assets” (or any like caption) on a balance sheet of such Person at such date.

“Total Debt” means with respect to any Person, at any time, without duplication, the Debt of such Person described in clauses (a), (b) and (d) of the definition of “Debt”; provided that Debt with respect to letters of credit referred to in clause (b) of such definition shall be considered “Total Debt” only to the extent such letters of credit are drawn or funded. For the avoidance of doubt, the Total Debt of the Borrower is the consolidated Total Debt of the Credit Parties, determined in accordance with GAAP.

“Total Secured Debt” means with respect to any Person, at any time, without duplication, the aggregate outstanding principal amount of Total Debt that is secured by Liens permitted under Section 9.03. For the avoidance of doubt, the Total Secured Debt of the Borrower is the consolidated Total Secured Debt of the Credit Parties, determined in accordance with GAAP.

“Transactions” means, with respect to each Credit Party, (a) the execution, delivery and performance of this Agreement, each other Loan Document to which it is a party, the borrowing of Loans, and the issuance of Letters of Credit hereunder, (b) the guaranteeing of the Obligations and the other obligations under the Guarantee Agreement by such Credit Party and such Credit Party’s grant of the security interests and provision of Collateral under the Security Instruments, (c) the grant of Liens on Mortgaged Properties pursuant to the Security Instruments and (d) the consummation of the Acquisition (including the refinancing of the Existing Credit Agreement and Carrizo Credit Agreement and, if applicable, the redemption of the Existing Carrizo Preferred Stock).

“Transfer” has the meaning assigned to such term in Section 9.11.

“Type,” when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Alternate Base Rate or the Adjusted LIBO Rate.

“UCC” means the Uniform Commercial Code of the State of New York or of any other state the laws of which are required to be applied in connection with the perfection of security interests in any Collateral.

“UK Financial Institutions” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

“Unrestricted Subsidiary” means Mississippi Marketing, Inc., the Riptide Entities (to the extent constituting a Subsidiary) and any other Person that would otherwise be a Restricted Subsidiary of the Borrower that the Borrower has designated to be an “Unrestricted Subsidiary” in writing to the Administrative Agent pursuant to Section 9.17 and each Subsidiary thereof.

“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.

“U.S. Special Resolution Regime” has the meaning assigned to such term in Section 12.20.

“U.S. Tax Compliance Certificate” has the meaning assigned such term in Section 5.03(e)(ii)(B)(3).

“USA Patriot Act” means the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto, or The United and Strengthening America by providing appropriate Tools Required to Intercept and Obstruct Terrorism.

“Water Services Assets” means those certain water handling and recycling assets (to none of which any Proved Reserves of oil or natural gas are attributed) owned by the Credit Parties as of the Effective Date which have been or will be contributed by the Credit Parties to the Riptide Entities or any other Unrestricted Subsidiary.

“Withholding Agent” means any Credit Party or the Administrative Agent.

“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right

had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

Section 1.03 Types of Loans and Borrowings. For purposes of this Agreement, Loans and Borrowings, respectively, may be classified and referred to by Type (e.g., a “Eurodollar Loan” or a “Eurodollar Borrowing”).

Section 1.04 Terms Generally; Rules of Construction. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” as used in this Agreement shall be deemed to be followed by the phrase “without limitation.” The word “or” is not exclusive. The word “shall” shall be construed to have the same meaning and effect as the word “will.” Unless the context requires otherwise any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Loan Documents), any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained in the Loan Documents), the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement. No provision of this Agreement or any other Loan Document shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.

Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the Financial Statements except for changes in which the Borrower’s independent certified public accountants concur and which are disclosed to the Administrative Agent as part of, or along with, the audited annual financial statements delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the Borrower and the Majority Revolving Credit Lenders shall otherwise agree in writing, no such change shall modify or affect the manner in which compliance with the covenants set forth in Section 9.01 is computed such that all such computations shall be conducted utilizing financial information presented consistently with prior periods. In the event that any “Accounting Change” shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to reflect equitably such Accounting Changes with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. “Accounting Changes” refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC. For the purposes of this agreement, operating leases shall be accounted for in a manner consistent with GAAP as in effect on December 31, 2018. Notwithstanding anything herein to the contrary, for the purposes of calculating any of the ratios tested under Section 9.01, and the components of each of such ratios, all Unrestricted Subsidiaries (including their assets, liabilities, income,

losses, cash flows, and the elements thereof) shall be excluded, except for any cash dividends or distributions actually paid by any Unrestricted Subsidiary to any Credit Parties or Restricted Subsidiaries, which shall be deemed to be income to such Credit Party or Restricted Subsidiary when actually received by it.

Section 1.06 Limited Condition Transactions. Notwithstanding anything in this Agreement or any Loan Document to the contrary, to the extent that any provision requires (x) compliance with any financial ratio or test (which, where calculated on a pro forma basis, shall take into account pro forma cost savings and synergy add-backs), (y) the absence of any Default or Event of Default or (z) compliance with any condition to (1) the consummation of any transaction in connection with any acquisition or similar Investment or any fundamental change, (2) the making of any Restricted Payment, (3) the incurrence of any Debt or Lien in connection therewith and/or (4) the making of any restricted payment in respect of any Junior Debt, the determination of whether the relevant condition is satisfied may be made, at the election of the Borrower: (A) in the case of any acquisition or similar Investment or any fundamental change, either (I) at the time of the execution of the definitive agreement with respect to the relevant acquisition or similar Investment or any fundamental change or (II) at the time of the consummation of the relevant acquisition or similar Investment or any fundamental change, in either case after giving effect to the acquisition or similar Investment or any fundamental change and any related Debt on a pro forma basis, (B) in the case of any Restricted Payment made within 60 days of the declaration of such restricted payment, either (I) at the time of the declaration of such Restricted Payment or (II) at the time of the making of such Restricted Payment, in either case after giving effect to the relevant restricted payment on a pro forma basis, (C) in the case of any Debt or Lien in connection therewith, either (I) at the time of entry into the commitment for such Debt or Lien or (II) at the time of the incurrence of such Debt or Lien, in either case after giving effect to the relevant Debt on a pro forma basis and/or (D) in the case of any restricted payment in respect of any Junior Debt made within 60 days of delivering an irrevocable notice, either (I) at the time of delivery an irrevocable notice (which may be conditional) with respect to such restricted payment or (II) at the time of the making of such restricted payment, in either case after giving effect to the relevant restricted payment and any substantially concurrent incurrence of Debt on a pro forma basis. For the avoidance of doubt, if any of such ratios, tests or caps are exceeded as a result of fluctuations in such ratios, tests or caps (including due to fluctuations in EBITDAX of the Borrower or the person subject to such acquisition or Investment or other transaction), at or prior to the consummation of the relevant transaction or action, such ratios, tests or caps will not be deemed to have been exceeded as a result of such fluctuations solely for purposes of determining whether the relevant transaction or action is permitted to be consummated or taken.

Section 1.07 Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its equity interests at such time.

ARTICLE II
THE REVOLVING CREDIT FACILITY

Section 2.01 Commitments.

(a) Commitments. Subject to the terms and conditions set forth herein, each Revolving Credit Lender severally and for itself alone, agrees to make Revolving Credit Loans to the Borrower during the Availability Period in an aggregate principal amount that will not result in such Revolving Credit Lender’s Revolving Credit Exposure exceeding such Revolving Credit Lender’s

Commitment or the total Revolving Credit Exposures exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, repay and reborrow the Revolving Credit Loans.

(b) Increases, Reductions and Terminations of Aggregate Elected Commitment Amount.

(i) Subject to the conditions set forth in Section 2.01(b)(ii), the Borrower may increase the Aggregate Elected Commitment Amount then in effect by increasing the Elected Commitment of one or more existing Lenders (each such Lender, an “Increasing Lender”) and/or causing one or more Persons acceptable to the Administrative Agent and that at such time are not Lenders to become a Lender (each such Person that is not at such time a Lender and becomes a Lender, an “Additional Lender”). Notwithstanding anything to the contrary contained in this Agreement, in no case shall an Additional Lender be the Borrower, an Affiliate of the Borrower or a natural person.

(ii) Any increase in the Aggregate Elected Commitment Amount shall be subject to the following additional conditions:

(A) no increase in the Aggregate Elected Commitment Amount shall be permitted if after giving effect thereto the Aggregate Elected Commitment Amount exceeds the lesser of (x) the Borrowing Base then in effect and (y) the Aggregate Maximum Credit Amount;

(B) the Borrower may not increase the Aggregate Elected Commitment Amount more than once between any two redeterminations of the Borrowing Base, whether a Scheduled Redetermination or an Interim Redetermination;

(D) subject to Section 2.01(b)(ix) below, if the Borrower elects to increase the Aggregate Elected Commitment Amount by increasing the Elected Commitment of one or more Lenders, the Borrower and each such Increasing Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form of Exhibit L (an “Elected Commitment Increase Certificate”) and the Borrower shall pay any applicable fees as may have been agreed to between the Borrower, such Increasing Lender and/or the Administrative Agent; and

(E) if the Borrower elects to increase the Aggregate Elected Commitment Amount by causing one or more Additional Lenders to become a party to this Agreement, then the Borrower and each such Additional Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form of Exhibit K (an “Additional Lender Certificate”), together with an Administrative Questionnaire for each Additional Lender, and the Borrower shall (x) if requested by any Additional Lender, deliver a Note payable to such Additional Lender in a principal amount equal to its Maximum Credit Amount, and otherwise duly completed and (y) pay any applicable fees as may have been agreed to between the Borrower, any Additional Lender and/or the Administrative Agent.

(iii) Subject to acceptance and recording thereof pursuant to Section 2.01(b)(iv), from and after the effective date specified in the Elected Commitment Increase Certificate or the Additional Lender Certificate: (x) the amount of the Aggregate Elected Commitment Amount shall

be increased as set forth therein, and (y) in the case of an Additional Lender Certificate, any Additional Lender party thereto shall be a party to this Agreement and have the rights and obligations of a Lender under this Agreement and the other Loan Documents. In addition, each Increasing Lender and Additional Lender shall be deemed to have purchased a pro rata portion of the outstanding Loans (and participation interests in Letters of Credit) of each of the other Lenders (and such Lenders hereby agree to sell and to take all such further action to effectuate such sale) such that each Lender (including any Increasing Lender and any Additional Lender) shall hold its Applicable Revolving Credit Percentage of the outstanding Loans (and participation interests in Letters of Credit) after giving effect to the increase in the Aggregate Elected Commitment Amount and the resulting modification of each Lender’s Applicable Revolving Credit Percentage and Maximum Credit Amount pursuant to Section 2.01(b)(v).

(iv) Upon its receipt of a duly completed Elected Commitment Increase Certificate or an Additional Lender Certificate, executed by the Borrower and the Lender or by the Borrower and the Additional Lender party thereto, as applicable, and the Administrative Questionnaire referred to in Section 2.01(b)(ii) the Administrative Agent shall accept such Elected Commitment Increase Certificate or Additional Lender Certificate and record the information contained therein in the Register required to be maintained by the Administrative Agent pursuant to Section 12.04(b)(iv).

(v) Upon any increase in the Aggregate Elected Commitment Amount pursuant to this Section 2.01(b), (w) each Lender’s Applicable Revolving Credit Percentage shall be automatically deemed amended to the extent necessary so that each such Lender’s Applicable Revolving Credit Percentage equals the percentage of the Aggregate Elected Commitment Amount represented by such Lender’s Elected Commitment, in each case after giving effect to such increase, (x) each Lender’s Maximum Credit Amount shall be automatically deemed amended to the extent necessary so that each Lender’s Maximum Credit Amount equals such Lender’s Applicable Revolving Credit Percentage, after giving effect to any adjustments thereto pursuant to the foregoing clause (w), of the Aggregate Maximum Credit Amount, (y) Schedule 1.2 to this Agreement shall be deemed amended to reflect the Elected Commitment of any Increasing Lender and any Additional Lender, and any changes in the Lenders’ respective Applicable Revolving Credit Percentages and Maximum Credit Amounts pursuant to the foregoing clauses (w) and (x) and (y) the Borrower shall execute and deliver new Notes to the extent required under Section 2.02(d).

(vi) The Borrower may from time to time terminate or reduce the Aggregate Elected Commitment Amount; provided that (x) each reduction of the Aggregate Elected Commitment Amount shall be in an amount that is an integral multiple of $100,000 and not less than $1,000,000 and (y) the Borrower shall not reduce the Aggregate Elected Commitment Amount if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.03(c), the total Revolving Credit Exposures would exceed the Aggregate Elected Commitment Amount.

(vii) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Aggregate Elected Commitment Amount under Section 2.01(b)(vi) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Any termination or reduction of the Aggregate Elected Commitment Amount shall be permanent and may not be reinstated, except pursuant to Section 2.01(b)(i). Each reduction of the Aggregate Elected Commitment Amount shall be made ratably among each Lender’s Maximum Credit Amount in accordance with each Lender’s Applicable Revolving Credit Percentage (and Schedule 1.2 shall be deemed amended to reflect such amendments to each Lender’s Elected Commitment and the Aggregate Elected Commitment Amount).

(viii) Upon any redetermination or other adjustment in the Borrowing Base pursuant to this Agreement that would otherwise result in the Borrowing Base becoming less than the Aggregate Elected Commitment Amount, the Aggregate Elected Commitment Amount shall be automatically reduced (ratably among the Lenders in accordance with each Lender’s Applicable Revolving Credit Percentage) so that they equal such redetermined Borrowing Base (and Schedule 1.2 shall be deemed amended to reflect such amendments to each Lender’s Elected Commitment and the Aggregate Elected Commitment Amount).

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General form for quarterly reports under Section 13 or 15(d) – Form 10-Q