XOG Extraction Oil & Gas
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (date of earliest event reported): May 9, 2021
EXTRACTION OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
|(State or other jurisdiction of|
|(Commission File Number)||(I.R.S. Employer|
370 17th Street
|(Address of principal executive offices)||(Zip Code)|
Registrant’s telephone number, including area code: (720) 557-8300
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|x||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|¨||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|¨||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))|
|¨||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class||Trading Symbol(s)||Name of each exchange on which|
|Common stock, par value $0.01 per share||XOG||NASDAQ Global Select Market|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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. ¨
Item 1.01. Entry into a Material Definitive Agreement.
On May 9, 2021, Extraction Oil & Gas, Inc., a Delaware corporation (“XOG”), Bonanza Creek Energy, Inc. (“BCEI”), and Raptor Eagle Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of BCEI (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), providing for a merger of equals between XOG and BCEI.
The Merger Agreement, among other things, provides for the merger of Merger Sub with and into XOG (the “Merger”), with XOG continuing its existence as the surviving corporation following the Merger (the “Surviving Corporation”). The board of directors of each of XOG (the “XOG Board”) and BCEI (the “BCEI Board”) has unanimously declared advisable and approved the Merger Agreement and the execution, delivery and performance of the Merger Agreement and the transactions contemplated thereby.
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of XOG common stock, par value $0.01 per share (“XOG Common Stock”) as of immediately prior to the Effective Time, will be converted into the right to receive 1.1711 shares of BCEI common stock, par value $0.01 per share (“BCEI Common Stock”) (the “Exchange Ratio”). Following the closing of the Merger, XOG’s existing stockholders and BCEI’s existing stockholders will own approximately 50% and 50%, respectively, of the issued and outstanding shares of the combined company.
The Merger Agreement provides at Closing (as defined in the Merger Agreement) that the post-Merger board of the combined company (“New Board”) will consist of eight members, (i) four of whom will be designated by XOG, each of whom shall be independent and acceptable to BCEI, and that one of the four shall be Mr. Ben Dell who will serve as the chairman of the New Board and (ii) four of whom will be designated by BCEI, which designees shall consist of Eric Greager, the President and Chief Executive Officer of BCEI, and three independent directors who shall be acceptable to XOG.
Mr. Greager will serve as the Chief Executive Officer of the combined company. Other senior leadership positions of the combined company will be filled by current executives of XOG and BCEI.
Upon consummation of the Merger, XOG’s shares will cease trading on the NASDAQ Global Select Market and BCEI’s shares, including BCEI shares issued in exchange for XOG’s shares, will trade under the name of the combined company, which will be changed to “Civitas Resources, Inc.” upon consummation of the Merger, on the New York Stock Exchange (the “NYSE”) under the ticker symbol “CIVI.”
In the event BCEI declares or pays one or more quarterly dividends to its stockholders following the date of the Merger Agreement and with a record date prior to the Effective Time (“BCEI Quarterly Dividends”) in accordance with the terms of the Merger Agreement, each eligible shareholder of XOG shall receive a number of additional shares of BCEI Common Stock such that the eligible shareholders of XOG receive substantially equivalent aggregate value as compared to the aggregate amount of any BCEI Quarterly Dividends.
Conditions to the Merger
The closing of the Merger is conditioned on certain conditions, including, among others, (i) the receipt of the required approvals from each of XOG’s and BCEI’s stockholders, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Act, (iii) the absence of any law or order prohibiting the consummation of the Merger, (iv) the effectiveness of the registration statement on Form S-4 pursuant to which the shares of BCEI Common Stock issuable in the Merger are registered with the Securities and Exchange Commission (the “SEC”), (v) the authorization for listing of BCEI Common Stock issuable in the Merger on the NYSE, and (vi) the delivery of an opinion of counsel to XOG to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct (subject to certain materiality exceptions), and the other party having performed in all material respects its obligations under the Merger Agreement.
The Merger Agreement contains certain termination rights for both XOG and BCEI, including, among others:
|(a)||by either XOG or BCEI, if any governmental entity shall have issued an order, decree, ruling or injunction or taken any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger and the same shall have become final and nonappealable;|
|(b)||by either XOG or BCEI, if the Merger shall not have been consummated by 5:00 p.m. Denver, Colorado time on November 9, 2021 (the “Outside Date”);|
|(c)||by XOG or BCEI, as applicable, if the other party breaches any of its representations, warranties, covenants or other agreements in the Merger Agreement that cannot be or is not cured in accordance with the terms of the Merger Agreement and such breach would cause applicable closing conditions not to be satisfied;|
|(d)||by either XOG or BCEI, if either the requisite XOG or BCEI stockholder approval shall not have been obtained upon a vote at a duly held meeting for such; or|
|(e)||by XOG or BCEI, as applicable, prior to the receipt of the requisite XOG or BCEI stockholder approval, if the other party’s board of directors changes its recommendation with respect to the Merger and the other transactions contemplated by the Merger Agreement.|
If the Merger Agreement is terminated by XOG in accordance with clause (e) above, then BCEI shall be required to pay XOG a termination fee of $37.5 million (the “Termination Fee”), and if the Merger Agreement is terminated by BCEI in accordance with clause (e), then XOG shall be required to pay BCEI the Termination Fee. If (i) (A) XOG or BCEI terminates the Merger Agreement pursuant to clause (d) above as a result of a failure to obtain XOG stockholder approval or (B) XOG terminates the Merger Agreement pursuant to clause (b) above at a time when BCEI would be permitted to terminate the Merger Agreement pursuant to clause (c) above or BCEI terminates the Merger Agreement pursuant to clause (c) above and on or prior to the date of such termination, a Company Competing Proposal (as defined in the Merger Agreement) shall have been announced or disclosed and not withdrawn without qualification at least seven business days prior to the XOG special meeting of stockholders or the date of such termination, as applicable, and (ii) within twelve months of such termination, XOG enters into a definitive agreement with respect to a Company Competing Proposal (or publicly approves or recommends to the XOG stockholders a Company Competing Proposal) or consummates a Company Competing Proposal, XOG shall pay BCEI the Termination Fee. Under reciprocal specified circumstances, BCEI will be required to pay the Termination Fee to XOG.
Treatment of XOG Equity Awards
The Merger Agreement provides that each outstanding award of restricted stock units (including those subject to performance-based vesting conditions) issued pursuant to XOG’s 2021 Long Term Incentive Plan that is outstanding immediately prior to the Effective Time and that by its terms does not settle by reason of the occurrence of the Closing (each, an “RSU Award”) will be assumed by BCEI and converted into a number of restricted stock units with respect to shares (rounded to the nearest number of whole shares) of BCEI Common Stock (such restricted stock unit, a “Converted RSU”) equal to the product of the number of XOG Common Stock subject to the RSU Award immediately prior to the Effective Time multiplied by Exchange Ratio, effective as of the Effective Time.
Effective as of the Effective Time, each Converted RSU shall continue to be governed by the same terms and conditions (including vesting and forfeiture) that were applicable to the corresponding RSU Award immediately prior to the Effective Time; provided that any RSU Award subject to performance-based vesting conditions shall continue to be measured pursuant to the same terms and conditions of the underlying RSU Award in effect as of immediately prior to the Effective Time; provided further that RSU Awards subject to performance-based vesting conditions held by certain executives of XOG (each, an “XOG Executive”) shall each provide that, in the event such XOG Executive’s employment is terminated for death, disability, by BCEI for any reason other than for Cause (as defined in the applicable award agreement), or by the XOG Executive for Good Reason (as defined in the applicable award agreement), in each case, on or within 12 months following the closing of the Merger, the portion of such XOG Executive’s Converted RSU Award subject to performance-based vesting conditions shall, effective as of such XOG Executive’s termination date, immediately vest in full based on deemed achievement of any applicable performance goals at the maximum level of performance.
Other Terms of the Merger Agreement
XOG and BCEI each have made customary representations, warranties and covenants in the Merger Agreement, in each case generally subject to customary materiality qualifiers. Among other things, each party has agreed, subject to certain exceptions, (i) to conduct its business in the ordinary course, from the date of the Merger Agreement until the earlier of the Effective Time and the termination of the Merger Agreement, and not to take certain actions prior to the Closing without the prior written consent of the other party, (ii) not to solicit alternative business combination transactions and (iii) not to engage in discussions or negotiations regarding any alternative business combination transactions. Additionally, pursuant to the terms of the Merger Agreement, the parties will use their reasonable best efforts to procure, through the amendment or restatement of BCEI’s current credit facility, through a new credit facility, or any combination of the foregoing, senior secured debt financing on terms reasonably acceptable to XOG and BCEI in an amount sufficient for the combined company’s liquidity needs.
The foregoing summary of the Merger Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by reference.
The Merger Agreement and the above description of the Merger Agreement have been included to provide investors and security holders with information regarding the terms of the Merger Agreement. They are not intended to provide any other factual information about XOG, BCEI or their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made by each contracting party to the other for the purposes of allocating contractual risk between them that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of XOG, BCEI or any of their respective subsidiaries, affiliates or businesses. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by XOG or BCEI. Accordingly, investors should read the representations and warranties in the Merger Agreement not in isolation but only in conjunction with the other information about XOG or BCEI and their respective subsidiaries that the respective companies include in reports, statements and other filings they make with the SEC.
Voting and Support Agreement
As an inducement to XOG and BCEI entering into the Merger Agreement, on May 9, 2021, Kimmeridge Energy Management Company, LLC (“Kimmeridge”) which beneficially owns, in the aggregate, approximately 39% of the outstanding XOG Common Stock entered into a Voting and Support Agreement (the “Voting Agreement”), by and among BCEI, XOG and Kimmeridge, pursuant to which Kimmeridge has agreed to vote its shares in favor of the matters to be submitted to XOG’s stockholders in connection with the Merger, subject to the terms and conditions set forth in the Stockholder Voting Agreement.
The Voting Agreement will terminate upon the earliest to occur of: (a) the effective time of the Merger, (b) the date on which the Merger Agreement is terminated in accordance with its terms, (c) the mutual written consent of the parties thereto and (d) the date of any modification, waiver or amendment to the Merger Agreement effected without the Kimmeridge’s consent that (i) decreases the amount or changes the form of consideration payable to all of the stockholders of XOG pursuant to the terms of the Merger Agreement or (ii) otherwise materially adversely affects the interests of Kimmeridge or the stockholders of XOG.
The foregoing summary of the Voting Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Voting Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
|Item 2.02.||Results of Operations and Financial Condition.|
On May 10, 2021, XOG and BCEI issued a joint press release announcing the execution of the Merger Agreement and later that day XOG and BCEI held a joint conference call with investors to discuss the proposed Merger. The joint press release and presentation to be used in connection with the investor conference call include certain preliminary operational and financial results of XOG for the quarter ended March 31, 2021, and copies of each of the press release and the presentation are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, hereto and each are incorporated by reference into this Item 2.02.
The information in this Item 2.02, including Exhibit 99.1 and Exhibit 99.2, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, or the Securities Exchange Act of 1934, as amended, except as specifically identified therein as being incorporated by reference.
|Item 7.01.||Regulation FD Disclosure.|
The information set forth in Item 2.02 of this Current Report on Form 8-K is incorporated by reference into this Item 7.01.
No Offer or Solicitation
This communication relates to a proposed business combination transaction (the “Transaction”) between XOG and BCEI. This communication is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, in any jurisdiction, with respect to the Transaction or otherwise, nor shall there be any sale, issuance or transfer of the securities referred to in this document in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Important Additional Information
In connection with the Transaction, XOG and BCEI intend to file materials with the SEC, including (1) a joint proxy statement in preliminary and definitive form (the “Joint Proxy Statement”) and (2) a Registration Statement on Form S-4 with respect to the Merger (the “Registration Statement���), of which the Joint Proxy Statement will be a part. After the Registration Statement is declared effective by the SEC, XOG and BCEI intend to send the definitive form of the Joint Proxy Statement to the shareholders of XOG and the shareholders of BCEI. These documents are not substitutes for the Joint Proxy Statement or Registration Statement or for any other document that XOG or BCEI may file with the SEC and send to XOG’s shareholders or BCEI’s shareholders in connection with the Transaction. INVESTORS AND SECURITY HOLDERS OF XOG AND BCEI ARE URGED TO CAREFULLY AND THOROUGHLY READ THE JOINT PROXY STATEMENT AND REGISTRATION STATEMENT, AS EACH MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND OTHER RELEVANT DOCUMENTS FILED BY XOG AND BCEI WITH THE SEC, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT, XOG, BCEI, THE TRANSACTION, THE RISKS RELATED THERETO AND RELATED MATTERS.
Investors and security holders will be able to obtain free copies of the Registration Statement and Joint Proxy Statement, as each may be amended from time to time, and other relevant documents filed by XOG and BCEI with the SEC (when they become available) through the website maintained by the SEC at www.sec.gov. Copies of documents filed with the SEC by XOG will be available free of charge from XOG’s website at www.extractionog.com under the “Investor Relations” tab or by contacting XOG’s Investor Relations Department at (720) 974-7773 or email@example.com. Copies of documents filed with the SEC by BCEI will be available free of charge from BCEI’s website at www.bonanzacrk.com under the “For Investors” tab or by contacting BCEI’s Investor Relations Department at (720) 225-6679 or firstname.lastname@example.org.
Participants in the Solicitation
XOG, BCEI, and their respective directors and certain of their executive officers and other members of management and employees may be deemed, under SEC rules, to be participants in the solicitation of proxies from XOG’s shareholders and BCEI’s shareholders in connection with the Transaction. Information regarding the executive officers and directors of XOG is included in its Annual Report on Form 10-K/A filed with the SEC on April 30, 2021. Information regarding the executive officers and directors of BCEI is included in its definitive proxy statement for its 2021 annual meeting filed with the SEC on April 28, 2021. Additional information regarding the persons who may be deemed participants and their direct and indirect interests, by security holdings or otherwise, will be set forth in the Registration Statements, Joint Proxy Statement and other materials when they are filed with the SEC in connection with the Transaction. Free copies of these documents may be obtained as described in the paragraphs above.
Forward-Looking Statements and Cautionary Statements
Certain statements contained in this Current Report on Form 8-K constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Exchange Act. All statements, other than statements of historical facts, included herein concerning, among other things, the Transaction, any statements regarding the expected timetable for completing the Transaction, the results, effects, benefits and synergies of the Transaction, future opportunities for the combined company, future financial performance and condition, guidance and any other statements regarding XOG’s or BCEI’s future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts are “forward-looking” statements based on assumptions currently believed to be valid. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “estimate,” “probable,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “would,” “potential,” “may,” “might,” “anticipate,” “likely” “plan,” “positioned,” “strategy,” and similar expressions or other words of similar meaning, and the negatives thereof. Specific forward-looking statements include statements regarding XOG and BCEI’s plans and expectations with respect to the Transaction and the anticipated impact of the Transaction on the combined company’s results of operations, financial position, growth opportunities and competitive position. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, the possibility that shareholders of BCEI may not approve the issuance of new shares of BCEI common stock in the Transaction or that shareholders of XOG may not approve the Merger Agreement; the risk that a condition to closing of the Transaction may not be satisfied, that either party may terminate the Merger Agreement or that the closing of the Transaction might be delayed or not occur at all; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of XOG and BCEI; the effects of the business combination of XOG and BCEI, including the combined company’s future financial condition, results of operations, strategy and plans; the ability of the combined company to realize anticipated synergies in the timeframe expected or at all; changes in capital markets and the ability of the combined company to finance operations in the manner expected; regulatory approval of the transaction; the effects of commodity prices; the risks of oil and gas activities; and the fact that operating costs and business disruption may be greater than expected following the public announcement or consummation of the Transaction. Expectations regarding business outlook, including changes in revenue, pricing, capital expenditures, cash flow generation, strategies for our operations, oil and natural gas market conditions, legal, economic and regulatory conditions, and environmental matters are only forecasts regarding these matters.
Additional factors that could cause results to differ materially from those described above can be found in XOG’s Annual Report on Form 10-K for the year ended December 31, 2020 and in its subsequently filed Annual Report on Form 10-K/A, each of which is on file with the SEC and available from XOG’s website at www.extractionog.com under the “Investor Relations” tab, and in other documents XOG files with the SEC, and in BCEI’s Annual Report on Form 10-K for the year ended December 31, 2020 and in its subsequently filed Quarterly Reports on Form 10-Q, each of which is on file with the SEC and available from BCEI’s website at www.bonanzacrk.com under the “For Investors” tab, and in other documents BCEI files with the SEC.
All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither XOG nor BCEI assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
|Item 9.01||Financial Statements and Exhibits.|
* Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. XOG agrees to furnish a supplemental copy of any omitted schedule or attachment to the SEC upon request.
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 hereunto duly authorized.
|Extraction Oil & Gas, Inc.|
|Date: May 10, 2021||By:||/s/ Thomas B. Tyree Jr.|
|Thomas B. Tyree Jr.|
|Chief Executive Officer and Director|