Centennial Resource Development, Inc. (Form: S-1, Received: 06/22/2016 17:16:19)

Large accelerated filer

Accelerated filer

Non-accelerated filer

þ (Do not check if a smaller reporting company)

Smaller reporting company

As filed with the Securities and Exchange Commission on June 22, 2016

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Centennial Resource Development, Inc.

(Exact name of registrant as specified in its charter)

Delaware

1311

47-2040396

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(IRS Employer

Identification Number)

1401 17 ^th Street, Suite 1000

Denver, CO 80202

(720) 441-5515

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

George S. Glyphis

Chief Financial Officer

1401 17 ^th Street, Suite 1000

Denver, CO 80202

(720) 441-5515

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Douglas E. McWilliams

Christopher G. Schmitt

Vinson & Elkins L.L.P.

1001 Fannin Street, Suite 2500

Houston, Texas 77002

(713) 758-2222

Gerald M. Spedale

Andrew J. Ericksen

Baker Botts L.L.P.

One Shell Plaza

901 Louisiana St.

Houston, Texas 77002

(713) 229-1234

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)	Amount of Registration Fee
Common Stock, par value $0.01 per share	$100,000,000	$10,070

(1)	Includes shares issuable upon exercise of the underwriters’ over-allotment option.

(2)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. The securities described herein may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities, in any state or jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 22, 2016

Shares

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Centennial Resource Development, Inc.

Common stock

This is the initial public offering of our common stock. We are selling shares of common stock, and the selling stockholders are selling shares of common stock. The selling stockholders are deemed under federal securities laws to be underwriters with respect to the shares of common stock they are offering hereby and any shares of common stock that they may sell pursuant to the underwriters’ option to purchase additional shares of our common stock. We will not receive any proceeds from the shares of common stock sold by the selling stockholders.

Prior to this offering, there has been no public market for our common stock. The initial public offering price of the common stock is expected to be between $ and $ per share. We have applied to list our common stock on the NASDAQ Global Select Market under the symbol “CDEV.”

To the extent that the underwriters sell more than shares of common stock, the underwriters have the option to purchase up to an additional shares from the selling stockholders at the public offering price less the underwriting discount and commissions.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, and as such, we have elected to take advantage of certain reduced public company reporting requirements for this prospectus and future filings. See “Risk Factors” and “Prospectus Summary—Emerging Growth Company.”

Investing in our common stock involves risks. See “ Risk Factors ” on page 21.


	Price to Public	Underwriting Discounts and Commissions	Proceeds to Issuer	Proceeds to Selling Stockholders
Per Share	$	$	$	$
Total	$	$	$	$

Delivery of the shares of common stock will be made on or about , 2016.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


Credit Suisse		Barclays

The date of this prospectus is , 2016.

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TABLE OF CONTENTS


P ROSPECTUS S UMMARY			1
R ISK F ACTORS			21
C AUTIONARY S TATEMENT R EGARDING F ORWARD -L OOKING S TATEMENTS			49
U SE OF P ROCEEDS			51
D IVIDEND P OLICY			52
C APITALIZATION			53
D ILUTION			55
S ELECTED H ISTORICAL C ONSOLIDATED AND C OMBINED F INANCIAL D ATA			57
M ANAGEMENT ’ S D ISCUSSION AND A NALYSIS OF F INANCIAL C ONDITION AND R ESULTS OF O PERATIONS			60
B USINESS			84
M ANAGEMENT			111
E XECUTIVE C OMPENSATION			116
P RINCIPAL AND S ELLING S TOCKHOLDERS			127
R ECENT AND F ORMATION T RANSACTIONS			131
C ERTAIN R ELATIONSHIPS AND R ELATED P ARTY T RANSACTIONS			134
D ESCRIPTION OF C APITAL S TOCK			138
S HARES E LIGIBLE FOR F UTURE S ALE			143
M ATERIAL U.S. F EDERAL I NCOME T AX C ONSIDERATIONS FOR N ON -U.S. H OLDERS			145
U NDERWRITING			149
L EGAL M ATTERS			155
E XPERTS			155
W HERE Y OU C AN F IND M ORE I NFORMATION			155
I NDEX TO F INANCIAL S TATEMENTS			F-1
A NNEX A: G LOSSARY OF O IL AND N ATURAL G AS T ERMS			A-1

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on behalf of us or the information to which we have referred you. Neither we, the selling stockholders nor the underwriters have authorized anyone to provide you with information different from that contained in this prospectus and any free writing prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We, the selling stockholders and the underwriters are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. See “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

Until , 2016 (25 days after commencement of this offering), all dealers that effect transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

Industry and Market Data

The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications and other published independent sources. Although we believe these third-party sources are reliable as of their respective dates, neither we, the selling stockholders nor the underwriters have independently verified the accuracy or completeness of this information. Some data is also based on our good faith estimates. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.

Trademarks and Trade Names

We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and does not imply, a relationship with us or an endorsement or sponsorship by or of us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ^® , TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the information under the headings “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and the notes to those financial statements appearing elsewhere in this prospectus. The information presented in this prospectus assumes (i) an initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus) and (ii) unless otherwise indicated, that the underwriters do not exercise their option to purchase additional shares of common stock.

On October 15, 2014, Centennial Resource Production, LLC (“Centennial OpCo”), an independent oil and natural gas company formed on August 30, 2012, acquired all of the oil and natural gas properties and certain other assets of Celero Energy Company, LP (“Celero”) in exchange for interests in Centennial OpCo, which is referred to in this prospectus as the “Combination.” Prior to the closing of this offering, we will complete a corporate reorganization pursuant to which all of the interests in Centennial OpCo, including Celero’s interests, will be contributed to Centennial Resource Development, Inc., a Delaware corporation and the issuer of common stock in this offering, in exchange for shares of common stock in Centennial Resource Development, Inc. Except as expressly stated or the context otherwise requires, our financial, reserve and operating information in this prospectus gives effect to the Combination, and the terms “we,” “us” and “our” refer, prior to the corporate reorganization, to the consolidated and combined financial, reserve and operating information of Centennial OpCo and Celero, and, after the corporate reorganization, to Centennial Resource Development, Inc. and its subsidiaries. Please read “Recent and Formation Transactions.”

This prospectus includes certain terms commonly used in the oil and natural gas industry, which are defined elsewhere in this prospectus in the “Glossary of Oil and Natural Gas Terms.”

Our Company

Business Overview

We are an independent oil and natural gas company focused on the development and acquisition of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin. Our assets are concentrated in the Delaware Basin, a sub-basin of the Permian Basin. Our properties consist of large, contiguous acreage blocks in Reeves, Ward and Pecos counties in West Texas.

As of June 15, 2016, our portfolio included 61 operated producing horizontal wells. Our horizontal wells span an area approximately 45 miles long by 20 miles wide where we have established commercial production in five distinct zones: the 3rd Bone Spring Sandstone, Upper Wolfcamp A, Lower Wolfcamp A, Wolfcamp B and Wolfcamp C. As a result, we have broadly appraised our acreage across various geographic areas and stratigraphic zones, which we expect will allow us to efficiently develop our drilling inventory with a focus on maximizing returns to our stockholders. In addition, we believe our acreage may be prospective for the 2nd and 3rd Bone Spring shales and Avalon Shale, where other operators have experienced drilling success near our acreage.

2016 and expect to add a second horizontal rig in the fourth quarter of 2016. During 2015, we operated, on average, one rig and placed 13 horizontal wells on production. Our development drilling plan is comprised exclusively of horizontal drilling with an ongoing focus on reducing drilling times, optimizing completions and reducing costs.

The Permian Basin is an attractive operating area due to its extensive original oil-in-place, favorable operating environment, multiple horizontal zones, high oil and liquids-rich natural gas content, well-developed network of oilfield service providers, long-lived reserves with relatively consistent reservoir quality and historically high drilling success rates. According to the Energy Information Administration of the U.S. Department of Energy (the “EIA”), the Permian Basin is the most prolific oil producing area in the United States, accounting for 23% and 20% of total U.S. crude oil production during the twelve-month periods ended April 30, 2016 and April 30, 2015, respectively.

Over the past decade, the Delaware Basin has experienced significant horizontal drilling. According to Baker Hughes, three of the top six Permian Basin counties by horizontal rig count are located in the Delaware Basin. Reeves County, where the majority of our acreage is located, had the second most horizontal rigs of any U.S. county as of June 17, 2016, with 21 rigs as of such date. As a result of this horizontal drilling, the Delaware Basin is the only region in the United States that has experienced sustained fourth quarter-to-fourth quarter production growth rates greater than 25% for the past three years, as illustrated in the chart below.

Year-Over-Year Production Growth for Major Oil Basins and Plays

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Production (MMBoe)


	Permian Basin(1)				Eagle Ford		Bakken /Three Forks
	Delaware Wolfcamp, Bone Spring		Midland Wolfcamp, Spraberry		Eagle Ford		Bakken /Three Forks
Fourth Quarter 2012		22.5		49.6		112.5		78.2
Fourth Quarter 2013		33.8		61.4		164.0		101.0
Fourth Quarter 2014		56.9		86.1		219.2		130.3
Fourth Quarter 2015		72.6		91.8		205.9		127.1

(1)

Does not include production in the Permian Basin beyond the Midland and Delaware Basins.

Source: IHS Performance Evaluator as of April 2016.

Based on recent well results and significant decreases in drilling and completion costs, we believe the Delaware Basin represents one of the most attractive operating regions in the United States. As illustrated in the chart below, according to data from IHS Performance Evaluator, in 2012, 2013, 2014 and 2015, wells in the Delaware Basin had a higher average three-month cumulative initial production per 1,000 feet of lateral section than wells in the Midland Basin, another sub-basin of the Permian Basin. These results are driven primarily by the over-pressured nature of the Bone Spring and Wolfcamp reservoirs in the Delaware Basin, which enhances the deliverability of horizontal wells. We believe these results indicate the Wolfcamp and the Bone Spring formations in the Delaware Basin generate greater implied EURs per 1,000 feet of lateral length as compared to the Spraberry and Wolfcamp zones in the Midland Basin.

Horizontal Well Results—Delaware Basin versus Midland Basin

Average per well 3 month cumulative initial production

(MBoe per 1,000 feet of lateral length)

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Note: Delaware Basin includes horizontal wells from Wolfcamp and Bone Spring producing formations and Midland Basin includes wells from Wolfcamp and Spraberry producing formations. Reflects a 6:1 gas - oil equivalent conversion ratio.

Source: IHS Performance Evaluator as of April 2016.

We were formed by an affiliate of Natural Gas Partners (“NGP”), a family of energy-focused private equity investments funds. Our goal is to build a premier development and acquisition company focused on horizontal drilling in the Delaware Basin. Our key management and technical team members average approximately 28 years of experience and have successfully led development operations in prolific oil basins in the Continental United States, including horizontal development in the Permian, Bakken and Niobrara plays. This expertise and technical acumen have been applied to the horizontal drilling and multi-stage completions on our properties, resulting in drilling success and continuous operating improvements across multiple zones.

intend to drill locations in the 3rd Bone Spring Sandstone, Wolfcamp B and Wolfcamp C zones. Based on our and other operators’ well results and our analysis of geologic and engineering data, we believe the 2nd and 3rd Bone Spring shales and Avalon Shale may also be prospective across our acreage, and we may integrate these zones into our future drilling program as they become further delineated. The following table provides a summary of our gross horizontal drilling locations by zone as of June 15, 2016.

Gross Identified Horizontal Drilling Locations(1)(2)


	Total
Zones:
3 ^rd Bone Spring Sandstone		64
Upper Wolfcamp A		398
Lower Wolfcamp A		329
Wolfcamp B		300
Wolfcamp C		266

Total Horizontal Locations(3)(4)		1,357

(1)

Our total identified horizontal drilling locations include 51 locations associated with proved undeveloped reserves as of December 31, 2015. We have estimated our drilling locations based on well spacing assumptions and upon the evaluation of our horizontal drilling results and those of other operators in our area, combined with our interpretation of available geologic and engineering data. In particular, we have analyzed and interpreted well results and other data acquired through our participation in the drilling of vertical wells that have penetrated our horizontal zones. In addition, to evaluate the prospectivity of our horizontal acreage, we have performed open-hole and mud log evaluations, core analysis and drill cuttings analysis. See “Business—Our Properties.” The drilling locations that we actually drill will depend on the availability of capital, regulatory approvals, commodity prices, costs, actual drilling results and other factors. Any drilling activities we are able to conduct on these identified locations may not be successful and may not result in our ability to add additional proved reserves to our existing proved reserves. See “Risk Factors—Risks Related to Our Business—Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations.” Further, to the extent the drilling locations are associated with acreage that expires, we would lose our right to develop the related locations. See “Risk Factors—Risks Related to Our Business—Our identified drilling locations are scheduled out over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. In addition, we may not be able to raise the substantial amount of capital that would be necessary to drill such locations.”

(2)

Our horizontal drilling location count implies 880-foot spacing with five to six wells per 640-acre section in the Wolfcamp zones and 1,320-foot spacing with four wells per 640-acre section in the 3rd Bone Spring Sandstone, in each case, consisting primarily of single-section (i.e., approximately 4,500-foot) laterals.

(3)	674 of our 1,357 horizontal drilling locations are on acreage that we operate. We have an approximate 82% average working interest in our operated acreage.

(4)	We have included undeveloped horizontal locations only on our leasehold in Reeves and Ward counties.

We believe that development drilling of our 1,357 gross horizontal locations, with an increasing focus on drilling extended lateral wells as well as potential downspacing, will allow us to grow our production and reserves. In addition, we believe our large acreage blocks allow us to optimize our horizontal development program to maximize our resource recovery and our returns. We also intend to grow our production and reserves through acquisitions that meet our strategic and financial objectives. Furthermore, we believe our operational efficiency is enhanced by a third-party gas gathering system and cryogenic processing plant, which were built specifically for the area where the majority of our acreage is located, and our operated saltwater disposal system.

In addition, a third-party crude gathering system, which is expected to be operational in the third quarter of 2016 and which will transport the majority of our crude oil to market at a lower cost than we have experienced historically, will provide additional efficiencies.

We experienced a significant decrease in our drilling and completion costs during 2015, which has continued into 2016. This trend has been driven by efficiency improvements in the field, including reduced drilling days, the modification of well designs and reduction or elimination of unnecessary costs. Additionally, overall service costs have declined as a result of reduced industry demand. For the three months ended March 31, 2016, the spud-to-rig release for our three single-section horizontal wells was approximately 22 days compared to 28 days and 46 days for all single-section horizontal wells we drilled in 2015 and 2014, respectively. We expect that further optimization in the field (including the increased drilling of longer laterals, pad drilling, the use of shared facilities and zipper fracs), reduced rig rates and lower service costs will improve our well economics.

Our 2016 capital budget for drilling, completion and recompletion activities and facilities costs is approximately $87 million, excluding leasing and other acquisitions. We expect to allocate approximately $72 million of our 2016 capital budget for the drilling and completion of operated wells and $8 million for our participation in the drilling and completion of non-operated wells. For 2016, we have budgeted $25 million for leasing. In the three months ended March 31, 2016, we incurred capital costs of approximately $16.5 million, excluding leasing and acquisition costs.

Because we operate approximately 83% of our net acreage, the amount and timing of these capital expenditures are largely subject to our discretion. We believe our approximate 82% average working interest in our operated acreage provides us with flexibility to manage our drilling program and optimize our returns and profitability. We could choose to defer a portion of our planned capital expenditures depending on a variety of factors, including the success of our drilling activities; prevailing and anticipated prices for oil, natural gas and NGLs; the availability of necessary equipment, infrastructure and capital; the receipt and timing of required regulatory permits and approvals; drilling, completion and acquisition costs; and the level of participation by other working interest owners. We have an approximate 15% working interest in our non-operated acreage.

For the three months ended March 31, 2016, our average net daily production was 7,212 Boe/d (approximately 71.7% oil, 17.7% natural gas and 10.6% NGLs). The following table provides summary information regarding our proved reserves as of December 31, 2015, based on a reserve report prepared by Netherland, Sewell & Associates, Inc. (“NSAI”), our independent petroleum engineer. Of our proved reserves, approximately 40% were classified as proved developed producing (“PDP”). Proved undeveloped reserves (“PUDs”) included in this estimate are from 52 horizontal well locations across three zones.


Estimated Total Proved Reserves
Oil (MMBbls)	NGLs (MMBbls)	Natural Gas (Bcf)	Total (MMBoe)	% Oil	% Liquids(1)	% Developed
23.2	3.9	32.4	32.5	71	83	40

(1)	Includes oil and NGLs.

Business Strategies

Our primary business objective is to increase stockholder value through the following strategies:

•

Grow production, cash flow and reserves by developing our extensive Delaware Basin drilling inventory. Our horizontal drilling expertise and technical acumen have enabled us to successfully drill horizontal wells across the areal extent of our acreage while targeting multiple horizontal zones. We have identified an inventory of 1,357 horizontal drilling locations across five zones, which we believe can be expanded via downspacing or the de-risking of other stacked pay zones accessible on our leasehold. After

temporarily suspending drilling activity at the end of March 2016 to preserve capital, we added one horizontal drilling rig in June 2016 and expect to add a second horizontal rig in the fourth quarter of 2016. Our recent drilling activity has focused on both the Upper and Lower Wolfcamp A zones. We also plan to target the 3rd Bone Spring Sandstone, Wolfcamp B and Wolfcamp C zones in our future drilling program. We will continue to closely monitor operators with active leases on adjoining properties, or offset operators, as they delineate adjoining acreage and zones, providing us further data to optimize our development plan over time. We believe this strategy will allow us to significantly grow our production, cash flow and reserves while efficiently allocating capital to maximize the value of our resource base.

•

Maximize returns by optimizing drilling and completion techniques and improving operating efficiency. We believe completion design combined with cost reductions are the biggest drivers within our control affecting field-level economics. Additionally, we believe that drilling extended laterals of 7,500 or 9,500 feet will enhance our field level economics, and we are optimizing our land position, through swaps and acquisitions, to maximize our extended lateral inventory. We seek to optimize our wellbore economics and consequently increase net asset value through a methodical and continuous focus on drilling efficiency, wellbore accuracy, completion design and execution. We have also improved our completion techniques by increasing the amount of proppant used, reducing gel weight and increasing the slickwater component of total fluid pumped. We closely monitor offset operators to learn from their operational results and apply best practices to our own drilling plan to enhance returns.

•

Maintain a high degree of operational control. We seek to maintain operational control of our properties in order to better execute on our strategy of enhancing returns through operating improvements and cost efficiencies. As the operator of approximately 83% of our net acreage, we are able to manage (i) the timing and level of our capital spending, (ii) our development drilling strategies and (iii) our operating costs. We believe this flexibility to manage our drilling program allows us to optimize our returns and profitability.

•

Leverage extensive acquisition and Delaware Basin experience to evaluate and execute accretive opportunities. Our executive and core technical team has an average of approximately 28 years of industry experience. Our team has significant experience in successfully evaluating and executing acquisition opportunities and an extensive track record of building businesses in resource plays. Furthermore, we believe our ability to understand the geology, geophysics and reservoir parameters of the rock formations in the Delaware Basin will allow us to make prudent future acquisition decisions in order to grow our resource base and maximize stockholder value. Finally, we have developed working relationships with many operators in the Delaware Basin that we believe represent potential acquisition or partnership opportunities and also provide insight into operational best practices.

•

Preserve financial flexibility to pursue organic and external growth opportunities. We carefully manage our liquidity and leverage levels by continuously monitoring cash flow, capital spending and debt capacity. We intend to maintain modest leverage levels to preserve operational and strategic flexibility as well as access to the capital markets. We expect to fund our growth with cash flow from operations, availability under our revolving credit facility and capital markets offerings when appropriate. We intend to allocate capital in a disciplined manner and proactively manage our cost structure to achieve our business objectives. We expect to maintain an active hedging program that seeks to reduce our exposure to commodity price volatility and protect our cash flow.

Our Competitive Strengths

We believe that the following strengths will help us achieve our business goals:

•

Attractively positioned in the oil-rich core of the Southern Delaware Basin. Substantially all of our current leasehold acreage is located in the oil-rich southern portion of the Delaware Basin in Reeves, Ward and Pecos counties. The majority of our properties are in Reeves County, which is the second most active county in the United States in horizontal drilling with 21 horizontal rigs running as of June 17,

2016. We believe our multi-year, oil-weighted inventory of horizontal drilling locations provides attractive growth and return opportunities. As of December 31, 2015, our estimated reserves consisted of approximately 71% oil, 12% NGLs and 17% natural gas. The extensive original oil-in-place and other favorable geologic characteristics of the Southern Delaware Basin, along with the established vertical well control present across our acreage, give us a high degree of confidence in our current inventory of horizontal drilling locations. Further, our acreage is in close proximity to extensive infrastructure with long-term transportation agreements in place, which facilitates development. A crude gathering system, which is expected to be operational in the third quarter of 2016, will transport the majority of our crude oil to market at a lower cost than we have experienced historically. For gas gathering and processing, the majority of our gas is processed at a cryogenic plant that is centrally located in our area of operations. As a result of the existing infrastructure, the Permian Basin has historically realized attractive differentials compared to other top U.S. basins.

•

Large horizontal drilling inventory across multiple pay zones. We have identified 1,357 undeveloped horizontal drilling locations in five zones across our acreage position in Reeves and Ward counties. Our horizontal drilling inventory includes 366 extended lateral locations that we believe will generate superior economic returns relative to single-section laterals. Based upon our current operated drilling inventory and anticipated development pace, we believe we have over ten years of drilling inventory. In addition, we believe we may be able to identify additional horizontal locations as we conduct future downspacing pilots. Of the initial 1,357 identified horizontal drilling locations, 64 are in the 3rd Bone Spring Sandstone, 398 are in the Upper Wolfcamp A, 329 are in the Lower Wolfcamp A, 300 are in the Wolfcamp B and 266 are in the Wolfcamp C. Future development results achieved by us and offset operators may allow us to expand our location inventory in these intervals to other parts of our leasehold. Furthermore, the 2nd and 3rd Bone Spring shales, which are thought to be geologically analogous to the Middle and Lower Spraberry shales in the Midland Basin, and the Avalon Shale may provide additional future opportunities as offset operators prove up and reduce development risk in those zones.

•

Our acreage has been delineated across multiple zones. Our 61 operated horizontal wells span an area approximately 45 miles long by 20 miles wide where we have established commercial production in five distinct zones: the 3rd Bone Spring Sandstone, Upper Wolfcamp A, Lower Wolfcamp A, Wolfcamp B and Wolfcamp C. As a result, we have broadly appraised our acreage across various geographic areas and stratigraphic zones, which we expect will allow us to efficiently develop our drilling inventory with a focus on maximizing returns to our stockholders. In addition, offset operators have continued to successfully drill horizontal wells across our five targeted zones in close proximity to our leasehold, further delineating our acreage position. This delineation of the surrounding acreage by offset operators combined with the consistent performance of our wells provides us with substantial data to make development decisions.

•

Proven horizontal drilling expertise and technical acumen in the Delaware Basin. We believe our horizontal drilling experience targeting multiple pay zones in the Delaware Basin provides us with a competitive advantage. Over the past two years, we have substantially reduced drilling days for our Wolfcamp horizontal wells. For the three months ended March 31, 2016, the average spud-to-rig release for our three single-section horizontal wells was 22 days, as compared to 28 days and 46 days for all single-section horizontal wells we drilled in 2015 and 2014, respectively. We expect drilling efficiencies to continue and have continually modified our completion design to optimize the performance of our wells. Furthermore, our technical team has extensive experience developing resources using horizontal drilling in the Permian, Bakken and Niobrara plays over the last decade and has leveraged this experience to enhance the development of our Delaware Basin acreage.

•

opportunistically for the prevailing commodity price environment. In addition, we believe communication and data exchange with offset operators will reduce the risks associated with drilling the multiple horizontal zones of our acreage. We also believe our significant level of operational control will enable us to implement drilling and completion optimization strategies, such as pad drilling, continued reduction of spud-to-rig release days and tailored completion designs. As of June 15, 2016, approximately 75% of our net acreage in Reeves and Ward counties was either held by production or under continuous drilling provisions. We believe the substantial majority of our operated net acreage in Reeves and Ward counties will be held by production or under continuous drilling provisions by the end of 2017.

•

Experienced and incentivized management team. With an average of 28 years of industry experience, our senior management team has a proven track record of building and running successful businesses focused on the development and acquisition of oil and natural gas properties. We believe our team’s experience and expertise in horizontal drilling and completions in unconventional formations across multiple resource plays provides us with a distinct competitive advantage. Additionally, our management team has a significant economic interest in us, which provides a meaningful incentive to increase the value of our business for the benefit of all stockholders.

•

Conservatively capitalized balance sheet and strong liquidity profile . After giving effect to this offering and the use of proceeds therefrom, we expect to have no outstanding debt and approximately $ million of cash on the balance sheet. We believe the approximately $ million of availability under our revolving credit facility, cash on hand and cash flow from operations will provide us with sufficient liquidity to execute on our current capital program.

Formation Transactions

Centennial OpCo . Centennial OpCo (Centennial Resource Production, LLC, formerly named Atlantic Energy Holdings, LLC) is an independent oil and natural gas company formed on August 30, 2012 by its management members, third-party investors and an affiliate of NGP. Centennial OpCo commenced operations following the acquisition of working interests in oil and natural gas properties located in Reeves, Ward and Pecos counties in West Texas, targeting the Delaware Basin portion of the Permian Basin. At the time of that acquisition, Celero also owned a working interest in the majority of these same properties.

Subsequently, in April 2014, NGP contributed its membership interests in Centennial OpCo to Centennial Resource Development, LLC (“Centennial HoldCo”), which was formed by NGP and current members of our management. Centennial HoldCo is a holding company with no independent operations apart from its ownership interests in Centennial OpCo. By August 2014, all of the other members of Centennial OpCo (including its management members) had sold their membership interests in Centennial OpCo to Centennial OpCo or Centennial HoldCo for cash. As a result of these transactions, Centennial OpCo became a wholly-owned subsidiary of Centennial HoldCo.

Celero . Celero is an independent oil and natural gas company that was formed in 2006 to focus on the development and acquisition of oil and natural gas properties in Texas and New Mexico, primarily in the Permian Basin in West Texas. Celero was formed by its general partner, Celero Energy Management, LLC, its management team and NGP. Prior to the Combination, Celero owned non-operated interests in oil and natural gas properties in the Delaware Basin in which Centennial OpCo also has a working interest and substantially all of which were operated by Centennial OpCo.

The Combination . On October 15, 2014, Celero conveyed substantially all of its oil and natural gas properties and other assets to Centennial OpCo in exchange for membership interests in Centennial OpCo. Immediately following the completion of the Combination, Centennial HoldCo owned approximately 72% of Centennial OpCo, and Celero owned the remaining 28%.

Subsequent Capital Raising Activities . In 2015, Centennial OpCo issued additional membership interests to Centennial HoldCo and NGP Centennial Follow-On LLC, a Delaware limited liability company controlled by NGP but the economic interests in which are owned by unaffiliated third party investors and management (“Follow-On”), in exchange for capital contributions. As a result of such capital contributions, Centennial HoldCo, Celero and Follow-On own an approximate 61.1%, 21.2% and 17.6% membership interest in Centennial OpCo, respectively.

Our Corporate Reorganization . Pursuant to the terms of certain reorganization transactions that will be completed prior to the closing of this offering, through a series of steps, we will acquire, directly or indirectly all of the interests in Centennial OpCo currently owned by each of Centennial HoldCo, Celero and Follow-On, in exchange for shares, shares and shares, respectively, of our common stock. As a result of these transactions, we will directly and indirectly wholly own Centennial OpCo. Promptly following the consummation of this offering, Follow-On intends to distribute its shares of our common stock and any cash received in respect of our common stock that it sells in this offering to its members on a pro-rata basis.

Recent Events

Reeves County Leasehold Acquisitions

In June 2016, we closed an acquisition of acreage that is contiguous to our existing acreage position, and in May 2016, we closed a leasehold acquisition in close proximity to our operating area (together, the “Recent Acquisitions”). These assets are comprised primarily of operated acreage, and we believe they increase our inventory of extended laterals. The Recent Acquisitions added approximately 2,400 net acres and 250 Boe/d of production. Thus far in 2016, we have spent approximately $44 million on acquisitions.

Borrowing Base Reaffirmation

The borrowing base under our revolving credit facility depends on, among other things, projected revenues from, and asset values of, the oil and natural gas properties securing our loan. Our borrowing base was $140 million as of March 31, 2016 and was reaffirmed on April 29, 2016. Our next scheduled borrowing base redetermination is expected in the fall of 2016.

Crude Gathering Agreement

In the first quarter of 2016, we entered into a crude gathering and transportation agreement with Oryx Southern Delaware Oil Gathering and Transport LLC, a private midstream company, pursuant to which it will build and operate a crude gathering system that will transport the majority of our crude production to market. The system, which is currently under construction and expected to be operational in the third quarter of 2016, will transport our crude oil to market at a lower cost than we have experienced historically. Under the agreement, we dedicated the majority of our operated acreage but have no volume commitments to the system.

Our Ownership and Organizational Structure

Following our corporate reorganization, our existing investors (the “Existing Investors”) will consist of the following:


	Number of Shares Owned Before this Offering	Shares to be Offered in this Offering	Number of Shares Owned After this Offering
Existing Investor Name:
Centennial Resource Development, LLC(1)
Celero Energy Company, LP(1)
NGP Centennial Follow-On LLC(2)

Total

(1)

In connection with this offering, we will enter into a voting agreement with Centennial HoldCo and Celero pursuant to which, among other things, Celero has agreed to vote its shares of our common stock as directed by Centennial HoldCo. See “Certain Relationships and Related Party Transactions—Voting Agreement.”

(2)

As part of the reorganization transactions that will be completed prior to the closing of this offering, Follow-On will be recapitalized into a single class of equity with each member of Follow-On, including holders of the Follow-On incentive units, receiving a fixed percentage interest in Follow-On based on the distribution provisions contained in Follow-On’s limited liability company agreement and the implied equity value of Follow-On immediately prior to this offering, based on the aggregate number of shares of our common stock to be issued to Follow-On in connection with our corporate reorganization and the initial public offering price of our common stock in this offering. Promptly following the consummation of this offering, Follow-On intends to distribute all of its shares of our common stock and any cash received in respect of shares of our common stock it sells in this offering to its members on a pro-rata basis and then dissolve. See footnote (5) in “Principal and Selling Stockholders” for information regarding Follow-On’s members who are officers or directors of the Company or are expected to beneficially own more than 5% of our outstanding common stock after this offering.

Ownership Structure After Giving Effect to Our Corporate Reorganization and This Offering

The following diagram indicates our ownership structure after giving effect to our corporate reorganization and this offering (assuming that the underwriters’ option to purchase additional shares is not exercised).

LOGO

(1)	NGP X US Holdings, L.P. serves as the managing member of Follow-On and does not own any economic interest in Follow-On.

(2)

Follow-On intends to distribute all of its shares of our common stock and any cash received in respect of shares of our common stock it sells in this offering to its members on a pro-rata basis and then dissolve. See footnote (5) in “Principal and Selling Stockholders” for information regarding Follow-On’s members who are officers or directors of the Company or are expected to beneficially own more than 5% of our outstanding common stock after this offering.

Risk Factors

Investing in our common stock involves risks that include the speculative nature of oil and natural gas development and production, competition, volatile oil, natural gas and NGL prices and other material factors. You should read carefully the section of this prospectus entitled “Risk Factors” for an explanation of these risks before investing in our common stock. In particular, the following considerations may offset our competitive strengths or have a negative effect on our strategy or operating activities, which could cause a decrease in the price of our common stock and a loss of all or part of your investment:

•

Oil, natural gas and NGL prices are volatile. A sustained decline in oil, natural gas and NGL prices could adversely affect our business, financial condition and results of operations and our ability to meet our capital expenditure obligations and financial commitments.

•

Our development and acquisition projects require substantial capital that we may be unable to obtain, which could lead to a decline in our ability to access or grow production and reserves.

•

Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present values of our reserves.

•

Our producing properties are located in the Delaware Basin, a sub-basin of the Permian Basin, in West Texas, making us vulnerable to risks associated with a concentration of operations in a single geographic area.

•

Development of our PUDs may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated PUDs may not be ultimately developed or produced.

•

If commodity prices decrease to a level such that our future undiscounted cash flows from our properties are less than their carrying value, we may be required to take write-downs of the carrying values of our properties.

•

Our future cash flows and results of operations are highly dependent on our ability to find, develop or acquire additional oil and natural gas reserves.

•

We depend upon several significant purchasers for the sale of most of our oil, natural gas and NGL production. The loss of one or more of these purchasers could adversely affect our revenues in the short-term.

•

Our operations are subject to operational hazards for which we may not be adequately insured.

•

Our business is difficult to evaluate because we have a limited operating history, and we are susceptible to the potential difficulties associated with rapid growth and expansion.

•

Our operations are subject to various governmental regulations that require compliance that can be burdensome and expensive and adversely affect the feasibility of conducting our operations.

•

Any failure by us to comply with applicable environmental laws and regulations, including those relating to hydraulic fracturing, could result in governmental authorities taking actions that adversely affect our operations and financial condition.

•

NGP, through Centennial HoldCo and Celero, will hold approximately % of our common stock after this offering, assuming no exercise of the underwriters’ option to purchase additional shares of our common stock, and their interests may conflict with yours.

•

We expect to be a “controlled company” within the meaning of the rules of the NASDAQ Global Select Market (the “NASDAQ”) and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.

Emerging Growth Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as we are an emerging growth company, unlike public companies that are not emerging growth companies under the JOBS Act, we will not be required to:

•

provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002;

•

provide more than two years of audited financial statements and related management’s discussion and analysis of financial condition and results of operations;

•

comply with any new requirements adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer;

•

provide certain disclosures regarding executive compensation required of larger public companies or hold stockholder advisory votes on the executive compensation required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”); or

•

obtain stockholder approval of any golden parachute payments not previously approved.

We will cease to be an emerging growth company upon the earliest of:

•

the last day of the fiscal year in which we have $1.0 billion or more in annual revenues;

•

the date on which we become a “large accelerated filer” (the fiscal year-end on which the total market value of our common equity securities held by non-affiliates is $700 million or more as of June 30);

•

the date on which we issue more than $1.0 billion of non-convertible debt over a three-year period; or

•

the last day of the fiscal year following the fifth anniversary of our initial public offering.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards, but we hereby irrevocably opt out of the extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates in which adoption of such standards is required for other public companies.

Principal Executive Offices and Internet Address

Our principal executive offices are located at 1401 17th Street, Suite 1000, Denver, Colorado 80202, and our telephone number at that address is (720) 441-5515. We lease additional office space in Midland, Texas.

Our website address is . We expect to make our periodic reports and other information filed with or furnished to the Securities and Exchange Commission (the “SEC”), available free of charge through our website as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into, and does not constitute a part of, this prospectus.

The Offering

Issuer

Centennial Resource Development, Inc.

Common stock offered by us

shares.

Common stock offered by the selling stockholders

shares (or shares, if the underwriters exercise in full their option to purchase additional shares).

Common stock outstanding after this offering

shares.

Option to purchase additional shares

The selling stockholders have granted the underwriters a 30-day option to purchase up to an aggregate of additional shares of our common stock to the extent the underwriters sell more than shares of common stock in this offering.

Use of proceeds

We expect to receive approximately $ million of net proceeds, based upon the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and estimated offering expenses payable by us. Each $1.00 increase (decrease) in the public offering price would increase (decrease) our net proceeds by approximately $ million.

We intend to use a portion of the net proceeds from this offering to fully repay our $65.0 million term loan and the outstanding indebtedness under our revolving credit facility and the remaining net proceeds for general corporate purposes, including to fund our 2016, 2017 and 2018 capital expenditures. As June 30, 2016, we had $ million of outstanding borrowings under our revolving credit facility. We will not receive any proceeds from the sale of shares by the selling stockholders. Please read “Use of Proceeds.”

Dividend policy

We do not anticipate paying any cash dividends on our common stock. In addition, our credit agreement places certain restrictions on our ability to pay cash dividends. Please read “Dividend Policy.”

Directed share program

The underwriters have reserved for sale at the initial public offering price up to % of the common stock being offered by this prospectus for sale to our employees, executive officers, directors, business associates and related persons who have expressed an interest in purchasing common stock in this offering. We do not know if these persons will choose to purchase all or any portion of these reserved shares, but any purchases they do make will reduce the number of shares available to the general public. Please read “Underwriting.”

Listing and trading symbol

We have applied to list our common stock on the NASDAQ under the symbol “CDEV.”

Risk factors

You should carefully read and consider the information set forth under the heading “Risk Factors” and all other information set forth in this prospectus before deciding to invest in our common stock.

The information above does not include shares of common stock reserved for issuance pursuant to the 2016 Long Term Incentive Plan (as defined in “Executive Compensation—2016 Long Term Incentive Plan”).

Summary Historical Financial Data

Centennial Resource Development, Inc. was formed as a holding company in October 2014 and has not had any operations since its formation. Accordingly, Centennial Resource Development, Inc. does not have historical financial operating results. The following table shows summary historical consolidated and combined financial data, for the periods and as of the dates indicated, of Centennial Resource Development, Inc.‘s accounting predecessor. For all periods ending on or prior to and all dates as of or prior to the consummation of the Combination on October 15, 2014, the accounting predecessor reflects the combined results of Centennial OpCo and Celero, and for all periods and dates subsequent to October 15, 2014, the accounting predecessor reflects the results of Centennial OpCo. Due to the factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting the Comparability of Our Results of Operations to the Historical Results of Operations of Our Predecessor,” our future results of operations will not be comparable to the historical results of our predecessor. For more information regarding our predecessor, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Predecessor and Centennial Resource Development, Inc.”

The summary historical consolidated and combined financial data of our predecessor as of and for the years ended December 31, 2015 and 2014 were derived from the audited historical consolidated and combined financial statements of our predecessor included elsewhere in this prospectus. The summary historical interim consolidated financial data of our predecessor as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 were derived from the unaudited interim condensed consolidated financial statements of our predecessor included elsewhere in this prospectus.

Our historical results are not necessarily indicative of future operating results. You should read the following table in conjunction with “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Recent and Formation Transactions,” the historical consolidated and combined financial statements of our predecessor and accompanying notes included elsewhere in this prospectus.


	Our Predecessor
	Three Months Ended March 31,						Year Ended December 31,
	2016			2015			2015			2014
	(Unaudited)
	(In thousands, except per share data)
Statement of Operations Data:
Revenues:
Oil sales	$	13,226		$	21,066		$	77,643		$	114,955
Natural gas sales		1,313			1,963			7,965			9,670
NGL sales		582			1,387			4,852			7,200

Total revenues		15,121			24,416			90,460			131,825

Operating expenses:
Lease operating expenses		4,042			6,497			21,173			17,690
Severance and ad valorem taxes		844			1,193			5,021			6,875
Transportation, processing, gathering and other operating expenses		1,130			1,283			5,732			4,772
Depreciation, depletion, amortization and accretion of asset retirement obligations		21,303			23,230			90,084			69,110
Abandonment expense and impairment of unproved properties		—			—			7,619			20,025
Exploration		—			—			84			—
Contract termination and rig stacking		—			1,540			2,387			—
General and administrative expenses		2,536			2,913			14,206			31,694

Total operating expenses		29,855			36,656			146,306			150,166

Loss (gain) on sale of oil and natural gas properties		4			(2,675	)		(2,439	)		2,096

Total operating loss		(14,738	)		(9,565	)		(53,407	)		(20,437	)

Other income (expense):
Interest expense		(1,641	)		(1,526	)		(6,266	)		(2,475	)
Gain on derivatives instruments		1,918			5,154			20,756			41,943
Other income		—			—			20			281

Total other income		277			3,628			14,510			39,749

(Loss) income before taxes		(14,461	)		(5,937	)		(38,897	)		19,312
Income tax benefit (expense)		—			—			572			(1,524	)

Net (loss) income		(14,461	)		(5,937	)		(38,325	)		17,788
Less: Net loss attributable to noncontrolling interest		—			—			—			(2	)

Net (loss) income	$	(14,461	)	$	(5,937	)	$	(38,325	)	$	17,790

Pro Forma Per Share Data (Unaudited)(1):
Net loss per common share:
Basic and diluted	$						$
Weighted average common shares outstanding:
Basic and diluted
Cash Flow Data:
Net cash provided by operating activities	$	18,552		$	27,632		$	68,882		$	97,248
Net cash used in investing activities		(22,419	)		(79,006	)		(198,635	)		(163,380	)
Net cash provided by financing activities		2,197			38,913			118,504			36,966
Other Financial Data:
Adjusted EBITDAX(2)	$	15,198		$	22,259		$	82,279		$	88,108

(1)

The net loss per common share and weighted average common shares outstanding reflect the estimated number of shares of common stock we expect to have outstanding upon the completion of the corporate reorganization described under “Recent and Formation Transactions—Formation Transactions—Our Corporate Reorganization” and this offering. The pro forma per share data also reflects additional pro forma income tax benefit of $5.1 million and $13.6 million for the three months ended March 31, 2016 and the year ended December 31, 2015 associated with the income tax effects of the corporate reorganization described under “Recent and Formation Transactions—Formation Transactions—Our Corporate Reorganization” or this offering. Centennial Resource Development, Inc. is a Subchapter C corporation (“C-corp”) under the Internal Revenue Code of 1986, as amended (the “Code”), and as a result, will be subject to U.S. federal, state and local income taxes. Although our predecessor was subject to franchise tax in the State of Texas, it generally passed through its taxable income to its owners for other income tax purposes and thus was not subject to U.S. federal income taxes or other state or local income taxes.

(2)	Adjusted EBITDAX is a non-GAAP financial measure. For a definition of Adjusted EBITDAX and a reconciliation of Adjusted EBITDAX to net income, see “—Non-GAAP Financial Measure” below.


	Our Predecessor
	March 31, 2016		December 31,
	March 31, 2016		2015		2014
	(Unaudited)
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	98	$	1,768	$	13,017
Other current assets		22,153		32,377		54,329

Total current assets		22,251		34,145		67,346

Total property and equipment, net		579,863		578,787		540,624
Other long-term assets		2,953		3,363		7,799

Total assets	$	605,067	$	616,295	$	615,769

Current liabilities	$	22,146	$	22,133	$	103,512
Revolving credit facility		77,000		74,000		65,000
Term loan, net of unamortized financing costs		64,687		64,649		64,568
Other long-term liabilities		4,831		4,649		4,757

Total liabilities		168,664		165,431		237,837
Owners’ equity		436,403		450,864		377,932

Total liabilities and owners’ equity	$	605,067	$	616,295	$	615,769

Non-GAAP Financial Measure

Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income (loss) before interest expense, income taxes, depreciation, depletion and amortization and accretion of asset retirement obligations, abandonment expense and impairment of unproved properties, (gains) losses on derivatives excluding net cash receipts (payments) on settled derivatives, non-cash equity based compensation, gains and losses from the sale of assets and other non-cash and non-recurring operating items. Adjusted EBITDAX is not a measure of net income as determined by United States generally accepted accounting principles (“GAAP”).

understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. Our presentation of Adjusted EBITDAX should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

The following table presents a reconciliation of Adjusted EBITDAX to net income, our most directly comparable financial measure calculated and presented in accordance with GAAP.


	Our Predecessor
	Three Months Ended March 31,						Year Ended December 31,
	2016			2015			2015			2014
	(In thousands)
Adjusted EBITDAX reconciliation to net income:
Net (loss) income	$	(14,461	)	$	(5,937	)	$	(38,325	)	$	17,790
Interest expense		1,641			1,526			6,266			2,475
Income tax (benefit) expense		—			—			(572	)		1,524
Depreciation, depletion and amortization and accretion of asset retirement obligations		21,303			23,230			90,084			69,110
Abandonment expense and impairment of unproved properties		—			—			7,619			20,025
Gain on derivatives		(1,918	)		(5,154	)		(20,756	)		(41,943	)
Net cash receipts on settled derivatives		8,629			9,729			36,430			4,611
Non-cash equity based compensation		—			—			—			12,420
Contract termination and rig stacking		—			1,540			2,387			—
Write-off of deferred offering costs(1)		—			—			1,585
Loss (gain) on sale of assets		4			(2,675	)		(2,439	)		2,096

Adjusted EBITDAX	$	15,198		$	22,259		$	82,279		$	88,108

(1)	During the year ended December 31, 2015, we delayed the timing of this offering and, as a result, deferred offering costs of $1.6 million were charged against earnings.

Summary Historical Reserve and Operating Data

The following tables present, for the periods and as of the dates indicated, summary data with respect to our estimated net proved oil and natural gas reserves and operating data.

The reserve estimates attributable to our properties as of December 31, 2015 presented in the table below are based on a reserve report prepared by NSAI, our independent petroleum engineer. All of these reserve estimates were prepared in accordance with the SEC’s rules regarding oil and natural gas reserve reporting that are currently in effect. The following tables also contain summary unaudited information regarding production and sales of oil, natural gas and NGLs with respect to such properties.

Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business—Oil and Natural Gas Data—Proved Reserves” in evaluating the material presented below.


	As of December 31, 2015(1)
Proved Reserves:
Oil (MBbls)		23,199
Natural gas (MMcf)		32,442
NGLs (MBbls)		3,851

Total proved reserves (MBoe)		32,457
Proved Developed Reserves:
Oil (MBbls)		9,347
Natural gas (MMcf)		12,711
NGLs (MBbls)		1,603

Total proved developed reserves (MBoe)		13,068
Proved developed reserves as a percentage of total proved reserves		40	%
Proved Undeveloped Reserves:
Oil (MBbls)		13,852
Natural gas (MMcf)		19,731
NGLs (MBbls)		2,248

Total proved undeveloped reserves (MBoe)		19,389
Oil and Natural Gas Prices:
Oil—WTI posted price per Bbl	$	46.79
Natural gas—Henry Hub spot price per MMBtu	$	2.59

(1)

Our estimated net proved reserves were determined using average first-day-of-the-month prices for the prior 12 months in accordance with SEC guidance. For oil and NGL volumes, the average West Texas Intermediate posted price of $46.79 per barrel as of December 31, 2015 was adjusted for quality, transportation fees and a regional price differential. For gas volumes, the average Henry Hub spot price of $2.59 per MMBtu as of December 31, 2015 was adjusted for energy content, transportation fees and a regional price differential. All prices are held constant throughout the lives of the properties. The average adjusted product prices weighted by production over the remaining lives of the properties are $41.85 per barrel of oil, $13.94 per barrel of NGL and $1.71 per Mcf of gas as of December 31, 2015.


	Our Predecessor
	Three Months Ended March 31, 2016		Year Ended December 31, 2015
Production and Operating Data:
Net Production Volumes(1):
Oil (MBbls)		470		1,830
Natural gas (MMcf)		698		3,058
NGLs (MBbls)		70		331

Total (MBoe)		656		2,671

Average net daily production (Boe/d)		7,212		7,317
Average Sales Prices:
Oil (per Bbl) (excluding impact of cash settled derivatives)	$	28.14	$	42.43
Oil (per Bbl) (after impact of cash settled derivatives)		46.50		61.61
Natural gas (per Mcf) (excluding impact of cash settled derivatives)		1.88		2.60
Natural gas (per Mcf) (after impact of cash settled derivatives)		1.88		3.04
NGLs (per Bbl)		8.31		14.66

Total (per Boe) (excluding impact of cash settled derivatives)		23.05		33.87
Total (per Boe) (after impact of cash settled derivatives)		36.20		47.51
Average Unit Costs per Boe:
Lease operating expenses	$	6.16	$	7.93
Severance and ad valorem taxes		1.29		1.88
Transportation, processing, gathering and other operating expenses		1.72		2.15
Depreciation, depletion, amortization, and accretion of asset retirement obligations		32.47		33.73
Abandonment expense and impairment of unproved properties		—		2.85
Exploration		—		0.03
Contract termination and rig stacking		—		0.89
General and administrative expenses(2)		3.87		5.32

(1)	Totals may not sum or recalculate due to rounding.

(2)	General and administrative expenses do not include additional expenses we would have incurred as a result of being a public company.

RISK FACTORS

Investing in our common stock involves risks. You should carefully consider the information in this prospectus, including the matters addressed under “Cautionary Statement Regarding Forward-Looking Statements,” and the following risks before making an investment decision. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

Risks Related to Our Business

The prices we receive for our oil, natural gas and NGL production heavily influence our revenue, profitability, access to capital, future rate of growth and carrying value of our properties. Oil, natural gas and NGLs are commodities, and their prices may fluctuate widely in response to relatively minor changes in the supply of and demand for oil, natural gas and NGLs and market uncertainty. Historically, oil, natural gas and NGL prices have been volatile. For example, during the period from January 1, 2014 through May 31, 2016, the WTI spot price for oil has declined from a high of $107.62 per Bbl on July 23, 2014 to $26.21 per Bbl on February 11, 2016, and the Henry Hub spot price for natural gas has declined from a high of $7.92 per MMBtu on March 4, 2014 to a low of $1.49 per MMBtu on March 4, 2016. Likewise, NGLs, which are made up of ethane, propane, isobutene, normal butane and natural gasoline, all of which have different uses and different pricing characteristics, have suffered significant recent declines in realized prices. The prices we receive for our production, and the levels of our production, depend on numerous factors beyond our control, which include the following:

•

worldwide and regional economic conditions impacting the global supply and demand for oil, natural gas and NGLs;

•

the price and quantity of foreign imports of oil, natural gas and NGLs;

•

political and economic conditions in or affecting other producing regions or countries, including the Middle East, Africa, South America and Russia;

•

actions of the Organization of the Petroleum Exporting Countries, its members and other state-controlled oil companies relating to oil price and production controls;

•

the level of global exploration, development and production;

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the level of global inventories;

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prevailing prices on local price indexes in the area in which we operate;

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the proximity, capacity, cost and availability of gathering and transportation facilities;

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localized and global supply and demand fundamentals and transportation availability;

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the cost of exploring for, developing, producing and transporting reserves;

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weather conditions and other natural disasters;

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technological advances affecting energy consumption;

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the price and availability of alternative fuels;

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expectations about future commodity prices; and

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U.S. federal, state and local and non-U.S. governmental regulation and taxes.

In the second half of 2014, oil prices began a rapid and significant decline as the global oil supply began to outpace demand. During 2015 and thus far in 2016, the global oil supply has continued to outpace demand, resulting in a sustained decline in realized prices for oil production. In general, this imbalance between supply and demand reflects the significant supply growth achieved in the United States as a result of shale drilling and oil production increases by certain other countries, including Russia and Saudi Arabia, as part of an effort to retain market share, combined with only modest demand growth in the United States and less-than-expected demand in other parts of the world, particularly in Europe and China. Although there has been a dramatic decrease in drilling activity in the industry, oil storage levels in the United States remain at historically high levels. Until supply and demand balance and the overhang in storage levels begins to decline, prices are expected to remain under pressure. In addition, the lifting of economic sanctions on Iran has resulted in increasing supplies of oil from Iran, adding further downward pressure to oil prices. NGL prices generally correlate to the price of oil. Also adversely affecting the price for NGLs is the supply of NGLs in the United States, which has continued to grow due to an increase in industry participants targeting projects that produce NGLs in recent years. Prices for domestic natural gas began to decline during the third quarter of 2014 and have continued to be weak throughout 2015 and thus far in 2016. The declines in natural gas prices are primarily due to an imbalance between supply and demand across North America. The duration and magnitude of the commodity price declines cannot be accurately predicted. Compared to 2014, our realized oil price for 2015 fell 47.3% to $42.43 per barrel, and our realized oil price for the three months ended March 31, 2016 has further decreased to $28.14 per barrel. Similarly, our realized natural gas price for 2015 dropped 43.2% to $2.60 per Mcf and our realized price for NGLs declined 52.2% to $14.66 per barrel. For the three months ended March 31, 2016, our realized price for natural gas was $1.88 per Mcf and our realized price for NGLs was $8.31 per barrel.

Lower commodity prices may reduce our cash flows and borrowing ability. If we are unable to obtain needed capital or financing on satisfactory terms, our ability to develop future reserves could be adversely affected. Also, using lower prices in estimating proved reserves may result in a reduction in proved reserve volumes due to economic limits. In addition, sustained periods with oil and natural gas prices at levels lower than current West Texas Intermediate or Henry Hub strip prices and the resultant effect such prices may have on our drilling economics and our ability to raise capital may require us to re-evaluate and postpone or eliminate our development drilling, which could result in the reduction of some of our proved undeveloped reserves and related standardized measure. If we are required to curtail our drilling program, we may be unable to continue to hold leases that are scheduled to expire, which may further reduce our reserves. As a result, a substantial or extended decline in commodity prices may materially and adversely affect our future business, financial condition, results of operations, liquidity and ability to finance planned capital expenditures.

Our development and acquisition projects require substantial capital expenditures. We may be unable to obtain required capital or financing on satisfactory terms, which could lead to a decline in our ability to access or grow production and reserves.

The oil and natural gas industry is capital-intensive. We make and expect to continue to make substantial capital expenditures related to our development and acquisition projects. Our 2016 capital budget for drilling, completion, recompletion activities and facilities costs is approximately $87 million, excluding leasing and other acquisitions. We expect to fund our 2016 capital expenditures with cash generated by operations, borrowings under our revolving credit facility and a portion of the proceeds from this offering; however, our financing needs may require us to alter or increase our capitalization substantially through the issuance of debt or equity securities or the sale of assets. The issuance of additional indebtedness would require that a portion of our cash flow from operations be used for the payment of interest and principal on our indebtedness, thereby reducing our ability to use cash flow from operations to fund working capital, capital expenditures and acquisitions. The issuance of additional equity securities would be dilutive to our other stockholders. The actual amount and timing of our future capital expenditures may differ materially from our estimates as a result of, among other things, oil, natural gas and NGL prices; actual drilling results; the availability of drilling rigs and other services and equipment; and regulatory, technological and competitive developments. A reduction in commodity prices from current levels may result in a decrease in our actual capital expenditures, which would negatively impact our ability to grow production.

Our cash flow from operations and access to capital are subject to a number of variables, including:

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the prices at which our production is sold;

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our proved reserves;

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the level of hydrocarbons we are able to produce from existing wells;

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our ability to acquire, locate and produce new reserves;

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the levels of our operating expenses; and

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our ability to borrow under our revolving credit facility and our ability to access the capital markets.

If our revenues or the borrowing base under our revolving credit facility decrease as a result of lower oil, natural gas and NGL prices, operating difficulties, declines in reserves or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations at current levels. If additional capital is needed, we may not be able to obtain debt or equity financing on terms acceptable to us, if at all. For a period of 180 days following the date of this prospectus, we will not be able to sell any shares of our common stock, whether pursuant to a private or public offering, without the prior written consent of Credit Suisse Securities (USA) LLC. See “Underwriting” for more information. If cash flow generated by our operations or available borrowings under our revolving credit facility are not sufficient to meet our capital requirements, the failure to obtain additional financing could result in a curtailment of our operations relating to development of our properties, which in turn could lead to a decline in our reserves and production, and could materially and adversely affect our business, financial condition and results of operations.

Part of our strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application.

Our operations involve utilizing some of the latest drilling and completion techniques as developed by us and our service providers. Risks that we face while drilling horizontal wells include the following:

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landing our wellbore in the desired drilling zone;

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staying in the desired drilling zone while drilling horizontally through the formation;

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running our casing the entire length of the wellbore; and

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being able to run tools and other equipment consistently through the horizontal wellbore.

Risks that we face while completing our wells include the following:

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the ability to fracture stimulate the planned number of stages;

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the ability to run tools the entire length of the wellbore during completion operations; and

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the ability to successfully clean out the wellbore after completion of the final fracture stimulation stage.

In addition, certain of the new techniques we are adopting may cause irregularities or interruptions in production due to offset wells being shut in and the time required to drill and complete multiple wells before any such wells begin producing. Furthermore, the results of our drilling in new or emerging formations are more uncertain initially than drilling results in areas that are more developed and have a longer history of established production. Newer or emerging formations and areas have limited or no production history and, consequently, we are more limited in assessing future drilling results in these areas. If our drilling results are less than anticipated, the return on our investment for a particular project may not be as attractive as we anticipated, and we could incur material write-downs of unevaluated properties and the value of our undeveloped acreage could decline in the future.

Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations.

Our future financial condition and results of operations will depend on the success of our development, acquisition and production activities, which are subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable oil and natural gas production.

Our decisions to develop or purchase prospects or properties will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. For a discussion of the uncertainty involved in these processes, see “—Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.” In addition, our cost of drilling, completing and operating wells is often uncertain.

Further, many factors may curtail, delay or cancel our scheduled drilling projects, including the following:

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delays imposed by or resulting from compliance with regulatory requirements, including limitations resulting from wastewater disposal, emission of greenhouse gases (“GHGs”) and limitations on hydraulic fracturing;

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pressure or irregularities in geological formations;

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shortages of or delays in obtaining equipment and qualified personnel or in obtaining water for hydraulic fracturing activities;

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equipment failures, accidents or other unexpected operational events;

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lack of available gathering facilities or delays in construction of gathering facilities;

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lack of available capacity on interconnecting transmission pipelines;

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adverse weather conditions;

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issues related to compliance with environmental regulations;

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environmental hazards, such as oil and natural gas leaks, oil spills, pipeline and tank ruptures and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the surface and subsurface environment;

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declines in oil and natural gas prices;

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limited availability of financing at acceptable terms;

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title problems; and

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limitations in the market for oil and natural gas.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under applicable debt instruments, which may not be successful.

Our ability to make scheduled payments on or to refinance our indebtedness obligations, including our term loan and revolving credit facility, depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund debt service obligations, we may be forced to reduce or delay investments and capital expenditures, sell assets, seek additional capital or restructure or refinance indebtedness. Our ability to restructure or refinance indebtedness will depend on the condition of the

capital markets and our financial condition at such time. Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence of sufficient cash flows and capital resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet debt service and other obligations. Our credit agreement currently restricts our ability to dispose of assets and our use of the proceeds from such disposition. We may not be able to consummate those dispositions, and the proceeds of any such disposition may not be adequate to meet any debt service obligations then due. These alternative measures may not be successful and may not permit us to meet scheduled debt service obligations.

Restrictions in our existing and future debt agreements could limit our growth and our ability to engage in certain activities.

Our credit agreement contains a number of significant covenants, including restrictive covenants that may limit our ability to, among other things:

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incur additional indebtedness;

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make loans to others;

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make investments;

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merge or consolidate with another entity;

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make certain payments;

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hedge future production or interest rates;

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incur liens;

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sell assets; and

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engage in certain other transactions without the prior consent of the lenders.

In addition, our credit agreement requires us to maintain certain financial ratios or to reduce our indebtedness if we are unable to comply with such ratios. As of March 31, 2016, we were in full compliance with such financial ratios and covenants.

The restrictions in our credit agreement may also limit our ability to obtain future financings to withstand a future downturn in our business or the economy in general, or to otherwise conduct necessary corporate activities. We may also be prevented from taking advantage of business opportunities that arise because of the limitations that the restrictive covenants under our credit agreement impose on us.

A breach of any covenant in our credit agreement would result in a default under the applicable agreement after any applicable grace periods. A default, if not waived, could result in acceleration of the indebtedness outstanding under our credit agreement and in a default with respect to, and an acceleration of, the indebtedness outstanding under other debt agreements. The accelerated indebtedness would become immediately due and payable. If that occurs, we may not be able to make all of the required payments or borrow sufficient funds to refinance such indebtedness. Even if new financing were available at that time, it may not be on terms that are acceptable to us.

Any significant reduction in our borrowing base under our revolving credit facility as a result of the periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations.

Our revolving credit facility limits the amounts we can borrow up to a borrowing base amount, which the lenders, in their sole discretion, determine semiannually on April 1 and October 1. The borrowing base depends on, among other things, projected revenues from, and asset values of, the oil and natural gas properties securing our loan. The borrowing base will automatically be decreased by an amount equal to 25% of the aggregate notional amount of issued permitted senior unsecured notes unless such decrease is waived by the lenders. The lenders can unilaterally adjust the borrowing base and the borrowings permitted to be outstanding under our revolving credit facility. Any increase in the borrowing base requires the consent of the lenders holding 100% of the commitments. Our borrowing base was $140 million as of March 31, 2016 and was reaffirmed on April 29, 2016. Our next scheduled borrowing base redetermination is expected in the fall of 2016.

In the future, we may not be able to access adequate funding under our revolving credit facility as a result of a decrease in our borrowing base due to the issuance of new indebtedness, the outcome of a subsequent borrowing base redetermination or an unwillingness or inability on the part of lending counterparties to meet their funding obligations and the inability of other lenders to provide additional funding to cover the defaulting lender’s portion. Declines in commodity prices could result in a determination to lower the borrowing base in the future and, in such a case, we could be required to repay any indebtedness in excess of the redetermined borrowing base. As a result, we may be unable to implement our respective drilling and development plan, make acquisitions or otherwise carry out business plans, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our indebtedness.

Our derivative activities could result in financial losses or could reduce our earnings.

We enter into derivative instrument contracts for a portion of our oil and natural gas production. As of March 31, 2016, we had entered into hedging contracts through December 2018 covering a total of 996 MBbls of our projected oil production. In addition, as of March 31, 2016, we had entered into basis swaps covering a total of 1,071 MBbls of our projected oil production. Accordingly, our earnings may fluctuate significantly as a result of changes in fair value of our derivative instruments.

Derivative instruments also expose us to the risk of financial loss in some circumstances, including when:

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production is less than the volume covered by the derivative instruments;

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the counterparty to the derivative instrument defaults on its contractual obligations;

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there is an increase in the differential between the underlying price in the derivative instrument and actual prices received; or

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there are issues with regard to legal enforceability of such instruments.

The use of derivatives may, in some cases, require the posting of cash collateral with counterparties. If we enter into derivative instruments that require cash collateral and commodity prices or interest rates change in a manner adverse to us, our cash otherwise available for use in our operations would be reduced, which could limit our ability to make future capital expenditures and make payments on our indebtedness, and which could also limit the size of our borrowing base. Future collateral requirements will depend on arrangements with our counterparties, highly volatile oil and natural gas prices and interest rates. In addition, derivative arrangements could limit the benefit we would receive from increases in the prices for oil and natural gas, which could also have a material adverse effect on our financial condition.

Our commodity derivative contracts expose us to risk of financial loss if a counterparty fails to perform under a contract. Disruptions in the financial markets could lead to sudden decreases in a counterparty’s liquidity,

which could make the counterparty unable to perform under the terms of the contract, and we may not be able to realize the benefit of the contract. We are unable to predict sudden changes in a counterparty’s creditworthiness or ability to perform. Even if we do accurately predict sudden changes, our ability to negate the risk may be limited depending upon market conditions.

During periods of declining commodity prices, our derivative contract receivable positions generally increase, which increases our counterparty credit exposure. If the creditworthiness of our counterparties deteriorates and results in their nonperformance, we could incur a significant loss with respect to our commodity derivative contracts.

Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.

The process of estimating oil and natural gas reserves is complex. It requires interpretations of available technical data and many assumptions, including assumptions relating to current and future economic conditions and commodity prices. Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of our reserves. In order to prepare reserve estimates, we must project production rates and timing of development expenditures. We must also analyze available geological, geophysical, production and engineering data. The extent, quality and reliability of this data can vary. The process also requires economic assumptions about matters such as oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds.

Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves may vary from our estimates. For instance, initial production rates reported by us or other operators may not be indicative of future or long-term production rates, our recovery efficiencies may be worse than expected, and production declines may be greater than we estimate and may be more rapid and irregular when compared to initial production rates. In addition, we may adjust reserve estimates to reflect additional production history, results of development activities, current commodity prices and other existing factors. Any significant variance could materially affect the estimated quantities and present value of our reserves.

You should not assume that the present value of future net revenues from our reserves is the current market value of our estimated reserves. We generally base the estimated discounted future net cash flows from reserves on prices and costs on the date of the estimate. Actual future prices and costs may differ materially from those used in the present value estimate. For example, our estimated proved reserves as of December 31, 2015 and related standardized measure were calculated under SEC rules using twelve-month trailing average benchmark prices of $46.79 per barrel of oil (WTI) and $2.59 per MMBtu (Henry Hub spot), which, for certain periods in 2016, were substantially higher than the available spot prices. If spot prices are below such calculated amounts, using more recent prices in estimating proved reserves may result in a reduction in proved reserve volumes due to economic limits.

We will not be the operator on all of our acreage or drilling locations, and, therefore, we will not be able to control the timing of exploration or development efforts, associated costs, or the rate of production of any non-operated assets.

We have leased or acquired approximately 42,500 net acres, approximately 83% of which we operate, as of June 15, 2016. As of June 15, 2016, we were the operator on 674 of our 1,357 identified gross horizontal drilling locations. We will have limited ability to exercise influence over the operations of the drilling locations operated by our partners, and there is the risk that our partners may at any time have economic, business or legal interests

or goals that are inconsistent with ours. Furthermore, the success and timing of development activities operated by our partners will depend on a number of factors that will be largely outside of our control, including:

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the timing and amount of capital expenditures;

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the operator’s expertise and financial resources;

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the approval of other participants in drilling wells;

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the selection of technology; and

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the rate of production of reserves, if any.

This limited ability to exercise control over the operations and associated costs of some of our drilling locations could prevent the realization of targeted returns on capital in drilling or acquisition activities.

Our identified drilling locations are scheduled out over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. In addition, we may not be able to raise the substantial amount of capital that would be necessary to drill such locations.

Our management team has specifically identified and scheduled certain drilling locations as an estimation of our future multi-year drilling activities on our existing acreage. These drilling locations represent a significant part of our growth strategy. Our ability to drill and develop these locations depends on a number of uncertainties, including oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, gathering system and pipeline transportation constraints, access to and availability of water sourcing and distribution systems, regulatory approvals and other factors. Because of these uncertain factors, we do not know if the numerous drilling locations we have identified will ever be drilled or if we will be able to produce natural gas or oil from these or any other drilling locations. In addition, unless production is established within the spacing units covering the undeveloped acres on which some of the drilling locations are obtained, the leases for such acreage will expire. As such, our actual drilling activities may materially differ from those presently identified.

As of June 15, 2016, we had identified 1,357 horizontal drilling locations on our acreage based on approximately 880-foot spacing with five to six wells per 640-acre section in the Wolfcamp zones and approximately 1,320-foot spacing with four wells per 640-acre section in the 3rd Bone Spring Sandstone, in each case, consisting of laterals ranging from 4,500 feet up to 9,500 feet. As a result of the limitations described above, we may be unable to drill many of our identified locations. In addition, we will require significant additional capital over a prolonged period in order to pursue the development of these locations, and we may not be able to raise or generate the capital required to do so. See “—Our development and acquisition projects require substantial capital expenditures. We may be unable to obtain required capital or financing on satisfactory terms, which could lead to a decline in our ability to access or grow production and reserves.” Any drilling activities we are able to conduct on these locations may not be successful or result in our ability to add additional proved reserves to our overall proved reserves or may result in a downward revision of our estimated proved reserves, which could have a material adverse effect on our future business and results of operations. Additionally, if we curtail our drilling program, we may lose a portion of our acreage through lease expirations.

Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage, the primary term is extended through continuous drilling provisions or the leases are renewed.

As of June 15, 2016, approximately 67% of our total net acreage (approximately 75% of our net acreage in Reeves and Ward counties) was either held by production or under continuous drilling provisions. The leases for our net acreage not held by production will expire at the end of their primary term unless production is established in paying quantities under the units containing these leases, the leases are held beyond their primary terms under continuous drilling provisions or the leases are renewed. If our leases expire and we are unable to renew the leases, we will lose our right to develop the related properties. Our ability to drill and develop these

locations depends on a number of uncertainties, including oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, gathering system and pipeline transportation constraints, access to and availability of water sourcing and distribution systems, regulatory approvals and other factors.

Adverse weather conditions may negatively affect our operating results and our ability to conduct drilling activities.

Adverse weather conditions may cause, among other things, increases in the costs of, and delays in, drilling or completing new wells, power failures, temporary shut-in of production and difficulties in the transportation of our oil, natural gas and NGLs. Any decreases in production due to poor weather conditions will have an adverse effect on our revenues, which will in turn negatively affect our cash flow from operations.

Our operations are substantially dependent on the availability of water. Restrictions on our ability to obtain water may have an adverse effect on our financial condition, results of operations and cash flows.

Water is an essential component of deep shale oil and natural gas production during both the drilling and hydraulic fracturing processes. Drought conditions have persisted in Texas in past years. These drought conditions have led governmental authorities to restrict the use of water subject to their jurisdiction for hydraulic fracturing to protect local water supplies. If we are unable to obtain water to use in our operations, we may be unable to economically produce oil and natural gas, which could have a material and adverse effect on our financial condition, results of operations and cash flows.

Our producing properties are located in the Delaware Basin, a sub-basin of the Permian Basin, in West Texas, making us vulnerable to risks associated with operating in a single geographic area.

All of our producing properties are geographically concentrated in the Delaware Basin, a sub-basin of the Permian Basin, in West Texas. At December 31, 2015, all of our total estimated proved reserves were attributable to properties located in this area. As a result of this concentration, we may be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, processing or transportation capacity constraints, market limitations, availability of equipment and personnel, water shortages or other drought related conditions or interruption of the processing or transportation of oil, natural gas or NGLs.

The marketability of our production is dependent upon transportation and other facilities, certain of which we do not control. If these facilities are unavailable, our operations could be interrupted and our revenues reduced.

The marketability of our oil and natural gas production depends in part upon the availability, proximity and capacity of transportation facilities owned by third parties. Our oil production is transported from the wellhead to our tank batteries by our gathering systems. The oil is then transported by the purchaser by truck to a transportation facility. Our natural gas production is generally transported by third-party gathering lines from the wellhead to a gas processing facility. We do not control these trucks and other third-party transportation facilities and our access to them may be limited or denied. Insufficient production from our wells to support the construction of pipeline facilities by our purchasers or a significant disruption in the availability of our or third-party transportation facilities or other production facilities could adversely impact our ability to deliver to market or produce our oil and natural gas and thereby cause a significant interruption in our operations. If, in the future, we are unable, for any sustained period, to implement acceptable delivery or transportation arrangements or encounter production related difficulties, we may be required to shut in or curtail production. Any such shut-in or curtailment, or an inability to obtain favorable terms for delivery of the oil and natural gas produced from our fields, would materially and adversely affect our financial condition and results of operations.

We may incur losses as a result of title defects in the properties in which we invest.

The existence of a material title deficiency can render a lease worthless and can adversely affect our results of operations and financial condition. While we typically obtain title opinions prior to commencing drilling operations on a lease or in a unit, the failure of title may not be discovered until after a well is drilled, in which case we may lose the lease and the right to produce all or a portion of the minerals under the property.

The development of our estimated PUDs may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated PUDs may not be ultimately developed or produced.

As of December 31, 2015, 60% of our total estimated proved reserves were classified as proved undeveloped. Development of these proved undeveloped reserves may take longer and require higher levels of capital expenditures than we currently anticipate. Delays in the development of our reserves, increases in costs to drill and develop such reserves or decreases in commodity prices will reduce the value of our estimated PUDs and future net revenues estimated for such reserves and may result in some projects becoming uneconomic. In addition, delays in the development of reserves could cause us to have to reclassify our PUDs as unproved reserves. Further, we may be required to write-down our PUDs if we do not drill those wells within five years after their respective dates of booking.

Accounting rules require that we periodically review the carrying value of our properties for possible impairment. Based on prevailing commodity prices and specific market factors and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development plans, production data, economics and other factors, we may be required to write-down the carrying value of our properties. A write-down constitutes a non-cash charge to earnings. Recently, commodity prices have declined significantly. On May 31, 2016, the WTI spot price for crude oil was $45.10 per barrel and the Henry Hub spot price for natural gas was $2.09 per MMBtu, representing decreases of 54% and 74%, respectively, from the high of $107.62 per barrel of oil and $7.92 per MMBtu for natural gas during 2014. Likewise, NGLs have suffered significant recent declines in realized prices. NGLs are made up of ethane, propane, isobutene, normal butane and natural gasoline, all of which have different uses and different pricing characteristics. Lower commodity prices in the future could result in impairments of our properties, which could have a material adverse effect on our results of operations for the periods in which such charges are taken.

Unless we replace our reserves with new reserves and develop those reserves, our reserves and production will decline, which would adversely affect our future cash flows and results of operations.

Producing oil and natural gas reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Unless we conduct successful ongoing exploration and development activities or continually acquire properties containing proved reserves, our proved reserves will decline as those reserves are produced. Our future reserves and production, and therefore our future cash flow and results of operations, are highly dependent on our success in efficiently developing our current reserves and economically finding or acquiring additional recoverable reserves. We may not be able to develop, find or acquire sufficient additional reserves to replace our current and future production. If we are unable to replace our current and future production, the value of our reserves will decrease, and our business, financial condition and results of operations would be materially and adversely affected.

Conservation measures and technological advances could reduce demand for oil and natural gas.

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, technological advances in fuel economy and energy generation devices could reduce demand for oil and natural gas. The impact of the changing demand for oil and natural gas may have a material adverse effect on our business, financial condition, results of operations and cash flows.

We depend upon a significant purchaser for the sale of most of our oil, natural gas and NGL production.

We normally sell our production to a relatively small number of customers, as is customary in our business. For the years ended December 31, 2015 and 2014, Plains Marketing, L.P. accounted for 64% and 78%, respectively, of our total revenue. During such years, no other purchaser accounted for 10% or more of our revenue. The loss of Plains Marketing, L.P. as a purchaser could materially and adversely affect our revenues in the short-term.

Our operations may be exposed to significant delays, costs and liabilities as a result of environmental and occupational health and safety requirements applicable to our business activities.

Our operations are subject to stringent and complex federal, state and local laws and regulations governing the discharge of materials into the environment, health and safety aspects of our operations or otherwise relating to environmental protection. These laws and regulations may impose numerous obligations applicable to our operations, including the acquisition of a permit or other approval before conducting regulated activities; the restriction of types, quantities and concentration of materials that can be released into the environment; the limitation or prohibition of drilling activities on certain lands lying within wilderness, wetlands and other protected areas; the application of specific health and safety criteria addressing worker protection; and the imposition of substantial liabilities for pollution resulting from our operations. Numerous governmental authorities, such as the U.S. Environmental Protection Agency (“EPA”) and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them. Such enforcement actions often involve taking difficult and costly compliance measures or corrective actions. Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil or criminal penalties, natural resource damages, the imposition of investigatory or remedial obligations, and the issuance of orders limiting or prohibiting some or all of our operations. In addition, we may experience delays in obtaining, or be unable to obtain, required permits, which may delay or interrupt our operations and limit our growth and revenue.

Certain environmental laws impose strict as well as joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released. We may be required to remediate contaminated properties currently or formerly operated by us or facilities of third parties that received waste generated by our operations regardless of whether such contamination resulted from the conduct of others or from consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. In connection with certain acquisitions, we could acquire, or be required to provide indemnification against, environmental liabilities that could expose us to material losses. In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of our operations. Our insurance may not cover all environmental risks and costs or may not provide sufficient coverage if an environmental claim is made against us. Moreover, public interest in the protection of the environment has increased dramatically in recent years. The trend of more expansive and stringent environmental legislation and regulations applied to the crude oil and natural gas industry could continue, resulting in increased costs of doing business and consequently affecting profitability. To the extent laws are enacted or other governmental action is taken that restricts drilling or imposes more stringent and costly operating, waste handling, disposal and cleanup requirements, our business, prospects, financial condition or results of operations could be materially adversely affected.

We may incur substantial losses and be subject to substantial liability claims as a result of our operations. Additionally, we may not be insured for, or our insurance may be inadequate to protect us against, these risks.

We are not insured against all risks. Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect our business, financial condition or results of operations.

Our development activities are subject to all of the operating risks associated with drilling for and producing oil and natural gas, including the possibility of:

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environmental hazards, such as uncontrollable releases of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater, air and shoreline contamination;

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abnormally pressured formations;

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mechanical difficulties, such as stuck oilfield drilling and service tools and casing collapse;

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fires, explosions and ruptures of pipelines;

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personal injuries and death;

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natural disasters; and

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terrorist attacks targeting oil and natural gas related facilities and infrastructure.

Any of these risks could adversely affect our ability to conduct operations or result in substantial loss to us as a result of claims for:

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injury or loss of life;

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damage to and destruction of property, natural resources and equipment;

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pollution and other environmental damage;

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regulatory investigations and penalties; and

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repair and remediation costs.

We may elect not to obtain insurance for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

Properties that we decide to drill may not yield oil or natural gas in commercially viable quantities.

Properties that we decide to drill that do not yield oil or natural gas in commercially viable quantities will adversely affect our results of operations and financial condition. There is no way to predict in advance of drilling and testing whether any particular prospect will yield oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable. The use of micro-seismic data and other technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling whether oil or natural gas will be present or, if present, whether oil or natural gas will be present in commercial quantities. We cannot assure you that the analogies we draw from available data from other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects. Further, our drilling operations may be curtailed, delayed or cancelled as a result of numerous factors, including:

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unexpected drilling conditions;

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title problems;

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pressure or lost circulation in formations;

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equipment failure or accidents;

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adverse weather conditions;

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compliance with environmental and other governmental or contractual requirements; and

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increase in the cost of, shortages or delays in the availability of, electricity, supplies, materials, drilling or workover rigs, equipment and services.

We may be unable to make attractive acquisitions or successfully integrate acquired businesses, and any inability to do so may disrupt our business and hinder our ability to grow.

In the future we may make acquisitions of assets or businesses that complement or expand our current business. However, there is no guarantee we will be able to identify attractive acquisition opportunities. In the event we are able to identify attractive acquisition opportunities, we may not be able to complete the acquisition or do so on commercially acceptable terms. Competition for acquisitions may also increase the cost of, or cause us to refrain from, completing acquisitions.

The success of any completed acquisition will depend on our ability to integrate effectively the acquired business into our existing operations. The process of integrating acquired businesses may involve unforeseen difficulties and may require a disproportionate amount of our managerial and financial resources. In addition, possible future acquisitions may be larger and for purchase prices significantly higher than those paid for earlier acquisitions. No assurance can be given that we will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets. Our failure to achieve consolidation savings, to integrate the acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our financial condition and results of operations.

In addition, our credit agreement imposes certain limitations on our ability to enter into mergers or combination transactions. Our credit agreement also limits our ability to incur certain indebtedness, which could indirectly limit our ability to engage in acquisitions of businesses.

Certain of our properties are subject to land use restrictions, which could limit the manner in which we conduct our business.

Certain of our properties are subject to land use restrictions, including city ordinances, which could limit the manner in which we conduct our business. Although none of our drilling locations associated with proved undeveloped reserves as of December 31, 2015 or March 31, 2016 are on properties currently subject to such land use restrictions, such restrictions could affect, among other things, our access to and the permissible uses of our facilities as well as the manner in which we produce oil and natural gas and may restrict or prohibit drilling in general. The costs we incur to comply with such restrictions may be significant in nature, and we may experience delays or curtailment in the pursuit of development activities and perhaps even be precluded from the drilling of wells.

The unavailability or high cost of additional drilling rigs, equipment, supplies, personnel and oilfield services could adversely affect our ability to execute our development plans within our budget and on a timely basis.

The demand for drilling rigs, pipe and other equipment and supplies, as well as for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry, can fluctuate significantly, often in correlation with oil and natural gas prices, causing periodic shortages. Our operations are concentrated in areas in which industry had

increased rapidly, and as a result, demand for such drilling rigs, equipment and personnel, as well as access to transportation, processing and refining facilities in these areas, had increased, as did the costs for those items. However, beginning in the second half of 2014, commodity prices began to decline and the demand for goods and services has subsided due to reduced activity. To the extent that commodity prices improve in the future, any delay or inability to secure the personnel, equipment, power, services, resources and facilities access necessary for us to resume or increase our development activities could result in production volumes being below our forecasted volumes. In addition, any such negative effect on production volumes, or significant increases in costs, could have a material adverse effect on our cash flow and profitability. Furthermore, if we are unable to secure a sufficient number of drilling rigs at reasonable costs, we may not be able to drill all of our acreage before our leases expire.

We could experience periods of higher costs if commodity prices rise. These increases could reduce our profitability, cash flow and ability to complete development activities as planned.

Historically, our capital and operating costs have risen during periods of increasing oil, natural gas and NGL prices. These cost increases result from a variety of factors beyond our control, such as increases in the cost of electricity, steel and other raw materials that we and our vendors rely upon; increased demand for labor, services and materials as drilling activity increases; and increased taxes. Decreased levels of drilling activity in the oil and gas industry in recent periods have led to declining costs of some drilling equipment, materials and supplies. However, such costs may rise faster than increases in our revenue if commodity prices rise, thereby negatively impacting our profitability, cash flow and ability to complete development activities as scheduled and on budget. This impact may be magnified to the extent that our ability to participate in the commodity price increases is limited by our derivative activities.

Should we fail to comply with all applicable FERC administered statutes, rules, regulations and orders, we could be subject to substantial penalties and fines.

Under the Domenici-Barton Energy Policy Act of 2005 (“EP Act of 2005”), the Federal Energy Regulatory Commission (“FERC”) has civil penalty authority under the Natural Gas Act of 1938 (the “NGA”) and the Natural Gas Policy Act (“NGPA”) to impose penalties for current violations of up to $1 million per day for each violation and disgorgement of profits associated with any violation. While our operations have not been regulated by FERC as a natural gas company under the NGA, FERC has adopted regulations that may subject certain of our otherwise non-FERC jurisdictional operations to FERC annual reporting and posting requirements. We also must comply with the anti-market manipulation rules enforced by FERC. Additional rules and legislation pertaining to those and other matters may be considered or adopted by FERC from time to time. Failure to comply with those regulations in the future could subject us to civil penalty liability, as described in “Business—Regulation of the Oil and Natural Gas Industry.”

Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the oil and natural gas that we produce, while potential physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects.

sources in the oil and natural gas source category, including production, processing, transmission and storage activities. The rule includes first-time standards to address emissions of methane from equipment and processes across the source category, including hydraulically fractured oil and natural gas well completions. The EPA has also announced that it intends to impose methane emission standards for existing sources as well but, to date, has not yet issued a proposal. Compliance with these rules will require enhanced record-keeping practices, the purchase of new equipment, such as optical gas imaging instruments to detect leaks, and increased frequency of maintenance and repair activities to address emissions leakage. The rules will also likely require additional personnel time to support these activities or the engagement of third party contractors to assist with and verify compliance. These new and proposed rules could result in increased compliance costs on our operations.

While Congress has from time to time considered legislation to reduce emissions of GHGs, there has not been significant activity in the form of adopted legislation to reduce GHG emissions at the federal level in recent years. In the absence of such federal climate legislation, a number of state and regional efforts have emerged that are aimed at tracking and/or reducing GHG emissions by means of cap and trade programs. These programs typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs. In addition, efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues. Most recently in April 2016, the United States was one of 175 countries to ratify the Paris Agreement, which requires member countries to review and “represent a progression” in their intended nationally determined contributions, which set GHG emission reduction goals, every five years beginning in 2020. Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions would impact our business, any such future laws and regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment and operations could require us to incur costs to reduce emissions of GHGs associated with our operations. Substantial limitations on GHG emissions could adversely affect demand for the oil and natural gas we produce. Finally, it should be noted that some scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, floods and other climatic events; if any such effects were to occur, they could have a material adverse effect on our operations.

Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing as well as governmental reviews of such activities could result in increased costs and additional operating restrictions or delays in the completion of oil and natural gas wells and adversely affect our production.

Hydraulic fracturing is an important and common practice that is used to stimulate production of oil and/or natural gas from dense subsurface rock formations. The hydraulic fracturing process involves the injection of water, proppants and chemicals under pressure into targeted subsurface formations to fracture the surrounding rock and stimulate production. We regularly use hydraulic fracturing as part of our operations. Hydraulic fracturing is typically regulated by state oil and natural gas commissions, but the EPA has asserted federal regulatory authority pursuant to the federal Safe Drinking Water Act (“SDWA”) over certain hydraulic fracturing activities involving the use of diesel fuels and published permitting guidance in February 2014 addressing the performance of such activities using diesel fuels. The EPA has also issued final regulations under the federal Clean Air Act establishing performance standards, including standards for the capture of air emissions released during hydraulic fracturing, and advanced notice of proposed rulemaking under the Toxic Substances Control Act to require companies to disclose information regarding the chemicals used in hydraulic fracturing, and also finalized rules in 2016 that prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants. In addition, the Bureau of Land Management finalized rules in March 2015 that impose new or more stringent standards for performing hydraulic fracturing on federal and American Indian lands. The U.S. District Court of Wyoming has temporarily stayed implementation of this rule. A final decision has not yet been issued. In addition, Congress has from time to time considered legislation to provide for federal regulation of hydraulic fracturing under the SDWA and to require disclosure of the chemicals used in the hydraulic fracturing process. It is unclear how any additional federal regulation of hydraulic fracturing activities may affect our operations.

Certain governmental reviews are either underway or being proposed that focus on environmental aspects of hydraulic fracturing practices. The White House Council on Environmental Quality is coordinating an administration-wide review of hydraulic fracturing practices. Additionally, in June 2015, the EPA released its draft report on the potential impacts of hydraulic fracturing on drinking water resources. The EPA report concluded that hydraulic fracturing activities have not led to widespread, systemic impacts on drinking water resources in the United States, although there are above and below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources. The draft report is expected to be finalized after a public comment period and a formal review by the EPA’s Science Advisory Board. Other governmental agencies, including the United States Department of Energy and the United States Department of the Interior, are evaluating various other aspects of hydraulic fracturing. These ongoing or proposed studies could spur initiatives to further regulate hydraulic fracturing under the federal SDWA or other regulatory mechanisms.

At the state level, several states have adopted or are considering legal requirements that could impose more stringent permitting, disclosure and well construction requirements on hydraulic fracturing activities. For example, in May 2013, the Railroad Commission of Texas issued a “well integrity rule,” which updates the requirements for drilling, putting pipe down and cementing wells. The rule also includes new testing and reporting requirements, such as (i) the requirement to submit cementing reports after well completion or after cessation of drilling, whichever is later, and (ii) the imposition of additional testing on wells less than 1,000 feet below usable groundwater. The well integrity rule took effect in January 2014. Local governments also may seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular. We believe that we follow applicable standard industry practices and legal requirements for groundwater protection in our hydraulic fracturing activities. Nonetheless, if new or more stringent federal, state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where we operate, we could incur potentially significant added costs to comply with such requirements, experience delays or curtailment in the pursuit of development activities, and perhaps even be precluded from drilling wells.

Legislation or regulatory initiatives intended to address seismic activity could restrict our drilling and production activities, as well as our ability to dispose of saltwater gathered from such activities, which could have a material adverse effect on our business.

State and federal regulatory agencies recently have focused on a possible connection between the hydraulic fracturing related activities and the increased occurrence of seismic activity, and regulatory agencies at all levels are continuing to study the possible linkage between oil and gas activity and induced seismicity. For example, in 2015, the United States Geological Study identified eight states, including Texas, with areas of increased rates of induced seismicity that could be attributed to fluid injection or oil and gas extraction. In addition, a number of lawsuits have been filed in other states, most recently in Oklahoma, alleging that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating waste disposal. In response to these concerns, regulators in some states are seeking to impose additional requirements, including requirements in the permitting of saltwater disposal wells or otherwise to assess any relationship between seismicity and the use of such wells. For example, in October 2014, the Railroad Commission of Texas published a new rule governing permitting or re-permitting of disposal wells that would require, among other things, the submission of information on seismic events occurring within a specified radius of the disposal well location, as well as logs, geologic cross sections and structure maps relating to the disposal area in question. If the permittee or an applicant of a disposal well permit fails to demonstrate that the saltwater or other fluids are confined to the disposal zone or if scientific data indicates such a disposal well is likely to be or determined to be contributing to seismic activity, then the agency may deny, modify, suspend or terminate the permit application or existing operating permit for that well.

We dispose of large volumes of saltwater gathered from our drilling and production operations pursuant to permits issued to us by governmental authorities overseeing such disposal activities. While these permits are issued pursuant to existing laws and regulations, these legal requirements are subject to change, which could

result in the imposition of more stringent operating constraints or new monitoring and reporting requirements, owing to, among other things, concerns of the public or governmental authorities regarding such gathering or disposal activities. The adoption and implementation of any new laws or regulations that restrict our ability to use hydraulic fracturing or dispose of saltwater gathered from our drilling and production activities by limiting volumes, disposal rates, disposal well locations or otherwise, or requiring us to shut down disposal wells, could have a material adverse effect on our business, financial condition and results of operations.

Competition in the oil and natural gas industry is intense, making it more difficult for us to acquire properties, market oil or natural gas and secure trained personnel.

Our ability to acquire additional prospects and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment for acquiring properties, marketing oil and natural gas and securing trained personnel. Also, there is substantial competition for capital available for investment in the oil and natural gas industry. Many of our competitors possess and employ financial, technical and personnel resources substantially greater than ours. Those companies may be able to pay more for productive properties and exploratory prospects and to evaluate, bid for and purchase a greater number of properties and prospects than our financial or personnel resources permit. In addition, other companies may be able to offer better compensation packages to attract and retain qualified personnel than we are able to offer. The cost to attract and retain qualified personnel has increased over the past three years due to competition and may increase substantially in the future. We may not be able to compete successfully in the future in acquiring prospective reserves, developing reserves, marketing hydrocarbons, attracting and retaining quality personnel and raising additional capital, which could have a material adverse effect on our business.

The loss of senior management or technical personnel could adversely affect operations.

We depend on the services of our senior management and technical personnel. We do not maintain, nor do we plan to obtain, any insurance against the loss of any of these individuals. The loss of the services of our senior management or technical personnel could have a material adverse effect on our business, financial condition and results of operations.

Our business is difficult to evaluate because we have a limited operating history, and we are susceptible to the potential difficulties associated with rapid growth and expansion.

Our predecessors were formed in 2006 and 2012. As a result, there is only limited historical financial and operating information available upon which to base your evaluation of our performance.

In addition, we have grown rapidly over the last several years. Our management believes that our future success depends on our ability to manage the rapid growth that we have experienced and the demands from increased responsibility on management personnel. The following factors could present difficulties:

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increased responsibilities for our executive level personnel;

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increased administrative burden;

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increased capital requirements; and

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increased organizational challenges common to large, expansive operations.

Our operating results could be adversely affected if we do not successfully manage these potential difficulties. The historical financial information incorporated herein is not necessarily indicative of the results that may be realized in the future. In addition, our operating history is limited and the results from our current producing wells are not necessarily indicative of success from our future drilling operations.

Increases in interest rates could adversely affect our business.

Our business and operating results can be harmed by factors such as the availability, terms of and cost of capital, increases in interest rates or a reduction in credit rating. These changes could cause our cost of doing business to increase, limit our ability to pursue acquisition opportunities, reduce cash flow used for drilling and place us at a competitive disadvantage. For example, as of March 31, 2016, outstanding borrowings subject to variable interest rates were approximately $142 million, and a 1.0% increase in interest rates would result in an increase in annual interest expense of approximately $1.4 million, assuming the $142 million of debt was outstanding for the full year. Recent and continuing disruptions and volatility in the global financial markets may lead to a contraction in credit availability impacting our ability to finance our operations. We require continued access to capital. A significant reduction in cash flows from operations or the availability of credit could materially and adversely affect our ability to achieve our planned growth and operating results.

We may be subject to risks in connection with acquisitions of properties.

The successful acquisition of producing properties requires an assessment of several factors, including:

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recoverable reserves;

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future oil and natural gas prices and their applicable differentials;

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operating costs; and

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potential environmental and other liabilities.

The accuracy of these assessments is inherently uncertain. In connection with these assessments, we perform a review of the subject properties that we believe to be generally consistent with industry practices. Our review will not reveal all existing or potential problems nor will it permit us to become sufficiently familiar with the properties to fully assess their deficiencies and capabilities. Inspections may not always be performed on every well, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, the seller may be unwilling or unable to provide effective contractual protection against all or part of the problems. We often are not entitled to contractual indemnification for environmental liabilities and acquire properties on an “as is” basis.

Certain U.S. federal income tax deductions currently available with respect to oil and natural gas exploration and development may be eliminated, and additional federal, state and local taxes on oil and natural gas extraction may be imposed, as a result of future legislation.

Potential legislation, if enacted into law, could make significant changes to U.S. federal and state income tax laws, including the elimination of certain key U.S. federal income tax incentives currently available to oil and gas exploration and production companies. These changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and natural gas properties, (ii) the elimination of current deductions for intangible drilling and development costs, (iii) the elimination of the deduction for certain U.S. production activities, and (iv) an extension of the amortization period for certain geological and geophysical expenditures. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could become effective. The passage of this legislation or any other similar changes in U.S. federal and state income tax laws could eliminate or postpone certain tax deductions that are currently available with respect to oil and natural gas exploration and development, and any such change could negatively affect our financial condition and results of operations. Additionally, legislation could be enacted that increases the taxes states impose on oil and natural gas extraction. Moreover, President Obama has proposed, as part of the Budget of the United States Government for Fiscal Year 2017, to impose an “oil fee” of $10.25 on a per barrel equivalent of crude oil. This fee would be collected on domestically produced and imported petroleum products. The fee would be phased in evenly over five years, beginning October 1, 2016. The adoption of this, or similar proposals, could result in increased operating costs and/or reduced consumer demand for petroleum products, which in turn could affect the prices we receive for our oil.

Our use of seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas, which could adversely affect the results of our drilling operations.

Even when properly used and interpreted, seismic data and visualization techniques are only tools used to assist geoscientists in identifying subsurface structures and hydrocarbon indicators and do not enable the interpreter to know whether hydrocarbons are, in fact, present in those structures. As a result, our drilling activities may not be successful or economical. In addition, the use of advanced technologies, such as 3-D seismic data, requires greater pre-drilling expenditures than traditional drilling strategies, and we could incur losses as a result of such expenditures.

Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in areas where we operate.

Oil and natural gas operations in our operating areas may be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife. Seasonal restrictions may limit our ability to operate in protected areas and can intensify competition for drilling rigs, oilfield equipment, services, supplies and qualified personnel, which may lead to periodic shortages when drilling is allowed. These constraints and the resulting shortages or high costs could delay our operations or materially increase our operating and capital costs. Permanent restrictions imposed to protect endangered species could prohibit drilling in certain areas or require the implementation of expensive mitigation measures. The designation of previously unprotected species in areas where we operate as threatened or endangered could cause us to incur increased costs arising from species protection measures or could result in limitations on our activities that could have a material and adverse impact on our ability to develop and produce our reserves.

The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business.

The Dodd-Frank Act, enacted on July 21, 2010, established federal oversight and regulation of the over-the-counter derivatives market and entities, such as us, that participate in that market. The Dodd-Frank Act requires the Commodity Futures Trading Commission (“CFTC”) and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act. In October 2011, the CFTC issued regulations to set position limits for certain futures and option contracts in the major energy markets and for swaps that are their economic equivalents. The initial position limits rule was vacated by the United States District Court for the District of Columbia in September 2012. However, in November 2013, the CFTC proposed new rules that would place limits on positions in certain core futures and equivalent swaps contracts for or linked to certain physical commodities, subject to exceptions for certain bona fide hedging transactions. As these new position limit rules are not yet final, the impact of those provisions on us is uncertain at this time.

The CFTC has designated certain interest rate swaps and credit default swaps for mandatory clearing. The CFTC has not yet proposed rules designating any other classes of swaps, including physical commodity swaps, for mandatory clearing. In addition, certain banking regulators and the CFTC have recently adopted final rules establishing minimum margin requirements for uncleared swaps. Although we expect to qualify for the end-user exception from such margin requirements for swaps entered into to hedge our commercial risks, the application of such requirements to other market participants, such as swap dealers, may change the cost and availability of the swaps that we use for hedging. If any of our swaps do not qualify for the commercial end-user exception, posting of collateral could impact liquidity and reduce cash available to us for capital expenditures, therefore reducing our ability to execute hedges to reduce risk and protect cash flow.

The full impact of the Dodd-Frank Act and related regulatory requirements upon our business will not be known until the regulations are implemented and the market for derivatives contracts has adjusted. The Dodd-Frank Act and any new regulations could significantly increase the cost of derivative contracts, materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks we encounter, and

reduce our ability to monetize or restructure our existing derivative contracts. If we reduce our use of derivatives as a result of the Dodd-Frank Act and regulations, our results of operations may become more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures. Finally, the Dodd-Frank Act was intended, in part, to reduce the volatility of oil and natural gas prices, which some legislators attributed to speculative trading in derivatives and commodity instruments related to oil and natural gas. Our revenues could therefore be adversely affected if a consequence of the Dodd-Frank Act and implementing regulations is to lower commodity prices. Any of these consequences could have a material and adverse effect on us and our financial condition.

In addition, the European Union and other non-U.S. jurisdictions are implementing regulations with respect to the derivatives market. To the extent we transact with counterparties in foreign jurisdictions, we may become subject to such regulations, the impact of which is not clear at this time.

The standardized measure of our estimated reserves is not an accurate estimate of the current fair value of our estimated oil and natural gas reserves.

Standardized measure is a reporting convention that provides a common basis for comparing oil and natural gas companies subject to the rules and regulations of the SEC. Standardized measure requires the use of specific pricing as required by the SEC as well as operating and development costs prevailing as of the date of computation. Consequently, it may not reflect the prices ordinarily received or that will be received for oil and natural gas production because of varying market conditions, nor may it reflect the actual costs that will be required to produce or develop the oil and natural gas properties. In addition, our predecessor generally passed through its taxable income to its owners for income tax purposes and was not subject to U.S. federal, state or local income taxes other than franchise tax in the State of Texas. Accordingly, our standardized measure does not provide for U.S. federal, state or local income taxes other than franchise tax in the State of Texas. However, following our corporate reorganization, we will be subject to U.S. federal, state and local income taxes. As a result, estimates included herein of future net cash flow may be materially different from the future net cash flows that are ultimately received. Therefore, the standardized measure of our estimated reserves included in this prospectus should not be construed as accurate estimates of the current fair value of our proved reserves.

We may not be able to keep pace with technological developments in our industry.

The oil and natural gas industry is characterized by rapid and significant technological advancements and introductions of new products and services using new technologies. As others use or develop new technologies, we may be placed at a competitive disadvantage or may be forced by competitive pressures to implement those new technologies at substantial costs. In addition, other oil and natural gas companies may have greater financial, technical and personnel resources that allow them to enjoy technological advantages and that may in the future allow them to implement new technologies before we can. We may not be able to respond to these competitive pressures or implement new technologies on a timely basis or at an acceptable cost. If one or more of the technologies we use now or in the future were to become obsolete, our business, financial condition or results of operations could be materially and adversely affected.

Risks Related to this Offering and Our Common Stock

The requirements of being a public company, including compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company, we will need to comply with new laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, related regulations of the SEC and the requirements of the NASDAQ, with which we are not required to comply as a private company. Complying with these statutes, regulations and requirements will occupy a significant amount of time of our board of directors and management and will significantly increase our costs and expenses. We will need to:

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institute a more comprehensive compliance function;

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comply with rules promulgated by the NASDAQ;

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continue to prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;

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establish new internal policies, such as those relating to insider trading; and

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involve and retain to a greater degree outside counsel and accountants in the above activities.

Furthermore, while we generally must comply with Section 404 of the Sarbanes Oxley Act of 2002 for our fiscal year ending December 31, 2016, we are not required to have our independent registered public accounting firm attest to the effectiveness of our internal controls until our first annual report subsequent to our ceasing to be an “emerging growth company” within the meaning of Section 2(a)(19) of the Securities Act. Accordingly, we may not be required to have our independent registered public accounting firm attest to the effectiveness of our internal controls until as late as our annual report for the fiscal year ending December 31, 2021. Once it is required to do so, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, operated or reviewed. Compliance with these requirements may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

In addition, we expect that being a public company subject to these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We cannot be certain that our efforts to develop and maintain our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Section 404 of the Sarbanes Oxley Act of 2002. Any failure to develop or maintain effective internal controls, or difficulties encountered in implementing or improving our internal controls, could harm our operating results or cause us to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our common stock.

The initial public offering price of our common stock may not be indicative of the market price of our common stock after this offering. In addition, an active, liquid and orderly trading market for our common stock may not develop or be maintained, and our stock price may be volatile.

Prior to this offering, our common stock was not traded on any market. An active, liquid and orderly trading market for our common stock may not develop or be maintained after this offering. Active, liquid and orderly trading markets usually result in less price volatility and more efficiency in carrying out investors’ purchase and sale orders. The market price of our common stock could vary significantly as a result of a number of factors, some of which are beyond our control. In the event of a drop in the market price of our common stock, you could lose a substantial part or all of your investment in our common stock. The initial public offering price will be negotiated between us, the selling stockholders and representative of the underwriters, based on numerous factors which we discuss in “Underwriting,” and may not be indicative of the market price of our common stock after this offering. Consequently, you may not be able to sell shares of our common stock at prices equal to or greater than the price paid by you in this offering.

The following factors could affect our stock price:

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our operating and financial performance and drilling locations, including reserve estimates;

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quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;

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the public reaction to our press releases, our other public announcements and our filings with the SEC;

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strategic actions by our competitors;

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changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;

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speculation in the press or investment community;

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the failure of research analysts to cover our common stock;

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sales of our common stock by us, the selling stockholders or other stockholders, or the perception that such sales may occur;

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changes in accounting principles, policies, guidance, interpretations or standards;

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additions or departures of key management personnel;

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actions by our stockholders;

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general market conditions, including fluctuations in commodity prices;

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domestic and international economic, legal and regulatory factors unrelated to our performance; and

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the realization of any risks described under this “Risk Factors” section.

The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our business, operating results and financial condition.

NGP has the ability to direct the voting of a majority of our common stock, and its interests may conflict with those of our other stockholders.

Upon completion of this offering, NGP, through Centennial HoldCo and Celero, will beneficially own approximately % of our outstanding common stock (or approximately % if the underwriters’ over-allotment

option is exercised in full). As a result, NGP will be able to control matters requiring stockholder approval, including the election of directors, changes to our organizational documents and significant corporate transactions. This concentration of ownership makes it unlikely that any other holder or group of holders of our common stock will be able to affect the way we are managed or the direction of our business. The interests of NGP with respect to matters potentially or actually involving or affecting us, such as future acquisitions, financings and other corporate opportunities and attempts to acquire us, may conflict with the interests of our other stockholders. Given this concentrated ownership, NGP would have to approve any potential acquisition of us. In addition, certain of our directors are currently employees of NGP. These directors’ duties as employees of NGP may conflict with their duties as our directors, and the resolution of these conflicts may not always be in our or your best interest. Furthermore, in connection with this offering, we expect to enter into a voting agreement with Centennial HoldCo and Celero. The voting agreement is expected to provide Centennial HoldCo with the right to designate a certain number of nominees to our board of directors so long as it and Celero and their affiliates collectively beneficially own more than 5% of the outstanding shares of our common stock. See “Certain Relationships and Related Party Transactions—Voting Agreement.” The existence of a significant stockholder and the voting agreement may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our company. Moreover, NGP’s concentration of stock ownership may adversely affect the trading price of our common stock to the extent investors perceive a disadvantage in owning stock of a company with a significant stockholder.

Certain of our directors have significant duties with, and spend significant time serving, entities that may compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.

Certain of our directors, who are responsible for managing the direction of our operations and acquisition activities, hold positions of responsibility with other entities (including NGP-affiliated entities) that are in the business of identifying and acquiring oil and natural gas properties. For example, four of our directors (Messrs. Carter, Hayes, Ray and Weber) are Managing Directors or Managing Partners of NGP, which is in the business of investing in oil and natural gas companies with independent management teams that also seek to acquire oil and natural gas properties, and one of our directors (Mr. Sumner) is a Managing Director of The Carlyle Group L.P. (“Carlyle”), which is in the business of making investments in companies, including other energy companies. The existing positions held by these directors may give rise to fiduciary or other duties that are in conflict with the duties they owe to us. These directors may become aware of business opportunities that may be appropriate for presentation to us as well as to the other entities with which they are or may become affiliated. Due to these existing and potential future affiliations, they may present potential business opportunities to other entities prior to presenting them to us, which could cause additional conflicts of interest. They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated, and as a result, they may elect not to present those opportunities to us. These conflicts may not be resolved in our favor. For additional discussion of our management’s business affiliations and the potential conflicts of interest of which our stockholders should be aware, see “Certain Relationships and Related Party Transactions.”

NGP, Carlyle and their respective affiliates are not limited in their ability to compete with us, and the corporate opportunity provisions in our amended and restated certificate of incorporation could enable NGP and Carlyle to benefit from corporate opportunities that might otherwise be available to us.

Our governing documents will provide that NGP, Carlyle and their respective affiliates (including portfolio investments of NGP, Carlyle and their respective affiliates) are not restricted from owning assets or engaging in businesses that compete directly or indirectly with us. In particular, subject to the limitations of applicable law, our amended and restated certificate of incorporation will, among other things:

•

permit NGP, Carlyle and their respective affiliates to conduct business that competes with us and to make investments in any kind of property in which we may make investments; and

•

provide that if NGP, Carlyle or any of their respective affiliates, or any employee, partner, member, manager, officer or director of NGP or Carlyle or their respective affiliates who is also one of our directors or officers, becomes aware of a potential business opportunity, transaction or other matter, they will have no duty to communicate or offer that opportunity to us.

NGP, Carlyle or their respective affiliates may become aware, from time to time, of certain business opportunities (such as acquisition opportunities) and may direct such opportunities to other businesses in which they have invested, in which case we may not become aware of or otherwise have the ability to pursue such opportunity. Further, such businesses may choose to compete with us for these opportunities, possibly causing these opportunities to not be available to us or causing them to be more expensive for us to pursue. In addition, NGP, Carlyle and their respective affiliates may dispose of oil and natural gas properties or other assets in the future, without any obligation to offer us the opportunity to purchase any of those assets. As a result, our renouncing our interest and expectancy in any business opportunity that may be from time to time presented to NGP, Carlyle or their respective affiliates could adversely impact our business or prospects if attractive business opportunities are procured by such parties for their own benefit rather than for ours. Please read “Description of Capital Stock—Corporate Opportunity.”

NGP and Carlyle are established participants in the oil and natural gas industry and have resources greater than ours, which may make it more difficult for us to compete with NGP and Carlyle with respect to commercial activities as well as for potential acquisitions. We cannot assure you that any conflicts that may arise between us and our stockholders, on the one hand, and NGP or Carlyle, on the other hand, will be resolved in our favor. As a result, competition from NGP, Carlyle and their respective affiliates could adversely impact our results of operations.

Our amended and restated certificate of incorporation and amended and restated bylaws, as well as Delaware law, will contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock and could deprive our investors of the opportunity to receive a premium for their shares.

Our amended and restated certificate of incorporation will authorize our board of directors to issue preferred stock without stockholder approval in one or more series, designate the number of shares constituting any series, and fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series. If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire us. In addition, some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders. These provisions include:

•

at such time as a group that includes Centennial HoldCo and Celero no longer beneficially own or control the voting of more than 50% of our outstanding common stock, dividing our board of directors into three classes of directors, with each class serving staggered three-year terms;

•

at such time as a group that includes Centennial HoldCo and Celero no longer beneficially own or control the voting of more than 50% of our outstanding common stock, providing that all vacancies, including newly created directorships, may, except as otherwise required by law or, if applicable, the rights of holders of a series of preferred stock, only be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum (prior to such time, vacancies may also be filled by stockholders holding a majority of the outstanding shares);

•

at such time as a group that includes Centennial HoldCo and Celero no longer beneficially own or control the voting of more than 50% of our outstanding common stock, permitting any action by stockholders to be taken only at an annual meeting or special meeting rather than by a written consent of the stockholders, subject to the rights of any series of preferred stock with respect to such rights;

•

at such time as a group that includes Centennial HoldCo and Celero no longer beneficially own or control the voting of more than 50% of our outstanding common stock, permitting special meetings of our stockholders to be called only by our board of directors pursuant to a resolution adopted by the affirmative vote of a majority of the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships (prior to such time, a special meeting may also be called at the request of stockholders holding a majority of the outstanding shares entitled to vote);

•

at such time as a group that includes Centennial HoldCo and Celero no longer beneficially own or control the voting of more than 50% of our outstanding common stock, requiring the affirmative vote of the holders of at least 75% in voting power of all then outstanding common stock entitled to vote generally in the election of directors, voting together as a single class, to remove any or all of the directors from office at any time, and directors will be removable only for “cause”;

•

prohibiting cumulative voting in the election of directors;

•

establishing advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders; and

•

providing that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws.

Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.

Our amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”), our amended and restated certificate of incorporation or our bylaws, or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our amended and restated certificate of incorporation described in the preceding sentence. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

Investors in this offering will experience immediate and substantial dilution of $ per share.

Based on an assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover of this prospectus), purchasers of our common stock in this offering will experience an immediate and substantial dilution of $ per share in the as adjusted net tangible book value per share of common stock from the initial public offering price, and our as adjusted net tangible book value as of March 31, 2016 after giving effect to this offering would be $ per share. This dilution is due in large part to earlier investors having paid substantially less than the initial public offering price when they purchased their shares. See “Dilution.”

We do not intend to pay cash dividends on our common stock, and our credit agreement places certain restrictions on our ability to do so. Consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.

We do not plan to declare cash dividends on shares of our common stock in the foreseeable future. Additionally, our credit agreement places certain restrictions on our ability to pay cash dividends. Consequently, your only opportunity to achieve a return on your investment in us will be if you sell your common stock at a price greater than you paid for it. There is no guarantee that the price of our common stock that will prevail in the market will ever exceed the price that you pay in this offering.

Future sales of our common stock in the public market, or the perception that such sales may occur, could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.

We may sell additional shares of common stock in subsequent public offerings. We may also issue additional shares of common stock or convertible securities. After the completion of this offering, we will have outstanding shares of common stock. This number includes shares that we and the selling stockholders are selling in this offering and shares that the selling stockholders may sell in this offering if the underwriters’ over-allotment option is fully exercised, which may be resold immediately in the public market. Following the completion of this offering, and assuming full exercise of the underwriters’ over-allotment option, the Existing Investors will own shares of our common stock, or approximately % of our total outstanding shares, all of which are restricted from immediate resale under the federal securities laws and are subject to the lock-up agreements between them and the underwriters described in “Underwriting,” but may be sold into the market in the future. The Existing Investors will be party to a registration rights agreement, which will require us to effect the registration of their shares in certain circumstances no earlier than the expiration of the lock-up period contained in the underwriting agreement entered into in connection with this offering.

In connection with this offering, we intend to file a registration statement with the SEC on Form S-8 providing for the registration of shares of our common stock issued or reserved for issuance under the 2016 Long Term Incentive Plan. Subject to the satisfaction of vesting conditions, the expiration of lock-up agreements and the requirements of Rule 144, shares registered under the registration statement on Form S-8 may be made available for resale immediately in the public market without restriction.

We cannot predict the size of future issuances of our common stock or securities convertible into common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock.

The underwriters of this offering may waive or release parties to the lock-up agreements entered into in connection with this offering, which could adversely affect the price of our common stock.

We, all of our directors and executive officers, and the selling stockholders have entered or will enter into lock-up agreements pursuant to which we and they will be subject to certain restrictions with respect to the sale or other disposition of our common stock for a period of 180 days following the date of this prospectus. Credit Suisse Securities (USA) LLC, at any time and without notice, may release all or any portion of the common stock subject to the foregoing lock-up agreements. See “Underwriting” for more information on these agreements. If the restrictions under the lock-up agreements are waived, then the common stock, subject to compliance with the Securities Act or exceptions therefrom, will be available for sale into the public markets, which could cause the market price of our common stock to decline and impair our ability to raise capital.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

Our amended and restated certificate of incorporation will authorize us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

We expect to be a “controlled company” within the meaning of the NASDAQ rules and, as a result, will qualify for and intend to rely on exemptions from certain corporate governance requirements.

Upon completion of this offering, NGP, through Centennial HoldCo and Celero, will collectively beneficially control a majority of the combined voting power of all classes of our outstanding voting stock. As a result, we expect to be a controlled company within the meaning of the NASDAQ corporate governance standards. Under the NASDAQ rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain NASDAQ corporate governance requirements, including the requirements that:

•

a majority of the board of directors consist of independent directors as defined under the rules of NASDAQ;

•

the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

•

the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

These requirements will not apply to us as long as we remain a controlled company. Following this offering, we intend to utilize some or all of these exemptions. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NASDAQ. See “Management.”

For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.

In April 2012, President Obama signed into law the JOBS Act. We are classified as an “emerging growth company” under the JOBS Act. For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things: (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; (iii) provide certain disclosures regarding executive compensation required of larger public companies; or (iv) hold nonbinding advisory votes on executive compensation. We will remain an emerging growth company for up to five years, although we will lose that status sooner if we have more than $1.0 billion of revenues in a fiscal year, have more than $700.0 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.

To the extent that we rely on any of the exemptions available to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are

not emerging growth companies. If some investors find our common stock to be less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our common stock or if our operating results do not meet their expectations, our stock price could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrades our common stock or if our operating results do not meet their expectations, our stock price could decline.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information in this prospectus includes “forward-looking statements.” All statements, other than statements of historical fact included in this prospectus, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this prospectus, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in this prospectus.

Forward-looking statements may include statements about:

•

our business strategy;

•

our reserves;

•

our drilling prospects, inventories, projects and programs;

•

our ability to replace the reserves we produce through drilling and property acquisitions;

•

our financial strategy, liquidity and capital required for our development program;

•

our realized oil, natural gas and NGL prices;

•

the timing and amount of our future production of oil, natural gas and NGLs;

•

our hedging strategy and results;

•

our future drilling plans;

•

our competition and government regulations;

•

our ability to obtain permits and governmental approvals;

•

our pending legal or environmental matters;

•

our marketing of oil, natural gas and NGLs;

•

our leasehold or business acquisitions;

•

our costs of developing our properties;

•

general economic conditions;

•

credit markets;

•

uncertainty regarding our future operating results; and

•

our plans, objectives, expectations and intentions contained in this prospectus that are not historical.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of oil and natural gas. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks described under “Risk Factors” in this prospectus.

Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered.

Should one or more of the risks or uncertainties described in this prospectus occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this prospectus 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.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this prospectus.

USE OF PROCEEDS

We expect to receive approximately $ million of net proceeds (assuming the midpoint of the price range set forth on the cover of this prospectus) from the sale of the common stock offered by us after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares by the selling stockholders.

We intend to use a portion of the net proceeds from this offering to fully repay our $65.0 million term loan and the outstanding indebtedness under our revolving credit facility and the remaining net proceeds to fund our 2016, 2017 and 2018 capital expenditures and for general corporate purposes. The following table illustrates our anticipated use of the net proceeds from this offering:


Sources of Funds		Use of Funds
(In millions)
Net proceeds from this offering	$	Repayment of our term loan	$
		Repayment of our credit facility
		Funding of our 2016, 2017 and 2018 capital expenditures
		General corporate purposes

Total sources of funds	$	Total uses of funds	$

Our term loan matures on April 15, 2018. Interest on the term loan is LIBOR plus 5.25%. At March 31, 2016, the weighted average interest rate on our term loan was 5.69%. As of June 30, 2016, we had $ million of outstanding borrowings and $0.5 million of letters of credit outstanding under our revolving credit facility. Our revolving credit facility matures October 15, 2019 and bears interest at a variable rate. At March, 31, 2016, the weighted average interest rate on borrowings under our revolving credit facility was 2.44%. We also pay a commitment fee on unused amounts of our revolving credit facility ranging from 37.5 basis points to 50 basis points, depending on the percentage of the borrowing base utilized. The outstanding borrowings under our revolving credit facility were incurred to fund a portion of our 2014, 2015 and 2016 capital expenditures. We may at any time reborrow amounts repaid under our revolving credit facility, and we expect to do so in the future to fund our capital program.

A $1.00 increase or decrease in the assumed initial public offering price of $ per share would cause the net proceeds from this offering, after deducting the underwriting discounts and commissions and estimated offering expenses, received by us to increase or decrease, respectively, by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. If the proceeds increase due to a higher initial public offering price, we would use the additional net proceeds to fund our 2016, 2017 and 2018 capital expenditures or for general corporate purposes. If the proceeds decrease due to a lower initial public offering price, then we would first reduce by a corresponding amount the net proceeds directed to general corporate purposes and then, if necessary, the net proceeds directed to repay outstanding borrowings under our revolving credit facility.

DIVIDEND POLICY

We have never declared or paid, and do not anticipate declaring or paying, any cash dividends to holders of our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance our operations and the growth of our business. Our future dividend policy is within the discretion of our board of directors and will depend upon then-existing conditions, including our results of operations, financial condition, capital requirements, investment opportunities, statutory restrictions on our ability to pay dividends and other factors our board of directors may deem relevant. In addition, our credit agreement places restrictions on our ability to pay cash dividends.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2016:

•

on an actual basis for our predecessor; and

•

on a pro forma basis to give effect to our corporate reorganization and the sale of shares of our common stock in this offering at an assumed initial offering price of $ per share (which is the midpoint of the range set forth on the cover of this prospectus) and the application of the net proceeds from this offering as set forth under “Use of Proceeds.”

The pro forma information set forth in the table below is illustrative only and will be adjusted based on the actual initial public offering price and other final terms of this offering. This table should be read in conjunction with “Use of Proceeds,” the historical audited and unaudited consolidated and combined financial statements of our predecessor and accompanying notes included elsewhere in this prospectus.


	As of March 31, 2016
	Actual(1)		Pro Forma(2)
	(In thousands, except number of shares and par value)
Cash and cash equivalents	$	98	$

Long-term debt, including current maturities:
Revolving credit facility(3)		77,000		—
Term loan, net of unamortized deferred financing costs(4)		64,687		—

Total long-term debt	$	141,687	$	—

Owners’ equity	$	436,403	$
Stockholders’ equity:
Common stock—$0.01 par value; no shares authorized, issued or outstanding, actual; shares authorized, shares issued and outstanding, pro forma		—
Additional paid-in capital		—
Accumulated deficit		—

Total owners’ and stockholders’ equity	$	436,403	$

Total capitalization	$	578,090	$

(1)

Centennial Resource Development, Inc. was formed as a holding company in October 2014 and has not had any operations since its formation. Accordingly, Centennial Resource Development, Inc. does not have historical financial operating results, and the data in this table has been derived from the historical consolidated and combined financial statements included in this prospectus which pertain to the assets, liabilities, revenues and expenses of our accounting predecessor.

(2)

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) additional paid-in capital, total equity and total capitalization by approximately $ million, $ million and $ million, respectively, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions payable by us. We may also increase or decrease the number of shares we are offering. An increase (decrease) of one million shares offered by us at an assumed offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) additional paid-in capital, total stockholders’ equity and total capitalization by approximately $ million, $ million and $ million, respectively, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(3)

As of March 31, 2016, the borrowing base was $140.0 million, we had $77.0 million of outstanding borrowings and $0.5 million of letters of credit outstanding under our revolving credit facility, and we were able to incur approximately $62.5 million of additional indebtedness under our revolving credit facility. As of June 30, 2016, the borrowing base was $140.0 million, we had $ million of outstanding borrowings and $0.5 million of letters of credit outstanding under our revolving credit facility, and we were able to incur approximately $ million of additional indebtedness under our revolving credit facility. After giving effect to the sale of shares of our common stock in this offering and the application of the anticipated net proceeds of this offering, we expect to have $ million of available borrowing capacity under our revolving credit facility. However, borrowings could be limited due to covenant restrictions.

(4)	Unamortized deferred financing costs, which were approximately $0.3 million as of March 31, 2016, have been netted against the carrying value of our $65.0 million term loan.

DILUTION

Purchasers of our common stock in this offering will experience immediate and substantial dilution in the net tangible book value (tangible assets less total liabilities) per share of our common stock for accounting purposes. Our net tangible book value as of March 31, 2016, after giving pro forma effect to the corporate reorganization, was approximately $ million, or $ per share.

Pro forma net tangible book value per share is determined by dividing our net tangible book value, or total tangible assets less total liabilities, by our shares of common stock that will be outstanding immediately prior to the closing of this offering, including giving effect to the corporate reorganization. Assuming an initial public offering price of $ per share (which is the midpoint of the price range set forth on the cover page of this prospectus), after giving effect to the sale of the shares in this offering and further assuming the receipt of the estimated net proceeds (after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us), our adjusted pro forma net tangible book value as of March 31, 2016 would have been approximately $ million, or $ per share. This represents an immediate increase in the net tangible book value of $ per share to our existing stockholders and an immediate dilution to new investors purchasing shares in this offering of $ per share, resulting from the difference between the offering price and the pro forma as adjusted net tangible book value after this offering. The following table illustrates the per share dilution to new investors purchasing shares in this offering:


Assumed initial public offering price per share		$
Pro forma net tangible book value per share as of March 31, 2016 (after giving effect to the corporate reorganization)	$
Increase per share attributable to new investors in this offering

As adjusted pro forma net tangible book value per share (after giving effect to the corporate reorganization and this offering)

Dilution in pro forma net tangible book value per share to new investors in this offering		$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our as adjusted pro forma net tangible book value per share after the offering by $ and increase (decrease) the dilution to new investors in this offering by $ per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, on an adjusted pro forma basis as of March 31, 2016, the total number of shares of common stock owned by existing stockholders and to be owned by new investors at $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and the total consideration paid and the average price per share paid by our existing stockholders and to be paid by new investors in this offering at $ , the midpoint of the price range set forth on the cover page of this prospectus, calculated before deduction of estimated underwriting discounts and commissions.


	Shares Acquired				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent			Average Price Per Share
Existing stockholders				%	$			%	$
New investors in this offering

Total			100	%	$		100	%	$

The data in the table excludes shares of common stock reserved for issuance under the 2016 Long Term Incentive Plan (which amount may be increased each year in accordance with the terms of the Plan). If the underwriters’ over-allotment option is exercised in full, the number of shares held by new investors will be increased to , or approximately % of the total number of shares of common stock.

SELECTED HISTORICAL CONSOLIDATED AND COMBINED FINANCIAL DATA

Centennial Resource Development, Inc. was formed as a holding company in October 2014 and has not had any operations since its formation. Accordingly, Centennial Resource Development, Inc. does not have historical financial operating results, and the following table shows selected historical consolidated and combined financial data, for the periods and as of the dates indicated, of Centennial Resource Development, Inc.’s accounting predecessor. For all periods ending on or prior to and all dates as of or prior to the consummation of the Combination on October 15, 2014, the accounting predecessor reflects the combined results of Centennial OpCo and Celero, and for all periods and dates subsequent to October 15, 2014, the accounting predecessor reflects the results of Centennial OpCo. Due to the factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting the Comparability of Our Results of Operations to the Historical Results of Operations of Our Predecessor,” our future results of operations will not be comparable to the historical results of our predecessor. For more information regarding our predecessor, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Predecessor and Centennial Resource Development, Inc.”

The selected historical consolidated and combined financial data of our predecessor as of and for the years ended December 31, 2015 and 2014 were derived from the audited historical consolidated and combined financial statements of our predecessor included elsewhere in this prospectus. The selected historical interim consolidated financial data of our predecessor as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 were derived from the unaudited interim condensed consolidated financial statements of our predecessor included elsewhere in this prospectus.

Our historical results are not necessarily indicative of future operating results. The selected consolidated and combined financial data should be read in conjunction with, “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Recent and Formation Transactions,” the historical consolidated and combined financial statements of our predecessor and accompanying notes included elsewhere in this prospectus.


	Our Predecessor
	Three Months Ended March 31,						Year Ended December 31,
	2016			2015			2015			2014
	(Unaudited)
	(In thousands, except per share data)
Statement of Operations Data:
Revenues:
Oil sales	$	13,226		$	21,066		$	77,643		$	114,955
Natural gas sales		1,313			1,963			7,965			9,670
NGL sales		582			1,387			4,852			7,200

Total revenues		15,121			24,416			90,460			131,825

Operating expenses:
Lease operating expenses		4,042			6,497			21,173			17,690
Severance and ad valorem taxes		844			1,193			5,021			6,875
Transportation, processing, gathering and other operating expenses		1,130			1,283			5,732			4,772
Depreciation, depletion, amortization and accretion of asset retirement obligations		21,303			23,230			90,084			69,110
Abandonment expense and impairment of unproved properties		—			—			7,619			20,025
Exploration		—			—			84			—
Contract termination and rig stacking		—			1,540			2,387			—
General and administrative expenses		2,536			2,913			14,206			31,694

Total operating expenses		29,855			36,656			146,306			150,166

Loss (gain) on sale of oil and natural gas properties		4			(2,675	)		(2,439	)		2,096

Total operating loss		(14,738	)		(9,565	)		(53,407	)		(20,437	)

Other income (expense):
Interest expense		(1,641	)		(1,526	)		(6,266	)		(2,475	)
Gain on derivatives instruments		1,918			5,154			20,756			41,943
Other income		—			—			20			281

Total other income		277			3,628			14,510			39,749

(Loss) income before taxes		(14,461	)		(5,937	)		(38,897	)		19,312
Income tax benefit (expense)		—			—			572			(1,524	)

Net (loss) income		(14,461	)		(5,937	)		(38,325	)		17,788
Less: Net loss attributable to noncontrolling interest		—			—			—			(2	)

Net (loss) income	$	(14,461	)	$	(5,937	)	$	(38,325	)	$	17,790

Pro Forma Per Share Data (Unaudited)(1):
Net loss per common share:
Basic and diluted	$						$
Weighted average common shares outstanding:
Basic and diluted
Cash Flow Data:
Net cash provided by operating activities	$	18,552		$	27,632		$	68,882		$	97,248
Net cash used in investing activities		(22,419	)		(79,006	)		(198,635	)		(163,380	)
Net cash provided by financing activities		2,197			38,913			118,504			36,966
Other Financial Data:
Adjusted EBITDAX(2)	$	15,198		$	22,259		$	82,279		$	88,108

(1)

The net loss per common share and weighted average common shares outstanding reflect the estimated number of shares of common stock we expect to have outstanding upon the completion of the corporate reorganization described under “Recent and Formation Transactions—Formation Transactions—Our Corporate Reorganization” and this offering. The pro forma per share data also reflects additional pro forma income tax benefit of $5.1 million and $13.6 million for the three months ended March 31, 2016 and the year ended December 31, 2015 associated with the income tax effects of the corporate reorganization described under “Recent and Formation Transactions—Formation Transactions—Our Corporate Reorganization” or this offering. Centennial Resource Development, Inc. is a C-corp under the Code, and as a result, will be subject to U.S. federal, state and local income taxes. Although our predecessor was subject to franchise tax in the State of Texas, it generally passed through its taxable income to its owners for other income tax purposes and thus was not subject to U.S. federal income taxes or other state or local income taxes.

(2)	Adjusted EBITDAX is a non-GAAP financial measure. For a definition of Adjusted EBITDAX and a reconciliation of Adjusted EBITDAX to net income, see “Prospectus Summary—Summary Historical Financial Data—Non-GAAP Financial Measure.”


	Our Predecessor
	March 31, 2016		December 31,
	March 31, 2016		2015		2014
	(Unaudited)
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	98	$	1,768	$	13,017
Other current assets		22,153		32,377		54,329

Total current assets		22,251		34,145		67,346

Total property and equipment, net		579,863		578,787		540,624
Other long-term assets		2,953		3,363		7,799

Total assets	$	605,067	$	616,295	$	615,769

Current liabilities	$	22,146	$	22,133	$	103,512
Revolving credit facility		77,000		74,000		65,000
Term loan, net of unamortized deferred financing costs		64,687		64,649		64,568
Other long-term liabilities		4,831		4,649		4,757

Total liabilities		168,664		165,431		237,837
Owners’ equity		436,403		450,864		377,932

Total liabilities and owners’ equity	$	605,067	$	616,295	$	615,769

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the “Selected Historical Consolidated and Combined Financial Data” and the accompanying financial statements and related notes included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGLs, production volumes, estimates of proved reserves, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this prospectus, particularly in “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

Our Predecessor and Centennial Resource Development, Inc.

Centennial Resource Development, Inc. was formed as a holding company in October 2014 and has not had any operations since its formation. Accordingly, Centennial Resource Development, Inc. does not have historical financial operating results. Our accounting predecessor, for all periods ending on or before October 15, 2014 and for all dates on or before October 15, 2014, reflects the combined results of (i) Centennial OpCo, which was formed in August 2012 to engage in the development and acquisition of both conventional and unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin, and (ii) Celero, which was formed in 2006 to focus on the development and acquisition of oil and natural gas properties in Texas and New Mexico, primarily in the Permian Basin in West Texas. On October 15, 2014, through the Combination, Celero conveyed substantially all of its oil and natural gas properties and other assets to Centennial OpCo in exchange for membership interests in Centennial OpCo, and as a result, subsequent to October 15, 2014, our accounting predecessor reflects the results of Centennial OpCo. As a result of the dispositions discussed under “—Factors Affecting the Comparability of Our Results of Operations to the Historical Results of Operations of Our Predecessor—Dispositions,” substantially all of our operations are now concentrated in the Delaware Basin in West Texas.

Pursuant to the terms of a corporate reorganization that will be completed prior to the closing of this offering, our Existing Investors will contribute all of their interests in Centennial OpCo to Centennial Resource Development, Inc., the issuer of common stock in this offering, in exchange for shares of common stock of Centennial Resource Development, Inc. For more information on our corporate formation transactions, see “Recent and Formation Transactions—Formation Transactions.”

Overview

We are an independent oil and natural gas company focused on the development and acquisition of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin. Our assets are concentrated in the Delaware Basin, a sub-basin of the Permian Basin. Our horizontal wells span an area approximately 45 miles long by 20 miles wide where we have established commercial production in five distinct zones: the 3rd Bone Spring Sandstone, Upper Wolfcamp A, Lower Wolfcamp A, Wolfcamp B and Wolfcamp C.

Market Conditions

The oil and gas industry is cyclical and commodity prices are highly volatile. In the second half of 2014, oil prices began a rapid and significant decline as the global oil supply began to outpace demand. During 2015 and thus far in 2016, the global oil supply has continued to outpace demand, resulting in a sustained decline in realized prices for oil production. In general, this imbalance between supply and demand reflects the significant supply growth achieved in the United States as a result of shale drilling and oil production increases by certain other countries, including Russia and Saudi Arabia, as part of an effort to retain market share, combined with only modest demand growth in the United States and less-than-expected demand in other parts of the world, particularly in Europe and China. Although there has been a dramatic decrease in drilling activity in the industry, oil storage levels in the United States remain at historically high levels. Until supply and demand balance and the overhang in storage levels begins to decline, prices are expected to remain under pressure. In addition, the lifting of economic sanctions on Iran has resulted in increasing supplies of oil from Iran, adding further downward pressure to oil prices. NGL prices generally correlate to the price of oil. Also adversely affecting the price for NGLs is the supply of NGLs in the United States, which has continued to grow due to an increase in industry participants targeting projects that produce NGLs in recent years. Prices for domestic natural gas began to decline during the third quarter of 2014 and have continued to be weak throughout 2015 and thus far in 2016. The declines in natural gas prices are primarily due to an imbalance between supply and demand across North America. The duration and magnitude of the commodity price declines cannot be accurately predicted.

Our revenue, profitability and future growth are highly dependent on the prices we receive for our oil and natural gas production, as well as NGLs that are extracted from our natural gas during processing. Compared to 2014, our realized oil price for 2015 fell 47.3% to $42.43 per barrel, and our realized oil price for the three months ended March 31, 2016 has further decreased to $28.14 per barrel. Similarly, our realized natural gas price for 2015 dropped 43.2% to $2.60 per Mcf and our realized price for NGLs declined 52.2% to $14.66 per barrel. For the three months ended March 31, 2016, our realized price for natural gas was $1.88 per Mcf and our realized price for NGLs was $8.31 per barrel. Lower oil, natural gas and NGL prices not only may decrease our revenues, but also may reduce the amount of oil, natural gas and NGLs that we can produce economically and therefore potentially lower our oil, natural gas and NGL reserves. Lower commodity prices in the future could result in impairments of our properties and may materially and adversely affect our future business, financial condition, results of operations, operating cash flows, liquidity or ability to finance planned capital expenditures. Lower oil, natural gas and NGL prices may also reduce the borrowing base under our credit agreement, which is determined at the discretion of the lenders and is based on the collateral value of our proved reserves that have been mortgaged to the lenders. Alternatively, higher oil and natural gas prices may result in significant non-cash fair value losses being incurred on our derivatives, which could cause us to experience net losses when oil and natural gas prices rise.

How We Evaluate Our Operations

We use a variety of financial and operational metrics to assess the performance of our oil and natural gas operations, including:

•

realized prices on the sale of oil, natural gas and NGLs, including the effect of our commodity derivative contracts on our oil production;

•

production results;

•

lease operating expenses; and

•

Adjusted EBITDAX.

See “—Sources of Our Revenues,” “—Production Results,” “—Operating Costs and Expenses” and “—Adjusted EBITDAX” for a discussion of these metrics.

Sources of Our Revenues

Our revenues are derived from the sale of our oil and natural gas production, as well as the sale of NGLs that are extracted from our natural gas during processing. Oil sales contributed 87% of our total revenues for the first three months of 2016. Natural gas sales contributed 9% and NGL sales contributed 4% of our total revenues for the first three months of 2016. Our oil, natural gas and NGL revenues do not include the effects of derivatives.

Increases or decreases in our revenue, profitability and future production growth are highly dependent on the commodity prices we receive. Oil, natural gas and NGL prices are market driven and have been historically volatile, and we expect that future prices will continue to fluctuate due to supply and demand factors, seasonality and geopolitical and economic factors. See “—Market Conditions” for information regarding the current commodity price environment. A $1.00 per barrel change in our realized oil price would have resulted in a $0.5 million change in oil revenues for the first three months of 2016. A $0.10 per Mcf change in our realized natural gas price would have resulted in a $0.1 million change in our gas revenues for the first three months of 2016. A $1.00 per barrel change in NGL prices would have changed revenue by $0.1 million for the first three months of 2016.

The following table presents our average realized commodity prices, as well as the effects of derivative settlements.


	Three Months Ended March 31,				Year Ended December 31,
	2016		2015		2015		2014
Crude Oil (per Bbl):
Average NYMEX price	$	33.63	$	48.57	$	48.76	$	92.91
Realized price, before the effects of derivative settlements		28.14		42.22		42.43		80.50
Effects of derivative settlements		18.36		18.73		19.18		3.23
Natural Gas:
Average NYMEX price (per MMBtu)	$	1.98	$	2.81	$	2.63	$	4.26
Realized price, before the effects of derivative settlements (per Mcf)		1.88		2.78		2.60		4.58
Effects of derivative settlements (per Mcf)		—		0.54		0.43		—
NGLs (per Bbl):
Average realized NGL price	$	8.31	$	17.12	$	14.66	$	30.64

While quoted NYMEX oil and natural gas prices are generally used as a basis for comparison within our industry, the prices we receive are affected by quality, energy content, location and transportation differentials for these products.

See “—Predecessor Results of Operations” below for an analysis of the impact changes in realized prices had on our revenues.

Production Results

The following table presents historical production volumes for our properties for the three months ended March 31, 2016 and 2015 and the years ended December 31, 2015 and 2014:


	Three Months Ended March 31,				Year Ended December 31,
	2016		2015		2015		2014
Oil (MBbls)		470		499		1,830		1,428
Natural gas (MMcf)		698		705		3,058		2,112
NGLs (MBbls)		70		81		331		235

Total (MBoe)(1)		656		698		2,671		2,015
Average net daily production (Boe/d)(1)		7,212		7,750		7,317		5,521

(1)	May not sum or recalculate due to rounding.

As reservoir pressures decline, production from a given well or formation decreases. Growth in our future production and reserves will depend on our ability to continue to add proved reserves in excess of our production. Accordingly, we plan to maintain our focus on adding reserves through drilling as well as acquisitions. Our ability to add reserves through development projects and acquisitions is dependent on many factors, including our ability to borrow or raise capital, obtain regulatory approvals, procure contract drilling rigs and personnel and successfully identify and consummate acquisitions. Please read “Risk Factors—Risks Related to Our Business” for a discussion of these and other risks affecting our proved reserves and production.

Derivative Activity

Pricing for oil and natural gas production has been volatile and unpredictable for several years, and we expect this volatility to continue in the future. Due to this volatility, we have historically used commodity derivative instruments, such as collars, swaps and basis swaps, to hedge price risk associated with a portion of our anticipated production. Our hedging instruments allow us to reduce, but not eliminate, the potential effects of the variability in cash flow from operations due to fluctuations in oil and natural gas prices and provide increased certainty of cash flows for our drilling program and debt service requirements. These instruments provide only partial price protection against declines in oil and natural gas prices and may partially limit our potential gains from future increases in prices. See “—Quantitative and Qualitative Disclosure About Market Risk—Commodity Price Risk” for information regarding our exposure to market risk, including the effects of changes in commodity prices, and our commodity derivative contracts.

We expect to continue to use commodity derivative instruments to hedge our price risk in the future. Our hedging strategy and future hedging transactions will be determined at our discretion and may be different than what we have done on a historical basis. We are not under an obligation to hedge a specific portion of our production. Our credit agreement allows us to hedge up to 80% of our reasonably anticipated production from proved reserves for up to 24 months in the future and up to 90% of our reasonably anticipated production from proved developed producing reserves for 25 to 60 months in the future, provided that no hedges may have a tenor beyond five years.

Operating Costs and Expenses

Costs associated with producing oil, gas and NGLs are substantial. Some of these costs vary with commodity prices, some trend with the type and volume of production, and others are a function of the number of wells we own. As of March 31, 2016 and December 31, 2015, we owned interests in 140 and 138 gross wells, respectively.

Lease Operating Expenses . Lease operating expenses (“LOE”) are the costs incurred in the operation of producing properties and workover costs. Expenses for utilities, direct labor, water injection and disposal, materials and supplies comprise the most significant portion of our LOE. Certain items, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on activities performed during a specific period. For instance, repairs to our pumping equipment or surface facilities result in increased LOE in periods during which they are performed. Certain of our operating cost components are variable and increase or decrease as the level of produced hydrocarbons and water increases or decreases. For example, we incur power costs in connection with various production-related activities, such as pumping to recover oil and natural gas and separation and treatment of water produced in connection with our oil and natural gas production.

We monitor our operations to ensure that we are incurring LOE at an acceptable level. For example, we monitor our LOE per Boe to determine if any wells or properties should be shut in, recompleted or sold. This unit rate also allows us to monitor these costs in certain fields and geographic areas to identify trends and to benchmark against other producers. Although we strive to reduce our LOE, these expenses can increase or

decrease on a per unit basis as a result of various factors as we operate our properties or make acquisitions and dispositions of properties. For example, we may increase field level expenditures to optimize our operations, incurring higher expenses in one quarter relative to another, or we may acquire or dispose of properties that have different LOE per Boe. These initiatives would influence our overall operating cost and could cause fluctuations when comparing LOE on a period to period basis.

Severance and Ad Valorem Taxes . Severance taxes are paid on produced oil and natural gas based on a percentage of revenues from production sold at fixed rates established by federal, state or local taxing authorities. In general, the severance taxes we pay correlate to the changes in oil, natural gas and NGLs revenues. We are also subject to ad valorem taxes in the counties where our production is located. Ad valorem taxes are generally based on the valuation of our oil and natural gas properties, which also trend with oil and natural gas prices.

Transportation, Processing, Gathering and Other Operating Expense. Transportation, processing, gathering and other operating expense principally consists of expenditures to prepare and transport production from the wellhead to a specified sales point and gas processing costs. These costs will fluctuate with increases or decreases in production volumes, contractual fees and changes in fuel and compression costs.

Depreciation, Depletion, Amortization, and Accretion of Asset Retirement Obligations. Depreciation, depletion, amortization, and accretion of asset retirement obligations (“DD&A”) is the systematic expensing of the capitalized costs incurred to acquire and develop oil and natural gas properties. We use the successful efforts method of accounting for oil and natural gas activities and, as such, we capitalize all costs associated with our development and acquisition efforts and all successful exploration efforts, which are then allocated to each unit of production using the unit of production method. Please read “—Critical Accounting Policies and Estimates—Successful Efforts Method of Accounting for Oil and Natural Gas Activities” for further discussion.

Impairment Expense. We review our proved properties and unproved leasehold costs for impairment whenever events and changes in circumstances indicate that a decline in the recoverability of their carrying value may have occurred. Please read “—Critical Accounting Policies and Estimates—Impairment of Oil and Natural Gas Properties” for further discussion.

General and Administrative Expenses. General and administrative (“G&A”) expenses are costs incurred for overhead, including payroll and benefits for our corporate staff, costs of maintaining our headquarters, costs of managing our production and development operations, audit and other fees for professional services and legal compliance.

Derivative Gain (Loss). Derivative instruments are recognized on the balance sheet as either assets or liabilities measured at fair value. We have not elected to apply cash flow hedge accounting, and consequently, recognize gains and losses in earnings rather than deferring such amounts in other comprehensive income as allowed under cash flow hedge accounting. Fair value gains or losses, as well as cash receipts or payments on settled derivative contracts, are recognized in our results of operations. Cash flows from derivatives are reported as cash flows from operating activities.

Interest Expense. We finance a portion of our working capital requirements and capital expenditures with borrowings under our revolving credit facility and term loan. As a result, we incur interest expense that is affected by both fluctuations in interest rates and our financing decisions. We reflect interest paid to the lenders under our revolving credit facility and term loan in interest expense.

Adjusted EBITDAX

We define Adjusted EBITDAX as net income (loss) before interest expense, income taxes, depreciation, depletion and amortization and accretion of asset retirement obligations, abandonment expense and impairment of unproved properties, (gains) losses on derivatives excluding net cash receipts (payments) on settled derivatives, non-cash equity based compensation, gains and losses from the sale of assets and other non-cash and non-recurring operating items.

Management believes Adjusted EBITDAX is useful because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. Our computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies. For further discussion, please read “Prospectus Summary—Summary Historical Financial Data—Non-GAAP Financial Measure.”

Factors Affecting the Comparability of Our Results of Operations to the

Historical Results of Operations of Our Predecessor

Our future results of operations may not be comparable to the historical results of operations of our predecessor for the periods presented, primarily for the reasons described below.

Incentive Unit Compensation

Centennial HoldCo Incentive Units. Certain of our employees hold incentive units in Centennial HoldCo that are intended to be compensation for services rendered to us. After members that have made capital contributions to Centennial HoldCo have received cumulative distributions in respect of their membership interests equal to specified rates of return, these incentive units may upon vesting entitle the holders to a disproportionate share of Centennial HoldCo’s distributions. These rates of return and the vesting schedule are described under “Executive Compensation—Narrative Disclosures—Incentive Units.” These incentive units are being accounted for as liability-classified awards with performance conditions under the Financial Accounting Standards Board’s Accounting Standard Codification Topic 718-Stock Compensation (“ASC 718”).

At such time that the occurrence of the performance conditions associated with any of these incentive units are deemed probable, we will record non-cash compensation expense equal to a percentage of the then-determined fair value of those awards based on the implied service period that has been rendered at that date. As long as we continue to view the achievement of the performance conditions as probable of occurring, we will remeasure the amount of compensation expense to be recognized each period until the awards are settled. We expect that upon successful completion of this offering at the midpoint of the price range set forth on the cover of this prospectus, the performance conditions associated with the Centennial HoldCo Tier incentive units will be deemed probable of reaching payout, which will result in the recognition of non-cash compensation expense of approximately $ million and unrecognized non-cash compensation expense of approximately $ million. Assuming no change to the midpoint of the price range set forth on the cover of this prospectus, the non-cash compensation expense for the remainder of 2016 would be $ million and $ million in 2017. Any change in fair value of the awards at each subsequent reporting period will impact the aforementioned non-cash compensation expense. Please read “Executive Compensation—Narrative Disclosures—Incentive Units” for more information on the incentive units.

Follow-On Incentive Units. Certain of our employees hold incentive units in Follow-On that are intended to be compensation for services rendered to us. After members that have made capital contributions to Follow-On have received cumulative distributions in respect of their membership interests equal to specified rates of return, these incentive units may upon vesting entitle the holders to a disproportionate share of Follow-On’s distributions. These rates of return and the vesting schedule are described under “Executive Compensation—Narrative Disclosures—

Incentive Units.” These incentive units are being accounted for as liability-classified awards with performance conditions under ASC 718, and at such time that the occurrence of the performance conditions associated with any of these incentive units are deemed probable, we will record non-cash compensation expense equal to a percentage of the then-determined fair value of those awards based on the implied service period that has been rendered at that date.

As part of the transactions described in “Recent and Formation Transactions—Formation Transactions—Our Corporate Reorganization,” Follow-On will be recapitalized into a single class of equity with each member of Follow-On, including holders of the Follow-On incentive units, receiving a fixed percentage interest in Follow-On based on the distribution provisions contained in Follow-On’s limited liability company agreement and the implied equity value of Follow-On immediately prior to this offering, based on the aggregate number of shares of our common stock to be issued to Follow-On in connection with our corporate reorganization. Promptly following the consummation of this offering, Follow-On intends to distribute all of its shares of our common stock and any cash received in respect of shares of our common stock it sells in this offering to its members on a pro-rata basis and then dissolve. We expect that upon a successful completion of this offering at the midpoint of our price range set forth on the cover of this prospectus and assuming the underwriters’ over-allotment option is not exercised, approximately shares of our common stock and approximately $ million of cash will be distributed in respect of the Follow-On incentive units. This is expected to result in the recognition of approximately $ million of non-cash compensation expense to be recorded in the period in which this offering occurs.

Public Company Expenses

Upon completion of this offering, we expect to incur direct, incremental G&A expenses as a result of being a publicly traded company, including, but not limited to, costs associated with hiring new personnel, implementation of compensation programs that are competitive with our public company peer group, annual and quarterly reports to stockholders, tax return preparation, independent auditor fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and independent director compensation. These direct, incremental G&A expenses are not included in our historical results of operations.

Income Taxes

Centennial Resource Development, Inc. is a C-corp under the Code, and as a result, will be subject to U.S. federal, state and local income taxes. Although our predecessor was subject to franchise tax in the State of Texas (at less than 1% of modified pre-tax earnings), it generally passed through its taxable income to its owners for other income tax purposes and thus was not subject to U.S. federal income taxes or other state or local income taxes. Accordingly, the financial data attributable to our predecessor contains no provision for U.S. federal income taxes or income taxes in any state or locality other than franchise tax in the State of Texas. We estimate that Centennial Resource Development, Inc. will be subject to U.S. federal, state and local taxes at a blended statutory rate of 36% of pre-tax earnings.

Dispositions

Our predecessor made the following dispositions in 2014:

•

Marston Disposition—In December 2014, our predecessor conveyed approximately 1,845 net acres in Ward County, Texas, including 18 wells that produced 122 net Boe/d for the year ended December 31, 2014, for cash proceeds of approximately $12.5 million. This disposition was accounted for as a transaction between entities under common control. We refer to this disposition as the “Marston Disposition.”

•

CO ₂ Project Disposition—In May 2014, our predecessor conveyed certain oil and natural gas properties in Chaves County, New Mexico pursuant to which it had pursued a tertiary recovery project utilizing CO ₂

to increase production on such properties, including wells that produced 378 net Boe/d in the first half of 2014, for net cash proceeds of approximately $59.3 million. We refer to this disposition as the “CO ₂ Project Disposition.”

Predecessor Results of Operations

Three Months Ended March 31, 2016 Compared to Three Months Ended March 31, 2015

Oil, Natural Gas and NGL Sales Revenues . The following table provides the components of our revenues for the periods indicated, as well as each period’s respective average prices and production volumes:


	Three Months Ended March 31,
	2016		2015		Change			% Change
Revenues (in thousands):
Oil sales	$	13,226	$	21,066	$	(7,840	)		(37	)%
Natural gas sales		1,313		1,963		(650	)		(33	)%
NGL sales		582		1,387		(805	)		(58	)%

Total revenues	$	15,121	$	24,416	$	(9,295	)		(38	)%

Average sales price:(1)
Oil (per Bbl)	$	28.14	$	42.22	$	(14.08	)		(33	)%
Natural gas (per Mcf)		1.88		2.78		(0.90	)		(32	)%
NGL (per Bbl)		8.31		17.12		(8.81	)		(51	)%

Total (per Boe)	$	23.05	$	34.98	$	(11.93	)		(34	)%
Production:
Oil (MBbls)		470		499		(29	)		(6	)%
Natural gas (MMcf)		698		705		(7	)		(1	)%
NGLs (MBbls)		70		81		(11	)		(14	)%

Total (MBoe)(2)		656		698		(42	)		(6	)%

Average daily production volume:
Oil (Bbls/d)		5,165		5,544		(379	)		(7	)%
Natural Gas (Mcf/d)		7,670		7,833		(163	)		(2	)%
NGLs (Bbls/d)		769		900		(131	)		(15	)%

Total (Boe/d)(2)		7,212		7,750		(538	)		(7	)%

(1)	Average prices shown in the table reflect prices before the effects of our realized commodity derivative transactions.

(2)	Totals may not sum or recalculate due to rounding.

As reflected in the table above, our total revenues for the first three months of 2016 was 38%, or $9.3 million, lower than the prior year period. The decrease is primarily due to a significant decrease in commodity prices, resulting in a 34% decrease in the average sales price per Boe, and 6% decrease in production sold in the first three months of 2016 compared to the prior year period. The decrease in average daily production is attributable to the decrease in commodity prices, which resulted in the curtailment of drilling activity in the beginning of 2015 continuing into 2016.

Oil sales decreased 37%, or $7.8 million, primarily due to a 33% decrease in the average sales price for oil and partially due to a 6% decrease in oil volumes sold. Natural gas sales decreased 33%, or $0.7 million, primarily due to a 32% decrease in the average sales price for natural gas . NGL sales decreased 58%, or $0.8 million, primarily due to a 51% decrease in the average sales price for NGLs and partially due to a 14% decrease in NGL volumes sold.

Operating Expenses. We present per Boe information because we use this information to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis.

The following table summarizes our expenses for the periods indicated:


	Three Months Ended March 31,
	2016		2015			Change			% Change
	(Unaudited)
Operating expenses (in thousands):
Lease operating expenses	$	4,042	$	6,497		$	(2,455	)		(38	)%
Severance and ad valorem taxes		844		1,193			(349	)		(29	)%
Transportation, processing, gathering and other operating expenses		1,130		1,283			(153	)		(12	)%
Depreciation, depletion, amortization and accretion of asset retirement obligations		21,303		23,230			(1,927	)		(8	)%
Contract termination and rig stacking		—		1,540			(1,540	)		(100	)%
General and administrative expenses		2,536		2,913			(377	)		(13	)%

Total operating expenses before loss on sale of oil and natural gas properties	$	29,855	$	36,656		$	(6,801	)		(19	)%
Loss (gain) on sale of oil and natural gas properties		4		(2,675	)		NM			NM

Total operating expenses after loss (gain) on sale of oil and natural gas properties	$	29,859	$	33,981		$	(4,122	)		(12	)%

Expenses per Boe:
Lease operating expenses	$	6.16	$	9.31		$	(3.15	)		(34	)%
Severance and ad valorem taxes		1.29		1.71			(0.42	)		(25	)%
Transportation, processing, gathering and other operating expenses		1.72		1.84			(0.12	)		(7	)%
Depreciation, depletion, amortization and accretion of asset retirement obligations		32.47		33.28			(0.81	)		(2	)%
Contract termination and rig stacking		—		2.21			(2.21	)		(100	)%
General and administrative expenses		3.87		4.17			(0.30	)		(7	)%

Total operating expenses per Boe	$	45.51	$	52.52		$	(7.01	)		(13	)%

Lease Operating Expenses. We experience volatility in our LOE as a result of the impact industry activity has on service provider costs and seasonality in workover expense. LOE decreased 38%, or $2.5 million, in the first three months of 2016 compared to the prior year period due in part to service providers lowering costs in light of the weak commodity price environment. Additionally, fewer wells were brought on line in the first three months of 2016 compared to the prior year period, which resulted in decreased needs for compression, rental equipment, fuel, saltwater disposal and chemicals. Furthermore, workover expense decreased in the first three months of 2016 compared to the prior year period.

Severance and Ad Valorem Taxes. Severance taxes are primarily based on the market value of our production at the wellhead and ad valorem taxes are generally based on the valuation of our oil and natural gas properties and vary across the different counties in which we operate. Severance and ad valorem taxes decreased 29%, or $0.3 million, in the first three months of 2016 compared to the prior year period, primarily due to lower production revenues, which were primarily as a result of lower realized commodity prices. Severance and ad valorem taxes as a percentage of our revenue was 5.6% for the first three months of 2016 compared to 4.9% for the prior year period.

Transportation, Processing, Gathering and Other Operating Expenses. Transportation, processing, gathering and other operating expenses decreased 12%, or $0.2 million, in the first three months of 2016 compared to the prior year period, primarily due to a decrease in sales and processing volumes and lower prices for natural gas and NGLs, which resulted in lower costs associated with fuel and processing fees.

Depreciation, Depletion, Amortization and Accretion of Asset Retirement Obligations. Our DD&A rate can fluctuate as a result of impairments, dispositions, finding and development costs and proved reserve volumes. DD&A decreased 8%, or $1.9 million, for the first three months of 2016 compared to the prior year period, primarily due to a decrease in production volumes. DD&A per Boe was $32.47 for the first three months of 2016 compared to $33.28 for the prior year period.

Contract Termination and Rig Stacking. In the first three months of 2016, we incurred no drilling and rig termination fees, as compared to $1.5 million in the prior year period. In light of the low commodity price environment, we curtailed drilling activity beginning in the first quarter of 2015, and as a result, we incurred drilling and rig termination fees of $1.5 million in the first three months of 2015.

General and Administrative Expenses. G&A expenses decreased 13%, or $0.4 million, primarily due to a decrease in consulting and professional services in the first three months of 2016 compared to the prior year period.

Gain (Loss) on Sale of Oil and Natural Gas Properties. In the first three months of 2016, we recorded an immaterial net loss on the sale of oil and natural gas properties as compared to a net gain of $2.7 million in the prior year period, which was primarily attributable to a gain of $2.4 million associated with the sale of non-core unproved property to an unrelated third party.

Other Income and Expenses. The following table summarizes our other income and expenses for the periods indicated:


	Three Months Ended March 31,
	2016			2015			Change			% Change
	(Unaudited)
Other (expense) income (in thousands):
Interest expense	$	(1,641	)	$	(1,526	)	$	(115	)		8	%
Gain on derivative instruments		1,918			5,154			(3,236	)		(63	)%

Total other income	$	277		$	3,628		$	(3,351	)		(92	)%

Income tax expense	$	—		$	—		$	—			—	%

Interest Expense. Interest expense increased 8%, or $0.1 million, primarily due to an increase in the average borrowings under our revolving credit facility during the first three months of 2016 compared to the prior year period.

Gain on Derivative Instruments. In the first three months of 2016, we recognized a $1.9 million derivative gain as compared to a $5.2 million derivative gain in the prior year period. Net gains on our derivatives are a function of fluctuations in the underlying commodity prices and the monthly settlement of the instruments.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Oil and Natural Gas Revenues. The following table provides the components of our revenues for the years indicated, as well as each year’s respective average prices and production volumes:


	Year Ended December 31,
	2015		2014		$ Change			% Change
Revenues (in thousands):
Oil sales	$	77,643	$	114,955	$	(37,312	)		(32	)%
Natural gas sales		7,965		9,670		(1,705	)		(18	)%
NGL sales		4,852		7,200		(2,348	)		(33	)%

Total revenues	$	90,460	$	131,825	$	(41,365	)		(31	)%

Average sales price:(1)
Oil (per Bbl)	$	42.43	$	80.50	$	(38.07	)		(47	)%
Natural gas (per Mcf)		2.60		4.58		(1.98	)		(43	)%
NGLs (per Bbl)		14.66		30.64		(15.98	)		(52	)%

Total (per Boe)	$	33.87	$	65.42	$	(31.55	)		(48	)%
Production:
Oil (MBbls)		1,830		1,428		402			28	%
Natural gas (MMcf)		3,058		2,112		946			45	%
NGLs (MBbls)		331		235		96			41	%

Total (MBoe)(2)		2,671		2,015		656			33	%

Average daily production volumes:
Oil (Bbls/d)		5,014		3,912		1,102			28	%
Natural gas (Mcf/d)		8,378		5,786		2,592			45	%
NGLs (Bbls/d)		907		644		263			41	%

Total (Boe/d)(2)		7,317		5,521		1,796			33	%

(1)	Average prices shown in the table reflect prices before the effects of our realized commodity derivative transactions.

(2)	Totals may not sum or recalculate due to rounding.

As reflected in the table above, our total revenues for 2015 was 31%, or $41.4 million, lower than in 2014. The decrease is primarily due to a significant decrease in commodity prices, resulting in a 48% decrease in the average sales price per Boe. The decrease was offset in part by a 33% increase in average daily production sold in 2015 compared to 2014. The increase in average daily production in 2015 was negatively impacted by property divestitures that occurred in 2014. In 2014, average daily production attributable to the property dispositions approximated 310 Boe/d.

Oil sales decreased 32%, or $37.3 million, primarily as result of a 47% decrease in average sales price for oil, offset by a 28% increase in oil volumes sold . Natural gas sales decreased 18%, or $1.7 million, primarily as a result of 43% decrease in the average sales price for natural gas, offset by a 45% increase in natural gas volumes sold . NGL sales decreased 33%, or $2.3 million, primarily as a result of a 52% decrease in the average price for NGLs, offset by a 41% increase in NGL volumes sold .

Operating Expenses. The following table summarizes our expenses for the periods indicated:


	Year Ended December 31,
	2015			2014		$ Change			% Change
Operating expenses (in thousands):
Lease operating expenses	$	21,173		$	17,690	$	3,483			20	%
Severance and ad valorem taxes		5,021			6,875		(1,854	)		(27	)%
Transportation, processing, gathering and other operating expenses		5,732			4,772		960			20	%
Depreciation, depletion, amortization and accretion of asset retirement obligations		90,084			69,110		20,974			30	%
Abandonment expense and impairment of unproved properties		7,619			20,025		(12,406	)		(62	)%
Exploration		84			—		84			100	%
Contract termination and rig stacking		2,387			—		2,387			100	%
General and administrative expenses		14,206			31,694		(17,488	)		(55	)%

Total operating expenses	$	146,306		$	150,166	$	(3,860	)		(3	)%
(Gain) loss on sale of oil and natural gas properties		(2,439	)		2,096		NM			NM

Total operating expenses after (loss) gain on sale of oil and natural gas properties	$	143,867		$	152,262	$	(8,395	)		(6	)%

Average unit costs per Boe:
Lease operating expenses	$	7.93		$	8.78	$	(0.85	)		(10	)%
Severance and ad valorem taxes		1.88			3.41		(1.53	)		(45	)%
Transportation, processing, gathering and other operating expenses		2.15			2.37		(0.22	)		(9	)%
Depreciation, depletion, amortization and accretion of asset retirement obligations		33.73			34.30		(0.57	)		(2	)%
Abandonment expense and impairment of unproved properties		2.85			9.94		(7.09	)		(71	)%
Exploration		0.03			—		0.03			100	%
Contract termination and rig stacking		0.89			—		0.89			100	%
General and administrative expenses		5.32			15.73		(10.41	)		(66	)%

Total operating expenses per Boe	$	54.78		$	74.53	$	(19.75	)		(26	)%

Lease Operating Expenses. We experience volatility in our LOE as a result of the impact industry activity has on service provider costs and seasonality in workover expense. LOE increased 20%, or $3.5 million, in 2015 as compared to 2014, as we continued to put new wells on production, resulting in increased needs for compression, rental equipment, fuel, saltwater disposal and chemicals. We also had a year-over-year increase in workover expense.

Severance and Ad Valorem Taxes. Severance taxes are primarily based on the market value of our production at the wellhead and ad valorem taxes are generally based on the valuation of our oil and natural gas properties and vary across the different counties in which we operate. Severance and ad valorem taxes decreased 27%, primarily due to lower production revenues primarily as a result of lower realized commodity prices. Severance and ad valorem taxes as a percentage of our revenue was 5.6% for 2015 compared to 5.2% for 2014.

Transportation, Processing, Gathering and Other Operating Expenses. Transportation, processing, gathering and other operating expenses increased 20%, or $1.0 million. In 2015, lower prices for natural gas and NGLs resulted in lower costs associated with fuel and processing fees, which were partially offset by higher processing volumes.

Depreciation, Depletion, Amortization and Accretion of Asset Retirement Obligations. Our DD&A rate can fluctuate as a result of impairments, dispositions, finding and development costs and proved reserve volumes. DD&A expense increased 30%, or $21.0 million, primarily due to an increase in production volumes. DD&A per Boe was $33.73 for 2015, a slight decrease as compared to $34.30 in 2014.

Abandonment Expense and Impairment of Unproved Properties. In 2015, we recorded $7.6 million attributable to leases that expired during the year or were expected to expire in the future. In 2014, we recorded impairment expense of $20.0 million, of which $13.8 million was attributable to an impairment of unproved properties and $6.2 million was attributable to leases that expired during the year or were expected to expire in the future.

Contract Termination and Rig Stacking. In light of the low commodity price environment, we curtailed drilling activity in 2015. As a result, we incurred drilling and rig termination fees of $2.4 million in 2015 as compared to no drilling and rig termination fees in 2014.

General and Administrative Expenses. G&A expenses decreased 55%, or $17.5 million, primarily due to $12.4 million of incentive compensation recorded in 2014 due to the achievement of certain performance criteria associated with our predecessor’s incentive units. Additionally, the decrease is the result of no longer having two distinct management teams and employees associated with each of our predecessors along with our growing capital program and oil production levels.

Gain (Loss) on Sale of Oil and Natural Gas Properties. In 2015, we recorded a net gain of $2.4 million, primarily attributable to the sale of non-core unproved property to an unrelated third party. In 2014, we recorded a net loss of $2.1 million, primarily attributable to the CO ₂ Project Disposition

Other Income and Expenses. The following table summarizes our other income and expenses for the years indicated:


	Year Ended December 31,
	2015			2014			$ Change			% Change
Other income (expense) (in thousands):
Interest expense	$	(6,266	)	$	(2,475	)	$	(3,791	)		153	%
Gain on derivative instruments		20,756			41,943			(21,187	)		(51	)%
Other income		20			281			(261	)		NM

Total other income	$	14,510		$	39,749		$	(25,239	)		(63	)%

Income tax benefit (expense)	$	572		$	(1,524	)		NM			NM

Interest Expense. Interest expense increased $3.8 million, or 153%, primarily due to an increase in the average amounts outstanding under our term loan and revolving credit facility in 2015 compared to 2014.

Gain on Derivative Instruments. In 2015, we recognized a $20.8 million gain on derivative instruments compared to a $41.9 million gain on derivative instruments in 2014. Net gains on our derivatives are a function of fluctuations in the underlying commodity prices and the monthly settlement of the instruments.

Income Tax Expense. For the year ended December 31, 2015, we recognized a tax benefit of $0.6 million associated with our Texas franchise tax obligation. For the year ended December 31, 2014, we recognized income tax expense of $1.5 million. The decrease is primarily due to a decrease in the Texas franchise tax rate and a decrease in our estimated income attributable to Texas franchise tax year-over-year.

Capital Requirements and Sources of Liquidity

Our development and acquisition activities require us to make significant operating and capital expenditures. Historically, our primary sources of liquidity have been capital contributions from our equity sponsors, borrowings under our revolving credit facility and term loan, proceeds from asset dispositions and cash flows from operations. Centennial HoldCo and Follow-On, our equity sponsors, have agreed to make capital contributions to Centennial OpCo of up to $321.9 million and $184.5 million, respectively, and as of March 31, 2016, Centennial HoldCo and Follow-On have made total capital contributions of $289.4 million and $84.2 million, respectively. Such capital contribution commitments will terminate upon the closing of this offering. To date, our primary use of capital has been for the development and acquisition of oil and natural gas properties.

We plan to continue our practice of entering into hedging arrangements to reduce the impact of commodity price volatility on our cash flow from operations. Under this strategy, we expect to maintain an active hedging program that seeks to reduce our exposure to commodity prices and protect our cash flow.

The amount and allocation of future capital expenditures will depend upon a number of factors, including the number and size of acquisition opportunities, our cash flows from operating, investing and financing activities, and our ability to assimilate acquisitions and execute our drilling program. We periodically review our capital expenditure budget to assess changes in current and projected cash flows, acquisition and divestiture activities, debt requirements, and other factors. If we are unable to obtain funds when needed or on acceptable terms, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to maintain our production or proved reserves.

Our 2016 capital budget for drilling, completion and recompletion activities and facilities costs is approximately $87 million, excluding leasing and other acquisitions. In the three months ended March 31, 2016, we incurred capital costs of approximately $16.5 million, excluding leasing and acquisition costs.

Because we are the operator of a high percentage of our acreage, the amount and timing of these capital expenditures are largely discretionary and within our control. We could choose to defer a portion of these planned capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated prices for oil and natural gas, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other working interest owners. A deferral of planned capital expenditures, particularly with respect to drilling and completing new wells, could result in a reduction in anticipated production and cash flows. Additionally, if we curtail our drilling program, we may lose a portion of our acreage through lease expirations. See “Business—Oil and Natural Gas Production Prices and Costs—Developed and Undeveloped Acreage.” In addition, we may be required to reclassify some portion of our reserves currently booked as proved undeveloped reserves if such a deferral of planned capital expenditures means we will be unable to develop such reserves within five years of their initial booking.

As of March 31, 2016, we had $77.0 million outstanding under our revolving credit facility and $0.5 million of letters of credit outstanding, and we were able to incur approximately $62.5 million of additional indebtedness under our revolving credit facility. We intend to use a portion of the net proceeds from this offering to fully repay the outstanding borrowings under our revolving credit facility. Our borrowing base under our revolving credit facility was $140.0 million as of March 31, 2016 and was reaffirmed on April 29, 2016.

Based upon current oil and natural gas price expectations for the remainder of 2016 and 2017, following the closing of this offering, we believe that our cash flow from operations, additional borrowings under our revolving credit facility and a portion of the proceeds from this offering will provide us with sufficient liquidity to execute our current capital program. However, future cash flows are subject to a number of variables, including the level of oil and natural gas production and prices, and significant additional capital expenditures will be required to more fully develop our properties. We cannot assure you that operations and other needed capital will be available on acceptable terms or at all. In the event we make additional acquisitions and the amount of capital

required is greater than the amount we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital. If we require additional capital for that or other reasons, we may seek such capital through traditional reserve base borrowings, joint venture partnerships, production payment financings, asset sales, offerings of debt and equity securities or other means. We cannot assure you that needed capital will be available on acceptable terms or at all. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current drilling program, which could result in a loss of acreage through lease expirations. In addition, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to maintain our production or replace our reserves.

Working Capital

Our working capital, which we define as current assets minus current liabilities, totaled $0.1 million at March 31, 2016. At December 31, 2015, we had a working capital of $12.0 million, and at December 31, 2014, we had a working capital deficit of $36.2 million. We may again incur a working capital deficit in the future due to the amounts that accrue related to our drilling program. Our collection of receivables has historically been timely, and losses associated with uncollectible receivables have historically not been significant. Our cash and cash equivalents balance totaled $0.1 million, $1.8 million and $13.0 million at March 31, 2016, December 31, 2015 and December 31, 2014, respectively. We expect that our cash flows from operating activities, availability under our revolving credit facility after application of the estimated net proceeds from this offering, as described under “Use of Proceeds,” and a portion of the proceeds from this offering will be sufficient to fund our working capital needs. We expect that our pace of development, production volumes, commodity prices and differentials to NYMEX prices for our oil and natural gas production will be the largest variables affecting our working capital.

Cash Flows

The following table summarizes our cash flows for the periods indicated:


	Three Months Ended March 31,						Year Ended December 31,
	2016			2015			2015			2014
	(Unaudited)
	(In thousands)
Net cash provided by operating activities	$	18,552		$	27,632		$	68,882		$	97,248
Net cash used in investing activities		(22,419	)		(79,006	)		(198,635	)		(163,380	)
Net cash provided by financing activities		2,197			38,913			118,504			36,966

Analysis of Cash Flow Changes Between the Three Months Ended March 31, 2016 and 2015

Operating Activities. Net cash provided by operating activities is primarily affected by the price of oil, natural gas and NGLs, production volumes and changes in working capital. The decrease in net cash provided by operating activities for the first three months of 2016 compared to the prior year period is primarily due to a $9.3 million decrease in total revenues and a $1.1 million decrease in net cash received for derivative settlements, primarily offset by decreased operating expenses.

Investing Activities. Net cash used in investing activities is primarily comprised of acquisition and development of oil and natural gas properties, net of dispositions. In the first three months of 2016, net cash used for investing activities included $22.4 million attributable to the acquisition and development of oil and natural gas properties. In 2015, net cash used for investing activities included $80.8 million for the acquisition and development of oil and natural gas properties and $1.0 million for the acquisitions of other property, plant and equipment, offset by proceeds from asset sales of $2.7 million.

Financing Activities. Net cash provided by financing activities in the first three months of 2016 included $5.0 million of borrowings under our revolving credit facility, offset by repayments of $2.0 million and payments of $0.8 million associated with our financing obligation. Net cash provided by financing activities in the first three months of 2015 primarily included $39.0 million of borrowings under our revolving credit facility.

Analysis of Cash Flow Changes Between the Year Ended December 31, 2015 and 2014

Operating Activities. Net cash provided by operating activities is primarily affected by the price of oil, natural gas and NGLs, production volumes and changes in working capital. The decrease in net cash provided by operating activities for the year ended December 31, 2015 as compared to the prior year is primarily due to a $41.4 million decrease in total revenues and a decrease in changes in current assets and current liabilities, which decreased cash proceeds provided by operating activities by $16.4 million. The decreases are primarily offset by an increase in net cash received for derivative settlements of $30.9 million.

Investing Activities. Net cash used in investing activities is primarily comprised of acquisition and development of oil and natural gas properties net of dispositions. In 2015, net cash used for investing activities included $201.3 million attributable to the acquisition and development of oil and natural gas properties, offset by proceeds from asset sales of $2.7 million. In 2014, net cash used for investing activities included $298.3 million attributable to the acquisition and development of oil and natural gas properties, offset by net proceeds from asset sales of $129.9 million.

Financing Activities. Net cash provided by financing activities in 2015 included $92.0 million of borrowings under our revolving credit facility, offset by repayments of $83.0 million, capital contributions of $111.4 million, $1.6 million of payments associated with our financing obligation and debt issuance costs of $0.3 million. Net cash provided by financing activities in 2014 included $196.0 million of borrowing under our revolving credit facility, offset by $160.0 million of repayments, $65.0 million of proceeds from our term loan, and capital contributions of $59.8 million, offset by $119.3 million attributable to the repurchase of equity interests and $1.6 million of debt issuance costs.

Our Term Loan and Our Revolving Credit Facility

On October 15, 2014, Centennial OpCo entered into an amended and restated credit agreement (as amended to date, our “credit agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders, that includes both a term loan commitment of $65.0 million (our “term loan”), which was fully funded as of March 31, 2016, and a revolving credit facility (our “revolving credit facility”) with commitments of $500.0 million (subject to the borrowing base), with a sublimit for letters of credit of $15.0 million. As of March 31, 2016, the borrowing base under our revolving credit facility was $140.0 million, and our borrowing base was reaffirmed on April 29, 2016. As of March 31, 2016, we had $77.0 million outstanding under our revolving credit facility and $0.5 million of letters of credit outstanding, and we were able to incur approximately $62.5 million of additional indebtedness under our revolving credit facility. We intend to use a portion of the net proceeds of this offering to fully repay and terminate our term loan and fully repay the outstanding borrowings under our revolving credit facility. Our term loan matures on April 15, 2018, and our revolving credit facility matures on October 15, 2019.

The amount available to be borrowed under our revolving credit facility is subject to a borrowing base that will be redetermined semiannually each April 1 and October 1 by the lenders in their sole discretion. Our credit agreement also allows, in 2016 and thereafter, for two optional borrowing base redeterminations on January 1 and July 1. The borrowing base depends on, among other things, the volumes of Centennial OpCo’s proved oil and natural gas reserves and estimated cash flows from these reserves and Centennial OpCo’s commodity hedge positions. The borrowing base will automatically be decreased by an amount equal to 25% of the aggregate notional amount of issued permitted senior unsecured notes unless such decrease is waived by the lenders. Upon a redetermination of the borrowing base, if borrowings in excess of the revised borrowing capacity are outstanding, Centennial OpCo could be required to immediately repay a portion of its debt outstanding under our credit agreement.

Principal amounts borrowed are payable on the term loan maturity date and the revolving credit maturity date, as applicable. Interest on the term loan is LIBOR plus 5.25%. At March 31, 2016, the weighted average interest rate on our term loan was 5.69%. Loans under our revolving credit facility may be base rate loans or LIBOR loans. Interest is payable quarterly for base rate loans and at the end of the applicable interest period for LIBOR loans. LIBOR loans bear interest at LIBOR (adjusted for statutory reserve requirements) plus an applicable margin ranging from 150 to 250 basis points, depending on the percentage of the borrowing base utilized. Base rate loans bear interest at a rate per annum equal to the greatest of: (i) the agent bank’s prime rate; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted LIBOR rate for a one-month interest period plus 100 basis points, plus an applicable margin ranging from 50 to 150 basis points, depending on the percentage of the borrowing base utilized. At March 31, 2016, the weighted average interest rate on borrowings under our revolving credit facility was approximately 2.44%. Centennial OpCo also pays a commitment fee on unused amounts of our revolving credit facility ranging from 37.5 basis points to 50 basis points, depending on the percentage of the borrowing base utilized. Centennial OpCo may repay any amounts borrowed prior to the maturity date without any premium or penalty other than customary LIBOR breakage costs.

Our credit agreement contains restrictive covenants that limit Centennial OpCo’s ability to, among other things:

•

incur additional indebtedness;

•

make investments and loans;

•

enter into mergers;

•

make or declare dividends;

•

enter into commodity hedges exceeding a specified percentage of Centennial OpCo’s expected production;

•

enter into interest rate hedges exceeding a specified percentage of Centennial OpCo’s outstanding indebtedness;

•

incur liens;

•

sell assets; and

•

engage in transactions with affiliates.

Our credit agreement also requires Centennial OpCo to maintain compliance with the following financial ratios:

•

a current ratio, which is the ratio of Centennial OpCo’s consolidated current assets (including unused commitments under our revolving credit facility and excluding non-cash assets under Financial Accounting Standards Board’s (“FASB”) Accounting Standard Codification (“ASC”) 815 and certain restricted cash) to Centennial OpCo’s consolidated current liabilities (excluding the current portion of long-term debt under our credit agreement and non-cash liabilities under ASC 815), of not less than 1.0 to 1.0; and

•

a leverage ratio, which is the ratio of Total Funded Debt (as defined in our credit agreement) to consolidated EBITDAX (as defined in our credit agreement) for the rolling four fiscal quarter period ending on such day, of not greater than 4.0 to 1.0.

As of March 31, 2016, we were in compliance with such covenants and the financial ratios described above.

Contractual Obligations

A summary of our contractual obligations as of December 31, 2015 is provided in the following table.


	Payments Due by Period For the Year Ending December 31,
	2016		2017		2018		2019		2020		Thereafter		Total
	(In thousands)
Revolving credit facility(1)	$	—	$	—	$	—	$	74,000	$	—	$	—	$	74,000
Term loan(2)		—		—		65,000		—		—		—		65,000
Drilling rig commitments		422		—		—		—		—		—		422
Office and equipment leases		539		477		485		419		—		—		1,920
Pipeline financing obligation(3)		2,137				—		—		—		—		2,137
Asset retirement obligations(4)		—		—		—		—		—		2,288		2,288

Total	$	3,098	$	477	$	65,485	$	74,419	$	—	$	2,288	$	145,767

(1)

This table does not include future commitment fees, amortization of deferred financing costs, interest expense or other fees on our revolving credit facility because obligations thereunder are floating rate instruments and we cannot determine with accuracy the timing of future loan advances, repayments or future interest rates to be charged. As of March 31, 2016, we had $77.0 million outstanding under our revolving credit facility and $0.5 million of letters of credit outstanding, and we were able to incur approximately $62.5 million of additional indebtedness under our revolving credit facility. We intend to use a portion of the net proceeds from this offering to fully repay borrowings under our revolving credit facility. Please see “Use of Proceeds.”

(2)	We intend to use a portion of the net proceeds from this offering to fully repay and terminate our term loan. Please see “Use of Proceeds.”

(3)	A subsidiary of PennTex Midstream Partners, LP has constructed an expansion of a gas gathering system for which we have agreed to repay all construction costs, which totaled approximately $4.0 million. Each month, we pay a minimum fee of $7,000 per day until all construction costs are paid.

(4)

Amounts represent estimates of our future asset retirement obligations. Because these costs typically extend many years into the future, estimating these future costs requires management to make estimates and judgments that are subject to future revisions based upon numerous factors, including the rate of inflation, changing technology and the political and regulatory environment.

Quantitative and Qualitative Disclosure About Market Risk

We are exposed to market risk, including the effects of adverse changes in commodity prices and interest rates as described below. The primary objective of the following information is to provide quantitative and qualitative information about our potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in oil and natural gas prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. All of our market risk sensitive instruments were entered into for purposes other than speculative trading.

Commodity Price Risk

Our major market risk exposure is in the pricing that we receive for our oil, natural gas and NGLs production. Pricing for oil, natural gas and NGLs has been volatile and unpredictable for several years, and we expect this volatility to continue in the future. During the period from January 1, 2014 through May 31, 2016, the WTI spot price for oil has declined from a high of $107.62 per Bbl on July 23, 2014 to $26.21 per Bbl on February 11, 2016. NGL prices generally correlate to the price of oil, and accordingly prices for these products have likewise declined and are likely to continue following that market. Prices for domestic natural gas began to decline during the third quarter of 2014 and have continued to be weak throughout 2015 and thus far in 2016.

During the period from January 1, 2014 through May 31, 2016, the Henry Hub spot price for natural gas has declined from a high of $7.92 per MMBtu on March 4, 2014 to a low of $1.49 per MMBtu on March 4, 2016. The prices we receive for our oil, natural gas and NGLs production depend on numerous factors beyond our control, some of which are discussed in “Risk Factors—Risks Related to Our Business—Oil, natural gas and NGL prices are volatile. A sustained decline in oil, natural gas and NGL prices could adversely affect our business, financial condition and results of operations and our ability to meet our capital expenditure obligations and financial commitments.”

A $1.00 per barrel change in our realized oil price would have resulted in a $1.8 million change in oil revenues for 2015. A $0.10 per Mcf change in our realized natural gas price would have resulted in a $0.3 million change in our natural gas revenues for 2015. A $1.00 per barrel change in NGL prices would have changed NGL revenue by $0.3 million for 2015. Oil sales contributed 86% of our total revenues for 2015. Natural gas sales contributed 9% and NGL sales contributed 5% of our total revenues for 2015. Our oil, natural gas and NGL revenues do not include the effects of derivatives.

Due to this volatility, we have historically used, and we expect to continue to use, commodity derivative instruments, such as collars, swaps and basis swaps, to hedge price risk associated with a portion of our anticipated production. Our hedging instruments allow us to reduce, but not eliminate, the potential effects of the variability in cash flow from operations due to fluctuations in oil and natural gas prices and provide increased certainty of cash flows for our drilling program and debt service requirements. These instruments provide only partial price protection against declines in oil and natural gas prices and may partially limit our potential gains from future increases in prices. Our credit agreement allows us to hedge up to 80% of our reasonably anticipated production from proved reserves for up to 24 months in the future and up to 90% of our reasonably anticipated production from proved developed producing reserves for 25 to 60 months in the future, provided that no hedges may have a tenor beyond five years.

Our open positions as of March 31, 2016:


Description & Production Period	Volume (Bbl)		Weighted Average Swap Price ($/Bbl)(1)
Crude Oil Swaps:
April 2016—December 2016		34,375	$	76.25
April 2016—December 2016		68,750		62.42
April 2016—December 2016		34,375		77.32
April 2016—December 2016		68,750		65.58
April 2016—June 2016		90,000		90.95
April 2016—December 2016		27,500		54.00
April 2016—December 2016		27,500		53.23
April 2016—December 2016		27,500		51.80
April 2016—December 2016		96,250		52.10
April 2016—December 2016		27,500		50.20
July 2016—December 2016		18,400		40.87
July 2016—December 2016		36,800		43.35
July 2016—December 2016		55,200		42.75
January 2017—December 2017		91,250		64.05
January 2017—December 2017		36,500		54.65
January 2017—December 2017		36,500		43.50
January 2017—December 2017		36,500		44.85
January 2017—December 2017		36,500		45.10
January 2017—December 2017		109,500		44.80
January 2018—December 2018		36,500		55.95
Crude Oil Basis Swaps:
February 2016—November 2016		68,750	$	(1.65	)
February 2016—November 2016		68,750		(1.05	)
February 2016—November 2016		68,750		(1.40	)
March 2016—December 2016		76,500		(0.55	)
February 2016—November 2016		82,500		0.25
February 2016—November 2016		55,000		(0.16	)
February 2016—November 2016		27,500		(0.50	)
February 2016—November 2016		27,500		(0.40	)
February 2016—November 2016		82,500		(0.25	)
February 2016—November 2016		137,500		(0.25	)
February 2016—November 2016		137,500		(0.20	)
February 2016—November 2016		55,000		(0.10	)
February 2016—November 2016		55,000		0.10
November 2016—November 2017		91,250		(0.20	)
November 2016—November 2017		36,500		(0.20	)

(1)	The oil swap contracts are settled based on the month’s average daily NYMEX price of West Texas Intermediate Light Sweet Crude. The oil basis derivative contracts are settled based on the month’s average daily implied Principal Components of Our Cost Structure

Counterparty and Customer Credit Risk

Our derivative contracts expose us to credit risk in the event of nonperformance by counterparties. While we do not require counterparties to our derivative contracts to post collateral, we do evaluate the credit standing of such counterparties as we deem appropriate. The counterparties to our derivative contracts currently in place have investment grade ratings.

Our principal exposures to credit risk are through receivables resulting from joint interest receivables and receivables from the sale of our oil and natural gas production due to the concentration of our oil and natural gas receivables with several significant customers. The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. However, we believe the credit quality of our customers is high.

Joint operations 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 intend to drill. We have little ability to control whether these entities will participate in our wells.

Interest Rate Risk

At March 31, 2016, we had $142.0 million of debt outstanding, with an assumed weighted average interest rate of 3.93%. Interest is calculated under the terms of our credit agreement based on a LIBOR spread. Assuming no change in the amount outstanding, the impact on interest expense of a 1% increase or decrease in the assumed weighted average interest rate would be approximately $1.4 million per year. We do not currently have or intend to enter into any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our predecessor’s consolidated and combined financial statements, which have been prepared in accordance with GAAP. The preparation of our predecessor’s financial statements requires it to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates.

A complete list of our predecessor’s significant accounting policies are described in Note 2—Basis of Presentation, Summary of Significant Accounting Policies, and Recently Issued Accounting Standards in our predecessor’s audited financial statements for the year ended December 31, 2015 included elsewhere in this prospectus.

Successful Efforts Method of Accounting for Oil and Natural Gas Activities

Our oil and natural gas producing activities are accounted for using the successful efforts method of accounting. Under the successful efforts method, we capitalize lease acquisition costs, all development costs and successful exploration costs.

Proved Oil and Natural Gas Properties . Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing oil, natural gas and NGLs are capitalized. All costs incurred to drill and equip successful exploratory wells, development wells, development-type stratigraphic test wells and service wells, including unsuccessful development wells, are capitalized.

Unproved Properties . Acquisition costs associated with the acquisition of non-producing leaseholds are recorded as unproved leasehold costs and capitalized as incurred. These consist of costs incurred in obtaining a mineral interest or right in a property, such as a lease in addition to options to lease, broker fees, recording fees and other similar costs related to acquiring properties. Leasehold costs are classified as unproved until proved reserves are discovered, at which time related costs are transferred to proved oil and natural gas properties.

Exploration Costs . Exploration costs, other than exploration drilling costs, are charged to expense as incurred. These costs include seismic expenditures, other geological and geophysical costs, and lease rentals. The costs of drilling exploratory wells and exploratory-type stratigraphic wells are initially capitalized pending

determination of whether the well has discovered proved commercial reserves. If the exploratory well is determined to be unsuccessful, the cost of the well is transferred to expense.

Impairment of Oil and Natural Gas Properties

Our proved oil and natural gas properties are recorded at cost. We evaluate our proved properties for impairment when events or changes in circumstances indicate that a decline in the recoverability of their carrying value may have occurred. We estimate the expected future cash flows of our oil and natural gas properties and compare these undiscounted cash flows to the carrying amount of the oil and natural gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we will write down the carrying amount of the oil and natural gas properties to fair value. The factors used to determine fair value include, but are not limited to, estimates of reserves, future commodity prices, future production estimates, estimated future operating and capital expenditures, and discount rates.

Unproved properties costs consist of costs to acquire undeveloped leases as well as costs to acquire unproved reserves. We evaluate significant unproved properties for impairment based on remaining lease term, drilling results, reservoir performance, seismic interpretation or future plans to develop acreage.

Oil and Natural Gas Reserve Quantities

Our estimated proved reserve quantities and future net cash flows are critical to the understanding of the value of our business. They are used in comparative financial ratios and are the basis for significant accounting estimates in our financial statements, including the calculations of depletion and impairment of proved oil and natural gas properties. Future cash inflows and future production and development costs are determined by applying prices and costs, including transportation, quality differentials and basis differentials, applicable to each period to the estimated quantities of proved reserves remaining to be produced as of the end of that period. Expected cash flows are discounted to present value using an appropriate discount rate. For example, the standardized measure calculations require a 10 percent discount rate to be applied. Although reserve estimates are inherently imprecise, and estimates of new discoveries and undeveloped locations are more imprecise than those of established producing oil and gas properties, we make a considerable effort in estimating our reserves. We engage NSAI, our independent petroleum engineer, to prepare our total calculated proved reserve PV-10. We expect proved reserve estimates will change as additional information becomes available and as commodity prices and operating and capital costs change. We evaluate and estimate our proved reserves each year-end. For purposes of depletion and impairment, reserve quantities are adjusted in accordance with GAAP for the impact of additions and dispositions.

Revenue Recognition

Our revenue recognition policy is significant because revenue is a key component of our results of operations and our forward-looking statements contained in the above analysis of liquidity and capital resources. We derive our revenue primarily from the sale of produced oil, natural gas, and NGLs. Revenue is recognized when our production is delivered to the purchaser, but payment is generally received between 30 and 90 days after the date of production. No revenue is recognized unless it is determined that title to the product has transferred to a purchaser. At the end of each month, we make estimates of the amount of production delivered to the purchaser and the price we will receive. We use our knowledge of our properties, contractual arrangements, NYMEX and local spot market prices and other factors as the basis for these estimates. Variances between our estimates and the actual amounts received are recorded in the month payment is received.

Derivative Instruments

We utilize commodity derivative instruments, including swaps, collars and basis swaps, to manage the price risk associated with the forecasted sale of our oil and natural gas production. Our derivative instruments are not

designated as hedges for accounting purposes. Accordingly, changes in fair value are recognized in our consolidated and combined statements of operations in the period of change. Gains and losses on derivatives and premiums paid for put options are included in cash flows from operating activities.

Asset Retirement Obligations

Our asset retirement obligation represents the estimated present value of the amount we will incur to retire long-lived assets at the end of their productive lives, in accordance with applicable state laws. Our asset retirement obligation is determined by calculating the present value of estimated cash flows related to the liability. The retirement obligation is recorded as a liability at its estimated present value as of inception with an offsetting increase in the carrying amount of the related long-lived asset. Periodic accretion of discount of the estimated liability is recorded as an expense in the income statement. The cost of the tangible asset, including the asset retirement cost, is depreciated over the useful life of the asset.

Asset retirement liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of assets and our risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligation. Because of the subjectivity of assumptions, the costs to ultimately retire our wells may vary significantly from prior estimates.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases , which requires all leasing arrangements to be presented in the balance sheet as liabilities along with a corresponding asset. The ASU will replace most existing leases guidance in GAAP when it becomes effective. The new standard becomes effective for us on January 1, 2019. Although early application is permitted, we do not plan to early adopt the ASU. The standard requires the use of the modified retrospective transition method. We are evaluating the impact, if any, that the adoption of this update will have on our condensed consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting , which includes provisions intended to simplify various aspects related to how share-based compensation payments are accounted for and presented in financial statements. This amendment will be effected prospectively for reporting periods beginning on or after December 15, 2016, and early adoption is permitted. We are evaluating the impact, if any, that the adoption of this update will have on our condensed consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . This guidance is to be applied using a full retrospective method or a modified retrospective method, as outlined in the guidance. In August 2015, the FASB deferred the effective date of the new revenue recognition standard by one year. The revenue recognition standard is now effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted but only for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. We are evaluating the impact, if any, that the adoption of this update will have on our consolidated and combined financial statements and related disclosures.

Internal Controls and Procedures

We are not currently required to comply with the SEC’s rules implementing Section 404 of the Sarbanes Oxley Act of 2002, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required

to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act of 2002, which will require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. We will not be required to make our first assessment of our internal control over financial reporting under Section 404 until our first annual report subsequent to our ceasing to be an “emerging growth company” within the meaning of Section 2(a)(19) of the Securities Act.

Inflation

Inflation in the United States has been relatively low in recent years and did not have a material impact on our results of operations for the years ended December 31, 2015 or 2014. Although the impact of inflation has been insignificant in recent years, it is still a factor in the United States economy and we tend to experience inflationary pressure on the cost of oilfield services and equipment as increasing oil and natural gas prices increase drilling activity in our areas of operations.

Off-Balance Sheet Arrangements

Currently, neither we nor our predecessor have off-balance sheet arrangements.

BUSINESS

The following discussion should be read in conjunction with the “Selected Historical Consolidated and Combined Financial Data” and the accompanying financial statements and related notes included elsewhere in this prospectus.

The estimated proved reserve information for our properties as of December 31, 2015 contained in this prospectus is based on a reserve report relating to our properties prepared by NSAI, our independent petroleum engineer.

Business Overview

We have leased or acquired approximately 42,500 net acres, approximately 83% of which we operate, as of June 15, 2016. Our acreage is predominantly located in the southern portion of the Delaware Basin, where production and reserves typically contain a higher percentage of oil and natural gas liquids and a correspondingly lower percentage of natural gas compared to the northern portion of the Delaware Basin. After temporarily suspending drilling activity at the end of March 2016 to preserve capital, we added one horizontal rig in June 2016 and expect to add a second horizontal rig in the fourth quarter of 2016. During 2015, we operated, on average, one rig and placed 13 horizontal wells on production. Our development drilling plan is comprised exclusively of horizontal drilling with an ongoing focus on reducing drilling times, optimizing completions and reducing costs.

The Permian Basin is an attractive operating area due to its extensive original oil-in-place, favorable operating environment, multiple horizontal zones, high oil and liquids-rich natural gas content, well-developed network of oilfield service providers, long-lived reserves with relatively consistent reservoir quality and historically high drilling success rates. According to the EIA, the Permian Basin is the most prolific oil producing area in the United States, accounting for 23% and 20% of total U.S. crude oil production during the twelve-month periods ended April 30, 2016 and April 30, 2015, respectively.

Year-Over-Year Production Growth for Major Oil Basins and Plays

LOGO

Production (MMBoe)


	Permian Basin(1)
	Delaware Wolfcamp, Bone Spring		Midland Wolfcamp, Spraberry		Eagle Ford		Bakken / Three Forks
Fourth Quarter 2012		22.5		49.6		112.5		78.2
Fourth Quarter 2013		33.8		61.4		164.0		101.0
Fourth Quarter 2014		56.9		86.1		219.2		130.3
Fourth Quarter 2015		72.6		91.8		205.9		127.1

(1)

Does not include production in the Permian Basin beyond the Midland and Delaware Basins.

Source: IHS Performance Evaluator as of April 2016.

Horizontal Well Results—Delaware Basin versus Midland Basin

Average per well 3 month cumulative initial production

(MBoe per 1,000 feet of lateral length)

LOGO

Source: IHS Performance Evaluator as of April 2016.

We were formed by an affiliate of NGP, a family of energy-focused private equity investments funds. Our goal is to build a premier development and acquisition company focused on horizontal drilling in the Delaware Basin. Our key management and technical team members average approximately 28 years of experience and have successfully led development operations in prolific oil basins in the Continental United States, including horizontal development in the Permian, Bakken and Niobrara plays. This expertise and technical acumen have been applied to the horizontal drilling and multi-stage completions on our properties, resulting in drilling success and continuous operating improvements across multiple zones.

We have assembled a multi-year inventory of horizontal drilling projects. As of June 15, 2016, we had identified 1,357 gross horizontal drilling locations in the 3rd Bone Spring Sandstone, Upper Wolfcamp A, Lower Wolfcamp A, Wolfcamp B and Wolfcamp C zones across our Delaware Basin acreage based on spacing of four wells per 640-acre section in the 3rd Bone Spring Sandstone and five to six wells per 640-acre section in the Wolfcamp zones. Our drilling inventory includes 366 extended lateral locations of either 9,500 or 7,500 lateral feet. Our near-term drilling program is focused on both the Upper and Lower Wolfcamp A zones, but we also intend to drill locations in the 3rd Bone Spring Sandstone, Wolfcamp B and Wolfcamp C zones. Based on our and other operators’ well results and our analysis of geologic and engineering data, we believe the 2nd and 3rd Bone Spring shales and Avalon Shale may also be prospective across our acreage, and we may integrate these

zones into our future drilling program as they become further delineated. The following table provides a summary of our gross horizontal drilling locations by zone as of June 15, 2016.

Gross Identified Horizontal Drilling Locations(1)(2)


	Total
Zones:
3rd Bone Spring Sandstone		64
Upper Wolfcamp A		398
Lower Wolfcamp A		329
Wolfcamp B		300
Wolfcamp C		266

Total Horizontal Locations(3)(4)		1,357

(1)

Our total identified horizontal drilling locations include 51 locations associated with proved undeveloped reserves as of December 31, 2015. We have estimated our drilling locations based on well spacing assumptions and upon the evaluation of our horizontal drilling results and those of other operators in our area, combined with our interpretation of available geologic and engineering data. In particular, we have analyzed and interpreted well results and other data acquired through our participation in the drilling of vertical wells that have penetrated our horizontal zones. In addition, to evaluate the prospectivity of our horizontal acreage, we have performed open-hole and mud log evaluations, core analysis and drill cuttings analysis. See “—Our Properties.” The drilling locations that we actually drill will depend on the availability of capital, regulatory approvals, commodity prices, costs, actual drilling results and other factors. Any drilling activities we are able to conduct on these identified locations may not be successful and may not result in our ability to add additional proved reserves to our existing proved reserves. See “Risk Factors—Risks Related to Our Business—Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations.” Further, to the extent the drilling locations are associated with acreage that expires, we would lose our right to develop the related locations. See “Risk Factors—Risks Related to Our Business—Our identified drilling locations are scheduled out over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. In addition, we may not be able to raise the substantial amount of capital that would be necessary to drill such locations.”

(2)

(3)	674 of our 1,357 horizontal drilling locations are on acreage that we operate. We have an approximate 82% average working interest in our operated acreage.

(4)	We have included undeveloped horizontal locations only on our leasehold in Reeves and Ward counties.

For the three months ended March 31, 2016, our average net daily production was 7,212 Boe/d (approximately 71.7% oil, 17.7% natural gas and 10.6% NGLs). The following table provides summary information regarding our proved reserves as of December 31, 2015, based on a reserve report prepared by NSAI, our independent petroleum engineer. Of our proved reserves, approximately 40% were classified as PDP. PUDs included in this estimate are from 52 horizontal well locations across three zones.


Estimated Total Proved Reserves
Oil (MMBbls)	NGLs (MMBbls)	Natural Gas (Bcf)	Total (MMBoe)	% Oil	% Liquids(1)	% Developed
23.2	3.9	32.4	32.5	71	83	40

(1)	Includes oil and NGLs.

Based on the reserve estimates of NSAI, the average PUD horizontal EUR as of December 31, 2015 is approximately 610 MBoe (approximately 71% oil, 12% NGLs and 17% natural gas) for our Wolfcamp wells, which have an average lateral length of approximately 4,500 feet.

Business Strategies

Our primary business objective is to increase stockholder value through the following strategies:

•

Our Competitive Strengths

We believe that the following strengths will help us achieve our business goals:

•

attractive growth and return opportunities. As of December 31, 2015, our estimated reserves consisted of approximately 71% oil, 12% NGLs and 17% natural gas. The extensive original oil-in-place and other favorable geologic characteristics of the Southern Delaware Basin, along with the established vertical well control present across our acreage, give us a high degree of confidence in our current inventory of horizontal drilling locations. Further, our acreage is in close proximity to extensive infrastructure with long-term transportation agreements in place, which facilitates development. A crude gathering system, which is expected to be operational in the third quarter of 2016, will transport the majority of our crude oil to market at a lower cost than we have experienced historically. For gas gathering and processing, the majority of our gas is processed at a cryogenic plant that is centrally located in our area of operations. As a result of the existing infrastructure, the Permian Basin has historically realized attractive differentials compared to other top U.S. basins.

•

High degree of operational control. Our significant operational control allows us to execute our development program, with a focus on the timing and allocation of capital expenditures and application of the optimal drilling and completion techniques to efficiently develop our resource base. We believe this flexibility allows us to efficiently develop our current acreage and adjust drilling and completion activity opportunistically for the prevailing commodity price environment. In addition, we believe communication and data exchange with offset operators will reduce the risks associated with drilling the multiple horizontal zones of our acreage. We also believe our significant level of operational control will enable us to implement drilling and completion optimization strategies, such as pad drilling, continued reduction of

spud-to-rig release days and tailored completion designs. As of June 15, 2016, approximately 75% of our net acreage in Reeves and Ward counties was either held by production or under continuous drilling provisions. We believe the substantial majority of our operated net acreage in Reeves and Ward counties will be held by production or under continuous drilling provisions by the end of 2017.

•

Conservatively capitalized balance sheet and strong liquidity profile. After giving effect to this offering and the use of proceeds therefrom, we expect to have no outstanding debt and approximately $ million of cash on the balance sheet. We believe the approximately $ million of availability under our revolving credit facility, cash on hand and cash flow from operations will provide us with sufficient liquidity to execute on our current capital program.

Our Properties

Our properties include working interests in approximately 90,700 gross (42,500 net) surface acres, substantially all of which are located in the oil-rich core of the Southern Delaware Basin, a sub-basin of the Permian Basin, in the Texas counties of Reeves, Ward and Pecos. The following table summarizes our surface acreage by county as of June 15, 2016.


	Gross		Net
County:
Reeves		76,100		35,800
Ward		2,400		1,900
Pecos		12,200		4,800

Total		90,700		42,500

Permian Basin . The Permian Basin consists of mature, legacy onshore oil and liquids-rich natural gas reservoirs that span approximately 86,000 square miles in West Texas and New Mexico. The Basin is composed of five sub regions: the Delaware Basin, the Central Basin Platform, the Midland Basin, the Northwest Shelf and the Eastern Shelf. The Permian Basin is an attractive operating area due to its multiple horizontal and vertical target zones, favorable operating environment, high oil and liquids-rich natural gas content, mature infrastructure, well-developed network of oilfield service providers, long-lived reserves with consistent reservoir quality and historically high drilling success rates. According to the EIA, the Permian Basin is the most prolific oil producing area in the U.S., accounting for 23% and 20% of total U.S. crude oil production during the twelve-month periods ended April 30, 2016 and April 30, 2015, respectively. Six key producing formations within the Permian Basin (Spraberry, Wolfcamp, Bone Spring, Glorieta, Yeso and Delaware) have provided the bulk of the Basin’s 122% increase in oil production since 2007. Approximately 62% of the increase came from the Wolfcamp, Bone Spring and Spraberry formations.

Delaware Basin . The present structural form of the Delaware Basin, a sub-basin of the Permian Basin, began to take shape in the early Pennsylvanian period at which time the area slowly downwarped relative to the adjacent Central Basin Platform and Northwest Shelf. This period was characterized by relatively stable marine shale and limestone deposition with periodic influxes of siliciclastics during sea-level lowstands. Stratigraphic records indicate a rapid deepening of the Delaware Basin during early Permian time. High total organic carbon

marine shales, carbonate debris flows and turbidite sandstones were the predominant deposits in the Delaware Basin during this period. Subsequent burial and thermal maturation of this thick Permian succession of highly organic source and reservoir rock resulted in what we believe is evolving into a prolific oil field.

The Delaware Basin encompasses an estimated 10,039 square miles and contained over 25,000 producing wells at the end of 2015, with production from certain wells dating back to 1924. Over the past decade, horizontal drilling activity has been more prevalent within the Delaware Basin relative to other areas of the Permian Basin. According to Baker Hughes, three of the top six Permian Basin counties by horizontal rig count are located in the Delaware Basin. Reeves County, where the majority of our acreage is located, had the second most horizontal rigs of any U.S. county in June 17, 2016, with 21 rigs as of such date.

We believe that our properties are prospective for oil and liquids-rich natural gas from multiple producing stratigraphic horizons, which we refer to as “stacked pay zones.” For the three months ended March 31, 2016, our net daily production averaged 71.7% oil, 17.7% natural gas and 10.6% NGLs and had a greater liquids-content than other areas of the Delaware Basin.

Oil and gas production was first established in the area of our leasehold from vertical wells in the Wolfbone interval, a blend of stacked pay zones in the Permian (Wolfcampian) Wolfcamp and overlying (Leonardian) Bone Spring formations. Operators were initially drawn to this area for the thick pay section, superior rock quality and oil-rich production. The Barilla Draw field, partially coincident with our leasehold, is the source of substantial petrophysical data acquired during this vertical phase of development. This data, including 17 of our wells with advanced petrophysical logs and two of our wells with whole core, is being utilized to guide our horizontal development of the area. The vertical development has resulted in a better understanding of our leasehold’s geology relative to other parts of the Basin and has not caused significant depletion. Depth to the top of the Wolfcamp from a representative well central to our leasehold is approximately 10,600 feet. The gross thickness of the potential pay section from the top of the Bone Spring formation through the base of the Wolfcamp C is approximately 3,500 feet, an attractive thickness for development with multiple horizontal landing zones. We believe that the combination of these conditions will allow us to achieve superior results during the development of our leasehold.

Our horizontal drilling, including 61 operated wells, has been widespread with locations across the majority of our leasehold. We have established commercial production in five distinct zones: the 3rd Bone Spring Sandstone, Upper Wolfcamp A, Lower Wolfcamp A, Wolfcamp B and Wolfcamp C, across an area approximately 45 miles long by 20 miles wide. As a result, we have broadly appraised our acreage across various geographic areas and stratigraphic zones. Also, as of June 15, 2016, approximately 67% of our total net acreage (approximately 75% of our net acreage in Reeves and Ward counties) was either held by production or under continuous drilling provisions. This has put us in a position to strategically develop our acreage with a near-term focus on high-return projects. Our previous activity, such as horizontal drilling in the Wolfcamp B and C zones, has been a catalyst for activity from offset operators. We will closely monitor this offset activity and adjust our future development plans with information and best practices learned from our peers.

We operate approximately 83% of our net acreage and have an approximate 82% average working interest in our operated acreage. This operational control gives us flexibility in development strategy and pace. After temporarily suspending drilling activity at the end of March 2016 to preserve capital, which suspension had no effect on our proved undeveloped reserves as of December 31, 2015, we added one horizontal drilling rig in June 2016 and expect to add a second horizontal rig in the fourth quarter of 2016. During 2015, we operated, on average, one rig and placed 13 horizontal wells on production. Our development drilling plan is comprised exclusively of horizontal drilling with an ongoing focus on reducing drilling times, optimizing completions and reducing costs without compromising worker health, safety and environmental protection. For the three months ended March 31, 2016, the spud-to-rig release for our three single-section horizontal wells was approximately 22 days compared to 28 days and 46 days for all single-section horizontal wells we drilled in 2015 and 2014, respectively. We expect that further optimization in the field (including the increased drilling of longer laterals,

pad drilling, the use of shared facilities and zipper fracs), reduced rig rates and lower service costs will improve our well economics. In March 2016, we drilled and completed our first 9,500-foot lateral well, which had an initial 90-day oil production rate of approximately 900 barrels of oil per day.

Completion design and its effective execution are the predominant factors that dictate relative well performance in an area or zone. We have an evolving completion strategy that includes methodical adjustments of parameters, experimentation of different designs on adjacent locations with similar rock characteristics, constant monitoring and re-evaluation of results and ultimately tailoring completions to the conditions specific to an area or zone. Our current base completion design is a hybrid fracture stimulation, a combination of slickwater and cross-linked gel, targeting approximately 150 feet stage length, 50 feet cluster spacing, 40 barrels of total fluid per foot of lateral length and 1,600 to 1,900 pounds of white sand per foot of lateral length. Field-level rate of return is most influenced by incremental improvements in well performance and cost savings; our philosophy is to focus on both parameters, with an emphasis on performance enhancement.

Our current drilling program is focused primarily on the Upper and Lower Wolfcamp A intervals. However, based on existing well results and our analysis of geologic and engineering data, we believe the 3rd Bone Spring Sandstone, Wolfcamp B and Wolfcamp C intervals are prospective across our acreage and plan to target those zones in our future drilling program. Our current location count for the Wolfcamp is based on locations spaced approximately 880 feet from each other within a zone and staggered vertically in adjacent zones, and for the 3rd Bone Spring Sandstone, the current location count is based on locations spaced approximately 1,320 feet from each other (as illustrated in the figure below). If future downspacing pilots are successful, we may be able to add additional locations to our multi-year inventory. In addition, we believe our acreage may be prospective for the 2nd and 3rd Bone Spring shales and Avalon Shale, where other operators have experienced drilling success near our acreage.

LOGO

NSAI, our independent petroleum engineer, has estimated that as of December 31, 2015, proved reserves net to our interest in our properties were approximately 32,457 MBoe, of which 40% were classified as PDP. The proved reserves are generally characterized as long-lived, with predictable production profiles.

Production Status. For the three months ended March 31, 2016, our average net daily production was 7,212 Boe/d (approximately 71.7% oil, 17.7% natural gas and 10.6% NGLs). During 2015, our average net daily production was 7,317 Boe/d (approximately 69% oil and 19% natural gas and 12% NGLs). As of March 31, 2016, we produced from 72 horizontal and 68 vertical wells, in each case, operated and non-operated.

Facilities. We strive to develop the necessary infrastructure to lower our costs and support our drilling schedule and production growth. We accomplish this goal primarily through contractual arrangements with third-party service providers. Our facilities located on our properties are generally in close proximity to our well

locations and include storage tank batteries, oil/gas/water separation equipment and artificial lift equipment. A crude gathering system, which is expected to be operational in the third quarter of 2016, will transport the majority of our crude oil to market at a lower cost than we have experienced historically. For gas gathering and processing, we have infrastructure in place that spans the heart of our leasehold. The majority of our gas is processed at a cryogenic plant that is centrally located in our area of operations. We have a long-term agreement with a third-party gas gatherer and processor and benefit from priority producer status as the anchor tenant.

Recent and Future Activity. During the three months ended March 31, 2016, 2 gross (1.0 net) wells were placed on production on our acreage. All of these wells were horizontal wells. After temporarily suspending drilling activity at the end of March 2016 to preserve capital, we added one horizontal rig in June 2016 and expect to add a second horizontal rig in the fourth quarter of 2016. During the remainder of 2016, an additional 11 operated horizontal wells are scheduled to be placed on production.

As of June 15, 2016, we had identified 1,357 gross horizontal drilling locations in the 3rd Bone Spring Sandstone, Upper Wolfcamp A, Lower Wolfcamp A, Wolfcamp B and Wolfcamp C horizontal zones across our Delaware Basin acreage based on approximately 880-foot spacing for the Wolfcamp zones and 1,320-foot spacing for the 3 ^rd Bone Spring Sandstone. Our drilling inventory includes 366 horizontal extended lateral locations of either 9,500 or 7,500 feet. In this prospectus, we define identified gross drilling locations as locations on operated and non-operated leaseholds specifically identified by management as an estimation of our multi-year drilling activities based on evaluation of applicable geologic and engineering data. We have estimated our drilling locations based on well spacing assumptions and upon the evaluation of our horizontal drilling results and those of other operators in our area, combined with our interpretation of available geologic and engineering data. In particular, we have analyzed and interpreted well results and other data acquired through our participation in the drilling of vertical wells that have penetrated our horizontal zones. In addition, to evaluate the prospectivity of our horizontal acreage, we have performed open-hole and mud log evaluations, core analysis and drill cuttings analysis. The availability of local infrastructure, drilling support assets and other factors as management may deem relevant, such as easement restrictions and state and local regulations, are considered in determining such locations. The drilling locations for which we actually drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results and other factors.

Oil and Natural Gas Data

Proved Reserves

Evaluation and Review of Proved Reserves. Our proved reserve estimates as of December 31, 2015 and 2014 were prepared by NSAI, our independent petroleum engineer. The technical persons responsible for preparing our proved reserve estimates meet the requirements with regard to qualifications, independence, objectivity and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers. NSAI does not own an interest in any of our properties, nor is it employed by us on a contingent basis. A copy of our independent petroleum engineer’s proved reserve reports as of December 31, 2015 and December 31, 2014 are included as exhibits to the registration statement of which this prospectus forms a part.

We maintain an internal staff of petroleum engineers and geoscience professionals who worked closely with our independent petroleum engineer to ensure the integrity, accuracy and timeliness of the data used to calculate our proved reserves relating to our assets in the Permian Basin. Our internal technical team members meet with our independent petroleum engineer periodically during the period covered by the proved reserve report to discuss the assumptions and methods used in the proved reserve estimation process. We provide historical information to NSAI for our properties, such as ownership interest, oil and natural gas production, well test data, commodity prices and operating and development costs. Terry Sherban, our Vice President, Reservoir Engineering, is primarily responsible for overseeing the preparation of all of our reserve estimates. Mr. Sherban

is a petroleum engineer with 37 years of reservoir and operations experience, and our geoscience staff has an average of approximately 28 years of energy industry experience.

The preparation of our proved reserve estimates were completed in accordance with our internal control procedures. These procedures, which are intended to ensure reliability of reserve estimations, include the following:

•

review and verification of historical production data, which data is based on actual production as reported by us;

•

review of reserve estimates by Mr. Sherban or under his direct supervision;

•

review by our Vice President, Development and Chief Executive Officer of all of our reported proved reserves, including the review of all significant reserve changes and all new PUDs additions;

•

direct reporting responsibilities by our Vice President, Reservoir Engineering to our Chief Executive Officer; and

•

verification of property ownership by our land department.

Estimation of Proved Reserves. Under SEC rules, proved reserves are those quantities of oil and natural gas, 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. If deterministic methods are used, the SEC has defined reasonable certainty for proved reserves as a “high degree of confidence that the quantities will be recovered.” All of our proved reserves as of December 31, 2015 and December 31, 2014 were estimated using a deterministic method. The estimation of reserves involves two distinct determinations. The first determination results in the estimation of the quantities of recoverable oil and natural gas and the second determination results in the estimation of the uncertainty associated with those estimated quantities in accordance with the definitions established under SEC rules. The process of estimating the quantities of recoverable oil and natural gas reserves relies on the use of certain generally accepted analytical procedures. These analytical procedures fall into four broad categories or methods: (i) production performance-based methods; (ii) material balance-based methods; (iii) volumetric-based methods; and (iv) analogy. These methods may be used singularly or in combination by the reserve evaluator in the process of estimating the quantities of reserves. Reserves for PDP wells were estimated using production performance methods for the vast majority of properties. Certain new producing properties with very little production history were forecast using a combination of production performance and analogy to similar production, both of which are considered to provide a reasonably high degree of accuracy. Non-producing reserve estimates, for developed and undeveloped properties, were forecast using analogy methods. This method provides a reasonably high degree of accuracy for predicting proved developed non-producing (“PDNP”) and PUD for our properties, due to the abundance of analog data.

To estimate economically recoverable proved reserves and related future net cash flows, NSAI considered many factors and assumptions, including the use of reservoir parameters derived from geological and engineering data which cannot be measured directly, economic criteria based on current costs and the SEC pricing requirements and forecasts of future production rates.

Under SEC rules, reasonable certainty can be established using techniques that have been proven effective by actual production from projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology that establishes reasonable certainty. Reliable technology is a grouping of one or more technologies (including computational methods) that have been field tested and have been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. To establish reasonable certainty with respect to our estimated proved reserves, the

technologies and economic data used in the estimation of our proved reserves have been demonstrated to yield results with consistency and repeatability, and include production and well test data, downhole completion information, geologic data, electrical logs, radioactivity logs, core analyses, available seismic data and historical well cost and operating expense data.

Summary of Oil and Natural Gas Reserves. The following table presents our estimated net proved oil and natural gas reserves as of December 31, 2015 and 2014, based on the proved reserve report as of such dates by NSAI, our independent petroleum engineer, prepared in accordance with the rules and regulations of the SEC. A copy of the proved reserve report as of December 31, 2015 prepared by NSAI with respect to our properties is included as an exhibit to the registration statement of which this prospectus forms a part. All of our proved reserves are located in the United States.


	December 31, 2015(1)		December 31, 2014(2)
Proved developed reserves:
Oil (MBbls)		9,347		8,026
Natural gas (MMcf)		12,711		11,959
NGLs (MBbls)		1,603		766

Total (MBoe)		13,068		10,786

Proved undeveloped reserves:
Oil (MBbls)		13,852		11,823
Natural gas (MMcf)		19,731		15,455
NGLs (MBbls)		2,248		785

Total (MBoe)		19,389		15,184

Total proved reserves:
Oil (MBbls)		23,199		19,850
Natural gas (MMcf)		32,442		27,414
NGLs (MBbls)		3,851		1,551

Total (MBoe)		32,457		25,970

Oil and Natural Gas Prices:
Oil—WTI posted price per Bbl	$	46.79	$	91.48
Natural gas—Henry Hub spot price per MMBtu	$	2.59	$	4.35

(1)

(2)

Our estimated net proved reserves were determined using average first-day-of-the-month prices for the prior twelve months in accordance with SEC guidance. For oil and NGL volumes, the average West Texas Intermediate posted price of $91.48 per barrel as of December 31, 2014 was adjusted for quality, transportation fees and a regional price differential. For gas volumes, the average Henry Hub spot price of $4.35 per MMBtu as of December 31, 2014 was adjusted for energy content, transportation fees and a regional price differential. All prices are held constant throughout the lives of the properties. The average adjusted product prices weighted by production over the remaining lives of the properties are $84.94 per barrel of oil, $22.70 per barrel of NGL and $4.70 per Mcf of gas as of December 31, 2014.

The changes from December 31, 2014 estimated proved reserves to December 31, 2015 estimated proved reserves reflect the addition of 12,864 MBoe of proved reserves through extensions and 1,275 MBoe of acquired proved reserves , offset by net negative revisions of 4,981 MBoe primarily due to the decline in commodity prices.

Reserve engineering is and must be recognized as a subjective process of estimating volumes of economically recoverable oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation. As a result, the estimates of different engineers often vary. In addition, the results of drilling, testing and production may justify revisions of such estimates. Accordingly, reserve estimates often differ from the quantities of oil and natural gas that are ultimately recovered. Estimates of economically recoverable oil and natural gas and of future net revenues are based on a number of variables and assumptions, all of which may vary from actual results, including geologic interpretation, prices and future production rates and costs. Please read “Risk Factors” appearing elsewhere in this prospectus.

Additional information regarding our proved reserves can be found in the notes to our financial statements included elsewhere in this prospectus and the proved reserve report as of December 31, 2015, which is included as an exhibit to the registration statement of which this prospectus forms a part.

PUDs

Year Ended December 31, 2015

As of December 31, 2015, our PUDs totaled 13,852 MBbls of oil, 19,731 MMcf of natural gas and 2,248 MBbls of NGLs, for a total of 19,389 MBoe. PUDs will be converted from undeveloped to developed as the applicable wells begin production.

Changes in PUDs that occurred during 2015 were primarily due to (i) negative revisions of 4,648 MBoe primarily related to the conversion of PUDs to unproved reserves of approximately 6,794 MBoe due to the decline in commodity prices, partially offset by a positive revision in performance; (ii) an increase of approximately 9,605 MBoe attributable to extensions resulting from strategic drilling of wells by us to delineate our acreage position; (iii) the conversion of approximately 1,020 MBoe attributable to PUDs into proved developed reserves; and (iv) the acquisition of 268 MBoe of PUDs.

During the twelve months ended December 31, 2015, we spent $17.7 million to convert PUDs to proved developed reserves.

All of our PUD drilling locations are scheduled to be drilled within five years of their initial booking. As of December 31, 2015, none of our total proved reserves were classified as PDNP.

Year Ended December 31, 2014

As of December 31, 2014, our PUDs totaled 11,823 MBbls of oil, 15,455 MMcf of natural gas and 785 MBbls of NGLs, for a total of 15,184 MBoe. PUDs will be converted from undeveloped to developed as the applicable wells begin production.

Changes in PUDs that occurred during 2014 were primarily due to (i) a decrease of approximately 10,806 MBoe related to the CO ₂ Project Disposition in May 2014 and 296 MBoe related to the Marston Disposition in December 2014; (ii) additions of approximately 13,618 MBoe attributable to extensions resulting from strategic drilling of wells by us to delineate our acreage position; and (iii) the conversion of approximately 318 MBoe attributable to PUDs into proved developed reserves.

During the twelve months ended December 31, 2014, we spent $10.6 million to convert PUDs to proved developed reserves.

All of our PUD drilling locations are scheduled to be drilled within five years of their initial booking. As of December 31, 2014, 0.2% of our total proved reserves were classified as PDNP.

Oil and Natural Gas Production Prices and Costs

Production and Price History

The following table sets forth information regarding net production of oil, natural gas and NGLs, and certain price and cost information for each of the periods indicated:


	Our Predecessor
	Three Months Ended March 31,				Year Ended December 31,
	2016		2015		2015		2014
	(In thousands)
Production data:
Oil (MBbls)		470		499		1,830		1,428
Natural gas (MMcf)		698		705		3,058		2,112
NGLs (MMBbls)		70		81		331		235

Total (MBoe)(1)		656		698		2,671		2,015
Average realized prices before effects of hedges:
Oil (per Bbl)	$	28.14	$	42.22	$	42.43	$	80.50
Natural gas (per Mcf)		1.88		2.78		2.60		4.58
NGLs (per Bbl)		8.31		17.12		14.66		30.64

Total (per Boe)	$	23.05	$	34.98	$	33.87	$	65.42
Average realized prices after effects of hedges:
Oil (per Bbl)	$	46.50	$	60.95	$	61.61	$	83.73
Natural gas (per Mcf)		1.88		3.33		3.04		4.58
NGLs (per Bbl)		8.31		17.12		14.66		30.64

Total (per Boe)	$	36.20	$	48.92	$	47.51	$	67.71
Average costs (per Boe):
Lease operating expenses	$	6.16	$	9.31	$	7.93	$	8.78
Severance and ad valorem taxes		1.29		1.71		1.88		3.41
Transportation, processing, gathering and other operating expenses		1.72		1.84		2.15		2.37
Depreciation, depletion, amortization and accretion of asset retirement obligations		32.47		33.28		33.73		34.30
Abandonment expense and impairment of unproved properties		—		—		2.85		9.94
Exploration		—		—		0.03		—
Contract termination and rig stacking		—		2.21		0.89		—
General and administrative expenses(2)		3.87		4.17		5.32		15.73

Total	$	45.51	$	52.52	$	54.78	$	74.53

(1)	May not sum or recalculate due to rounding.

(2)	General and administrative expenses do not include additional expenses we would have to incur as a result of being a public company.

Productive Wells

As of March 31, 2016, we owned an approximate 59% average working interest in 140 gross (82 net) productive wells. Our wells are oil wells that produce associated liquids-rich natural gas. Productive wells consist of producing wells, wells capable of production and wells awaiting connection to production facilities. Gross wells are the total number of producing wells in which we have an interest, operated and non-operated, and net wells are the sum of our fractional working interests owned in gross wells.

Developed and Undeveloped Acreage

The following table sets forth information as of March 31, 2016 relating to our leasehold acreage. Developed acreage consists of acres spaced or assigned to productive wells and does not include undrilled acreage held by production under the terms of the lease. Undeveloped acreage is defined as acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or natural gas, regardless of whether such acreage contains proved reserves.


Developed Acreage		Undeveloped Acreage		Total Acreage
Gross(1)	Net(2)	Gross(1)	Net(2)	Gross(1)	Net(2)
7,700	5,800	79,000	34,900	86,700	40,700

(1)	A gross acre is an acre in which a working interest is owned. The number of gross acres is the total number of acres in which a working interest is owned.

(2)	A net acre is deemed to exist when the sum of the fractional ownership working interests in gross acres equals one. The number of net acres is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof.

Many of the leases comprising the undeveloped acreage set forth in the table above will expire at the end of their respective primary terms unless production from the leasehold acreage has been established prior to such date, in which event the lease will remain in effect until the cessation of production. Substantially all of the leases governing our acreage have continuous development clauses that permit us to continue to hold the acreage under such leases after the expiration of the primary term if we initiate additional development within 60 to 180 days after the completion of the last well drilled on such lease, without the requirement of a lease extension payment. Thereafter, the lease is held with additional development every 60 to 180 days until the entire lease is held by production. None of our horizontal drilling locations associated with proved undeveloped reserves are scheduled for drilling outside of a lease term that is not accounted for with a continuous development schedule. The following table sets forth the gross and net undeveloped acreage, as of March 31, 2016, that will expire over the next five years unless production is established within the spacing units covering the acreage or the lease is renewed or extended under continuous drilling provisions prior to the primary term expiration dates.


Remaining 2016		2017		2018		2019		2020
Gross	Net	Gross	Net	Gross	Net	Gross	Net	Gross	Net
11,600	5,500	6,600	3,100	11,300	5,300	1,100	500	0	0

Drilling Results

The following table sets forth the results of our drilling activity, as defined by wells having been placed on production, for the periods indicated. The information should not be considered indicative of future performance, nor should it be assumed that there is necessarily any correlation among the number of productive wells drilled, quantities of reserves found or economic value. Productive wells are those that produce, or are capable of producing, commercial quantities of hydrocarbons, regardless of whether they produce a reasonable rate of return. Dry wells are those that prove to be incapable of producing hydrocarbons in sufficient quantities to justify completion.


	For the Three Months Ended March 31,								For the Year Ended December 31,
	2016				2015				2015				2014
	Gross		Net		Gross		Net		Gross		Net		Gross		Net
Exploratory Wells:
Productive(1)		—		—		—		—		—		—		—		—
Dry		—		—		—		—		—		—		—		—

Total Exploratory		—		—		—		—		—		—		—		—

Development Wells:
Productive(1)		2.0		1.0		3.0		2.7		16.0		12.4		36.0		26.8
Dry		—		—		—		—		—		—		—		—

Total Development		2.0		1.0		3.0		2.7		16.0		12.4		36.0		26.8

Total Wells:
Productive(1)		2.0		1.0		3.0		2.7		16.0		12.4		36.0		26.8
Dry		—		—		—		—		—		—		—		—

Total		2.0		1.0		3.0		2.7		16.0		12.4		36.0		26.8

(1)	Although a well may be classified as productive upon completion, future changes in oil and natural gas prices, operating costs and production may result in the well becoming uneconomical, particularly exploratory wells where there is no production history.

Operations

General

We are the operator of approximately 83% of our net acreage. As operator, we design and manage the development of a well and supervise operation and maintenance activities on a day-to-day basis. Independent contractors engaged by us provide all the equipment and personnel associated with these activities. We employ petroleum engineers, geologists and land professionals who work to improve production rates, increase reserves and lower the cost of operating our oil and natural gas properties.

Marketing and Customers

We market the majority of our production from properties we operate for both our account and the account of the other working interest owners in these properties. We sell our oil, natural gas and NGL production to purchasers at market prices. We sell all of our natural gas and NGLs under contracts with terms of greater than twelve months and all of our oil under contracts with terms of twelve months or less.

We normally sell production to a relatively small number of customers, as is customary in our business. For the years ended December 31, 2015 and 2014, Plains Marketing, L.P. accounted for 64% and 78%, respectively, of our total revenue. During such years, no other purchaser accounted for 10% or more of our revenue. The loss

100

of Plains Marketing, L.P. as a purchaser could materially and adversely affect our revenues in the short-term. However, based on the current demand for oil and natural gas and the availability of other purchasers, we believe that the loss of Plains Marketing, L.P. as a purchaser would not have a material adverse effect on our financial condition and results of operations because crude oil and natural gas are fungible products with well-established markets and numerous purchasers.

Transportation

During the initial development of our fields, we consider all gathering and delivery infrastructure options in the areas of our production. Our oil is transported from the wellhead to our tank batteries by our gathering systems. Currently, the oil is then transported by the purchaser by truck to a transportation facility. However, we expect that, beginning in the third quarter of 2016, a third-party crude gathering system will transport the majority of our oil production at a lower cost than we have experienced historically with trucking. Our natural gas is generally transported by third-party gathering lines from the wellhead to a gas processing facility. At a small number of our wells, we own natural gas pipeline facilities that connect our wells to third-party natural gas gathering systems located in the vicinity of those wells.

Competition

The oil and natural gas industry is intensely competitive, and we compete with other companies that have greater resources. Many of these companies not only explore for and produce oil and natural gas, but also carry on midstream and refining operations and market petroleum and other products on a regional, national or worldwide basis. These companies may be able to pay more for productive oil and natural gas properties and exploratory prospects or to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, these companies may have a greater ability to continue exploration activities during periods of low oil and natural gas market prices. Our larger or more integrated competitors may be able to absorb the burden of existing, and any changes to, federal, state and local laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to acquire additional properties and to discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, because we have fewer financial and human resources than many companies in our industry, we may be at a disadvantage in bidding for exploratory prospects and producing oil and natural gas properties.

There is also competition between oil and natural gas producers and other industries producing energy and fuel. Furthermore, competitive conditions may be substantially affected by various forms of energy legislation and/or regulation considered from time to time by the governments of the United States and the jurisdictions in which we operate. It is not possible to predict the nature of any such legislation or regulation which may ultimately be adopted or its effects upon our future operations. Such laws and regulations may substantially increase the costs of developing oil and natural gas and may prevent or delay the commencement or continuation of a given operation. Our larger competitors may be able to absorb the burden of existing, and any changes to, federal, state and local laws and regulations more easily than we can, which would adversely affect our competitive position.

Seasonality of Business

Weather conditions affect the demand for, and prices of, oil and natural gas. Demand for oil and natural gas is typically higher in the fourth and first quarters resulting in higher prices. Due to these seasonal fluctuations, results of operations for individual quarterly periods may not be indicative of the results that may be realized on an annual basis.

Title to Properties

As is customary in the oil and natural gas industry, we initially conduct only a cursory review of the title to our properties in connection with acquisition of leasehold acreage. At such time as we determine to conduct

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drilling operations on those properties, we conduct a thorough title examination and perform curative work with respect to significant defects prior to commencement of drilling operations. To the extent title opinions or other investigations reflect title defects on those properties, we are typically responsible for curing any title defects at our expense. We generally will not commence drilling operations on a property until we have cured any material title defects on such property. We have obtained title opinions on substantially all of our producing properties and believe that we have satisfactory title to our producing properties in accordance with standards generally accepted in the oil and natural gas industry.

Prior to completing an acquisition of producing oil and natural gas leases, we perform title reviews on the most significant leases and, depending on the materiality of properties, we may obtain a title opinion, obtain an updated title review or opinion or review previously obtained title opinions. Our oil and natural gas properties are subject to customary royalty and other interests, liens for current taxes and other burdens which we believe do not materially interfere with the use of or affect our carrying value of the properties.

We believe that we have satisfactory title to all of our material assets. Although title to these properties is subject to encumbrances in some cases, such as customary interests generally retained in connection with the acquisition of real property, customary royalty interests and contract terms and restrictions, liens under operating agreements, liens related to environmental liabilities associated with historical operations, liens for current taxes and other burdens, easements, restrictions and minor encumbrances customary in the oil and natural gas industry, we believe that none of these liens, restrictions, easements, burdens and encumbrances will materially detract from the value of these properties or from our interest in these properties or materially interfere with our use of these properties in the operation of our business. In addition, we believe that we have obtained sufficient rights-of-way grants and permits from public authorities and private parties for us to operate our business in all material respects as described in this prospectus.

Oil and Natural Gas Leases

The typical oil and natural gas lease agreement covering our properties provides for the payment of royalties to the mineral owner for all oil and natural gas produced from any wells drilled on the leased premises. The lessor royalties and other leasehold burdens on our properties generally range from 20% to 25%, resulting in a net revenue interest to us generally ranging from 75% to 80%.

Regulation of the Oil and Natural Gas Industry

Our operations are substantially affected by federal, state and local laws and regulations. In particular, natural gas production and related operations are, or have been, subject to price controls, taxes and numerous other laws and regulations. All of the jurisdictions in which we own or operate producing oil and natural gas properties have statutory provisions regulating the development and production of oil and natural gas, including provisions related to permits for the drilling of wells, bonding requirements to drill or operate wells, the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, sourcing and disposal of water used in the drilling and completion process, and the abandonment of wells. Our operations are also subject to various conservation laws and regulations. These include the regulation of the size of drilling and spacing units or proration units, the number of wells which may be drilled in an area, and the unitization or pooling of crude oil or natural gas wells, as well as regulations that generally prohibit the venting or flaring of natural gas, and impose certain requirements regarding the ratability or fair apportionment of production from fields and individual wells.

Failure to comply with applicable laws and regulations can result in substantial penalties. The regulatory burden on the industry increases the cost of doing business and affects profitability. Although we believe we are in substantial compliance with all applicable laws and regulations, such laws and regulations are frequently amended or reinterpreted. Therefore, we are unable to predict the future costs or impact of compliance. Additional proposals and proceedings that affect the oil and natural gas industry are regularly considered by Congress, the states, FERC and the courts. We cannot predict when or whether any such proposals may become effective.

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We believe we are in substantial compliance with currently applicable laws and regulations and that continued substantial compliance with existing requirements will not have a material adverse effect on our financial position, cash flows or results of operations. However, current regulatory requirements may change, currently unforeseen environmental incidents may occur or past non-compliance with environmental laws or regulations may be discovered.

Regulation of Production of Oil and Natural Gas

The production of oil and natural gas is subject to regulation under a wide range of local, state and federal statutes, rules, orders and regulations. Federal, state and local statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. We own interests in properties located in Texas, which regulates drilling and operating activities by, among other things, requiring permits for the drilling of wells, maintaining bonding requirements in order to drill or operate wells, and regulating the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled and the plugging and abandonment of wells. The laws of Texas also govern a number of conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum allowable rates of production from oil and natural gas wells, the regulation of well spacing or density, and plugging and abandonment of wells. The effect of these regulations is to limit the amount of oil and natural gas that we can produce from our wells and to limit the number of wells or the locations at which we can drill, although we can apply for exceptions to such regulations or to have reductions in well spacing or density. Moreover, Texas imposes a production or severance tax with respect to the production and sale of oil, natural gas and NGLs within its jurisdiction.

The failure to comply with these rules and regulations can result in substantial penalties. Our competitors in the oil and natural gas industry are subject to the same regulatory requirements and restrictions that affect our operations.

Regulation of Sales and Transportation of Oil

Sales of oil, condensate and NGLs are not currently regulated and are made at negotiated prices. Nevertheless, Congress could reenact price controls in the future.

Our sales of oil are affected by the availability, terms and cost of transportation. The transportation of oil in common carrier pipelines is also subject to rate and access regulation. FERC regulates interstate oil pipeline transportation rates under the Interstate Commerce Act. In general, interstate oil pipeline rates must be cost-based, although settlement rates agreed to by all shippers are permitted and market-based rates may be permitted in certain circumstances.

Intrastate oil pipeline transportation rates are subject to regulation by state regulatory commissions. The basis for intrastate oil pipeline regulation, and the degree of regulatory oversight and scrutiny given to intrastate oil pipeline rates, varies from state to state. Insofar as effective interstate and intrastate rates and regulations regarding access are equally applicable to all comparable shippers, we believe that the regulation of oil transportation will not affect our operations in any way that is of material difference from those of our competitors who are similarly situated.

Regulation of Transportation and Sales of Natural Gas

Historically, the transportation and sale for resale of natural gas in interstate commerce have been regulated by agencies of the U.S. federal government, primarily FERC. In the past, the federal government has regulated the prices at which natural gas could be sold. While sales by producers of natural gas can currently be made at uncontrolled market prices, Congress could reenact price controls in the future. Deregulation of wellhead natural gas sales began with the enactment of the NGPA, and culminated in adoption of the Natural Gas Wellhead Decontrol Act which removed controls affecting wellhead sales of natural gas effective January 1, 1993. The

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transportation and sale for resale of natural gas in interstate commerce is regulated primarily under the NGA, and by regulations and orders promulgated under the NGA by FERC. In certain limited circumstances, intrastate transportation and wholesale sales of natural gas may also be affected directly or indirectly by laws enacted by Congress and by FERC regulations.

The EP Act of 2005 is a comprehensive compilation of tax incentives, authorized appropriations for grants and guaranteed loans, and significant changes to the statutory policy that affects all segments of the energy industry. Among other matters, the EP Act of 2005 amends the NGA to add an anti-market manipulation provision which makes it unlawful for any entity to engage in prohibited behavior to be prescribed by FERC, and furthermore provides FERC with additional civil penalty authority. The EP Act of 2005 provides FERC with the power to assess civil penalties of up to $1,000,000 per day for violations of the NGA and increases FERC’s civil penalty authority under the NGPA from $5,000 per violation per day to $1,000,000 per violation per day. The civil penalty provisions are applicable to entities that engage in the sale of natural gas for resale in interstate commerce. On January 19, 2006, FERC issued Order No. 670, a rule implementing the anti-market manipulation provision of the EP Act of 2005, and subsequently denied rehearing. The rules make it unlawful to: (i) in connection with the purchase or sale of natural gas subject to the jurisdiction of FERC, or the purchase or sale of transportation services subject to the jurisdiction of FERC, for any entity, directly or indirectly, use or employ any device, scheme or artifice to defraud; (ii) make any untrue statement of material fact or omit to make any such statement necessary to make the statements made not misleading; or (iii) engage in any act or practice that operates as a fraud or deceit upon any person. The new anti-market manipulation rule does not apply to activities that relate only to intrastate or other non-jurisdictional sales or gathering, but does apply to activities of gas pipelines and storage companies that provide interstate services, as well as otherwise non-jurisdictional entities to the extent the activities are conducted “in connection with” gas sales, purchases or transportation subject to FERC jurisdiction, which now includes the annual reporting requirements under Order 704, described below. The anti-market manipulation rule and enhanced civil penalty authority reflect an expansion of FERC’s NGA enforcement authority.

On December 26, 2007, FERC issued Order 704, a final rule on the annual natural gas transaction reporting requirements, as amended by subsequent orders on rehearing. Under Order 704, wholesale buyers and sellers of more than 2.2 million MMBtus of physical natural gas in the previous calendar year, including natural gas producers, gatherers and marketers, are now required to report, on May 1 of each year, aggregate volumes of natural gas purchased or sold at wholesale in the prior calendar year to the extent such transactions utilize, contribute to, or may contribute to the formation of price indices. It is the responsibility of the reporting entity to determine which individual transactions should be reported based on the guidance of Order 704. Order 704 also requires market participants to indicate whether they report prices to any index publishers, and if so, whether their reporting complies with FERC’s policy statement on price reporting.

Gathering service, which occurs upstream of jurisdictional transmission services, is regulated by the states onshore and in state waters. Section 1(b) of the NGA exempts natural gas gathering facilities from regulation by FERC as a natural gas company under the NGA. Although FERC has set forth a general test for determining whether facilities perform a non-jurisdictional gathering function or a jurisdictional transmission function, FERC’s determinations as to the classification of facilities are done on a case-by-case basis. To the extent that FERC issues an order that reclassifies certain jurisdictional transmission facilities as non-jurisdictional gathering facilities, and depending on the scope of that decision, our costs of getting gas to point of sale locations may increase. We believe that the natural gas pipelines in our gathering systems meet the traditional tests FERC has used to establish a pipeline’s status as a gatherer not subject to regulation as a natural gas company. However, the distinction between FERC-regulated transmission services and federally unregulated gathering services is the subject of ongoing litigation, so the classification and regulation of our gathering facilities are subject to change based on future determinations by FERC, the courts or Congress. State regulation of natural gas gathering facilities generally includes various occupational safety, environmental and, in some circumstances, nondiscriminatory-take requirements. Although such regulation has not generally been affirmatively applied by state agencies, natural gas gathering may receive greater regulatory scrutiny in the future.

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The price at which we sell natural gas is not currently subject to federal rate regulation and, for the most part, is not subject to state regulation. However, with regard to our physical sales of these energy commodities, we are required to observe anti-market manipulation laws and related regulations enforced by FERC under the EP Act of 2005 and under the Commodity Exchange Act (“CEA”), and regulations promulgated thereunder by the CFTC. The CEA prohibits any person from manipulating or attempting to manipulate the price of any commodity in interstate commerce or futures on such commodity. The CEA also prohibits knowingly delivering or causing to be delivered false or misleading or knowingly inaccurate reports concerning market information or conditions that affect or tend to affect the price of a commodity. Should we violate the anti-market manipulation laws and regulations, we could also be subject to related third-party damage claims by, among others, sellers, royalty owners and taxing authorities.

Intrastate natural gas transportation is also subject to regulation by state regulatory agencies. The basis for intrastate regulation of natural gas transportation and the degree of regulatory oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from state to state. Insofar as such regulation within a particular state will generally affect all intrastate natural gas shippers within the state on a comparable basis, we believe that the regulation of similarly situated intrastate natural gas transportation in any states in which we operate and ship natural gas on an intrastate basis will not affect our operations in any way that is of material difference from those of our competitors. Like the regulation of interstate transportation rates, the regulation of intrastate transportation rates affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas.

Changes in law and to FERC or state policies and regulations may adversely affect the availability and reliability of firm and/or interruptible transportation service on interstate and intrastate pipelines, and we cannot predict what future action FERC or state regulatory bodies will take. We do not believe, however, that any regulatory changes will affect us in a way that materially differs from the way they will affect other natural gas producers and marketers with which we compete.

Regulation of Environmental and Occupational Safety and Health Matters

Our oil and natural gas development operations are subject to numerous stringent federal, regional, state and local statutes and regulations governing occupational safety and health, the discharge of materials into the environment or otherwise relating to environmental protection, some of which carry substantial administrative, civil and criminal penalties for failure to comply. These laws and regulations may require the acquisition of a permit before drilling or other regulated activity commences; restrict the types, quantities and concentrations of various substances that can be released into the environment in connection with drilling, production and transporting through pipelines; govern the sourcing and disposal of water used in the drilling and completion process; limit or prohibit drilling activities in certain areas and on certain lands lying within wilderness, wetlands, frontier and other protected areas; require some form of remedial action to prevent or mitigate pollution from former operations such as plugging abandoned wells or closing earthen pits; establish specific safety and health criteria addressing worker protection; and impose substantial liabilities for pollution resulting from operations or failure to comply with regulatory filings. In addition, these laws and regulations may restrict the rate of production.

The following is a summary of the more significant existing environmental and occupational health and safety laws and regulations, as amended from time to time, to which our business operations are subject and for which compliance may have a material adverse impact on our capital expenditures, results of operations or financial position.

Hazardous Substances and Waste Handling

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), also known as the “Superfund” law, and comparable state laws impose liability, without regard to fault or the legality

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of the original conduct, on certain classes of persons that are considered to have contributed to the release of a “hazardous substance” into the environment. These persons include the current and past owner or operator of the disposal site or the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances at the site where the release occurred. Under CERCLA, such persons may be subject to joint and several strict liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources, and it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. We are able to control directly the operation of only those wells with respect to which we act as operator. Notwithstanding our lack of direct control over wells operated by others, the failure of an operator other than us to comply with applicable environmental regulations may, in certain circumstances, be attributed to us. We generate materials in the course of our operations that may be regulated as hazardous substances but we are unaware of any liabilities for which we may be held responsible that would materially and adversely affect us.

The Resource Conservation and Recovery Act (“RCRA”) and analogous state laws, impose detailed requirements for the generation, handling, storage, treatment and disposal of nonhazardous and hazardous solid wastes. RCRA specifically excludes drilling fluids, produced waters and other wastes associated with the development or production of crude oil, natural gas or geothermal energy from regulation as hazardous wastes. However, these wastes may be regulated by the EPA or state agencies under RCRA’s less stringent nonhazardous solid waste provisions, state laws or other federal laws. Moreover, it is possible that these particular oil and natural gas development and production wastes now classified as nonhazardous solid wastes could be classified as hazardous wastes in the future. For example, from time to time various environmental groups have challenged the EPA’s exemption of certain oil and gas wastes from RCRA. A loss of the RCRA exclusion for drilling fluids, produced waters and related wastes could result in an increase in our costs to manage and dispose of generated wastes, which could have a material adverse effect on our results of operations and financial position. In addition, in the course of our operations, we generate some amounts of ordinary industrial wastes, such as paint wastes, waste solvents, laboratory wastes and waste compressor oils that may be regulated as hazardous wastes if such wastes have hazardous characteristics. Although the costs of managing hazardous waste may be significant, we do not believe that our costs in this regard are materially more burdensome than those for similarly situated companies.

We currently own, lease or operate numerous properties that have been used for oil and natural gas development and production activities for many years. Although we believe that we have utilized operating and waste disposal practices that were standard in the industry at the time, hazardous substances, wastes or petroleum hydrocarbons may have been released on, under or from the properties owned or leased by us, or on, under or from other locations, including off-site locations, where such substances have been taken for recycling or disposal. In addition, some of our properties have been operated by third parties or by previous owners or operators whose treatment and disposal of hazardous substances, wastes or petroleum hydrocarbons was not under our control. These properties and the substances disposed or released on, under or from them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to undertake response or corrective measures, which could include removal of previously disposed substances and wastes, cleanup of contaminated property or performance of remedial plugging or pit closure operations to prevent future contamination.

Water Discharges

The Clean Water Act and comparable state laws impose restrictions and strict controls regarding the discharge of pollutants, including produced waters and other oil and natural gas wastes, into or near navigable waters. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA or the state. The discharge of dredge and fill material in regulated waters, including wetlands, is also prohibited, unless authorized by a permit issued by the U.S. Army Corps of Engineers (the “Corps”). In September 2015, the EPA and the Corps issued new rules defining the scope of the EPA’s and the

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Corps’ jurisdiction under the Clean Water Act with respect to certain types of waterbodies and classifying these waterbodies as regulated wetlands. To the extent the rule expands the scope of the Clean Water Act’s jurisdiction, we could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas. The rule has been challenged in court on the grounds that it unlawfully expands the reach of the Clean Water Act, and implementation of the rule has been stayed pending resolution of the court challenge. Obtaining permits has the potential to delay the development of oil and natural gas projects. These laws and any implementing regulations provide for administrative, civil and criminal penalties for any unauthorized discharges of oil and other substances in reportable quantities and may impose substantial potential liability for the costs of removal, remediation and damages.

Pursuant to these laws and regulations, we may be required to obtain and maintain approvals or permits for the discharge of wastewater or storm water and are required to develop and implement spill prevention, control and countermeasure plans, also referred to as “SPCC plans,” in connection with on-site storage of significant quantities of oil. We believe that we maintain all required discharge permits necessary to conduct our operations, and further believe we are in substantial compliance with the terms thereof. We are currently undertaking a review of recently acquired oil properties to determine the need for new or updated SPCC plans and, where necessary, we will be developing or upgrading such plans implementing the physical and operation controls imposed by these plans, the costs of which are not expected to be substantial.

The primary federal law related specifically to oil spill liability is the Oil Pollution Act of 1990 (“OPA”), which amends and augments the oil spill provisions of the Clean Water Act and imposes certain duties and liabilities on certain “responsible parties” related to the prevention of oil spills and damages resulting from such spills in or threatening waters of the United States or adjoining shorelines. For example, operators of certain oil and natural gas facilities must develop, implement and maintain facility response plans, conduct annual spill training for certain employees and provide varying degrees of financial assurance. Owners or operators of a facility, vessel or pipeline that is a source of an oil discharge or that poses the substantial threat of discharge is one type of “responsible party” who is liable. The OPA applies joint and several liability, without regard to fault, to each liable party for oil removal costs and a variety of public and private damages. Although defenses exist, they are limited. As such, a violation of the OPA has the potential to adversely affect our operations.

Air Emissions

The federal Clean Air Act and comparable state laws restrict the emission of air pollutants from many sources, such as, for example, compressor stations, through air emissions standards, construction and operating permitting programs and the imposition of other compliance requirements. These laws and regulations may require us to obtain pre-approval for the construction or modification of certain projects or facilities expected to produce or significantly increase air emissions, obtain and strictly comply with stringent air permit requirements or utilize specific equipment or technologies to control emissions of certain pollutants. Over the next several years, we may be required to incur certain capital expenditures for air pollution control equipment or other air emissions related issues. For example, in October 2015, the EPA lowered the National Ambient Air Quality Standard (“NAAQS”) for ozone from 75 to 70 parts per billion. State implementation of the revised NAAQS could result in stricter permitting requirements, delay or prohibit our ability to obtain such permits, and result in increased expenditures for pollution control equipment, the costs of which could be significant. In addition, the EPA has adopted new rules under the Clean Air Act that require the reduction of volatile organic compound emissions from certain fractured and refractured natural gas wells for which well completion operations are conducted and further require that most wells use reduced emission completions, also known as “green completions.” These regulations also establish specific new requirements regarding emissions from production-related wet seal and reciprocating compressors, and from pneumatic controllers and storage vessels. More recently, in May 2016, the EPA finalized rules regarding criteria for aggregating multiple small surface sites into a single source for air-quality permitting purposes applicable to the oil and gas industry. This rule could cause small facilities, on an aggregate basis, to be deemed a major source, thereby triggering more stringent air permitting processes and requirements. Compliance with these and other air pollution control and permitting

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requirements has the potential to delay the development of oil and natural gas projects and increase our costs of development, which costs could be significant. However, we do not believe that compliance with such requirements will have a material adverse effect on our operations.

Regulation of GHG Emissions

In response to findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to public health and the environment, the EPA has adopted regulations pursuant to the federal Clean Air Act that, among other things, require preconstruction and operating permits for certain large stationary sources. Facilities required to obtain preconstruction permits for their GHG emissions are also required to meet “best available control technology” standards that are being established by the states or, in some cases, by the EPA on a case-by-case basis. These regulatory requirements could adversely affect our operations and restrict or delay our ability to obtain air permits for new or modified sources. In addition, the EPA has adopted rules requiring the monitoring and reporting of GHG emissions from specified onshore and offshore oil and natural gas production sources in the United States on an annual basis, which include certain of our operations. Furthermore, in May 2016, the EPA finalized rules that establish new controls for emissions of methane from new, modified or reconstructed sources in the oil and natural gas source category, including production, processing, transmission and storage activities. The rule includes first-time standards to address emissions of methane from equipment and processes across the source category, including hydraulically fractured oil and natural gas well completions. The EPA has also announced that it intends to impose methane emission standards for existing sources as well but, to date, has not yet issued a proposal. Compliance with these rules will require enhanced record-keeping practices, the purchase of new equipment such as optical gas imaging instruments to detect leaks, and increased frequency of maintenance and repair activities to address emissions leakage. The rules will also likely require hiring additional personnel to support these activities or the engagement of third party contractors to assist with and verify compliance. These new and proposed rules could result in increased compliance costs on our operations.

Hydraulic Fracturing Activities

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fuels and published permitting guidance in February 2014 addressing the performance of such activities using diesel fuels. The EPA has also issued final regulations under the federal Clean Air Act establishing performance standards, including standards for the capture of air emissions released during hydraulic fracturing, and advanced notice of proposed rulemaking under the Toxic Substances Control Act to require companies to disclose information regarding the chemicals used in hydraulic fracturing, and also finalized rules in June 2016 that prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants. In addition, the Bureau of Land Management finalized rules in March 2015 that impose new or more stringent standards for performing hydraulic fracturing on federal and American Indian lands. The U.S. District Court of Wyoming has temporarily stayed implementation of this rule. A final decision has not yet been issued. In addition, Congress has from time to time considered legislation to provide for federal regulation of hydraulic fracturing under the SDWA and to require disclosure of the chemicals used in the hydraulic fracturing process. It is unclear how any additional federal regulation of hydraulic fracturing activities may affect our operations.

ESA and Migratory Birds

The Endangered Species Act (“ESA”) and (in some cases) comparable state laws were established to protect endangered and threatened species. Pursuant to the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species’ habitat. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act. We may conduct operations on oil and natural gas leases in areas where certain species that are listed as threatened or endangered are known to exist and where other species, such as the sage grouse, that potentially could be listed as threatened or endangered under the ESA may exist. The U.S. Fish and Wildlife Service may designate critical habitat and suitable habitat areas that it believes are necessary for survival of a threatened or endangered species. A critical habitat or suitable habitat designation could result in further material restrictions to federal land use and may materially delay or prohibit land access for oil and natural gas development. Moreover, as a result of a settlement approved by the U.S. District Court for the District of Columbia in September 2011, the U.S. Fish and Wildlife Service is required to make a determination on listing of more than 250 species as endangered or threatened under the ESA by no later than completion of the agency’s 2017 fiscal year. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act. The federal government recently issued indictments under the Migratory Bird Treaty Act to several oil and natural gas companies after dead migratory birds were found near reserve pits associated with drilling activities. The identification or designation of previously unprotected species as threatened or endangered in areas where underlying property operations are conducted could cause us to incur increased costs arising from species protection measures or could result in limitations on our development activities that could have an adverse impact on our ability to develop and produce reserves. If we were to have a portion of our leases designated as critical or suitable habitat, it could adversely impact the value of our leases.

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OSHA

We are subject to the requirements of the Occupational Safety and Health Act (“OSHA”) and comparable state statutes whose purpose is to protect the health and safety of workers. In addition, the OSHA hazard communication standard, the Emergency Planning and Community Right-to-Know Act and comparable state statutes and any implementing regulations require that we organize and/or disclose information about hazardous materials used or produced in our operations and that this information be provided to employees, state and local governmental authorities and citizens. We believe that we are in substantial compliance with all applicable laws and regulations relating to worker health and safety.

Related Permits and Authorizations

Many environmental laws require us to obtain permits or other authorizations from state and/or federal agencies before initiating certain drilling, construction, production, operation or other oil and natural gas activities, and to maintain these permits and compliance with their requirements for on-going operations. These permits are generally subject to protest, appeal or litigation, which can in certain cases delay or halt projects and cease production or operation of wells, pipelines and other operations.

We have not experienced any material adverse effect from compliance with environmental requirements; however, there is no assurance that this will continue. We did not have any material capital or other non-recurring expenditures in connection with complying with environmental laws or environmental remediation matters in 2015, nor do we anticipate that such expenditures will be material in 2016.

Related Insurance

We maintain insurance against some risks associated with above or underground contamination that may occur as a result of our development activities. However, this insurance is limited to activities at the well site and there can be no assurance that this insurance will continue to be commercially available or that this insurance will be available at premium levels that justify its purchase by us. The occurrence of a significant event that is not fully insured or indemnified against could have a materially adverse effect on our financial condition and operations. Further, we have no coverage for gradual, long-term pollution events.

Employees

As of March 31, 2016, we had 39 full-time employees. We hire independent contractors on an as needed basis. We have no collective bargaining agreements with our employees. We believe that our employee relationships are satisfactory. Please see “Executive Compensation—Named Executive Officers” for a discussion regarding the entity that has historically employed our employees.

Legal Proceedings

We are party to lawsuits arising in the ordinary course of our business. We cannot predict the outcome of any such lawsuits with certainty, but management believes it is remote that pending or threatened legal matters will have a material adverse impact on our financial condition.

Due to the nature of our business, we are, from time to time, involved in other routine litigation or subject to disputes or claims related to our business activities, including workers’ compensation claims and employment related disputes. In the opinion of our management, none of these other pending litigation, disputes or claims against us, if decided adversely, will have a material adverse effect on our financial condition, cash flows or results of operations.

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MANAGEMENT

Our executive officers are currently employees of Centennial Resource Management, LLC (“Centennial Management”), a wholly-owned subsidiary of Centennial HoldCo, and provide services to Centennial HoldCo and Centennial OpCo pursuant to management services agreements between such entities. Prior to the completion of this offering, Centennial HoldCo will contribute its interests in Centennial Management to Centennial OpCo and our executive officers will become employees of a wholly-owned subsidiary of Centennial OpCo.

The following table sets forth the names, ages and titles of our directors and executive officers.


Name	Age		Position
Ward Polzin		53	Chief Executive Officer and Director
George Glyphis		46	Vice President and Chief Financial Officer
Bret Siepman		57	Vice President, Development
Jamie Wheat		46	Vice President and Chief Accounting Officer
Chris Carter		37	Director
David Hayes		41	Director
Christopher Ray		46	Director
Martin Sumner		42	Director
Tony Weber		53	Director

Ward Polzin has served as our Chief Executive Officer since our formation and as a member of our board of directors since October 2014 and has served Centennial Management as Chief Executive Officer since July 2013. Immediately prior to joining Centennial Management, from February 2008 to June 2013, Mr. Polzin served as a Managing Director in Investment Banking at Tudor, Pickering, Holt & Co. Securities, Inc., where he spearheaded the firm’s E&P asset acquisition and divestiture practice since its inception in 2008. Mr. Polzin continues to serve as a senior advisor to Tudor, Pickering, Holt & Co. Securities, Inc. From 2006 to 2007, Mr. Polzin served as the U.S. Country Manager of Enerplus Resources (USA) Corporation with a focus on Bakken shale drilling in the Williston Basin of Montana. From 2003 to 2005, Mr. Polzin served in various positions at Scotia Waterous and rose to Co-Head of U.S. Acquisitions and Divestitures. He began his career with British Petroleum in Alaska where he spent seven years in various engineering and planning roles. Mr. Polzin earned his B.S. in Petroleum Engineering from Colorado School of Mines and an M.B.A. from Rice University. He is a member of the Society of Petroleum Engineers, Western Energy Alliance and the Colorado Oil & Gas Association. Mr. Polzin is also a CFA charterholder.

The board of directors believes that Mr. Polzin’s degree and experience in petroleum engineering, as well as his business expertise, bring valuable strategic, managerial and analytical skills to the board of directors and us.

George Glyphis has served as our Vice President and Chief Financial Officer since our formation and has served Centennial Management in such capacity since July 2014. Immediately, prior to joining Centennial Management, Mr. Glyphis served as a Managing Director in the Oil & Gas Investment Banking practice at J.P. Morgan where his client base comprised primarily upstream and integrated oil & gas companies. In his 21 years at J.P. Morgan, Mr. Glyphis led the origination and execution of transactions including initial public offerings, equity follow-on offerings, high yield and investment grade bond offerings, corporate mergers and acquisitions, asset acquisition and divestitures, and reserve-based and corporate lending. Mr. Glyphis earned his B.A. in History from the University of Virginia.

Bret Siepman has served as our Vice President, Development since our formation and has served Centennial Management in such capacity since August 2013. Immediately prior to joining Centennial Management, Mr. Siepman was Vice President, Business Development for Resolute Energy Corporation (“Resolute”), where he acted in various roles, including Vice President, Geology and Geophysics, for nine years with a focus on the Rockies and the Permian Basin. Mr. Siepman previously served as the Onshore North

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America Exploration Manager for Kerr-McGee Corporation, Geophysicist exploring the Rockies and California for Samedan Oil Corporation and Geologist and Geophysicist for Chevron USA. Mr. Siepman earned his B.A. in Geology at the University of California, Santa Barbara and an M.S. in Geology at Colorado School of Mines. He is a member of the American Association of Petroleum Geologists, the Society of Exploration Geophysicists and is a Registered Professional Geologist in Wyoming.

Jamie Wheat has served as our Vice President and Chief Accounting Officer since our formation and has served Centennial Management in such capacity since January 2014. Immediately prior to joining Centennial Management, Ms. Wheat served Berry Petroleum Company as the Vice President and Controller from March 2013 to December 2013, as the Controller from August 2009 to February 2013 and as the Accounting Manager from August 2008 to August 2009. Ms. Wheat also held various audit positions with KPMG from 2001 to 2008. She earned a B.S. in Accounting at the University of Colorado, Boulder, and an M.S. in Accounting at the University of Colorado, Denver. Ms. Wheat is a Certified Public Accountant and is a member of the American Institute of Certified Public Accountants and COPAS-Colorado.

Chris Carter has served as a member of our board of directors since May 2016. Mr. Carter has served Natural Gas Partners as a Managing Partner since March 2015 and previously served Natural Gas Partners in other capacities, including as a Managing Director from December 2012 to March 2015 and as a Principal from 2010 to December 2012. Prior to joining Natural Gas Partners in 2004, Mr. Carter was an analyst with Deutsche Bank’s Energy Investment Banking group in Houston, Texas, where he focused on financing and merger and acquisition transactions in the oil and gas and oilfield services industries. Since June 2015, Mr. Carter has served as a director for the general partner of PennTex Midstream Partners, LP. From October 2013 to November 2014, Mr. Carter served as a director of Rice Energy, Inc., and from April 2014 to January 2016, Mr. Carter served as a director of Parsley Energy, Inc. Mr. Carter received a B.B.A. and an M.P.A. in Accounting, summa cum laude, in 2002 from the University of Texas, where he was a member of the Business Honors Program. He received an M.B.A. in 2008 from Stanford University, where he graduated as an Arjay Miller Scholar.

The board of directors believes that Mr. Carter’s considerable financial and energy investing experience will bring important and valuable skills to the board of directors.

David Hayes has served as a member of our board of directors since November 2014. Mr. Hayes joined Natural Gas Partners in 1998 and has served as a Managing Director since 2008. He also currently serves as Director of Corporate Finance for Natural Gas Partners. Prior to joining Natural Gas Partners, Mr. Hayes was a member of Merrill Lynch’s Energy Investment Banking group in Houston, Texas, where he focused on mergers and acquisitions and financing in the exploration and production and natural gas pipeline industries. Since June 2015, Mr. Hayes has served as a director for the general partner of PennTex Midstream Partners, LP. Mr. Hayes previously served on the board of directors of the general partner of Eagle Rock Energy Partners, L.P. from June 2011 until its sale to Vanguard Natural Resources LLC in October 2015. Mr. Hayes received a B.A. in Economics, magna cum laude, in 1996 from Rice University, where he was elected to the Phi Beta Kappa scholastic honor society, and an M.B.A. in 2002 from Harvard Business School.

The board of directors believes that Mr. Hayes’s wealth of industry-specific transactional skills and experience will bring important and valuable skills to the board of directors.

Christopher Ray has served as a member of our board of directors since May 2015. Mr. Ray joined Natural Gas Partners in 2003 and has served as Senior Managing Director and Counsel since July 2012. He also currently serves on Natural Gas Partners’ Executive Committee and previously served Natural Gas Partners in other capacities, including Managing Director from 2007 to July 2012. Prior to joining Natural Gas Partners, Mr. Ray served as a partner in the law firm of Thompson & Knight, LLP. He practiced in the Corporate and Securities group in Dallas, Texas for eight years, working on investment and corporate financing transactions, including the formation and capitalization of investment funds, portfolio company investments and exits, mergers and

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acquisitions, securities law compliance and public and private debt and equity offerings. Since June 2015, Mr. Ray has served as a director for the general partner of PennTex Midstream Partners, LP. He previously served on the board of directors of the general partner of Eagle Rock Energy Partners, L.P. from June 2011 until its sale to Vanguard Natural Resources LLC in October 2015. Mr. Ray received a B.S. in Accounting with distinction in 1992 and a Juris Doctor in 1995 from the University of Virginia.

The board of directors believes that Mr. Ray’s significant financial and transactional background in the energy industry will bring important and valuable skills to the board of directors.

Martin Sumner has served as a member of our board of directors since May 2015. Mr. Sumner joined The Carlyle Group L.P. in 2003 and has served as a Managing Director focused on U.S. buyout opportunities in the industrial and transportation sectors since January 2014 and as a Principal from January 2011 to January 2014. Prior to joining The Carlyle Group L.P., Mr. Sumner held positions with Thayer Capital Partners, a private equity firm, and the strategy consulting group of Mercer Management Consulting. Since February 2013, Mr. Sumner has served as a member of the board of directors of Axalta Coating Systems Ltd., and he currently serves as the chairman of its nominating and corporate governance committee. Mr. Sumner received a B.S. in Economics, magna cum laude, from the Wharton School of the University of Pennsylvania in 1996. He received an M.B.A. in 2003 from Stanford University, where he graduated as an Arjay Miller Scholar.

The board of directors believes that Mr. Sumner’s significant financial and transactional background in the industrials industry will bring important and valuable skills to the board of directors.

Tony Weber has served as a member of our board of directors since May 2015. Mr. Weber joined Natural Gas Partners in December 2003 and has served as a Managing Partner since November 2013. He previously served Natural Gas Partners in other capacities, including Managing Director from 2007 to November 2013. Prior to joining Natural Gas Partners, Mr. Weber was the Chief Financial Officer of Merit Energy Company from April 1998 to December 2003. Prior to that, he was Senior Vice President and Manager of Union Bank of California’s Energy Division in Dallas, Texas from 1987 to 1998. Since September 2011, Mr. Weber has served as the Chairman of the Board for Memorial Resource Development Corp., and from September 2011 to March 2016, he served as a director of the general partner of Memorial Production Partners LP. Mr. Weber received a B.B.A. in Finance in 1984 from Texas A&M University.

The board of directors believes that Mr. Weber’s extensive corporate finance, banking and private equity experience will bring important and valuable skills to the board of directors.

There are no family relationships among any of our directors or executive officers.

Board Composition

Upon the closing of this offering, it is anticipated that we will have seven directors.

Our board of directors has determined that is independent under NASDAQ listing standards.

In connection with this offering, we will enter into a voting agreement with Centennial HoldCo and Celero. The voting agreement is expected to provide Centennial HoldCo with the right to designate a certain number of nominees to our board of directors so long as it and Celero and their affiliates collectively beneficially own more than 5% of the outstanding shares of our common stock.

Initially, our board of directors will consist of a single class of directors each serving one year terms. After NGP, through Centennial HoldCo and Celero, no longer beneficially owns or controls more than 50% of the voting power of our outstanding common stock, our board of directors will be divided into three classes of directors, with each class as equal in number as possible, serving staggered three-year terms, and such directors will be removable only for “cause.”

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In evaluating director candidates, we will assess whether a candidate possesses the integrity, judgment, knowledge, experience, skills and expertise that are likely to enhance the board of directors’ ability to manage and direct our affairs and business, including, when applicable, to enhance the ability of the committees of the board of directors to fulfill their duties. Our directors hold office until the earlier of their death, resignation, retirement, disqualification or removal or until their successors have been duly elected and qualified.

Status as a Controlled Company

Because NGP, through Centennial HoldCo and Celero, will collectively beneficially own a majority of our outstanding common stock following the completion of this offering, we expect to be a controlled company under the NASDAQ corporate governance standards. A controlled company need not comply with the NASDAQ corporate governance rules that require its board of directors to have a majority of independent directors and independent compensation and nominating and governance committees. Notwithstanding our status as a controlled company, we will remain subject to the NASDAQ corporate governance standard that requires us to have an audit committee composed entirely of independent directors. As a result, we must have at least one independent director on our audit committee by the date our common stock is listed on the NASDAQ, a majority of independent directors within 90 days of the listing date and all independent directors within one year of the listing date.

If at any time we cease to be a controlled company, we will take all action necessary to comply with the NASDAQ rules, including appointing a majority of independent directors to our board of directors and ensuring we have a compensation committee and a nominating and corporate governance committee, each composed entirely of independent directors, subject to a permitted “phase-in” period. We will cease to qualify as a controlled company once NGP, through Centennial HoldCo and Celero, ceases to control a majority of our voting stock.

Committees of the Board of Directors

Upon the conclusion of this offering, we intend to have an audit committee of our board of directors, and may have such other committees as the board of directors shall determine from time to time. We anticipate that each of the standing committees of the board of directors will have the composition and responsibilities described below.

In connection with this offering, we will enter into a voting agreement with Centennial HoldCo and Celero, which is expected to provide that, among other things, for so long as Centennial HoldCo and Celero and their affiliates collectively beneficially own at least 15% of the outstanding shares of our common stock, Centennial HoldCo will have the right to cause any committee of our board to include in its membership at least one director designated by Centennial HoldCo, except to the extent that such membership would violate applicable securities laws or stock exchange rules.

Audit Committee

We will establish an audit committee prior to the completion of this offering. will serve as the members of our audit committee. As required by the rules of the SEC and listing standards of the NASDAQ, the audit committee will consist solely of independent directors within one year of the listing date. SEC rules also require that a public company disclose whether or not its audit committee has an “audit committee financial expert” as a member. An “audit committee financial expert” is defined as a person who, based on his or her experience, possesses the attributes outlined in such rules. Our board of directors has determined that Mr. satisfies the definition of “audit committee financial expert.”

The audit committee will oversee, review, act on and report on various auditing and accounting matters to our board of directors, including: the selection of our independent accountants, the scope of our annual audits, fees to be paid to the independent accountants, the performance of our independent accountants and our

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accounting practices. In addition, the audit committee will oversee our compliance programs relating to legal and regulatory requirements. We expect to adopt an audit committee charter defining the committee’s primary duties in a manner consistent with the rules of the SEC and the NASDAQ.

Code of Business Conduct and Ethics

Prior to the completion of this offering, our board of directors will adopt a code of business conduct and ethics applicable to our employees, directors and officers, in accordance with applicable U.S. federal securities laws and the corporate governance rules of the NASDAQ. Any waiver of this code may be made only by our board of directors and will be promptly disclosed as required by applicable U.S. federal securities laws and the corporate governance rules of the NASDAQ.

Corporate Governance Guidelines

Prior to the completion of this offering, our board of directors will adopt corporate governance guidelines in accordance with the corporate governance rules of the NASDAQ.

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EXECUTIVE COMPENSATION

Named Executive Officers

We are currently considered an emerging growth company for purposes of the SEC’s executive compensation disclosure rules. In accordance with such rules, we are required to provide a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year End Table, as well as limited narrative disclosures regarding executive compensation for our last completed fiscal year. Further, our reporting obligations extend only to our “named executive officers,” who are those individuals serving as our principal executive officer and our two other most highly compensated executive officers who were serving as executive officers at the end of the last completed fiscal year. For fiscal year 2015, our named executive officers were:


Name		Principal Position
Ward Polzin		Chief Executive Officer
George Glyphis		Vice President and Chief Financial Officer
Bret Siepman		Vice President, Development

During 2015 and to date in 2016, our executive officers have been employees of Centennial Management, a wholly-owned subsidiary of Centennial HoldCo, and provide services to Centennial HoldCo and Centennial OpCo pursuant to management services agreements between such entities. Prior to the completion of this offering, Centennial HoldCo will contribute its interests in Centennial Management to Centennial OpCo and our executive officers and the other employees providing services to us will become employees of a wholly-owned subsidiary of Centennial OpCo.

2015 Summary Compensation Table

The following table summarizes, with respect to our named executive officers, information relating to the compensation earned for services rendered in all capacities during the fiscal years ended December 31, 2015, December 31, 2014, and December 31, 2013, to the extent each such individual was a named executive officer for the applicable fiscal year.


Name and Principal Position	Year		Salary ($)		Bonus ($)(1)		Option Awards ($)(2)(3)		All Other Compensation ($)(4)		Total ($)
Ward Polzin, Chief Executive Officer		2015	$	250,000	$	62,500	$	0	$	14,417	$	326,917
		2014	$	236,458	$	62,500		N/A	$	13,958	$	312,916
		2013	$	89,567	$	200,000	$	0		N/A	$	289,567

George Glyphis, Vice President and Chief Financial Officer(5)		2015	$	275,000	$	68,750	$	0	$	25,077	$	368,827

Bret Siepman, Vice President, Development(5)		2015	$	250,000	$	62,500	$	0	$	14,417	$	326,917
		2014	$	236,458	$	62,500		N/A	$	13,958	$	312,916

(1)	Amounts in this column reflect the discretionary bonus paid to our named executive officers for services in 2013, 2014 and 2015, as applicable.

(2)

Mr. Polzin received an award of “incentive units” pursuant to the Limited Liability Company Agreement of Centennial HoldCo (as amended from time to time, the “HoldCo LLC Agreement”) in 2013 (the “HoldCo Incentive Units”). While Messrs. Glyphis and Siepman also previously received awards of HoldCo Incentive Units, as explained in greater detail in footnote (5) to this 2015 Summary Compensation Table, neither Mr. Glyphis nor Mr. Siepman was a named executive officer for the applicable year in which the award was granted (2014 for Mr. Glyphis; 2013 for Mr. Siepman) and, therefore, 2014 compensation for Mr. Glyphis and 2013 compensation for Mr. Siepman, in either case, is not required to be reported in this

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table. Information regarding outstanding HoldCo Incentive Units held by each of our named executive officers as of December 31, 2015 is provided below under “—Outstanding Equity Awards at 2015 Fiscal Year-End.” The HoldCo Incentive Units are intended to constitute “profits interests” and represent actual (non-voting) equity interests in Centennial HoldCo that have no liquidation value for U.S. federal income tax purposes on the date of grant but are designed to gain value only after the underlying assets have realized a certain level of growth and return to those persons who hold certain other classes of Centennial HoldCo’s equity. We believe that, despite the fact that the HoldCo Incentive Units do not require the payment of an exercise price, these awards are most similar economically to stock options and, as such, they are properly classified as “options” for purposes of the SEC’s executive compensation disclosure rules under the definition provided in Item 402(m)(5)(i) of Regulation S-K since these awards have “option-like features.” The amount reflected in this column for Mr. Polzin reports the value of the HoldCo Incentive Units at the grant date based upon the probable outcome of the applicable performance conditions, determined as of the grant date under ASC 718, which was $0, because the performance conditions related to these awards were not deemed probable of achievement at the time of grant in 2013. Further information regarding the assumptions used in the valuation of the HoldCo Incentive Units is included in Note 9—Incentive Unit Compensation to our Consolidated and Combined Financial Statements and under “—Narrative Disclosures—Incentive Units—HoldCo Incentive Units” below. The HoldCo Incentive Units are not designed with a threshold, target or maximum potential payout level; however, our best estimate of the aggregate grant date fair value of Mr. Polzin’s HoldCo Incentive Units that could have been reported under ASC 718 if the applicable performance conditions had been deemed probable to occur at the grant date would have been $3.7 million. The performance conditions related to the HoldCo Incentive Units granted to Messrs. Glyphis and Siepman also were not deemed probable of achievement at the time of grant in 2014 and 2013, respectively.

(3)

Our named executive officers each received an award of “incentive units” pursuant to the Limited Liability Company Agreement of Follow-On (as amended from time to time, the “Follow-On LLC Agreement”) in 2015 (the “Follow-On Incentive Units”). Information regarding outstanding Follow-On Incentive Units held by each of our named executive officers as of December 31, 2015 is provided below under “—Outstanding Equity Awards at 2015 Fiscal Year-End.” The Follow-On Incentive Units are intended to constitute “profits interests” and represent actual (non-voting) equity interests in Follow-On that have no liquidation value for U.S. federal income tax purposes on the date of grant but are designed to gain value only after the underlying assets have realized a certain level of growth and return to those persons who hold certain other classes of Follow-On’s equity. We believe that, despite the fact that the Follow-On Incentive Units do not require the payment of an exercise price, these awards are most similar economically to stock options and, as such, they are properly classified as “options” for purposes of the SEC’s executive compensation disclosure rules under the definition provided in Item 402(m)(5)(i) of Regulation S-K since these awards have “option-like features.” The amount reflected in this column for the named executive officers reports the value of the Follow-On Incentive Units at the grant date based upon the probable outcome of the applicable performance conditions, determined as of the grant date under ASC 718, which was $0, because the performance conditions related to these awards were not deemed probable of achievement at the time of grant in 2015. Further information regarding the assumptions used in the valuation of the Follow-On Incentive Units is included in Note 9—Incentive Unit Compensation to our Consolidated and Combined Financial Statements and under “—Narrative Disclosures—Incentive Units—Follow-On Incentive Units” below. The Follow-On Incentive Units are not designed with a threshold, target or maximum potential payout level; however, our best estimate of the aggregate grant date fair value of each named executive officer’s Follow-On Incentive Units that could have been reported under ASC 718 if the applicable performance conditions had been deemed probable to occur at the grant date would have been $2.4 million with respect to Mr. Polzin, $0.7 million with respect to Mr. Glyphis and $1.2 million with respect to Mr. Siepman.

(4)

Amounts in this column reflect (a) for all named executive officers, matching contributions to the 401(k) Plan made on behalf of our named executive officers for 2014 and 2015, as applicable, and (b) for Mr. Glyphis, reimbursement of moving expenses for 2015. See “—Narrative Disclosures—Retirement Benefits” below for more information on matching contributions to the 401(k) Plan.

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(5)

Mr. Glyphis became our employee during fiscal year 2014 and did not have compensation that exceeded $100,000 in fiscal year 2014, so disclosure of his compensation has not been provided in the table above for fiscal year 2014 in accordance with SEC rules. Mr. Siepman did not have compensation that exceeded $100,000 in fiscal year 2013, so disclosure of his compensation has not been provided in the table above for fiscal year 2013 in accordance with SEC rules.

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Outstanding Equity Awards at 2015 Fiscal Year-End

The following table reflects information regarding outstanding incentive units held by our named executive officers as of December 31, 2015. As the incentive units are equity interests in Centennial HoldCo and Follow-On, following this offering, the incentive units held by our named executive officers will not relate directly to our securities, and we will not be responsible for making any payments, distributions or settlements to any award recipient relating to such incentive units. Centennial HoldCo and Follow-On, are currently responsible for making all payments, distributions and settlements to all award recipients relating to the HoldCo Incentive Units and Centennial Follow-On Incentive Units, and will continue to be responsible for making all payments, distributions and settlements to all award recipients relating to such incentive units following the closing of this offering.

Option Awards(1)

Name

Number of
Securities
Underlying
Unexercised
Options,
Exercisable
(#)

Number of
Securities
Underlying
Unexercised
Options,
Unexercisable
(#)

Option Exercise
Price ($)

Option
Expiration Date

Ward Polzin

HoldCo Incentive Units

HoldCo Tier I Units

154,000

176,000

N/A

HoldCo Tier II Units

154,000

176,000

N/A

HoldCo Tier III Units

330,000

N/A

HoldCo Tier IV Units

330,000

N/A

HoldCo Tier V Units

330,000

N/A

Follow-On Incentive Units

Follow-On Tier I Units

44,000

286,000

N/A

Follow-On Tier II Units

44,000

286,000

N/A

Follow-On Tier III Units

330,000

N/A

Follow-On Tier IV Units

330,000

N/A

Follow-On Tier V Units

330,000

N/A

George Glyphis

HoldCo Incentive Units

HoldCo Tier I Units

25,000

75,000

N/A

HoldCo Tier II Units

25,000

75,000

N/A

HoldCo Tier III Units

100,000

N/A

HoldCo Tier IV Units

100,000

N/A

HoldCo Tier V Units

100,000

N/A

Follow-On Incentive Units

Follow-On Tier I Units

13,333

86,667

N/A

Follow-On Tier II Units

13,333

86,667

N/A

Follow-On Tier III Units

100,000

N/A

Follow-On Tier IV Units

100,000

N/A

Follow-On Tier V Units

100,000

N/A

Bret Siepman

HoldCo Incentive Units

HoldCo Tier I Units

77,000

88,000

N/A

HoldCo Tier II Units

77,000

88,000

N/A

HoldCo Tier III Units

165,000

N/A

HoldCo Tier IV Units

165,000

N/A

HoldCo Tier V Units

165,000

N/A

Follow-On Incentive Units

Follow-On Tier I Units

22,000

143,000

N/A

Follow-On Tier II Units

22,000

143,000

N/A

Follow-On Tier III Units

165,000

N/A

Follow-On Tier IV Units

165,000

N/A

Follow-On Tier V Units

165,000

N/A

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(1)

The HoldCo Incentive Units and Follow-On Incentive Units are each divided into five tiers, and each tier has a separate distribution threshold and vesting schedule. Awards reflected as “Exercisable” are incentive units that have vested, and awards reflected as “Unexercisable” are incentive units that have not yet vested. For a description of how and when the HoldCo Incentive Units and Follow-On Incentive Units could become vested and when such awards could begin to receive payments, see “—Narrative Disclosures—Incentive Units” below. Additional information regarding the HoldCo Incentive Units and Follow-On Incentive Units is also provided in footnotes (2) and (3), respectively, to the 2015 Summary Compensation Table above.

Narrative Disclosures

Employment, Severance or Change in Control Agreements

We historically have not maintained any employment, severance or change in control agreements with our named executive officers. In addition, our named executive officers are not entitled to any payments or other benefits in connection with a termination of employment or a change in control, other than with respect to incentive units as described below under “—Incentive Units.”

Retirement Benefits

We have not maintained, and do not currently intend to maintain, a defined benefit pension plan or nonqualified deferred compensation plan. Instead, our employees, including our named executive officers, may participate in a retirement plan intended to provide benefits under section 401(k) of the Code (the “401(k) Plan”) pursuant to which employees are allowed to contribute a portion of their base compensation to a tax-qualified retirement account. We provide matching contributions equal to 100% of the first 6% of employees’ eligible compensation contributed to the 401(k) Plan. Employees are immediately 100% vested in the matching contributions made to their 401(k) Plan account and are always 100% vested in the employee contributions they make to their 401(k) Plan account. Employees may generally receive a distribution of the vested portion of their 401(k) Plan account upon (i) a termination of employment, (ii) normal retirement, (iii) disability or (iv) death.

Incentive Units

Centennial HoldCo Incentive Units. In 2013, certain executive officers received an award of incentive units in Centennial HoldCo, or profits interests that represent actual (non-voting) equity interests in Centennial HoldCo, in order to provide them with the ability to benefit from the growth in our operations and business. The HoldCo Incentive Units are divided into five tiers, with each tier currently comprised of one tranche. A potential payout for each tranche will occur when a certain specified level of cumulative cash distributions has been received by the capital interest holding members of Centennial HoldCo. Tier I units and Tier II units each vest in five equal annual installments beginning on the first anniversary of the applicable date of grant (with vesting between such anniversaries occurring pro rata each month), although such vesting will be fully accelerated upon the occurrence of either (i) (a) with respect to the Tier I units, satisfaction of the payment threshold established for the Tier I units or (b) with respect to the Tier II units, satisfaction of the payment threshold established for the Tier II units or (ii) with respect to both Tier I units and Tier II units, a “Fundamental Change” (as defined below). Tier III units, Tier IV units and Tier V units each vest only upon satisfaction of the payment threshold established for the applicable tier. All HoldCo Incentive Units that have not yet vested according to their applicable vesting requirements will automatically be forfeited and become null and void at the time a named executive officer’s employment is terminated for any reason; provided, however, that, prior to such forfeiture, solely with respect to any unvested HoldCo Incentive Units that are Tier I or Tier II units, the named executive officer will vest, immediately prior to his termination of employment, as to a pro rata amount of such unvested HoldCo Incentive Units determined by multiplying the number of HoldCo Incentive Units that would vest on the next annual vesting date by a fraction with a numerator equal to the number of full months that have elapsed since the most recent vesting date and a denominator of 12, with such pro rata amount rounded to the closest whole number. If a

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named executive officer’s employment is terminated for “cause” (as defined below), or the named executive officer resigns or terminates the service relationship early (each, a “voluntary termination”), all vested HoldCo Incentive Units will be forfeited at the time of the termination. In the event that a named executive officer’s employment is terminated other than (i) for cause or (ii) due to a voluntary termination, the named executive officer will retain all vested HoldCo Incentive Units following such termination. For purposes of the foregoing, a named executive officer’s termination of employment means the termination of such named executive officer’s employment with us, Centennial HoldCo, Follow-On and all of its affiliates.

The Tier I units entitle Tier I unitholders to 20% of future distributions only after all of the members that have made capital contributions to Centennial HoldCo have received cumulative cash distributions in respect of their membership interests equal to their cumulative capital contributions multiplied by (1.08) ⁿ , where “n” is equal to the “Weighted Average Capital Contribution Factor” (as defined below) determined as of the date of such distribution. The Tier II units entitle Tier II unitholders to 5% of future distributions only after all of the members that have made capital contributions to Centennial HoldCo have received cumulative cash distributions in respect of their membership interests equal to their cumulative capital contributions multiplied by (1.20) ⁿ , where “n” is equal to the Weighted Average Capital Contribution Factor determined as of the date of such distribution. The Tier III units entitle Tier III unitholders to 5% of future distributions only after all of the members that have made capital contributions to Centennial HoldCo have received cumulative cash distributions in respect of their membership interests equal to two times their cumulative capital contributions. Tier IV units entitle Tier IV unitholders to 5% of future distributions only after all of the members that have made capital contributions to Centennial HoldCo have received cumulative cash distributions in respect of their membership interests equal to 2.5 times their cumulative capital contributions. The Tier V units entitle Tier V unitholders to 5% of future distributions only after all of the members that have made capital contributions to Centennial HoldCo have received cumulative cash distributions in respect of their membership interests equal to three times their cumulative capital contributions. “Weighted Average Capital Contribution Factor” is, as of any date of calculation, a weighted average equal to the sum of the amounts determined for each date on which capital contributions have been funded calculated as the product of (a) the percentage of the total capital commitments funded on each date, times (b) the number of years from the date of each capital contribution until the date of such calculation (with a partial year being expressed as a decimal determined by dividing the number of days which have passed since the most recent anniversary by 365).

We do not expect that this offering will result in a Fundamental Change with respect to the HoldCo Incentive Units, and as of the date of this filing, no tier of HoldCo Incentive Units has received a payout. Because we are not a party to the HoldCo LLC Agreement, we cannot be certain that the terms of the HoldCo Incentive Units and HoldCo LLC Agreement will remain the same in the future.

Follow-On Incentive Units. In 2015, each named executive officer received an award of incentive units in Follow-On, or profits interests that represent actual (non-voting) equity interests in Follow-On, in order to provide them with the ability to benefit from the growth in our operations and business. The Follow-On Incentive Units are divided into five tiers, with each tier currently comprised of one tranche. A potential payout for each tranche will occur when a certain specified level of cumulative cash distributions has been received by the capital interest holding members of Follow-On. Tier I units and Tier II units each vest in five equal annual installments beginning on the first anniversary of the applicable date of grant (with vesting between such anniversaries occurring pro rata each month), although such vesting will be fully accelerated upon the occurrence of either (i) (a) with respect to the Tier I units, satisfaction of the payment threshold established for the Tier I units or (b) with respect to the Tier II units, satisfaction of the payment threshold established for the Tier II units or (ii) with respect to both Tier I units and Tier II units, a “Fundamental Change” (as defined below). Tier III units, Tier IV units and Tier V units each vest only upon satisfaction of the payment threshold established for the applicable tier. All Follow-On Incentive Units that have not yet vested according to their applicable vesting requirements will automatically be forfeited and become null and void at the time a named executive officer’s employment is terminated for any reason; provided, however, that, prior to such forfeiture, solely with respect to any unvested Follow-On Incentive Units that are Tier I or Tier II units, the named executive officer will vest,

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immediately prior to his termination of employment, as to a pro rata amount of such unvested Follow-On Incentive Units determined by multiplying the number of Follow-On Incentive Units that would vest on the next annual vesting date by a fraction with a numerator equal to the number of full months that have elapsed since the most recent vesting date and a denominator of 12, with such pro rata amount rounded to the closest whole number. If a named executive officer’s employment is terminated for “cause” (as defined below), or the named executive officer resigns or terminates the service relationship early (each, a “voluntary termination”), all vested Follow-On Incentive Units will be forfeited at the time of the termination. In the event that a named executive officer’s employment is terminated other than (i) for cause or (ii) due to a voluntary termination, the named executive officer will retain all vested Follow-On Incentive Units following such termination. For purposes of the foregoing, a named executive officer’s termination of employment means the termination of such named executive officer’s employment with us, Follow-On, Centennial HoldCo and all of its affiliates.

The Tier I units entitle Tier I unitholders to 20% of future distributions only after all of the members that have made capital contributions to Follow-On have received cumulative cash distributions in respect of their membership interests equal to their cumulative capital contributions multiplied by (1.08) ⁿ , where “n” is equal to the “Weighted Average Capital Contribution Factor” (as defined below) determined as of the date of such distribution. The Tier II units entitle Tier II unitholders to 5% of future distributions only after all of the members that have made capital contributions to Follow-On have received cumulative cash distributions in respect of their membership interests equal to their cumulative capital contributions multiplied by (1.20) ⁿ , where “n” is equal to the Weighted Average Capital Contribution Factor determined as of the date of such distribution. The Tier III units entitle Tier III unitholders to 5% of future distributions only after all of the members that have made capital contributions to Follow-On have received cumulative cash distributions in respect of their membership interests equal to two times their cumulative capital contributions. Tier IV units entitle Tier IV unitholders to 5% of future distributions only after all of the members that have made capital contributions to Follow-On have received cumulative cash distributions in respect of their membership interests equal to 2.5 times their cumulative capital contributions. The Tier V units entitle Tier V unitholders to 5% of future distributions only after all of the members that have made capital contributions to Follow-On have received cumulative cash distributions in respect of their membership interests equal to three times their cumulative capital contributions. “Weighted Average Capital Contribution Factor” is, as of any date of calculation, a weighted average equal to the sum of the amounts determined for each date on which capital contributions have been funded calculated as the product of (a) the percentage of the total capital commitments funded on each date, times (b) the number of years from the date of each capital contribution until the date of such calculation (with a partial year being expressed as a decimal determined by dividing the number of days which have passed since the most recent anniversary by 365).

As of the date of this filing, no tier of Follow-On Incentive Units has received a payout. In connection with our corporate reorganization, Follow-On will be recapitalized into a single class of equity with each member of Follow-On, including holders of the Follow-On incentive units, receiving a fixed percentage interest in Follow-On based on the distribution provisions contained in Follow-On’s limited liability company agreement and the implied equity value of Follow-On immediately prior to this offering, based on the aggregate number of shares of our common stock to be issued to Follow-On in connection with our corporate reorganization. Promptly following the consummation of this offering, Follow-On intends to distribute all of its shares of our common stock and any cash received in respect of shares of our common stock it sells in this offering to its members on a pro-rata basis and then dissolve. Based on an initial public offering price of $ (the mid-point of the range set forth on the cover of this prospectus) and assuming the underwriters’ over-allotment option is not exercised, approximately shares of our common stock and approximately $ million in cash will be distributed in respect of the Follow-On Incentive Units. As a result, Messrs. Polzin, Glyphis and Siepman will receive approximately , and shares of our common stock, respectively, and approximately $ , $ and $ in cash (in each case, based on the mid-point of the price range set forth on the cover of this prospectus) with respect to the Follow-On incentive units. After the consummation of this offering, there will be no further liability with respect to the Follow-On Incentive Units. Because we are not a party to the Follow-On LLC Agreement, we cannot be certain that the terms of the Follow-On LLC Agreement will remain the same in the future.

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Definitions. Under the HoldCo LLC Agreement and the Follow-On LLC Agreement, a “Fundamental Change” is generally the occurrence of any of the following events: (i) (a) Centennial HoldCo merges or consolidates with or into, or enters into any similar transaction with, any person other than one of Centennial HoldCo’s affiliates, members or certain of its other related parties; (b) Centennial HoldCo’s outstanding interests are sold or exchanged in a single transaction, or a series of related transactions, to any person other than one of Centennial HoldCo’s affiliates, members or certain of its other related parties; or (c) Centennial HoldCo sells, leases, licenses or exchanges, or agrees to sell, lease, license or exchange, all or substantially all of Centennial HoldCo’s assets to a person that is not one of Centennial HoldCo’s affiliates, members or certain of its other related parties, provided that in the case of any such transaction described in (a), (b) or (c), the individuals that served as members of Centennial HoldCo’s board of managers before the consummation of such transaction cease to constitute at least a majority of the members of the board or analogous managing body of the surviving or acquiring entity immediately following completion of such transaction; (ii) any person or group (other than one of Centennial HoldCo’s affiliates, members or certain of its other related parties) purchases or otherwise acquires the right to vote or dispose of securities of Centennial HoldCo representing 50% or more of the total voting power of all outstanding voting securities of Centennial HoldCo, unless the transaction was approved by Centennial HoldCo’s board of managers; or (iii) Centennial HoldCo is dissolved and liquidated.

Under the HoldCo LLC Agreement and the Follow-On LLC Agreement, a termination for “cause” generally occurs upon a named executive officer’s: (i) conviction of, or plea of nolo contendere to, any felony or crime causing substantial harm to Follow-On, Centennial HoldCo or their respective affiliates or involving acts of theft, fraud, embezzlement, moral turpitude, or similar conduct; (ii) repeated intoxication by alcohol or drugs during the performance of the named executive officer’s duties in a manner that materially and adversely affects the performance of such duties; (iii) malfeasance in the conduct of the named executive officer’s duties, including but not limited to (a) misuse or diversion of funds of Follow-On, Centennial HoldCo or their respective affiliates, (b) embezzlement or (c) misrepresentations or concealments on any written reports submitted to Follow-On, Centennial HoldCo or their respective affiliates; (iv) violation of the Voting and Transfer Restriction Agreement among Centennial HoldCo and its members or the named executive officer’s confidentiality and noncompete agreement; or (v) failure to perform the duties of the named executive officer’s employment relationship with us, Follow-On, Centennial HoldCo or their respective affiliates, or failure to follow or comply with the reasonable and lawful written directives of our board of directors, Centennial HoldCo’s board of managers or the board of an affiliate of Centennial HoldCo or Follow-On by which the named executive officer is employed with, in either case, after the named executive officer shall have been informed, in writing, of such failure and given a period of not less than 60 days to remedy the failure.

Compensation of Directors

Our board of directors was formed in October 2014. No obligations with respect to compensation for directors have been accrued or paid for any periods prior to such formation date or following such formation date during the remainder of fiscal year 2014, fiscal year 2015 or to date in 2016. Individuals serving on the boards of managers of our predecessor did not receive any compensation for their services on such boards of managers during fiscal year 2015.

Going forward, our board of directors believes that attracting and retaining qualified non-employee directors will be critical to the future value growth and governance of our company. Our board of directors also believes that a significant portion of the total compensation package for our non-employee directors should be equity-based to align the interest of these directors with our stockholders.

We are reviewing the non-employee director compensation packages provided by certain peer companies and intend to implement a non-employee director compensation program in connection with this offering.

Directors who are also our employees will not receive any additional compensation for their service on our board of directors.

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We expect that each director will be reimbursed for (i) travel and miscellaneous expenses to attend meetings and activities of our board of directors or its committees; (ii) travel and miscellaneous expenses related to such director’s participation in general education and orientation programs for directors; and (iii) travel and miscellaneous expenses for each director’s spouse who accompanies a director to attend meetings and activities of our board of directors or any of our committees.

Compensation Following this Offering

IPO Bonuses

We intend to grant certain employees, including our named executive officers, a bonus in connection with this offering. For each recipient, half of the bonus is expected to be made in the form of a cash award and the second half of the bonus is expected to be made in the form of a restricted stock award under our 2016 Long Term Incentive Plan (as described further below). We anticipate that the cash award and the restricted stock award will each be granted at, or shortly following, the closing of this offering. With respect to the cash award, it is generally expected that one-half of the award will become payable on the closing date of this offering and one-half of the award will become payable on the earlier to occur of a “change of control” (as defined in the 2016 Long Term Incentive Plan) and the first anniversary of the closing date of this offering. With respect to the restricted stock award, it is generally expected that the award will vest in three substantially equal installments on the first three anniversaries of the closing date of this offering. Notwithstanding the foregoing, each cash award and restricted stock award will accelerate and become payable or vested, as applicable, upon a termination of the employee’s service relationship due to death, “disability” or without “cause” or for “good reason” (each such term as defined in the applicable award agreement) and the restricted stock award will also accelerate and become vested upon the occurrence of a change of control.

We expect that the cash award portion of the offering bonus will equal approximately $2,678,466 in the aggregate for all employees, with Mr. Polzin receiving $125,000, Mr. Glyphis receiving $137,500 and Mr. Siepman receiving $125,000. We expect that the value, on or around the date of grant, of the restricted stock award portion of the offering bonus will equal approximately $2,678,466 in the aggregate for all employees, with Mr. Polzin receiving an award valued at approximately $125,000, Mr. Glyphis receiving an award valued at approximately $137,500 and Mr. Siepman receiving an award valued at approximately $125,000.

2016 Long Term Incentive Plan

Prior to the completion of this offering, we anticipate that our board of directors will adopt a long term incentive plan pursuant to which our employees, consultants and directors (and those of our subsidiaries), including our named executive officers, will be eligible to receive awards. We anticipate that the long term incentive plan, which we refer to herein as the “2016 Long Term Incentive Plan” or the “Plan,” will provide for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards, substitute awards, and performance awards intended to align the interests of participants with those of our stockholders. The following description of the Plan is based on the form we anticipate adopting, but the Plan has not yet been adopted and the provisions discussed below remain subject to change. As a result, the following description is qualified in its entirety by reference to the final Plan once adopted.

Administration . We anticipate that the Plan will be administered by our board of directors, or a committee thereof (as applicable, the “Plan Administrator”). The Plan Administrator will have the authority to, among other things, designate eligible persons as participants under the Plan, determine the type or types of awards to be granted to eligible persons, determine the number of shares of our common stock to be covered by awards, determine the terms and conditions applicable to awards and interpret and administer the Plan. The Plan Administrator may terminate or amend the Plan at any time with respect to any shares of our common stock for which a grant has not yet been made. The Plan Administrator also has the right to alter or amend the Plan or any

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part of the Plan from time to time, including increasing the number of shares of our common stock that may be granted, subject to stockholder approval as required by any exchange upon which our common stock is listed at that time. However, no change to any outstanding award may be made that would materially and adversely affect the rights of the participant under the award without the consent of the participant.

Number of Shares. Subject to adjustment in the event of any distribution, recapitalization, split, merger, consolidation or similar corporate event, we anticipate that the number of shares available for delivery pursuant to awards granted under the Plan will not exceed shares of our common stock. There is no limit on the number of awards that may be granted and paid in cash. Shares subject to awards under the Plan that are canceled, forfeited, exchanged, settled in cash or otherwise terminated, including shares withheld to satisfy exercise prices or tax withholding obligations, will again be available for awards under the Plan. The shares of our common stock to be delivered under the Plan will be made available from authorized but unissued shares, shares held in treasury, or previously issued shares reacquired by us, including by purchase on the open market.

Stock Options. A stock option, or option, is a right to purchase shares of our common stock at a specified price during specified time periods. It is anticipated that options will have an exercise price that may not be less than the fair market value of our common stock on the date of grant. Options granted under the Plan can be either incentive options (within the meaning of section 422 of the Code), which have certain tax advantages for recipients, or non-qualified options. No option will have a term that exceeds ten years.

Stock Appreciation Rights. A stock appreciation right is an award that, upon exercise, entitles a participant to receive the excess of the fair market value of our common stock on the exercise date over the grant price established for the stock appreciation right on the date of grant. Such excess will be paid in cash or in common stock, or a combination thereof. It is anticipated that stock appreciation rights will have a grant price that may not be less than the fair market value of our common stock on the date of grant.

Restricted Stock. A restricted stock grant is an award of common stock that vests over a period of time and, during such time, is subject to transfer limitations, a risk of forfeiture and other restrictions imposed by the Plan Administrator, in its discretion. During the restricted period, a participant will have rights as a stockholder, including the right to vote the common stock subject to the award and to receive cash dividends thereon (which may, if required by the Plan Administrator, be subjected to the same vesting terms that apply to the underlying award of restricted stock).

Restricted Stock Units. A restricted stock unit is a notional share that entitles the grantee to receive shares of our common stock, cash or a combination thereof, as determined by the Plan Administrator, following a specified period.

Stock Awards. A stock award is a transfer of unrestricted shares of our common stock on terms and conditions determined by the Plan Administrator.

Dividend Equivalents. Dividend equivalents entitle a participant to receive cash, common stock, other awards or other property equal in value to dividends paid with respect to a specified number of shares of our common stock, or other periodic payments at the discretion of the Plan Administrator. Dividend equivalents may be granted on a free-standing basis or in connection with another award (other than an award of restricted stock or a stock award).

Other Stock-Based Awards. Other stock-based awards are awards denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, the value of our common stock.

Cash Awards. Cash awards may be granted on a free-standing basis, as an element of or a supplement to, or in lieu of any other award.

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Substitute Awards. Awards may be granted in substitution or exchange for any other award granted under the Plan or under another equity incentive plan or any other right of an eligible person to receive payment from us. Awards may also be granted under the Plan in substitution for similar awards held for individuals who become eligible persons as a result of a merger, consolidation or acquisition of another entity by or with us or one of our affiliates.

Performance Awards. A performance award is a right to receive all or part of an award granted under the Plan based upon performance conditions specified by the Plan Administrator. The Plan Administrator will determine the period over which certain specified company or individual goals or objectives must be met. The performance award may be paid in cash, common stock, other awards or other property, in the discretion of the Plan Administrator.

Tax Withholding. The Plan Administrator will determine, in its sole discretion, the form of payment acceptable to satisfy a participant’s obligations with respect to withholding taxes and other tax obligations relating to an award, including, without limitation, the delivery of cash or cash equivalents, common stock (including previously owned shares, net settlement, broker-assisted sale or other cashless withholding or reduction of the amount of shares of our common stock otherwise issuable or delivered pursuant to the award), other property or any other legal consideration that the Plan Administrator deems appropriate.

Change in Control. Upon a “change in control” (as defined in the Plan), the Plan Administrator may, in its discretion, (i) remove any forfeiture restrictions applicable to an award, (ii) accelerate the time of exercisability or vesting of an award, (iii) require awards to be surrendered in exchange for a cash payment, (iv) cancel unvested awards without payment or (v) make adjustments to awards as the Plan Administrator deems appropriate to reflect the change in control.

Other Adjustments. In the case of (i) a subdivision or consolidation of our common stock (by reclassification, split or reverse split or otherwise), (ii) a recapitalization, reclassification, or other change in our capital structure or (iii) any other reorganization, merger, combination, exchange or other relevant change in capitalization of our equity, then a corresponding and proportionate adjustment shall be made in accordance with the terms of the Plan, as appropriate, with respect to the maximum number of shares available under the Plan, the number of shares that may be acquired with respect to an award, and, if applicable, the exercise price of an award, in order to prevent dilution or enlargement of awards as a result of such events.

Termination of Employment or Service. The consequences of the termination of a participant’s employment, consulting arrangement, or membership on the board of directors will be determined by the Plan Administrator in the terms of the relevant award agreement.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth the beneficial ownership of our common stock that, upon the consummation of the corporate reorganization and this offering, will be owned by:

•

each of the selling stockholders;

•

each person known to us to beneficially own more than 5% of any class of our outstanding common stock;

•

each of our directors;

•

our named executive officers; and

•

all of our directors and executive officers as a group.

The selling stockholders are deemed under federal securities laws to be underwriters with respect to the shares of common stock they are offering hereby and any shares of common stock that they may sell pursuant to the underwriters’ option to purchase additional shares of our common stock. For further information regarding material transactions between us and the selling stockholders, see “Certain Relationships and Related Party Transactions.”

All information with respect to beneficial ownership has been furnished by the respective 5% or more stockholders, selling stockholders, directors or named executive officer, as the case may be. Unless otherwise noted, the mailing address of each listed beneficial owner is c/o Centennial Resource Development, Inc., 1401 17th Street, Suite 1000, Denver, Colorado 80202.

The underwriters have an option to purchase a maximum of additional shares from the selling stockholders to cover over-allotments of shares.

Shares Beneficially Owned
Before this Offering

Shares
Offered
Hereby

Shares Beneficially Owned
After this Offering
(Assuming No Exercise of
the Underwriters’ Over-
Allotment Option)

Shares Beneficially Owned
After this Offering
(Assuming the
Underwriters’ Over-
Allotment Option is
Exercised in Full)

Name of Beneficial Owner(1)

Number

Percentage

Number

Percentage

Number

Percentage

Selling Stockholders:

Centennial Resource Development, LLC(2)

Celero Energy Company, LP(3)

NGP Centennial Follow-On LLC(4)(5)

Carlyle Partners VI Centennial Holdings, L.P.(5)(6)

Directors and Named Executive Officers:

Chris Carter

David Hayes

Ward Polzin(5)

Christopher Ray

Martin Sumner

Tony Weber

George Glyphis(5)

Bret Siepman(5)

Directors and Executive Officers as a Group (9 Persons)(5)

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(1)

The amounts and percentages of common stock beneficially owned are reported on the bases of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power, which includes the power to vote or direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person’s ownership percentage, but not for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Except as otherwise indicated in these footnotes, each of the beneficial owners has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock, except to the extent this power may be shared with a spouse.

(2)

The board of managers of Centennial HoldCo has voting and dispositive power over these shares. The board of managers of Centennial HoldCo consists of Ward Polzin (our Chief Executive Officer and one of our directors), Bret Siepman (our Vice President, Development), Chris Carter (one of our directors), David Hayes (one of our directors), Martin Sumner (one of our directors), Christopher Ray (one of our directors) and Tony Weber (one of our directors). None of such persons individually have voting and dispositive power over these shares, and the board of managers of Centennial HoldCo acts by majority vote and thus each such person is not deemed to beneficially own the shares held by Centennial HoldCo. NGP X US Holdings, L.P. (“NGP X US Holdings”) owns 99% of Centennial HoldCo, and certain members of our management team own the remaining 1%. Certain members of our management team and certain of our employees also own incentive units in Centennial HoldCo. Please see “Executive Compensation—Narrative Disclosures—Incentive Units” for more information on the incentive units. As a result, NGP X US Holdings may be deemed to indirectly beneficially own the shares held by Centennial HoldCo. NGP X US Holdings disclaims beneficial ownership of these shares except to the extent of its pecuniary interest therein. NGP X Holdings GP, L.L.C. (the sole general partner of NGP X US Holdings), NGP Natural Resources X, L.P. (the sole member of NGP X Holdings GP, L.L.C.), G.F.W. Energy X, L.P. (the sole general partner of NGP Natural Resources X, L.P.) and GFW X, L.L.C. (the sole general partner of G.F.W. Energy X, L.P.) may each be deemed to share voting and dispositive power over the reported shares and therefore may also be deemed to be the beneficial owner of these shares. GFW X, L.L.C. has delegated full power and authority to manage NGP X US Holdings to NGP Energy Capital Management, L.L.C. and accordingly, NGP Energy Capital Management, L.L.C. may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Chris Carter and Tony Weber, both of whom are members of our board of directors, are managing partners of NGP Energy Capital Management, L.L.C. In addition, Craig Glick and Christopher Ray are senior managing directors of NGP Energy Capital Management, L.L.C. Although none of Messrs. Carter, Weber, Glick or Ray individually have voting or dispositive power over these shares, such individuals may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Each of Messrs. Carter, Weber, Glick and Ray disclaim beneficial ownership of these shares except to the extent of their respective pecuniary interest therein. The number of shares reflected in the table above as beneficially owned by Centennial HoldCo does not include shares held by Celero that are subject to the terms of the voting agreement pursuant to which, among other things, Celero has agreed to vote as directed by Centennial HoldCo. See “Certain Relationships and Related Party Transactions—Voting Agreement.”

(3)

Celero Energy Management, LLC, the general partner of Celero (“Celero GP”), has voting and dispositive power over these shares. The board of managers of Celero GP consists of David Hayes (one of our directors), Bruce Selkirk and Christopher Ray (one of our directors). None of such persons individually have voting and dispositive power over these shares, and the board of managers of Celero GP acts by majority vote and thus each such person is not deemed to beneficially own the shares held by Celero GP. Natural Gas Partners VIII, L.P. (“NGP VIII”) owns 94.7% of the membership interests of Celero GP, and the remaining 5.3% is held by certain members of Celero’s management team and other minority owners. As a result, NGP VIII may be deemed to indirectly beneficially own these shares. NGP VIII disclaims beneficial ownership

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of these shares except to the extent of its pecuniary interest therein. G.F.W. Energy VIII, L.P. (the sole general partner of NGP VIII) and GFW VIII, L.L.C. (the sole general partner of G.F.W. Energy VIII, L.P.) may each be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. GFW VIII, L.L.C. has delegated full power and authority to manage NGP VIII to NGP Energy Capital Management, L.L.C. and accordingly, NGP Energy Capital Management, L.L.C. may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Chris Carter and Tony Weber, both of whom are members of our board of directors, are managing partners of NGP Energy Capital Management, L.L.C. In addition, Craig Glick and Christopher Ray are senior managing directors of NGP Energy Capital Management, L.L.C. Although none of Messrs. Carter, Weber, Glick or Ray individually have voting or dispositive power over these shares, such individuals may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Each of Messrs. Carter, Weber, Glick and Ray disclaim beneficial ownership of these shares except to the extent of their respective pecuniary interest therein.

(4)

NGP Centennial Follow-On LLC is managed by its managing member, NGP X US Holdings. As such, NGP X US Holdings has voting and dispositive power over these shares. NGP X US Holdings disclaims beneficial ownership of these shares except to the extent of its pecuniary interest therein. NGP X Holdings GP, L.L.C. (the sole general partner of NGP X US Holdings), NGP Natural Resources X, L.P. (the sole member of NGP X Holdings GP, L.L.C.), G.F.W. Energy X, L.P. (the sole general partner of NGP Natural Resources X, L.P.) and GFW X, L.L.C. (the sole general partner of G.F.W. Energy X, L.P.) may each be deemed to share voting and dispositive power over the reported shares and therefore may also be deemed to be the beneficial owner of these shares. G.F.W. Energy X, L.P. has delegated full power and authority to manage NGP Natural Resources X, L.P. to NGP Energy Capital Management, L.L.C. and accordingly, NGP Energy Capital Management, L.L.C. may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Chris Carter and Tony Weber, both of whom are members of our board of directors, are managing partners of NGP Energy Capital Management, L.L.C. In addition, Craig Glick and Christopher Ray are senior managing directors of NGP Energy Capital Management, L.L.C. Although none of Messrs. Carter, Weber, Glick or Ray individually have voting or dispositive power over these shares, such individuals may be deemed to share voting and dispositive power over these shares and therefore may also be deemed to be the beneficial owner of these shares. Each of Messrs. Carter, Weber, Glick and Ray disclaim beneficial ownership of these shares except to the extent of their respective pecuniary interest therein.

(5)

As part of the transactions described in “Recent and Formation Transactions—Formation Transactions—Our Corporate Reorganization,” Follow-On will be recapitalized into a single class of equity with each member of Follow-On, including holders of the Follow-On incentive units, receiving a fixed percentage interest in Follow-On based on the distribution provisions contained in Follow-On’s limited liability company agreement and the implied equity value of Follow-On immediately prior to this offering, based on the aggregate number of shares of our common stock to be issued to Follow-On in connection with our corporate reorganization. Promptly following the consummation of this offering, Follow-On intends to distribute all of its shares of our common stock and any cash received in respect of shares of our common stock it sells in this offering to its members on a pro-rata basis and then dissolve. As a result of such distribution, Messrs. Polzin, Glyphis and Siepman and our directors and executive officers as a group will receive , , and shares of our common stock, respectively, based on an assumed initial public offering price of $ per share of common stock, the midpoint of the price range set forth on the cover page of this prospectus. Also as a result of such distribution, Carlyle Partners VI Centennial Holdings, L.P. will receive shares of our common stock, based on an assumed initial offering price of $ per share of common stock, the midpoint of the price range set forth on the cover page of this prospectus. The number of shares reflected in the table above as beneficially owned by Messrs. Polzin, Glyphis and Siepman, our directors and executive officers as a group and Carlyle Partners VI Centennial Holdings, L.P. does not include the shares to be received by such persons upon such distribution from Follow-On.

(6)	Carlyle Partners VI Centennial Holdings, L.P. is the record holder of the securities reported herein. Carlyle

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Group Management L.L.C. is the general partner of The Carlyle Group L.P., which is a publicly traded entity listed on NASDAQ. The Carlyle Group L.P. is the sole shareholder of Carlyle Holdings I GP Inc., which is the sole member of Carlyle Holdings I GP Sub L.L.C., which is the general partner of Carlyle Holdings I L.P., which is sole member of TC Group, L.L.C., which is the general partner of TC Group Sub L.P., which is the managing member of TC Group VI S1, L.L.C., which is the general partner of TC Group VI S1, L.P., which is the general partner of Carlyle Partners VI Centennial Holdings, L.P. Accordingly, each of the foregoing entities may be deemed to share beneficial ownership of the securities owned of record by Carlyle Partners VI Centennial Holdings, L.P. Voting and investment determinations with respect to the securities held by Carlyle Partners VI Centennial Holdings, L.P. are made by an investment committee of TC Group VI, L.P. comprised of Daniel D’Aniello, William Conway, David Rubenstein, Louis Gerstner, Allan Holt, Peter Clare, Gregor Bôhm, Kewsong Lee and Thomas Mayrhofer. Each member of the investment committee disclaims beneficial ownership of such securities. The address for each of the persons or entities named in this footnote is c/o The Carlyle Group, 1001 Pennsylvania Ave. NW, Suite 220 South, Washington, D.C. 20004-2505.

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RECENT AND FORMATION TRANSACTIONS

Recent Acquisition

Reeves County Leasehold Acquisitions

In June 2016, we closed an acquisition of acreage that is contiguous to our existing acreage position, and in May 2016, we closed a leasehold acquisition in close proximity to our operating area. These assets are comprised primarily of operated acreage, and we believe they increase our inventory of extended laterals. The Recent Acquisitions added approximately 2,400 net acres and 250 Boe/d of production. Thus far in 2016, we have spent approximately $44 million on acquisitions.

Recent Dispositions

Marston Disposition

In December 2014, we conveyed approximately 3,840 gross (1,845 net) acres, including 18 vertical wells that produced approximately 142 net Boe/d for the second half of 2014, in Ward County, Texas for net cash proceeds of approximately $12.5 million to an NGP-controlled affiliate. Following the Marston Disposition, we have no vertical drilling locations in our drilling plan.

CO ₂ Project Disposition

In May 2014, we conveyed certain oil and natural gas properties in Chaves County, New Mexico pursuant to which we had pursued a tertiary recovery project utilizing CO ₂ to increase production on such properties, including wells that produced approximately 378 net Boe/d in the first half of 2014, for net cash proceeds of approximately $59.3 million.

Atlantic Midstream Disposition

In February 2014, Centennial OpCo sold its 98.5% interest in Atlantic Midstream, LLC (“Atlantic Midstream”) to an NGP-controlled entity for net cash proceeds of $71.8 million.

Formation Transactions

The Combination

Centennial OpCo is an independent oil and natural gas company formed on August 30, 2012 by its management members, third-party investors and an affiliate of NGP, a family of energy-focused private equity investment funds founded in 1988 with aggregate committed capital under management since inception of over $15.8 billion. Subsequently, in April 2014, NGP contributed its membership interests in Centennial OpCo to Centennial HoldCo, which was formed by NGP and certain members of management. Centennial HoldCo is a holding company with no independent operations apart from its ownership interests in Centennial OpCo. By August 2014, all of the other members of Centennial OpCo (including its management members) had sold their membership interests in Centennial OpCo to Centennial OpCo or Centennial HoldCo for cash. As a result of these transactions, Centennial OpCo became a wholly-owned subsidiary of Centennial HoldCo.

Celero is an independent oil and natural gas company that was formed in 2006 to focus on the development and acquisition of oil and natural gas properties in Texas and New Mexico, primarily in the Permian Basin in West Texas. Celero was formed by its general partner, Celero Energy Management, LLC, its management team and NGP. Prior to the Combination, Celero owned non-operated interests in oil and natural gas properties in the Delaware Basin in which Centennial OpCo also has a working interest and substantially all of which were operated by Centennial OpCo.

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On October 15, 2014, Celero conveyed substantially all of its oil and natural gas properties and other assets to Centennial OpCo in exchange for membership interests in Centennial OpCo. Immediately following the completion of the Combination, Centennial HoldCo owned approximately 72% of Centennial OpCo, and Celero owned the remaining 28%.

Subsequent Capital Raising Activities

In 2015, Centennial OpCo issued additional membership interests to Centennial HoldCo and Follow-On in exchange for capital contributions. As a result of such capital contributions, Centennial HoldCo, Celero and Follow-On own an approximate 61.1%, 21.2% and 17.6% membership interest in Centennial OpCo, respectively.

Our Corporate Reorganization

Pursuant to the terms of certain reorganization transactions that will be completed in connection with this offering, through a series of steps, we will acquire, directly and indirectly, all of the interests in Centennial OpCo currently owned by each of Centennial HoldCo, Celero and Follow-On in exchange for shares, shares and shares, respectively, of our common stock. As a result of these transactions, we will directly and indirectly wholly own Centennial OpCo.

As part of the reorganization transactions, Follow-On will be recapitalized into a single class of equity with each member of Follow-On, including holders of the Follow-On incentive units, receiving a fixed percentage interest in Follow-On based on the distribution provisions contained in Follow-On’s limited liability company agreement and the implied equity value of Follow-On immediately prior to this offering, based on the aggregate number of shares of our common stock to be issued to Follow-On in connection with our corporate reorganization and the initial public offering price of our common stock in this offering. Promptly following the consummation of this offering, Follow-On intends to distribute all of its shares of our common stock and any cash received in respect of shares of our common stock it sells in this offering to its members on a pro-rata basis and then dissolve.

As part of the corporate reorganization and in connection with this offering, we will enter into a registration rights agreement with Centennial HoldCo, Celero and Follow-On and a voting agreement with Centennial HoldCo and Celero. See “Certain Relationships and Related Party Transactions—Registration Rights Agreement” and “Certain Relationships and Related Party Transactions —Voting Agreement.”

Since our formation and to date in 2016, our executive officers have been employees of Centennial Management, a wholly-owned subsidiary of Centennial HoldCo, and have provided services to Centennial HoldCo and Centennial OpCo pursuant to management services agreements between such entities. Prior to the completion of this offering, Centennial HoldCo will contribute its interests in Centennial Management to Centennial OpCo and our executive officers and the other employees providing services to us will become employees of a wholly-owned subsidiary of Centennial OpCo.

The Existing Investors

Following our corporate reorganization, the Existing Investors will consist of the following:


	Number of Shares Owned Before this Offering	Shares to be Offered in this Offering	Number of Shares Owned After this Offering
Existing Investor Name:
Centennial Resource Development, LLC(1)
Celero Energy Company, LP(1)
NGP Centennial Follow-On LLC(2)

Total

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(1)

(2)

For more information on the ownership of our common stock by our principal and selling stockholders, see “Principal and Selling Stockholders.”

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Historical Transactions with Affiliates

The NGP Contributions

In August 2012, an affiliate of NGP contributed approximately $75 million in cash to Centennial OpCo in exchange for 50.5% of the initial membership interests in Centennial OpCo. During 2013, the same affiliate of NGP contributed an additional $115 million to Centennial OpCo for additional membership interests in Centennial OpCo. In 2014, the same affiliate of NGP contributed all of its membership interests in Centennial OpCo to Centennial HoldCo.

In April 2015, Centennial HoldCo contributed an additional $19.9 million to Centennial OpCo for additional membership interest in Centennial OpCo. Also in April 2015 and May 2015, Follow-On, a Delaware limited liability company controlled by NGP but the economic interests in which are owned by unaffiliated third party investors and management, contributed $28.2 million and $33.3 million, respectively, in cash to Centennial OpCo in exchange for the membership interests in Centennial OpCo. In September 2015, Follow-On and Centennial HoldCo contributed $22.7 million and $7.3 million, respectively, to Centennial OpCo in exchange for additional membership interests in Centennial OpCo.

Other Transactions with NGP Affiliates

In May 2016, Centennial OpCo acquired acreage in close proximity to our operating area in Reeves County, Texas and wellbore only rights in an uncompleted horizontal wellbore for approximately $9.8 million from Caird DB, LLC, an affiliate of NGP. See “Recent and Formation Transactions—Recent Acquisition—Reeves County Leasehold Acquisitions.”

In February 2014, Centennial OpCo entered into a 15-year gas gathering agreement with Atlantic Midstream, which has been renamed PennTex Permian, LLC, which terminates on April 1, 2029 and is subject to one-year extensions at either party’s election. At the time this agreement was entered into, Centennial OpCo had a 98.5% interest in Atlantic Midstream. In February 2014, subsequent to entry into this gas gathering agreement, Centennial OpCo sold its 98.5% interest in Atlantic Midstream to PennTex Midstream Partners, LLC, an affiliate of NGP, for net cash proceeds of approximately $71.8 million. In October 2014, the gas gathering agreement was amended to provide for construction by PennTex Permian, LLC of an expansion of the gathering system and a receipt point. Centennial OpCo has agreed to repay all construction costs of this expansion project, which totaled approximately $4.0 million, and pays PennTex Permian, LLC a minimum monthly fee of $7,000 per day until repayment is complete. As of March 31, 2016, Centennial OpCo has repaid approximately $2.6 million of the construction costs. In addition, PennTex Permian, LLC paid Centennial OpCo approximately $2.2 million, $1.2 million and $30,000 for purchases of residue gas and NGLs (net of gas gathering, processing and other fees) for the years ended December 31, 2014 and 2015 and the three months ended March 31, 2016, respectively.

In December 2014, Centennial OpCo sold 3,840 gross (1,845 net) acres in Ward County, Texas to Blackbeard Resources, LLC, an affiliate of NGP, for net cash proceeds of approximately $12.5 million. See “Recent and Formation Transactions—Recent Dispositions—Marston Disposition.”

Effective October 2014, Centennial OpCo entered into a Management Services Agreement with Centennial Management, a wholly-owned subsidiary of Centennial HoldCo, pursuant to which employees of Centennial Management provide their services to Centennial HoldCo and Centennial OpCo. Our executive officers are currently employees of Centennial Management. Prior to the completion of this offering, Centennial HoldCo will contribute its interests in Centennial Management to Centennial OpCo and our executive officers will become employees of a wholly-owned subsidiary of Centennial OpCo.

From time to time, Centennial OpCo obtains services related to its drilling and completion activities from affiliates of NGP. In particular, since 2014, Centennial OpCo has paid the following amounts to the following

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affiliates of NGP for such services: (i) approximately $0.3 million during the three months ended March 31, 2016 to Cretic Energy Services, LLC; (ii) approximately $1.2 million and approximately $2.2 million during the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, to RockPile Energy Services, LLC; and (iii) approximately $1.7 million during the year ended December 31, 2014 to MS Energy Services.

During the year ended December 31, 2015 and the three months ended March 31, 2016, Centennial OpCo paid approximately $0.5 million and approximately $0.2 million to WildHorse Resources II, LLC, an affiliate of NGP, for certain oil and gas lease extensions.

The Combination

As described under “Recent and Formation Transactions—Formation Transactions—The Combination,” on October 15, 2014, Celero conveyed substantially all of its oil and natural gas properties and other assets to Centennial OpCo in exchange for membership interests in Centennial OpCo. Immediately following the completion of the Combination, Celero owned approximately 28% of Centennial OpCo. An affiliate of NGP, Natural Gas Partners VIII, L.P., owns over 90% of the membership interests in the general partner of Celero and approximately 33% of the limited partnership interests of Celero. Two of our directors, David Hayes and Christopher Ray, are also directors of Celero.

Corporate Reorganization

As described in “Recent and Formation Transactions—Formation Transactions—Our Corporate Reorganization,” in connection with this offering, we will complete certain reorganization transactions pursuant to which we will acquire, directly or indirectly, all of the interests in Centennial OpCo currently owned by each of Centennial HoldCo, Celero and Follow-On, in exchange for shares, shares and shares, respectively, of our common stock. Promptly following the consummation of this offering, Follow-On intends to distribute its shares of our common stock and any cash received in respect of our common stock that it sells in this offering to its members on a pro-rata basis.

Registration Rights Agreement

In connection with the closing of this offering, we will enter into a registration rights agreement with Centennial HoldCo, Celero and Follow-On. We have been informed that, shortly after the consummation of this offering, Follow-On intends to distribute all of its shares of our common stock and other assets (including any cash received in respect of shares of our common stock it sells in this offering) to its members on a pro rata basis, assign its rights and obligations under the registration rights agreement to its members and dissolve. Pursuant to the registration rights agreement, we have agreed to register the sale of shares of our common stock under certain circumstances.

Demand Rights

At any time after the 180 day lock-up period, as described in “Underwriting,” and subject to the limitations set forth below, each of Centennial HoldCo and Celero (or their permitted transferees) will have the right to require us by written notice to prepare and file a registration statement registering the offer and sale of a certain number of their shares of our common stock. Generally, we are required to provide notice of the request to certain other holders of our common stock who may, in certain circumstances, participate in the registration. Subject to certain exceptions, we will not be obligated to effect a demand registration within 90 days after the closing of any underwritten offering of shares of our common stock. Further, we are not obligated to effect:

•

(i) through the third anniversary of the closing date of this offering, more than a total of four demand registrations or (ii) on or after the third anniversary of the closing date of this offering, more than one demand registration per calendar year, at the request of Centennial HoldCo (or its permitted transferee); and

•

more than a total of three demand registrations at the request of Celero (or its permitted transferee).

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We will also not be obligated to effect any demand registration in which the anticipated aggregate offering price for our common stock included in such offering is less than $30 million. Once we are eligible to effect a registration on Form S-3, any such demand registration may be for a shelf registration statement. We will be required to use reasonable best efforts to maintain the effectiveness of any such registration statement until the earlier of (i) 180 days (or two years in the case of a shelf registration statement) after the effective date thereof or (B) the date on which all shares covered by such registration statement have been sold (subject to certain extensions).

In addition, each of Centennial HoldCo and Celero (or their permitted transferees) will have the right to require us, subject to certain limitations, to effect a distribution of any or all of their shares of our common stock by means of an underwritten offering. In general, any demand for an underwritten offering (other than the first requested underwritten offering made in respect of a prior demand registration and other than a requested underwritten offering made concurrently with a demand registration) shall constitute a demand request subject to the limitations set forth above.

Piggyback Rights

Subject to certain exceptions, if at any time we propose to register an offering of common stock or conduct an underwritten offering, whether or not for our own account, then we must notify Centennial HoldCo, Celero and Follow-On (or their permitted transferees) of such proposal to allow them to include a specified number of their shares of our common stock in that registration statement or underwritten offering, as applicable.

Conditions and Limitations; Expenses

These registration rights will be subject to certain conditions and limitations, including the right of the underwriters to limit the number of shares to be included in a registration and our right to delay or withdraw a registration statement under certain circumstances. We will generally pay all registration expenses in connection with our obligations under the registration rights agreement, regardless of whether a registration statement is filed or becomes effective.

Voting Agreement

In connection with this offering, we will enter into a voting agreement with Centennial HoldCo and Celero. Among other things, the voting agreement will provide that Celero will vote all of their shares of our common stock as directed by Centennial HoldCo. The voting agreement will also provide Centennial HoldCo with the right to designate up to three nominees to our board of directors, provided that such number of nominees shall be reduced to two, one and zero if Centennial HoldCo and Celero and their affiliates collectively own less than 35%, 15% and 5%, respectively, of the outstanding shares of our common stock. Pursuant to the voting agreement we, Centennial HoldCo and Celero will be required to take all necessary actions, to the fullest extent permitted by applicable law (including with respect to any fiduciary duties under Delaware law), to cause the election of the nominees designated by Centennial HoldCo. In addition, the voting agreement will provide that for so long as Centennial HoldCo and Celero and their affiliates own at least 15% of the outstanding shares of our common stock, Centennial HoldCo will have the right to cause any committee of our board of directors to include in its membership at least one director designated by Centennial HoldCo, except to the extent that such membership would violate applicable securities laws or stock exchange rules. The rights granted to Centennial HoldCo to designate directors are additive to and not intended to limit in any way the rights that Centennial HoldCo, Celero or any of their affiliates may have to nominate, elect or remove our directors under our certificate of incorporation, bylaws or the DGCL.

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Procedures for Approval of Related Party Transactions

Prior to the closing of this offering, we have not maintained a policy for approval of Related Party Transactions. A “Related Party Transaction” is a transaction, arrangement or relationship in which we or any of our subsidiaries was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest. A “Related Person” means:

•

any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors;

•

any person who is known by us to be the beneficial owner of more than 5% of our common stock;

•

any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, executive officer or a beneficial owner of more than 5% of our common stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5% of our common stock; and

•

any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

We anticipate that our board of directors will adopt a written related party transactions policy prior to the completion of this offering. Pursuant to this policy, we expect that our audit committee will review all material facts of all Related Party Transactions.

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DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, the authorized capital stock of Centennial Resource Development, Inc. will consist of shares of common stock, $0.01 par value per share, of which shares will be issued and outstanding, and shares of preferred stock, $0.01 par value per share, of which no shares will be issued and outstanding.

The following summary of the capital stock and amended and restated certificate of incorporation and amended and restated bylaws of Centennial Resource Development, Inc. does not purport to be complete and is qualified in its entirety by reference to the provisions of applicable law and to our amended and restated certificate of incorporation and amended and restated bylaws, which are filed as exhibits to the registration statement of which this prospectus is a part.

Common Stock

Except as provided by law or in a preferred stock designation, holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders, will have the exclusive right to vote for the election of directors and do not have cumulative voting rights. Except as otherwise required by law, holders of common stock are not entitled to vote on any amendment to the amended and restated certificate of incorporation (including any certificate of designations relating to any series of preferred stock) that relates solely to the terms of any outstanding series of preferred stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to our amended and restated certificate of incorporation (including any certificate of designations relating to any series of preferred stock) or pursuant to the DGCL. Subject to prior rights and preferences that may be applicable to any outstanding shares or series of preferred stock, holders of common stock are entitled to receive ratably in proportion to the shares of common stock held by them such dividends (payable in cash, stock or otherwise), if any, as may be declared from time to time by our board of directors out of funds legally available for dividend payments. All outstanding shares of common stock are fully paid and non-assessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and non-assessable.

The holders of common stock have no preferences or rights of conversion, exchange, pre-emption or other subscription rights. There are no redemption or sinking fund provisions applicable to common stock. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of our affairs, holders of common stock will be entitled to share ratably in our assets in proportion to the shares of common stock held by them that are remaining after payment or provision for payment of all of our debts and obligations and after distribution in full of preferential amounts to be distributed to holders of outstanding shares of preferred stock, if any.

Preferred Stock

Our amended and restated certificate of incorporation will authorize our board of directors, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time one or more classes or series of preferred stock, par value $0.01 per share, covering up to an aggregate of shares of preferred stock. Each class or series of preferred stock will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the board of directors, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock will not be entitled to vote at or receive notice of any meeting of stockholders.

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Anti-Takeover Effects of Provisions of Our Amended and Restated Certificate of Incorporation, Our Amended and Restated Bylaws and Delaware Law

Some provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws will contain provisions that could make the following transactions more difficult: acquisitions of us by means of a tender offer, a proxy contest or otherwise or removal of our incumbent officers and directors. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market price for our shares.

These provisions are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection and our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

Delaware Law

Section 203 of the DGCL prohibits a Delaware corporation, including those whose securities are listed for trading on the NASDAQ, from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:

•

the transaction is approved by the board of directors before the date the interested stockholder attained that status;

•

upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or

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on or after such time the business combination is approved by the board of directors and authorized at a meeting of stockholders by at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

Under our amended and restated certificate of incorporation, we have elected not to be subject to the provisions of Section 203 of the DGCL.

Our Amended and Restated Certificate of Incorporation and Our Amended and Restated Bylaws

Provisions of our amended and restated certificate of incorporation and our amended and restated bylaws, which will become effective upon the closing of this offering, may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock.

Among other things, upon the completion of this offering, our amended and restated certificate of incorporation and amended and restated bylaws will:

•

establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. Our amended and restated bylaws

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specify the requirements as to form and content of all stockholders’ notices. These requirements may preclude stockholders from bringing matters before the stockholders at an annual or special meeting;

•

provide our board of directors the ability to authorize undesignated preferred stock. This ability makes it possible for our board of directors to issue, without stockholder approval, preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company;

•

provide that the authorized number of directors may be changed only by resolution of the board of directors;

•

provide that all vacancies, including newly created directorships, may, except as otherwise required by law or, if applicable, the rights of holders of a series of preferred stock, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

•

provide that our bylaws can be amended by the board of directors; and

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at any time after a group that includes Centennial HoldCo and Celero no longer collectively own or control the voting of more than 50% of the outstanding shares of our common stock,

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provide that all vacancies, including newly created directorships, may, except as otherwise required by law or, if applicable, the rights of holders of a series of preferred stock, only be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum (prior to such time, vacancies may also be filled by stockholders holding a majority of the outstanding shares);

•

provide that any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing in lieu of a meeting of such stockholders, subject to the rights of the holders of any series of preferred stock with respect to such series (prior to such time, such actions may be taken without a meeting by written consent of holders of common stock having not less than the minimum number of votes that would be necessary to authorize such action at a meeting);

•

provide that our certificate of incorporation and bylaws may be amended by the affirmative vote of the holders of at least two-thirds of our then outstanding common stock (prior to such time, our certificate of incorporation and bylaws may be amended by the affirmative vote of the holders of a majority of our then outstanding common stock);

•

provide that special meetings of our stockholders may only be called by our board of directors pursuant to a resolution adopted by the affirmative vote of a majority of the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships (prior to such time, a special meeting may also be called at the request of stockholders holding a majority of the outstanding shares entitled to vote);

•

provide for our board of directors to be divided into three classes of directors, with each class as nearly equal in number as possible, serving staggered three year terms, other than directors which may be elected by holders of preferred stock, if any. This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors; and

•

provide that the affirmative vote of the holders of at least 75% of the voting power of all then outstanding common stock entitled to vote generally in the election of directors, voting together as a single class, shall be required to remove any or all of the directors from office and such removal may only be for cause.

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Corporate Opportunity

Under our amended and restated certificate of incorporation, to the extent permitted by law:

•

NGP, Carlyle and their respective affiliates have the right to, and have no duty to abstain from, exercising such right to, conduct business with any business that is competitive or in the same line of business as us, do business with any of our clients or customers, or invest or own any interest publicly or privately in, or develop a business relationship with, any business that is competitive or in the same line of business as us;

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if NGP, Carlyle or their respective affiliates acquire knowledge of a potential transaction that could be a corporate opportunity, they have no duty to offer such corporate opportunity to us; and

•

we have renounced any interest or expectancy in, or in being offered an opportunity to participate in, such corporate opportunities.

Forum Selection

Our amended and restated certificate of incorporation will provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for:

•

any derivative action or proceeding brought on our behalf;

•

any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders;

•

any action asserting a claim against us arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our bylaws; or

•

any action asserting a claim against us that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.

Our amended and restated certificate of incorporation will also provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and to have consented to, this forum selection provision. Although we believe these provisions will benefit us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against our directors, officers, employees and agents. The enforceability of similar exclusive forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with one or more actions or proceedings described above, a court could rule that this provision in our amended and restated certificate of incorporation is inapplicable or unenforceable.

Limitation of Liability and Indemnification Matters

Our amended and restated certificate of incorporation will limit the liability of our directors for monetary damages for breach of their fiduciary duty as directors, except for liability that cannot be eliminated under the DGCL. Delaware law provides that directors of a company will not be personally liable for monetary damages for breach of their fiduciary duty as directors, except for liabilities:

•

for any breach of their duty of loyalty to us or our stockholders;

•

for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

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•

for unlawful payment of dividend or unlawful stock repurchase or redemption, as provided under Section 174 of the DGCL; or

•

for any transaction from which the director derived an improper personal benefit.

Any amendment, repeal or modification of these provisions will be prospective only and would not affect any limitation on liability of a director for acts or omissions that occurred prior to any such amendment, repeal or modification.

Our amended and restated bylaws will also provide that we will indemnify our directors and officers to the fullest extent permitted by Delaware law. Our amended and restated bylaws also will permit us to purchase insurance on behalf of any officer, director, employee or other agent for any liability arising out of that person’s actions as our officer, director, employee or agent, regardless of whether Delaware law would permit indemnification. We intend to enter into indemnification agreements with each of our current and future directors and officers. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liability that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We believe that the limitation of liability provision that will be in our amended and restated certificate of incorporation and the indemnification agreements will facilitate our ability to continue to attract and retain qualified individuals to serve as directors and officers.

For a description of registration rights with respect to our common stock, see “Certain Relationships and Related Party Transactions—Registration Rights Agreement.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.

Listing

We have applied to list our common stock on the NASDAQ under the symbol “CDEV.”

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect the market price of our common stock prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of a substantial number of shares of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price of our common stock at such time and our ability to raise equity-related capital at a time and price we deem appropriate.

Sales of Restricted Shares

Upon the closing of this offering, we will have outstanding an aggregate of shares of common stock. Of these shares, all of the shares of common stock to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless the shares are held by any of our “affiliates” as such term is defined in Rule 144 under the Securities Act. All remaining shares of common stock held by existing stockholders will be deemed “restricted securities” as such term is defined under Rule 144. The restricted securities were issued and sold by us in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which rules are summarized below.

As a result of the lock-up agreements described below and the provisions of Rule 144 and Rule 701 under the Securities Act, the shares of our common stock (excluding the shares to be sold in this offering) that will be available for sale in the public market are as follows:

•

no shares will be eligible for sale on the date of this prospectus or prior to 180 days after the date of this prospectus;

•

shares will be eligible for sale upon the expiration of the lock-up agreements, beginning 180 days after the date of this prospectus (subject to extension) and when permitted under Rule 144 or Rule 701; and

•

shares will be eligible for sale, upon exercise of vested options, upon the expiration of the lock-up agreements, beginning 180 days after the date of this prospectus (subject to extension).

Lock-up Agreements

We, all of our directors and executive officers, the selling stockholders and certain of our stockholders and employees have agreed or will agree that, subject to certain exceptions and under certain conditions, for a period of 180 days after the date of this prospectus, we and they will not, without the prior written consent of Credit Suisse Securities (USA) LLC, dispose of or hedge any shares or any securities convertible into or exchangeable for shares of our capital stock. See “Underwriting” for a description of these lock-up provisions.

Rule 144

In general, under Rule 144 under the Securities Act as currently in effect, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for a least sixth months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.

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A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the then outstanding shares of our common stock or the average weekly trading volume of our common stock reported through the NASDAQ during the four calendar weeks preceding the filing of notice of the sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us.

Rule 701

In general, under Rule 701 under the Securities Act, any of our employees, directors, officers, consultants or advisors who purchase or otherwise receive shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering are entitled to sell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirement of Rule 144 and, in the case of non-affiliates, without having to comply with the public information, volume limitation or notice filing provisions of Rule 144. The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus.

Stock Issued Under Employee Plans

We intend to file a registration statement on Form S-8 under the Securities Act to register shares issuable under the 2016 Long Term Incentive Plan. This registration statement on Form S-8 is expected to be filed following the effective date of the registration statement of which this prospectus is a part and will be effective upon filing. Accordingly, shares registered under such registration statement may be made available for sale in the open market following the effective date, unless such shares are subject to vesting restrictions with us, Rule 144 restrictions applicable to our affiliates or the lock-up restrictions described above.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS

The following is a summary of the material U.S. federal income tax considerations related to the purchase, ownership and disposition of our common stock by a non-U.S. holder (as defined below), that holds our common stock as a “capital asset” (generally, property held for investment). This summary is based on the provisions of the Code, U.S. Treasury regulations and administrative rulings and judicial decisions, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. We have not sought any ruling from the Internal Revenue Service (“IRS”) with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.

This summary does not address all aspects of U.S. federal income taxation that may be relevant to non-U.S. holders in light of their personal circumstances. In addition, this summary does not address the Medicare tax on certain investment income, U.S. federal gift or estate tax laws, any state, local or non-U.S. tax laws or any tax treaties. This summary also does not address tax considerations applicable to investors that may be subject to special treatment under the U.S. federal income tax laws, such as (without limitation):

•

banks, insurance companies or other financial institutions;

•

tax-exempt or governmental organizations;

•

qualified foreign pension funds;

•

dealers in securities or foreign currencies;

•

traders in securities that use the mark-to-market method of accounting for U.S. federal income tax purposes;

•

persons subject to the alternative minimum tax;

•

partnerships or other pass-through entities for U.S. federal income tax purposes or holders of interests therein;

•

persons deemed to sell our common stock under the constructive sale provisions of the Code;

•

persons that acquired our common stock through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan;

•

certain former citizens or long-term residents of the United States;

•

real estate investment trusts or regulated investment companies; and

•

persons that hold our common stock as part of a straddle, appreciated financial position, synthetic security, hedge, conversion transaction or other integrated investment or risk reduction transaction.

PROSPECTIVE INVESTORS ARE ENCOURAGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL GIFT OR ESTATE TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

Non-U.S. Holder Defined

For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of our common stock that is not for U.S. federal income tax purposes a partnership or any of the following:

•

an individual who is a citizen or resident of the United States;

•

a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

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•

an estate the income of which is subject to U.S. federal income tax regardless of its source; or

•

a trust (i) whose administration is subject to the primary supervision of a U.S. court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (ii) which has made a valid election under applicable U.S. Treasury regulations to be treated as a United States person.

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, we urge partners in partnerships (including entities or arrangements treated as partnerships for U.S. federal income tax purposes) considering the purchase of our common stock to consult their tax advisors regarding the U.S. federal income tax considerations of the purchase, ownership and disposition of our common stock by such partnership.

Distributions

As described in the section entitled “Dividend Policy,” we do not plan to make any distributions on our common stock for the foreseeable future. However, if we do make distributions of cash or property on our common stock, those distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, the distributions will be treated as a non-taxable return of capital to the extent of the non-U.S. holder’s tax basis in our common stock and thereafter as capital gain from the sale or exchange of such common stock. See “—Gain on Disposition of Common Stock.” Subject to the withholding rules under FATCA (as defined below) and with respect to effectively connected dividends, each of which is discussed below, any distribution made to a non-U.S. holder on our common stock generally will be subject to U.S. withholding tax at a rate of 30% of the gross amount of the distribution unless an applicable income tax treaty provides for a lower rate. To receive the benefit of a reduced treaty rate, a non-U.S. holder must provide the applicable withholding agent with an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor form) certifying qualification for the reduced rate.

Dividends paid to a non-U.S. holder that are effectively connected with a trade or business conducted by the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, are treated as attributable to a permanent establishment maintained by the non-U.S. holder in the United States) generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons (as defined under the Code). Such effectively connected dividends will not be subject to U.S. withholding tax if the non-U.S. holder satisfies certain certification requirements by providing the applicable withholding agent a properly executed IRS Form W-8ECI certifying eligibility for exemption. If the non-U.S. holder is a non-U.S. corporation, it may also be subject to a branch profits tax (at a 30% rate or such lower rate as specified by an applicable income tax treaty) on its effectively connected earnings and profits (as adjusted for certain items), which will include effectively connected dividends.

Gain on Disposition of Common Stock

Subject to the discussion below under “—Additional Withholding Requirements under FATCA,” a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

•

the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met;

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•

the gain is effectively connected with a trade or business conducted by the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States); or

•

our common stock constitutes a United States real property interest by reason of our status as a United States real property holding corporation (“USRPHC”) for U.S. federal income tax purposes.

A non-U.S. holder described in the first bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) on the amount of such gain, which generally may be offset by U.S. source capital losses.

A non-U.S. holder whose gain is described in the second bullet point above or, subject to the exceptions described in the next paragraph, the third bullet point above generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons (as defined under the Code) unless an applicable income tax treaty provides otherwise. If the non-U.S. holder is a corporation, it may also be subject to a branch profits tax (at a 30% rate or such lower rate as specified by an applicable income tax treaty) on its effectively connected earnings and profits (as adjusted for certain items), which will include the gain described in the second bullet point above.

Generally, a corporation is a USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. We believe that we currently are, and expect to remain for the foreseeable future, a USRPHC for U.S. federal income tax purposes. However, as long as our common stock continues to be regularly traded on an established securities market, only a non-U.S. holder that actually or constructively owns, or owned at any time during the shorter of the five-year period ending on the date of the disposition or the non-U.S. holder’s holding period for the common stock, more than 5% of our common stock will be taxable on gain realized on the disposition of our common stock as a result of our status as a USRPHC. If our common stock were not considered to be so regularly traded during the calendar year in which the relevant disposition by a non-U.S. holder occurs, such holder (regardless of the percentage of our common stock owned) would be subject to U.S. federal income tax on a taxable disposition of our common stock (as described in the preceding paragraph), and a 15% withholding tax would apply to the gross proceeds from such disposition.

Non-U.S. holders should consult their tax advisors with respect to the application of the foregoing rules to their ownership and disposition of our common stock.

Backup Withholding and Information Reporting

Any dividends paid to a non-U.S. holder must be reported annually to the IRS and to the non-U.S. holder. Copies of these information returns may be made available to the tax authorities in the country in which the non-U.S. holder resides or is established. Payments of dividends to a non-U.S. holder generally will not be subject to backup withholding if the non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate version of IRS Form W-8.

Payments of the proceeds from a sale or other disposition by a non-U.S. holder of our common stock effected by or through a U.S. office of a broker generally will be subject to information reporting and backup withholding (at the applicable rate) unless the non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate version of IRS Form W-8 and certain other conditions are met. Information reporting and backup withholding generally will not apply to any payment of the proceeds from a sale or other disposition of our common stock effected outside the United States by a non-U.S. office of a broker. However, unless such broker has documentary evidence in its records that the holder is not a United States person and certain other conditions are met, or the non-U.S. holder otherwise establishes an exemption, information reporting will apply to a payment of the proceeds of the disposition of our common stock effected outside the United States by such a broker if it has certain relationships within the United States.

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Backup withholding is not an additional tax. Rather, the U.S. income tax liability (if any) of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the IRS.

Additional Withholding Requirements under FATCA

Sections 1471 through 1474 of the Code, and the Treasury regulations and administrative guidance issued thereunder (“FATCA”), impose a 30% withholding tax on any dividends paid on our common stock and on the gross proceeds from a disposition of our common stock (if such disposition occurs after December 31, 2018), in each case if paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code) (including, in some cases, when such foreign financial institution or non-financial foreign entity is acting as an intermediary), unless (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are non-U.S. entities with U.S. owners); (ii) in the case of a non-financial foreign entity, such entity certifies that it does not have any “substantial United States owners” (as defined in the Code) or provides the applicable withholding agent with a certification identifying the direct and indirect substantial United States owners of the entity (in either case, generally on an IRS Form W-8BEN-E); or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation (such as an IRS Form W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing these rules may be subject to different rules. Under certain circumstances, a holder might be eligible for refunds or credits of such taxes.

INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE APPLICABILITY AND EFFECT OF U.S. FEDERAL GIFT AND ESTATE TAX LAWS AND ANY STATE, LOCAL OR NON-U.S. TAX LAWS AND TAX TREATIES.

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated , we and the selling stockholders have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC and Barclays Capital Inc. are acting as representatives, the following respective numbers of shares of common stock:


Underwriter		Number of Shares
Credit Suisse Securities (USA) LLC
Barclays Capital Inc.

Total

The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

We and the selling stockholders have agreed to indemnify the underwriters and certain of their controlling persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of those liabilities.

The selling stockholders have granted to the underwriters a 30-day option to purchase on a pro rata basis up to additional shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $ per share. The underwriters and selling group members may allow a discount of $ per share on sales to other broker/dealers. After the initial public offering, the representatives may change the public offering price and concession and discount to other broker/dealers.

The following table summarizes the underwriting discounts and commissions we and the selling stockholders will pay:

Per Share

Total

Without
Over-allotment

With
Over-allotment

Without
Over-allotment

With
Over-allotment

Underwriting discounts and commissions paid by us

Underwriting discounts and commissions paid by selling stockholders

The expenses of this offering that are payable by us are estimated to be approximately $ million (excluding underwriting discounts and commissions). We have agreed to pay certain expenses incurred by the selling stockholders in connection with this offering, other than the underwriting discounts and commissions.

The representatives have informed us that they do not expect sales to accounts over which the underwriters have discretionary authority to exceed 5% of the shares of common stock being offered.

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We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse Securities (USA) LLC for a period of 180 days after the date of this prospectus.

Our officers and directors and the selling stockholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC for a period of 180 days after the date of this prospectus; provided, however, that Follow-On will be permitted to make a pro rata distribution of its shares of our common stock to its members, who shall agree to be subject to the restrictions described in this paragraph; provided, further, however, that such members who are individuals who are not executive officers or directors of the Company will not be subject to the restrictions described in this paragraph.

The underwriters have reserved for sale at the initial public offering price up to shares of the common stock for employees, directors and other persons associated with us who have expressed an interest in purchasing common stock in the offering. The number of shares available for sale to the general public in the offering will be reduced to the extent these persons purchase the reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares.

We have applied to list the shares of common stock on the NASDAQ under the symbol “CDEV.”

Prior to this offering, there has been no public market for our common stock. The initial public offering price was determined by negotiations among us and the representatives and will not necessarily reflect the market price of the common stock following this offering. The principal factors considered included:

•

the information presented in this prospectus and otherwise available to the underwriters;

•

the history of, and prospects for, the industry in which we will compete;

•

the ability of our management;

•

the prospects for our future earnings;

•

the present state of our development, results of operations and our current financial condition;

•

the general condition of the securities markets at the time of this offering; and

•

the recent market prices of, and the demand for, publicly traded common stock of generally comparable companies.

We cannot assure you that the initial public offering price will correspond to the price at which the common stock will trade in the public market subsequent to this offering or that an active trading market for the common stock will develop and continue after this offering.

In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions, and penalty bids.

•

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•

Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may

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be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.

•

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

•

Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NASDAQ or otherwise and, if commenced, may be discontinued at any time.

A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.

Other Relationships

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, for which they received or may in the future receive customary fees and expenses.

In the ordinary course of their various business activities, the underwriters and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and certain of their affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/ or short positions in such securities and instruments.

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Selling Restrictions

This prospectus does not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which such an offer or solicitation is not authorized; (ii) in which any person making such offer or solicitation is not qualified to do so; or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is intended to, permit a public offer of the shares of our common stock or possession or distribution of this prospectus or any other offering or publicity material relating to the shares of our common stock in any country or jurisdiction (other than the United States) where any such action for that purpose is required. Accordingly, each underwriter has undertaken that it will not, directly or indirectly, offer or sell any shares of our common stock or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of shares of our common stock by it will be made on the same terms.

European Economic Area

In relation to each Member State of the European Economic Area that has implemented the Prospectus Directive (each, a “Relevant Member State”), an offer to the public of any common stock that are the subject of the offering contemplated herein may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

•

to legal entities that are qualified investors as defined under the Prospectus Directive;

•

by the underwriters to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives of the underwriters for any such offer; or

•

in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of common stock shall result in a requirement for us, the selling stockholders or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person in a Relevant Member State who receives any communication in respect of, or who acquires any common stock under, the offers contemplated here in this prospectus will be deemed to have represented, warranted and agreed to and with each underwriter, the selling stockholders and us that:

•

it is a qualified investor as defined under the Prospectus Directive; and

•

in the case of any common stock acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the common stock acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in the circumstances in which the prior consent of the representatives of the underwriters has been given to the offer or resale or (ii) where common stock have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of such common stock to it is not treated under the Prospectus Directive as having been made to such persons.

For the purposes of this representation and the provision above, the expression an “offer of common stock to the public” in relation to any common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any common stock to be offered so

152

as to enable an investor to decide to purchase or subscribe for the common stock, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

United Kingdom

This prospectus has only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000 (the “FSMA”)) as received in connection with the issue or sale of the common stock in circumstances in which Section 21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA will be complied with in respect to anything done in relation to the common stock in, from or otherwise involving the United Kingdom.

Notice to Prospective Investors in Switzerland

This prospectus does not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss Code of Obligations (“CO”) and the shares will not be listed on the SIX Swiss Exchange. Therefore, this prospectus may not comply with the disclosure standards of the CO and/or the listing rules (including any prospectus schemes) of the SIX Swiss Exchange. Accordingly, the shares may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors, which do not subscribe to the shares with a view to distribution.

Notice to Canadian Residents

Resale Restrictions

The distribution of shares of common stock in Canada is being made only in the provinces of Ontario, Quebec, Alberta and British Columbia on a private placement basis exempt from the requirement that we and the selling stockholders prepare and file a prospectus with the securities regulatory authorities in each province where trades of these securities are made. Any resale of the common stock in Canada must be made under applicable securities laws which may vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the securities.

Representations of Canadian Purchasers

By purchasing shares of our common stock in Canada and accepting delivery of a purchase confirmation, a purchaser is representing to us, the selling stockholders and the dealer from whom the purchase confirmation is received that:

•

the purchaser is entitled under applicable provincial securities laws to purchase the shares of common stock without the benefit of a prospectus qualified under those securities laws as it is an “accredited investor” as defined under National Instrument 45-106— Prospectus Exemptions ,

•

the purchaser is a “permitted client” as defined in National Instrument 31-103— Registration Requirements, Exemptions and Ongoing Registrant Obligations ,

•

where required by law, the purchaser is purchasing as principal and not as agent, and

•

the purchaser has reviewed the text above under Resale Restrictions.

153

Conflicts of Interest

Canadian purchasers are hereby notified that the underwriters are relying on the exemption set out in section 3A.3 or 3A.4, if applicable, of National Instrument 33-105— Underwriting Conflicts from having to provide certain conflict of interest disclosure in this document.

Statutory Rights of Action

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if the offering memorandum (including any amendment thereto) such as this document contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser of these securities in Canada should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Enforcement of Legal Rights

All of our directors and officers as well as the experts named herein and the selling stockholders may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

CANADIAN PERSONS CONSIDERING THE PURCHASE OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR OWN LEGAL AND TAX ADVISORS REGARDING THE U.S. AND CANADIAN LEGAL AND TAX CONSEQUENCES OF AN INVESTMENT IN OUR SHARES OF COMMON STOCK AND THE APPLICATION OF SUCH LAWS TO THEIR PARTICULAR SITUATIONS.

154

LEGAL MATTERS

The validity of our common stock offered by this prospectus will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas. Certain legal matters in connection with this offering will be passed upon for the underwriters by Baker Botts L.L.P., Houston, Texas.

EXPERTS

The consolidated and combined financial statements of Centennial Resource Production, LLC and Celero Energy Company, LP (Predecessor) as of December 31, 2015 and 2014, and each of the years in the two-year period ended December 31, 2015, and the balance sheet of Centennial Resource Development, Inc. as of April 30, 2016, have been included herein and in the registration statement in reliance upon the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

Estimates of our oil and natural gas reserves and related future net cash flows related to our properties as of December 31, 2015 included herein and elsewhere in the registration statement were based upon a reserve report prepared by our independent petroleum engineer, Netherland, Sewell & Associates, Inc. We have included these estimates in reliance on the authority of such firm as an expert in such matters.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 (including the exhibits, schedules and amendments thereto) under the Securities Act, with respect to the shares of our common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract, agreement or any other document are summaries of the material terms of such contract, agreement or other document and are not necessarily complete. With respect to each of these contracts, agreements or other documents filed as an exhibit to the registration statement, reference is made to the exhibits for a more complete description of the matter involved. A copy of the registration statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the SEC at 100 F Street NE, Washington, D.C. 20549. Copies of these materials may be obtained, upon payment of a duplicating fee, from the Public Reference Room of the SEC at 100 F Street NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the SEC’s website is www.sec.gov .

As a result of this offering, we will become subject to full information requirements of the Exchange Act. We will fulfill our obligations with respect to such requirements by filing periodic reports and other information with the SEC. We intend to furnish our stockholders with annual reports containing financial statements certified by an independent public accounting firm.

155

INDEX TO FINANCIAL STATEMENTS


	Page
CENTENNIAL RESOURCE DEVELOPMENT, INC.

Historical Balance Sheet

Report of independent registered public accounting firm		F-2

Balance sheet as of April 30, 2016		F-3

Notes to balance sheet		F-4

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP (PREDECESSOR)

Unaudited Historical Condensed Consolidated Financial Statements

Unaudited condensed consolidated balance sheets as of March 31, 2016		F-5

Unaudited condensed consolidated statements of operations for the three months ended March 31, 2016 and 2015		F-6

Unaudited condensed consolidated statement of changes in owners’ equity for the three months ended March 31, 2016		F-7

Unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2016 and 2015		F-8

Notes to unaudited condensed consolidated financial statements		F-9

Historical Consolidated and Combined Financial Statements

Report of independent registered public accounting firm		F-17

Consolidated and combined balance sheets as of December 31, 2015 and 2014		F-18

Consolidated and combined statements of operations for the years ended December 31, 2015 and 2014		F-19

Consolidated and combined statements of changes in owners’ equity for the years ended December 31, 2015 and 2014		F-20

Consolidated and combined statements of cash flows for the years ended December 31, 2015 and 2014		F-21

Notes to consolidated and combined financial statements		F-22

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors

Centennial Resource Development, Inc.:

We have audited the accompanying balance sheet of Centennial Resource Development, Inc. (the Company) as of April 30, 2016. This balance sheet is the responsibility of the Company’s management. Our responsibility is to express an opinion on this balance sheet based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Centennial Resource Development, Inc. as of April 30, 2016, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Denver, Colorado

May 17, 2016

F-2

CENTENNIAL RESOURCE DEVELOPMENT, INC.

BALANCE SHEET


	April 30, 2016
ASSETS
Cash	$	10

Total assets	$	10

STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 1,000 shares authorized; 1,000 shares issued and outstanding	$	10

Total stockholders’ equity	$	10

See the accompanying notes to the balance sheet.

F-3

CENTENNIAL RESOURCE DEVELOPMENT, INC.

NOTES TO BALANCE SHEET

Note 1—Formation of the Company and Description of the Business

Centennial Resource Development, Inc. (the “Company”) was formed on October 6, 2014, pursuant to the laws of the State of Delaware, to become a holding company for Centennial Resource Production, LLC.

Note 2—Basis of Presentation

This balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Separate statements of operations, statements of changes in stockholders’ equity and statements of cash flows have not been presented because the Company has had no business transactions or activities to date.

Note 3—Subsequent Events

We are not aware of any events that have occurred subsequent to April 30, 2016 through the filing of Registration Statement on Form S-1 of which this prospectus is a part that would require recognition or disclosure in this financial statement.

F-4

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2016			December 31, 2015
	(in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	98		$	1,768
Accounts receivable, net		9,084			13,012
Derivative instruments, net		12,657			19,043
Prepaid and other current assets		412			322

Total current assets		22,251			34,145
Oil and natural gas properties, other property and equipment
Oil and natural gas properties, successful efforts method		669,426			651,596
Accumulated depreciation, depletion and amortization		(201,967	)		(180,946	)
Unproved oil and natural gas properties		110,371			105,897
Other property and equipment, net of accumulated depreciation of $1,108 and $868, respectively		2,033			2,240

Total property and equipment, net		579,863			578,787
Noncurrent assets
Derivative instruments, net		1,745			2,070
Other noncurrent assets		1,208			1,293

Total assets	$	605,067		$	616,295

LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	20,813		$	19,985
Other current liabilities		1,333			2,148

Total current liabilities		22,146			22,133
Noncurrent liabilities
Revolving credit facility		77,000			74,000
Term loan, net of unamortized deferred financing costs		64,687			64,649
Asset retirement obligations		2,470			2,288
Deferred tax liability		2,361			2,361

Total liabilities		168,664			165,431
Owners’ equity		436,403			450,864

Total liabilities and owners’ equity	$	605,067		$	616,295

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

F-5

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended March 31,
	2016			2015
Revenues
Oil sales	$	13,226		$	21,066
Natural gas sales		1,313			1,963
NGL sales		582			1,387

Total revenues		15,121			24,416
Operating expenses
Lease operating expenses		4,042			6,497
Severance and ad valorem taxes		844			1,193
Transportation, processing, gathering and other operating expense		1,130			1,283
Depreciation, depletion, amortization and accretion of asset retirement obligations		21,303			23,230
Contract termination and rig stacking		—			1,540
General and administrative expenses		2,536			2,913

Total operating expenses		29,855			36,656
Loss (gain) on sale of oil and natural gas properties		4			(2,675	)

Total operating loss		(14,738	)		(9,565	)
Other income (expense)
Interest expense		(1,641	)		(1,526	)
Gain on derivative instruments		1,918			5,154

Total other income		277			3,628

Loss before income taxes		(14,461	)		(5,937	)
Income tax expense		—			—

Net loss attributable to Predecessor	$	(14,461	)	$	(5,937	)

Pro Forma Information (Unaudited)
Net loss	$	(14,461	)
Pro forma tax benefit for income taxes		5,134

Pro forma net loss	$	(9,327	)

Pro forma net income per common share
Basic and diluted	$
Weighted average pro forma common shares outstanding
Basic and diluted

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

F-6

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN OWNERS’ EQUITY

(Unaudited)


	Total Owners’ Equity
	(in thousands)
Balance at December 31, 2015	$	450,864
Contributions		—
Net loss		(14,461	)

Balance at March 31, 2016	$	436,403

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

F-7

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Three Months Ended March 31,
	2016			2015
	(in thousands)
Cash flows from operating activities
Net loss	$	(14,461	)	$	(5,937	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Accretion of asset retirement obligations		40			32
Depreciation, depletion and amortization		21,263			23,198
Loss (gain) on sale of oil and natural gas properties		4			(2,675	)
Gain on derivative instruments		(1,918	)		(5,154	)
Net cash received for derivative settlements		8,629			9,729
Amortization of debt issuance costs		122			114
Changes in operating assets and liabilities:
Decrease in accounts receivable		4,234			8,780
Decrease (increase) in prepaid and other assets		9			(448	)
Increase (decrease) in accounts payable and other liabilities		630			(7	)

Net cash provided by operating activities		18,552			27,632

Cash flows from investing activities
Acquisition of oil and natural gas properties		(6,180	)		(4,096	)
Development of oil and natural gas properties		(16,206	)		(76,679	)
Purchases of other property and equipment		(33	)		(922	)
Proceeds from sales of oil and natural gas properties		—			2,691

Net cash used by investing activities		(22,419	)		(79,006	)

Cash flows from financing activities
Proceeds from revolving credit facility		5,000			39,000
Repayment of revolving credit facility		(2,000	)		—
Financing obligation		(803	)		—
Debt issuance costs		—			(87	)

Net cash provided by financing activities		2,197			38,913

Net decrease in cash and cash equivalents		(1,670	)		(12,461	)
Cash and cash equivalents, beginning		1,768			13,017

Cash and cash equivalents, end	$	98		$	556

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,478		$	1,368
Supplemental disclosure of noncash activity:
Accrued capital expenditures included in accounts payable and accrued expenses	$	13,000		$	35,928

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

F-8

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Organization and Nature of Operations

Centennial Resource Production, LLC, a Delaware limited liability company formerly named Atlantic Energy Holdings, LLC (“Centennial OpCo”), was formed on August 30, 2012 by its management members, third-party investors and NGP Natural Resources X, LP (“NGP X”), an affiliate of Natural Gas Partners (“NGP”), a family of energy-focused private equity investment funds. Centennial OpCo (the “Predecessor”) is engaged in the development and acquisition of unconventional oil and associated liquids-rich natural gas reserves, primarily in the Delaware Basin of West Texas.

For additional information regarding the organization and formation of the Predecessor please refer to Note 1 — Organization and Nature of Operations in the Predecessor’s audited consolidated and combined financial statements for the year ended December 31, 2015, included in this prospectus.

Note 2—Basis of Presentation, Significant Accounting Policies, and Recently Issued Accounting Standards

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The condensed consolidated financial statements do not include all information and notes required by U.S. GAAP for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated and combined financial statements included in the Predecessor’s audited financial statements for the year ended December 31, 2015, included in this prospectus. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of interim financial information, have been included. Operating results for the periods presented are not necessarily indicative of expected results for the full year. Certain prior period amounts have been reclassified to conform to the current presentation on the accompanying condensed consolidated financial statements.

Subsequent Events

On April 25, 2016, the Predecessor entered into a purchase and sale agreement to acquire acreage that is contiguous to its existing acreage position, and on May 13, 2016, the Predecessor closed a leasehold acquisition in close proximity to its operating area. The acquisitions added approximately 2,400 net acres and 250 Boe/d of production.

Assumptions, Judgments and Estimates

The preparation of the Predecessor’s condensed consolidated financial statements requires the Predecessor’s management to make various assumptions, judgments and estimates to determine the reported amounts of assets, liabilities, revenues and expenses, and in the disclosures of commitments and contingencies. Changes in these assumptions, judgments, and estimates will occur as a result of the passage of time and the occurrence of future events and, accordingly, actual results could differ from amounts previously established.

The more significant areas requiring the use of assumptions, judgments and estimates include: (1) oil and natural gas reserves; (2) cash flow estimates used in impairment tests of long-lived assets; (3) depreciation, depletion and amortization; (4) asset retirement obligations; (5) determining fair value and allocating purchase price in connection with business combinations; (6) valuation of derivative instruments; and (7) accrued revenue and related receivables.

F-9

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

Significant Accounting Policies

The significant accounting policies followed by the Predecessor are set forth in Note 2—Basis of Presentation, Summary of Significant Accounting Policies, and Recently Issued Accounting Standards in the Predecessor’s audited consolidated and combined financial statements for the year ended December 31, 2015, included in this prospectus.

Unaudited Pro Forma Income Taxes

These condensed consolidated financial statements have been prepared in anticipation of a proposed initial public offering (the “Offering”) of the common stock of the Predecessor’s parent entity. In connection with the Offering, all interests in the Predecessor will be contributed to a Delaware corporation that will be taxed as a corporation under the Internal Revenue Code of 1986, as amended, and thus subject to U.S. federal, state and local income taxes. Accordingly, a pro forma income tax provision has been disclosed as if the Predecessor were a taxable corporation for all periods presented. The Predecessor has computed pro forma income tax expense using an estimated 36% blended corporate level U.S. federal, state and local tax rate.

Unaudited Pro Forma Earnings Per Share

The Predecessor has presented pro forma earnings per share for the most recent period. Pro forma basic and diluted income per share was computed by dividing pro forma net income by the number of shares of common stock attributable to the Predecessor by the number of shares of common stock to be issued in the initial public offering described in the registration statement, as if such shares were issued and outstanding for the three month period ended March 31, 2016.

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases , which requires all leasing arrangements to be presented in the balance sheet as liabilities along with a corresponding asset. The ASU will replace most existing leases guidance in U.S. GAAP when it becomes effective. The new standard becomes effective for the Predecessor on January 1, 2019. Although early application is permitted, the Predecessor does not plan to early adopt the ASU. The standard requires the use of the modified retrospective transition method. The Predecessor is evaluating the impact, if any, that the adoption of this update will have on the Predecessor’s condensed consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting , which includes provisions intended to simplify various aspects related to how share-based compensation payments are accounted for and presented in the financial statements. This amendment will be effective prospectively for reporting periods beginning on or after December 15, 2016, and early adoption is permitted. The Predecessor is evaluating the impact, if any, that the adoption of this update will have on the Predecessor’s condensed consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . This guidance is to be applied using a full retrospective method or a modified retrospective method, as outlined in the guidance. In August 2015, the FASB deferred the effective date of the new revenue recognition standard by one year. The revenue recognition standard is now effective for annual periods, and interim periods within those annual

F-10

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

periods, beginning after December 15, 2017. Early adoption is permitted but only for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. The Predecessor is evaluating the impact, if any, that the adoption of this update will have on the Predecessor’s consolidated and combined financial statements and related disclosures.

Other than as disclosed above or set forth in Note 2— Basis of Presentation , Summary of Significant Accounting Policies, and Recently Issued Accounting Standards in the Predecessor’s audited consolidated and combined financial statements for the year ended December 31, 2015, included in this prospectus, there are no other new accounting standards that would have a material impact on the Predecessor’s condensed consolidated financial statements and disclosures.

Note 3—Accounts Receivable, Accounts Payable and Accrued Expenses

Accounts receivable are comprised of the following:


	March 31, 2016			December 31, 2015
	(in thousands)
Oil and natural gas	$	4,468		$	5,789
Joint interest billings		2,028			1,514
Hedge settlements		2,622			3,956
Other		57			1,844
Allowance for doubtful accounts		(91	)		(91	)

Accounts receivable, net	$	9,084		$	13,012

Accounts payable and accrued expenses are comprised of the following:


	March 31, 2016		December 31, 2015
	(in thousands)
Accounts payable	$	6,098	$	1,827
Accrued capital expenditures		8,661		11,700
Revenues payable		3,242		3,439
Other		2,812		3,019

Accounts payable and accrued expenses	$	20,813	$	19,985

Note 4—Asset Retirement Obligations

The following table summarizes the changes in the Predecessor’s asset retirement obligations for the three months ended March 31, 2016 (in thousands):


Asset retirement obligations, beginning of period	$	2,288
Additional liabilities incurred		95
Accretion expense		40
Revision of estimated liabilities		47

Asset retirement obligations, end of period	$	2,470

F-11

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

Note 5—Derivative Instruments

The Predecessor periodically uses derivative instruments to mitigate its exposure to a decline in commodity prices and the corresponding negative impact on cash flow available for reinvestment. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future revenues from favorable price changes. Depending on changes in oil and natural gas futures markets and the Predecessor’s view of underlying supply and demand trends, it may increase or decrease its hedging positions.

The following table summarizes the approximate volumes and average contract prices of swap and basis swap contracts the Predecessor had in place as of March 31, 2016 expiring during the periods indicated:


	Nine Months Ending December 31, 2016			Year Ending December 31, 2017
Crude Oil Swaps:
Notional volume (Bbl)		612,900			346,750
Weighted average floor price ($/Bbl)	$	61.58		$	50.80
Crude Oil Basis Swaps:
Notional volume (Bbl)		942,750			127,750
Weighted average floor price ($/Bbl)	$	(0.44	)	$	(0.20	)

In a typical commodity swap agreement, if the agreed upon published third-party index price (“index price”) is lower than the swap fixed price, the Predecessor receives the difference between the index price and the agreed upon swap fixed price. If the index price is higher than the swap fixed price, the Predecessor pays the difference. In addition, the Predecessor has entered into basis swap contracts in order to hedge the difference between the NYMEX index price and a local index price. When the actual differential exceeds the fixed price provided by the basis swap contract, the Predecessor receives the difference from the counterparty; when the differential is less than the fixed price provided by the basis swap contract, the Predecessor pays the difference to the counterparty.

The Predecessor’s oil and natural gas derivative instruments have not been designated as hedges for accounting purposes; therefore, all gains and losses were recognized in the Predecessor’s condensed consolidated statements of operations. The derivative instruments are measured at fair value and are included in the accompanying condensed consolidated balance sheets as derivative assets. The fair value of the commodity contracts was a net asset of $14.4 million and $21.1 million as of March 31, 2016 and December 31, 2015, respectively.

F-12

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

The following tables below summarize the gross fair value of derivative assets and liabilities and the effect of netting on the condensed consolidated and combined balance sheets (in thousands):


	Balance Sheet Classification	Gross Amounts		Netting Adjustments			Net Amounts Presented on the Balance Sheet
March 31, 2016:
Assets:
Derivative instruments	Current assets	$	12,958	$	(301	)	$	12,657
Derivative instruments	Noncurrent assets		1,854		(109	)		1,745

Total assets		$	14,812	$	(410	)	$	14,402

December 31, 2015:
Assets:
Derivative instruments	Current assets	$	19,469	$	(426	)	$	19,043
Derivative instruments	Noncurrent assets		2,071		(1	)		2,070

Total assets		$	21,540	$	(427	)	$	21,113

The following table presents gains and losses for derivative instruments not designated as hedges for accounting purposes for the periods presented (in thousands):


	For the Three Months Ended March 31,
	2016		2015
Gain on derivative instruments	$	1,918	$	5,154

The Predecessor is exposed to financial risks associated with its derivative contracts from non-performance by its counterparties. The Predecessor mitigates its exposure to any single counterparty by contracting with a number of financial institutions, each of which have a high credit rating and is a member of its bank credit facility. The Predecessor’s member banks do not require it to post collateral for its hedge liability positions.

Note 6—Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Predecessor has categorized its assets and liabilities measured at fair value, based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy. Level 1 inputs are the highest priority and consist of unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 are unobservable inputs for an asset or liability.

The following table is a listing of the Predecessor’s assets and liabilities that are measured at fair value and where they were classified within the fair value hierarchy as of March 31, 2016:


	Level 1		Level 2		Level 3
Assets:
Derivative instruments(1)	$	—	$	14,402	$	—

F-13

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

(1)	This represents a financial asset that is measured at fair value on a recurring basis.

The following table is a listing of the Predecessor’s assets and liabilities that are measured at fair value and where they were classified within the fair value hierarchy as of December 31, 2015:


	Level 1		Level 2		Level 3
Assets:
Derivative instruments(1)	$	—	$	21,113	$	—

(1)	This represents a financial asset that is measured at fair value on a recurring basis.

Both financial and non-financial assets and liabilities are categorized within the above fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used by the Predecessor as well as the general classification of such instruments pursuant to the above fair value hierarchy. There were no transfers between Level 1, Level 2 or Level 3 during any period presented.

Derivatives

The Predecessor uses Level 2 inputs to measure the fair value of oil and natural gas commodity derivatives. The Predecessor uses industry-standard models that considered various assumptions including current market and contractual prices for the underlying instruments, implied market volatility, time value, nonperformance risk, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be supported by observable data. The Predecessor utilizes its counterparties’ valuations to assess the reasonableness of its own valuations.

Other Financial Instruments

The carrying amounts of the Predecessor’s cash, cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short-term maturities and/or liquid nature of these assets and liabilities. The carrying values of the amounts outstanding under the credit agreement approximated fair value because the variable interest rates are reflective of current market conditions.

Note 7—Long-Term Debt

Credit Agreement

The amended and restated credit agreement (credit agreement), dated October 15, 2014, includes both a term loan commitment of $65.0 million (the “term loan”) and a revolving credit facility (the “revolving credit facility”) with commitments of $500.0 million (subject to the borrowing base), with a sublimit for letters of credit of $15.0 million. The revolving credit facility matures on October 19, 2019 and the term loan matures on April 15, 2018.

The borrowing base under the revolving credit facility is determined at the discretion of the lenders and depends on, among other things, the volumes of the Predecessor’s proved oil and natural gas reserves and estimated cash flows from these reserves and the Predecessor’s commodity hedge positions. The borrowing base was $140.0 million as of March 31, 2016 and was reaffirmed on April 29, 2016. The next scheduled borrowing base redetermination is expected in the fall of 2016. As of March 31, 2016, borrowings under the revolving credit facility were $77.0 million and $0.5 million of outstanding letters of credit, leaving $62.5 million in borrowing capacity under the revolving credit facility.

F-14

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

The term loan, net of unamortized deferred financing costs on the accompanying condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015, consisted of the following:


	March 31, 2016			December 31, 2015
	(in thousands)
Term loan	$	65,000		$	65,000
Unamortized deferred financing costs		(313	)		(351	)

Term loan, net of unamortized deferred financing costs	$	64,687		$	64,649

The credit agreement also has customary covenants with which the Predecessor was in compliance as of March 31, 2016.

Note 8—Incentive Unit Compensation

There have been no material changes in issued, forfeited or vested incentive units during the three months ended March 31, 2016. Please refer to Note 9 — Incentive Unit Compensation in the Predecessor’s audited consolidated and combined financial statements for the year ended December 31, 2015, included in this prospectus.

Incentive units are accounted for as liability awards under FASB ASC Topic 718, Compensation-Stock Compensation , with compensation expense based on period-end fair value. The achievement of payout conditions is a performance condition that requires the Predecessor to assess, at each reporting period, the probability that an event of payout will occur. Compensation cost is required to be recognized at such time that the payout terms are probable of being met. At the grant dates and subsequent reporting periods, the Predecessor did not deem as probable that such payouts would be achieved.

Note 9—Transactions with Related Parties

The Predecessor is party to a 15-year gas gathering agreement with PennTex Permian, LLC (“PennTex”), an NGP affiliated company, which terminates on April 1, 2029 and is subject to one-year extensions at either party’s election. Under the agreement, PennTex gathers and processes the Predecessor’s gas. PennTex purchases the extracted natural gas liquids from the Predecessor, net of gathering fees and an agreed percentage of the actual proceeds from the sale of the residue natural gas and natural gas liquids. Net payments received from PennTex for the three months ended March 31, 2016 and 2015 were $0.03 million and $0.2 million, respectively. As of March 31, 2016, the Predecessor recorded a receivable of $0.05 million from PennTex.

In October 2014, the gas gathering agreement with PennTex was amended to construct an expansion of the gathering system and a receipt point. Please refer to Note 10 — Commitments and Contingences .

During the three months ended March 31, 2016 and 2015, the Predecessor paid approximately $0.3 million and $0 million, respectively, to Cretic Energy Services, LLC, an NGP affiliated company, for services related to our drilling and completion activities.

During the three months ended March 31, 2016 and 2015, the Predecessor paid approximately $2.2 million and $0 million, respectively, to RockPile Energy Services, LLC, an NGP affiliated company, for services related to our drilling and completion activities.

F-15

CENTENNIAL RESOURCE PRODUCTION, LLC

(PREDECESSOR)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

During the three months ended March 31, 2016 and 2015, the Predecessor paid approximately $0.5 million and $0 million, respectively, to WildHorse Resources II, LLC, an NGP affiliated company, for certain oil and gas lease extensions.

Note 10—Commitments and Contingencies

Commitments

In October 2014, the Predecessor’s gas gathering agreement with PennTex was amended to construct an expansion of the gathering system and a receipt point. The Predecessor will reimburse PennTex for the total cost of the expansion project. The Predecessor shall pay a minimum fee of $7,000 per day until PennTex recoups the capital outlay for the expansion project. At March 31, 2016 a short-term liability of $1.3 million was included in Other current liabilities on the condensed consolidated balance sheets. For the three months ended March 31, 2016, the Predecessor made payments of $0.6 million, including interest.

There have been no other material changes in commitments during the three months ended March 31, 2016. Please refer to Note 11 — Commitment and Contingencies in the Predecessor’s audited consolidated and combined financial statements for the year ended December 31, 2015, included in this prospectus.

Contract Termination and Rig Stacking

In light of the low commodity price environment, the Predecessor curtailed its drilling activity during 2015. For the three months ended March 31, 2015, the Predecessor incurred drilling rig termination fees of $1.5 million, which is recorded in the Contract termination and rig stacking line item in the accompanying condensed consolidated statements of operations.

Contingencies

In the ordinary course of business, the Predecessor may at times be subject to claims and legal actions. Management believes it is remote that the impact of such matters will have a material adverse effect on the Predecessor’s financial position, results of operations or cash flows. Management is unaware of any pending litigation brought against the Predecessor requiring the reserve of a contingent liability as of the date of these condensed consolidated financial statements.

F-16

Report of Independent Registered Public Accounting Firm

The Board of Directors

Centennial Resource Development, Inc.:

We have audited the accompanying consolidated and combined balance sheets of Centennial Resource Production, LLC and Celero Energy Company, LP (Predecessor) as of December 31, 2015 and 2014, and the related consolidated and combined statements of operations, changes in owners’ equity, and cash flows for each of the years in the two-year period ended December 31, 2015. These consolidated and combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated and combined financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated and combined financial statements referred to above present fairly, in all material respects, the financial position of Centennial Resource Production, LLC and Celero Energy Company, LP (Predecessor) as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated and combined financial statements, the balance sheets, and the related statements of operations, changes in equity, and cash flows have been prepared on a consolidated and combined basis of accounting as a result of the reorganization of interests under common control.

/s/ KPMG LLP

Denver, Colorado

April 5, 2016, except as to Note 14, which is as of May 17, 2016

F-17

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

CONSOLIDATED AND COMBINED BALANCE SHEETS


	December 31,
	2015			2014
	(in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	1,768		$	13,017
Accounts receivable, net		13,012			23,117
Derivative instruments, net		19,043			30,422
Prepaid and other current assets		322			790

Total current assets		34,145			67,346
Oil and natural gas properties, other property and equipment
Oil and natural gas properties, successful efforts method		651,596			541,119
Accumulated depreciation, depletion and amortization		(180,946	)		(91,735	)
Unproved oil and natural gas properties		105,897			90,645
Other property and equipment, net of accumulated depreciation of $868 and $139, respectively		2,240			595

Total property and equipment, net		578,787			540,624
Noncurrent assets
Derivative instruments, net		2,070			6,365
Other noncurrent assets		1,293			1,434

Total assets	$	616,295		$	615,769

LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	19,985		$	101,295
Other current liabilities		2,148			2,217

Total current liabilities		22,133			103,512
Noncurrent liabilities
Revolving credit facility		74,000			65,000
Term loan, net of unamortized deferred financing costs		64,649			64,568
Asset retirement obligations		2,288			1,824
Deferred tax liability		2,361			2,933

Total liabilities		165,431			237,837
Owners’ equity		450,864			377,932

Total liabilities and owners’ equity	$	616,295		$	615,769

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

F-18

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS


	For the Year Ended December 31,
	2015			2014
	(in thousands, except per share amounts)
Revenues
Oil sales	$	77,643		$	114,955
Natural gas sales		7,965			9,670
NGL sales		4,852			7,200

Total revenues		90,460			131,825
Operating expenses
Lease operating expenses		21,173			17,690
Severance and ad valorem taxes		5,021			6,875
Transportation, processing, gathering and other operating expense		5,732			4,772
Depreciation, depletion, amortization and accretion of asset retirement obligations.		90,084			69,110
Abandonment expense and impairment of unproved properties		7,619			20,025
Exploration		84			—
Contract termination and rig stacking		2,387			—
General and administrative expenses		14,206			31,694

Total operating expenses		146,306			150,166
(Gain) loss on sale of oil and natural gas properties		(2,439	)		2,096

Total operating loss		(53,407	)		(20,437	)
Other income (expense)
Interest expense		(6,266	)		(2,475	)
Gain on derivative instruments		20,756			41,943
Other income		20			281

Total other income		14,510			39,749

(Loss) income before income taxes		(38,897	)		19,312
Income tax benefit (expense)		572			(1,524	)

Net (loss) income		(38,325	)		17,788
Less net loss attributable to noncontrolling interest		—			(2	)

Net (loss) income attributable to Predecessor	$	(38,325	)	$	17,790

Pro Forma Information (Unaudited)
Net loss attributable to predecessor	$	(38,325	)
Pro forma tax benefit for income taxes		13,605

Pro forma net loss	$	(24,720	)

Pro forma net loss per common share
Basic	$
Diluted	$
Weighted average pro forma common shares outstanding
Basic
Diluted

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

F-19

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN OWNERS’ EQUITY


	Total Owners’ Equity			Noncontrolling Interest in Subsidiary			Total Equity
	(in thousands)
Balance at December 31, 2013	$	389,859		$	688		$	390,547
Contributions		59,776			150			59,926
Repurchase of equity interests		(119,272	)		—			(119,272	)
Deemed contribution from sale of assets		21,489			(836	)		20,653
Deemed contribution from parent for payment of incentive units		12,420			—			12,420
Deemed distribution in connection with common control acquisition		(4,130	)		—			(4,130	)
Net income (loss)		17,790			(2	)		17,788

Balance at December 31, 2014		377,932			—			377,932
Contributions		111,396			—			111,396
Deemed distribution from sale of assets		(139	)		—			(139	)
Net loss		(38,325	)		—			(38,325	)

Balance at December 31, 2015	$	450,864		$	—		$	450,864

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

F-20

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS


	For the Year Ended December 31,
	2015			2014
	(in thousands)
Cash flows from operating activities
Net (loss) income	$	(38,325	)	$	17,788
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Accretion of asset retirement obligations		139			156
Depreciation, depletion and amortization		89,945			68,954
Noncash incentive compensation expense		—			12,420
Abandonment and impairment of unproved leases		7,619			20,025
Write-off of deferred S-1 related expense		1,585			—
Deferred tax (benefit) expense		(572	)		1,524
(Gain) loss on sale of oil and natural gas properties		(2,439	)		2,096
Gain on derivative instruments		(20,756	)		(41,943	)
Net cash received for derivative settlements		35,493			4,611
Recovery of bad debt		—			(777	)
Amortization of debt issuance costs		482			316
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		5,244			(6,322	)
Increase in prepaid and other assets		(864	)		(79	)
(Decrease) increase in accounts payable and other liabilities		(8,669	)		18,479

Net cash provided by operating activities		68,882			97,248

Cash flows from investing activities
Acquisition of oil and natural gas properties		(43,223	)		(22,167	)
Development of oil and natural gas properties		(156,006	)		(275,683	)
Purchases of other property and equipment		(2,097	)		(453	)
Proceeds from sales of oil and natural gas properties and other assets		2,691			72,382
Development of assets held for sale		—			(14,240	)
Proceeds from sale of Atlantic Midstream, net of cash sold		—			71,781
Change in cash held in escrow		—			5,000

Net cash used by investing activities		(198,635	)		(163,380	)

Cash flows from financing activities
Proceeds from revolving credit facility		92,000			196,000
Repayment of revolving credit facility		(83,000	)		(160,000	)
Financing obligation		(1,633	)		—
Capital contributions		111,396			59,776
Debt issuance costs		(259	)		(1,637	)
Repurchase of equity		—			(119,272	)
Proceeds from term loan		—			65,000
Distribution in connection with common control acquisition		—			(3,051	)
Contributions received from noncontrolling interest		—			150

Net cash provided by financing activities		118,504			36,966

Net decrease in cash and cash equivalents		(11,249	)		(29,166	)
Cash and cash equivalents, beginning		13,017			42,183

Cash and cash equivalents, end	$	1,768		$	13,017

Supplemental disclosures of cash flow information:
Cash paid for interest	$	5,782		$	1,935
Supplemental disclosures of noncash activity:
Accrued capital expenditures included in accounts payable and accrued expenses	$	13,124		$	81,510
Financing obligation		3,770			—

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

F-21

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Note 1—Organization and Nature of Operations

Centennial Resource Production, LLC, a Delaware limited liability company formerly named Atlantic Energy Holdings, LLC (“Centennial OpCo”), was formed on August 30, 2012 by its management members, third-party investors and NGP Natural Resources X, LP (“NGP X”), an affiliate of Natural Gas Partners (“NGP”), a family of energy-focused private equity investment funds. Centennial OpCo is engaged in the development and acquisition of unconventional oil and associated liquids-rich natural gas reserves, primarily in the Delaware Basin of West Texas.

Atlantic Midstream was formed on May 21, 2013, as a Delaware limited liability company and is constructing assets to gather and process natural gas in the Delaware Basin of West Texas. Centennial OpCo sold its interests in Atlantic Midstream on February 12, 2014 (refer to Note 4—Acquisitions and Divestitures ).

On March 31, 2014, all of Centennial OpCo’s employee members sold their membership interests to Centennial OpCo. Contemporaneously, Centennial Resource Development, LLC, a Delaware limited liability company formed by NGP X and certain management members (“Centennial HoldCo”), agreed to purchase the entirety of Centennial OpCo’s issued and outstanding incentive units. On April 30, 2014, NGP X contributed and conveyed its membership interests in Centennial OpCo to Centennial HoldCo. On May 9, 2014, Centennial OpCo’s remaining members sold their membership interests to Centennial OpCo. As a result of these transactions, Centennial OpCo became a wholly-owned subsidiary of Centennial HoldCo. Centennial HoldCo is a holding company with no independent operations apart from its ownership interests in Centennial OpCo. NGP X controls Centennial HoldCo through ownership of 99.0% of its membership interests.

Celero Energy Company, LP, a Delaware limited partnership (“Celero”), was formed on September 22, 2006, by its general partner, Celero Energy Management, LLC (“Celero GP”), its management team and Natural Gas Partners VIII, L.P. (“NGP VIII”), also an affiliate of NGP. Celero is engaged in the development and acquisition of oil and natural gas properties in Texas and New Mexico, primarily in the Permian Basin in West Texas.

On October 15, 2014, Celero conveyed substantially all of its oil and gas properties and other assets to Centennial OpCo in exchange for membership interests in Centennial OpCo (the “Combination”). As a result of the transaction, Centennial HoldCo owned approximately 72% of Centennial OpCo, and Celero owned the remaining 28%.

In 2015, NGP Centennial Follow-On LLC (“Follow-On”), a Delaware limited liability company controlled by NGP but the economic interests in which are owned by unaffiliated third party investors and management, contributed $84.2 million to Centennial OpCo in exchange for membership interests in Centennial OpCo. In addition, Centennial HoldCo contributed approximately $27.2 million to Centennial OpCo in exchange for additional membership interests in Centennial OpCo. Accordingly, Centennial HoldCo, Celero and Follow-On own an approximate 61.2%, 21.2% and 17.6% membership interest in Centennial OpCo, respectively.

Note 2—Basis of Presentation, Significant Accounting Policies, and Recently Issued Accounting Standards

Basis of Presentation

Through the delegation of authority of the general partners of NGP X and NGP VIII to NGP Energy Capital Management, L.L.C. (“NGP ECM”), all power and authority of the respective fund limited partnership in effectuating its core investment, management and divestment function is controlled by NGP ECM. As all power and authority to control the core functions of Centennial OpCo and Celero (collectively, the “Predecessor”) are

F-22

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

controlled by NGP X and NGP VIII, respectively, the Combination has been accounted for as a reorganization of entities under common control in a manner similar to a pooling of interests. The results of Centennial OpCo and Celero have been combined for all periods in which common control existed for financial reporting purposes. All significant intercompany and intra-company balances and transactions have been eliminated.

Certain prior period amounts have been reclassified to conform to the current presentation on the accompanying consolidated and combined financial statements.

Under certain contracts, when NGLs are extracted from the gas stream, processors receive a portion of the sales value from both the residue gas and the NGLs as a processing fee and remit the contractual proceeds to us. Prior to 2015, revenue was recognized net of these processing fees for residue gas and NGLs sold under these contracts as allowed under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition . Increasing NGL production has resulted in processing costs becoming more significant. Accordingly, the Predecessor changed its policy to record these processing costs with operating costs as allowed under ASC 605. Beginning in 2015, the Predecessor’s realized prices for sales under these contracts reflect the value of 100% of the residue gas and NGLs yielded by processing, rather than the value associated with the contractual proceeds it received. The related processing fees now are included in Transportation, processing, gathering, and other operating expense . Financial statements for periods prior to 2015 have been reclassified to reflect this change in accounting treatment. There was no impact on operating income.

Assumptions, Judgments and Estimates

In the course of preparing the Predecessor’s consolidated and combined financial statements, the Predecessor’s management makes various assumptions, judgments and estimates to determine the reported amounts of assets, liabilities, revenues and expenses, and in the disclosures of commitments and contingencies. Changes in these assumptions, judgments, and estimates will occur as a result of the passage of time and the occurrence of future events and, accordingly, actual results could differ from amounts previously established.

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Significant Accounting Policies

Cash and Cash Equivalents

The Predecessor considers all highly liquid instruments with an original maturity of three months or less at the time of issuance to be cash equivalents.

F-23

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

Accounts Receivable

Accounts receivable consists mainly of receivables from oil and natural gas purchasers and from joint interest owners on properties the Predecessor operates. For receivables from joint interest owners, the Predecessor typically has the ability to withhold future revenue disbursements to recover non-payment of joint interest billings. Generally, oil and natural gas receivables are collected within two months and the Predecessor has had minimal bad debts. The Predecessor establishes an allowance for doubtful accounts equal to the estimable portions of accounts receivable for which failure to collect is probable. The Predecessor’s allowance for doubtful accounts totaled $0.1 million and $0.3 million as of December 31, 2015 and 2014, respectively.

Credit Risk and Other Concentrations

The Predecessor sells oil and natural gas to various third party purchasers. The future availability of a ready market for oil and natural gas depends on numerous factors outside the Predecessor’s control, none of which can be predicted with certainty. For the year ended December 31, 2015 and 2014, the Predecessor had one major customer, Plains Marketing, LP, which accounted for 64% and 78%, respectively, of total revenue. The Predecessor does not require collateral and does not believe the loss of any single purchaser would materially impact its operating results, as crude oil and natural gas are fungible products with well-established markets and numerous purchasers.

By using derivative instruments to economically hedge exposures to changes in commodity prices, the Predecessor exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Predecessor, which creates credit risk. As of December 31, 2015, and through the filing date of this report, all of the Predecessor’s derivative counterparties were members of the Predecessor’s credit facility lender group. The credit facility is secured by the Predecessor’s proved oil and natural gas properties and therefore, the Predecessor is not required to post any collateral. The Predecessor does not receive collateral from its counterparties. The maximum amount of loss due to credit risk that the Predecessor would incur if its counterparties failed completely to perform according to the terms of the contracts, based on the gross fair value of financial instruments, was approximately $21.5 million at December 31, 2015. The Predecessor minimizes the credit risk in derivative instruments by: (i) limiting its exposure to any single counterparty; and (ii) monitoring the creditworthiness of the Predecessor’s counterparties on an ongoing basis. In accordance with the Predecessor’s standard practice, its commodity derivatives are subject to counterparty netting under agreements governing such derivatives and therefore the risk of loss due to counterparty nonperformance is somewhat mitigated.

The Predecessor places its temporary cash investments with high-quality financial institutions and does not limit the amount of credit exposure to any one financial institution. For the years ended December 31, 2015 and 2014, the Predecessor has not incurred losses related to these investments.

Oil and Natural Gas Properties

The Predecessor follows the successful efforts method of accounting for its oil and natural gas properties. Under the successful efforts method, the costs incurred to acquire, drill, and complete productive wells and development wells are capitalized. Oil and gas lease acquisition costs are also capitalized. Exploration costs, including personnel and other internal costs, geological and geophysical expenses, delay rentals for gas and oil leases, and costs associated with unsuccessful lease acquisitions are charged to expense as incurred. Costs of drilling exploratory wells are initially capitalized but are charged to expense if the well is determined to be

F-24

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

unsuccessful. As of December 31, 2015 and 2014, no costs were capitalized in connection with exploratory wells in progress. Net carrying values of retired, sold or abandoned properties that constitute less than a complete unit of depreciable property are charged or credited, net of proceeds, to accumulated depreciation, depletion and amortization unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized in income. Gains or losses from the disposal of complete units of depreciable property are recognized to income.

Unproved properties consist of costs to acquire undeveloped leases as well as costs to acquire unproved reserves. The Predecessor evaluates significant unproved properties for impairment based on remaining lease term, drilling results, reservoir performance, seismic interpretation or future plans to develop acreage. Unproved properties and the related costs are transferred to proved properties when reserves are discovered on or otherwise attributed to the property. For the year ended December 31, 2015, the Predecessor recorded abandonment and impairment expense of $7.6 million for leases which have expired, or are expected to expire. For the year-ended December 31, 2014, the Predecessor recorded impairment expense of $20.0 million, of which $13.8 million was attributable to an impairment of unproved properties and $6.2 million was attributable to leases which had expired, or were expected to expire.

The Predecessor reviews its proved oil and natural gas properties for impairment when events and circumstances indicate a possible decline in the recoverability of the carrying amount of such property. The Predecessor estimates the expected future cash flows of its oil and natural gas properties and compares these undiscounted cash flows to the carrying amount of the oil and natural gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Predecessor will write down the carrying amount of the oil and natural gas properties to fair value. The factors used to determine fair value include, but are not limited to, estimates of reserves, future commodity prices, future production estimates, estimated future capital expenditures and discount rates commensurate with the risk associated with realizing the projected cash flows. There were no impairments of proved oil and natural gas properties during the years ended December 31, 2015 and 2014.

Other Property and Equipment

Other property and equipment such as office furniture and equipment, buildings, vehicles, and computer hardware and software is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from three to twenty years. Major renewals and improvements are capitalized while expenditures for maintenance and repairs are expensed as incurred. When other property and equipment is sold or retired, the capitalized costs and related accumulated depreciation are removed from the accounts.

Deferred Loan Costs

Deferred loan costs related to the Predecessor’s revolving credit facility are included in the line item Other noncurrent assets in the consolidated and combined balance sheets and are stated at cost, net of amortization, and are amortized to interest expense on a straight line basis over the borrowing term. Please refer to Recently Issued Accounting Standards , for additional discussion of deferred loan costs related to the Predecessor’s term loan.

Derivative Financial Instruments

In order to manage its exposure to oil and natural gas price volatility, the Predecessor enters into derivative transactions from time to time, including commodity swap agreements, basis swap agreements, collar

F-25

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

agreements, and other similar agreements relating to the price risk associated with a portion of its production. To the extent legal right of offset exists with a counterparty, the Predecessor reports derivative assets and liabilities on a net basis.

The Predecessor records derivative instruments on the consolidated and combined balance sheets as either an asset or liability measured at fair value and records changes in the fair value of derivatives in current earnings as they occur. The Predecessor’s derivatives have not been designated as hedges for accounting purposes. For additional discussion on derivatives, please refer to Note 5 — Derivative Financial Instruments .

Asset Retirement Obligations

The Predecessor recognizes an estimated liability for future costs associated with the abandonment of its oil and natural gas properties. A liability for the fair value of an asset retirement obligation and corresponding increase to the carrying value of the related long-lived asset are recorded at the time a well is drilled or acquired. The increase in carrying value is included in proved oil and natural gas properties in the accompanying consolidated and combined balance sheets. The Predecessor depletes the amount added to proved oil and natural gas property costs and recognizes expense in connection with the accretion of the discounted liability over the remaining estimated economic lives of the respective oil and natural gas properties. For additional discussion, please refer to Note 10 — Asset Retirement Obligations .

Revenue Recognition

The Predecessor derives revenue primarily from the sale of produced oil, natural gas, and NGLs. Revenue is recognized when the Predecessor’s production is delivered to the purchaser, but payment is generally received between 30 and 90 days after the date of production. No revenue is recognized unless it is determined that title to the product has transferred to the purchaser. At the end of each month, the Predecessor estimates the amount of production delivered to the purchaser and the price it will receive. The Predecessor follows the sales method of accounting for its oil and natural gas revenue, whereby revenue is recorded based on the Predecessor’s share of volume sold, regardless of whether the Predecessor has taken its proportional share of volume produced. A receivable or liability is recognized only to the extent that the Predecessor has an imbalance on a specific property greater than the expected remaining proved reserves. The Predecessor had no significant imbalances as of December 31, 2015 or 2014.

Incentive Units

Incentive units are accounted for as liability awards under FASB ASC Topic 718, Compensation-Stock Compensation, with compensation expense based on period-end fair value. No incentive compensation expense was recorded at December 31, 2015 or 2014, because it was not probable that the performance criterion would be met. For additional discussion, please refer to Note 9 — Incentive Unit Compensation.

Segment Reporting

The Predecessor operates in only one industry segment, which is the exploration and production of oil and natural gas. All of its operations are conducted in one geographic area of the United States. All revenues are derived from customers located in the United States.

F-26

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

Income Taxes

Centennial OpCo is organized as a Delaware limited liability company, and Celero is organized as a Delaware limited partnership. As such, the Predecessor is treated as a flow-through entity for U.S. federal income tax purposes and for purposes of certain state and local income taxes. For such purposes, the net taxable income of the Predecessor and any related tax credits are passed through to the owners and are included in their tax returns, even though such net taxable income or tax credits may not have actually been distributed. Accordingly, no provision has been made in the consolidated and combined financial statements of the Predecessor for such income taxes paid at the owner level.

The Predecessor is subject to the Texas franchise tax, at a statutory rate of 0.75% of taxable margin. Deferred tax assets and liabilities are recognized for future Texas franchise tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective Texas franchise tax bases. As of December 31, 2015 and 2014, the Predecessor’s long-term deferred tax liability was $2.4 million and $2.9 million, respectively.

The Predecessor evaluates the tax positions taken or expected to be taken in the course of preparing its tax returns and disallows the recognition of tax positions not deemed to meet a “more-likely-than-not” threshold of being sustained by the applicable tax authority. The Predecessor’s management does not believe that any tax positions included in its tax returns would not meet this threshold. The Predecessor’s policy is to reflect interest and penalties related to uncertain tax positions as part of its income tax expense, when and if they become applicable.

As of December 31, 2015 the Predecessor has no current tax years under audit. The Predecessor remains subject to examination for federal income taxes and state income taxes for tax years 2012-2015.

Unaudited Pro Forma Income Taxes

These financial statements have been prepared in anticipation of a proposed initial public offering (the “Offering”) of the common stock of the Predecessor’s parent entity. In connection with the Offering, all interests in the Predecessor will be contributed to a Delaware corporation that will be taxed as a corporation under the Internal Revenue Code of 1986, as amended, and thus generally subject to U.S. federal, state and local income taxes. Accordingly, a pro forma income tax provision has been disclosed as if the Predecessor were a taxable corporation for all periods presented. The Predecessor has computed pro forma entity-level income tax expense using an estimated effective rate of 36%, inclusive of all applicable U.S. federal, state and local income taxes.

Unaudited Pro Forma Earnings Per Share

The Predecessor has presented pro forma earnings per share for the most recent period. Pro forma basic and diluted income per share was computed by dividing pro forma net income attributable to the Predecessor by the number of shares of common stock attributable to the Predecessor to be issued in the initial public offering described in the registration statement, as if such shares were issued and outstanding for the period ended December 31, 2014.

Recently Issued Accounting Standards

In May 2014, In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . This guidance is to be applied using a full retrospective method or a modified retrospective method, as outlined in the

F-27

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

guidance. In August 2015, the FASB deferred the effective date of the new revenue recognition standard by one year. The revenue recognition standard is now effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted but only for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. The Predecessor is currently evaluating the impact, if any, that the adoption of this update will have on its consolidated and combined financial statements or disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . This update requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the entity’s financial statements are issued, or within one year after the date the entity’s financial statements are available to be issued, and to provide disclosures when certain criteria are met. This guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Predecessor is currently evaluating the impact, if any, that the adoption of this update will have on its consolidated and combined financial statements or disclosures.

Effective November 1, 2015, the Predecessor early adopted, on a retrospective basis, ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires deferred financing costs to be presented on the accompanying consolidated and combined balance sheets as a direct deduction from the carrying value of the related debt liability. In accordance, the Predecessor has reclassified $0.4 million of deferred financing costs related to its term loan, from the other noncurrent assets line item to the term loan, net of unamortized deferred financing costs line item. The December 31, 2014 accompanying balance sheet line items that were adjusted as a result of the adoption of ASU No. 2015-03 are presented in the following table:


	As of December 31, 2014
	As Reported		As Adjusted
	(in thousands)
Other noncurrent assets	$	1,866	$	1,434
Total assets	$	616,201	$	615,769
Term loan	$	65,000	$	—
Term loan, net of unamortized deferred financing costs	$	—	$	64,568
Total liabilities	$	238,269	$	237,837
Total liabilities and owners’ equity	$	616,201	$	615,769

ASU 2015-03 does not specifically address the accounting for deferred financing costs related to line-of-credit arrangements. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU 2015-15”) allowing for deferred financing costs associated with line-of-credit arrangements to continue to be presented as assets. ASU 2015-15 is consistent with how the Predecessor currently accounts for deferred financing costs related to the Predecessor’s revolving credit facility.

Effective January 1, 2015, the Predecessor early adopted, on a prospective basis, ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items . This ASU simplifies income statement presentation by eliminating the concept of extraordinary items. There was no impact to the Predecessor’s consolidated and combined financial statements or disclosures from the adoption of this standard.

Effective December 1, 2015, the Predecessor early adopted, on a prospective basis, ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). This ASU requires that deferred tax liabilities

F-28

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

and assets, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in ASU 2015-17. As ASU 2015-17 was adopted on a prospective basis, the Predecessor did not retrospectively adjust prior periods.

Note 3—Accounts Receivable and Accounts Payable and Accrued Expenses

Accounts receivable are comprised of the following:


	December 31, 2015			December 31, 2014
	(in thousands)
Oil and natural gas	$	5,789		$	9,116
Joint interest billings		1,514			11,116
Hedge settlements		3,956			3,141
Other		1,844			—
Allowance for doubtful accounts		(91	)		(256	)

Accounts receivable, net	$	13,012		$	23,117

Accounts payable and accrued expenses are comprised of the following:


	December 31, 2015		December 31, 2014
	(in thousands)
Accounts payable	$	1,827	$	30,224
Accrued capital expenditures		11,700		59,675
Revenues payable		3,439		7,566
Other		3,019		3,830

Accounts payable and accrued expenses	$	19,985	$	101,295

Note 4—Acquisitions and Divestitures

2015 Acquisitions

On September 1, 2015, the Predecessor acquired additional interests in proved and unproved oil and natural gas properties in the Delaware Basin. Total cash consideration paid by the Predecessor was $16.0 million, net of closing adjustments.

On September 3, 2015, the Predecessor acquired a non-operated interest in 1,804 net acres in the Delaware Basin from an unrelated third party. Total cash consideration paid by the Predecessor was $6.4 million, net of closing adjustments.

F-29

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

The Predecessor determined that both of these acquisitions met the criteria for business combinations under FASB ASC Topic 805, Business Combinations. The Predecessor allocated the final purchase prices to the acquired assets and liabilities based on fair value as of the respective acquisition dates, as summarized in the table below. Refer to Note 6—Fair Value Measurements for additional discussion on the valuation techniques used in determining the fair value of the acquired properties.


	Acquisition #1			Acquisition #2
	September 1, 2015			September 3, 2015
	(in thousands)
Cash Consideration	$	16,006		$	6,369

Fair value of assets and liabilities acquired:
Proved oil and natural gas properties		7,731			6,491
Unproved oil and natural gas properties		8,312			—

Total fair value of oil and natural gas properties acquired		16,043			6,491
Asset retirement obligation		(37	)		(122	)

Total fair value of net assets acquired	$	16,006		$	6,369

2014 Acquisitions

In June 2014, Centennial OpCo acquired 2,400 net acres in the Delaware Basin from an unrelated third party, for approximately $11.0 million, net of customary closing adjustments.

2014 Dispositions

In December 2014, the Centennial OpCo sold its interest in approximately 1,845 net acres in Ward County, Texas, including 18 vertical wells, to an NGP-controlled entity for proceeds of $12.5 million, which resulted in a gain of $1.5 million and was recorded as an equity contribution due to the entities being under common control.

In May 2014, Celero sold its Caprock field to an unrelated third party for $59.3 million, net of customary closing adjustments. A net loss of $2.2 million was recognized on the sale during the second quarter of 2014.

In February 2014, the Centennial OpCo sold its 98.5% interest in Atlantic Midstream to PennTex Permian, an NGP-controlled entity for net proceeds of $71.8 million, which resulted in a gain of $20.0 million and was recorded as an equity contribution due to the entities being under common control.

Note 5—Derivative Financial Instruments

The Predecessor has entered into various commodity derivative instruments to mitigate a portion of its exposure to potentially adverse market changes in commodity prices and the associated impact on cash flows. All contracts are entered into for other-than-trading purposes. The Predecessor’s derivative contracts include swap arrangements for oil.

F-30

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

The Predecessor’s derivative instruments have not been designated as hedges for accounting purposes; therefore, all gains and losses are recognized in the Predecessor’s consolidated and combined statements of operations. The Predecessor’s commodity derivatives are measured at fair value and are included in the accompanying consolidated and combined balance sheets as derivative assets. The fair value of the commodity contracts was a net asset of $21.1 million and $36.8 million as of December 31, 2015 and 2014, respectively.

As of December 31, 2015, the Predecessor had open crude oil derivative positions with respect to future production as set forth in the table below. When aggregating multiple contracts, the weighted average contract price is disclosed.


	2016			2017
Crude Oil Swaps:
Notional volume (Bbl)		729,000			127,750
Weighted average floor price ($/Bbl)	$	67.82		$	61.36

Crude Oil Basis Swaps :
Notional volume (Bbl)		622,200			91,250
Weighted average floor price ($/Bbl)	$	(0.71	)	$	(0.20	)

The following tables below summarize the gross fair value of derivative assets and liabilities and the effect of netting on the consolidated and combined balance sheets (in thousands):


	Balance Sheet Classification	Gross Amounts		Netting Adjustments			Net Amounts Presented on the Balance Sheet
December 31, 2015 :
Assets:
Derivative instruments	Current assets	$	19,469	$	(426	)	$	19,043
Derivative instruments	Noncurrent assets		2,071		(1	)		2,070

Total assets		$	21,540	$	(427	)	$	21,113


	Balance Sheet Classification	Gross Amounts		Netting Adjustments			Net Amounts Presented on the Balance Sheet
December 31, 2014 :
Assets:
Derivative instruments	Current assets	$	30,444	$	(22	)	$	30,422
Derivative instruments	Noncurrent assets		6,365		—			6,365

Total assets		$	36,809	$	(22	)	$	36,787

The following table presents gains for derivative instruments not designated as hedges for accounting purposes for the periods presented (in thousands):


	For the Year Ended December 31,
	2015		2014
Gain on derivative instruments	$	20,756	$	41,943

F-31

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

Note 6—Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table is a listing of the Predecessor’s assets and liabilities that are measured at fair value and where they were classified within the fair value hierarchy as of December 31, 2015:


	Level 1		Level 2		Level 3
Assets:
Derivative instruments, net(1)	$	—	$	21,113	$	—

(1)	This represents financial assets or liabilities that are measured at fair value on a recurring basis.

The following table is a listing of the Predecessor’s assets and liabilities that are measured at fair value and where they were classified within the fair value hierarchy as of December 31, 2014:


	Level 1		Level 2		Level 3
Assets:
Derivative instruments, net(1)	$	—	$	36,787	$	—
Unproved oil and gas properties(2)	$	—	$	—	$	5,705

(1)	This represents a financial asset or liability that is measured at fair value on a recurring basis.

(2)	This represents a non-financial asset that is measured at fair value on a nonrecurring basis.

Derivatives

The Predecessor uses Level 2 inputs to measure the fair value the Predecessor’s derivative instruments. The fair value of all derivative instruments is estimated with industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. The fair value of all derivative instruments is estimated using a combined income and market valuation methodology based upon forward commodity price and volatility curves. The curves are obtained from independent pricing services, and the Predecessor has made no adjustments to the obtained prices. The independent pricing services publish observable market information from multiple brokers and exchanges. All valuations were compared against counterparty valuations to verify the reasonableness of prices. The Predecessor also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Predecessor has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative contracts it holds. The Predecessor recognizes transfers between levels at the end of the reporting period for which the transfer has occurred.

F-32

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

Nonrecurring Fair Value Measurements

Unproved oil and natural gas property costs are evaluated for impairment and reduced to fair value when there is an indication that the carrying costs may not be recoverable. To measure the fair value of the unproved properties, the Predecessor uses a market approach, which takes into account further development plans, risk weighted potential resource recovery, and estimated reserve values (if any). The Predecessor recorded a $13.8 million impairment related to certain unproved oil and natural gas properties for the year ended December 31, 2014.

The fair value measurements of assets acquired and liabilities assumed are measured on a nonrecurring basis on the acquisition date using an income valuation technique based on inputs that are not observable in the market and therefore represent Level 3 inputs. Significant inputs to the valuation of acquired oil and gas properties include estimates of: (i) reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices, including price differentials; (v) future cash flows; and (vi) a market participant-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Predecessor’s management at the time of the valuation. Refer to Note 4 — Acquisitions and Divestitures for additional information on the fair value of assets acquired during 2015.

Other Financial Instruments

The carrying amounts of our cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term maturities and/or liquid nature of these assets and liabilities. The carrying values of the amounts outstanding under the credit agreement approximate fair value because the variable interest rates are reflective of current market conditions.

Note 7—Long-Term Debt

Credit Agreement

In May 2015, the Predecessor entered into an amendment to its amended and restated credit agreement (“credit agreement”) dated as of October 15, 2014. The amendment extends the term loan maturity from April 15, 2017 to April 15, 2018. The credit agreement includes both a term loan commitment of $65.0 million (the “term loan”) and a revolving credit facility (the “revolving credit facility”) with commitments of $500.0 million (subject to the borrowing base), with a sublimit for letters of credit of $15.0 million. The borrowing base is subject to regular semi-annual redeterminations.

The borrowing base of the revolving credit facility under the credit agreement is determined at the discretion of the lenders, and is subject to regular redeterminations in each quarter of 2015 and on April 1 and October 1 in subsequent years. The borrowing base depends on, among other things, the volumes of the Predecessor’s proved oil and natural gas reserves and estimated cash flows from these reserves and the Predecessor’s commodity hedge positions. In August 2015, the Predecessor’s borrowing base was reaffirmed at $140.0 million. The next redetermination date is scheduled for April 1, 2016. Upon a redetermination of the borrowing base, if borrowings in excess of the revised borrowing capacity were outstanding, the Predecessor could be forced to immediately repay a portion of its debt outstanding under the credit agreement.

At December 31, 2015, outstanding borrowings under the revolving credit facility were $74.0 million and $0.6 million of outstanding letters of credit, leaving $65.4 million in borrowing capacity under the revolving credit facility.

F-33

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

Interest on the term loan is LIBOR plus 5.25%. Borrowings under the credit agreement bear interest at either (i) LIBOR plus a margin between 1.50% and 2.50% or (ii) the prime rate plus a margin between 0.50% and 1.50%, in each case, based on the amount utilized. The annual commitment fee on the unused portion of the credit facility ranges between 0.375% and 0.50% based on the amount utilized.

The term loan, net of unamortized deferred financing costs, line on the accompanying consolidated and combined balance sheets as of December 31, 2015 and 2014, consisted of the following:


	December 31, 2015			December 31, 2014
	(in thousands)
Term loan	$	65,000		$	65,000
Unamortized deferred financing costs		(351	)		(432	)

Term loan, net of unamortized deferred financing costs	$	64,649		$	64,568

The Predecessor must comply with certain financial and non-financial covenants under the terms of its credit agreement, including limitations on distribution payments, disposition of assets and requirements to maintain certain financial ratios, which include:

•

a requirement that the Predecessor’s current assets—including amounts available to be drawn under the credit agreement—must exceed current liabilities;

•

a requirement that the Predecessor maintain a ratio of consolidated funded debt to consolidated EBITDAX of not more than 4.0 to 1.0.

At December 31, 2015 the Predecessor was in compliance with its financial covenants.

Note 8—Owners’ Equity

Centennial OpCo’s operations are governed by the provisions of the Fourth Amended and Restated Limited Liability Company Agreement (“Agreement”), effective April 15, 2015. As of December 31, 2015, members included Centennial HoldCo, Celero and Follow-On, owning an approximate 61.2%, 21.2% and 17.6% membership interest in Centennial OpCo, respectively.

In 2015 Follow-On contributed $84.2 million to Centennial OpCo in exchange for membership interests in Centennial OpCo. In addition, Centennial HoldCo contributed approximately $27.2 million to Centennial OpCo in exchange for additional membership interests in Centennial OpCo.

At December 31, 2015, Centennial OpCo has two classes of membership interests outstanding: Class A, which consist of membership interests held by Centennial HoldCo and Follow-On; and Class B, which consist of membership interests held by Celero. As of December 31, 2015, Centennial HoldCo had contributed $289.4 million and had a remaining capital commitment of $32.5 million, Follow-On had contributed $84.2 million and had a remaining capital commitment of $100.3 million, and Celero had contributed $125.4 million in conjunction with the Combination and does not have a remaining capital commitment. Under the terms of the Agreement, Centennial OpCo will dissolve upon the earlier of July 1, 2022; the sale, disposition or termination of all or substantially all of the property owned by Centennial OpCo; or consent in writing of Centennial HoldCo. Pursuant to the Agreement (and as is customary for limited liability companies), the liability of the members is limited to their contributed capital.

F-34

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

In December 2014, the Predecessor sold its interest in approximately 1,845 net acres in Ward County, Texas, including 18 vertical wells, to an NGP-controlled entity for proceeds of $12.5 million. Because the Predecessor and purchaser are considered entities under common control, the gain of $1.5 million was recorded as a deemed contribution from sale of assets.

On October 15, 2014, Celero conveyed substantially all of its oil and gas properties and other assets to Centennial OpCo in exchange for membership interests in Centennial OpCo. In connection with the transaction Centennial HoldCo made cash tender offers to Celero’s limited partners to purchase their interest in the Partnership for their respective share of the transaction value of $157.6 million. A total of 20.4% of the partners accepted the cash tender offer for a total of $32.2 million. Celero subsequently redeemed Celero limited partnership interests from Centennial HoldCo for $17.1 million in cash and $15.1 million in Centennial OpCo’s membership interest. Celero’s contribution in Centennial OpCo after the conveyance was $125.4 million. Furthermore, the Combination was accounted for as a reorganization of entities under common control in a manner similar to a pooling of interest which resulted in a deemed distribution of $4.1 million.

On April 30, 2014 NGP X contributed and conveyed its membership interest in Centennial OpCo to Centennial HoldCo. On May 9, 2014, Centennial OpCo’s remaining members sold their membership interests to Centennial OpCo for $75.7 million.

On March 31, 2014 all of Centennial OpCo’s employee members sold their membership interests in Centennial OpCo. Centennial OpCo paid $11.4 million, net of promissory notes from certain employee members, to acquire the membership interests. Contemporaneously, Centennial HoldCo, agreed to purchase the entirety of Centennial OpCo’s issued and outstanding incentive units. The total consideration paid by Centennial HoldCo to acquire the issued and outstanding incentive units was $12.4 million and is included in General and administration expense on the consolidated and combined statement of operations. Additionally, the Predecessor recorded a deemed contribution from parent for payment of incentive units from Centennial HoldCo of $12.4 million for funding the incentive unit purchase. All of the incentive unit purchases were fully settled and terminated as of August 31, 2014.

In February 2014, the Predecessor sold its 98.5% interest in Atlantic Midstream to PennTex Permian, an NGP-controlled entity for net proceeds of $71.8 million. Because the Predecessor and purchaser are considered entities under common control, the gain of $20.0 million was recorded as a deemed contribution from sale of assets.

Note 9—Incentive Unit Compensation

Follow-On Incentive Units

Under the Amended and Restated NGP Centennial Follow-On LLC Agreement (“Follow-On LLC Agreement”), Follow-On grants certain incentive units to certain employees of Centennial Resource Management, LLC (“Centennial Management”), a wholly-owned subsidiary of Centennial HoldCo. Employees of Centennial Management provide substantially all of their services to the Predecessor and in substance the incentive unit holders are employees of the Predecessor; therefore, Follow-On’s incentive units have been treated as obligations of the Predecessor for accounting purposes.

In April 2015, Tier I, Tier II, Tier III, Tier IV and Tier V incentive units were issued.

F-35

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

The following table summarizes Follow-On’s incentive unit activity for the year ended December 31, 2015:


	Tier I			Tier II			Tier III			Tier IV			Tier V
Incentive units at December 31, 2014		—			—			—			—			—
Forfeited		(5,000	)		(5,000	)		(5,000	)		(5,000	)		(5,000	)
Granted		919,000			919,000			919,000			919,000			919,000

Incentive units at December 31, 2015		914,000			914,000			914,000			914,000			914,000

Vested at December 31, 2015		121,197			121,197			—			—			—

All of the incentive units are non-voting and subject to certain vesting and performance conditions. The terms of the incentive units are as follows: Tier I and Tier II incentive units vest ratably over five years, but are subject to forfeiture if payout is not achieved. In addition, all unvested Tier I and Tier II incentive units vest immediately upon Tier I and Tier II payout, respectively. Tier III, IV and V incentive units vest only upon the achievement of certain payout thresholds for each such tier and each tier of incentive units is subject to forfeiture if the applicable required payouts are not achieved. In addition, vested and unvested incentive units are forfeited if an incentive unit holder’s employment is terminated for any reason or if the incentive unit holder voluntarily terminates their employment. Payouts for each Tier I through V are based upon achievement of specified rates of return on Follow-On’s invested capital.

The incentive units are issued to employees in return for services provided and cash payout is based, in part, on the value of Follow-On’s equity; therefore, the incentive units are accounted for as liability awards under FASB ASC Topic 718, Compensation-Stock Compensation, with compensation expense based on period-end fair value. The achievement of payout conditions is a performance condition that requires the Predecessor to assess, at each reporting period, the probability that an event of payout will occur. Compensation cost is required to be recognized at such time that the payout terms are probable of being met. No incentive compensation expense was recorded at December 31, 2015 or 2014, because it was not probable that the performance criterion would be met.

Centennial HoldCo Incentive Units

As of December 31, 2015 and 2014, Tier I, Tier II, Tier III, Tier IV and Tier V incentive units had been issued to certain employees of Centennial Management. Employees of Centennial Management provide substantially all of their services to the Predecessor and in substance the incentive unit holders are employees of the Predecessor. Therefore, Centennial HoldCo’s incentive units have been treated as obligations of the Predecessor for accounting purposes.

The following table summarizes Centennial HoldCo’s incentive unit activity for the year ended December 31, 2015:


	Tier I			Tier II			Tier III			Tier IV			Tier V
Incentive units at December 31, 2014		909,000			909,000			909,000			909,000			909,000
Forfeited		(6,000	)		(6,000	)		(6,000	)		(6,000	)		(6,000	)
Granted		11,000			11,000			11,000			11,000			11,000

Incentive units at December 31, 2015		914,000			914,000			914,000			914,000			914,000

Vested at December 31, 2015		370,517			370,517			—			—			—

F-36

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

All of the incentive units are non-voting and subject to certain vesting and performance conditions. The terms of the incentive units are as follows: Tier I and Tier II incentive units vest ratably over five years, but are subject to forfeiture if payout is not achieved. In addition, all unvested Tier I and Tier II incentive units vest immediately upon Tier I and Tier II payout, respectively. Tier III, IV and V incentive units vest only upon the achievement of certain payout thresholds for each such tier and each tier of incentive units is subject to forfeiture if the applicable required payouts are not achieved. In addition, vested and unvested incentive units are forfeited if an incentive unit holder’s employment is terminated for any reason or if the incentive unit holder voluntarily terminates their employment. Payouts for each Tier I through Tier V are based upon achievement of specified rates of return on Centennial HoldCo’s invested capital.

The incentive units are issued to employees in return for services provided and cash payout is based, in part, on the value of Centennial HoldCo’s equity; therefore, the incentive units are accounted for as liability awards under FASB ASC Topic 718, Compensation-Stock Compensation, with compensation expense based on period-end fair value. The achievement of payout conditions is a performance condition that requires the Predecessor to assess, at each reporting period, the probability that an event of payout will occur. Compensation cost is required to be recognized at such time that the payout terms are probable of being met. No incentive compensation expense was recorded at December 31, 2015 or 2014, because it was not probable that the performance criterion would be met.

Note 10—Asset Retirement Obligations

The Predecessor recognizes an estimated liability for future costs associated with the plugging and abandonment of its oil and natural gas properties. A liability for the fair value of an asset retirement obligation (“ARO”) and a corresponding increase to the carrying value of the related long-lived asset are recorded at the time a well is drilled or acquired. The increase in carrying value is included in proved oil and natural gas properties in the accompanying consolidated and combined balance sheets. The Predecessor depletes the amount added to proved oil and gas property costs and recognizes expense in connection with the accretion of the discounted liability over the remaining estimated economic lives of the respective oil and gas properties. Cash paid to settle asset retirement obligations is included in the operating section of the Predecessor’s accompanying consolidated and combined statements of cash flows.

The Predecessor’s estimated asset retirement obligation liability is based on historical experience in plugging and abandoning wells, estimated economic lives, estimated plugging and abandonment cost, and federal and state regulatory requirements. The liability is discounted using the credit-adjusted risk-free rate estimated at the time the liability is incurred or revised. In periods subsequent to the initial measurement of the ARO, the Predecessor must recognize period-to-period changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows.

F-37

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the changes in the Predecessor’s asset retirement obligations for the periods indicated (in thousands):


	For the Year Ended December 31,
	2015		2014
Asset retirement obligations, beginning of year	$	1,824	$	3,557
Additional liabilities incurred		133		670
Liabilities acquired		178		—
Liabilities disposed(1)		—		(2,820	)
Accretion expense		139		156
Revision of estimated liabilities		14		261

Asset retirement obligations, end of year	$	2,288	$	1,824

(1)	Refer to Note 4 — Acquisitions and Divestitures .

Note 11—Commitments and Contingencies

Commitments

The following is a schedule of minimum future lease payments with commitments that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2015:


Years Ending December 31,	Amount (in thousands)
2016	$	2,676
2017		477
2018		485
2019		419
2020		—
Thereafter		—

Total	$	4,057

Drilling Rig Contracts

As of December 31, 2015, the Predecessor is not party to any long-term drilling rig contracts.

In light of the low commodity price environment, the Predecessor curtailed its drilling activity during 2015. For the year ended December 31, 2015, the Predecessor incurred drilling rig termination fees of $2.4 million, which are recorded in the Contract termination and rig stacking line item in the accompanying consolidated and combined statement of operations.

Office Leases

The Predecessor leases office space in Denver, Colorado and Midland, Texas. Rent expense for the years ended December 31, 2015 and 2014 was $0.4 million and $0.5 million, respectively.

F-38

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

Financing Obligation

The Predecessor is party to a contract with PennTex Permian, LLC (“PennTex”), an NGP-controlled entity, to construct an expansion of the gathering system and a receipt point. The Predecessor will reimburse the gas gatherer for the total cost of the expansion project. The Predecessor shall pay a minimum fee of $7,000 per day until the gas gatherer recoups the capital outlay for the expansion project. The Predecessor determined that the agreement contains an embedded lease and the transaction was accounted for as a financing obligation. The Predecessor recorded an asset and a liability of $3.8 million attributable to this agreement. The asset is being depreciated over its estimated remaining life. At December 31, 2015, a short-term liability of $2.1 million was included in Other current liabilities on the consolidated and combined balance sheets. The Predecessor has made payments of $1.7 million as of December 31, 2015, including interest.

Contingencies

The Predecessor is subject to litigation and claims arising in the ordinary course of business. The Predecessor accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, the results of such pending litigation and claims will not have a material effect on the results of operations, the financial position, or the cash flows of the Predecessor.

Note 12—Transactions with Related Parties

In December 2014, the Predecessor sold its interest in approximately 1,845 net acres in Ward County, Texas, including 18 vertical wells, to an NGP-controlled entity for proceeds of $12.5 million. For additional discussion, please refer to Note 4—Acquisitions and Divestitures.

In October 2014, Celero, an NGP-controlled entity, conveyed substantially all of its oil and gas properties and other assets to Centennial OpCo in exchange for membership interests in Centennial OpCo. As a result of the transaction, Centennial HoldCo owned approximately 72% of Centennial OpCo, and Celero owned the remaining 28%. For additional discussion, please refer to Note 2—Basis of Presentation.

Effective October 14, 2014, the Predecessor entered into a Management Services Agreement with Centennial Management, a wholly-owned subsidiary of Centennial HoldCo. Employees of Centennial Management provide substantially all of their services to the Predecessor.

In February 2014, the Predecessor entered into a gas gathering agreement with Atlantic Midstream. At the time this agreement was entered into, the Predecessor had a 98.5% interest in Atlantic Midstream. In February 2014, subsequent to entry into this gas gathering agreement, the Predecessor sold its 98.5% interest in Atlantic Midstream to PennTex Permian, LLC, an NGP-controlled entity for net proceeds of $71.8 million. PennTex paid the Predecessor $1.2 million and $2.2 million for purchases of residue gas and NGLs (net of gathering, processing and other fees) for the years ended December 31, 2015 and 2014.

In October 2014, the gas gathering agreement with PennTex Permian was amended to construct an expansion of the gathering system and a receipt point. The Predecessor will reimburse PennTex Permian for the total cost of the expansion project. The Predecessor shall pay a minimum fee of $7,000 per day until PennTex Permian recoups the capital outlay for the expansion project. At December 31, 2015, a short-term liability of $2.1 million was included in Other current liabilities on the consolidated and combined balance sheets. As of December 31, 2015, the Predecessor has made payments of $1.7 million, including interest.

F-39

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

Note 13—Subsequent Events

We have evaluated all subsequent events through April 4, 2016, the date the financial statements were issued and have nothing additional to disclose.

Note 14—Supplemental Oil and Gas Information (unaudited)

Costs Incurred For Oil and Natural Gas Producing Activities

The following table sets forth the capitalized costs incurred in the Predecessor’s oil and gas production, exploration, and development activities:


	For the Years Ended December 31,
	2015		2014
	(in thousands)
Acquisition costs:
Proved properties	$	14,268	$	5,758
Unproved properties		28,955		16,409
Development costs		87,452		324,802

Total	$	130,675	$	346,969

Oil and Gas Reserve Quantities

The reserve estimates presented below were made in accordance with U.S. GAAP requirements for disclosures about oil and natural gas producing activities and Securities and Exchange Commission (“SEC”) rules for oil and natural gas reporting reserves estimation and disclosure.

Estimates of the Predecessor’s proved oil and natural gas reserves at December 31, 2015 and 2014 were prepared by Netherland, Sewell & Associates, Inc. There are numerous uncertainties inherent in estimating quantities of proved oil and natural gas reserves. Oil and natural gas reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be precisely measured and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and natural gas that are ultimately recovered.

The following table summarizes the trailing 12-month index prices used in the reserve estimates for the years ended December 31, 2015 and 2014. The following prices, as adjusted for transportation, quality, and basis differentials, were used in the calculation of the standardized measure of discounted future net cash flows (“standardized measure”):


	For the Years Ended December 31,
	2015		2014
Oil (per Bbl)	$	41.85	$	84.94
Gas (per Mcf)	$	1.71	$	4.70
NGLs (per Bbl)	$	13.94	$	22.70

F-40

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

The table below presents a summary of changes in the Predecessor’s estimated proved reserves:


	For the Years Ended December 31,
	2015									2014
	Crude Oil (MBbls)			Natural Gas (MMcf)			Natural Gas Liquids (MBbls)			Crude Oil (MBbls)			Natural Gas (MMcf)			Natural Gas Liquids (MBbls)
Total Proved Reserves:
Beginning of the year		19,850			27,414			1,551			18,510			6,968			525
Extensions and discoveries		9,444			11,927			1,432			16,122			22,575			1,127
Revisions of previous estimates		(5,109	)		(5,204	)		995			56			178			180
Purchases of reserves in place		844			1,363			204			162			192			23
Divestitures of reserves in place		—			—			—			(13,572	)		(387	)		(69	)
Production		(1,830	)		(3,058	)		(331	)		(1,428	)		(2,112	)		(235	)

End of the year		23,199			32,442			3,851			19,850			27,414			1,551

Proved Developed Reserves:
Beginning of the year		8,026			11,959			766			6,021			4,837			382
End of the year		9,347			12,711			1,603			8,026			11,959			766
Proved Undeveloped Reserves:
Beginning of the year		11,823			15,455			785			12,489			2,131			143
End of the year		13,852			19,731			2,248			11,823			15,455			785

Proved reserves at December 31, 2015 increased 25% to 32,457 MBoe, compared to 25,970 MBoe at December 31, 2014.

During 2015, the Predecessor added 12,864 MBoe of proved reserves through extensions, primarily due to our drilling activity.

During 2015, the Predecessor had net negative revisions of 4,981 MBoe. The significant decrease in commodity prices seen in 2015 resulted in negative revisions related to the conversion of approximately 6,794 MBoe from PUDs to unproved reserves, partially offset by a positive revision in performance.

During 2015, the Predecessor acquired 1,275 MBoe of proved reserves. Refer to Note 4 — Acquisitions and Divestitures .

During 2014, the Predecessor added 21,012 MBoe of proved reserves through extensions and discoveries, primarily due to its continued development drilling program and 265 MBoe of proved reserves, due to better than expected performance of its proved developed reserves.

During 2014, the Predecessor divested of 13,706 MBoe of proved reserves. Refer to Note 4 — Acquisitions and Divestitures .

Standardized Measure of Discounted Future Net Cash Flows

The Predecessor computes a standardized measure of discounted future net cash flows and changes therein relating to estimated proved reserves in accordance with authoritative accounting guidance. Future cash inflows and production and development costs are determined by applying prices and costs, including transportation, quality, and basis differentials, to the year-end estimated future reserve quantities. The resulting future net cash flows are reduced to present value amounts by applying a 10% annual discount factor.

F-41

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

Future operating costs are determined based on estimates of expenditures to be incurred in developing and producing the proved reserves in place at the end of the period using year-end costs and assuming continuation of existing economic conditions.

The assumptions used to compute the standardized measure are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect the Predecessor’s expectations of actual revenues to be derived from those reserves, nor their present value amount. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process.

The following table presents the Predecessor’s standardized measure of discounted future net cash flows:


	December 31,
	2015			2014
	(in thousands)
Future cash inflows	$	1,079,962		$	1,850,205
Future development costs		(277,837	)		(440,366	)
Future production costs		(450,058	)		(457,236	)
Future income tax expenses(1)		(6,643	)		(10,834	)

Future net cash flows		345,424			941,769
10% discount to reflect timing of cash flows		(210,355	)		(575,886	)

Standardized measure of discounted future net cash flows	$	135,069		$	365,883

(1)

Although the Predecessor was subject to franchise tax in the State of Texas (at less than 1% of modified pre-tax earnings), it generally passed through its taxable income to its owners for other income tax purposes and thus was not subject to U.S. federal income taxes or other state or local income taxes as of December 31, 2015 and 2014. Accordingly, future income tax expenses do not include the effects of U.S. federal income taxes or income taxes in any state or locality other than franchise tax in the State of Texas . Had the Predecessor been subject to U.S. federal, state and local income taxes for the years ended December 31, 2015 and 2014, the future income tax expenses at December 31, 2015 and 2014 would have been approximately $70.7 million and $280.3 million, respectively, and the unaudited standardized measure at December 31, 2015 and December 31, 2014 would have been approximately $115.7 million and $256.4 million, respectively.

F-42

CENTENNIAL RESOURCE PRODUCTION, LLC AND CELERO ENERGY COMPANY, LP

(PREDECESSOR)

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS—(Continued)

A summary of changes in the standardized measure of discounted future net cash flows is as follows:


	For the Years Ended December 31,
	2015			2014
	(in thousands)
Standardized measure of discounted future net cash flows, beginning of the period	$	365,883		$	371,307
Sales of oil, natural gas and NGLs, net of production costs		(58,534	)		(102,488	)
Purchase of minerals in place		14,416			5,650
Divestiture of minerals in place		—			(242,344	)
Extensions and discoveries, net of future development costs		57,894			312,532
Change in estimated development costs		16,100			10,386
Net change in prices and production costs		(494,734	)		(3,027	)
Change in estimated future development costs		247,642			2,935
Revisions of previous quantity estimates		(51,342	)		924
Accretion of discount		37,517			13,561
Net change in income taxes		1,601			(2,762	)
Net change in timing of production and other		(1,374	)		(791	)

Standardized measure of discounted future net cash flows, end of the period	$	135,069		$	365,883

F-43

ANNEX A

GLOSSARY OF OIL AND NATURAL GAS TERMS

The following are abbreviations and definitions of certain terms used in this document, which are commonly used in the oil and natural gas industry:

3-D seismic . Geophysical data that depict the subsurface strata in three dimensions. 3-D seismic typically provides a more detailed and accurate interpretation of the subsurface strata than 2-D, or two-dimensional, seismic.

Analogous reservoir . Analogous reservoirs, as used in resources assessments, have similar rock and fluid properties, reservoir conditions (depth, temperature, and pressure) and drive mechanisms, but are typically at a more advanced stage of development than the reservoir of interest and thus may provide concepts to assist in the interpretation of more limited data and estimation of recovery. When used to support proved reserves, an analogous reservoir refers to a reservoir that shares the following characteristics with the reservoir of interest: (i) same geological formation (but not necessarily in pressure communication with the reservoir of interest); (ii) same environment of deposition; (iii) similar geological structure; and (iv) same drive mechanism. For a complete definition of analogous reservoir, refer to the SEC’s Regulation S-X, Rule 4-10(a)(2).

Basin . A large natural depression on the earth’s surface in which sediments generally brought by water accumulate.

Bbl . One stock tank barrel of 42 U.S. gallons liquid volume used herein in reference to crude oil, condensate or NGLs.

Bbl/d . One Bbl per day.

Bcf . One billion cubic feet of natural gas.

Boe . One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil. This is an energy content correlation and does not reflect a value or price relationship between the commodities.

Boe/d . One Boe per day.

British thermal unit or Btu . The quantity of heat required to raise the temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.

Completion . Installation of permanent equipment for production of oil or gas, or, in the case of a dry well, to reporting to the appropriate authority that the well has been abandoned.

Condensate. A mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure, but that, when produced, is in the liquid phase at surface pressure and temperature.

Delineation . The process of placing a number of wells in various parts of a reservoir to determine its boundaries and production characteristics.

Developed acreage . The number of acres that are allocated or assignable to productive wells or wells capable of production.

Development costs . Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and natural gas. For a complete definition of development costs refer to the SEC’s Regulation S-X, Rule 4-10(a)(7).

A-1

Development project . The means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single reservoir or field, an incremental development in a producing field or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a development project.

Development well . A well drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive.

Differential . An adjustment to the price of oil or natural gas from an established spot market price to reflect differences in the quality and/or location of oil or natural gas.

Downspacing . Additional wells drilled between known producing wells to better develop the reservoir.

Dry well . A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

Economically producible . The term economically producible, as it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. For a complete definition of economically producible, refer to the SEC’s Regulation S-X, Rule 4-10(a)(10).

Estimated ultimate recovery or EUR . The sum of reserves remaining as of a given date and cumulative production as of that date.

Exploration costs . Costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects of containing oil and natural gas reserves, including costs of drilling exploratory wells and exploratory-type stratigraphic test wells. For a complete definition of exploration costs, refer to the SEC’s Regulation S-X, Rule 4-10(a)(12).

Exploratory well . A well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or natural gas in another reservoir.

Field . An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations. For a complete definition of field, refer to the SEC’s Regulation S-X, Rule 4-10(a)(15).

Formation . A layer of rock which has distinct characteristics that differs from nearby rock.

Gross acres or gross wells . The total acres or wells, as the case may be, in which a working interest is owned.

Held by production . Acreage covered by a mineral lease that perpetuates a company’s right to operate a property as long as the property produces a minimum paying quantity of oil or gas.

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

MBbl . One thousand barrels of crude oil, condensate or NGLs.

MBoe . One thousand Boe.

Mcf . One thousand cubic feet of natural gas.

Mcf/d . One Mcf per day.

A-2

MMBbl . One million barrels of crude oil, condensate or NGLs.

MMBoe . One million Boe.

MMBtu . One million British thermal units.

MMcf . One million cubic feet of natural gas.

Net acres . The percentage of total acres an owner has out of a particular number of acres, or a specified tract. An owner who has 50% interest in 100 acres owns 50 net acres.

Net production . Production that is owned less royalties and production due to others.

Net revenue interest . A working interest owner’s gross working interest in production less the royalty, overriding royalty, production payment and net profits interests.

NGLs . Natural gas liquids. Hydrocarbons found in natural gas which may be extracted as liquefied petroleum gas and natural gasoline.

NYMEX . The New York Mercantile Exchange.

Offset operator . Any entity that has an active lease on an adjoining property for oil, natural gas or NGLs purposes.

Operator . The individual or company responsible for the development and/or production of an oil or natural gas well or lease.

Play . A geographic area with hydrocarbon potential.

Present value of future net revenues or PV-10 . The estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development and abandonment costs, using prices and costs in effect at the determination date, before income taxes, and without giving effect to non-property-related expenses, discounted to a present value using an annual discount rate of 10% in accordance with the guidelines of the SEC.

Production costs . Costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. For a complete definition of production costs, refer to the SEC’s Regulation S-X, Rule 4-10(a)(20).

Productive well . A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of the production exceed production expenses and taxes.

Prospect . A specific geographic area which, based on supporting geological, geophysical or other data and also preliminary economic analysis using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons.

Proved area . Part of a property to which proved reserves have been specifically attributed.

Proved developed reserves . Reserves that can be expected to be recovered through (i) existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well or (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

A-3

Proved properties . Properties with proved reserves.

Proved reserves . Those quantities of oil, natural gas and NGLs, 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. For a complete definition of proved oil and natural gas reserves, refer to the SEC’s Regulation S-X, Rule 4-10(a)(22).

Proved undeveloped reserves or PUDs . Proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Undrilled locations can be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that such locations are scheduled to be drilled within five years, unless specific circumstances justify a longer time.

Realized price . The cash market price less all expected quality, transportation and demand adjustments.

Reasonable certainty . A high degree of confidence. For a complete definition of reasonable certainty, refer to the SEC’s Regulation S-X, Rule 4-10(a)(24).

Recompletion . The completion for production of an existing wellbore in another formation from that which the well has been previously completed

Reliable technology . Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.

Reserves . Estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to market and all permits and financing required to implement the project. Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).

Reservoir . A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

Resources . Quantities of oil and natural gas estimated to exist in naturally occurring accumulations. A portion of the resources may be estimated to be recoverable and another portion may be considered to be unrecoverable. Resources include both discovered and undiscovered accumulations.

Royalty . An interest in an oil and natural gas lease that gives the owner the right to receive a portion of the production from the leased acreage (or of the proceeds from the sale thereof), but does not require the owner to pay any portion of the production or development costs on the leased acreage. Royalties may be either landowner’s royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner.

A-4

Service well. A well drilled or completed for the purpose of supporting production in an existing field.

Spacing . The distance between wells producing from the same reservoir. Spacing is often expressed in terms of acres, e.g., 40-acre spacing, and is often established by regulatory agencies.

Spot market price . The cash market price without reduction for expected quality, transportation and demand adjustments.

Spud . Commenced drilling operations on an identified location.

Standardized measure . Discounted future net cash flows estimated by applying year-end prices to the estimated future production of year-end proved reserves. Future cash inflows are reduced by estimated future production and development costs based on period-end costs to determine pre-tax cash inflows. Future income taxes, if applicable, are computed by applying the statutory tax rate to the excess of pre-tax cash inflows over our tax basis in the oil and natural gas properties. Future net cash inflows after income taxes are discounted using a 10% annual discount rate.

Stratigraphic test well . A drilling effort, geologically directed, to obtain information pertaining to a specific geologic condition. Such wells customarily are drilled without the intent of being completed for hydrocarbon production. The classification also includes tests identified as core tests and all types of expendable holes related to hydrocarbon exploration. Stratigraphic tests are classified as “exploratory type” if not drilled in a known area or “development type” if drilled in a known area.

Success rate . The percentage of wells drilled which produce hydrocarbons in commercial quantities.

Undeveloped acreage . Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.

Unit . The joining of all or substantially all interests in a reservoir or field, rather than a single tract, to provide for development and operation without regard to separate property interests. Also, the area covered by a unitization agreement.

Unproved properties . Properties with no proved reserves.

Wellbore . The hole drilled by the bit that is equipped for natural gas production on a completed well. Also called well or borehole.

Wellbore only rights . A working interest that limits the working interest to the production and equipment associated with a specific wellbore only and does not include ownership in the acreage outside of the regulatory proration unit for that wellbore.

Working interest . The right granted to the lessee of a property to develop and produce and own natural gas or other minerals. The working interest owners bear the exploration, development and operating costs on either a cash, penalty or carried basis.

Workover . Operations on a producing well to restore or increase production.

WTI . West Texas Intermediate.

A-5

LOGO

Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth an itemized statement of the amounts of all expenses (excluding underwriting discounts and commissions) payable by us in connection with the registration of the common stock offered hereby. With the exception of the SEC registration fee and the FINRA filing fee, the amounts set forth below are estimates.


SEC registration fee	$	*
FINRA filing fee		*
NASDAQ listing fee		*
Accounting fees and expenses		*
Legal fees and expenses		*
Printing and engraving expenses		*
Transfer agent and registrar fees		*
Miscellaneous		*

Total	$	*

*	To be provided by amendment

Item 14. Indemnification of Directors and Officers

Section 145 of the DGCL provides that a corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise), against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. A similar standard is applicable in the case of derivative actions (i.e., actions by or in the right of the corporation), except that indemnification extends only to expenses, including attorneys’ fees, incurred in connection with the defense or settlement of such action and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation.

Our amended and restated certificate of incorporation and our amended and restated bylaws will contain provisions that limit the liability of our directors and officers for monetary damages to the fullest extent permitted by the DGCL. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except liability:

•

for any breach of the director’s duty of loyalty to our company or our stockholders;

•

for any act or omission not in good faith or that involve intentional misconduct or knowing violation of law;

•

under Section 174 of the DGCL regarding unlawful dividends and stock purchases; or

•

for any transaction from which the director derived an improper personal benefit.

Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal. If the DGCL is

II-1

amended to provide for further limitations on the personal liability of directors or officers of corporations, then the personal liability of our directors and officers will be further limited to the fullest extent permitted by the DGCL.

In addition, we intend to enter into indemnification agreements with our current directors and officers containing provisions that are in some respects broader than the specific indemnification provisions contained in the DGCL. The indemnification agreements will require us, among other things, to indemnify our directors against certain liabilities that may arise by reason of their status or service as directors and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future directors and officers.

We intend to maintain liability insurance policies that indemnify our directors and officers against various liabilities, including certain liabilities under arising under the Securities Act and the Exchange Act, that may be incurred by them in their capacity as such.

The proposed form of Underwriting Agreement to be filed as Exhibit 1.1 to this registration statement provides for indemnification of our directors and officers by the underwriters against certain liabilities arising under the Securities Act or otherwise in connection with this offering.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Item 15. Recent Sales of Unregistered Securities

Prior to the closing of this offering, based on the assumed initial public offering price of $ per share of common stock (the midpoint of the price range set forth on the cover of this prospectus), we will issue shares of our common stock to the members of Centennial Resource Production, LLC in connection with our corporate reorganization. The shares of our common stock described in this Item 15 will be issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act as sales by an issuer not involving any public offering.

II-2

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits


Exhibit Number			Description
	*1.1		Form of Underwriting Agreement
	3.1		Certificate of Incorporation of Centennial Resource Development, Inc.
	*3.2		Form of Amended and Restated Certificate of Incorporation of Centennial Resource Development, Inc.
	3.3		Bylaws of Centennial Resource Development, Inc.
	*3.4		Form of Amended and Restated Bylaws of Centennial Resource Development, Inc.
	*4.1		Form of Common Stock Certificate
	*4.2		Form of Registration Rights Agreement among Centennial Resource Development, Inc., Centennial Resource Development, LLC, Celero Energy Company, LP and NGP Centennial Follow-On LLC
	*4.3		Form of Voting Agreement among Centennial Resource Development, Inc., Centennial Resource Development LLC and Celero Energy Company, LP
	*5.1		Form of opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered
	10.1		Amended and Restated Credit Agreement, dated as of October 15, 2014, among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto
	10.2		First Amendment to Amended and Restated Credit Agreement, dated as of May 6, 2015, among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and guarantors party thereto
	*10.3	†	Form of Centennial Resource Development, Inc. 2016 Long Term Incentive Plan
	*10.4	†	Form of Restricted Stock Agreement
	*10.5		Form of Indemnification Agreement between Centennial Resource Development, Inc. and each of the directors and officers thereof
	*10.6		Form of Second Amended and Restated Limited Liability Company Agreement of Centennial Resource Development, LLC
	*10.7		Form of Master Contribution Agreement among Centennial Resource Development, Inc., Centennial Resource Development, LLC, Celero Energy Company, LP and NGP Centennial Follow-On LLC
	*21.1		Subsidiaries of Centennial Resource Development, Inc.
	23.1		Consent of KPMG LLP
	23.2		Consent of KPMG LLP
	23.3		Consent of Netherland, Sewell & Associates, Inc.
	*23.4		Consent of Vinson & Elkins L.L.P. (included as part of Exhibit 5.1 hereto)
	24.1		Power of Attorney (included on the signature page of this Registration Statement)
	99.1		Netherland, Sewell & Associates, Inc., Summary of Reserves at December 31, 2014
	99.2		Netherland, Sewell & Associates, Inc., Summary of Reserves at December 31, 2015

*	To be filed by amendment.

†	Compensatory plan or arrangement.

(b) Financial Statement Schedules. Financial statement schedules are omitted because the required information is not applicable, not required or included in the financial statements or the notes thereto included in the prospectus that forms a part of this registration statement.

II-3

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1)

For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2)

For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on June 22, 2016.


CENTENNIAL RESOURCE DEVELOPMENT, INC.

By:		/s/ Ward Polzin
Name:		Ward Polzin
Title:		Chief Executive Officer

Each person whose signature appears below appoints George Glyphis and Jamie Wheat, and each of them, any of whom may act without the joinder of the other, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and any registration statement (including any amendment thereto) for this offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or would do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Ward Polzin	Chief Executive Officer and Director (Principal Executive Officer)	June 22, 2016
Ward Polzin

/s/ George Glyphis	Vice President and Chief Financial Officer (Principal Financial Officer)	June 22, 2016
George Glyphis

/s/ Jamie Wheat	Vice President and Chief Accounting Officer (Principal Accounting Officer)	June 22, 2016
Jamie Wheat

/s/ Chris Carter	Director	June 22, 2016
Chris Carter

/s/ David Hayes	Director	June 22, 2016
David Hayes

/s/ Christopher Ray	Director	June 22, 2016
Christopher Ray

	Director
Martin Sumner

/s/ Tony Weber	Director	June 22, 2016
Tony Weber

II-5

INDEX TO EXHIBITS


Exhibit Number		Description

	*1.1	Form of Underwriting Agreement

	3.1	Certificate of Incorporation of Centennial Resource Development, Inc.

	*3.2	Form of Amended and Restated Certificate of Incorporation of Centennial Resource Development, Inc.

	3.3	Bylaws of Centennial Resource Development, Inc.

	*3.4	Form of Amended and Restated Bylaws of Centennial Resource Development, Inc.

	*4.1	Form of Common Stock Certificate

	*4.2	Form of Registration Rights Agreement among Centennial Resource Development, Inc., Centennial Resource Development, LLC, Celero Energy Company, LP and NGP Centennial Follow-On LLC

	*4.3	Form of Voting Agreement among Centennial Resource Development, Inc., Centennial Resource Development, LLC and Celero Energy Company, LP

	*5.1	Form of opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered

	10.1	Amended and Restated Credit Agreement, dated as of October 15, 2014, among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto

	10.2	First Amendment to Amended and Restated Credit Agreement, dated as of May 6, 2015, among Centennial Resource Production, LLC, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and guarantors party thereto

	*10.3†	Form of Centennial Resource Development, Inc. 2016 Long Term Incentive Plan

	*10.4†	Form of Restricted Stock Agreement

	*10.5	Form of Indemnification Agreement between Centennial Resource Development, Inc. and each of the directors and officers thereof

	*10.6	Form of Second Amended and Restated Limited Liability Company Agreement of Centennial Resource Development, LLC

	*10.7	Form of Master Contribution Agreement among Centennial Resource Development, Inc., Centennial Resource Development, LLC, Celero Energy Company, LP and NGP Centennial Follow-On LLC

	*21.1	Subsidiaries of Centennial Resource Development, Inc.

	23.1	Consent of KPMG LLP

	23.2	Consent of KPMG LLP

	23.3	Consent of Netherland, Sewell & Associates, Inc.

	*23.4	Consent of Vinson & Elkins L.L.P. (included as part of Exhibit 5.1 hereto)

	24.1	Power of Attorney (included on the signature page of this Registration Statement)

	99.1	Netherland, Sewell & Associates, Inc., Summary of Reserves at December 31, 2014

	99.2	Netherland, Sewell & Associates, Inc., Summary of Reserves at December 31, 2015

*	To be filed by amendment.

†	Compensatory plan or arrangement.

II-6

Exhibit 3.1

CERTIFICATE OF INCORPORATION

CENTENNIAL RESOURCE DEVELOPMENT, INC.

FIRST: The name of the corporation is Centennial Resource Development, Inc. (the “Corporation”).

SECOND: The address of the Corporation’s registered office in the State of Delaware is The Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. The Corporation shall have all power necessary or convenient to the conduct, promotion or attainment of such acts and activities.

FOURTH: The total number of shares of all classes of stock that the Corporation shall have authority to issue is One Thousand (1,000) shares. All shares shall be Common Stock, par value of One Cent ($0.01) per share, and are to be of one class.

FIFTH: Each holder of shares of Common Stock shall be entitled to attend all special and annual meetings of the stockholders of the Corporation and to cast one vote for each outstanding share of Common Stock so held upon any matter or thing (including, without limitation, the election of one or more directors) properly considered and acted upon by the stockholders.

SIXTH: The name of the incorporator is Robert O. Hopkins and his mailing address is c/o Vinson & Elkins L.L.P., 1001 Fannin Street, Houston, Texas 77002-6760.

SEVENTH: In furtherance of, and not in limitation of, the powers conferred by the General Corporation Law of the State of Delaware, the Board of Directors is expressly authorized and empowered to adopt, amend or repeal the bylaws of the Corporation or adopt new bylaws without any action on part of the stockholders; provided that any bylaw adopted or amended by the Board of Directors, and any powers thereby conferred, may be amended, altered or repealed by the stockholders.

EIGHTH: The number of directors of the Corporation shall be such number as from time to time shall be fixed by, or in the manner provided in, the bylaws of the Corporation. Unless and except to the extent that the bylaws of the Corporation shall otherwise require, the election of directors need not be by written ballot. Except as otherwise provided in this Certificate of Incorporation, each director of the Corporation shall be entitled to one vote on all matters voted or acted upon by the Board of Directors of the Corporation.

NINTH: The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors of the Corporation.

TENTH: No director of the corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article TENTH shall be prospective only and shall not adversely affect any right or protection of, or limitation of the liability of, a director of the Corporation existing at, or arising out of facts or incidents occurring prior to, the effective date of such repeal or modification.

ELEVENTH: The Corporation reserves the right at any time, and from time to time, to amend, change or repeal any provision contained in this Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of any nature conferred upon directors, stockholders or any other persons by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Article ELEVENTH.

I, the undersigned, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this Certificate of Incorporation, hereby declaring that this is my act and deed and that the facts herein stated are true, and accordingly have hereunto set my hand this 6th day of October, 2014.

/s/ Robert O. Hopkins

Robert O. Hopkins

Exhibit 3.3

BYLAWS

CENTENNIAL RESOURCE DEVELOPMENT, INC.

A Delaware Corporation

Date of Adoption:

October 6, 2014

TABLE OF CONTENTS


		Page
ARTICLE I
OFFICES

Section 1.	Registered Office		1
Section 2.	Other Offices		1

ARTICLE II
STOCKHOLDERS

Section 1.	Place of Meetings		1
Section 2.	Quorum; Adjournment of Meetings		1
Section 3.	Annual Meetings		2
Section 4.	Special Meetings		2
Section 5.	Record Date		2
Section 6.	Notice of Meetings		2
Section 7.	Stock List		3
Section 8.	Proxies		3
Section 9.	Voting; Elections; Inspectors		3
Section 10.	Conduct of Meetings		4
Section 11.	Treasury Stock		5
Section 12.	Action Without Meeting		5

ARTICLE III
BOARD OF DIRECTORS

Section 1.	Power; Number; Term of Office		5
Section 2.	Quorum		6
Section 3.	Place of Meetings; Order of Business		6
Section 4.	First Meeting		6
Section 5.	Regular Meetings		6
Section 6.	Special Meetings		6
Section 7.	Removal		6
Section 8.	Vacancies; Increases in the Number of Directors		7
Section 9.	Compensation		7
Section 10.	Action Without a Meeting; Telephone Conference Meeting		7
Section 11.	Approval or Ratification of Acts or Contracts by Stockholders		7

ARTICLE IV
COMMITTEES

Section 1.	Designation; Powers		8
Section 2.	Procedure; Meetings; Quorum		8
Section 3.	Substitution of Members		8


		Page
ARTICLE V
OFFICERS

Section 1.	Number, Titles and Term of Office		9
Section 2.	Salaries		9
Section 3.	Removal		9
Section 4.	Vacancies		9
Section 5.	Powers and Duties of the Chief Executive Officer		9
Section 6.	Powers and Duties of the Chairman of the Board		9
Section 7.	Vice Presidents		9
Section 8.	Treasurer		10
Section 9.	Assistant Treasurers		10
Section 10.	Secretary		10
Section 11.	Assistant Secretaries		10
Section 12.	Action with Respect to Securities of Other Corporations		10

ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS

Section 1.	Right to Indemnification		11
Section 2.	Indemnification of Employees and Agents		11
Section 3.	Right of Claimant to Bring Suit		11
Section 4.	Nonexclusivity of Rights		12
Section 5.	Insurance		12
Section 6.	Savings Clause		12
Section 7.	Definitions		12

ARTICLE VII
CAPITAL STOCK

Section 1.	Certificates of Stock		13
Section 2.	Transfer of Shares		13
Section 3.	Ownership of Shares		13
Section 4.	Regulations Regarding Certificates		14
Section 5.	Lost or Destroyed Certificates		14

ARTICLE VIII
MISCELLANEOUS PROVISIONS

Section 1.	Fiscal Year		14
Section 2.	Corporate Seal		14
Section 3.	Notice and Waiver of Notice		14
Section 4.	Resignations		14
Section 5.	Facsimile Signatures		15
Section 6.	Reliance upon Books, Reports and Records		15
Section 7.	Form of Records		15

ARTICLE IX
AMENDMENTS

Section 1.	Amendments		15

BYLAWS

CENTENNIAL RESOURCE DEVELOPMENT, INC.

ARTICLE I

OFFICES

Section 1. Registered Office . The registered office of Centennial Resource Development, Inc. (the “ Corporation ”) required by the General Corporation Law of the State of Delaware (the “ DGCL ”) to be maintained in the State of Delaware, shall be the registered office named in the original Certificate of Incorporation of the Corporation (as the same may be amended and restated from time to time, the “ Certificate of Incorporation ”), or such other office as may be designated from time to time by the Board of Directors of the Corporation (the “ Board of Directors ”) in the manner provided by law. Should the Corporation maintain a principal office within the State of Delaware such registered office need not be identical to such principal office of the Corporation.

Section 2. Other Offices . The Corporation may have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or as the business of the Corporation may require.

ARTICLE II

STOCKHOLDERS

Section 1. Place of Meetings . All meetings of the stockholders shall be held at the principal office of the Corporation, or at such other place within or without the State of Delaware as shall be specified or fixed in the notices or waivers of notice thereof.

Section 2. Quorum; Adjournment of Meetings . Unless otherwise required by law or provided in the Certificate of Incorporation or these bylaws, the holders of shares of stock with a majority of the voting power entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of stockholders for the transaction of business and the act of the holders of a majority of the voting power of such stock so represented at any meeting of stockholders at which a quorum is present shall constitute the act of the meeting of stockholders. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Notwithstanding the other provisions of the Certificate of Incorporation or these bylaws, the chairman of the meeting or the holders of shares of stock with a majority of the voting power present in person or represented by proxy at any meeting of stockholders, whether or not a quorum is present, shall have the power to adjourn such meeting from time to time, without any notice other than announcement at the meeting of the time and place of the holding of the adjourned meeting; provided, however, if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. At any such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally called.

Section 3. Annual Meetings . An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, within or without the State of Delaware, on such date, and at such time as the Board of Directors shall fix and set forth in the notice of the meeting.

Section 4. Special Meetings . Unless otherwise provided in the Certificate of Incorporation, special meetings of the stockholders for any purpose or purposes may be called at any time by the Chairman of the Board (if any), by the Chief Executive Officer or by a majority of the Board of Directors, or by a majority of the executive committee (if any), and shall be called by the Chairman of the Board (if any), by the Chief Executive Officer or the Secretary.

Section 5. Record Date . For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors of the Corporation may fix, in advance, a date as the record date for any such determination of stockholders, which date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.

If the Board of Directors does not fix a record date for any meeting of the stockholders, the record date for determining stockholders entitled to notice of or to vote at such meeting shall be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with Article VIII , Section 3 of these bylaws notice is waived, at the close of business on the day next preceding the day on which the meeting is held. If, in accordance with Section 12 of this Article II , corporate action without a meeting of stockholders is to be taken, the record date for determining stockholders entitled to express consent to such corporate action in writing, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 6. Notice of Meetings . Written notice of the place, date and hour of all meetings, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given by or at the direction of the Chairman of the Board (if any) or the Chief Executive Officer, the Secretary or the other person(s) calling the meeting to each stockholder entitled to vote thereat and shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, personally, by electronic transmission or by mail. If mailed,

notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation. The Corporation may provide stockholders with notice of a meeting by electronic transmission provided such stockholders have consented to receiving electronic notice.

Section 7. Stock List . A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each such stockholder and the number of shares registered in the name of such stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either on a reasonably accessible electronic network, provided that the information required to gain access to the list is provided with the notice of the meeting, or during ordinary business hours, at the principal place of business of the Corporation. The stock list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

Section 8. Proxies . Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to a corporate action in writing without a meeting may authorize another person or persons to act for him by proxy. Proxies for use at any meeting of stockholders shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions.

No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power.

Should a proxy designate two or more persons to act as proxies, unless such instrument shall provide the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect of the same portion of the shares as he or she is of the proxies representing such shares.

Section 9. Voting; Elections; Inspectors . Unless otherwise required by law or provided in the Certificate of Incorporation, each stockholder shall have one vote for each share of stock entitled to vote which is registered in his or her name on the record date for the meeting. Shares registered in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaw (or comparable instrument) of such corporation may

prescribe, or in the absence of such provision, as the Board of Directors (or comparable body) of such corporation may determine. Shares registered in the name of a deceased person may be voted by his or her executor or administrator, either in person or by proxy.

All voting, except as required by the Certificate of Incorporation or where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by stockholders holding shares of stock representing a majority of the voting power present in person or by proxy at any meeting a written ballot vote shall be taken. Unless otherwise provided in the Certificate of Incorporation or these bylaws, directors shall be elected by a plurality of the votes cast by the holders of shares of stock entitled to vote in the election of directors at a meeting of stockholders at which a quorum is present. All other elections and questions presented to the stockholders at a meeting at which a quorum is present shall, unless otherwise provided by the Certificate of Incorporation, these by-laws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, be decided by the affirmative vote of the holders of a majority in voting power of the shares of stock of the Corporation which are present in person or by proxy and entitled to vote thereon. Every stock vote shall be taken by written ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting.

At any meeting at which a vote is taken by ballots, the chairman of the meeting may appoint one or more inspectors, each of whom shall subscribe an oath or affirmation to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his or her ability. Such inspector shall ascertain the number of shares of capital stock of the Corporation outstanding and the voting power of each such share, determine the shares of capital stock of the Corporation represented at the meeting and the validity of proxies and ballots, count all votes and ballots, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and certify their determination of the number of shares of capital stock of the Corporation represented at the meeting and such inspectors’ count of all votes and ballots. Such certification and report shall specify such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Corporation, the inspectors may consider such information as is permitted by applicable law. The chairman of the meeting may appoint any person to serve as inspector, except no candidate for the office of director shall be appointed as an inspector.

Unless otherwise provided in the Certificate of Incorporation, cumulative voting for the election of directors shall be prohibited.

Section 10. Conduct of Meetings . The meetings of the stockholders shall be presided over by the Chairman of the Board (if any), or if he or she is not present, by the Chief Executive Officer, or if neither the Chairman of the Board (if any), nor Chief Executive Officer is present, by a chairman elected at the meeting. The Secretary of the Corporation, if present, shall act as secretary of such meetings, or if he or she is not present, an Assistant Secretary shall so act; if neither the Secretary nor an Assistant Secretary is present, then a secretary shall be appointed by the chairman of the meeting. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of

voting and the conduct of discussion as seem to him in order. Unless the chairman of the meeting of stockholders shall otherwise determine, the order of business shall be as follows:

(a)

Calling of meeting to order.

(b)

Election of a chairman and the appointment of a secretary if necessary.

(c)

Presentation of proof of the due calling of the meeting.

(d)

Presentation and examination of proxies and determination of a quorum.

(e)

Reading and settlement of the minutes of the previous meeting.

(f)

Reports of officers and committees.

(g)

The election of directors if an annual meeting, or a meeting called for that purpose.

(h)

Unfinished business.

(i)

New business.

(j)

Adjournment.

Section 11. Treasury Stock . The Corporation shall not vote, directly or indirectly, shares of its own stock owned by it or any other corporation, if a majority of shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly by the Corporation and such shares shall not be counted for quorum purposes.

Section 12. Action Without Meeting . Unless otherwise provided in the Certificate of Incorporation, any action permitted or required by law, the Certificate of Incorporation or these bylaws to be taken at a meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than a unanimous written consent shall be given by the Secretary to those stockholders who have not consented in writing.

ARTICLE III

BOARD OF DIRECTORS

Section 1. Power; Number; Term of Office . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and subject to the restrictions imposed by law or the Certificate of Incorporation, they may exercise all the powers of the Corporation.

The number of directors of the Corporation shall be determined from time to time by resolution of the Board of Directors, unless the Certificate of Incorporation fixes the number of directors, in which case a change in the number of directors shall be made only by amendment of the Certificate of Incorporation. Each director shall hold office for the term for which he or she is elected, and until his or her successor shall have been elected and qualified or until his or her earlier death, resignation or removal.

Unless otherwise provided in the Certificate of Incorporation, directors need not be stockholders nor residents of the State of Delaware.

Section 2. Quorum . Unless otherwise provided in the Certificate of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business of the Board of Directors and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 3. Place of Meetings; Order of Business . The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by law, in such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine by resolution. At all meetings of the Board of Directors business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board (if any), or in his or her absence by the Chief Executive Officer, or by resolution of the Board of Directors.

Section 4. First Meeting . Each newly elected Board of Directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of the stockholders. Notice of such meeting shall not be required.

Section 5. Regular Meetings . Regular meetings of the Board of Directors shall be held at such times and places as shall be designated from time to time by resolution of the Board of Directors. Notice of such regular meetings shall not be required.

Section 6. Special Meetings . Special meetings of the Board of Directors may be called by the Chairman of the Board (if any), the Chief Executive Officer or, on the written request of any two directors, by the Secretary, in each case on at least twenty-four (24) hours personal or written notice or on at least twenty-four (24) hours notice by electronic transmission to each director. Such notice, or any waiver thereof pursuant to Article VIII , Section 3 hereof, need not state the purpose or purposes of such meeting, except as may otherwise be required by law or provided for in the Certificate of Incorporation or these bylaws.

Section 7. Removal . Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided that, unless the Certificate of Incorporation otherwise provides, if the Board of Directors is classified, then the stockholders may effect such removal only for cause; and provided further that, if the Certificate of Incorporation expressly grants to stockholders the right to cumulate votes for the election of directors and if less than the entire Board of Directors is to be removed, no director may be removed without cause if the votes cast

against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which such director is a part.

Section 8. Vacancies; Increases in the Number of Directors . Unless otherwise provided in the Certificate of Incorporation, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or a sole remaining director; and any director so chosen shall hold office until the next annual election and until his or her successor shall be duly elected and shall qualify, unless sooner displaced.

If the directors of the Corporation are divided into classes, any directors elected to fill vacancies or newly created directorships shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be duly elected and shall qualify.

Section 9. Compensation . Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of directors.

Section 10. Action Without a Meeting; Telephone Conference Meeting . Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee designated by the Board of Directors, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be stated as such in any document or instrument filed with the Secretary of State of Delaware.

Unless otherwise restricted by the Certificate of Incorporation, subject to the requirement for notice of meetings, members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in a meeting of such Board of Directors or committee, as the case may be, by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Section 11. Approval or Ratification of Acts or Contracts by Stockholders . The Board of Directors in its discretion may submit any act or contract for approval or ratification at any annual meeting of the stockholders, or at any special meeting of the stockholders called for the purpose of considering any such act or contract, and any act or contract that shall be approved or be ratified by the vote of the holders of shares of stock representing a majority of the voting power entitled to vote and present in person or by proxy at such meeting (provided that a quorum is present), shall be as valid and as binding upon the Corporation and upon all the stockholders as if it has been approved or ratified by every stockholder of the Corporation. In addition, any such

act or contract may be approved or ratified by the written consent of the holders of shares of stock representing a majority of the voting power entitled to vote and such consent shall be as valid and as binding upon the Corporation and upon all the stockholders as if it had been approved or ratified by every stockholder of the Corporation.

ARTICLE IV

COMMITTEES

Section 1. Designation; Powers . The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, including, if they shall so determine, an executive committee, each such committee to consist of one or more of the directors of the Corporation. Any such designated committee shall have and may exercise such of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation as may be provided in such resolution, except that no such committee shall have the power or authority of the Board of Directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders an agreement of merger, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution of the Corporation, or amending, altering or repealing the bylaws or adopting new bylaws for the Corporation and, unless such resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Any such designated committee may authorize the seal of the Corporation to be affixed to all papers which may require it. In addition to the above, such committee or committees shall have such other powers and limitations of authority as may be determined from time to time by resolution adopted by the Board of Directors.

Section 2. Procedure; Meetings; Quorum . Any committee designated pursuant to Section 1 of this Article IV shall choose its own chairman, shall keep regular minutes of its proceedings and report the same to the Board of Directors when requested, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by resolution of such committee or resolution of the Board of Directors. At every meeting of any such committee, the presence of a majority of all the members thereof shall constitute a quorum and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution.

Section 3. Substitution of Members . The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

ARTICLE V

OFFICERS

Section 1. Number, Titles and Term of Office . The officers of the Corporation shall be a Chief Executive Officer and a Secretary and, if the Board of Directors so elects, a Chairman of the Board, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), a Treasurer and such other officers as the Board of Directors may from time to time elect or appoint. Each officer shall hold office until his or her successor shall be duly elected and shall qualify or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided. Any number of offices may be held by the same person, unless the Certificate of Incorporation provides otherwise. Except for the Chairman of the Board, if any, no officer need be a director.

Section 2. Salaries . The salaries or other compensation of the officers and agents of the Corporation shall be fixed from time to time by the Board of Directors.

Section 3. Removal . Any officer or agent elected or appointed by the Board of Directors may be removed, either with or without cause, by the vote of a majority of the whole Board of Directors at a special meeting called for the purpose, or at any regular meeting of the Board of Directors. Election or appointment of an officer or agent shall not of itself create contract rights.

Section 4. Vacancies . Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors.

Section 5. Powers and Duties of the Chief Executive Officer . Subject to the control of the Board of Directors and the executive committee (if any), the Chief Executive Officer shall have general executive charge, management and control of the properties, business and operations of the Corporation with all such powers as may be reasonably incident to such responsibilities; he or she may agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation and may sign all certificates for shares of capital stock of the Corporation; and shall have such other powers and duties as designated in accordance with these bylaws and as from time to time may be assigned to him by the Board of Directors.

Section 6. Powers and Duties of the Chairman of the Board . If elected, the Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors and shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors.

Section 7. Vice Presidents . In the absence of the Chief Executive Officer, or in the event of his or her inability or refusal to act, a Vice President designated by the Board of Directors shall perform the duties of the Chief Executive Officer, and when so acting shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. In the absence of a designation by the Board of Directors of a Vice President to perform the duties of the Chief Executive Officer, or in the event of his or her absence or inability or refusal to act, the Vice President who is present and who is senior in terms of time as a Vice President of the Corporation shall so act. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

Section 8. Treasurer . The Treasurer, if any, shall have responsibility for the custody and control of all the funds and securities of the Corporation, and he or she shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him or her by the Board of Directors. He or she shall perform all acts incident to the position of Treasurer, subject to the control of the Chief Executive Officer and the Board of Directors; and he or she shall, if required by the Board of Directors, give such bond for the faithful discharge of his or her duties in such form as the Board of Directors may require.

Section 9. Assistant Treasurers . Each Assistant Treasurer, if any, shall have the usual powers and duties pertaining to his or her office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him or her by the Chief Executive Officer or the Board of Directors. The Assistant Treasurers shall exercise the powers of the Treasurer during that officer’s absence or inability or refusal to act.

Section 10. Secretary . The Secretary shall keep the minutes of all meetings of the Board of Directors, committees of directors and the stockholders, in books provided for that purpose; he or she shall attend to the giving and serving of all notices; he or she may in the name of the Corporation affix the seal of the Corporation to all contracts of the Corporation and attest the affixation of the seal of the Corporation thereto; he or she may sign with the other appointed officers all certificates for shares of capital stock of the Corporation; he or she shall have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection of any director upon application at the office of the Corporation during business hours; he or she shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him or her by the Board of Directors or the Chief Executive Officer; and he or she shall in general perform all acts incident to the office of Secretary, subject to the control of the Chief Executive Officer and the Board of Directors.

Section 11. Assistant Secretaries . Each Assistant Secretary, if any, shall have the usual powers and duties pertaining to his or her office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him or her by the Chief Executive Officer or the Board of Directors. The Assistant Secretaries shall exercise the powers of the Secretary during that officer’s absence or inability or refusal to act.

Section 12. Action with Respect to Securities of Other Corporations . Unless otherwise directed by the Board of Directors, the Chief Executive Officer shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS

Section 1. Right to Indemnification . Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative, is or was or has agreed to become a director or officer of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving or having agreed to serve as a director or officer, shall be indemnified, advanced expenses and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) against all expense, liability and loss (including without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to serve in the capacity which initially entitled such person to indemnity hereunder and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof), other than a proceeding (or part thereof) brought under Section 3 of this Article VI , initiated by such person or his or her heirs, executors and administrators only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Article VI shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the DGCL requires, the payment of such expenses incurred by a current, former or proposed director or officer in his or her capacity as a director or officer or proposed director or officer (and not in any other capacity in which service was or is or has been agreed to be rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnified person, to repay all amounts so advanced if it shall ultimately be determined that such indemnified person is not entitled to be indemnified under this Section or otherwise.

Section 2. Indemnification of Employees and Agents . The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation, individually or as a group, with the same scope and effect as the indemnification of directors and officers provided for in this Article VI .

Section 3. Right of Claimant to Bring Suit . If a written claim received by the Corporation from or on behalf of an indemnified party under this Article VI is not paid in full by the Corporation within ninety days after such receipt, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in

whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 4. Nonexclusivity of Rights . The right to indemnification and the advancement and payment of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any law (common or statutory), provision of the Certificate of Incorporation of the Corporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

Section 5. Insurance . The Corporation may maintain insurance, at its expense, to protect itself and any person who is or was serving as a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Section 6. Savings Clause . If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify and hold harmless each director and officer of the Corporation, as to costs, charges and expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law. Any repeal or modification of the foregoing provisions of this Article VI shall not adversely affect any right or protection hereunder of any person indemnified under this Article VI in respect of any act or omission occurring prior to the time of such repeal or modification.

Section 7. Definitions . For purposes of this Article, reference to the “Corporation” shall include, in addition to the Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger prior to (or, in the case of an entity specifically designated in a resolution of the Board of Directors, after) the adoption hereof and which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another

corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

ARTICLE VII

CAPITAL STOCK

Section 1. Certificates of Stock . Except as provided in this Section 1 of Article VII, the certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with that required by law and the Certificate of Incorporation, as shall be approved by the Board of Directors. The Chairman of the Board (if any), Chief Executive Officer or a Vice President shall cause to be issued to each stockholder one or more certificates, under the seal of the Corporation or a facsimile thereof if the Board of Directors shall have provided for such seal, and signed by the Chairman of the Board (if any), Chief Executive Officer or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer certifying the number of shares owned by such stockholder in the Corporation; provided, however, that any of or all the signatures on the certificate may be facsimile. The stock record books and the blank stock certificate books shall be kept by the Secretary, or at the office of such transfer agent or transfer agents as the Board of Directors may from time to time by resolution determine. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature or signatures shall have been placed upon any such certificate or certificates shall have ceased to be such officer, transfer agent or registrar before such certificate is issued by the Corporation, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The stock certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder’s name and number of shares. The Board of Directors may deem that any outstanding shares of the Corporation will be uncertificated and registered in such form on the stock books of the Corporation.

Section 2. Transfer of Shares . Subject to the provisions of the Certificate of Incorporation and any other applicable agreements regarding the transfer of stock, the shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives upon surrender and cancellation of certificates for a like number of shares. Subject to the provisions of the Certificate of Incorporation and any other applicable agreements regarding the transfer of stock, upon surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

Section 3. Ownership of Shares . The Corporation shall be entitled to treat the holder of record of any share or shares of capital stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

Section 4. Regulations Regarding Certificates . The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of capital stock of the Corporation.

Section 5. Lost or Destroyed Certificates . The Board of Directors may determine the conditions upon which a new certificate of stock may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed; and may, in their discretion, require the owner of such certificate or his or her legal representative to give bond, with sufficient surety, to indemnify the Corporation and each transfer agent and registrar against any and all losses or claims which may arise by reason of the issue of a new certificate in the place of the one so lost, stolen or destroyed.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 1. Fiscal Year . The fiscal year of the Corporation shall be such as established from time to time by the Board of Directors.

Section 2. Corporate Seal . The Board of Directors may provide a suitable seal, containing the name of the Corporation. The Secretary shall have charge of the seal (if any). If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by the Assistant Secretary or Assistant Treasurer.

Section 3. Notice and Waiver of Notice . Whenever any notice is required to be given by law, the Certificate of Incorporation or under the provisions of these bylaws, said notice shall be deemed to be sufficient if given by electronic transmission or by deposit of the same in a post office box in a sealed prepaid wrapper addressed to the person entitled thereto at his or her post office address, as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such transmission or mailing, as the case may be.

Whenever notice is required to be given by law, the Certificate of Incorporation or under any of the provisions of these bylaws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these bylaws.

Section 4. Resignations . Any director, member of a committee or officer may resign at any time. Such resignation shall be made in writing or by electronic transmission and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the Chief Executive Officer or Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.

Section 5. Facsimile Signatures . In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors.

Section 6. Reliance upon Books, Reports and Records . Each director and each member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Corporation.

Section 7. Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time.

ARTICLE IX

AMENDMENTS

Section 1. Amendments . If provided in the Certificate of Incorporation of the Corporation, the Board of Directors shall have the power to adopt, amend and repeal from time to time bylaws of the Corporation, subject to the right of the stockholders entitled to vote with respect thereto to amend or repeal such bylaws as adopted or amended by the Board of Directors.

Exhibit 10.1

Execution Version

A MENDED AND R ESTATED C REDIT A GREEMENT

dated as of October 15, 2014

among

C ENTENNIAL R ESOURCE P RODUCTION , LLC,

as Borrower,

Any Parent Guarantor Party Hereto ,

JPM ORGAN C HASE B ANK , N.A.,

as Administrative Agent,

and

The Lenders Party Hereto

J.P. M ORGAN S ECURITIES LLC,

W ELLS F ARGO S ECURITIES , LLC , AND C OMERICA B ANK ,

as Joint Lead Arrangers,

W ELLS F ARGO B ANK , N.A., AND C OMERICA B ANK ,

as Co-Syndication Agents,

BMO H ARRIS B ANK , N.A., C ANADIAN I MPERIAL B ANK OF C OMMERCE , N EW Y ORK B RANCH ,

AND U.S. B ANK N ATIONAL A SSOCIATION ,

as Co-Documentation Agents,

and

J.P. M ORGAN S ECURITIES LLC,

as Sole Bookrunner

T ABLE O F C ONTENTS


		Page
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01	Terms Defined Above.		1
Section 1.02	Certain Defined Terms.		1
Section 1.03	Types of Loans and Borrowings.		32
Section 1.04	Terms Generally; Rules of Construction.		32
Section 1.05	Accounting Terms and Determinations; GAAP.		32

ARTICLE II
THE CREDITS

Section 2.01	Term Loan Commitment.		33
Section 2.02	Revolving Credit Commitment.		33
Section 2.03	Loans and Borrowings.		33
Section 2.04	Requests for Borrowings.		34
Section 2.05	Interest Elections.		36
Section 2.06	Funding of Borrowings.		37
Section 2.07	Termination and Reduction of Commitments and Aggregate Maximum Revolving Credit Amounts.		38
Section 2.08	Borrowing Base.		39
Section 2.09	Letters of Credit.		41

ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

Section 3.01	Repayment of Loans.		47
Section 3.02	Interest.		47
Section 3.03	Alternate Rate of Interest.		49
Section 3.04	Prepayments.		49
Section 3.05	Fees.		52

ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

Section 4.01	Payments Generally; Pro Rata Treatment; Sharing of Set-offs.		54
Section 4.02	Presumption of Payment by the Borrower.		55
Section 4.03	Certain Deductions by the Administrative Agent.		55
Section 4.04	Disposition of Proceeds.		56

ARTICLE V
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

Section 5.01	Increased Costs.		56
Section 5.02	Break Funding Payments.		57
Section 5.03	Taxes.		57
Section 5.04	Mitigation Obligations; Replacement of Lenders.		61
Section 5.05	Illegality.		62


		Page

ARTICLE VI
CONDITIONS PRECEDENT

Section 6.01	Effective Date.		62
Section 6.02	Each Credit Event.		65
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01	Organization; Powers.		66
Section 7.02	Authority; Enforceability.		66
Section 7.03	Approvals; No Conflicts.		66
Section 7.04	Financial Condition; No Material Adverse Change.		67
Section 7.05	Litigation.		68
Section 7.06	Environmental Matters.		68
Section 7.07	Compliance with the Laws and Agreements; No Defaults or Borrowing Base Deficiency.		69
Section 7.08	Investment Company Act.		69
Section 7.09	Taxes.		70
Section 7.10	ERISA.		70
Section 7.11	Disclosure; No Material Misstatements.		71
Section 7.12	Insurance.		71
Section 7.13	Restriction on Liens.		71
Section 7.14	Subsidiaries.		72
Section 7.15	Location of Business and Offices.		72
Section 7.16	Properties; Titles, Etc.		72
Section 7.17	Maintenance of Properties.		73
Section 7.18	Gas Imbalances, Prepayments.		73
Section 7.19	Marketing of Production.		74
Section 7.20	Swap Agreements and Qualified ECP Counterparty.		74
Section 7.21	Use of Loans and Letters of Credit.		74
Section 7.22	Solvency.		74
Section 7.23	Anti-Corruption Laws and Sanctions.		75

ARTICLE VIII
AFFIRMATIVE COVENANTS

Section 8.01	Financial Statements; Other Information.		75
Section 8.02	Notices of Material Events.		79
Section 8.03	Existence; Conduct of Business.		79
Section 8.04	Payment of Obligations.		80
Section 8.05	Performance of Obligations under Loan Documents.		80
Section 8.06	Operation and Maintenance of Properties.		80
Section 8.07	Insurance.		81
Section 8.08	Books and Records; Inspection Rights.		81
Section 8.09	Compliance with Laws.		81
Section 8.10	Environmental Matters.		81
Section 8.11	Further Assurances.		83
Section 8.12	Reserve Reports.		83


		Page
Section 8.13	Title Information.		84
Section 8.14	Collateral and Guaranty Agreements.		85
Section 8.15	ERISA Compliance.		87
Section 8.16	Unrestricted Subsidiaries.		87
Section 8.17	Commodity Exchange Act Keepwell Provisions.		87

ARTICLE IX
NEGATIVE COVENANTS

Section 9.01	Financial Covenants.		88
Section 9.02	Debt.		89
Section 9.03	Liens.		89
Section 9.04	Dividends and Distributions and Redemptions of Permitted Senior Unsecured Notes.		90
Section 9.05	Investments, Loans and Advances.		91
Section 9.06	Designation and Conversion of Restricted and Unrestricted Subsidiaries.		93
Section 9.07	Nature of Business; No International Operations.		93
Section 9.08	Proceeds of Notes.		94
Section 9.09	ERISA Compliance.		94
Section 9.10	Sale or Discount of Receivables.		94
Section 9.11	Mergers, Etc.		95
Section 9.12	Sale of Properties and Termination of Swap Agreements.		95
Section 9.13	Transactions with Affiliates.		96
Section 9.14	Subsidiaries.		97
Section 9.15	Negative Pledge Agreements; Dividend Restrictions.		97
Section 9.16	Gas Imbalances, Take-or-Pay or Other Prepayments.		97
Section 9.17	Swap Agreements.		98
Section 9.18	Celero Acquisition Documents.		99

ARTICLE X
EVENTS OF DEFAULT; REMEDIES

Section 10.01	Events of Default.		100
Section 10.02	Right to Cure Ratio Non-Compliance.		102
Section 10.03	Remedies.		102
ARTICLE XI
THE AGENTS
Section 11.01	Appointment; Powers.		104
Section 11.02	Duties and Obligations of Administrative Agent.		104
Section 11.03	Action by Administrative Agent.		105
Section 11.04	Reliance by Administrative Agent.		105
Section 11.05	Subagents.		106
Section 11.06	Resignation of Administrative Agent.		106
Section 11.07	Agents as Lenders.		106
Section 11.08	No Reliance.		107
Section 11.09	Administrative Agent May File Proofs of Claim.		107
Section 11.10	Authority of Administrative Agent to Release Collateral, Liens and Guarantors.		108

iii


		Page
Section 11.11	Agents.		109

ARTICLE XII
MISCELLANEOUS

Section 12.01	Notices.		109
Section 12.02	Waivers; Amendments.		110
Section 12.03	Expenses, Indemnity; Damage Waiver.		112
Section 12.04	Successors and Assigns.		114
Section 12.05	Survival; Revival; Reinstatement.		117
Section 12.06	Counterparts; Integration; Effectiveness.		118
Section 12.07	Severability.		119
Section 12.08	Right of Setoff.		119
Section 12.09	GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.		119
Section 12.10	Headings.		120
Section 12.11	Confidentiality.		120
Section 12.12	Interest Rate Limitation.		121
Section 12.13	EXCULPATION PROVISIONS.		122
Section 12.14	Collateral Matters; Swap Agreements.		123
Section 12.15	No Third Party Beneficiaries.		123
Section 12.16	USA Patriot Act Notice.		123
Section 12.17	No Advisory or Fiduciary Responsibility.		123
Section 12.18	Amendment and Restatement.		124
Section 12.19	True-up Loans.		124

ANNEXES, EXHIBITS AND SCHEDULES


Annex I		List of Term Loan Commitments and Maximum Revolving Credit Amounts
Annex II		Existing Letters of Credit

Exhibit A		Form of Term Loan Note
Exhibit B		Form of Revolving Credit Note
Exhibit C		Form of Borrowing Request
Exhibit D		Form of Interest Election Request
Exhibit E		Form of Compliance Certificate
Exhibit F		Security Instruments as of the Effective Date
Exhibit G		Form of Guaranty Agreement
Exhibit H		Form of Security Agreement
Exhibit I		Form of Assignment and Assumption
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 Parent Joinder Agreement

Schedule 1-1		Permitted Fees
Schedule 7.05		Litigation
Schedule 7.06		Environmental Matters
Schedule 7.14		Subsidiaries
Schedule 7.18		Gas Imbalances
Schedule 7.19		Marketing Contracts
Schedule 7.20		Swap Agreements
Schedule 9.02		Existing Debt
Schedule 9.05		Investments
Schedule 9.13		Affiliate Transactions

T HIS A MENDED AND R ESTATED C REDIT A GREEMENT dated as of October 15, 2014, is among: C ENTENNIAL R ESOURCE P RODUCTION , LLC, a limited liability company duly formed and existing under the laws of the State of Delaware (the “ Borrower ”), as the borrower; the Parent (defined below) from time to time party hereto, as a parent guarantor; each of the Lenders from time to time party hereto; and JPM ORGAN C HASE B ANK , N.A. (in its individual capacity, “ JPMorgan ”), 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 (previously named Atlantic Energy Holdings, LLC), the Administrative Agent and the other agents and lenders party thereto are parties to that certain Credit Agreement dated as of June 11, 2013, pursuant to which such lenders provided certain loans to and extensions of credit on behalf of the Borrower (as renewed, extended, amended or otherwise modified from time prior to the date hereof, the “ Existing Credit Agreement ”).

B. The parties hereto desire to amend and restate in its entirety the Existing Credit Agreement in the form of this Agreement to (i) renew and rearrange the indebtedness outstanding under the Existing Credit Agreement (but not to repay or pay off any such indebtedness), (ii) add certain Lenders as parties and provide for the future addition of a Parent Guarantor as a party, and (iii) amend certain other terms of the Existing Credit Agreement in certain respects as provided in this Agreement.

C. 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 that the Existing Credit Agreement is hereby amended, renewed, extended and restated in its entirety in the form of this Agreement on (and subject to) the terms and conditions set forth herein. The parties hereto further 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:

“ 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.

“ Act ” has the meaning assigned such term in Section 12.16 .

“ 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 the LIBO Rate for such Interest Period multiplied by the Statutory Reserve Rate.

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

“ Affected Loans ” has the meaning assigned such term in Section 5.05 .

“ 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, provided that Borrower and its Subsidiaries shall not be considered “Affiliates” of other portfolio companies Controlled by any member of the NGP Group.

“ Agents ” means, collectively, the Administrative Agent, the Arrangers, the Co-Syndication Agents, and the Co-Documentation Agents, and “ Agent ” shall mean any of them individually, as the context requires.

“ Aggregate Maximum Revolving Credit Amounts ” at any time shall equal the sum of the Maximum Revolving Credit Amounts, as the same may be reduced or terminated pursuant to Section 2.07 .

“ Agreement ” means this Amended and Restated Credit Agreement, as the same may from time to time be amended, 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 Federal Funds Effective Rate in effect on such day plus ¹ ⁄ ₂ of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1.0%, provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the rate (rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar deposits of $5,000,000 with a one month maturity are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, on such day (or the immediately preceding Business Day if such day is not a day on which banks are open for dealings in dollar deposits in the London interbank market). Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

“ Annualized EBITDAX ” means, for the purposes of calculating the financial ratios set forth in Section 9.01(a) for the Rolling Periods ending on or prior to June 30, 2015, the sum of (a) EBITDAX for such Rolling Period (without giving effect to any amounts added to Consolidated Net Income in the calculation of EBITDAX pursuant to clauses (a)(v) or (a)(vi) of the definition thereof) multiplied by the factor for such Rolling Period set forth in the table below, plus (b) any amounts added to Consolidated Net Income in the calculation of EBITDAX pursuant to clauses (a)(v) or (a)(vi) of the definition thereof for such Rolling Period:


Rolling Period Ending	Factor
December 31, 2014		4
March 31, 2015		2
June 30, 2015		4/3

“ Anti-Corruption Laws ” means all state or federal laws, rules, and regulations applicable to the Parent, the Borrower or any of their Affiliates from time to time concerning or relating to bribery or corruption, including, without limitation, the FCPA.

“ Applicable Margin ” means (a) with respect to the Term Loans (i) 4.250% for an ABR Loan or (ii) 5.250% for a Eurodollar Loan, and (b) for any day, with respect to any ABR Loan or Eurodollar Loan that is a Revolving Loan, or with respect to the Revolving Credit Commitment Fee Rate, as the case may be, the rate per annum set forth in the Borrowing Base Utilization Grid below based upon the Borrowing Base Utilization Percentage then in effect:


*Borrowing Base Utilization Grid*
Borrowing Base Utilization Percentage	£ 25%	> 25% £ 50%	> 50% £ 75%	> 75% £ 90%	> 90%
Eurodollar Loans	1.500%	1.750%	2.000%	2.250%	2.500%
ABR Loans	0.500%	0.750%	1.000%	1.250%	1.500%
Revolving Credit Commitment Fee Rate	0.375%	0.375%	0.500%	0.500%	0.500%

Each change in the Applicable Margin for Revolving Loans shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change; provided that if at any time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a) , then the “ Applicable Margin ” means, with respect to Revolving Loans, the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level until such Reserve Report is delivered.

“ Applicable Percentage ” means, with respect to any Lender, the fraction expressed as a percentage obtained by dividing (a) the sum of such Lender’s outstanding Term Loan plus such Lender’s Revolving Credit Commitment by (b) the sum of the total outstanding Term Loans plus the total Revolving Credit Commitments; provided that for purposes of this definition, if the Revolving Credit Commitments are terminated pursuant to this Agreement, then each Lender’s Revolving Credit Commitment and the total Revolving Credit Commitments shall be the amounts thereof immediately prior to giving effect to any such termination of such Revolving Credit Commitments.

“ Applicable Revolving Credit Percentage ” means, with respect to any Revolving Credit Lender, the percentage of the Aggregate Maximum Revolving Credit Amounts represented by such Revolving Credit Lender’s Maximum Revolving Credit Amount as such percentage is set forth on Annex I; provided that in the case of Section 2.09(k) when a Defaulting Lender shall exist, “Applicable Revolving Credit Percentage” as used in such Section 2.09(k) shall mean the percentage of the Aggregate Maximum Revolving Credit Amounts (disregarding any Defaulting Lender’s Maximum Revolving Credit Amount) represented by such Lender’s Maximum Revolving Credit Amount.

“ Applicable Term Loan Percentage ” means, with respect to any Term Lender, the percentage of the total Term Loan Commitments represented by such Term Lender’s Term Loan Commitment as such percentage is set forth on Annex I.

“ Approved Counterparty ” means each of (a) any Lender or any Affiliate of a Lender and (b) any other Person if such Person or its credit support provider with respect to its Swap Agreements with Credit Parties has a long term senior unsecured debt rating of BBB/Baa2 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 bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“ Approved Petroleum Engineers ” means (a) Netherland, Sewell & Associates, Inc., (b) Ryder Scott Company Petroleum Consultants, L.P., (c) Russell K. Hall and Associates, Inc. (d) Miller and Lents, Ltd. and (e) any other independent petroleum engineers reasonably acceptable to the Administrative Agent and the Borrower.

“ Arrangers ” means, collectively, J.P. Morgan Securities LLC, in its capacity as joint lead arranger and sole bookrunner hereunder, Wells Fargo Securities, LLC, in its capacity as joint lead arranger hereunder, and Comerica Bank, in its capacity as joint lead arranger hereunder, and “ Arranger ” means any of them individually.

“ ASC ” means the Financial Accounting Standards Board Accounting Standards Codification, as in effect from time to time.

“ 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 I or any other form approved by the Administrative Agent.

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

“ Bank Products ” means any of the following bank services: (a) commercial credit cards, (b) stored value cards, and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

“ Bank Products Provider ” means any Lender or Affiliate of a Lender that provides Bank Products to the Borrower, any Restricted Subsidiary or any Guarantor.

“ 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 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 2.08 , as the same may be adjusted from time to time pursuant to Section 8.13(c) .

“ Borrowing Base Deficiency ” means, at any time in question, the amount by which the total Revolving Credit Exposures exceed the Borrowing Base then in effect.

“ Borrowing Base 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 Lenders on such day, and the denominator of which is the Borrowing Base in effect on such day.

“ Borrowing Request ” means a request by the Borrower for a Borrowing in accordance with Section 2.04 .

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Denver, Colorado are authorized or required by law to remain closed; and if such day relates to a Borrowing or continuation of, a payment or prepayment of principal of or interest on, or a conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice by the Borrower with respect to any such Borrowing or continuation, payment, prepayment, conversion or Interest Period, any day which is also a day on which banks are 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 on the date hereof, recorded as capital leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder.

“ Casualty Event ” means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of the Parent or any of its Restricted Subsidiaries having a fair market value in excess of the Threshold Amount.

“ Celero ” means Celero Energy II, LP, a Delaware limited partnership.

“ Celero Acquisition ” means the acquisition by the Borrower of the Celero Properties pursuant to the terms and conditions of the Celero Acquisition Documents.

“ Celero Acquisition Documents ” means, collectively, (a) that certain Contribution Agreement, dated as of August 19, 2014, between Celero, as seller, and the Borrower, as purchaser, with respect to the acquisition by the Borrower of the Celero Properties and (b) all assignments, bills of sale, side letters and other material agreements executed and delivered in connection with the Celero Acquisition, in each case, as the same may be amended, supplemented or otherwise modified from time to time to the extent not in violation of Section 9.18 .

“ Celero Oil and Gas Properties ” means the Oil and Gas Properties acquired by the Borrower pursuant to the Celero Acquisition Documents.

“ Celero Properties ” means the Celero Oil and Gas Properties and any other properties acquired by the Borrower pursuant to the Celero Acquisition Documents.

“ Change in Control ” means

(a) (i) at any time prior to a Qualifying IPO, the NGP Group shall at any time fail to have direct or indirect beneficial ownership (as defined in Rules 13(d)-3 and 13(d)-5 under the Securities Exchange Act) and the power to vote or direct the voting of at least 50.0% of the Equity Interests of the Borrower, or

(ii) at any time from and after a Qualifying IPO, (A) any Person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act), other than the NGP Group (or any holding company parent of the Parent owned directly or indirectly by the NGP Group), shall at any time have acquired direct or indirect beneficial ownership (as defined in Rules 13(d)-3 and 13(d)-5 under the Securities Exchange Act) of voting power of the outstanding Equity Interests of the Parent having more than the greater of (1) 35% of the ordinary voting power for the election of directors of the Parent and (2) the percentage of the ordinary voting power for the election of directors of the Parent owned in the aggregate, directly or indirectly, beneficially, by the NGP Group or (B) the Parent ceases to own 100% of the Equity Interests in the Borrower; or

(b) at any time Continuing Directors shall not constitute at least a majority of the directors or managers (as applicable) of the Parent.

“ Change in Law ” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 5.01(b) , by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided , however, for the purposes of this Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, guidelines or directives in connection therewith or promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision or the United States or foreign regulatory authorities, in each case, pursuant to Basel III, are deemed to have gone into effect and to have been adopted after the date of this Agreement.

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

“ Co-Documentation Agents ” means, collectively, BMO Harris Bank, N.A., Canadian Imperial Bank of Commerce, New York Branch, and U.S. Bank National Association.

“ Commitments ” means, collectively, the Term Loan Commitments and the Revolving Credit Commitments of all the Lenders, and “ Commitment ” means any Term Loan Commitment and/or Revolving Credit Commitment of a Lender, as the context requires.

“ 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, and any regulations promulgated thereunder.

“ Consolidated Net Income ” means with respect to the Parent and the Consolidated Restricted Subsidiaries, for any period, the net income (or loss) of the Parent and the Consolidated Restricted Subsidiaries after allowances for taxes for such period 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 Parent or any Consolidated Restricted Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Parent and the Consolidated Restricted Subsidiaries 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 Parent or to a Consolidated Restricted Subsidiary, as the case may be; (b) the net income (but not loss) during such period of any Consolidated Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Restricted Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Restricted Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) the net income (or loss) of any Person acquired in a pooling-of-interests transaction for any period prior to the date of such transaction; (d) any extraordinary gains or losses during such period, (e) any non-cash gains or losses or positive or negative adjustments under ASC 815 as the result of changes in the fair market value of derivatives; and (f) any gains or losses attributable to writeups or writedowns of assets, including ceiling test writedowns.

“ Consolidated Restricted Subsidiaries ” means any Restricted Subsidiaries that are Consolidated Subsidiaries.

“ Consolidated Subsidiaries ” means each Subsidiary of the Parent (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of the Parent in accordance with GAAP.

“ Consolidated Unrestricted Subsidiaries ” means any Unrestricted Subsidiaries that are Consolidated Subsidiaries.

“ Continuing Director ” means, at any date, an individual (a) who is a director or manager of the Parent on the Effective Date, (b) who, as of the date of determination, has been a director or manager of the Parent for at least the twelve preceding months, (c) who has been nominated to be a director or manager of the Parent, directly or indirectly, by the NGP Group or Persons nominated by the NGP Group or (d) who has been nominated or designated to be a director or manager of the Parent by a majority of the other Continuing Directors then in office.

“ 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.

“ Cost Reimbursements ” means reimbursements to Centennial Resource Management, LLC and its Affiliates for services and goods provided by them to the Parent and the Restricted Subsidiaries, but only to the extent that such reimbursements are made in the ordinary course of the Parent’s and the Restricted Subsidiaries’ business in accordance with the Services Agreement and represent a fair and reasonable estimate or calculation of the actual overall costs to such providers of providing such services and goods to the Parent and the Restricted Subsidiaries.

“ Co-Syndication Agents ” means, collectively, Wells Fargo Bank, N.A. and Comerica Bank.

“ Credit Parties ” means, collectively, the Borrower and each Guarantor, and “ Credit Party ” means any one of the foregoing.

“ 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, surety or other bonds and similar instruments;

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

(d) all obligations under Capital Leases;

(e) all obligations under Synthetic Leases;

(f) 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, whether or not such Debt is assumed by such Person;

(g) 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) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss;

(h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others and, to the extent entered into as a means of providing credit support for the obligations of others and not primarily to enable such Person to acquire any such Property, all obligations or undertakings of such Person to purchase the Debt or Property of others;

(i) obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments (not including substantially contemporaneous payments), other than gas balancing arrangements in the ordinary course of business;

(j) obligations to pay for goods or services even if such goods or services are not actually received or utilized by such Person;

(k) 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;

(l) Disqualified Capital Stock; and

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

provided , however , that “Debt” does not include (i) obligations with respect to surety or performance bonds and similar instruments entered into in the ordinary course of business in connection with the operation of Oil and Gas Properties or with respect to appeal bonds, (ii) accounts payable and accrued expenses, liabilities or other obligations to pay the deferred purchase price of Property or services, from time to time incurred in the ordinary course of business (including, without limitation, under the Services Agreement) which are not greater than one hundred twenty (120) days past the date of invoice or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, or (iii) endorsements of negotiable instruments for collection. 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.

“ 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.

“ Defaulting Lender ” means any Revolving Credit Lender that (a) has failed, within two (2) Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder; (b) has notified the Administrative Agent, the Borrower or any Credit Party in writing, or has made a public statement, to the effect that it does not intend or expect to comply with any of its funding obligations under this Agreement or generally under other agreements in which it commits to extend credit; (c) has failed, within three (3) Business Days after request by the Administrative Agent or a Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations to fund prospective Loans and participations in then outstanding Letters of Credit under this Agreement; provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent; or (d) has (or whose bank holding company has) been placed into receivership, conservatorship or bankruptcy; provided that a Lender shall not become a Defaulting Lender solely as a result of the acquisition or maintenance

of an ownership interest in such Lender or Person controlling such Lender or the exercise of control over a Lender or Person controlling such Lender by a Governmental Authority or an instrumentality thereof.

“ Disqualified Capital Stock ” means 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 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 of the type described in clause (a) of the definition thereof 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 earlier of (a) the Revolving Credit Maturity Date and (b) the date on which there are no Loans, LC Exposure or other obligations hereunder outstanding and all of the Commitments are terminated.

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

“ Domestic Subsidiary ” means any Restricted Subsidiary that is organized under the laws of the United States of America or any state thereof or the District of Columbia, including, without limitation (except at such times that the Borrower is the Parent), the Borrower.

“ EBITDAX ” means, for any period, the sum of Consolidated Net Income for such period plus (a) the following expenses or charges to the extent deducted from Consolidated Net Income in such period: (i) interest, (ii) income taxes (however denominated), (iii) depreciation, depletion, amortization and other similar noncash charges, (iv) exploration expenses, including plugging and abandonment expenses, (v) transaction costs, expenses and charges with respect to the acquisition or disposition of Oil and Gas Properties incurred in such period in an aggregate amount not to exceed $5,000,000 in any Reference Period, and (vi) costs, fees and expenses incurred by the Credit Parties in connection with the closing of this Agreement and the Transactions occurring on or about the Effective Date, minus (b) all noncash income added to Consolidated Net Income. For the purposes of calculating EBITDAX (including any component thereof) for any period of four (4) consecutive fiscal quarters (each, a “ Reference Period ”) pursuant to any determination of the financial ratio contained in Section 9.01(a) , if at any time during such Reference Period the Parent or any Restricted Subsidiary shall have made any Material Disposition or Material Acquisition, the EBITDAX for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Disposition or Material Acquisition had occurred on the first day of such Reference Period (such calculations to be reasonably acceptable to the Administrative Agent).

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

“ Election Notice ” has the meaning assigned to such term in Section 3.04(c)(ii) .

“ Engagement Letter ” means that certain Engagement Letter dated as of September 2, 2014 among JPMorgan, J.P. Morgan Securities LLC, and the Borrower, as amended, restated,

supplemented or otherwise modified from time to time, and any other engagement or fee letters that may hereafter be entered into between the Administrative Agent and the Borrower or any other Credit Party.

“ Engineering Reports ” has the meaning assigned such term in Section 2.08(c)(i) .

“ Environmental Laws ” means any and all Governmental Requirements pertaining in any way to health, safety, 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 Parent or any Restricted Subsidiary is conducting, or at any time has conducted, business, or where any Property of the Parent or any Restricted Subsidiary 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, 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 Act, as amended, and other environmental conservation or protection Governmental Requirements.

“ Environmental Permit ” means any permit, registration, license, notice, approval, consent, exemption, variance, or other authorization required under or issued pursuant to 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, as amended, and any successor statute.

“ ERISA Affiliate ” means each trade or business (whether or not incorporated) which together with the Parent or a Restricted Subsidiary would be deemed to be a “single employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.

“ ERISA Event ” means (a) a “Reportable Event” described in section 4043 of ERISA, other than a Reportable Event as to which the provisions of thirty (30) days’ notice to the PBGC are expressly waived under applicable regulations, (b) the withdrawal of the Parent, a Subsidiary 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, (c) 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, (d) the institution of proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of withdrawal liability pursuant to Section 4202 of ERISA or (f) 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.

“ 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 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 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, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens, in each case, arising in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties 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; provided that any such Lien referred to in this clause that is not a statutory Lien arising by operation of law does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Parent or any Restricted Subsidiary or materially impair the value of such Property subject thereto;

(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 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 the Property covered by such Lien for the purposes for which such Property is held by the Parent or any Restricted Subsidiary or materially impair the value of such Property subject thereto;

(e) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies arising in the ordinary course of business and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral

account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by the Parent or any of its Restricted Subsidiaries to provide collateral to the depository institution;

(f) Liens in favor of depository banks arising under documentation governing deposit accounts which Liens secure the payment of returned items, settlement item amounts, customary bank fees for maintaining deposit accounts, and similar items and fees;

(g) (i) easements, restrictions, servitudes, permits, conditions, covenants, exceptions, reservations, zoning and land use requirements in any Property of the Parent or any Restricted Subsidiary for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like and/or usual and customary purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, that do not secure any Debt and in the aggregate do not materially impair the use of such Property for the purposes of which such Property is held by the Parent or any Restricted Subsidiary or materially impair the value of such Property subject thereto, and (ii) Immaterial Title Deficiencies;

(h) Liens on cash or securities pledged to secure (either directly, or indirectly by securing letters of credit that in turn secure) performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations, obligations in respect of workers’ compensation, unemployment insurance or other forms of governmental benefits or insurance and other obligations of a like nature incurred in the ordinary course of business,

(i) title and ownership interests of lessors (including sub-lessors) of Property leased by such lessors to the Parent or to any Restricted Subsidiary, Liens and encumbrances encumbering such lessors’ titles and interests in such property and to which Parent’s or such Restricted Subsidiary’s leasehold interests may be subject or subordinate, in each case whether or not evidenced by Uniform Commercial Code financing statement filings or other documents of record, provided that such Liens do not secure Funded Debt of the Parent or of any Restricted Subsidiary and do not encumber Property of any Parent or any Restricted Subsidiary other than the Property that is the subject of such leases and items located thereon; provided further that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Parent or any Restricted Subsidiary or materially impair the value of such Property subject thereto, and

(j) judgment and attachment Liens not giving rise to an Event of Default under Section 10.01(k) ; and

(k) Liens of licensors of software and other intangible Property licensed by such licensors to the Parent and/or to any Restricted Subsidiary, including, without limitation, restrictions and prohibitions on encumbrances and transferability with respect to such Property and the Parent’s and/or such Restricted Subsidiary’s interests therein imposed by such licenses, and Liens encumbering such licensors’ titles and interests in such Property and to which the Parent’s or such Restricted Subsidiary’s license interests may be subject or subordinate, in each case, whether or not evidenced by Uniform Commercial Code financing statement filings or

other documents of record, provided that such Liens do not encumber Property of the Parent or of any Restricted Subsidiary other than the software and other intangible Property that is the subject of such licenses,

provided, that (i) no intention to subordinate the first priority Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied or expressed by the permitted existence of such Excepted Liens and (ii) the term “Excepted Liens” shall not include any Lien securing Debt for borrowed money other than the Indebtedness.

“ Excluded Swap Obligation ” means, with respect to any Credit Party individually determined on a Credit Party by Credit Party basis, any Indebtedness in respect of any Swap Agreement or any other any “swap”, as defined in Section 1(a)(47) of the Commodities Exchange Act (in this definition, “ Swap Indebtedness ”) if, and solely to the extent that, all or a portion of the guarantee by such Credit Party of, or the grant by such Credit Party of a security interest to secure, such Swap Indebtedness (or any guarantee 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 Credit Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time such guarantee or grant of a security interest becomes effective with respect to such related Swap Indebtedness. If any Swap Indebtedness arises under a master agreement governing more than one transaction, such exclusion shall apply only to the portion of such Swap Indebtedness that is attributable to transactions for which such guarantee or security interest is or becomes illegal.

“ Excluded Taxes ” means, 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 the Borrower or any Guarantor hereunder or under any other Loan Document, (a) income taxes (however denominated) or franchise taxes (including Texas margin tax) imposed on (or measured by) its net income by the United States of America or such other jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower or any Guarantor is located, (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 5.04(b) ), any withholding tax that is imposed on amounts payable to such Foreign Lender pursuant to a law in effect at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure or inability to comply with Section 5.03(f) , except to the extent that such Foreign 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) , and (d) any United States federal withholding taxes imposed by FATCA.

“ Existing Letters of Credit ” means the letters of credit listed on Annex II hereto.

“ Existing Loan Documents ” has the meaning given to the term “Loan Documents” in the Existing Credit Agreement.

“ 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 and any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to such intergovernmental agreement.

“ FCPA ” means the Foreign Corrupt Practices Act of 1977, as amended.

“ Federal Funds Effective Rate ” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“ Financial Officer ” means, for any Person, the chief financial officer, the principal accounting officer, and the treasurer of such Person. Unless otherwise specified, all references herein to a Financial Officer means a Financial Officer of the Parent.

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

“ Flood Insurance Regulations ” means (a) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (b) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statute thereto, (c) the National Flood Insurance Reform Act of 1994 (amending 42 USC § 4001, et seq.), as the same may be amended or recodified from time to time, and (d) the Flood Insurance Reform Act of 2004 and any regulations promulgated thereunder.

“ Foreign Lender ” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

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

“ Funded Debt ” means the principal amount of all Debt other than (a) contingent obligations in respect of Debt described in clause (b) of the definition of “Debt”, (b) Debt described in clauses (c) , (i) , (j) , (k) , (l) and (m) of the definition of “Debt”, and (c) Debt described in clauses (f) , (g) or (h) of the definition of “Debt” in respect of Debt of others described in clauses (a) or (b) of this definition.

“ 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.

“ 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 Parent and each Domestic Subsidiary (other than the Borrower) that guarantees the Indebtedness pursuant to Section 8.14(b) .

“ Guaranty Agreement ” means an Amended and Restated Guaranty Agreement executed by the Guarantors in substantially the form of Exhibit G unconditionally guarantying, on a joint and several basis, payment of the Indebtedness, 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 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 Indebtedness 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 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.

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

“ Immaterial Title Deficiencies ” means minor defects or deficiencies in title which do not diminish by more than 2% the total value of the Proved Oil and Gas Properties evaluated in the Reserve Report used in the most recent determination of the Borrowing Base.

“ Indebtedness ” means any and all amounts owing or to be owing by the Borrower, the Parent, any other Restricted Subsidiary, or any other Guarantor (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising): (a) to any Agent, the Issuing Bank or any Lender under any Loan Document, including, without limitation, all interest on any of the Loans (including any interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of any Credit Party (or could accrue but for the operation of applicable bankruptcy or insolvency laws), whether or not such interest is allowed or allowable as a claim in any such case, proceeding or other action); (b) to any Secured Swap Provider under any Swap Agreement including any Swap Agreement in existence prior to the date hereof, but excluding any additional transactions or confirmations entered into after such Secured Swap Provider ceases to be a Lender or an Affiliate of a Lender and excluding any amounts owing or to be owing under a Swap Agreement after assignment of such Swap Agreement by a Secured Swap Provider to another Person that is not a Lender or an Affiliate of a Lender; (c) to any Bank Products Provider in respect of Bank Products; and (d) all renewals, extensions and/or rearrangements of any of the above; provided that solely with respect to any Guarantor that is not an “eligible contract participant” under the Commodity Exchange Act, Excluded Swap Obligations with respect to such Guarantor shall be excluded from the “Indebtedness” owing by such Guarantor.

“ Indemnified Taxes ” means Taxes other than Excluded Taxes and Other Taxes.

“ Industry Competitor ” means any Person (other than Borrower, any Guarantor or any of their Affiliates or Subsidiaries) that (a) is identified in writing by the Borrower to the Administrative Agent and (b) directly or indirectly, is actively engaged as one of its principal businesses in lease acquisitions, exploration and production operations or development of oil and gas properties (including the drilling and completion of producing wells).

“ Initial Reserve Report ” means, collectively, the reserve reports and other reserve engineering information provided by the Borrower to the Administrative Agent and the Lenders prior to the Effective Date and utilized by the Administrative Agent and the Lenders in determining the initial Borrowing Base hereunder including, without limitation a reserve report evaluating the Celero Properties.

“ Interest Election Request ” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.05 .

“ Interest Payment Date ” means (a) with respect to any ABR Loan, the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

“ Interest Period ” means 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 or six months (or, with the consent of each Lender, twelve months) thereafter, as the Borrower may elect; provided that (a) 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 (b) 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 2.08(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 2.08(d) .

“ Investment ” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests in 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 deposit with, or advance, loan or capital contribution to, assumption of Funded Debt of, purchase or other acquisition of any other Funded Debt of, 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; (c) the purchase or acquisition (in one or a series of transactions) of Property (other than Equity Interests) of another Person that constitutes a business unit both before and after such acquisition; or (d) the entering into of any guarantee of, or other surety obligation (including the deposit of any Equity Interests to be sold) with respect to, Funded Debt or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person, provided in each case that accounts receivable (including obligations of joint working interest owners) arising in the ordinary course of business do not constitute Investments.

“ Issuing Bank ” means JPMorgan, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.09(i) . The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “ Issuing Bank ” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“ LC Commitment ” means, at any time, $15,000,000.

“ LC Disbursement ” means a payment made by the Issuing Bank pursuant to a Letter of Credit.

“ LC Exposure ” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Credit Lender at any time shall be its Applicable Revolving Credit Percentage of the total LC Exposure at such time.

“ Lenders ” means the Persons listed on Annex I and any Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. The term “Lenders” shall include both Term Lenders and Revolving Credit Lenders.

“ Letter of Credit ” means any letter of credit issued pursuant to this Agreement and any Existing Letter of Credit.

“ Letter of Credit Agreements ” means all letter of credit applications and other agreements (including any amendments, modifications or supplements thereto) submitted by the Borrower, or entered into by the Borrower, with the Issuing Bank relating to any Letter of Credit.

“ LIBO Rate ” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar deposits of an amount comparable to such Eurodollar Borrowing and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

“ 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 (a) the lien or security interest arising from a deed of trust, mortgage, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (b) production payments and the like payable out of Oil and Gas Properties. The term “ Lien ” shall include encumbrances, easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations, in each case, where the effect is to secure an obligation owed to, or a claim by, a Person other than the owner of the Property. For the purposes of this Agreement, the Parent and its Restricted Subsidiaries 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.

“ Liquidity ” means, as of any date of determination, the aggregate unused amount of the total Revolving Credit Commitments under this Agreement as of such date (but only to the extent that the Borrower is permitted to borrow such amounts under the terms of this Agreement including, without limitation, Section 6.02 hereof).

“ Loan Documents ” means this Agreement, the Notes, the Letter of Credit Agreements, the Letters of Credit, the Engagement Letter and the Security Instruments.

“ Loans ” means, collectively, the Term Loans and Revolving Loans made by the Lenders to the Borrower pursuant to this Agreement.

“ Majority Lenders ” means, (a) if there are less than three Lenders at such time, all Lenders, and (b) if there are three or more Lenders at such time, (i) at any time while no Loans or LC Exposure is outstanding, Lenders having greater than fifty percent (50%) of the sum of (A) the total Revolving Credit Commitments, and (B) the total Term Loan Commitments; and (ii) at any time while any Loans or LC Exposure is outstanding, Lenders holding greater than fifty percent (50%) of the sum of (A) the outstanding aggregate principal amount of the Loans and participation interests in Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c) ) and (B) the unused Revolving Credit Commitments; provided that the Revolving Credit Commitments and the principal amount of the Loans and participation interests in Letters of Credit of the Defaulting Lenders (if any) shall be excluded from the determination of Majority Lenders.

“ Majority Revolving Credit Lenders ” means, (a) if there are less than three Revolving Credit Lenders at such time, all Revolving Credit Lenders, and (b) if there are three or more Revolving Credit Lenders at such time, (i) at any time while no Revolving Loans or LC Exposure is outstanding, Revolving Credit Lenders having greater than fifty percent (50%) of the Aggregate Maximum Revolving Credit Amounts; and (ii) at any time while any Revolving Loans or LC Exposure is outstanding, Revolving Credit Lenders holding greater than fifty percent (50%) of the outstanding aggregate principal amount of the Revolving Loans and participation interests in Letters of Credit (without regard to any sale by a Revolving Credit Lender of a participation in any Revolving Loan under Section 12.04(c) ); provided that the Maximum Revolving Credit Amounts and the principal amount of the Revolving Loans and participation interests in Letters of Credit of the Defaulting Lenders (if any) shall be excluded from the determination of Majority Revolving Credit Lenders.

“ Material Acquisition ” means any acquisition of Property or series of related acquisitions of Property that involves the payment of consideration by the Parent and/or its Restricted Subsidiaries in excess of a dollar amount equal to ten percent (10%) of the then effective Borrowing Base; provided that a Material Acquisition shall not include any acquisition of Oil and Gas Properties to which no Proved Reserves are attributed or any acquisition of any Equity Interests in any Unrestricted Subsidiary.

“ Material Adverse Effect ” means a material adverse change in, or material adverse effect on (a) the business, operations, Property or condition (financial or otherwise) of the Parent and the Restricted Subsidiaries taken as a whole, (b) the ability of the Credit Parties to perform their obligations, taken as a whole, under the Loan Documents, (c) the validity or enforceability

of any Loan Document or (d) the rights and remedies of or benefits available to, taken as a whole, 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 the Parent or any of its Restricted Subsidiaries in excess of a dollar amount equal to ten percent (10%) of the then effective Borrowing Base; provided that a Material Disposition shall not include any Transfer of Oil and Gas Properties to which no Proved Reserves are attributed or any Transfer of any Equity Interests in any Unrestricted Subsidiary.

“ Material Indebtedness ” means 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 Parent and its Restricted Subsidiaries in an aggregate principal amount exceeding the Threshold Amount. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Parent or any Restricted Subsidiary in respect of any Swap Agreement at any time shall be the Swap Termination Value of such Swap Agreement.

“ Maximum Revolving Credit Amount ” means, as to each Revolving Credit Lender, the amount set forth opposite such Revolving Credit Lender’s name on Annex I under the caption “Maximum Revolving Credit Amounts”, as the same may be (a) reduced or terminated from time to time in connection with a reduction or termination of the Aggregate Maximum Revolving Credit Amounts pursuant to Section 2.07(b) or (b) 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 Property owned by the Borrower or any Guarantor which is subject to the Liens existing and to exist under the terms of any mortgages or deeds of trust that are Security Instruments.

“ Net Proceeds ” means the aggregate cash proceeds received by a Credit Party in respect of any Transfer of Property (including any cash subsequently received upon the Transfer of any non-cash consideration received in any Transfer), any issuance of Permitted Senior Unsecured Notes, or Casualty Event, net of (a) the direct costs relating to such sale of Property, incurrence of Debt or Casualty Event (including legal, accounting and investment banking fees, and sales commissions paid to unaffiliated third parties), (b) taxes paid or payable as a result thereof (after taking into account any available and applicable tax credits or deductions and any tax sharing arrangements) and (c) Debt (other than the Indebtedness) which is secured by a Lien upon any of the assets subject to such Casualty Event or Transfer and which must be repaid as a result of such Casualty Event or Transfer.

“ New Borrowing Base Notice ” has the meaning assigned such term in Section 2.08(d) .

“ NGP Group ” means NGP Energy Capital Management, L.L.C., a Texas limited liability company (the “Manager”), Natural Gas Partners VII, L.P., Natural Gas Partners VIII, L.P., Natural Gas Partners IX, L.P., NGP Natural Resources X, L.P., NGP Capital Resources Company, NGP Energy Technology Partners, L.P., NGP Energy Technology Partners II, L.P.,

NGP VII Income Co-Investment Opportunities, L.P., NGP Income Co-Investment Opportunities Fund II, L.P., NGP Midstream & Resources, L.P. and NGP Agribusiness Follow-On Fund, L.P., together with the respective parallel investment entities and alternative investment entities of each of the foregoing, and any future investment fund or co-investment fund managed by the Manager or any of its Affiliates, and any Affiliates of one or more of the foregoing, and “member of the NGP Group” shall be construed accordingly; provided that in no event will any portfolio company of any member of the NGP Group be included in the definition of “NGP Group”.

“ Notes ” means the Term Loan Notes and the Revolving Credit Notes, or any of them, as the context requires.

“ OFAC ” means the Office of Foreign Assets Control of the United States Department of the Treasury.

“ Oil and Gas Properties ” means (a) Hydrocarbon Interests; (b) all rights and interests incidental to any Hydrocarbon Interests, including, without limitation, all rights and interests with respect to any presently existing or future pooled, communitized or unitized acreage which may affect all or any portion of such Hydrocarbon Interests by virtue of any such Hydrocarbon Interests being a part thereof (including without limitation all units created under orders, regulations and rules of any Governmental Authority); (c) all operating agreements, contracts and other agreements, including production sharing contracts and agreements, which relate to any Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; (d) all Hydrocarbons in and under and which may be produced and saved or attributable to any Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to such Hydrocarbon Interests; (e) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to Hydrocarbon Interests and (f) all Property, real or personal, now owned or hereinafter acquired and situated upon, used, or held for use in connection with the operating, working or development of any of such Hydrocarbon Interests (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, structures, 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 expressly provided herein, all references in this Agreement to “Oil and Gas Properties” refer to Oil and Gas Properties owned by the Parent and its Restricted Subsidiaries, as the context requires.

“ Other Taxes ” means any and all present or future stamp or documentary taxes or any other excise or Property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement and any other Loan Document.

“ Parent ” initially means the Borrower. If, following the Celero Acquisition, any Person acquires one hundred percent (100%) of the outstanding Equity Interests in the Borrower and executes and delivers a Parent Joinder Agreement to the Administrative Agent, that Person will become the Parent and the Borrower will automatically cease to be the Parent. The Borrower anticipates that, at or about the time of a Qualifying IPO, Centennial Resource Development, Inc. will have acquired such Equity Interests in the Borrower and will execute and deliver a Parent Joinder Agreement and become the Parent.

“ Parent Joinder Agreement ” means an agreement substantially in the form of Exhibit K (or otherwise in form and substance acceptable to the Administrative Agent).

“ Participant ” has the meaning set forth in Section 12.04(c)(i) .

“ Participant Register ” has the meaning set forth in Section 12.04(c)(i) .

“ PBGC ” means the Pension Benefit Guaranty Corporation, or any successor thereto.

“ Permitted Senior Unsecured Notes ” means those notes (whether senior, senior subordinated, or subordinated) that may be issued by the Parent or the Borrower (or by any Credit Party as co-issuer); provided that such Permitted Senior Unsecured Notes shall: (a) be in a principal amount not to exceed $500,000,000, (b) be unsecured; (c) not provide for any scheduled payment of principal, mandatory Redemptions or scheduled sinking fund payment on or before the date that is at least 180 days following the Revolving Credit Maturity Date in effect at the time of issuance (other than provisions requiring Redemption or offers to Redeem in connection with asset sales or a change in control); and (d) contain financial and negative covenants and events of default that are, taken as a whole, no more restrictive with respect to the Credit Parties than the financial and negative covenants and Events of Default herein (as determined in good faith by senior management of the Parent).

“ Permitted Senior Unsecured Notes Documents ” means the Permitted Senior Unsecured Notes, all guarantees thereof and all other agreements, documents or instruments executed and delivered by any Credit Party in connection with, or pursuant to, the issuance of Permitted Senior Unsecured Notes.

“ Permitted Tax Distributions ” means, with respect to the Parent so long as it is taxable as a partnership for United Stated federal income tax purposes, tax distributions to the members of the Parent in an aggregate amount that does not exceed (a) the sum of the highest marginal United States federal and New York state income tax rates applicable to individuals on ordinary income, multiplied by (b) the Parent’s federal taxable income.

“ 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, that is subject to Title IV of ERISA, section 302 of ERISA or section 412 of the Code and that (a) is currently or hereafter sponsored, maintained or contributed to by the Parent, a Restricted Subsidiary or an ERISA Affiliate or (b) was at any time during the six calendar years preceding the date hereof, sponsored, maintained or contributed to by the Parent or a Restricted Subsidiary or an ERISA Affiliate.

“ Prime Rate ” means the rate of interest per annum publicly announced from time to time by JPMorgan as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. Such rate is set by the Administrative Agent as a general reference rate of interest, taking into account such factors as the Administrative Agent may deem appropriate; it being understood that many of the Administrative Agent’s commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that the Administrative Agent may make various commercial or other loans at rates of interest having no relationship to such rate.

“ 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 2.08(c)(i) .

“ Proposed Borrowing Base Notice ” has the meaning assigned to such term in Section 2.08(c)(ii) .

“ Proved Developed Producing Reserves ” or “ PDP ” means “proved developed producing oil and gas reserves” as such term is defined by the SEC in its standards and guidelines.

“ Proved Oil and Gas Properties ” means Oil and Gas Properties to which Proved Reserves are attributed. References herein to the “total value” of Proved Oil and Gas Properties refer to the present value of the PDP that are attributed thereto in the then most recent Reserve Report plus risk-discounted portions (as determined by the Administrative Agent) of the present value of the Proved Reserves other than PDP that attributed thereto in such Reserve Report.

“ Proved Reserves ” or “ Proved ” means collectively, “proved oil and gas reserves,” “proved developed producing oil and gas reserves,” “proved developed non-producing oil and gas reserves” (consisting of proved developed shut-in oil and gas reserves and proved developed behind pipe oil and gas reserves), and “proved undeveloped oil and gas reserves,” as such terms are defined by the SEC in its standards and guidelines.

“ Purchase Money Debt ” 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; provided , however , that such Debt is incurred no later than 120 days after such acquisition or the completion of such construction or improvement.

“ Qualified ECP Counterparty ” means, in respect of any Swap Agreement, each Credit Party that (a) has total assets exceeding $10,000,000 at the time any guaranty of obligations under such Swap Agreement or grant of the relevant security interest becomes effective or (b) otherwise constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“ Qualifying IPO ” means the issuance by the Parent (or any direct or indirect holding company parent of the Borrower that owns (or will own following the transactions consummated in connection with such public offering) more than 50% of the Borrower) of its common Equity Interests generating (individually or in the aggregate together with any prior initial public offering) gross proceeds exceeding $200,000,000, in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act.

“ 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.

“ Redetermination Date ” means, with respect to any Scheduled Redetermination or any Interim Redetermination, the date that the redetermined Borrowing Base related thereto becomes effective pursuant to Section 2.08(d) .

“ Reference Period ” has the meaning assigned to such term in the definition of “EBITDAX”.

“ Register ” has the meaning assigned 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.

“ 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.

“ Remedial Work ” has the meaning assigned such term in Section 8.10(a) .

“ Required Revolving Credit Lenders ” means, (a) if there are less than three Revolving Credit Lenders at such time, all Revolving Credit Lenders, and (b) if there are three or more Revolving Credit Lenders at such time, (i) at any time while no Revolving Loans or LC Exposure is outstanding, Revolving Credit Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the Aggregate Maximum Revolving Credit Amounts; and (ii) at any time while any Revolving Loans or LC Exposure is outstanding, Revolving Credit Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding aggregate principal amount of the Revolving Loans and participation interests in Letters of Credit (without regard to any sale by a Revolving Credit Lender of a participation in any Loan under Section 12.04(c) ); provided that the Maximum Revolving Credit Amounts and the principal amount of the Revolving Loans and participation interests in Letters of Credit of the Defaulting Lenders (if any) shall be excluded from the determination of Required Revolving Credit Lenders.

“ Reserve Report ” means a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, as of the dates set forth in Section 8.12(a) (or such other date in the event of an Interim Redetermination) the Proved 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 SEC reporting requirements at the time and reflecting Swap Agreements in place with respect to such production. To the extent that any Oil and Gas Properties included in such report are owned by a Credit Party that is not a Qualified ECP Counterparty, the Borrower or the Parent will identify such Credit Party and such Oil and Gas Properties to the Administrative Agent. The Initial Reserve Report is also a “Reserve Report” hereunder.

“ Responsible Officer ” means, as to any Person, the chief executive officer, the president, and any Financial Officer of such Person. Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Parent or the Borrower, as applicable.

“ Restricted Payment ” means any return of capital, dividend or distribution (whether in cash, securities or other Property) with respect to any Equity Interests in the Parent or any of its Restricted Subsidiaries, 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 the Parent or any of its Restricted Subsidiaries; provided that for purposes of clarity, Cost Reimbursements and payment of any fees that are listed on Schedule 1-1 will not be deemed Restricted Payments.

“ Restricted Subsidiary ” means any Subsidiary of the Parent that is not an Unrestricted Subsidiary, including, without limitation (except at such times that the Borrower is the Parent), the Borrower.

“ Revolving Credit Commitment ” means, with respect to each Revolving Credit Lender, the commitment of such Revolving Credit Lender to make Revolving Loans and to acquire participations in Letters of Credit 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 (a) modified from time to time pursuant to Section 2.07 and (b) modified from time to time pursuant to assignments by or to such Revolving Credit Lender pursuant to Section 12.04 . The amount representing each Revolving Credit Lender’s Revolving Credit Commitment shall at any time be the lesser of such Revolving Credit Lender’s Maximum Revolving Credit Amount and such Revolving Credit Lender’s Applicable Revolving Credit Percentage of the then effective Borrowing Base. The total Revolving Credit Commitment is the aggregate amount of the Revolving Credit Commitments of all the Revolving Credit Lenders.

“ Revolving Credit Commitment Fee Rate ” has the meaning set forth in the definition of “Applicable Margin”.

“ 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 Loans and its LC Exposure at such time.

“ Revolving Credit Lenders ” means, collectively, all of the Lenders with a Revolving Credit Commitment, and “ Revolving Credit Lender ” means any of them individually.

“ Revolving Credit Maturity Date ” means October 15, 2019.

“ Revolving Credit Notes ” means the promissory notes of the Borrower described in Section 2.03(d) evidencing the Revolving Loans and being substantially in the form of Exhibit B , together with all amendments, modifications, replacements, extensions and rearrangements thereof.

“ Revolving Loan ” means any revolving loan made to the Borrower pursuant to Article II , and “ Revolving Loans ” means, collectively, two or more such revolving loans, as the context requires.

“ Rolling Period ” means (a) for the fiscal quarters ending on December 31, 2014, March 31, 2015 and June 30, 2015, the period commencing on October 1, 2014 and ending on the last day of such applicable fiscal quarter and (b) for the fiscal quarter ending on September 30, 2015, and for each fiscal quarter thereafter, the period of four (4) consecutive fiscal quarters ending on the last day of such applicable fiscal quarter.

“ Sanctions ” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including without limitation those administered by OFAC, the U.S. Department of the Treasury or the U.S. Department of State.

“ Sanctioned Country ” means, at any time, a country or territory which is itself the subject or target of any Sanctions (including without limitation, at the time of this Agreement, Cuba, Iran, North Korea, Sudan and Syria).

“ Sanctioned Person ” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of the Treasury or 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).

“ 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.

“ Scheduled Redetermination ” has the meaning assigned such term in Section 2.08(b) .

“ Scheduled Redetermination Date ” means (a) April 1st and October 1st of each year, commencing April 1, 2015, and (b) January 1, 2015 and July 1, 2015 (or, in the case of both of the foregoing clauses (a) and (b) , such date promptly thereafter as reasonably practicable).

“ Scheduled Redetermination Effective Date ” means the date on which a Borrowing Base that has been redetermined pursuant to a Scheduled Redetermination becomes effective as provided in Section 2.08(d) .

“ SEC ” means the Securities and Exchange Commission or any successor Governmental Authority.

“ Secured Parties ” means, collectively, the Administrative Agent, the Lenders, the Issuing Bank, the Bank Products Providers and Secured Swap Providers, and “ Secured Party ” means any of them individually.

“ Secured Swap Agreement ” means any Swap Agreement between the Borrower or any Subsidiary and any Secured Swap Provider.

“ Secured Swap Provider ” means any Person (other than the Borrower or any Subsidiary) that (a) is a Lender or an Affiliate of a Lender on the Effective Date and is a party to a Swap Agreement with the Borrower or any Restricted Subsidiary on the Effective Date, (b) hereafter enters into a Swap Agreement with the Borrower or any Restricted Subsidiary while such Person is a Lender or an Affiliate of a Lender, or (c) is a Lender or an Affiliate of a Lender at the time any such Swap Agreement is assigned or transferred to it (by novation or otherwise) by another Secured Swap Provider. Any Person that at any time is a Secured Swap Provider with respect to a particular Secured Swap Agreement shall not thereafter cease to be a Secured Swap Provider with respect to such Secured Swap Agreement because such Person ceases to be a Lender or an Affiliate of a Lender, provided that (x) any such Person that ceases to be a Lender or an Affiliate of a Lender shall not be a Secured Swap Provider with respect to any Swap Agreement that it thereafter enters into while it is not a Lender or an Affiliate of a Lender, and (y) any Person that assigns or transfers a Secured Swap Agreement as contemplated in clause (c) of this definition shall cease to be a Secured Swap Provider with respect to such Secured Swap Agreement to the extent of such assignment or transfer.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Securities Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Security Agreement ” means an Amended and Restated Pledge and Security Agreement among the Credit Parties and the Administrative Agent in substantially the form of Exhibit H (or otherwise in form and substance acceptable to the Administrative Agent) granting Liens and a security interest on the Credit Parties’ personal property constituting Collateral (as defined therein) in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Indebtedness, as the same may be amended, modified, supplemented or restated from time to time.

“ Security Instruments ” means the Guaranty Agreement, the Security Agreement, each of the mortgages, deeds of trust and other agreements or instruments described in Exhibit F , and any and all other guaranties, mortgages, deeds of trust, security agreements, pledge agreements, or other agreements or instruments now or hereafter executed and delivered by the Borrower or

any other Person (other than Notes, Swap Agreements with any Lenders or any Affiliate of a Lender, or participation or similar agreements between any Lender and any participant or similar party with respect to any Indebtedness) as security for, or as a guaranty of, the payment or performance of the Indebtedness, in each case as such agreement or instrument may be amended, modified, supplemented or restated from time to time.

“ Services Agreement ” means the Management Services Agreement dated effective as of October 1, 2014 between the Borrower and Centennial Resource Management, LLC, as such agreement exists on the Effective Date without giving effect to any amendments or modifications thereto that have not been approved in writing by the Administrative Agent (other than an extension of the term thereof).

“ Specified Equity Contribution ” means any direct or indirect Investment in the Borrower in cash in the form of a capital contribution to the Borrower or the purchase of common Equity Interests issued by the Borrower (or other Equity Interests issued by the Borrower that are reasonably acceptable to the Administrative Agent, but not Disqualified Capital Stock).

“ 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 percentages (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 percentages 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) are, as of such date, owned, controlled or held 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 Parent, including, without limitation (except at such times that the Borrower is the Parent), the Borrower.

“ Swap Agreement ” means any agreement with respect to any swap, forward, future or derivative transaction 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 other similar derivative transaction or any combination of these transactions (including any option to enter into any of the foregoing); provided that (a) 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 the Parent or its Subsidiaries shall be a Swap Agreement and (b) no transaction that is intended to be physically settled (including any sale of a commodity for a deferred shipment or delivery that is intended to be physically settled) shall be a Swap Agreement. If multiple transactions are entered into under a master agreement, each such transaction that constitutes a Swap Agreement shall be a separate Swap Agreement for the purposes of this Agreement. For the sole purpose of Section 9.17 , the term “Swap Agreement” shall be deemed to exclude all purchased put options or floors for Hydrocarbons that are not related to corresponding calls, collars or swaps and with respect to which neither the Parent nor any Restricted Subsidiary has any payment obligation other than premiums and charges the total amount of which are fixed and known at the time such transaction is entered into.

“ 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, (a) 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 (b) for any date prior to the date referenced in clause (a) , the amount(s) determined as the mark-to-market value(s) for such Swap Agreements, as determined by the counterparties to such Swap Agreements.

“ 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 United States 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 imposed by any Governmental Authority.

“ Term Lenders ” means, collectively, all of the Lenders with a Term Loan Commitment (or, following the initial funding on the Effective Date, all of the Lenders that made or hold Term Loans), and “ Term Lender ” means any of them individually.

“ Term Loans ” means the term loans made to the Borrower by the Term Lenders on the Effective Date pursuant to Article II , or any portion thereof, as the context requires.

“ Term Loan Commitment ” means, with respect to each Term Lender, the commitment of such Term Lender to fund its Term Loan on the Effective Date in the amount set forth opposite such Term Lender’s name on Annex I under the caption “Term Loan Commitment”. The total Term Loan Commitment is the aggregate amount of the Term Loan Commitments of all the Term Lenders.

“ Term Loan Maturity Date ” means April 15, 2017.

“ Term Loan Notes ” means the promissory notes of the Borrower described in Section 2.03(d) evidencing the Term Loans and being substantially in the form of Exhibit A , together with all amendments, modifications, replacements, extensions and rearrangements thereof.

“ Termination Date ” means the earlier of the Revolving Credit Maturity Date and the date of termination of the Revolving Credit Commitments.

“ Threshold Amount ” means the greater of (a) $3,000,000 and (b) 3% of the Borrowing Base then in effect.

“ Total Funded Debt ” means, at any date, all Funded Debt of the Parent and the Consolidated Restricted Subsidiaries on a consolidated basis.

“ Transactions ” means, with respect to (a) the Borrower, the execution, delivery and performance by the Borrower of this Agreement and each other Loan Document to which it is a party, the borrowing of Loans, the issuance of Letters of Credit hereunder, the grant of Liens by the Borrower on Mortgaged Properties pursuant to the Security Instruments and the consummation of the Celero Acquisition, and (b) each Guarantor, the execution, delivery and performance by such Guarantor of each Loan Document to which it is a party, the guaranteeing of the Indebtedness and the other obligations under the Guaranty Agreement by such Guarantor and such Guarantor’s grant of Liens on Mortgaged Properties pursuant to the Security Instruments.

“ Transfer ” has the meaning assigned to such term in Section 9.12 .

“ 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.

“ Unrestricted Subsidiary ” means any Subsidiary of the Parent designated as such on Schedule 7.14 or which the Parent or the Borrower has designated in writing to the Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 9.06 ; provided that in no event may the Borrower be designated as an Unrestricted Subsidiary.

“ Unrestricted Subsidiary Distribution ” means any cash dividend or distribution received by the Parent or any Restricted Subsidiary from any Unrestricted Subsidiary.

“ U.S. Tax Compliance Certificate ” has the meaning set forth in Section 5.03(f) .

“ Wholly-Owned Subsidiary ” means any Restricted Subsidiary of which all of the outstanding Equity Interests (other than any directors’ qualifying shares mandated by applicable law), on a fully-diluted basis, are owned by the Parent, the Borrower or one or more of the Wholly-Owned Subsidiaries or are owned by the Parent, the Borrower and one or more of the Wholly-Owned Subsidiaries, or any combination thereof.

“ Withholding Agent ” means any Credit Party or the Administrative Agent.

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 words “will” and “shall” as used in this Agreement shall be construed to have the same meaning and effect. The word “or” is not exclusive. Unless the context requires otherwise (a) 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, restated or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Loan Documents), (b) 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, (c) 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), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import as used in this Agreement, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) with respect to the determination of any time period, the word “from” as used in this Agreement means “from and including” and the word “to” means “to and including” and (f) 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 Borrower’s independent certified public accountants concur and which are disclosed to Administrative Agent on or before the next date on which financial statements are required to be delivered to the Lenders pursuant to Section 8.01(a) ; provided that, unless the Borrower and the Majority Lenders shall otherwise agree in writing, no such change shall modify or affect the manner in which compliance with the covenants contained herein is computed such that all such computations shall be conducted utilizing financial information presented consistently with prior periods. 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, and their

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 or any of its subsidiaries to the Parent or any Restricted Subsidiary (other than Unrestricted Subsidiary Distributions that have been or will be used by the Parent to make distributions permitted under Section 9.04(a)(v)) , which shall be deemed to be income to the Parent or such Restricted Subsidiary when actually received by it.

ARTICLE II

THE CREDITS

Section 2.01 Term Loan Commitment . Subject to the terms and conditions set forth herein, each Term Lender severally agrees to make a Term Loan to the Borrower on the Effective Date in an aggregate principal amount that will not result in (a) the amount of the Term Loan made by such Term Lender hereunder exceeding such Term Lender’s Term Loan Commitment or (b) the aggregate amount of the Term Loans made by all Term Lenders hereunder exceeding the total Term Loan Commitments. Once borrowed, the Borrower may not reborrow any portion of the Term Loans that has been repaid or prepaid, whether in whole or in part. Upon any funding of any Term Loan hereunder by any Term Lender, such Term Lender’s Term Loan Commitment shall terminate immediately and without further action in an amount equal to, and on the date of, such funding of such portion of such Term Loan.

Section 2.02 Revolving Credit Commitment . Subject to the terms and conditions set forth herein, each Revolving Credit Lender agrees to make Revolving Loans to the Borrower during the Availability Period in an aggregate principal amount that will not result in (a) such Revolving Credit Lender’s Revolving Credit Exposure exceeding such Revolving Credit Lender’s Revolving Credit Commitment or (b) the total Revolving Credit Exposures exceeding the total Revolving Credit Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, repay and reborrow the Revolving Loans.

Section 2.03 Loans and Borrowings .

(a) Borrowings; Several Obligations . Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

(b) Types of Loans . Subject to Section 3.03 , each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

(c) Minimum Amounts; Limitation on Number of Borrowings . At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be

in an aggregate amount that is an integral multiple of $250,000 and not less than $500,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $200,000; provided that an ABR Borrowing of a Revolving Loan may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Credit Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.09(e) . Borrowings of more than one Type may be outstanding at the same time, provided that there shall not at any time be more than a total of six (6) Eurodollar Borrowings outstanding. Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing of a Term Loan if the Interest Period requested with respect thereto would end after the Term Loan Maturity Date or of a Revolving Loan if the Interest Period requested with respect thereto would end after the Revolving Credit Maturity Date.

(d) Notes . If requested by a Lender, the Term Loan and Revolving Loans, as applicable, made by such Lender shall be evidenced by a Term Loan Note or Revolving Credit Note, as applicable, of the Borrower in substantially the form of Exhibit A and Exhibit B , respectively, in each case dated, in the case of (i) any Lender party hereto as of the date of this Agreement, as of the date of this Agreement, or (ii) any Lender that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of the Assignment and Assumption, each payable to such Lender in a principal amount equal to its Term Loan Commitment (or, for any Term Loan Note issued followed the Effective Date, in an amount equal to the principal amount of the Term Loan held by such Term Lender) or its Maximum Revolving Credit Amount, as applicable, as in effect on such date, and otherwise duly completed. In the event that any Revolving Credit Lender’s Maximum Revolving Credit Amount increases or decreases for any reason (whether pursuant to Section 2.07 , Section 12.04(b) or otherwise), the Borrower shall, upon request of such Lender, deliver or cause to be delivered, to the extent such Revolving Credit Lender is then holding a Revolving Credit Note, on the effective date of such increase or decrease, a new Revolving Credit Note, payable to such Revolving Credit Lender in a principal amount equal to its Maximum Revolving Credit Amount after giving effect to such increase or decrease, and otherwise duly completed, whereupon such Lender will promptly return to the Borrower the Notes so replaced. In the event any Term Lender’s share of the outstanding Term Loans increases for any reason (whether pursuant to Section 12.04(b) or otherwise), the Borrower shall, upon request of such Lender, deliver or cause to be delivered, to the extent such Term Lender is then holding a Term Loan Note, on the effective date of such increase, a new Term Loan Note payable to such Term Lender in a principal amount equal to its outstanding Term Loans as of such date, whereupon such Lender will promptly return to the Borrower the Notes so replaced. The date, amount, Type, interest rate and, if applicable, Interest Period of each Term Loan and Revolving Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books for its Term Loan Note and Revolving Credit Note, as applicable. Failure to make any such recordation shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Loans or affect the validity of any transfer by any Lender of its Term Loan Note and/or Revolving Credit Note.

Section 2.04 Requests for Borrowings . To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., Denver, Colorado time, three Business Days before the

date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., Denver, Colorado time, one Business Day before the date of the proposed Borrowing; provided that no such notice shall be required for any deemed request of an ABR Borrowing to finance the reimbursement of an LC Disbursement as provided in Section 2.09(e) . Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile transmission to the Administrative Agent (or other communication in writing acceptable to the Administrative Agent) of a written Borrowing Request in substantially the form of Exhibit C (or such other form as may be agreed to by the Administrative Agent and the Borrower) and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.03 :

(i) the aggregate amount of the requested Borrowing (and, with respect to any Borrowing Request on the Effective Date, the amount of the requested Term Loan Borrowing and the amount of the requested Revolving Loan Borrowing);

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”;

(v) the amount of the then effective Borrowing Base, the current total Revolving Credit Exposures (without regard to the requested Borrowing) and the pro forma total Revolving Credit Exposures (giving effect to the requested Borrowing); and

(vi) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06 .

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Each Borrowing Request shall constitute a representation by the Borrower that the amount of the requested Borrowing shall not cause (x) the total Revolving Credit Exposures to exceed the total Revolving Credit Commitments (i.e., the lesser of the Aggregate Maximum Revolving Credit Amounts and the then effective Borrowing Base) or (y) the total outstanding Term Loans to exceed the total Term Loan Commitments.

Promptly following receipt of a Borrowing Request in accordance with this Section 2.04 , the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loans to be made as part of the requested Borrowing.

Section 2.05 Interest Elections .

(a) Conversion and Continuance . Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.05 . The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

(b) Interest Election Requests . To make an election pursuant to this Section 2.05 , the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.04 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile transmission to the Administrative Agent (or other communication in writing acceptable to the Administrative Agent) of a written Interest Election Request in substantially the form of Exhibit D (or such other form as may be agreed to by the Administrative Agent and the Borrower) and signed by the Borrower.

(c) Information in Interest Election Requests . Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.03 :

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to Section 2.05(c)(iii) and (iv) shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Notice to Lenders by the Administrative Agent . Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Term Lender and/or Revolving Credit Lender, as applicable, of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) Effect of Failure to Deliver Timely Interest Election Request and Events of Default on Interest Election . If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing: (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing (and any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

Section 2.06 Funding of Borrowings .

(a) Funding by Lenders . Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 p.m. (noon), Denver, Colorado time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent or any Lender and designated by the Borrower in the applicable Borrowing Request; provided that ABR Loans that are Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.09(e) shall be remitted by the Administrative Agent to the Issuing Bank. Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.

(b) Presumption of Funding by the Lenders . Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.06(a) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans that are the same type (i.e. Revolving Loans or Term Loans) that such Lender failed to fund. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing. Any payment by the Borrower pursuant to this Section 2.06(b) shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

Section 2.07 Termination and Reduction of Commitments and Aggregate Maximum Revolving Credit Amounts .

(a) Scheduled Termination of Commitments . Notwithstanding anything to the contrary herein, the Term Loan Commitments that are funded on the Effective Date shall be terminated upon such funding and, if the total Term Loan Commitment as of the Effective Date is not drawn on the Effective Date, any Term Loan Commitments in respect of the undrawn amount shall automatically be cancelled. Unless previously terminated, the Revolving Credit Commitments shall terminate on the Revolving Credit Maturity Date. If at any time the Aggregate Maximum Revolving Credit Amounts or the Borrowing Base is terminated or reduced to zero, then the Revolving Credit Commitments shall terminate on the effective date of such termination or reduction.

(b) Optional Termination and Reduction of Aggregate Maximum Revolving Credit Amounts .

(i) The Borrower may at any time terminate, or from time to time reduce, the Aggregate Maximum Revolving Credit Amounts; provided that (A) each reduction of the Aggregate Maximum Revolving Credit Amounts shall be in an amount that is an integral multiple of $500,000 and not less than $500,000 and (B) the Borrower shall not terminate or reduce the Aggregate Maximum Revolving Credit Amounts if, (1) after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 3.04(c) , the total Revolving Credit Exposures would exceed the total Revolving Credit Commitments or (2) the Aggregate Maximum Revolving Credit Amount would be less than $5,000,000 (unless, with respect to this clause (2) , the Aggregate Maximum Revolving Credit Amounts are reduced to $0).

(ii) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Aggregate Maximum Revolving Credit Amounts under Section 2.07(b)(i) 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 Revolving Credit Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.07(b)(ii) shall be irrevocable; provided that a notice of termination of the Aggregate Maximum Revolving Credit Amounts delivered by the Borrower, or a payoff letter or similar communication accepted by the Administrative Agent, may state that such notice is conditioned upon the effectiveness of other credit facilities or the closing of a specified transaction, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Aggregate Maximum Revolving Credit Amounts shall be permanent and may not be reinstated. Each reduction of the Aggregate Maximum Revolving Credit Amounts shall be made ratably among the Revolving Credit Lenders in accordance with each Revolving Credit Lender’s Applicable Revolving Credit Percentage.

Section 2.08 Borrowing Base .

(a) Initial Borrowing Base . For the period from and including the Effective Date to but excluding the first Redetermination Date, the amount of the Borrowing Base shall be $145,000,000. Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments in between Scheduled Redeterminations from time to time pursuant to Section 2.08(e) or Section 8.13(c) .

(b) Scheduled and Interim Redeterminations . The Borrowing Base shall be redetermined periodically on each Scheduled Redetermination Date in accordance with this Section 2.08 (a “ Scheduled Redetermination ”), and, subject to Section 2.08(d) , such redetermined Borrowing Base shall become effective and applicable to the Borrower, the Agents, the Issuing Bank and the Revolving Credit Lenders on each Scheduled Redetermination Effective Date. The Borrower may, by notifying the Administrative Agent thereof, and the Administrative Agent may, at the direction of the Required Revolving Credit Lenders, by notifying the Borrower thereof, one time between any two successive Scheduled Redeterminations, each elect to cause the Borrowing Base to be redetermined between Scheduled Redeterminations (an “ Interim Redetermination ”) in accordance with this Section 2.08 .

(i) Each Scheduled Redetermination and each Interim Redetermination shall be effectuated as follows: Upon receipt by the Administrative Agent of (A) the Reserve Report and the certificate required to be delivered by the Borrower to the Administrative Agent, in the case of a Scheduled Redetermination, pursuant to Section 8.12(a) and (c) , and, in the case of an Interim Redetermination, pursuant to Section 8.12(b) and (c) , and (B) such other reports, data and supplemental information, including, without limitation, the information provided pursuant to Section 8.12(c) , as may, from time to time, be reasonably requested by the Majority Revolving Credit Lenders (the Reserve Report, such certificate and such other reports, data and supplemental information being the “ Engineering Reports ”), the Administrative Agent shall evaluate the information contained in the Engineering Reports and shall, in good faith, propose a new Borrowing Base (the “ Proposed Borrowing Base ”) based upon such information and such other information (including, without limitation, the status of title information with respect to the Oil and Gas Properties as described in the Engineering Reports and the existence of any other Debt, the Credit Parties’ other assets, liabilities, fixed charges, cash flow, business, properties, prospects, management and ownership, hedged and unhedged exposure to price, price and production scenarios, interest rate and operating cost changes) as the Administrative Agent deems appropriate in its sole discretion and consistent with its normal oil and gas lending criteria for revolving lines of credit at the particular time. In no event shall the Proposed Borrowing Base exceed the Aggregate Maximum Revolving Credit Amounts;

(ii) The Administrative Agent shall notify the Borrower and the Revolving Credit Lenders of the Proposed Borrowing Base (the “ Proposed Borrowing Base Notice ”) after the Administrative Agent has received complete Engineering Reports from the Borrower and has had a reasonable opportunity to determine the Proposed Borrowing Base in accordance with Section 2.08(c)(i) ; and

(iii) Any Proposed Borrowing Base that would increase the Borrowing Base then in effect must be approved by all of the Revolving Credit Lenders (other than any Defaulting Lenders) as provided in this Section 2.08(c)(iii) ; and any Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect must be approved or be deemed to have been approved by the Required Revolving Credit Lenders as provided in this Section 2.08(c)(iii) . Upon receipt of the Proposed Borrowing Base Notice, each Revolving Credit Lender shall have fifteen (15) days to agree with the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by proposing an alternate Borrowing Base. If, in the case of any Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect, at the end of such fifteen (15) days, any Revolving Credit Lender has not communicated its approval or disapproval in writing to the Administrative Agent, such silence shall be deemed to be an approval of the Proposed Borrowing Base. If, in the case of any Proposed Borrowing Base that would increase the Borrowing Base then in effect, at the end of such fifteen (15) days, any Revolving Credit Lender has not communicated its approval or disapproval in writing to the Administrative Agent, such silence shall be deemed to be a disapproval of the Proposed Borrowing Base. If, at the end of such 15-day period, all of the Revolving Credit Lenders (other than any Defaulting Lenders), in the case of a Proposed Borrowing Base that would increase the Borrowing Base then in effect, or the Required Revolving Credit Lenders, in the case of a Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect, have approved or, in the case of a decrease or reaffirmation, deemed to have approved, as aforesaid, then the Proposed Borrowing Base shall, subject to Section 12.02(b)(i) , become the new Borrowing Base, effective on the date specified in Section 2.08(d) . If, however, at the end of such 15-day period, all of the Revolving Credit Lenders (other than any Defaulting Lenders) or the Required Revolving Credit Lenders, as applicable, have not approved or, in the case of a decrease or reaffirmation, deemed to have approved, as aforesaid, then the Administrative Agent shall poll the Revolving Credit Lenders to ascertain the highest Borrowing Base then acceptable to (x) in the case of a decrease or reaffirmation, a number of Revolving Credit Lenders sufficient to constitute the Required Revolving Credit Lenders and (y) in the case of an increase, all of the Revolving Credit Lenders (other than any Defaulting Lenders), and such amount shall, subject to Section 12.02(b)(i) , become the new Borrowing Base, effective on the date specified in Section 2.08(d) .

(d) Effectiveness of a Redetermined Borrowing Base . After a redetermined Borrowing Base is approved or is deemed to have been approved by all of the Revolving Credit Lenders or the Required Revolving Credit Lenders, as applicable, pursuant to Section 2.08(c)(iii) , the Administrative Agent shall notify the Borrower and the Revolving Credit Lenders of the amount of the redetermined Borrowing Base (the “ New Borrowing Base Notice ”), and such amount shall become the new Borrowing Base, effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Revolving Credit Lenders:

(i) in the case of a Scheduled Redetermination, (A) if the Administrative Agent shall have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on the applicable Scheduled Redetermination Date following such notice, or (B) if the Administrative

Agent shall not have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on the Business Day next succeeding delivery of such notice; and

(ii) in the case of an Interim Redetermination, on the Business Day next succeeding delivery of such notice.

Such amount shall then become the Borrowing Base until the next Scheduled Redetermination Effective Date, the next Interim Redetermination Date or the next adjustment to the Borrowing Base under Section 2.08(e) or Section 8.13(c) , whichever occurs first. Notwithstanding the foregoing, no Scheduled Redetermination or Interim Redetermination shall become effective until the New Borrowing Base Notice related thereto is received by the Borrower.

(e) Automatic Reduction of Borrowing Base – Issuance of Permitted Senior Unsecured Notes . Upon any issuance of Permitted Senior Unsecured Notes (other than (i) Permitted Senior Unsecured Notes that refinance or replace then existing Permitted Senior Unsecured Notes, up to the principal amount of such then existing Permitted Senior Unsecured Notes that are refinanced or replaced and (ii) Permitted Senior Unsecured Notes that refinance the Term Loans hereunder, up to the principal amount of the Term Loans so refinanced), the Borrowing Base shall automatically be decreased by an amount equal to 25% of the aggregate notional amount of such Permitted Senior Unsecured Notes issued at such time. Such decrease in the Borrowing Base shall occur automatically upon the issuance of such Permitted Senior Unsecured Notes on the date of issuance, without any vote of Lenders or action by Administrative Agent. Upon any such reduction in the Borrowing Base, the Administrative Agent shall promptly deliver a New Borrowing Base Notice to the Borrower and the Revolving Credit Lenders.

Section 2.09 Letters of Credit .

(a) General . Subject to the terms and conditions set forth herein, the Borrower may request the issuance of dollar denominated Letters of Credit for its own account or for the account of any of its Restricted Subsidiaries, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Availability Period in an amount not to exceed the LC Commitment; provided that the Borrower may not request the issuance, amendment, renewal or extension of Letters of Credit hereunder if a Borrowing Base Deficiency exists at such time or would exist as a result thereof. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions . The Existing Letters of Credit shall be deemed to have been issued hereunder as of the Effective Date. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or facsimile (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (not less than five (5) Business Days in advance of the requested date of issuance, amendment, renewal or extension (or such lesser advance notice as is acceptable to both the Issuing Bank and the Administrative Agent)) a notice:

(i) requesting the issuance of a Letter of Credit or identifying the Letter of Credit to be amended, renewed or extended;

(ii) specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day);

(iii) specifying the date on which such Letter of Credit is to expire (which shall comply with Section 2.09(c) );

(iv) specifying the amount of such Letter of Credit;

(v) specifying the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit; and

(vi) specifying the amount of the then effective Borrowing Base and whether a Borrowing Base Deficiency exists at such time, the current total Revolving Credit Exposures (without regard to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit) and the pro forma total Revolving Credit Exposures (giving effect to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit).

Each notice shall constitute a representation and warranty by the Borrower that after giving effect to the requested issuance, amendment, renewal or extension, as applicable, (x) the LC Exposure shall not exceed the LC Commitment and (y) the total Revolving Credit Exposures shall not exceed the total Revolving Credit Commitments (i.e. the lesser of the Aggregate Maximum Revolving Credit Amounts and the then effective Borrowing Base). No letter of credit issued by the Issuing Bank (if the Issuing Bank is not the Administrative Agent) shall be deemed to be a “Letter of Credit” issued under this Agreement unless the Issuing Bank has requested and received written confirmation from the Administrative Agent that the representations by Borrower contained in the foregoing clauses (x) and (y) are true and correct.

If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit; provided that, in the event of any conflict between such application or any Letter of Credit Agreement and the terms of this Agreement, the terms of this Agreement shall control.

(c) Expiration Date . Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) (A) in the case of Letters of Credit issued to the Texas Railroad Commission, the date that is 460 days after the date of issuance of such Letter of Credit or (B) in the case of all other Letters of Credit, the date that is one year after the date of the issuance of such Letter of Credit (or, with respect to each of the foregoing clauses (A) and (B), in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Credit Maturity Date. Each Letter of Credit with a one (1) year term and each Letter of Credit issued to the Texas Railroad Commission with a term

longer than one (1) year but less than or equal to 460 days may provide for the renewal thereof for additional one (1) year periods; provided that no such period shall extend beyond the date described in clause (ii) above.

(d) Participations . By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Revolving Credit Lenders, the Issuing Bank hereby grants to each Revolving Credit Lender, and each Revolving Credit Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Revolving Credit Lender’s Applicable Revolving Credit Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Revolving Credit Lender’s Applicable Revolving Credit Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.09(e) , or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 2.09(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default, the existence of a Borrowing Base Deficiency or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement . If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 11:00 a.m., Denver, Colorado time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., Denver, Colorado time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 11:00 a.m., Denver, Colorado time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., Denver, Colorado time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that unless the Borrower has notified the Administrative Agent that it intends to reimburse all or part of such LC Disbursement without using Revolving Loan proceeds or has submitted a Borrowing Request with respect thereto, the Borrower shall, subject to the conditions to Borrowing set forth herein, be deemed to have requested, and the Borrower does hereby request under such circumstances, that such payment be financed with an ABR Borrowing of a Revolving Loan in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Revolving Credit Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Revolving Credit Lender’s Applicable Revolving Credit Percentage thereof. Promptly following receipt of such notice, each Revolving Credit Lender shall pay to the Administrative Agent its Applicable Revolving Credit Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.06 with respect to Revolving Loans made by such Revolving Credit Lender (and

Section 2.06 shall apply, mutatis mutandis , to the payment obligations of the Revolving Credit Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Revolving Credit Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this Section 2.09(e) , the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Revolving Credit Lenders have made payments pursuant to this Section 2.09(e) to reimburse the Issuing Bank, then to such Revolving Credit Lenders and the Issuing Bank as their interests may appear. Any payment made by a Revolving Credit Lender pursuant to this Section 2.09(e) to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Loans as contemplated above) shall not constitute a Revolving Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute . The Borrower’s obligation to reimburse LC Disbursements as provided in Section 2.09(e) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or any Letter of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.09(f) , constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise due care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence, bad faith or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised all requisite due care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures . The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by facsimile) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Revolving Credit Lenders with respect to any such LC Disbursement.

(h) Interim Interest . If the Issuing Bank shall make any LC Disbursement, then, until the Borrower shall have reimbursed the Issuing Bank for such LC Disbursement (either with its own funds or a Borrowing under Section 2.09(e) ), the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans that are Revolving Loans. Interest accrued pursuant to this Section 2.09(h) shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Credit Lender pursuant to Section 2.09(e) to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

(i) Replacement of the Issuing Bank . The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Revolving Credit Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 3.05(b) . From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

(j) Cash Collateralization . If (i) any Event of Default shall occur and be continuing and the Borrower receives notice from the Administrative Agent or the Majority Revolving Credit Lenders demanding the deposit of cash collateral pursuant to this Section 2.09(j) , or (ii) the Borrower is required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c) , then the Borrower shall deposit, in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to (A) in the case of an Event of Default, the LC Exposure, and (B) in the case of a payment required by Section 3.04(c) , the amount of such excess as provided in Section 3.04(c) , as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Parent or any Restricted Subsidiary described in Section 10.01(h) or

Section 10.01(i) . The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Bank and the Lenders, an exclusive first priority and continuing perfected security interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in such account, all deposits or wire transfers made thereto, any and all investments purchased with funds deposited in such account, all interest, dividends, cash, instruments, financial assets and other Property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any substitutions and replacements therefor. The Borrower’s obligation to deposit amounts pursuant to this Section 2.09(j) shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Parent or any of its Restricted Subsidiaries may now or hereafter have against any such beneficiary, the Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever. Such deposit shall be held as collateral securing the payment and performance of the Indebtedness. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent (in consultation with the Borrower) and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Borrower and the Guarantors under this Agreement or the other Loan Documents. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, and the Borrower is not otherwise required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c) , then such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

(k) Defaulting Lenders . Notwithstanding any provision of this Agreement to the contrary, if any Revolving Credit Lender becomes a Defaulting Lender, and any LC Exposure exists at the time a Revolving Credit Lender becomes a Defaulting Lender, then:

(i) all or any part of such LC Exposure shall be reallocated among the non-defaulting Revolving Credit Lenders in accordance with their respective Applicable Revolving Credit Percentages but only to the extent (x) the sum of all non-defaulting Revolving Credit Lenders’ Revolving Credit Exposures does not exceed the total of all non-defaulting Revolving Credit Lenders’ Revolving Credit Commitments and (y) the conditions set forth in Section 6.02 are satisfied at such time;

(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within three (3) Business Days following notice by the

Administrative Agent cash collateralize such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.09(j) for so long as such LC Exposure is outstanding;

(iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to this Section 2.09(k) , the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is cash collateralized;

(iv) if the LC Exposure of the non-defaulting Revolving Credit Lenders is reallocated pursuant to this Section 2.09(k) , then the fees payable to the Revolving Credit Lenders pursuant to Section 3.05(a) and Section 3.05(b) shall be adjusted in accordance with such non-defaulting Revolving Credit Lenders’ Applicable Revolving Credit Percentages; or

(v) if any Defaulting Lender’s LC Exposure is neither cash collateralized nor reallocated pursuant to this Section 2.09(k) , then, without prejudice to any rights or remedies of the Issuing Bank or any Revolving Credit Lender hereunder, all commitment fees that otherwise would have been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting Lender’s Revolving Credit Commitment that was utilized by such LC Exposure) under Section 3.05(a) and letter of credit fees payable under Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until such LC Exposure is cash collateralized and/or reallocated.

Notwithstanding any provision of this Agreement to the contrary, so long as any Revolving Credit Lender is a Defaulting Lender, the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure will be 100% covered by the Revolving Credit Commitments of the non-defaulting Revolving Credit Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 2.09(j) , and participating interests in any such newly issued or increased Letter of Credit shall be allocated among non-defaulting Revolving Credit Lenders in a manner consistent with Section 2.09(k)(i) (and any Defaulting Lender shall not participate therein).

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

Section 3.01 Repayment of Loans . The Borrower hereby unconditionally promises to pay in full to the Administrative Agent (i) for the account of each Term Lender, the outstanding principal amount of such Term Lender’s Term Loan, together with all accrued interest thereon, on the Term Loan Maturity Date (or, if earlier, on the Termination Date), and (ii) for the account of each Revolving Credit Lender, the then unpaid principal amount of such Revolving Lender’s Revolving Loans, together with all accrued interest thereon, on the Termination Date.

Section 3.02 Interest .

(a) ABR Loans . The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

(b) Eurodollar Loans . The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

(c) Post-Default Rate . Notwithstanding the foregoing, (i) if any principal of or interest on any Loan or any fee or other amount payable by the Borrower or any Guarantor hereunder or under any other Loan Document is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to two percent (2%) plus the rate applicable to ABR Loans as provided in Section 3.02(a) (including the Applicable Margin but in no event to exceed the Highest Lawful Rate) and shall be payable on demand by the Administrative Agent, (ii) if any Event of Default of the type described in Section 10.01(h) , Section 10.01(i) or Section 10.01(j) occurs and is continuing (and only for so long as it continues), then all outstanding principal, fees and other obligations under any Loan Document shall automatically bear interest at a rate per annum equal to two percent (2%) plus the rate applicable to ABR Loans as provided in Section 3.02(a) (including the Applicable Margin but in no event to exceed the Highest Lawful Rate) and shall be payable on demand by the Administrative Agent and (iii) if any Event of Default occurs and is continuing (and only for so long as it continues) (other than an Event of Default described in Section 10.01(a) , Section 10.01(b) , Section 10.01(h) , Section 10.01(i) or Section 10.01(j) ), then at the election of the Majority Lenders (or the Administrative Agent at the direction of Majority Lenders) and after written notice to the Borrower, all outstanding principal, fees and other obligations under any Loan Document shall bear interest at a rate per annum equal to two percent (2%) plus the rate applicable to ABR Loans as provided in Section 3.02(a) (including the Applicable Margin but in no event to exceed the Highest Lawful Rate) and shall be payable on demand by the Administrative Agent. References in this subsection (c) to the Applicable Margin refer, in the case of Term Loans, to the Applicable Margin for Term Loans and refer, in the case of all other amounts owing under any Loan Documents (including but not limited to Revolving Loans), to the Applicable Margin for Revolving Loans.

(d) Interest Payment Dates . Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and (i) in the case of Revolving Loans on the Termination Date and (ii) in the case of the Term Loans, on the Term Loan Maturity Date (or, if earlier, on the Termination Date); provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than an optional prepayment of an ABR Loan prior to the Termination Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e) Interest Rate Computations . All interest hereunder shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error, and be binding upon the parties hereto.

Section 3.03 Alternate Rate of Interest . If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest Period; or

(b) the Administrative Agent is advised by the Majority Lenders that the Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or facsimile as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made either as an ABR Borrowing or, at the election of the Borrower, at an alternate rate of interest determined by the Majority Lenders that represents their cost of funds plus the Applicable Margin for Eurodollar Loans.

Section 3.04 Prepayments .

(a) Optional Prepayments . Subject to Section 3.04(c)(ix) , the Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with Section 3.04(b) .

(b) Notice and Terms of Optional Prepayment . The Borrower shall notify the Administrative Agent by telephone (confirmed by facsimile) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., Denver, Colorado time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., Denver, Colorado time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid (and specify whether Revolving Loans or Term Loans are being prepaid); provided that, if a conditional notice of prepayment is given as contemplated by Section 2.07(b) , then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07(b) . Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.03 . Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02 .

(i) If, after giving effect to any termination or reduction of the Aggregate Maximum Revolving Credit Amounts pursuant to Section 2.07(b) , the total Revolving Credit Exposures exceeds the total Revolving Credit Commitments, then the Borrower shall (A) prepay the Borrowings of Revolving Loans on the date of such termination or reduction in an aggregate principal amount equal to such excess, and (B) if any excess remains after prepaying all of the Borrowings of the Revolving Loans as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Revolving Credit Lenders an amount equal to such excess to be held as cash collateral as provided in Section 2.09(j) .

(ii) Upon any redetermination of or adjustment to the amount of the Borrowing Base in accordance with Section 2.08 (other than Section 2.08(e) ) or Section 8.13(c) , if there exists a Borrowing Base Deficiency, then the Borrower shall within twenty (20) days following receipt of the New Borrowing Base Notice in accordance with Section 2.08(d) or the date the adjustment occurs (or such longer period, not to exceed thirty (30) days, acceptable to the Administrative Agent), provide written notice (the “ Election Notice ”) to the Administrative Agent stating the action which the Borrower proposes to take to eliminate such Borrowing Base Deficiency, and the Borrower shall thereafter, at its option, either:

(A) within ten (10) days following its delivery of the Election Notice (or such longer period, not to exceed 180 days, acceptable to the Administrative Agent), by instruments reasonably satisfactory in form and substance to the Administrative Agent, provide the Administrative Agent with additional security consisting of Oil and Gas Properties with value and quality satisfactory to the Administrative Agent and the Required Revolving Credit Lenders in their sole discretion to eliminate such Borrowing Base Deficiency,

(B) within ten (10) days following its delivery of the Election Notice, prepay without premium or penalty, the Borrowings of Revolving Loans in an amount sufficient to eliminate such Borrowing Base Deficiency and, if any Borrowing Base Deficiency remains after prepaying all of the Borrowings of Revolving Loans as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Revolving Credit Lenders an amount necessary to eliminate such remaining Borrowing Base Deficiency to be held as cash collateral as provided in Section 2.09(j) ,

(C) elect to prepay (and thereafter pay), without premium or penalty, the principal amount of Revolving Loans necessary to eliminate such Borrowing Base Deficiency in not more than six (6) equal monthly installments plus accrued interest thereon with the first such monthly payment being due within ten (10) days following its delivery of the Election Notice (and, if any Borrowing Base Deficiency remains after prepaying all of the Borrowings of Revolving Loans as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Revolving Credit Lenders an amount necessary to eliminate such remaining Borrowing Base Deficiency to be held as cash collateral as provided in Section 2.09(j) ), or

(D) by any combination of prepayment and additional security as provided in the preceding clauses (A) , (B) or (C) , eliminate such Borrowing Base Deficiency; provided that all payments required to be made pursuant to this Section 3.04(c)(ii) must be made on or prior to the Termination Date.

(iii) Upon any redetermination of the Borrowing Base pursuant to Section 2.08(e) in connection with issuance of Permitted Senior Unsecured Notes, then if there exists a Borrowing Base Deficiency, the Borrower shall prepay the Borrowings of Revolving Loans in an amount sufficient to eliminate such Borrowing Base Deficiency and, if any Borrowing Base Deficiency remains after prepaying all of the Borrowings of Revolving Loans as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Revolving Credit Lenders an amount necessary to eliminate such remaining Borrowing Base Deficiency to be held as cash collateral as provided in Section 2.09(j) . The Borrower shall be obligated to make such prepayment and/or deposit of cash collateral on the date of the issuance of such Permitted Senior Unsecured Notes; provided that all payments required to be made pursuant to this Section 3.04(c)(iii) must be made on or prior to the Termination Date.

(iv) Promptly following the issuance of any Permitted Senior Unsecured Notes by any Credit Party (other than Permitted Senior Unsecured Notes that refinance or replace then existing Permitted Senior Unsecured Notes, up to the principal amount of such then existing Permitted Senior Unsecured Notes that are refinanced or replaced), the Borrower shall prepay the Term Loans in an aggregate amount equal to the remainder of (A) one hundred percent (100%) of the Net Proceeds received in respect of such Permitted Senior Unsecured Notes minus (B) the portion, if any, of such Net Proceeds that is used to prepay Revolving Loans pursuant to subsection (iii) of this subsection (c) . Nothing in this paragraph is intended to permit any Credit Party to incur Debt other than as permitted under Section 9.02 , and any such incurrence of Debt in violation of Section 9.02 shall be a breach of this Agreement.

(v) Promptly following Transfer by any Credit Party of any of its Property (other than Hydrocarbons and other inventory sold in the ordinary course of business) with an aggregate fair market value in excess of $20,000,000 in a single transaction or a series of related transactions, the Borrower shall (unless provided otherwise in any waiver or amendment to this Agreement that authorizes such Transfer) prepay the Term Loans in an aggregate amount equal to one hundred percent (100%) of such Net Proceeds; provided that (A) if the Borrower delivers to the Administrative Agent a certificate of a Responsible Officer to the effect that the Credit Parties intend to apply the Net Proceeds from such Transfer (or a portion thereof as specified in such certificate), within 365 days after receipt of such Net Proceeds, to drill or develop Oil and Gas Properties of the Credit Parties, to otherwise purchase or improve assets useful in the business of the Credit Parties or for other purposes approved by the Majority Lenders, then, so long as no Event of Default or Borrowing Base Deficiency then exists, no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds specified in such certificate, and (B) to the extent any such Net Proceeds have not been so applied by the end of such 365 day period, a prepayment shall be required in an amount equal to such Net Proceeds that have not been so applied. Nothing in this paragraph is intended to permit any Credit Party to sell Property in breach of Section 9.12 , and any such sale in violation of Section 9.12 will constitute a breach of this Agreement.

(vi) Promptly following the receipt of Net Proceeds of $1,000,000 or more by any Credit Party in respect of any Casualty Event involving Property with a fair market

value in excess of $20,000,000, the Borrower shall prepay the Term Loans in an aggregate amount equal to one hundred percent (100%) of such Net Proceeds; provided that (A) if the Borrower delivers to the Administrative Agent a certificate of a Responsible Officer to the effect that the Credit Parties intend to apply the Net Proceeds from such Casualty Event (or a portion thereof as specified in such certificate), within 365 days after receipt of such Net Proceeds, to drill or develop Oil and Gas Properties of the Credit Parties, to otherwise purchase or improve assets useful in the business of the Credit Parties or for other purposes approved by the Majority Lenders, then, so long as no Event of Default or Borrowing Base Deficiency then exists, no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds specified in such certificate, and (B) to the extent any such Net Proceeds have not been so applied by the end of such 365 day period, a prepayment shall be required in an amount equal to such Net Proceeds that have not been so applied.

(vii) Subject to the other provisions of this Section 3.04(c) that specify whether the Revolving Loans or the Term Loans shall be prepaid first, each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied first to Revolving Loans and second to Term Loans and, in each case, ratably to any ABR Borrowings then outstanding and thereafter to any Eurodollar Borrowings then outstanding, and if more than one Eurodollar Borrowing is then outstanding, to each such Eurodollar Borrowing in order of priority beginning with the Eurodollar Borrowing with the least number of days remaining in the Interest Period applicable thereto and ending with the Eurodollar Borrowing with the most number of days remaining in the Interest Period applicable thereto.

(viii) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied ratably to the Loans included in the prepaid Borrowings. Prepayments pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the extent required by Section 3.02 .

(ix) Notwithstanding anything to the contrary herein, if a Borrowing Base Deficiency exists at the time any mandatory prepayment of Loans is required hereunder, or at the time any optional prepayment is tendered in respect of the Term Loans, any such prepayment amounts shall be applied first to prepay Revolving Loans and/or to cash collateralize LC Exposure in an amount sufficient to eliminate such Borrowing Base Deficiency, and thereafter to the prepayment of the Term Loans.

(d) No Premium or Penalty . All prepayments permitted or required under this Section 3.04 or otherwise under the Loan Documents shall be without premium or penalty, except as required under Section 5.02 .

Section 3.05 Fees .

(a) Commitment Fees . Subject to Section 3.05(d) below, the Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee, which shall accrue at the applicable Revolving Credit Commitment Fee Rate on the average daily amount of the unused amount of the Revolving Credit Commitment of such Revolving Credit Lender during the period from and including the date of this Agreement to but excluding the Termination Date (it being understood that LC Exposure shall constitute usage of

the Revolving Credit Commitments for purposes of this Section 3.05(a) ). Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the Termination Date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(b) Letter of Credit Fees . Subject to Section 3.05(d) below, the Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Credit Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Margin used to determine the interest rate applicable to Revolving Loans that are Eurodollar Loans on the average daily amount of such Revolving Credit Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date on which such Revolving Credit Lender’s Revolving Credit Commitment terminates and the date on which such Revolving Credit Lender ceases to have any LC Exposure, (ii) to the Issuing Bank, for its own account, a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date of termination of the Revolving Credit Commitments and the date on which there ceases to be any LC Exposure, provided that in no event shall such fee be less than $500 during any quarter, and (iii) to the Issuing Bank, for its own account, its standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the date of this Agreement; provided that all such fees shall be payable on the Termination Date and any such fees accruing after the Termination Date shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c) Administrative Agent Fees . The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent in the Engagement Letter.

(d) Defaulting Lender Fees . Subject to Section 2.09(k) , the Borrower shall not be obligated to pay the Administrative Agent any Defaulting Lender’s ratable share of the fees described in Section 3.05(a) and (b) for the period commencing on the day such Defaulting Lender becomes a Defaulting Lender and continuing for so long as such Lender continues to be a Defaulting Lender.

(e) Borrowing Base Increase Fees . The Borrower agrees to pay to the Administrative Agent, for the account of each Revolving Credit Lender then party to this Agreement, a Borrowing Base increase fee in an amount to be set forth in a separate written agreement on the amount of any increase of the Borrowing Base above the highest previous Borrowing Base in effect during the term of this Agreement, payable on the effective date of any such increase to the Borrowing Base.

ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs .

(a) Payments by the Borrower . The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 5.01 , Section 5.02 , Section 5.03 or otherwise) prior to 11:00 a.m., Denver, Colorado time, on the date when due, in immediately available funds, without defense, deduction, recoupment, set-off or counterclaim. Fees, once paid, shall be fully earned and shall not be refundable under any circumstances, absent manifest error. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices specified in Section 12.01 , except payments to be made directly to the Issuing Bank as expressly provided herein and except that payments pursuant to Section 5.01 , Section 5.02 , Section 5.03 and Section 12.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.

(b) Application of Insufficient Payments . If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

(c) Sharing of Payments by Lenders . If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Term Loans, Revolving Loans and/or participations in LC Disbursements of

other Lenders, as applicable, to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Term Loans, Revolving Loans and/or participations in LC Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 4.01(c) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Parent or any Restricted Subsidiary or Affiliate thereof (as to which the provisions of this Section 4.01(c) shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

Section 4.02 Presumption of Payment by the Borrower . Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

Section 4.03 Certain Deductions by the Administrative Agent . If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.06(a) , Section 2.09(d) , Section 2.09(e) or Section 4.02 , or otherwise hereunder, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid. If at any time prior to the acceleration or maturity of the Loans, the Administrative Agent shall receive any payment in respect of principal of a Loan or a reimbursement of an LC Disbursement while one or more Defaulting Lenders shall be party to this Agreement, the Administrative Agent shall apply such payment first to the Borrowing(s) for which such Defaulting Lender(s) shall have failed to fund its pro rata share until such time as such Borrowing(s) are paid in full or each Lender (including each Defaulting Lender) is owed its Applicable Term Loan Percentage of the Term Loans and Applicable Revolving Credit Percentage of the Revolving Loans then outstanding, as applicable. After acceleration or maturity of the Loans, all principal will be paid ratably as provided in Section 10.03(c) .

Section 4.04 Disposition of Proceeds . The Security Instruments contain assignments by the Borrower and/or the Guarantors unto and in favor of the Administrative Agent for the benefit of the Secured Parties of all of the Borrower’s or each Guarantor’s interest in and to production and all proceeds attributable thereto which may be produced from or allocated to the Mortgaged Property. The Security Instruments further provide in general for the application of such proceeds to the satisfaction of the Indebtedness and other obligations described therein and secured thereby. Notwithstanding the assignments contained in such Security Instruments, unless an Event of Default has occurred and is continuing, (a) the Administrative Agent and the Lenders will neither notify the purchaser or purchasers of such production nor take any other action to cause such proceeds to be remitted to the Administrative Agent or the Lenders, but the Administrative Agent and the Lenders will instead permit such proceeds to be paid to and used by the Parent and its Restricted Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to take such actions as may be necessary or useful to cause such proceeds to be paid to the Parent and/or such Restricted Subsidiaries.

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

Section 5.01 Increased Costs .

(a) Eurodollar Changes in Law . If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or

(ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender (whether of principal, interest or otherwise) with respect to any Eurodollar Loan, then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

(b) Capital Requirements . If any Lender or the Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy and liquidity), then from time to time upon receipt of a certificate described in subsection (c) below, the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

(c) Certificates . A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in Section 5.01(a) or (b) shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within thirty (30) days after receipt thereof.

(d) Effect of Failure or Delay in Requesting Compensation . Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section 5.01 for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

Section 5.02 Break Funding Payments . In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto, or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 5.04(b) , then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market.

A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 5.02 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within thirty (30) days after receipt thereof.

Section 5.03 Taxes .

(a) Payments Free of Taxes . Any and all payments by or on account of any obligation of the Borrower or any Guarantor under any Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower or any Guarantor shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 5.03(a) ), the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Guarantor shall make such deductions and (iii) the Borrower or such Guarantor shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) Payment of Other Taxes by the Borrower . The Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Indemnification by the Borrower . The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within thirty (30) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes payable or paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 5.03 ) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate of the Administrative Agent, a Lender or the Issuing Bank as to the amount of such payment or liability under this Section 5.03 shall be delivered to the Borrower and shall be conclusive absent manifest error.

(d) Indemnification by the Lenders . Each Lender shall severally indemnify the Administrative Agent, within thirty (30) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 12.04(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (d).

(e) Evidence of Payments . As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a

receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(f) Status of Lenders . (i) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments made under any Loan Document shall deliver to the Withholding Agent, at the time or times reasonably requested by the Withholding Agent, such properly completed and executed documentation reasonably requested by the Withholding Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Withholding Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Withholding Agent as will enable the Withholding Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 5.03(f)(ii)(A) and (ii)(B) and Section 5.03(g) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a “United States person” as defined in Section 7701(a)(30) of the Code,

(A) any Lender that is a “United States person” as defined in Section 7701(a)(3) of the Code shall deliver to the Withholding Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Withholding Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Withholding Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Withholding Agent), whichever of the following is applicable:

(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2) executed originals of IRS Form W-8ECI;

(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate

substantially in the form of Exhibit J-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) executed originals of IRS Form W-8BEN; or

(4) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit J-2 or Exhibit J-3 , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit J-4 on behalf of each such direct and indirect partner; and

(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Withholding Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Withholding Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Withholding Agent to determine the withholding or deduction required to be made.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Withholding Agent in writing of its legal inability to do so.

(g) FATCA . If a payment made to a Lender under this Agreement would be subject to United States federal withholding tax imposed by FATCA if such Lender fails to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Withholding Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Withholding Agent, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Withholding Agent as may be necessary for the Withholding Agent to comply with its obligations under FATCA, to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 5.03(g) , “ FATCA ” shall include any amendments made to FATCA after the date of this Agreement.

(h) Treatment of Certain Refunds . If the Administrative Agent, a Lender or the Issuing Bank determines, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 5.03 , it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 5.03 with respect to the Indemnified

Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the Issuing Bank, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to the Borrower pursuant to this paragraph (h) to the extent such payment would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the Borrower or any other Person.

Section 5.04 Mitigation Obligations; Replacement of Lenders .

(a) Designation of Different Lending Office . If any Lender requests compensation under Section 5.01 , or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03 , then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03 , as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) Replacement of Lenders . If (i) any Lender requests compensation under Section 5.01 , (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03 , (iii) any Revolving Credit Lender becomes a Defaulting Lender hereunder, (iv) Revolving Credit Lenders holding 80% or more of the Revolving Credit Commitments have provided their consent to any proposed increase in the Borrowing Base in accordance with the terms of this Agreement but any Revolving Credit Lender has not provided such consent, (v) any Lender has given notice that it is unable to make or maintain Eurodollar Loans but Lenders constituting Majority Lenders have not given such notice or (vi) Lenders whose aggregate Applicable Percentages are 80% or more have provided their consent to any proposed amendment or waiver of any term or provision of this Agreement or any Loan Document but any Lender has not provided such consent, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 12.04(b) ), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (vii) if such assignee is not already a Lender, the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (viii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts

payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (ix) in the case of any such assignment resulting from a claim for compensation under Section 5.01 or payments required to be made pursuant to Section 5.03 , such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

Section 5.05 Illegality . Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its applicable lending office to honor its obligation to make or maintain Eurodollar Loans either generally or having a particular Interest Period hereunder, then (a) such Lender shall promptly notify the Borrower and the Administrative Agent thereof and such Lender’s obligation to make such Eurodollar Loans shall be suspended (the “ Affected Loans ”) until such time as such Lender may again make and maintain such Eurodollar Loans and (b) all Affected Loans which would otherwise be made by such Lender shall be made instead as ABR Loans (and, if such Lender so requests by notice to the Borrower and the Administrative Agent, all Affected Loans of such Lender then outstanding shall be automatically converted into ABR Loans on the date specified by such Lender in such notice) and, to the extent that Affected Loans are so made as (or converted into) ABR Loans, all payments of principal which would otherwise be applied to such Lender’s Affected Loans shall be applied instead to its ABR Loans.

ARTICLE VI

CONDITIONS PRECEDENT

Section 6.01 Effective Date . This Agreement, including the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit (other than the Existing Letters of Credit) hereunder, shall not become effective until the date on which each of the following conditions and each of the conditions under Section 6.02 is satisfied (or waived in accordance with Section 12.02 ):

(a) The Administrative Agent, the Arrangers and the Lenders shall have received all commitment, facility and agency fees and all other fees and amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder (including, without limitation, the fees and expenses of Vinson & Elkins L.L.P., counsel to the Administrative Agent, that have then been invoiced).

(b) The Administrative Agent shall have received one or more certificates of the Secretary or an Assistant Secretary of the Borrower and each Guarantor setting forth (i) resolutions of its board of directors (or comparable governing body) with respect to the authorization of the Borrower or such Guarantor to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers of the Borrower or such Guarantor (y) who are authorized to sign the Loan Documents to which the Borrower or such Guarantor is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this

Agreement and the transactions contemplated hereby, (iii) specimen signatures of such authorized officers, and (iv) the articles or certificate of incorporation and bylaws (or comparable organizational documents for any Credit Parties that are not corporations) of the Borrower and such Guarantor, certified as being true and complete. The Administrative Agent and the Lenders may conclusively rely on such certificates until the Administrative Agent receives notice in writing from the Borrower to the contrary.

(c) The Administrative Agent shall have received certificates of the appropriate State agencies with respect to the existence, qualification and good standing of the Borrower and each Guarantor.

(d) The Administrative Agent shall have received from each party hereto counterparts (in such number as may be requested by the Administrative Agent) of this Agreement signed on behalf of such party.

(e) The Administrative Agent shall have received duly executed Notes payable to each Lender requesting a Note in principal amounts equal to its Maximum Revolving Credit Amount or Term Loan Commitment, respectively, dated as of the date hereof.

(f) The Administrative Agent shall have received from each signatory thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Security Instruments described on Exhibit F . In connection with the execution and delivery of the Security Instruments, the Administrative Agent shall:

(i) be reasonably satisfied that the Security Instruments (A) create first priority, perfected Liens (subject to Liens permitted under Section 9.03 and any limitations expressly set out in such Security Instruments) on all Property purported to be pledged as collateral pursuant to the Security Instruments and not described in clause (B) below (including, without limitation, all Equity Interests owned by any Credit Party in the Restricted Subsidiaries, and (B) create first priority, perfected Liens (subject only to Excepted Liens) on at least 80% of the total value of the Proved Oil and Gas Properties (including the Celero Properties) evaluated in the Initial Reserve Report; and

(ii) have received certificates, if any, together with undated, blank stock powers for each such certificate, representing all of the issued and outstanding Equity Interests owned by any Credit Party in each of the other Credit Parties.

(g) The Administrative Agent shall have received an opinion of Thompson & Knight LLP and local counsel in any jurisdictions reasonably requested by the Administrative Agent, in each case, in form and substance acceptable to the Administrative Agent and its counsel.

(h) The Administrative Agent shall have received a certificate of insurance coverage of the Credit Parties evidencing that the Credit Parties are carrying insurance in accordance with Section 7.11 .

(i) The Administrative Agent shall have received title information as the Administrative Agent may reasonably require satisfactory to the Administrative Agent setting forth the status of title to at least 80% of the total value of the Proved Oil and Gas Properties (including the Celero Properties) evaluated in the Initial Reserve Report.

(j) The Administrative Agent shall be reasonably satisfied with the environmental condition of the Oil and Gas Properties (including the Celero Properties) of the Parent and its Restricted Subsidiaries.

(k) The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying (i) that the Borrower has received all consents and approvals required by Section 7.03 and (ii) that attached to such certificate is a true, accurate and complete copy of the Services Agreement, which Services Agreement shall contain terms and conditions reasonably acceptable to the Administrative Agent.

(l) The Administrative Agent shall have received (i) the financial statements referred to in Section 7.04(a) and (ii) the Initial Reserve Report accompanied by a certificate covering the matters described in Section 8.12(c) .

(m) The Administrative Agent shall have received appropriate UCC search certificates and county-level real property record search results reflecting no prior Liens encumbering the Properties of the Parent and its Restricted Subsidiaries for each jurisdiction requested by the Administrative Agent; other than those being assigned or released on or prior to the Effective Date or Liens permitted by Section 9.03 .

(n) The Administrative Agent shall have received from the Credit Parties, to the extent requested by the Lenders or the Administrative Agent, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act.

(o) The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying: (i) that attached to such certificate are true, accurate and complete copies of the material Celero Acquisition Documents (which shall include the purchase and sale agreement, all conveyance documents and any other such agreements that the Borrower deems to be material in its reasonable discretion), which Celero Acquisition Documents shall contain terms and conditions reasonably acceptable to the Administrative Agent, (ii) that concurrently with the initial Borrowings hereunder the Borrower is consummating the Celero Acquisition, substantially in accordance with the terms of the Celero Acquisition Documents (without waiver or amendment of any material term or condition thereof not otherwise reasonably acceptable to the Administrative Agent) and that the Borrower is, concurrently with the initial Borrowings hereunder, acquiring substantially all of the Celero Properties contemplated by the Celero Acquisition Documents; (iii) as to the final purchase price for the Celero Properties after giving effect to all adjustments as of the closing date contemplated by the Celero Acquisition Documents; (iv) that since September 2, 2014, the Borrower’s equity capital has been increased (or is concurrently being increased in connection with the Celero Acquisition) by an aggregate amount not less than the greater of (A) $60,000,000 and (B) 50% of the total purchase price for the Celero Properties on the Effective Date, and that such increased equity capital has been increased by means of cash proceeds received from capital contributions to the Borrower or by means of the issuance of Equity Interests by the Borrower for consideration consisting of cash or interests in the Celero Properties, and (v) such other related documents and information as the Administrative Agent shall have reasonably requested.

(p) The capitalization structure and equity ownership of each Credit Party after giving effect to the Transactions shall be satisfactory to the Administrative Agent in all respects.

(q) The Administrative Agent shall have received evidence reasonably satisfactory to the Administrative Agent, concurrently with the funding of any Loans on the Effective Date and that upon such payment, all Liens encumbering the Celero Properties will be released (other than Liens permitted by Section 9.03 ).

Without limiting the generality of the provisions of Section 11.04 , for purposes of determining compliance with the conditions specified in this Section 6.01 , each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required under this Section 6.01 to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the Effective Date specifying its objection thereto. All documents executed or submitted pursuant to this Section 6.01 by and on behalf of the Parent or any of its Subsidiaries shall be in form and substance reasonably satisfactory to the Administrative Agent and its counsel. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 12.02 ) at or prior to 2:00 p.m., Denver, Colorado time, on November 30, 2014 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.

Section 6.02 Each Credit Event . The obligation of each Lender to make a Loan on the occasion of any Borrowing (including the initial funding), and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:

(a) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Borrowing Base Deficiency shall have occurred and be continuing.

(b) The representations and warranties of the Borrower and the Guarantors set forth in this Agreement and in the other Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the extent (i) that any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, such representations and warranties shall continue to be true and correct in all material respects as of such specified earlier date, and (ii) that any such representation and warranty is expressly qualified by materiality or by reference to Material Adverse Effect, in which case such representation and warranty (as so qualified) shall continue to be true and correct in all respects.

(c) The making of such Loan or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, would not conflict with, or cause any Lender or the Issuing Bank to violate or exceed, any applicable Governmental Requirement.

(d) The receipt by the Administrative Agent of a Borrowing Request in accordance with Section 2.04 or a request for a Letter of Credit (or an amendment, extension or renewal of a Letter of Credit) in accordance with Section 2.09(b) , as applicable.

Each request for a Borrowing and each request for the issuance, amendment, renewal or extension of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in Section 6.02(a) and Section 6.02(b) .

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

The Borrower and (to the extent that the Parent is not the Borrower) the Parent jointly and severally represent and warrant to the Lenders that:

Section 7.01 Organization; Powers . Each of the Parent and the Restricted Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority, and has all material governmental licenses, authorizations, consents and approvals necessary, to own its assets and to carry on its business as now conducted, and is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where failure to have such power, authority, licenses, authorizations, consents, approvals and qualifications could not reasonably be expected to have a Material Adverse Effect.

Section 7.02 Authority; Enforceability . The Transactions are within the Borrower’s and each Guarantor’s corporate, limited liability company, or partnership powers and have been duly authorized by all necessary corporate, limited liability company, or partnership action and, if required, stockholder action (including, without limitation, any action required to be taken by any class of directors, managers or supervisors of the Borrower or any other Person, whether interested or disinterested, in order to ensure the due authorization of the Transactions). Each Loan Document and Celero Acquisition Document to which the Borrower and each Guarantor is a party has been duly executed and delivered by the Borrower and such Guarantor and constitutes a legal, valid and binding obligation of the Borrower and such Guarantor, as applicable, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

Section 7.03 Approvals; No Conflicts . The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person (including shareholders or any class of directors, managers or supervisors,

as applicable, whether interested or disinterested, of the Parent, the Borrower or any other Person), nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of any Loan Document or the consummation of the Transactions, except such as have been obtained or made and are in full force and effect other than (i) the recording and filing of the Security Instruments as required by this Agreement, (ii) governmental consents, approvals, filings and registrations in connection with the Celero Acquisition that are customarily made after the consummation of an acquisition, and (iii) those third party approvals or consents which, if not made or obtained, would not cause a Default hereunder, could not reasonably be expected to have a Material Adverse Effect or do not have a material and adverse effect on the enforceability of the Loan Documents, (b) will not violate any applicable law or regulation or the limited liability company agreements, charter, bylaws or other organizational documents of the Parent or any Restricted Subsidiary or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture or other agreement regarding Funded Debt binding upon the Parent or any Restricted Subsidiary or any of their Properties, or give rise to a right thereunder to require any payment to be made by the Parent or such Restricted Subsidiary, (d) will not violate or result in a default under any Celero Acquisition Document, and (e) will not result in the creation or imposition of any Lien on any Property of the Parent or any Restricted Subsidiary (other than the Liens created by the Loan Documents).

Section 7.04 Financial Condition; No Material Adverse Change .

(a) The Borrower has heretofore furnished or caused to be furnished to the Lenders (i) the Borrower’s audited consolidated balance sheet and statements of income, stockholders equity and cash flows as of and for the fiscal year ended December 31, 2013, (ii) the Borrower’s unaudited consolidated balance sheet and statements of income and cash flows as of and for the fiscal quarter and the portion of the fiscal year ended June 30, 2014, including a schedule giving pro forma effect to the Celero Acquisition and the other Transactions on the Effective Date, and (iii) Celero’s unaudited consolidated balance sheet and statements of income and cash flows as of and for the fiscal quarter and the portion of the fiscal year ended June 30, 2014, in the case of the foregoing clauses (i) and (ii) , certified by the chief financial officer of the Borrower. Such financial statements referred to in the foregoing clauses (i) and (ii) present fairly, in all material respects, the financial position and income and cash flows of the Borrower and its Consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the unaudited quarterly financial statements.

(b) No Material Adverse Effect has occurred since December 31, 2013.

(c) Neither the Parent nor any Restricted Subsidiary has on the date hereof, after giving effect to the Transactions, any material Debt (including Disqualified Capital Stock), any material liabilities for past due taxes, or any material contingent liabilities, off-balance sheet liabilities or partnership liabilities that, in each case, would be required by GAAP to be reflected or noted in audited financial statements except as referred to or reflected or provided for in the Financial Statements, in Schedule 9.02 , or in other written information provided by any Credit Party to Administrative Agent and the Lenders prior to the date hereof.

Section 7.05 Litigation . Except as set forth in Schedule 7.05, there are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Parent or the Borrower, threatened against or affecting the Parent or any Restricted Subsidiary (i) not fully covered by insurance (except for normal deductibles) as to which there is a reasonable probability of an adverse determination that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or to impair in any material respect the Celero Acquisition or (ii) that involve any challenge by any Credit Party or any Affiliate of the Borrower to the validity or enforceability of any material provision of any Loan Document (including, without limitation, any provision relating to the Credit Parties’ obligations to repay the Indebtedness or any provision relating to the validity or perfection of any Lien created by any Loan Document).

Section 7.06 Environmental Matters . Except for such matters as set forth on Schedule 7.06 or that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

(a) the Parent and its Restricted Subsidiaries and each of their respective Properties and operations thereon are, and within all applicable statute of limitation periods have been, in compliance with all applicable Environmental Laws.

(b) the Parent and its Restricted Subsidiaries have obtained all Environmental Permits required for their respective operations and each of their Properties, with all such Environmental Permits being currently in full force and effect, and none of the Parent or its Restricted Subsidiaries has received any written notice or otherwise has knowledge that any such existing Environmental Permit will be revoked or that any application for any new Environmental Permit or renewal of any existing Environmental Permit will be protested or denied.

(c) there are no claims, demands, suits, orders, inquiries, or proceedings concerning any violation of, or any liability (including as a potentially responsible party) under, any applicable Environmental Laws that is pending or, to the Parent’s or the Borrower’s knowledge, threatened against the Parent or any Restricted Subsidiary or any of their respective Properties or as a result of any operations at such Properties.

(d) none of the Properties of the Parent or any Restricted Subsidiary contain or have contained any: (i) underground storage tanks; (ii) asbestos-containing materials; (iii) landfills or dumps; (iv) hazardous waste management units as defined pursuant to RCRA or any comparable state law; or (v) sites on or nominated for the National Priority List promulgated pursuant to CERCLA or any state remedial priority list promulgated or published pursuant to any comparable state law.

(e) there has been no Release or, to the Parent’s or the Borrower’s knowledge, threatened Release, of Hazardous Materials at, on, under or from the Parent’s or any Restricted Subsidiary’s Properties, there are no investigations, remediations, abatements, removals, or monitorings of Hazardous Materials required under applicable Environmental Laws at such Properties and, to the knowledge of the Parent and the Borrower, none of such Properties are adversely affected by any Release or threatened Release of a Hazardous Material originating or emanating from any other real property.

(f) neither the Parent nor any Restricted Subsidiary has received any written notice asserting an alleged liability or obligation under any applicable Environmental Laws with respect to the investigation, remediation, abatement, removal, or monitoring of any Hazardous Materials at, under, or Released or threatened to be Released from any real properties offsite the Parent’s or any Restricted Subsidiary’s Properties and, to the Parent’s and the Borrower’s knowledge, there are no conditions or circumstances that could reasonably be expected to result in the receipt of such written notice.

(g) there has been no exposure of any Person or Property to any Hazardous Materials as a result of or in connection with the operations and businesses of any of the Parent’s or its Restricted Subsidiaries’ Properties that could reasonably be expected to form the basis for a claim for damages or compensation.

(h) the Parent and its Restricted Subsidiaries have made available to the Lenders complete and correct copies of all environmental site assessment reports and studies on environmental matters (including matters relating to any alleged non-compliance with or liability under Environmental Laws) that are in any of the Parent’s or the Restricted Subsidiaries’ possession or control and relating to their respective Properties or operations thereon.

Section 7.07 Compliance with the Laws and Agreements; No Defaults or Borrowing Base Deficiency .

(a) Each of the Parent and the Restricted Subsidiaries is in compliance with all Governmental Requirements applicable to it or its Property and all agreements and other instruments binding upon it or its Property, and possesses all licenses, permits, franchises, exemptions, approvals and other governmental authorizations necessary for the ownership of its Property and the conduct of its business, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

(b) Neither the Parent nor any Restricted Subsidiary is in default nor has any event or circumstance occurred which, but for the expiration of any applicable grace period or the giving of notice, or both, would constitute a default or would require the Parent or a Restricted Subsidiary to Redeem or make any offer to Redeem under any indenture, note, credit agreement or similar instrument or agreement pursuant to which any Material Indebtedness is outstanding or by which the Parent or any Restricted Subsidiary or any of their Properties is bound.

Section 7.08 Investment Company Act . Neither the Parent nor any Restricted Subsidiary is an “investment company” or a company “controlled” by an “investment company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.

Section 7.09 Taxes . Each of the Parent and its Restricted Subsidiaries has timely filed or caused to be filed all federal income Tax returns and reports, and all other material Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Parent or such Restricted Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. The charges, accruals and reserves on the books of the Parent and its Restricted Subsidiaries in respect of Taxes and other governmental charges are, in the reasonable opinion of the Borrower, adequate. No Tax Lien has been filed and, to the knowledge of the Parent and the Borrower, no claim is being asserted with respect to any such Tax or other such governmental charge.

Section 7.10 ERISA . Except for such matters that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

(a) The Parent, its Restricted Subsidiaries and each ERISA Affiliate have complied in all material respects with ERISA and, where applicable, the Code regarding each Plan.

(b) Each Plan is, and has been, established and maintained in substantial compliance with its terms, ERISA and, where applicable, the Code.

(d) The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Accounting Standards Codification No. 715: Compensation-Retirement Benefits) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan allocable to such accrued benefits.

(e) No act, omission or transaction has occurred which could result in imposition on the Parent, any Restricted Subsidiary or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty assessed pursuant to subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under section 409 of ERISA.

(f) Full payment when due has been made of all amounts which the Parent, its Restricted Subsidiaries or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as contributions to such Plan as of the date hereof.

(g) Neither the Parent, its Restricted Subsidiaries nor any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by the Parent, a Restricted Subsidiary or any ERISA Affiliate in its sole discretion at any time without any material liability, other than for benefits due as of, or claims incurred prior to, the effective date of such termination.

(h) Neither the Parent, its Restricted Subsidiaries nor any ERISA Affiliate sponsors, maintains or contributes to, or has at any time in the six-year period preceding the date hereof sponsored, maintained or contributed to, any multiemployer plan, as defined in section 4001(a)(3) of ERISA.

Section 7.11 Disclosure; No Material Misstatements . The certificates, financial statements, reports, and other written information, taken as a whole, furnished by or on behalf of the Borrower or any Guarantor to the Administrative Agent and the Lenders in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto, do not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading as of the date such information is dated or certified; provided that (a) to the extent any such certificate, statement, report, or information was based upon or constitutes a forecast or projection, the Parent and the Borrower jointly and severally represent only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such certificate, statement, report, or information (it being recognized by the Lenders, however, that projections as to future events are not to be viewed as facts and that results during the period(s) covered by such projections may differ from the projected results and that such differences may be material and that the Parent and the Borrower make no representation that such projections will be realized), (b) with respect to any financial statements so furnished, the Parent and the Borrower jointly and severally represent only that (except as noted otherwise therein or as otherwise customary for non-annual financial statements) such financial statements present fairly in all material respects the financial condition and results of operations of the described Persons in accordance with GAAP consistently applied, and (c) as to statements, information and reports supplied by third parties, the Parent and the Borrower jointly and severally represent only that it is not aware of any material misstatement or omission therein. There are no statements or conclusions in any Reserve Report which are based upon or include material misleading information or fail to take into account known material information regarding the matters reported therein, it being understood that projections concerning volumes attributable to the Oil and Gas Properties of the Parent and its Restricted Subsidiaries and production and cost estimates contained in each Reserve Report are necessarily based upon professional opinions, estimates and projections and that the Parent and its Restricted Subsidiaries do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

Section 7.12 Insurance . The Parent has, and has caused all of its Restricted Subsidiaries to have, (a) all insurance policies sufficient for the compliance by each of them with all material Governmental Requirements and all material agreements and (b) insurance coverage in such amounts and against such risk that are usually insured against by companies similarly situated and engaged in the same or a similar business for the assets and operations of the Parent and its Restricted Subsidiaries. The Administrative Agent and the Lenders have been named as additional insureds in respect of such liability insurance policies and the Administrative Agent has been named as loss payee with respect to Property loss insurance.

Section 7.13 Restriction on Liens . Neither the Parent nor any of its Restricted Subsidiaries is a party to any material agreement or arrangement (other than agreements governing Debt permitted by Section 9.02 which create Liens permitted by Section 9.03 ), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its

ability to grant Liens to the Administrative Agent for the benefit of the Secured Parties on or in respect of their Properties to secure the Indebtedness and the Loan Documents, in each case, except as permitted by Section 9.15 .

Section 7.14 Subsidiaries . Except as set forth on Schedule 7.14 or as disclosed in writing to the Administrative Agent (which shall promptly furnish a copy to the Lenders), which, upon such disclosure, shall be deemed to be a supplement to Schedule 7.14, neither the Borrower nor the Parent has any Subsidiaries (other than, in the case of the Parent, the Borrower) or has any Foreign Subsidiaries. Schedule 7.14 identifies each Subsidiary as either Restricted or Unrestricted and, unless otherwise disclosed on such schedule, each Restricted Subsidiary on such schedule is a Wholly-Owned Subsidiary.

Section 7.15 Location of Business and Offices . The Borrower’s jurisdiction of organization is the State of Delaware; the name of the Borrower as listed in the public records of its jurisdiction of organization is Centennial Resource Production, LLC; and the organizational identification number of the Borrower in its jurisdiction of organization is 5196860 (or, in each case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(l) in accordance with Section 12.01 ). The Borrower’s principal place of business and chief executive offices are located at the address specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(l) and Section 12.01(c) ). Each Restricted Subsidiary of the Borrower’s jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its chief executive office is stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to Section 8.01(l) ).

Section 7.16 Properties; Titles, Etc .

(a) Subject to Immaterial Title Deficiencies, each of the Parent and the Restricted Subsidiaries has good and defensible title to the Oil and Gas Properties evaluated in the most recently delivered Reserve Report and good title to all its material personal Properties, in each case, free and clear of all Liens except Liens permitted by Section 9.03 . After giving full effect to the Excepted Liens (including Immaterial Title Deficiencies), the Parent or the Restricted Subsidiary specified as the owner owns the net interests in production attributable to the Hydrocarbon Interests as reflected in the most recently delivered Reserve Report, and the ownership of such Properties does not in any material respect obligate the Parent or such Restricted Subsidiary to bear the costs and expenses relating to the maintenance, development and operations of each such Property in an amount in excess of the working interest of each Property set forth in the most recently delivered Reserve Report that is not offset by a corresponding proportionate increase in the Parent’s or such Restricted Subsidiary’s net revenue interest in such Property or in the revenues therefrom.

(b) All material leases and agreements necessary for the conduct of the business of the Parent and its Restricted Subsidiaries are valid and subsisting, in full force and effect, and there exists no default or event or circumstance which with the giving of notice or the passage of time or both would give rise to a default under any such lease or leases, which could reasonably be expected to have a Material Adverse Effect.

(c) The rights and Properties presently owned, leased or licensed by the Parent and its Restricted Subsidiaries including, without limitation, all easements and rights of way and the benefits under the Services Agreement, include all rights and Properties necessary to permit the Parent and its Restricted Subsidiaries to conduct their business in all material respects in the same manner as its business has been conducted prior to the date hereof.

(d) All of the Properties of the Parent and its Restricted Subsidiaries which are reasonably necessary for the operation of their businesses are in good working condition and are maintained in accordance with prudent business standards.

(e) The Parent and each Restricted Subsidiary owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual Property material to its business (including, without limitation, all databases, geological data, geophysical data, engineering data, seismic data, maps, interpretations and other technical information material to its business), and the use thereof by the Parent and such Restricted Subsidiary does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 7.17 Maintenance of Properties . Except for such acts or failures to act as could not be reasonably expected to have a Material Adverse Effect, the Oil and Gas Properties (and Properties unitized therewith) of the Parent and its Restricted Subsidiaries have been maintained, operated and developed in a good and workmanlike manner and in conformity with all Governmental Requirements and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas Properties of the Parent and its Restricted Subsidiaries. Specifically in connection with the foregoing, except for those as could not be reasonably expected to have a Material Adverse Effect, (a) no Oil and Gas Property of the Parent or any Restricted Subsidiary is subject to having allowable production reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) and (b) the wells comprising a part of the Oil and Gas Properties (or Properties unitized therewith) of the Parent or any Restricted Subsidiary are producing only from the Oil and Gas Properties (or in the case of wells located on Properties pooled or unitized therewith, such pooled or unitized Properties) of the Parent or such Restricted Subsidiary. All pipelines, wells, gas processing plants, platforms and other material improvements, fixtures and equipment owned in whole or in part by the Parent or any of its Restricted Subsidiaries that are necessary to conduct normal operations are being maintained in a state adequate to conduct normal operations, and with respect to such of the foregoing which are operated by the Parent or any of its Restricted Subsidiaries, in a manner consistent with the Parent’s or its Restricted Subsidiaries’ past practices (other than those the failure of which to maintain in accordance with this Section 7.17 could not reasonably be expected to have a Material Adverse Effect).

Section 7.18 Gas Imbalances, Prepayments . Except as set forth on Schedule 7.18 or on the most recent certificate delivered pursuant to Section 8.12(c) , on a net basis there are no gas imbalances, take or pay or other prepayments which would require the Parent or any of its Restricted Subsidiaries to deliver Hydrocarbons produced from their Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor exceeding 2.5% of the aggregate annual production of gas from the Oil and Gas Properties of the Parent and its Restricted Subsidiaries during the most recent calendar year (on an mcf equivalent basis).

Section 7.19 Marketing of Production . Except for contracts listed and in effect on the date hereof on Schedule 7.19, or hereafter either disclosed in writing to the Administrative Agent or included in the most recently delivered Reserve Report (with respect to all of which contracts the Borrower represents that the Parent or its Restricted Subsidiaries are receiving a price for all production sold thereunder which is computed substantially in accordance with the terms of the relevant contract), no material agreements exist which are not cancelable on 90 days’ notice or less without penalty or detriment for the sale of production from the Parent’s or its Restricted Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other rights to purchase, production, whether or not the same are currently being exercised) that (a) pertain to the sale of production at a fixed price and (b) have a maturity or expiry date of longer than six (6) months.

Section 7.20 Swap Agreements and Qualified ECP Counterparty . Schedule 7.20, as of the date hereof, and after the date hereof, each report required to be delivered by the Borrower pursuant to Section 8.01(e) , sets forth, a true and complete list of all Swap Agreements of the Parent and each Restricted Subsidiary, and, with respect to any Swap Agreement of which the counterparty is not the Agent or a Lender, the material terms thereof (including the type, effective date, termination date and notional amounts or volumes), the estimated net mark to market value thereof, all credit support agreements (other than the Loan Documents) relating thereto (including any margin required or supplied) and the counterparty to each such agreement. The Borrower is a Qualified ECP Counterparty.

Section 7.21 Use of Loans and Letters of Credit . The proceeds of the Loans and the Letters of Credit shall be used to refinance existing indebtedness of the Borrower under the Existing Credit Agreement, fund a portion of the purchase price for the Celero Acquisition, pay fees, commissions and expenses in connection with the foregoing, provide working capital for exploration and production operations, finance acquisitions of Oil and Gas Properties permitted hereunder and for general corporate purposes. The Parent and its Restricted Subsidiaries are not engaged principally, or as one of its or their important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the Board). No part of the proceeds of any Loan or Letter of Credit will be used for any purpose which violates the provisions of Regulations T, U or X of the Board. The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that the Parent and its other Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (c) in any manner that would knowingly or negligently result in the violation of any Sanctions applicable to any party hereto.

Section 7.22 Solvency . After giving effect to the transactions contemplated hereby, (a) the Borrower and the Guarantors individually and on a consolidated basis are not insolvent as such term is used and defined in the United States Bankruptcy Code and (b) each of the Borrower and the Guarantors will not have (and will have no reason to believe that it will have thereafter) unreasonably small capital for the conduct of its business.

Section 7.23 Anti-Corruption Laws and Sanctions . The Parent and the Borrower have implemented and maintain in effect such policies and procedures, if any, as they reasonably deem appropriate, in light of their businesses and international activities (if any), to ensure compliance by the Parent, the Borrower and its other Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Parent, the Borrower and its other Subsidiaries and their respective officers and employees and, to the knowledge of the Parent and the Borrower, their respective directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) the Parent, the Borrower and its other Subsidiaries or any of their respective directors, officers or employees, or (b) to the knowledge of the Parent and the Borrower, any agent of the Parent, the Borrower or any other Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use of proceeds or other transaction contemplated by this Agreement will violate any Anti-Corruption Law, applicable Sanctions, the Act, or the Trading with the Enemy Act, as amended. The Parent, the Borrower and its other Subsidiaries are in compliance in all material respects with the Act.

ARTICLE VIII

AFFIRMATIVE COVENANTS

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, each of the Borrower and (to the extent that the Parent is not the Borrower) the Parent covenants and agrees with the Lenders that:

Section 8.01 Financial Statements; Other Information . The Borrower will furnish or will cause the Parent to furnish to the Administrative Agent (which shall promptly make a copy thereof available to the Lenders):

(a) Annual Financial Statements . As soon as available, but in any event in accordance with then applicable law and not later than one hundred twenty (120) days after the end of each fiscal year of the Parent (or, if the Parent or the Borrower is required to file such financial statements with the SEC at such time, on or before the fifth day after the date on which such financial statements are required to be filed with the SEC after giving effect to any permitted extensions pursuant to Rule 12b-25 under the Securities Exchange Act), commencing with the fiscal year ending December 31, 2014, the Parent’s audited consolidated balance sheet and related statements of operations, members’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent public accountants of recognized national standing or that are otherwise reasonably acceptable to the Administrative Agent (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Parent and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied.

(b) Quarterly Financial Statements . As soon as available, but in any event in accordance with then applicable law and not later than seventy-five (75) days after the end of each of the first three fiscal quarters of each fiscal year of the Parent (or, if the Parent or the Borrower is required to file such financial statements with the SEC at such time, on or before the fifth day after the date on which such financial statements are required to be filed with the SEC after giving effect to any permitted extensions pursuant to Rule 12b-25 under the Securities Exchange Act), commencing with the fiscal quarter ending September 30, 2014, the Parent’s consolidated balance sheet and related statements of income and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Parent and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.

(c) Certificate of Financial Officer – Compliance . Concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b) , a certificate of a Financial Officer in substantially the form of Exhibit E hereto (or such other form agreed to by the Administrative Agent and the Borrower) (i) certifying as to whether a Default then exists and, if a Default then exists, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 9.01 , and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the financial statements referred to in Section 7.04(a) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate.

(d) Certificate of Financial Officer – Consolidating Information . If, at any time, all of the Consolidated Subsidiaries of the Parent are not Consolidated Restricted Subsidiaries, then concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b) , a certificate of a Financial Officer setting forth consolidating spreadsheets that show all Consolidated Unrestricted Subsidiaries and the eliminating entries, in such form as would be presentable to the auditors of the Parent.

(e) Certificate of Financial Officer – Swap Agreements . Concurrently with the delivery of each Reserve Report hereunder (other than the Initial Reserve Report), a certificate of a Financial Officer, in form and substance reasonably satisfactory to the Administrative Agent, setting forth as of a recent date, a true and complete list of all Swap Agreements of the Parent and each Restricted Subsidiary, the material terms thereof (including the type, effective date, termination date and notional amounts or volumes), the estimated net mark-to-market value therefor, any new credit support agreements relating thereto (other than the Loan Documents), any margin required or supplied under any credit support document (other than the Loan Documents), and the counterparty to each such agreement.

(f) Certificate of Insurer – Insurance Coverage . Concurrently with any delivery of financial statements under Section 8.01(a) , one or more certificates of insurance coverage from the Parent’s insurance brokers or insurers with respect to the insurance required by Section 8.07 , in form and substance reasonably satisfactory to the Administrative Agent, and, if requested by the Administrative Agent, copies of the applicable policies.

(g) SEC and Other Filings; Reports to Shareholders . If the Parent or any Restricted Subsidiary becomes a publicly traded company, then promptly after the same becomes publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Parent or any Restricted Subsidiary with the SEC, or with any national securities exchange, or distributed by the Parent to its equity holders generally, as the case may be.

(h) Notices Under Material Instruments . Promptly after the furnishing thereof, copies of any financial statement, report or notice furnished to or by any Person pursuant to the terms of any preferred stock designation, indenture, loan or credit or other similar agreement with respect to Material Indebtedness, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section 8.01 .

(i) Lists of Purchasers . Promptly following the written request of the Administrative Agent, a list of all Persons (and their addresses for notices) purchasing Hydrocarbons from the Parent or any Restricted Subsidiary on a basis other than spot sales.

(j) Notice of Sales of Hydrocarbon Interests . In the event the Parent or any Restricted Subsidiary intends to sell, transfer, assign or otherwise dispose of any Proved Oil and Gas Properties with a total value with respect to any single sale in excess of $5,000,000, or any Equity Interests in any Subsidiary in accordance with Section 9.12 , reasonable prior written notice of such disposition, the anticipated price thereof and the anticipated date of closing and any other details thereof requested by the Administrative Agent.

(k) Notice of Casualty Events . Prompt written notice, and in any event within three Business Days, of the occurrence of any Casualty Event or the commencement of any action or proceeding that could reasonably be expected to result in a Casualty Event.

(l) Issuance of Permitted Senior Unsecured Notes . In the event the Parent or the Borrower intends to issue Permitted Senior Unsecured Notes, prior written notice of such intended offering of such Permitted Senior Unsecured Notes, the anticipated amount thereof, and the anticipated date of closing and promptly when available will furnish a copy of the preliminary offering memorandum (if any) and the final offering memorandum (if any).

(m) Information Regarding Borrower and Guarantors . Prompt written notice (and in any event not less than five (5) days prior thereto in the case of any change of name or jurisdiction of organization) of any change (i) in the Borrower or any Guarantor’s corporate name, (ii) in the Borrower or any Guarantor’s corporate structure, (iii) in the Borrower or any Guarantor’s jurisdiction of organization or such Person’s organizational identification number in such jurisdiction of organization, and (iv) in the Borrower or any Guarantor’s federal taxpayer identification number.

(n) Production Report and Lease Operating Statements . Not later than seventy-five (75) days after the end of each fiscal quarter of each fiscal year of the Parent, a report setting forth, for each calendar month during the then current fiscal year to date, the volume of production and sales attributable to production (and the prices at which such sales were made and the revenues derived from such sales) for each such calendar month from the Oil and Gas Properties, and setting forth the related ad valorem, severance and production taxes and lease operating expenses attributable thereto and incurred for each such calendar month, and setting forth the operator of record for the Oil and Gas Properties.

(o) Notices of Certain Changes . Promptly after the execution thereof, copies of any amendment, modification or supplement to the certificate or articles of incorporation or formation, bylaws, certificate or articles of organization, regulations or limited liability company agreement, any preferred stock designation or any other organic document of the Parent or any Restricted Subsidiary if such amendment, modification or supplement is material to the Lenders.

(p) Notice of Investments in Unrestricted Subsidiaries and Unrestricted Subsidiary Distributions . Promptly following the Parent or any Restricted Subsidiary making any Investment in an Unrestricted Subsidiary after the Effective Date, the Borrower shall deliver written notice thereof to the Administrative Agent specifying the name of the Unrestricted Subsidiary in which such Investment was made, the date of such Investment, the amount of such Investment and whether such Investment was made pursuant to clause (i) or (ii) of Section 9.05(i) . Promptly following any Credit Party’s receipt of any Unrestricted Subsidiary Distribution after the Effective Date from an Unrestricted Subsidiary in which a Credit Party has made an Investment after the Effective Date pursuant to Section 9.05(i) , the Borrower shall deliver written notice thereof specifying the amount of such Unrestricted Subsidiary Distribution, the date on which such Unrestricted Subsidiary Distribution was received, and whether or not the proceeds of such Unrestricted Subsidiary Distribution have been or will be used by the Borrower to make distributions permitted under Section 9.04(a)(v) .

(q) Notices Relating to the Celero Acquisition . In the event that after the Effective Date the Borrower or any Guarantor is required or elects to purchase any of the Celero Properties which had been excluded from, or to return any of the Celero Properties which had been included in, the Celero Properties in accordance with the terms of the Celero Acquisition Documents, or is required to honor any preferential purchase right in respect of any Celero Property which has not been waived, then, in each such case, the Borrower shall promptly give the Administrative Agent notice in reasonable detail of such circumstances.

(r) Other Requested Information . Promptly following any reasonable request therefor, such other information regarding the operations, business affairs and financial condition of the Parent or any Restricted Subsidiary (including, without limitation, any Plan of the Parent or any Restricted Subsidiary and any reports or other information required to be filed with respect thereto under the Code or under ERISA), or compliance with the terms of this Agreement or any other Loan Document, or in order to assist the Administrative Agent and the Lenders in maintaining compliance with the Act, in each case as the Administrative Agent may reasonably request.

From and after a Qualifying IPO, documents required to be delivered pursuant to Section 8.01(a) , Section 8.01(b) or Section 8.01(g) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (a) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s public website; or (b) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender upon its request to the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify the Administrative Agent and each Lender of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request by a Lender for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

Section 8.02 Notices of Material Events . The Borrower will furnish to the Administrative Agent (which shall promptly make a copy thereof available to the Lenders) prompt (and in any event within three Business Days) written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of, or the threat in writing of, any action, suit, proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority against or affecting the Parent or any Restricted Subsidiary not previously disclosed in writing to the Lenders or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Lenders) that, in either case, could reasonably be expected to result in a Material Adverse Effect; and

(c) the occurrence of any condition or event that the senior executive officers of the Parent have determined to constitute a Material Adverse Effect in their reasonable discretion.

Each notice delivered under this Section 8.02 shall be accompanied by a statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

Section 8.03 Existence; Conduct of Business . The Parent and the Borrower will, and will cause each other Restricted Subsidiary to, (a) do or cause to be done all things necessary to preserve, renew and keep in full force and effect (i) its legal existence and (ii) the rights, licenses, permits, privileges and franchises material to the conduct of its business and (b) maintain, if necessary, its qualification to do business in each other jurisdiction in which its Oil and Gas Properties are located or the ownership of its Properties requires such qualification, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 9.10 .

Section 8.04 Payment of Obligations . The Parent and the Borrower will, and will cause each other Restricted Subsidiary to, pay its obligations, including Tax liabilities of the Parent and all of its Restricted Subsidiaries before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Parent or such Restricted Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect or result in the seizure or levy of any material Property of the Parent or any Restricted Subsidiary.

Section 8.05 Performance of Obligations under Loan Documents . The Borrower will pay the Loans in accordance with the terms hereof, and the Parent and the Borrower will, and will cause each other Restricted Subsidiary to, do and perform every act and discharge all of the obligations to be performed and discharged by them under the Loan Documents, including, without limitation, this Agreement, at the time or times and in the manner specified taking into consideration any grace periods therein.

Section 8.06 Operation and Maintenance of Properties . The Parent and the Borrower, at their own expense, will, and will cause each other Restricted Subsidiary to:

(a) operate its Oil and Gas Properties and other material Properties or cause such Oil and Gas Properties and other material Properties to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance with all Governmental Requirements, including, without limitation, applicable proration requirements and Environmental Laws, and all applicable laws, rules and regulations of every other Governmental Authority from time to time constituted to regulate the development and operation of its Oil and Gas Properties and the production and sale of Hydrocarbons and other minerals therefrom, except, in each case, where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(b) keep and maintain all Property material to the conduct of its business in good working order and condition (ordinary wear and tear excepted), and preserve, maintain and keep in good repair, working order and efficiency (ordinary wear and tear and depletion excepted) all of its Oil and Gas Properties except, in each case, where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(c) promptly pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all delay rentals, royalties, expenses and indebtedness accruing under the leases or other agreements affecting or pertaining to its Oil and Gas Properties and will do all other things necessary to keep unimpaired their rights with respect thereto and prevent any forfeiture thereof or default thereunder, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

(d) promptly perform or make reasonable and customary efforts to cause to be performed, in accordance with customary industry standards, the obligations required by each

and all of the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other material Properties, except in each case where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

(e) to the extent a Credit Party is not the operator of any Property, the Parent and the Borrower shall (or shall cause the applicable Restricted Subsidiary to) use reasonable efforts to cause the operator to comply with this Section 8.06 , but the failure of the operator so to comply will not constitute a Default or Event of Default.

Section 8.07 Insurance . The Parent and the Borrower will, and will cause each other Restricted Subsidiary to, maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. The Administrative Agent on behalf of itself and each of the Lenders shall be named as “additional insured” in respect of such liability insurance policies, and the Administrative Agent shall be named as a loss payee with respect to property loss insurance for collateral subject to the Security Instruments and such policies shall provide that the Administrative Agent shall receive not less than 30 days’ prior notice of cancellation or non-renewal (or, if less, the maximum advance notice that the applicable carrier will agree to provide).

Section 8.08 Books and Records; Inspection Rights . The Parent and the Borrower will, and will cause each other Restricted Subsidiary to, keep proper books of record and account in which full, true and correct entries in conformance with GAAP are made of all dealings and transactions in relation to its business and activities. The Parent and the Borrower will, and will cause each other Restricted Subsidiary to, permit any representatives designated by the Administrative Agent, upon reasonable prior notice, to visit and inspect its Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants (so long as a member of the Borrower’s senior management team is present during all such discussions), all at such reasonable times and as often as reasonably requested, provided that so long as no Event of Default has occurred and is continuing, such visits and inspections shall not occur more than once in any 12-month period.

Section 8.09 Compliance with Laws . The Parent and the Borrower will, and will cause each other Restricted Subsidiary to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The Parent and the Borrower will maintain in effect and enforce such policies and procedures, if any, as they reasonably deem appropriate, in light of their businesses and international activities (if any), to ensure compliance by the Parent, the Borrower, the Parent’s other Subsidiaries and each of their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

Section 8.10 Environmental Matters .

(a) The Parent and the Borrower shall at their sole expense: (i) comply, and cause their Properties and operations and each other Restricted Subsidiary and each other Restricted Subsidiary’s Properties and operations to comply, with all applicable Environmental

Laws, to the extent the breach thereof could be reasonably expected to have a Material Adverse Effect; (ii) not Release or threaten to Release, and cause each Restricted Subsidiary not to Release or threaten to Release, any Hazardous Material on, under, about or from any of the Parent’s or its Restricted Subsidiaries’ Properties or any other property offsite the Property to the extent caused by the Parent’s or any of its Restricted Subsidiaries’ operations except in compliance with applicable Environmental Laws, to the extent such Release or threatened Release could reasonably be expected to have a Material Adverse Effect; (iii) timely obtain or file, and cause each other Restricted Subsidiary to timely obtain or file, all Environmental Permits, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Parent’s or its Restricted Subsidiaries’ Properties, to the extent such failure to obtain or file could reasonably be expected to have a Material Adverse Effect; (iv) promptly commence and diligently prosecute to completion, and cause each other Restricted Subsidiary to promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the “ Remedial Work ”) to the extent any Remedial Work is required or reasonably necessary under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future Release or threatened Release of any Hazardous Material on, under, about or from any of the Parent’s or its Restricted Subsidiaries’ Properties, to the extent failure to do so could reasonably be expected to have a Material Adverse Effect; (v) conduct, and cause each other Restricted Subsidiaries to conduct, their respective operations and businesses in a manner that will not expose any Property or Person to Hazardous Materials that could reasonably be expected to cause the Parent or its Restricted Subsidiaries to owe damages or compensation that could reasonably be expected to cause a Material Adverse Effect; and (vi) establish and implement, and shall cause each other Restricted Subsidiary to establish and implement, such procedures as may be necessary to continuously determine and assure that the Parent’s and its Restricted Subsidiaries’ obligations under this Section 8.10(a) are timely and fully satisfied, to the extent failure to do so could reasonably be expected to have a Material Adverse Effect.

(b) If the Parent or any Restricted Subsidiary receives written notice of any action, investigation or inquiry by any Governmental Authority or any threatened demand or lawsuit by any Person against the Parent or its Restricted Subsidiaries or their Properties, in each case in connection with any Environmental Laws, the Borrower will within fifteen (15) days after any Responsible Officer learns thereof give written notice of the same to the Administrative Agent if the Parent or the Borrower could reasonably anticipate that such action will result in liability (whether individually or in the aggregate) in excess of the Threshold Amount, not fully covered by insurance, subject to normal deductibles.

(c) In connection with any acquisition by any Credit Party of any Oil and Gas Property, other than an acquisition of additional interests in Oil and Gas Properties in which such Credit Party previously held an interest, to the extent any Credit Party obtains or is provided with same, the Borrower will, and will cause each other Credit Party to, promptly following any Credit Party’s obtaining or being provided with the same, deliver to the Administrative Agent such final and non-privileged material environmental reports of such Oil and Gas Properties as are reasonably requested by the Administrative Agent, the delivery of which will not violate any applicable confidentiality agreement entered into in good faith with an unaffiliated third party.

Section 8.11 Further Assurances .

(a) The Parent and the Borrower at their sole expense will, and will cause each other Restricted Subsidiary to, promptly execute and deliver to the Administrative Agent all such other documents, agreements and instruments reasonably requested by the Administrative Agent to comply with, cure any defects or accomplish the conditions precedent, covenants and agreements of the Parent or any Restricted Subsidiary, as the case may be, in the Loan Documents, including the Notes, or to further evidence and more fully describe the collateral intended as security for the Indebtedness, or to correct any omissions in this Agreement or the Security Instruments, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate in connection therewith.

(b) The Parent and the Borrower hereby authorize the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Mortgaged Property and other collateral under the Security Instruments without the signature of the Parent, the Borrower or any other Guarantor where permitted by law. A carbon, photographic or other reproduction of the Security Instruments or any financing statement covering such Mortgaged Property, collateral or any part thereof shall be sufficient as a financing statement where permitted by law. The Parent and the Borrower acknowledge and agree that any such financing statement may describe the collateral as “all assets” or “all personal property” of the applicable Credit Party or words of similar effect as may be required by the Administrative Agent.

Section 8.12 Reserve Reports .

(a) On or before March 1st and September 1st of each year, commencing March 1, 2015, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report evaluating the Oil and Gas Properties of the Credit Parties as of the immediately preceding January 1st and July 1st. In addition, (i) on or before December 1, 2014 and June 1, 2015, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report evaluating the Oil and Gas Properties of the Credit Parties, and (ii) the Borrower, from and after November 1, 2015, may elect in its discretion to deliver one interim Reserve Report evaluating the Oil and Gas Properties of the Credit Parties in between two successive Scheduled Redetermination Dates, which Reserve Reports in clauses (i) and (ii) shall have an “as of” date reasonably acceptable to the Administrative Agent. The Reserve Report as of January 1 of each year shall be prepared by one or more Approved Petroleum Engineers, and each other Reserve Report required hereunder shall be prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to have been prepared in accordance with the procedures used in the immediately preceding January 1 Reserve Report.

(b) In the event of an Interim Redetermination, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to have been prepared in accordance with the procedures used in the immediately preceding January 1 Reserve Report. For any Interim Redetermination requested by the Administrative Agent or the

Borrower pursuant to Section 2.08(b) , the Borrower shall provide such Reserve Report with an “as of” date as required by the Administrative Agent as soon as possible, but in any event no later than thirty (30) days following the receipt of such request.

(c) With the delivery of each such Reserve Report, the Borrower shall provide to the Administrative Agent and the Lenders a certificate of the Borrower confirming that in all material respects: (i) the Parent and the Borrower acted in good faith and utilized reasonable assumptions and due care in the preparation of such Reserve Report and that to their knowledge there are no statements or conclusions in such Reserve Report which are based upon or include material misleading information or fail to take into account material information known to them regarding the matters reported therein, (ii) the Parent or its Restricted Subsidiaries own good and defensible title to the Oil and Gas Properties evaluated in such Reserve Report as required in this Agreement and such Properties are free of all Liens except for Excepted Liens and Liens securing the Indebtedness, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other prepayments in excess of the volume specified in Section 7.18 with respect to its Oil and Gas Properties evaluated in such Reserve Report which would require the Parent or any Restricted Subsidiary to deliver Hydrocarbons either generally or produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (iv) none of the Parent’s or any Restricted Subsidiary’s Proved Oil and Gas Properties have been sold since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which certificate shall list all of its Proved Oil and Gas Properties sold and in such detail as reasonably required by the Administrative Agent, (v) attached to the certificate is a list of all marketing agreements entered into subsequent to the later of the date hereof or the most recently delivered Reserve Report which the Borrower could reasonably be expected to have been obligated to list on Schedule 7.19 had such agreement been in effect on the date hereof, (vi) attached thereto is a schedule of the Proved Oil and Gas Properties evaluated by such Reserve Report that are Mortgaged Properties which sets out the percentage of the total value of the Proved Oil and Gas Properties evaluated in such Reserve Report and demonstrates that the total value of such Proved Oil and Gas Properties is in compliance with Section 8.14(a) , and (vii) to the extent, if any, that any Oil and Gas Properties included in such report are owned by a Credit Party that is not a Qualified ECP Counterparty, such Credit Party and such Oil and Gas Properties are specified in such report.

Section 8.13 Title Information .

(a) On or before the delivery to the Administrative Agent and the Lenders of each Reserve Report required by Section 8.12(a) , the Borrower will deliver title information in form and substance acceptable to the Administrative Agent covering enough of the Oil and Gas Properties evaluated by such Reserve Report that were not included in the immediately preceding Reserve Report, so that the Administrative Agent shall have received together with title information previously delivered to the Administrative Agent, satisfactory title information on at least 80% of the total value of the Proved Oil and Gas Properties evaluated by such Reserve Report.

(b) If the Borrower has provided title information for additional Properties under Section 8.13(a) , the Borrower shall, within 60 days after notice from the Administrative Agent that title defects or exceptions (excluding Excepted Liens) exist with respect to such

additional Properties, either (i) cure any such title defects or exceptions (including defects or exceptions as to priority) which are not permitted by Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged Properties with no title defects or exceptions (excluding Excepted Liens) having an equivalent value or (iii) deliver title information in form and substance acceptable to the Administrative Agent so that the Administrative Agent shall have received, together with title information previously delivered to the Administrative Agent, satisfactory title information on at least 80% of the total value of the Proved Oil and Gas Properties evaluated by such Reserve Report.

(c) If the Borrower fails to cure any title defect (excluding Excepted Liens) requested by the Administrative Agent to be cured within the 60-day period or the Borrower fails to comply with the requirements to provide acceptable title information covering 80% of the total value of the Proved Oil and Gas Properties evaluated in the most recent Reserve Report, such failure shall not be a Default, but instead the Administrative Agent and/or the Required Revolving Credit Lenders shall have the right to exercise the following remedy in their sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative Agent or the Lenders. Such remedy is to have the Administrative Agent declare that such unacceptable Mortgaged Property shall not count towards the 80% requirement and for the Administrative Agent to send a notice to the Borrower and the Revolving Credit Lenders that the then outstanding Borrowing Base shall be reduced by an amount as determined by the Required Revolving Credit Lenders to cause the Borrower to be in compliance with the requirement to provide acceptable title information on 80% of the total value of the Proved Oil and Gas Properties. This new Borrowing Base shall become effective immediately after receipt of such notice.

Section 8.14 Collateral and Guaranty Agreements .

(a) In connection with each redetermination of the Borrowing Base, the Borrower shall review the Reserve Report and the list of current Mortgaged Properties (as described in Section 8.12(c)(vi) ) to ascertain whether the Mortgaged Properties represent at least 80% of the total value of the Proved Oil and Gas Properties evaluated in the most recently completed Reserve Report after giving effect to exploration and production activities, acquisitions, dispositions and production. In the event that the Mortgaged Properties do not represent at least 80% of such total value, then the Borrower shall, and shall cause the Parent and its other Restricted Subsidiaries to, grant, no later than thirty (30) days after delivery of the certificate required under Section 8.12(c) (or such longer period acceptable to the Administrative Agent), to the Administrative Agent as security for the Indebtedness first priority Liens and security interests (subject only to Excepted Liens) on additional Proved Oil and Gas Properties of the Credit Parties that are not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 80% of such total value. All such Liens will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements or other Security Instruments, all in form and substance reasonably satisfactory to the Administrative Agent and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes. In order to comply with the foregoing, if any Restricted Subsidiary places a Lien on its Oil and Gas Properties and such Restricted Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.14(b) .

(b) In the event that (i) the Parent creates or acquires any Restricted Subsidiary (including by designating any Unrestricted Subsidiary as a Restricted Subsidiary pursuant to the terms hereof) or (ii) any Domestic Subsidiary incurs or guarantees any Funded Debt, the Borrower shall, or shall cause the Parent to, promptly cause such Restricted Subsidiary (if other than the Borrower) to execute and deliver the Guaranty Agreement and the Security Agreement (or supplements thereto or assumption agreements thereto, as applicable) pursuant to which such Restricted Subsidiary shall guarantee the Indebtedness and grant liens and security interests in its personal property that constitutes Collateral (as defined in the Security Agreement). In the event that the Parent creates or acquires any Restricted Subsidiary, the Credit Party that owns the Equity Interests in such new Restricted Subsidiary shall execute and deliver a supplement to the Security Agreement pursuant to which such Credit Party will confirm the pledge of all of the Equity Interests of such new Restricted Subsidiary to secure the Indebtedness. In connection with the foregoing, the Credit Parties shall (i) deliver original stock certificates, if any, evidencing the Equity Interests of such new Restricted Subsidiary, together with an appropriate undated stock power for each certificate duly executed in blank by the registered owner thereof and (ii) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent. Parent and Borrower shall cause any Subsidiary (if other than the Borrower) that guarantees the obligations with respect to any Permitted Senior Unsecured Notes to become a Guarantor by executing and delivering to the Administrative Agent an assumption agreement with respect to the Guaranty Agreement.

(c) The Parent will at all times cause the other material tangible and intangible assets of the Parent and each Restricted Subsidiary (including, without limitation, all Swap Agreements) purported to be pledged as collateral pursuant to the Security Instruments to be or be made subject to a Lien under the Security Instruments.

(d) Promptly following the acquisition by any Person after the Celero Acquisition of one hundred percent (100%) of the outstanding Equity Interests in the Borrower, the Borrower will give notice of such event to the Administrative Agent and the Borrower will cause such Person to become a party to this Agreement by executing and delivering a Parent Joinder Agreement to the Administrative Agent. Pursuant to such Parent Joinder Agreement and the Guaranty Agreement as supplemented thereby, the Parent will guarantee the Indebtedness. Pursuant to such Parent Joinder Agreement and the Security Agreement as supplemented thereby, the Parent will grant liens and security interests in its personal property that constitutes Collateral (as defined in the Security Agreement), including all of its Equity Interests in the Borrower to secure the Indebtedness. In connection with the foregoing, the Parent will (i) deliver the original stock certificates, if any, evidencing its Equity Interests in the Borrower, together with an appropriate undated stock power for each certificate duly executed in blank by Parent and (ii) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent.

(e) Notwithstanding any provision in any of the Loan Documents to the contrary, in no event is any Building (as defined in the applicable Flood Insurance Regulations) or Manufactured (Mobile) Home (as defined in the applicable Flood Insurance Regulations) owned by any Credit Party included in the Mortgaged Property and no Building or Manufactured (Mobile) Home shall be encumbered by any Security Instrument; provided that (i) the applicable

Credit Party’s interests in all lands and Hydrocarbons situated under any such Building or Manufactured (Mobile) Home shall not be excluded from the Mortgaged Property and shall be encumbered by all applicable Security Instruments and (ii) the Borrower shall not, and shall not permit the Parent nor any of its other Restricted Subsidiaries to, permit to exist any Lien on any Building or Manufactured (Mobile) Home except Excepted Liens.

Section 8.15 ERISA Compliance . The Parent and the Borrower will (a) promptly furnish, and will cause each other Restricted Subsidiary to promptly furnish, to the Administrative Agent after request therefor by the Administrative Agent, copies of each annual and other report with respect to each Plan of the Parent or any Restricted Subsidiary or any trust created thereunder, and (b) promptly upon becoming aware of (i) the occurrence of any “prohibited transaction,” as described in section 406 of ERISA or in section 4975 of the Code for which no exception exists or is available by statute, regulation, administrative exemption, or otherwise, in connection with any Plan or any trust created thereunder and that is reasonably expected to result in liability to the Parent or any Restricted Subsidiary that is expected to have a Material Adverse Effect, (ii) the occurrence of an ERISA Event or (iii) the present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Accounting Standards Codification No. 715: Compensation-Retirement Benefits), as of the date of the most recent financial statements reflecting such amounts, exceeding the fair market value of the assets of such Plan allocable to such accrued benefits, promptly furnish to the Administrative Agent a written notice signed by the President or the principal Financial Officer of the Parent, the Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature thereof, what action the Parent, the Restricted Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service or the Department of Labor with respect thereto.

Section 8.16 Unrestricted Subsidiaries . The Parent and the Borrower will:

(a) cause the management, business and affairs of each of the Parent and its Restricted Subsidiaries to be conducted in such a manner (including, without limitation, by keeping separate books of account, furnishing separate financial statements of Unrestricted Subsidiaries to creditors and potential creditors thereof and by not permitting Properties of the Borrower and the Parent and its other respective Restricted Subsidiaries to be commingled) so that each Unrestricted Subsidiary that is a corporation will be treated as a corporate entity separate and distinct from the Parent and the Restricted Subsidiaries; provided that, notwithstanding the foregoing, the Parent and the Restricted Subsidiaries may enter into servicing arrangements with Unrestricted Subsidiaries so long as such arrangements are permitted under Section 9.13 .

(b) not, and not permit any of the Restricted Subsidiaries to, incur, assume, guarantee or be or become liable for any Funded Debt of any of the Unrestricted Subsidiaries.

(c) not permit any Unrestricted Subsidiary to hold any Equity Interest in, or any Funded Debt of, the Parent or any Restricted Subsidiary.

Section 8.17 Commodity Exchange Act Keepwell Provisions . The Borrower hereby absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as

may be needed from time to time by each other Credit Party that is not an “eligible contract participant” under the Commodity Exchange Act in order for such Credit Party to honor its obligations under the Guaranty Agreement and any other Loan Documents with respect to Swap Agreements ( provided , however , that the Borrower shall only be liable under this Section 8.17 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 8.17 , or otherwise under this Agreement or any Loan Document, as it relates to such other Credit Parties, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of the Borrower under this Section 8.17 shall remain in full force and effect until all Indebtedness is paid in full to the Lenders, the Administrative Agent, the Issuing Bank and all Secured Swap Providers, and all of the Lenders’ Commitments are terminated. The Borrower intends that this Section 8.17 constitute, and this Section 8.17 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

ARTICLE IX

NEGATIVE COVENANTS

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, each of the Borrower and (to the extent that the Parent is not the Borrower) the Parent covenants and agrees with the Lenders that:

Section 9.01 Financial Covenants .

(a) Ratio of Total Funded Debt to EBITDAX . The Parent and the Borrower will not permit, as of the last day of any fiscal quarter commencing December 31, 2014, the Parent’s ratio of (i) Total Funded Debt as of such day to (ii) EBITDAX (or Annualized EBITDAX for the Rolling Periods ending on December 31, 2014, March 31, 2015, and June 30, 2015) for the Rolling Period ending on such day to be greater than 4.00 to 1.00.

(b) Current Ratio . The Parent and the Borrower will not permit, as of the last day of any fiscal quarter commencing December 31, 2014, the Parent’s ratio of (i) consolidated current assets of the Parent and its Consolidated Restricted Subsidiaries (including the unused amount of the total Revolving Credit Commitments (but only to the extent that the Borrower is permitted to borrow such amount under the terms of this Agreement, including, without limitation, Section 6.02 hereof), but excluding non-cash assets under ASC 815 and any cash equity proceeds then being held by the Parent or a Restricted Subsidiary for purposes of making Investments in Unrestricted Subsidiaries pursuant to Section 9.05(i)(ii) or making Restricted Payments pursuant to Section 9.04(a)(v) ) to (ii) consolidated current liabilities of the Parent and its Consolidated Restricted Subsidiaries (excluding non-cash obligations under ASC 815 and current maturities under this Agreement) to be less than 1.00 to 1.00.

Section 9.02 Debt . The Parent and the Borrower will not, and will not permit any of the other Restricted Subsidiaries to, incur, create, assume or suffer to exist any Debt, except:

(a) the Loans or other Indebtedness arising under the Loan Documents or any guaranty of or suretyship arrangement for the Loans or other Indebtedness arising under the Loan Documents.

(b) Debt of the Parent and its Restricted Subsidiaries existing on the date hereof that is reflected on Schedule 9.02.

(c) Debt under Capital Leases or that constitutes Purchase Money Debt; provided that the Funded Debt permitted by this clause (c) together with all Funded Debt described in clause (g) of this Section 9.02 shall not exceed $10,000,000 in aggregate principal amount at any one time outstanding.

(d) intercompany Debt between the Parent and any Restricted Subsidiary or between Restricted Subsidiaries, provided that such Debt is subordinated to the Indebtedness as and to the extent provided in the Guaranty Agreement.

(e) Debt constituting a guaranty by the Parent or by a Restricted Subsidiary of other Debt permitted to be incurred under this Section 9.02 .

(f) Debt under the Permitted Senior Unsecured Notes and guarantees thereof by any Credit Party; provided that after giving effect to the issuance thereof, the application of the proceeds thereof, and any automatic reduction of the Borrowing Base pursuant to Section 2.08(e) on account thereof: (A) the Parent shall be in pro forma compliance with Section 9.01 and (B) no Event of Default or Borrowing Base Deficiency shall exist.

(g) other Funded Debt; provided that the Funded Debt permitted by this clause (g) together with all Funded Debt described in clause (c) of this Section 9.02 shall not exceed $10,000,000 in the aggregate at any one time outstanding.

(h) Debt not permitted by the foregoing clauses (a) through (g) which is approved in writing by the Majority Lenders.

Section 9.03 Liens . The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except:

(a) Liens securing the payment of any Indebtedness.

(b) Excepted Liens.

(c) Liens securing Capital Leases and Purchase Money Debt permitted by Section 9.02(c) but only on the Property under lease or the Property purchased, constructed or improved with such Purchase Money Debt.

(d) Liens securing Debt permitted by Section 9.02(g) , but only on Property not constituting Oil and Gas Properties or Equity Interests in Restricted Subsidiaries.

The Liens permitted by this Section 9.03 shall be construed to allow for Liens on the improvements, fixtures and/or accessions to Property which are permitted to be subject to such Liens and on the proceeds of such Property (including any insurance for such property) as determined in accordance with the Uniform Commercial Code.

Section 9.04 Dividends and Distributions and Redemptions of Permitted Senior Unsecured Notes .

(a) Dividends and Distributions . The Parent and the Borrower will not, and will not permit any other Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment to its Equity Interest holders, except: (i) the Parent may declare and pay dividends with respect to its Equity Interests payable solely in additional shares of its Equity Interests (other than Disqualified Capital Stock); (ii) Subsidiaries may declare and make Restricted Payments ratably with respect to their Equity Interests; (iii) the Parent may make Restricted Payments pursuant to and in accordance with stock option plans or other equity incentive or benefit plans for management or employees of the Parent and its Subsidiaries; (iv) at any time prior to a Qualifying IPO, the Parent may make Permitted Tax Distributions in accordance with the last sentence of this Section 9.04 ; (v) the Parent may, substantially contemporaneously with (and in any event within three (3) Business Days after) its receipt of (A) any Unrestricted Subsidiary Distribution received directly from any Unrestricted Subsidiary or indirectly from the Borrower or (B) the proceeds of any sale or other disposition of any Equity Interests in any Unrestricted Subsidiary, make cash distributions or dividends to its members in an amount not to exceed the amount of the corresponding Unrestricted Subsidiary Distribution or such net proceeds, respectively; provided that prior to or contemporaneously with making such cash distribution or dividend described in this clause (v) , the Borrower shall make a principal payment on the Borrowings (ratably among outstanding Revolving Loans and outstanding Term Loans) in an aggregate amount equal to (1) the aggregate amount of cash Investments made by the Parent and/or the Restricted Subsidiaries in such Unrestricted Subsidiary from and after the Effective Date pursuant to Section 9.05(i)(i) minus (2) the aggregate amount of principal payments previously made pursuant to this proviso that were calculated with reference to Investments made pursuant to Section 9.05(i)(i) ; and (vi) on the Effective Date, the Borrower may make a one-time cash distribution to Centennial Resource Development, LLC in an amount not to exceed $15,100,000. Permitted Tax Distributions may be made quarterly, based on the Parent’s estimated taxable income for each applicable quarterly period, and annually, based on Parent’s annual federal income tax filing, provided that if the aggregate quarterly estimates for any tax year exceed the actual annual amount for such tax year, such excess shall be deducted from the next quarterly distribution(s) to occur after such annual federal income tax filing.

(b) Redemption of Permitted Senior Unsecured Notes; Amendment of Terms of Permitted Senior Unsecured Notes Documents . The Parent and the Borrower will not, and will not permit any other Credit Party to, prior to the date that is 180 days after the Revolving Credit Maturity Date:

(i) call, make or offer to make any optional or voluntary Redemption of or otherwise optionally or voluntarily Redeem (whether in whole or in part) any Permitted Senior Unsecured Notes, except that, so long as no Event of Default exists, the Borrower may, substantially contemporaneously with its receipt of any cash proceeds from (A) any issuance of Permitted Senior Unsecured Notes or (B) any sale of Equity Interests in the Parent (other than Disqualified Capital Stock), prepay or otherwise Redeem Permitted Senior Unsecured Notes in an amount no greater than the amount of the net cash proceeds of such issuance of Permitted Senior Unsecured Notes or such sale of Equity Interests of the Parent; or

(ii) amend, modify, waive or otherwise change, consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Permitted Senior Unsecured Notes Documents (except to the extent a new issuance of Permitted Senior Unsecured Notes, the proceeds of which were used to Redeem existing Permitted Senior Unsecured Notes pursuant to the foregoing clause (i), would be permitted to have such terms as so amended, modified, waived or otherwise changed) if the effect thereof would be to (A) shorten its maturity or average life, (B) increase the amount of any payment of principal thereof, (C) increase the rate or shorten any period for payment of interest thereon, or (D) modify or amend financial or negative covenants or events of default such that the resulting financial and negative covenants and events of default in respect thereof, taken as a whole, are more restrictive with respect to the Credit Parties than the financial and negative covenants and Events of Default in this Agreement without this Agreement being contemporaneously amended to add similar provisions (as determined in good faith by senior management of the Parent).

Section 9.05 Investments, Loans and Advances . The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, make or permit to remain outstanding any Investments in or to any Person, except that the foregoing restriction shall not apply to:

(a) Investments as of the Effective Date which are disclosed to the Lenders in Schedule 9.05.

(b) accounts receivable arising in the ordinary course of business.

(c) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, in each case maturing within one year from the date of acquisition thereof.

(d) commercial paper maturing within one year from the date of acquisition thereof rated in the highest grade by S&P, Moody’s or Fitch Investor Service.

(e) demand deposits, and time deposits (including certificates of deposit) maturing within one year from the date of creation thereof, with (or issued by) any Lender or any office located in the United States of any other bank or trust company which is organized under the laws of the United States or any state thereof, has capital, surplus and undivided profits aggregating at least $100,000,000 (as of the date of such bank or trust company’s most recent financial reports) and has a short term deposit rating of no lower than A2 or P2, as such rating is set forth from time to time, by S&P or Moody’s, respectively.

(f) shares of any SEC registered 2a-7 money market fund that has net assets of at least $500,000,000 and the highest rating obtainable from either Moody’s or S&P.

(g) Investments (i) made by the Borrower in or to the Guarantors and (ii) made by the Parent or any Restricted Subsidiary in or to the Borrower or any Guarantor (in each case including any Person that becomes a Guarantor at or about the time of such Investment).

(h) subject to the limits in Section 9.07 , Investments of the type described in clause (c) of the definition of “ Investment ” in direct ownership interests in additional Oil and Gas Properties and gas gathering systems related thereto or related to farm-out, farm-in, joint operating, joint venture or area of mutual interest agreements, gathering systems, pipelines or other similar arrangements which are usual and customary in the oil and gas exploration and production business located within the geographic boundaries of the United States of America.

(i) (i) Investments in Unrestricted Subsidiaries (other than those described in subclause (ii) of this clause (i) ), provided that, at the time such Investment is made, (A) no Default, Event of Default or Borrowing Base Deficiency exists or results from the making of such Investment, (B) the amount of such Investment to be made, together with all previous Investments made pursuant to this clause (i)(i) does not exceed the lesser of (1) $30,000,000 and (2) an amount equal to fifteen percent (15%) of the Borrowing Base then in effect, and (C) after giving effect to such Investment, the Borrower’s Liquidity is not less than fifteen percent (15%) of the Borrowing Base then in effect, and (ii) additional Investments in Unrestricted Subsidiaries, provided that (A) no Event of Default or Borrowing Base Deficiency exists or results from the making of such Investment, (B) after giving effect to such Investment, the Borrower’s Liquidity is not less than fifteen percent (15%) of the Borrowing Base then in effect, and (C) such Investments are funded with net cash equity proceeds received by the Parent from the issuance by the Parent of its Equity Interests or contributions of capital made by the members of the Parent to the extent that such proceeds are (1) received by the Parent after the Effective Date, (2) designated as being for the sole purpose of making Investments in Unrestricted Subsidiaries and (3) actually used by the Parent or its Restricted Subsidiaries to make Investments in Unrestricted Subsidiaries within three (3) Business Days following the Parent’s receipt thereof.

(j) loans or advances to employees, officers or directors (i) in the ordinary course of business of the Parent or any of its Restricted Subsidiaries, in each case only as permitted by applicable law or (ii) to finance or fund capital commitments to purchase Equity Interests in the Parent pursuant to agreements among the Parent and its Equity Interest holders; provided that the Investments made pursuant to this clause (j) do not exceed $2,000,000 in aggregate principal amount at any time outstanding.

(k) Guarantee obligations permitted by Section 9.02 .

(l) Investments in stock, obligations or securities received in settlement of debts arising from Investments permitted under this Section 9.05 or from accounts receivable arising in the ordinary course of business, which Investments are obtained by the Parent or any Restricted Subsidiary as a result of a bankruptcy or other insolvency proceeding of, or difficulties in collecting from, the obligor in respect of such obligations.

(m) a loan from the Borrower to Centennial Resource Development, LLC made on the Effective Date in an amount not to exceed $17,100,000; provided that such loan shall be repaid in full and cease to remain outstanding within three (3) Business Days following the Effective Date.

(n) other Investments not to exceed $10,000,000 in the aggregate at any time.

Section 9.06 Designation and Conversion of Restricted and Unrestricted Subsidiaries .

(a) Unless designated as an Unrestricted Subsidiary on Schedule 7.14 as of the date hereof or thereafter, assuming compliance with Section 9.06(b) , any Person that becomes a Subsidiary of the Parent or any of its Restricted Subsidiaries shall be classified as a Restricted Subsidiary.

(b) The Borrower may designate by written notification thereof to the Administrative Agent, any Restricted Subsidiary (other than the Borrower), including a newly formed or newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after giving effect, to such designation, neither an Event of Default nor a Borrowing Base Deficiency would exist, (ii) such designation is deemed to be an Investment in an Unrestricted Subsidiary in an amount equal to the fair market value as of the date of such designation of the Parent’s direct and indirect ownership interest in such Subsidiary and such Investment would be permitted to be made at the time of such designation under Section 9.05(i) , and (iii) such Subsidiary is not a “restricted subsidiary” or guarantor with respect to any Permitted Senior Unsecured Notes. Except as provided in this Section 9.06(b) , no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.

(c) The Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if after giving effect to such designation, (i) the representations and warranties of the Borrower, the Parent and its other Restricted Subsidiaries contained in each of the Loan Documents are true and correct on and as of such date as if made on and as of the date of such redesignation (or, if stated to have been made expressly as of an earlier date, were true and correct as of such date), (ii) no Default would exist and (iii) the Borrower complies with the requirements of Section 8.14 , Section 8.16 and Section 9.14 .

Section 9.07 Nature of Business; No International Operations . The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, allow any material change to be made in the character of its business as an independent oil and gas exploration and production company. From and after the date hereof, the Parent and its Domestic Subsidiaries will not acquire or make any other expenditure (whether such expenditure is capital, operating or otherwise) in or related to, any Oil and Gas Properties not located within the geographical boundaries of the United States or of the offshore federal waters of the United States, and the Parent and the Borrower will not, and will not permit any of the other Restricted Subsidiaries to, enter into marketing contracts other than in the normal course of, or ancillary to, the exploration and production business. The Borrower shall at all times remain organized under the laws of the United States of America or any State thereof or the District of Columbia.

Section 9.08 Proceeds of Notes . The Parent and the Borrower will not permit the proceeds of the Notes to be used for any purpose other than those permitted by Section 7.21 . Neither the Parent, the Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which might cause any of the Loan Documents to violate Regulations T, U or X or any other regulation of the Board or to violate Section 7 of the Securities Exchange Act or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. If requested by the Administrative Agent, the Borrower will furnish to the Administrative Agent on behalf of any Lender included in such request, a statement to the foregoing effect in conformity with the requirements of FR Form U-1 or such other form referred to in Regulation U, Regulation T or Regulation X of the Board, as the case may be. The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that the Parent and its other Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (c) in any manner that would knowingly or negligently result in the violation of any Sanctions applicable to any party hereto.

Section 9.09 ERISA Compliance . The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, at any time:

(a) engage in any transaction in connection with which the Parent, a Restricted Subsidiary or any ERISA Affiliate could be subjected to either a civil penalty assessed pursuant to subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code, except where such penalty or tax could not reasonably be expected to have a Material Adverse Effect.

(b) fail to make full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or applicable law, the Parent, a Restricted Subsidiary or any ERISA Affiliate is required to pay as contributions thereto, except where such failure could not reasonably be expected to have a Material Adverse Effect.

(c) contribute to or assume an obligation to contribute to (i) any employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion at any time without any material liability other than for benefits due as of, or claims incurred prior to, the effective date of such termination or (ii) any multiemployer plan, as defined in Section 4001(a)(3) of ERISA, except in each case where such contribution or assumption of an obligation could not reasonably be expected to have a Material Adverse Effect.

Section 9.10 Sale or Discount of Receivables . Except for the sale of defaulted notes or accounts receivable in connection with the compromise or collection thereof and not in connection with any financing transaction, the Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, sell (with or without recourse) any of its notes receivable or accounts receivable to any Person other than Borrower or any Guarantor.

Section 9.11 Mergers, Etc . The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, merge into or with or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property to any other Person (whether now owned or hereafter acquired) (any such transaction, a “consolidation”), or liquidate or dissolve; provided that (a) any Restricted Subsidiary (other than the Borrower) may participate in a consolidation with the Borrower or the Parent (provided that the Borrower or the Parent shall be the continuing or surviving entity), and (b) any Restricted Subsidiary (other than the Borrower) may participate in a liquidation into or consolidation with another Restricted Subsidiary (other than the Borrower).

Section 9.12 Sale of Properties and Termination of Swap Agreements . The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, sell, assign, farm-out, convey or otherwise transfer (collectively, a “ Transfer ”) any Property to any Person other than a Credit Party or to enter into any Swap Monetization in respect of commodities except for:

(a) the sale of Hydrocarbons in the ordinary course of business;

(b) farmouts of undeveloped acreage and undeveloped depths and Transfers in connection with such farmouts;

(c) Transfers of equipment and other personal property that is no longer necessary for the business of the Parent or such Restricted Subsidiary or is replaced by equipment or other personal property of at least comparable value and use;

(d) Transfers of Oil and Gas Properties to which no Proved Reserves are attributed, and Transfers of any of the Equity Interests in any Unrestricted Subsidiary;

(e) Transfers not permitted under the preceding subsections (a) through (d) of any other Oil and Gas Property or any interest therein or of interests in any Restricted Subsidiary other than the Borrower, and Swap Monetizations; provided that

(i) if a Borrowing Base Deficiency exists at the time of such Transfer or Swap Monetization, then the cash consideration received by any Credit Party in respect of such Transfer or Swap Monetization shall be applied first to prepay Revolving Loans and/or cash collateralize LC Exposure until such Borrowing Base Deficiency is eliminated in full;

(ii) no Event of Default exists or results from such Transfer or Swap Monetization;

(iii) at least 75% of the consideration received in respect of any such Transfer of Oil and Gas Properties or any interest therein or of any such Restricted Subsidiary shall be cash, rights with respect to post-closing settlement or indemnification obligations of the transferee or its Affiliates, or (provided no Borrowing Base Deficiency will exist after the application of the cash proceeds of such Transfer) new Oil and Gas Properties acceptable to the Administrative Agent in its sole discretion acquired, and the total of all such consideration received in respect of any such Transfer shall be equal to or greater than the fair market value of the Oil and Gas Properties, interests therein and/or Restricted Subsidiaries that are the subject of

such Transfer as reasonably determined by the Parent and/or the Borrower (and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the Borrower certifying to such determination);

(iv) the consideration received in respect of any such Swap Monetization shall be equal to or greater than the fair market value of the consideration provided by the Credit Parties in such transaction as reasonably determined by the Parent and/or the Borrower (and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the Borrower certifying to such determination);

(v) the aggregate value (which, for purposes hereof, shall mean the value the Administrative Agent attributes thereto for purposes of the most recent determination of the Borrowing Base) of such Oil and Gas Properties and Equity Interests in Restricted Subsidiaries that are Transferred and of the Swap Agreements that are the subject of such Swap Monetizations, in each case pursuant to this clause (e) in any period between two successive Scheduled Redetermination Dates, shall not exceed five percent (5%) of the Borrowing Base then in effect;

(vi) if any such Transfer is of a Restricted Subsidiary (other than the Borrower) owning Oil and Gas Properties, such Transfer shall include all the Equity Interests of such Restricted Subsidiary; and

(vii) for purposes of this Section 9.12(e) , any Oil and Gas Property owned by a Restricted Subsidiary that is redesignated as an Unrestricted Subsidiary pursuant to Section 9.06(b) shall be deemed to be Transferred by such Subsidiary to a Person that is not a Credit Party at the time of such designation.

For purposes of this Section 9.12 , “ Swap Monetization ” means the liquidation, monetization, unwinding, termination or transfer (by novation or otherwise) of any commodity Swap Agreement taken into account by the Lenders in determining the most recent Borrowing Base, or the amendment of any such Swap Agreement in any way that could reasonably be expected to reduce the Borrowing Base value thereof, provided that none of the following shall constitute a Swap Monetization: (w) the novation of such Swap Agreement from one Credit Party to another Credit Party, with an Approved Counterparty being the “remaining party” for purposes of such novation, (x) the novation of such Swap Agreement from the existing counterparty to an Approved Counterparty, with the Borrower or the applicable Credit Party being the “remaining party” for purposes of such novation, (y) the termination of such Swap Agreement at the end of its stated term, or (z) the early termination of a Swap Agreement if, upon such early termination, it is replaced, in a substantially contemporaneous transaction, with one or more Swap Agreements covering Hydrocarbons of the type that were hedged pursuant to such replaced Swap Agreements with notional volumes, prices and tenors not less favorable to the Borrower or such Credit Party as those set forth in such replaced Swap Agreements and without cash payments to any Credit Party in connection therewith.

Section 9.13 Transactions with Affiliates . The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with

any Affiliate (other than the Credit Parties) unless such transactions are otherwise not prohibited under this Agreement and are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate, provided that the restrictions set forth in this Section 9.13 shall not apply to (a) Investments permitted by Section 9.05 , (b) the execution and delivery of any Loan Document, (c) the Services Agreement and transactions and payments of Cost Reimbursements thereunder, (d) transactions listed on Schedule 9.13, (e) payments made pursuant to Section 9.04(a) or otherwise expressly permitted under this Agreement, (f) the issuance and sale of Equity Interests in the Parent and any amendments to the terms of any Equity Interests issued by the Parent (excluding in each case any such Equity Interests that would be, or any amendments that would cause any such Equity Interests to become, Disqualified Capital Stock), and (g) the issuance and transfer of Equity Interests by the Borrower in connection with the Celero Acquisition or a Qualifying IPO and any amendments made in connection with the Celero Acquisition or a Qualifying IPO to the terms of any Equity Interests issued by the Borrower (excluding in each case any such Equity Interests that would be, or any amendments that would cause any such Equity Interests to become, Disqualified Capital Stock).

Section 9.14 Subsidiaries . The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, create or acquire any additional Restricted Subsidiary or redesignate an Unrestricted Subsidiary as a Restricted Subsidiary unless the Borrower gives written notice to the Administrative Agent of such creation or acquisition and complies with Section 8.14(b) . The Borrower shall not, and shall not permit the Parent or any other Restricted Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in any Restricted Subsidiary except in compliance with Section 9.12 . Neither the Parent nor any Restricted Subsidiary shall have any Foreign Subsidiaries. The Parent will not permit any Person other than the Parent or another Credit Party to own any Equity Interests in any Guarantor other than the Parent.

Section 9.15 Negative Pledge Agreements; Dividend Restrictions . The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, create, incur, assume or suffer to exist any contract, agreement or understanding (other than this Agreement, the Security Instruments, and agreements with respect to Purchase Money Debt or Capital Leases secured by Liens permitted by Section 9.03(c) , but then only with respect to Property which is the subject of such Capital Lease or Purchase Money Debt), which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property in favor of the Administrative Agent for the benefit of itself and the Secured Parties, or restricts any Restricted Subsidiary from paying dividends or making distributions to the Borrower or any Guarantor.

Section 9.16 Gas Imbalances, Take-or-Pay or Other Prepayments . Except as may be disclosed to the Administrative Agent and the Lenders and taken into account by them in the determination of the Borrowing Base, the Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, allow gas imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Parent or any Restricted Subsidiary that would require the Parent or such Restricted Subsidiary to deliver Hydrocarbons at some future time without then or thereafter receiving full payment therefor to exceed 2.5% of the aggregate annual production of gas from the Oil and Gas Properties of the Parent and its Restricted Subsidiaries during the most recent calendar year (on an mcf equivalent basis).

Section 9.17 Swap Agreements .

(a) The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, enter into any Swap Agreements for speculative purposes. The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, enter into any Swap Agreements with any Person other than:

(i) Subject to clause (b) of this Section 9.17 , Swap Agreements with an Approved Counterparty in respect of commodities the notional volumes of which (when aggregated with other commodity Swap Agreements then in effect) do not exceed, as of the date such Swap Agreement is entered into (and for each month during the period during which such Swap Agreement is in effect), the applicable percentage set forth in the table below for the time periods (relative to the execution date of the relevant Swap Agreement) set forth in the table below of the reasonably anticipated production of crude oil, natural gas and natural gas liquids and condensate, calculated separately and, in each case, as such production is forecast from the Parent’s and its Restricted Subsidiaries’ Oil and Gas Properties constituting Proved Reserves or Proved Developed Producing Reserves (as applicable pursuant to the table below) as set forth on the most recent Reserve Report delivered pursuant to the terms of this Agreement:


Period (relative to execution date of relevant Swap Agreement)		Percentage Limitation
Months 1-24		80% of Proved
Months 25-60		90% of PDP

provided , however , that such Swap Agreements shall not, in any case, have a tenor of greater than five (5) years. It is understood that Swap Agreements in respect of commodities which may, from time to time, “hedge” the same volumes, but different elements of commodity risk thereof (such as, for example, basis risk and price risk), shall not be aggregated together when calculating the foregoing limitations on notional volumes or for any other purpose of this Section.

(ii) Swap Agreements in respect of interest rates with an Approved Counterparty, as follows:

(A) Swap Agreements effectively converting interest rates from fixed to floating, the notional amounts of which (when aggregated with all other Swap Agreements of the Parent and its Restricted Subsidiaries then in effect effectively converting interest rates from fixed to floating) do not exceed 50% of the then outstanding principal amount of the Credit Parties’ Debt for borrowed money which bears interest at a fixed rate, and which Swap Agreements shall not, in any case, have a tenor beyond the maturity date of such Debt, and

(B) Swap Agreements effectively converting interest rates from floating to fixed, the notional amounts of which (when aggregated with all other Swap Agreements of the Parent and its Restricted Subsidiaries then in effect effectively converting

interest rates from floating to fixed) do not exceed 75% of the then outstanding principal amount of the Credit Parties’ Debt for borrowed money which bears interest at a floating rate, and which Swap Agreements shall not, in any case, have a tenor beyond the maturity date of such Debt.

(b) If, after the end of any calendar quarter, commencing with calendar quarter ending December 31, 2014, the Borrower determines that the volume of all Swap Agreements in respect of commodities for which settlement payments were calculated in such calendar quarter (other than Swap Agreements that “hedge” the same volumes but different elements of commodity risk) exceeded 100% of actual production of Hydrocarbons in such calendar quarter, then the Borrower (i) shall promptly notify the Administrative Agent of such determination and (ii) shall, no later than 30 days after such determination (or such longer period acceptable to the Administrative Agent), terminate (only to the extent such terminations are permitted pursuant to Section 9.12 ), create off-setting positions, or otherwise unwind or monetize (only to the extent such unwinds or monetizations are permitted pursuant to Section 9.12 ) existing Swap Agreements such that, at such time, future hedging volumes will not exceed 100% of reasonably anticipated projected production for the then-current and any succeeding calendar quarters.

(c) In no event shall any Swap Agreement contain any requirement, agreement or covenant for the Parent or any Restricted Subsidiary to post collateral, credit support (including in the form of letters of credit) or margin (other than pursuant to the Security Instruments) to secure their obligations under such Swap Agreement.

(d) The Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to, terminate or monetize any Swap Agreement in respect of commodities without the prior written consent of the Required Revolving Credit Lenders except to the extent such terminations are permitted pursuant to Section 9.12 .

(e) For purposes of entering into or maintaining Swap Agreement trades or transactions under Section 9.17(a)(i) and Section 9.17(b) , respectively, forecasts of reasonably anticipated production from the Parent’s and its Restricted Subsidiaries’ Proved Reserves as set forth on the most recent Reserve Report delivered pursuant to the terms of this Agreement shall be deemed to be updated to account for any increase or decrease therein anticipated because of information obtained by the Parent or any of its Restricted Subsidiaries and delivered to the Administrative Agent subsequent to the publication of such Reserve Report including, without limitation, (i) the Parent’s or any of its Restricted Subsidiaries’ internal forecasts of production decline rates for existing wells, (ii) additions to or deletions from anticipated future production from new wells, (iii) completed dispositions, and (iv) completed acquisitions coming on stream or failing to come on stream; provided that (A) any such supplemental information shall be reasonably satisfactory to the Administrative Agent and (B) if any such supplemental information is delivered, such information shall be presented on a net basis (i.e., it shall take into account both increases and decreases in anticipated production subsequent to publication of the most recent Reserve Report).

Section 9.18 Celero Acquisition Documents . Without the prior written consent of the Administrative Agent, the Parent and the Borrower will not, and will not permit any of the other Credit Parties to, enter into any supplement, modification, amendment, or amendment and

restatement of, or agree to any written waiver any right or obligation of any Person under, any of the Celero Acquisition Documents if the effect thereof would be materially adverse to the Administrative Agent and/or the Lenders.

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

Section 10.01 Events of Default . One or more of the following events shall constitute an “ Event of Default ”:

(a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof, by acceleration or otherwise.

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in Section 10.01(a) ) payable under any Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) Business Days.

(c) any representation or warranty made or deemed made by or on behalf of the Parent, the Borrower or any other Restricted Subsidiary in or in connection with any Loan Document or any amendment or modification of any Loan Document or waiver under such Loan Document, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made (or, to the extent that any such representation and warranty is qualified by materiality, such representation and warranty shall prove to have been incorrect when made or deemed made).

(d) the Borrower shall fail to give notice of any Default as required under Section 8.02(a) , the Parent, the Borrower or any other Restricted Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in Section 8.01(l) , Section 8.02(b) , Section 8.02(c) , Section 8.03(a)(i) , Section 8.14 or in Article IX .

(e) the Parent, the Borrower or any other Restricted Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 10.01(a) , Section 10.01(b) or Section 10.01(d) ) or any other Loan Document, and such failure shall continue unremedied for a period of thirty (30) days after the earlier to occur of (i) a Responsible Officer of the Parent, the Borrower or any other Restricted Subsidiary having knowledge of such default, or (ii) receipt of notice thereof by the Borrower from the Administrative Agent.

(f) the Parent, the Borrower or any other Restricted Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable, and such failure to pay shall extend beyond any applicable grace period.

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(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the Redemption thereof or any offer to Redeem to be made in respect thereof, prior to its scheduled maturity or require the Parent, the Borrower or any other Restricted Subsidiary to make a mandatory Redemption offer in respect thereof.

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Parent, the Borrower or any other Restricted Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Parent, the Borrower or any other Restricted Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered.

(i) the Parent, the Borrower or any other Restricted Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 10.01(h) , (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Parent, the Borrower or any other Restricted Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing.

(j) the Parent, the Borrower or any other Restricted Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due.

(k) one or more judgments for the payment of money in an aggregate amount in excess of the Threshold Amount (to the extent not covered by independent third party insurance as to which the insurer does not dispute coverage) shall be rendered against the Parent, the Borrower, any other Restricted Subsidiary or any combination thereof and the same shall not be discharged, vacated or stayed within thirty (30) days after becoming a final judgment.

(l) the Loan Documents after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in accordance with their terms against the Borrower or a Guarantor party thereto or shall be repudiated by any of them, or cease to create a valid and perfected Lien of the priority required thereby on any of the collateral purported to be covered thereby (except to the extent permitted by the terms of this Agreement or such Loan Document), or the Parent, the Borrower or any other Restricted Subsidiary or any of their Affiliates shall so state in writing.

(m) a Change in Control shall occur.

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(n) an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Credit Parties in an aggregate amount exceeding the Threshold Amount.

Section 10.02 Right to Cure Ratio Non-Compliance .

(a) Notwithstanding anything to the contrary contained in Section 10.01 or Section 10.03 , in the event that, at any time prior to a Qualifying IPO, the Borrower or the Parent fails to comply with the requirements of Section 9.01(a) or (b) , then, until the expiration of the tenth Business Day after the date on which financial statements with respect to any such four fiscal quarter period with respect to which (or as of the end of which) such covenant is being measured (the “ Test Period ”) are required to be delivered pursuant to Section 8.01 (the “ Cure Period ”), if the Borrower receives a Specified Equity Contribution during such Cure Period, then both EBITDAX for the last fiscal quarter of such Test Period and current assets as of the last day of such fiscal quarter shall, for the purposes of Section 9.01 , be deemed increased by the amount of the net cash proceeds so contributed. The parties hereby acknowledge and agree that this Section 10.02(a) may not be relied on or used for purposes of determining permitted amounts with respect to covenants in this Agreement other than Section 9.01 , that such deemed increase to EBITDAX in any fiscal quarter shall be applied solely for the purpose of determining the existence of a Default or Event of Default under Section 9.01(a) with respect to any Test Period that includes such fiscal quarter and not for any other purpose under any Loan Document, and that such deemed increase to current assets shall be applied solely for the purpose of determining the existence of a Default or Event of Default under Section 9.01(b) as of the last day of such Test Period and not for any other purpose under any Loan Document.

(b) If, after receipt of the Specified Equity Contribution and the recalculations pursuant to clause (a) above, the Parent shall then be in compliance with the requirements of Section 9.01 during such Test Period, the Parent shall be deemed to have satisfied the requirements of the Section 9.01 as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable Default and Event of Default under Section 10.01 that had occurred shall be deemed cured; provided that (i) no more than five Specified Equity Contributions will be made in the aggregate during the term of this Agreement, (ii) in each four fiscal quarter period, there shall be at least two fiscal quarters in respect of which no Specified Equity Contribution is made, (iii) the amount of any Specified Equity Contribution shall be no greater than the amount required to cause the Parent to be in compliance with Section 9.01(a) and (b) for any applicable period, and (iv) there shall be no pro forma reduction in Debt with the proceeds of any Specified Equity Contribution for determining compliance with Section 9.01(a) or (b) as applicable.

Section 10.03 Remedies .

(a) In the case of an Event of Default other than one described in Section 10.01(h) , Section 10.01(i) or Section 10.01(j) , at any time thereafter during the continuance of such Event of Default, the Administrative Agent may, and at the request of the Majority Lenders, shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Notes and the Loans then outstanding to be due

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and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.09(j) ), shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of an Event of Default described in Section 10.01(h) , Section 10.01(i) or Section 10.01(j) , the Commitments shall automatically terminate and the Notes and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.09(j) ), shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor.

(b) In the case of the occurrence of an Event of Default, the Administrative Agent and the Lenders will have all other rights and remedies available at law and equity.

(c) All proceeds realized from the liquidation or other disposition of collateral or otherwise received after maturity of the Loans, whether by acceleration or otherwise, shall be applied:

(i) first , to payment or reimbursement of that portion of the Indebtedness constituting fees, expenses and indemnities payable to the Administrative Agent in its capacity as such;

(ii) second , pro rata to payment or reimbursement of that portion of the Indebtedness constituting fees, expenses and indemnities payable to the Lenders;

(iii) third , pro rata to payment of accrued interest on the Loans;

(iv) fourth , pro rata to payment of principal outstanding on the Loans, LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time, and Indebtedness referred to in clause (b) of the definition of Indebtedness owing to Secured Swap Providers;

(v) fifth , pro rata to any other Indebtedness;

(vi) sixth , to serve as cash collateral to be held by the Administrative Agent to secure the remaining LC Exposure; and

(vii) seventh , any excess, after all of the Indebtedness shall have been indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise required by any Governmental Requirement.

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Notwithstanding the foregoing, amounts received from any Credit Party that is not an “eligible contract participant” under the Commodity Exchange Act shall not be applied to any obligations that constitute Excluded Swap Obligations with respect to such Credit Party (it being understood, that in the event that any amount is applied to Indebtedness other than Excluded Swap Obligations as a result of this clause, the Administrative Agent shall make such adjustments as it determines are appropriate to distributions pursuant to clause fourth above from amounts received from “eligible contract participants” under the Commodity Exchange Act to ensure, as nearly as possible, that the proportional aggregate recoveries with respect to Indebtedness described in clause fourth above by the holders of any Excluded Swap Obligations are the same as the proportional aggregate recoveries with respect to other Indebtedness pursuant to clause fourth above).

ARTICLE XI

THE AGENTS

Section 11.01 Appointment; Powers . Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto.

Section 11.02 Duties and Obligations of Administrative Agent . The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing (the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law; rather, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties), (b) the Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except as provided in Section 11.03 , and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Parent or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or under any other Loan Document or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article VI or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent or as to those conditions precedent expressly required to be to the Administrative Agent’s satisfaction, (vi) the

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existence, value, perfection or priority of any collateral security or the financial or other condition of the Parent and its Subsidiaries or any other obligor or guarantor, or (vii) any failure by the Borrower or any other Person (other than itself) to perform any of its obligations hereunder or under any other Loan Document or the performance or observance of any covenants, agreements or other terms or conditions set forth herein or therein. For purposes of determining compliance with the conditions specified in Article VI , each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the proposed closing date specifying its objection thereto.

Section 11.03 Action by Administrative Agent . The Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Majority Lenders (or such other number, percentage or class of the Lenders as shall be necessary under the circumstances as provided in Section 12.02 ) and in all cases the Administrative Agent shall be fully justified in failing or refusing to act hereunder or under any other Loan Documents unless it shall (a) receive written instructions from the Majority Lenders or the Lenders, as applicable, (or such other number, percentage or class of the Lenders as shall be necessary under the circumstances as provided in Section 12.02 ) specifying the action to be taken and (b) be indemnified to its satisfaction by the Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action. The instructions as aforesaid and any action taken or failure to act pursuant thereto by the Administrative Agent shall be binding on all of the Lenders. If a Default has occurred and is continuing, then the Administrative Agent shall take such action with respect to such Default as shall be directed by the requisite Lenders in the written instructions (with indemnities) described in this Section 11.03 , provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders. In no event, however, shall the Administrative Agent be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement, the Loan Documents or applicable law. If a Default has occurred and is continuing, no Agent shall have any obligation to perform any act in respect thereof. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or the Lenders (or such other number, percentage or class of the Lenders as shall be necessary under the circumstances as provided in Section 12.02 ), and otherwise the Administrative Agent shall not be liable for any action taken or not taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence, bad faith or willful misconduct.

Section 11.04 Reliance by Administrative Agent . The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely

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upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon and each of the Borrower, the Lenders and the Issuing Bank hereby waives the right to dispute the Administrative Agent’s record of such statement, except in the case of gross negligence, bad faith or willful misconduct by the Administrative Agent. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof permitted hereunder shall have been filed with the Administrative Agent.

Section 11.05 Subagents . The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding Sections of this Article XI shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

Section 11.06 Resignation of Administrative Agent . Subject to the appointment and acceptance of a successor Administrative Agent as provided in this Section 11.06 , the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Majority Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article XI and Section 12.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

Section 11.07 Agents as Lenders . Each bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Parent or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

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Section 11.08 No Reliance . Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any other Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Loan Document to which it is a party. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, any other Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder. The Agents shall not be required to keep themselves informed as to the performance or observance by the Parent or any of its Subsidiaries of this Agreement, the Loan Documents or any other document referred to or provided for herein or to inspect the Properties or books of the Parent or its Subsidiaries. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent or Arranger shall have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates) which may come into the possession of such Agent or any of its Affiliates. In this regard, each Lender acknowledges that Vinson & Elkins L.L.P. is acting in this transaction as special counsel to the Administrative Agent only, except to the extent otherwise expressly stated in any legal opinion or any Loan Document. Each other party hereto will consult with its own legal counsel to the extent that it deems necessary in connection with the Loan Documents and the matters contemplated therein.

Section 11.09 Administrative Agent May File Proofs of Claim . In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Parent or any of its Subsidiaries, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Indebtedness that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Section 12.03 ) allowed in such judicial proceeding; and

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 12.03 .

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Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Indebtedness or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

Section 11.10 Authority of Administrative Agent to Release Collateral, Liens and Guarantors . By accepting the benefits of the Security Instruments, each Secured Party hereby acts and agrees as follows:

(a) each Secured Party hereby authorizes the Administrative Agent to take the following actions, and the Administrative Agent hereby agrees to take such actions at the request of the Borrower:

(i) to release any Lien on any Property granted to or held by Administrative Agent under any Loan Document:

(A) to the extent such Property is, or is to be, sold, released or otherwise disposed of as permitted pursuant to the terms of the Loan Documents; or

(B) to the extent such Property did not belong to any Credit Party at the time such Lien was granted, or to the extent the Credit Parties hold interests in such Property only under a lease that has expired or is about to expire and which has not been, and is not intended by the Credit Parties to be, renewed or extended, or to the extent such Property is not a Proved Oil and Gas Property and was not required to be mortgaged pursuant to the terms of the Loan Documents; or

(C) if approved, authorized or ratified in writing by the Majority Lenders (or, if approval, authorization or ratification by all Lenders is required under Section 12.02(b) , then by all Lenders);

(D) upon (1) termination of all Commitments, payment in full of all Indebtedness (other than contingent indemnification obligations for which no claim has been made) owing to the Administrative Agent, the Issuing Bank and the Lenders under the Loan Documents and owing to any Secured Swap Provider under any Secured Swap Agreement (other than any Secured Swap Provider that has advised the Administrative Agent that the Indebtedness owing to it are otherwise adequately provided for or novated), and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the applicable Issuing Bank have been made) and (2) termination of all Secured Swap Agreements with Secured Swap Providers (other than any Secured Swap Provider that has advised the Administrative Agent that such Secured Swap Agreements are otherwise adequately provided for or novated); or

(E) Upon redesignation of a Restricted Subsidiary as an Unrestricted Subsidiary in accordance with Section 9.06(b) ;

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(ii) to release any Guarantor from its obligations under any Guaranty Agreement and any other Loan Document if such Person ceases to be a Restricted Subsidiary of the Borrower as a result of a transaction permitted under the Loan Documents;

(iii) to subordinate (or release) any Lien on any Property granted to or held by the Administrative Agent under any Loan Document to any Lien on such Property that is permitted by Section 9.03(c) ; and

(iv) to execute and deliver to the Borrower, at the Borrower’s sole cost and expense, any and all releases of Liens and guaranties, termination statements, assignments or other documents necessary or useful to accomplish or evidence the foregoing.

(b) Notwithstanding anything contained in any of the Loan Documents to the contrary, no Person other than the Administrative Agent has any individual right to realize upon any of the Mortgaged Property or other collateral under the Security Instruments, to enforce any Liens on Mortgaged Property or any such other collateral, or to enforce any Guaranty Agreement, and all powers, rights and remedies under the Security Instruments may be exercised solely by Administrative Agent on behalf of the Persons secured or otherwise benefitted thereby.

(c) By accepting the benefit of the Liens granted pursuant to the Security Instruments, each Person secured by such Liens that is not a party hereto agrees to the terms of this Section 11.10 and agrees that, notwithstanding anything to the contrary in any Secured Swap Agreement or any master agreement or other agreement relating thereto, each Credit Party is authorized and permitted to grant and assign to Administrative Agent under the Security Documents security interests in all Secured Swap Agreements and all rights with respect thereto.

Section 11.11 Agents . No Agent other than the Administrative Agent shall have any duties, responsibilities or liabilities under this Agreement and the other Loan Documents other than their duties, responsibilities and liabilities in their capacity as Lenders hereunder.

ARTICLE XII

MISCELLANEOUS

Section 12.01 Notices .

(a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to Section 12.01(b) ), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows:

(i) if to the Borrower, to it at 1401 17 ^th Street, Suite 1000, Denver, Colorado 80202, Attention: George Glyphis (gglyphis@centennialresource.com; Facsimile No. (303) 845-9516);

(ii) If to the Administrative Agent or Issuing Bank, to it at JPMorgan Chase Bank, N.A., 10 South Dearborn, Floor 7, IL1 0010, Chicago, Illinois 60603, Attention of Loan and Agency Services, (Facsimile No. (888) 292-9533), with a copy to JPMorgan Chase Bank, N.A., 2200 Ross Avenue, Floor 3, Dallas, Texas 75201-2787, Attention of Cathy Johann

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(Facsimile No. (214) 965-2884), and for all correspondence other than borrowings, continuation, conversion and Letter of Credit requests, 1125 17th Street, Floor 3, Denver, Colorado 80202, Attention: Ryan Fuessel (Facsimile: (832) 487-1765); and

(iii) if to any other Lender, to it at its address (or facsimile number) set forth in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent and the applicable Lender; provided that the foregoing shall not apply to notices by the Borrower to the Administrative Agent or the Lenders pursuant to Article II , Article III , Article IV and Article V unless otherwise agreed by the Administrative Agent and the applicable Lender, if any. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(c) Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

Section 12.02 Waivers; Amendments .

(a) No failure on the part of the Administrative Agent, any other Agent, the Issuing Bank or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege, or any abandonment or discontinuance of steps to enforce such right, power or privilege, under any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of the Administrative Agent, any other Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by Section 12.02(b) , and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any other Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.

(b) Neither this Agreement nor any provision hereof nor any Security Instrument nor any provision thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement (including, for the avoidance of doubt, any New Borrowing Base Notice) shall (i) increase the Commitments or the Maximum Revolving Credit Amount of any Lender

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without the written consent of such Lender, (ii) increase the Borrowing Base without the written consent of each Revolving Credit Lender (other than any Defaulting Lender), decrease or maintain the Borrowing Base without the consent of the Required Revolving Credit Lenders, or modify Section 2.08 in any manner that results in an increase in the Borrowing Base without the consent of each Revolving Credit Lender (other than any Defaulting Lender), (iii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, or reduce any other Indebtedness hereunder or under any other Loan Document, without the written consent of each Lender affected thereby, (iv) postpone the scheduled date of payment or prepayment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or any other Indebtedness hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone or extend the Term Loan Maturity Date, the Revolving Credit Maturity Date or the Termination Date without the written consent of each Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (vi) waive or amend Section 3.04(c) , Section 6.01 , Section 10.03(c) or Section 12.14 or change the definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, or “Subsidiary”, without the written consent of each Lender (other than any Defaulting Lender), (vii) release any Guarantor (except as set forth in Section 11.10 or in the Guaranty Agreement), release all or substantially all of the collateral (other than as provided in Section 11.10 ), or reduce the percentage set forth in Section 8.14(a) to less than 80%, without the written consent of each Lender (other than any Defaulting Lender), (viii) change any of the provisions of this Section 12.02(b) or the definition of “Majority Lenders” or, subject to the following clause (ix) , any other provision hereof specifying the number, percentage or class of Lenders required to waive, amend or modify any rights hereunder or under any other Loan Documents or make any determination or grant any consent hereunder or any other Loan Documents, without the written consent of each Lender (other than any Defaulting Lender), or (ix) change the definition of “Majority Revolving Credit Lenders” or “Required Revolving Credit Lenders” without the written consent of each Revolving Credit Lender (other than any Defaulting Lender); provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, any other Agent, or the Issuing Bank hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, such other Agent or the Issuing Bank, as the case may be. Notwithstanding the foregoing, (w) any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the Administrative Agent a supplemental schedule clearly marked as such and, upon receipt, the Administrative Agent will promptly deliver a copy thereof to the Lenders, (x) the Borrower and the Administrative Agent may amend this Agreement or any other Loan Document without the consent of any of the Lenders in order to correct, amend or cure any ambiguity, omission, inconsistency, illegality or defect therein, or correct any typographical error or other manifest error in any Loan Document or otherwise effectuate the intent of the parties hereto, (y) the Administrative Agent and the Borrower (or other applicable Credit Party) may enter into any amendment, modification or waiver of this Agreement or any other Loan Document or enter into any new Loan Document or other agreement or instrument to effect the granting, perfection, protection, expansion or enhancement of any Lien to secure, or the guarantee of, the Indebtedness for the benefit of the Secured Parties or as required by any Governmental Requirement to give effect to, protect or otherwise enhance the rights or benefits of the Secured Parties under the Loan Documents, in each case without the

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consent of any Lender, and (z) the Administrative Agent and the Borrower (or other applicable Credit Party) may enter into an amendment, modification or waiver of this Agreement or of any other Loan Document or enter into any agreement or instrument to join additional Persons as Credit Parties pursuant to the terms thereof.

Section 12.03 Expenses, Indemnity; Damage Waiver .

(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including, without limitation, the reasonable fees, charges and disbursements of counsel and other outside consultants for the Administrative Agent, the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the cost of environmental invasive and non-invasive assessments and audits and surveys and appraisals, in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration (both before and after the execution hereof and including advice of counsel to the Administrative Agent as to the rights and duties of the Administrative Agent and the Lenders with respect thereto) of this Agreement and the other Loan Documents and any amendments, modifications or waivers of or consents related to the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and other charges incurred by the Administrative Agent in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement or any Security Instrument or any other document referred to therein, (iii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iv) all out-of-pocket expenses incurred by any Agent or the Issuing Bank, including the fees, charges and disbursements of any counsel for any Agent or the Issuing Bank, in connection with the enforcement or protection of its rights in connection with this Agreement or any other Loan Document, including its rights under this Section 12.03 , or in connection with the Loans made or Letters of Credit issued hereunder, including, without limitation, all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. The Borrower also agrees to pay, during the continuance of an Event of Default, all reasonable out-of-pocket expenses of one additional legal counsel representing the Lenders as a group to the extent such legal fees are incurred by the Lenders in connection with the enforcement or protection of their rights in connection with this Agreement or any other Loan Document, including their rights under this Section 12.03 .

(b) THE BORROWER SHALL INDEMNIFY EACH AGENT, EACH ARRANGER, THE ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “ INDEMNITEE ”) AGAINST, AND DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE REASONABLE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY

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THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE PARENT, THE BORROWER OR ANY OTHER RESTRICTED SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE PARENT AND ITS RESTRICTED SUBSIDIARIES BY THE PARENT AND ITS RESTRICTED SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE PARENT OR ANY RESTRICTED SUBSIDIARY OR ANY OF THEIR PROPERTIES OR OPERATIONS, INCLUDING, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF HAZARDOUS MATERIALS ON OR AT ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE PARENT OR ANY RESTRICTED SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE PARENT OR ANY RESTRICTED SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE PARENT OR ANY RESTRICTED SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF HAZARDOUS MATERIALS ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE PARENT OR ANY RESTRICTED SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE PARENT OR ANY OF ITS RESTRICTED SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE PARENT OR ANY OF ITS RESTRICTED SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY

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AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; provided THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE, BAD FAITH OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

(c) To the extent that the Borrower fails to pay any amount required to be paid by it to any Agent, any Arranger or the Issuing Bank under Section 12.03(a) or (b) , each Lender severally agrees to pay to such Agent, such Arranger or the Issuing Bank, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought), of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent, such Arranger or the Issuing Bank in its capacity as such.

(d) All amounts due under this Section 12.03 shall be payable promptly after written demand therefor.

Section 12.04 Successors and Assigns .

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 12.04 . Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in Section 12.04(c) ) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement, and except for the foregoing Persons there are no third party beneficiaries to this Agreement.

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(b) (i) Subject to the conditions set forth in Section 12.04(b)(ii) , any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Credit Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

(A) the Borrower, provided that no consent of the Borrower shall be required if such assignment is to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing; and

(B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment to an assignee that is a Lender immediately prior to giving effect to such assignment.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Revolving Credit Commitment or Loans, the amount of the Revolving Credit Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;

(B) each total and partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, including, without limitation, its Revolving Credit Commitment, Maximum Revolving Credit Amount, LC Exposure, participations in Letters of Credit, outstanding Revolving Loans and outstanding Term Loans;

(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500;

(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and

(E) in no event may any Lender assign all or a portion of its rights and obligations under this Agreement to a natural person, an Industry Competitor or to the Borrower or any Affiliate of the Borrower.

(iii) Subject to Section 12.04(b)(iv) and the acceptance and recording thereof by the Administrative Agent, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party

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hereto but shall continue to be entitled to the benefits of Section 5.01 , Section 5.02 , Section 5.03 and Section 12.03 ). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.04(c) .

(iv) The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Maximum Revolving Credit Amount of, and principal amount (and stated interest) of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. In connection with any changes to the Register, if necessary, the Administrative Agent will reflect the revisions on Annex I and forward a copy of such revised Annex I to the Borrower, the Issuing Bank and each Lender.

(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in Section 12.04(b) and any written consent to such assignment required by Section 12.04(b) , the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 12.04(b) .

(c) (i) Any Lender may, without the consent of the Borrower, the Administrative Agent or the Issuing Bank, sell participations to one or more banks or other Persons (a “ Participant ”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Revolving Credit Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (C) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (D) no participation may be sold to the Borrower, any Affiliate of the Borrower, any natural person or any Industry Competitor. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 12.02(b) that affects such Participant. In addition such agreement must provide that the Participant be bound by the provisions of Section 12.03 . Subject to Section 12.04(c)(ii) , the Borrower agrees that each Participant shall be entitled to the benefits of Section 5.01 , Section 5.02 and Section 5.03 to

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the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.04(b) . To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.08 as though it were a Lender, provided such Participant agrees to be subject to Section 4.01(c) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(ii) Each Participant agrees (A) to be subject to the provisions of Sections 5.03 (subject to the requirements and limitations therein, including the requirements under Section 5.03(f) (it being understood that the documentation required under Section 5.03(f) shall be delivered to the participating Lender)) as if it were an assignee under paragraph (b) of this Section; and (B) that it shall not be entitled to receive any greater payment under Sections 5.01 or 5.03 , with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.

(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including, without limitation, any pledge or assignment to secure obligations to a Federal Reserve Bank or other central bank having jurisdiction over such Lender, and this Section 12.04 shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(e) Notwithstanding any other provisions of this Section 12.04 , no transfer or assignment of the interests or obligations of any Lender or any grant of participations therein shall be permitted if such transfer, assignment or grant would require any Credit Party to file a registration statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.

Section 12.05 Survival; Revival; Reinstatement .

(a) All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied

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upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any other Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Section 5.01 , Section 5.02 , Section 5.03 and Section 12.03 and Article XI shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement, any other Loan Document or any provision hereof or thereof.

(b) To the extent that any payments on the Indebtedness or proceeds of any collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, the Indebtedness so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Administrative Agent’s and the Lenders’ Liens, security interests, rights, powers and remedies under this Agreement and each Loan Document shall continue in full force and effect. In such event, each Loan Document shall be automatically reinstated and the Borrower shall take such action as may be reasonably requested by the Administrative Agent and the Lenders to effect such reinstatement.

Section 12.06 Counterparts; Integration; Effectiveness .

(a) This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.

(b) This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and thereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof and thereof. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

(c) Except as provided in Section 6.01 , this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission (e.g. .pdf) shall be effective as delivery of a manually executed counterpart of this Agreement.

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Section 12.07 Severability . Any provision of this Agreement or any other Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

Section 12.08 Right of Setoff . If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations (of whatsoever kind, including, without limitations obligations under Swap Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of the Parent or any Restricted Subsidiary against any of and all the obligations of the Parent or any Restricted Subsidiary owed to such Lender now or hereafter existing under this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 12.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender or its Affiliates may have.

Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS .

(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EITHER CASE LOCATED IN NEW YORK COUNTY, NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

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(c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; PROVIDED THAT NOTHING CONTAINED IN THIS SECTION 12.09(d)(ii) SHALL LIMIT THE BORROWER’S INDEMNIFICATION OBLIGATIONS TO THE EXTENT SET FORTH IN SECTION 12.03 TO THE EXTENT SUCH SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARE INCLUDED IN ANY THIRD PARTY CLAIM IN CONNECTION WITH WHICH SUCH INDEMNITEE IS OTHERWISE ENTITLED TO INDEMNIFICATION HEREUNDER; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09 .

Section 12.10 Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

Section 12.11 Confidentiality . Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by

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any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement or any other Loan Document, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement for the express benefit of the Borrower containing provisions substantially the same as those of this Section 12.11 , to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Swap Agreement relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 12.11 or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section 12.11 , “ Information ” means all information received from the Parent or any Restricted Subsidiary relating to the Parent or any Restricted Subsidiary and their businesses, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Parent or a Restricted Subsidiary; provided that, in the case of information received from the Parent or any Restricted Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 12.11 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding anything herein to the contrary, “Information” shall not include, and the Parent, the Parent’s Subsidiaries, the Administrative Agent, each Lender and the respective Affiliates of each of the foregoing (and the respective partners, directors, officers, employees, agents, advisors and other representatives of the aforementioned Persons), and any other party, may disclose to any and all Persons, without limitation of any kind (a) any information with respect to the United States federal and state income tax treatment of the transactions contemplated hereby and any facts that may be relevant to understanding the United States federal or state income tax treatment of such transactions (“tax structure”), which facts shall not include for this purpose the names of the parties or any other person named herein, or information that would permit identification of the parties or such other persons, or any pricing terms or other nonpublic business or financial information that is unrelated to such tax treatment or tax structure, and (b) all materials of any kind (including opinions or other tax analyses) that are provided to the Borrower, the Administrative Agent or such Lender relating to such tax treatment or tax structure.

Section 12.12 Interest Rate Limitation . It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America, any State therein, or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Notes, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the

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Notes shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (ii) in the event that the maturity of the Notes is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the stated term of the Loans until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 12.12 . To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate applicable to a Lender, such Lender elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time to time in effect. Chapter 346 of the Texas Finance Code does not apply to the Borrower’s obligations hereunder.

Section 12.13 EXCULPATION PROVISIONS . EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING

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THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

Section 12.14 Collateral Matters; Swap Agreements . The benefit of the Security Instruments and of the provisions of this Agreement relating to any collateral securing the Indebtedness shall also extend to and be available to the Secured Swap Providers, subject to the limitations in the above definition of “ Secured Swap Provider ”. No Lender or Affiliate of a Lender shall have any voting or consent rights under any Loan Document in its capacity as a Secured Swap Provider or as a result of the existence of obligations owed to it under any Swap Agreements.

Section 12.15 No Third Party Beneficiaries . This Agreement, the other Loan Documents, and the agreement of the Lenders to make Loans and the Issuing Bank to issue, amend, renew or extend Letters of Credit hereunder are solely for the benefit of the Borrower, and no other Person (including, without limitation, any Subsidiary of the Parent (other than the Borrower) or any obligor, contractor, subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any other Agent, the Issuing Bank or any Lender for any reason whatsoever. There are no third party beneficiaries other than as expressly provided herein with respect to Secured Swap Providers, Indemnitees (as provided in Section 12.03 ), and Participants (as provided in Section 12.04 ).

Section 12.16 USA Patriot Act Notice . Each Lender hereby notifies the Parent and the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (as amended from time to time, including any successor statute, the “ Act ”), it is required to obtain, verify and record information that identifies the Parent and the Borrower, which information includes the name and address of the Parent and the Borrower and other information that will allow such Lender to identify the Parent and the Borrower in accordance with the Act.

Section 12.17 No Advisory or Fiduciary Responsibility . In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each of the Parent and the Borrower acknowledges and agrees, and acknowledges the other Restricted Subsidiaries’ understanding, that: (a) (i) no fiduciary, advisory or agency relationship between the Parent and its Restricted Subsidiaries and the Administrative Agent or any Lender is intended to be or has been created in respect of the transactions contemplated hereby or by the other Loan Documents, irrespective of whether the Administrative Agent or any Lender has advised or is advising the Parent or any Restricted Subsidiary on other matters; (ii) the arranging and other services regarding this Agreement provided by the Administrative Agent and the Lenders are arm’s-length commercial transactions between the Parent and its Restricted Subsidiaries, on the one hand, and the Administrative Agent and the Lenders, on the other hand; (iii) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent that it has deemed

123

appropriate; and (iv) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; and (b) (i) the Administrative Agent and the Lenders each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Parent or any of its Restricted Subsidiaries, or any other Person; (ii) neither the Administrative Agent nor the Lenders has any obligation to the Parent or any of its Restricted Subsidiaries with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent and the Lenders and their respective Affiliates may be engaged, for their own accounts or the accounts of customers, in a broad range of transactions that involve interests that differ from those of the Parent and its Restricted Subsidiaries, and neither the Administrative Agent nor the Lenders has any obligation to disclose any of such interests to the Parent or its Restricted Subsidiaries. To the fullest extent permitted by Law, the Borrower hereby waives and releases any claims that it may have against the Administrative Agent and the Lenders with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

Section 12.18 Amendment and Restatement . It is the intention of the parties hereto that this Agreement amends, restates, supersedes and replaces the Existing Credit Agreement in its entirety; provided , that, (a) such amendment and restatement shall operate to renew, amend, modify, and extend all of the rights, duties, liabilities and obligations of the Borrower under the Existing Credit Agreement and under the Existing Loan Documents, which rights, duties, liabilities and obligations are hereby renewed, amended, modified and extended, and shall not act as a novation thereof, and (b) the Liens securing the Indebtedness under and as defined in the Existing Credit Agreement and the rights, duties, liabilities and obligations of the Borrower and the Guarantors under the Existing Credit Agreement and the Existing Loan Documents to which they are a party shall not be extinguished but shall be carried forward and shall secure such Indebtedness, obligations and liabilities as amended, renewed, extended and restated hereby. The parties hereto ratify and confirm each of the Existing Loan Documents entered into prior to the Effective Date (but excluding the Existing Credit Agreement) and agree that such Existing Loan Documents continue to be legal, valid, binding and enforceable in accordance with their terms (except to the extent amended, restated and/or superseded in connection with the transactions contemplated hereby), however, for all matters arising prior to the Effective Date (including the accrual and payment of interest and fees, and matters relating to indemnification and compliance with financial covenants), the terms of the Existing Credit Agreement (as unmodified by this Agreement) shall control and are hereby ratified and confirmed. The Borrower represents and warrants that, as of the Effective Date, there are no claims or offsets against, or defenses or counterclaims to, its obligations (or the obligations of any Guarantor) under the Existing Credit Agreement or any of the other Existing Loan Documents.

Section 12.19 True-up Loans . Upon the effectiveness of this Agreement, (a) each Revolving Credit Lender who holds Revolving Loans in an aggregate amount less than its Applicable Revolving Credit Percentage (after giving effect to this amendment and restatement) of all Revolving Loans shall advance new Revolving Loans which shall be disbursed to the Administrative Agent and used to repay Revolving Loans outstanding to each Revolving Credit Lender who holds Revolving Loans in an aggregate amount greater than its Applicable Revolving Credit Percentage of all Revolving Loans, (b) each Revolving Credit Lender’s

124

participation in each Letter of Credit shall be automatically adjusted to equal its Applicable Revolving Credit Percentage (after giving effect to this amendment and restatement), and (c) such other adjustments shall be made as the Administrative Agent shall specify so that each Revolving Credit Lender’s Revolving Credit Exposure equals its Applicable Revolving Credit Percentage (after giving effect to this amendment and restatement) of the total Revolving Credit Exposures of all of the Revolving Credit Lenders. The loans and/or adjustments described in this paragraph are referred to herein as the “True-Up Loans”.

[SIGNATURES BEGIN NEXT PAGE]

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

[S IGNATURE P AGE TO A MENDED AND R ESTATED C REDIT A GREEMENT – C ENTENNIAL R ESOURCE P RODUCTION , LLC]

[S IGNATURE P AGE TO A MENDED AND R ESTATED C REDIT A GREEMENT – C ENTENNIAL R ESOURCE P RODUCTION , LLC]

[S IGNATURE P AGE TO A MENDED AND R ESTATED C REDIT A GREEMENT – C ENTENNIAL R ESOURCE P RODUCTION , LLC]

[S IGNATURE P AGE TO A MENDED AND R ESTATED C REDIT A GREEMENT – C ENTENNIAL R ESOURCE P RODUCTION , LLC]

[S IGNATURE P AGE TO A MENDED AND R ESTATED C REDIT A GREEMENT – C ENTENNIAL R ESOURCE P RODUCTION , LLC]

[S IGNATURE P AGE TO A MENDED AND R ESTATED C REDIT A GREEMENT – C ENTENNIAL R ESOURCE P RODUCTION , LLC]

[S IGNATURE P AGE TO A MENDED AND R ESTATED C REDIT A GREEMENT – C ENTENNIAL R ESOURCE P RODUCTION , LLC]

[S IGNATURE P AGE TO A MENDED AND R ESTATED C REDIT A GREEMENT – C ENTENNIAL R ESOURCE P RODUCTION , LLC]

ANNEX I

LIST OF TERM LOAN COMMITMENTS AND

MAXIMUM REVOLVING CREDIT AMOUNTS


Name of Lender	Applicable Term Loan Percentage			Term Loan Commitment		Applicable Revolving Credit Percentage			Maximum Revolving Credit Amount
JPMorgan Chase Bank, N.A.		19.04761905	%	$	12,380,952.38		19.04761905	%	$	95,238,095.25
Wells Fargo Bank, N.A.		19.04761905	%	$	12,380,952.38		19.04761905	%	$	95,238,095.25
Comerica Bank		19.04761905	%	$	12,380,952.38		19.04761905	%	$	95,238,095.25
BMO Harris Bank, N.A.		13.09523809	%	$	8,511,904.76		13.09523809	%	$	65,476,190.45
Canadian Imperial Bank of Commerce, New York Branch		13.09523809	%	$	8,511,904.76		13.09523809	%	$	65,476,190.45
U.S. Bank National Association		13.09523809	%	$	8,511,904.76		13.09523809	%	$	65,476,190.45
Guaranty Bank and Trust Company		3.57142858	%	$	2,321,428.58		3.57142858	%	$	17,857,142.90
TOTAL		100.00	%	$	65,000,000.00		100.00	%	$	500,000,000.00

Annex I - 1

ANNEX II

EXISTING LETTERS OF CREDIT


Currency	Outstanding Amount		Issue Date	Expiry / Maturity Date	Beneficiary Name
USD	$	250,000	September 2, 2014	December 2, 2015	Railroad Commission of Texas
USD	$	50,000	September 2, 2013	February 1, 2015	Railroad Commission of Texas

Annex II - 1

EXHIBIT A

FORM OF TERM LOAN NOTE


$[ ]		[ ], 20[ ]

FOR VALUE RECEIVED, Centennial Resource Production, LLC, a Delaware limited liability company (the “ Borrower ”), hereby promises to pay to [ ] (the “ Lender ”), at the principal office of JPMorgan Chase Bank, N.A. (the “ Administrative Agent ”), at [ ], the principal sum of [ ] Dollars ($[ ]) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Term Loan made by the Lender to the Borrower under the Credit Agreement, as hereinafter defined), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of such Term Loan, at such office, in like money and funds, for the period commencing on the date of such Term Loan until such Term Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement.

The date, amount, Type, interest rate, Interest Period and maturity of the Term Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books. Failure to make any such recordation shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Term Loan or affect the validity of such transfer by any Lender of this Note pursuant to Section 12.04 of the Credit Agreement.

This Note is one of the Notes referred to in the Amended and Restated Credit Agreement dated as of October 15, 2014 among the Borrower, any Parent Guarantor party thereto, the Administrative Agent, and the other agents and lenders signatory thereto (including the Lender), and evidences the Term Loan made by the Lender thereunder (such Credit Agreement as the same may be amended, supplemented or restated from time to time, the “ Credit Agreement ”). Capitalized terms used in this Note and not otherwise defined herein have the respective meanings assigned to them in the Credit Agreement.

This Note is issued pursuant to, and is subject to the terms and conditions set forth in, the Credit Agreement and is entitled to the benefits provided for in the Credit Agreement and the other Loan Documents. The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events, for prepayments of Loans upon the terms and conditions specified therein and other provisions relevant to this Note.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Exhibit A-1


CENTENNIAL RESOURCE PRODUCTION, LLC, a Delaware limited liability company

By:

Name:

Title:

EXHIBIT B

FORM OF REVOLVING CREDIT NOTE


$[ ]		[ ], 20[ ]

FOR VALUE RECEIVED, Centennial Resource Production, LLC, a Delaware limited liability company (the “ Borrower ”), hereby promises to pay to [ ] (the “ Lender ”), at the principal office of JPMorgan Chase Bank, N.A. (the “ Administrative Agent ”), at [ ], the principal sum of [ ] Dollars ($[ ]) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Revolving Loans made by the Lender to the Borrower under the Credit Agreement, as hereinafter defined), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of each such Revolving Loan, at such office, in like money and funds, for the period commencing on the date of such Revolving Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement.

The date, amount, Type, interest rate, Interest Period and maturity of each Revolving Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books. Failure to make any such recordation shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Revolving Loans or affect the validity of such transfer by any Lender of this Note pursuant to Section 12.04 of the Credit Agreement.

This Note is one of the Notes referred to in the Amended and Restated Credit Agreement dated as of October 15, 2014 among the Borrower, any Parent Guarantor party thereto, the Administrative Agent, and the other agents and lenders signatory thereto (including the Lender), and evidences Revolving Loans made by the Lender thereunder (such Credit Agreement as the same may be amended, supplemented or restated from time to time, the “ Credit Agreement ”). Capitalized terms used in this Note and not otherwise defined herein have the respective meanings assigned to them in the Credit Agreement.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.


CENTENNIAL RESOURCE PRODUCTION, LLC, a Delaware limited liability company

By:

Name:

Title:

Exhibit B-1

EXHIBIT C

FORM OF BORROWING REQUEST

[ ], 20[ ]

Centennial Resource Production, LLC, a Delaware limited liability company (the “ Borrower ”), pursuant to Section 2.04 of the Amended and Restated Credit Agreement dated as of October 15, 2014 (together with all amendments, restatements, supplements or other modifications thereto, the “ Credit Agreement ”) among the Borrower, any Parent Guarantor party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and the other agents and lenders (the “ Lenders ”) which are or become parties thereto (unless otherwise defined herein, each capitalized term used herein is defined in the Credit Agreement), hereby requests a Borrowing of [the Term / a Revolving] Loan as follows:

(i) Aggregate amount of the requested Borrowing is $[ ]; ¹

(ii) Date of such Borrowing is [ ], 20[ ];

(iii) Requested Borrowing is to be [ an ABR Borrowing ] [ a Eurodollar Borrowing ];

(iv) In the case of a Eurodollar Borrowing, the initial Interest Period applicable thereto is [ ];

(v) Amount of Borrowing Base in effect on the date hereof is $[ ];

(vi) Total Revolving Credit Exposures on the date hereof (i.e., outstanding principal amount of Revolving Loans and total LC Exposure) is $[ ]; and

(vii) Pro forma total Revolving Credit Exposures (giving effect to the requested Borrowing) is $[ ]; and

(viii) Location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06 of the Credit Agreement, is as follows:

[ ]

¹	For initial funding, specify amounts of Term Loan Borrowings and Revolving Loan Borrowings.

Exhibit C-1

The undersigned certifies, represents and warrants on behalf of the Borrower (and not individually) that (a) he/she is the [ ] of the Borrower, and as such he/she is authorized to execute this certificate on behalf of the Borrower and (b) the Borrower is entitled to receive the requested Borrowing under the terms and conditions of the Credit Agreement.


CENTENNIAL RESOURCE PRODUCTION, LLC, a Delaware limited liability company

By:

Name:

Title:

Exhibit C-2

EXHIBIT D

FORM OF INTEREST ELECTION REQUEST

[ ], 20[ ]

Centennial Resource Production, LLC, a Delaware limited liability company (the “ Borrower ”), pursuant to Section 2.05 of the Amended and Restated Credit Agreement dated as of October 15, 2014 (together with all amendments, restatements, supplements or other modifications thereto, the “ Credit Agreement ”) among the Borrower, any Parent Guarantor party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and the other agents and lenders (the “ Lenders ”) which are or become parties thereto (unless otherwise defined herein, each capitalized term used herein is defined in the Credit Agreement), hereby makes an Interest Election Request as follows:

(i) This Interest Election Request applies to the Borrowing of [the Term / a Revolving] Loan, and if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information specified pursuant to (iii) and (iv) below shall be specified for each resulting Borrowing) is [ ];

(ii) The effective date of the election made pursuant to this Interest Election Request is [ ], 20[ ];[ and ]

(iii) The resulting Borrowing is to be [ an ABR Borrowing ] [ a Eurodollar Borrowing ][; and ]

(iv) [ If the resulting Borrowing is a Eurodollar Borrowing ] The Interest Period applicable to the resulting Borrowing after giving effect to such election is [ ]].

The undersigned certifies, represents and warrants on behalf of the Borrower (and not individually) that (a) he/she is the [ ] of the Borrower, and as such he/she is authorized to execute this certificate on behalf of the Borrower and (b) the Borrower is entitled to receive the requested continuation or conversion under the terms and conditions of the Credit Agreement.


CENTENNIAL RESOURCE PRODUCTION, LLC, a Delaware limited liability company

By:

Name:

Title:

Exhibit D-1

EXHIBIT E

FORM OF

COMPLIANCE CERTIFICATE

With reference to the Amended and Restated Credit Agreement dated as of October 15, 2014 (together with all amendments, restatements, supplements or other modifications thereto being the “ Agreement ”) among Centennial Resource Production, LLC, as the Borrower, any Parent Guarantor party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents and lenders (the “ Lenders ”) which are or become a party thereto, and such Lenders, the undersigned certifies on behalf of the Parent (and not individually) as follows (each capitalized term used herein having the same meaning given to it in the Agreement unless otherwise specified):

(i) There exists no Default or Event of Default [ or specify Default and describe any action taken or proposed to be taken in respect thereto ].

(ii) Attached hereto are the detailed computations necessary to determine whether the Parent is in compliance with Section 9.01 of the Agreement as of the end of the [ fiscal quarter ][ fiscal year ] ending [ ].

(iii) There has been no change in GAAP or in the application thereof since the date of the financial statements referred to in Section 7.04(a) of the Agreement that affects the financial statements of the Parent [ or specify if there has been such a change ].

The undersigned further certifies on behalf of the Parent (and not individually) that he/she is the [ ] of the Parent, and as such he/she is authorized to execute this certificate on behalf of the Parent.

EXECUTED AND DELIVERED this [ ] day of [ ].


[INSERT PARENT SIGNATURE BLOCK]

By:

Name:

Title:

Exhibit E-1

EXHIBIT F

SECURITY INSTRUMENTS AS OF THE EFFECTIVE DATE

(i) Amended and Restated Guaranty Agreement dated as of October 15, 2014 by the Borrower and the Guarantors, in favor of the Administrative Agent and the Secured Parties.

(ii) Amended and Restated Pledge and Security Agreement dated as of October 15, 2014 by the Borrower and the Guarantors, as the Grantors, in favor of the Administrative Agent and the Secured Parties.

(iii) Amended and Restated Mortgage, Deed of Trust, Assignment of As-Extracted Collateral, Security Agreement, Fixture Filing and Financing Statement dated as of October 15, 2014 by the Borrower, as mortgagor, in favor of Ryan Fuessel, as Trustee, for the benefit the Administrative Agent and the Secured Parties.

(iv) Financing Statements in respect of items (ii) and (iii).

Exhibit F-1

EXHIBIT G

FORM OF GUARANTY AGREEMENT

[attached]

Exhibit G-1

EXHIBIT H

FORM OF SECURITY AGREEMENT

[attached]

Exhibit H-1

EXHIBIT I

FORM OF ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “ Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between [ Insert name of Assignor ] (the “ Assignor ”) and [ Insert name of Assignee ] (the “ Assignee ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “ Credit Agreement ”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit and guarantees included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “ Assigned Interest ”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.


1.	Assignor:	________________________________

2.	Assignee:	________________________________ [ and is an Affiliate/Approved Fund of [identify Lender ] ² ]

3.	Borrower:	Centennial Resource Production, LLC

4.	Administrative Agent:	JPMorgan Chase Bank, N.A., as the administrative agent under the Credit Agreement

5.	Credit Agreement:	The Amended and Restated Credit Agreement dated as of October 15, 2014 among Centennial Resource Production, LLC, any Parent Guarantor party thereto, the Lenders parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents parties thereto

²	Select as applicable.

Exhibit I-1


6.		Assigned Interest:

Effective Date: , 20 [ TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR .]

The terms set forth in this Assignment and Assumption are hereby agreed to:


ASSIGNOR [ NAME OF ASSIGNOR ]

By:

Title:


ASSIGNEE [ NAME OF ASSIGNEE ]

By:

Title:

* each total and partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, including, without limitation, its Revolving Credit Commitment, Maximum Revolving Credit Amount, LC Exposure, participations in Letters of Credit, outstanding Revolving Loans and outstanding Term Loans

Exhibit I-2


[ Consented to and ] ³ Accepted: JPMORGAN CHASE BANK, N.A., as Administrative Agent

By:

Title:


[ Consented to: ] ⁴ [ NAME OF RELEVANT PARTY ]

By:

Title:

³	To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.

⁴	To be added only if the consent of the Borrower and/or other parties (e.g. Issuing Bank) is required by the terms of the Credit Agreement.

Exhibit I-3

ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, the Parent or any of its other Subsidiaries, any Affiliates thereof or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, the Parent or any of its other Subsidiaries, any Affiliates thereof or any other Person of any of their respective obligations under any Loan Document.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

Exhibit I-4

3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and the other parties to the Credit Agreement and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile or other electronic transmission (e.g. .pdf) shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

Exhibit I-5

EXHIBIT J-1

FORM OF U.S. TAX COMPLIANCE CERTIFICATE (FOREIGN LENDERS; NOT PARTNERSHIPS)

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Amended and Restated Credit Agreement dated as of October 15, 2014 (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Centennial Resource Production, LLC, a Delaware limited liability company, as Borrower, any Parent Guarantor party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, the financial institutions from time to time party thereto as Lenders, and the other Agents party thereto.

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[ NAME OF LENDER ]

By:

Name:

Title:

Date: , 20[ ]

Exhibit J-1- 1

EXHIBIT J-2

FORM OF U.S. TAX COMPLIANCE CERTIFICATE (FOREIGN PARTICIPANTS; NOT PARTNERSHIPS)

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[ NAME OF PARTICIPANT ]

By:

Name:

Title:

Date: , 20[ ]

Exhibit J-2 - 1

EXHIBIT J-3

FORM OF U.S. TAX COMPLIANCE CERTIFICATE (FOREIGN PARTICIPANTS; PARTNERSHIPS)

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[ NAME OF PARTICIPANT ]

By:

Name:

Title:

Date: , 20[ ]

Exhibit J-3 - 1

EXHIBIT J-4

FORM OF U.S. TAX COMPLIANCE CERTIFICATE (FOREIGN LENDERS; PARTNERSHIPS)

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[ NAME OF LENDER ]

By:

Name:

Title:

Date: , 20[ ]

Exhibit J-4 - 1

EXHIBIT K

FORM OF PARENT JOINDER AGREEMENT

[attached]

Exhibit K - 1

SCHEDULE 1-1

PERMITTED FEES

Reimbursements to Centennial Resource Development, LLC for the outside manager fee of $10,000 per person per year that is payable by it pursuant to Section 5.14 of its Second Amended and Restated Limited Liability Company Agreement.

Schedule 1 - 1

SCHEDULE 7.05

LITIGATION

Nothing to disclose.

Schedule 7.05 - 1

SCHEDULE 7.06

ENVIRONMENTAL MATTERS

Nothing to disclose.

Schedule 7.06 - 1

SCHEDULE 7.14

SUBSIDIARIES

Restricted Subsidiaries

Jurisdiction of

Organization

Organizational

Identification

Number

Principal Place of

Business and

Chief Executive Office

Atlantic Exploration, LLC

(Wholly-Owned)

Delaware

5222590

1401 17 ^th Street,

Suite 1000

Denver, CO 80202

Schedule 7.14 - 1

SCHEDULE 7.18

GAS IMBALANCES

Nothing to disclose.

Schedule 7.18 - 1

SCHEDULE 7.19

MARKETING CONTRACTS

Nothing to disclose.

Schedule 7.19 - 1

SCHEDULE 7.20

SWAP AGREEMENTS

Type

Fixed
Price

Underlying
Index or
Reference
Price

Effective
Date

Termination
Date

Notional
Amount (Bbls/
MMBtu)

Counterparty

Estimated Net
Mark to Market
Value ⁵

Crude Oil Swap

90.42

NYMEX WTI

1/1/2014

12/31/2014

60,000 Bbls

⁶

JPMorgan

($382,308.14

)

Crude Oil Swap

97.50

NYMEX WTI

4/1/2014

12/31/2014

108,000 Bbls

⁷

Wells Fargo

($407,570.63

)

Crude Oil Swap

95.25

NYMEX WTI

1/1/2014

12/31/2014

214,000 Bbls

⁸

Wells Fargo

($731,454.00

)

Crude Oil Swap

102.75

NYMEX WTI

7/1/2014

12/31/2014

234,000 Bbls

JPMorgan

($98,941.15

)

Crude Oil Swap

89.00

NYMEX WTI

1/1/2015

12/31/2015

48,000 Bbls

Koch

($373,991.22

)

Crude Oil Swap

89.50

NYMEX WTI

1/1/2015

12/31/2015

72,000 Bbls

Wells Fargo

($523,014.95

)

Crude Oil Swap

88.00

NYMEX WTI

1/1/2015

12/31/2015

182,500 Bbls

JPMorgan

($1,642,808.39

)

Crude Oil Swap

95.82

NYMEX WTI

1/1/2015

12/31/2015

432,000 Bbls

Wells Fargo

($417,244.42

)

Crude Oil Swap

90.95

NYMEX WTI

1/1/2016

6/30/2016

180,000 Bbls

Wells Fargo

($240,217.00

)

Crude Oil Collar

$
$

85.00 /
94.50

NYMEX WTI

1/1/2014

12/31/2014

24,000 Bbls

⁹

Koch

($109,993.83

)

⁵	All mark-to-market values are quoted as of 6/30/2014.

⁶	30,000 Bbls remaining under contract as of 6/30/2014 (5,000 Bbls per calculation period).

⁷	72,000 Bbls remaining under contract as of 6/30/2014 (12,000 Bbls per calculation period).

⁸	90,700 Bbls remaining under contract as of 6/30/2014 (various quantities per calculation period)

⁹	12,000 Bbls remaining under contract as of 6/30/2014 (2,000 Bbls per calculation period).

Schedule 7.20 - 1

Type

Fixed
Price

Underlying
Index or
Reference
Price

Effective
Date

Termination
Date

Notional
Amount (Bbls/
MMBtu)

Counterparty

Estimated Net
Mark to Market
Value

Crude Oil Collar

$
$

85.00 /
99.25

NYMEX WTI

1/1/2014

12/31/2014

36,000 Bbls

¹⁰

Koch

($94,043.58

)

¹⁰	18,000 Bbls remaining under contract as of 6/30/2014 (3,000 Bbls per calculation period).

Schedule 7.20 - 2

SCHEDULE 9.02

EXISTING DEBT

Nothing to disclose.

Schedule 9.02 - 1

SCHEDULE 9.05

INVESTMENTS

Nothing to disclose.

Schedule 9.05 - 1

SCHEDULE 9.13

TRANSACTIONS WITH AFFILIATES

Any arrangement or transaction pursuant to the certificate or articles of incorporation or formation, bylaws, certificate or articles of organization, regulations or limited liability company agreement, any preferred stock designation or any other organic document of the Parent, the Borrower or any Restricted Subsidiary.

The payment of compensation to, and the terms of any employment contracts with, individuals who are officers, managers and directors of the Parent and its Restricted Subsidiaries, provided such compensation is approved by the Parent’s board of managers or board of directors.

Schedule 9.13 - 1

Exhibit 10.2

F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

dated as of May 6, 2015

among

C ENTENNIAL R ESOURCE P RODUCTION , LLC,

as Borrower,

The Guarantors Party Hereto,

JPM ORGAN C HASE B ANK , N.A.,

as Administrative Agent,

and

The Lenders Party Hereto

J.P. M ORGAN S ECURITIES LLC,

W ELLS F ARGO S ECURITIES , LLC, AND C OMERICA B ANK ,

as Joint Lead Arrangers,

W ELLS F ARGO B ANK , N.A., AND C OMERICA B ANK ,

as Co-Syndication Agents,

BMO H ARRIS B ANK , N.A., C ANADIAN I MPERIAL B ANK OF C OMMERCE , N EW Y ORK B RANCH ,

AND U.S. B ANK N ATIONAL A SSOCIATION ,

as Co-Documentation Agents,

and

J.P. M ORGAN S ECURITIES LLC,

as Sole Bookrunner

F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

This F IRST A MENDMENT TO A MENDED AND R ESTATED C REDIT A GREEMENT (this “ First Amendment ”), dated as of May 6, 2015 (the “ First Amendment Effective Date ”), is among C ENTENNIAL R ESOURCE P RODUCTION , LLC, a Delaware limited liability company (the “ Borrower ”); each of the undersigned guarantors (the “ Guarantors ”, and together with the Borrower, the “ Credit Parties ”); each of the Lenders party hereto; and JPM ORGAN C HASE B ANK , N.A., as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “ Administrative Agent ”).

Recitals

A. The Borrower, the Administrative Agent and the Lenders are parties to that certain Amended and Restated Credit Agreement dated as of October 15, 2014 (as amended prior to the date hereof, the “ Credit Agreement ”), pursuant to which the Lenders have, subject to the terms and conditions set forth therein, made certain credit available to and on behalf of the Borrower.

B. The Borrower has requested that the Lenders enter into this First Amendment to amend the Credit Agreement in certain respects as set forth herein including, without limitation, to extend the Term Loan Maturity Date under the Credit Agreement from April 15, 2017 to April 15, 2018.

C. The Administrative Agent and the Lenders have agreed, subject to the terms and conditions set forth herein, to amend certain terms of the Credit Agreement as set forth herein to be effective as of the First Amendment Effective Date.

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 First Amendment, shall have the meaning ascribed such term in the Credit Agreement, as amended hereby. Unless otherwise indicated, all section references in this First Amendment refer to the Credit Agreement.

Section 2. Amendments . In reliance on the representations, warranties, covenants and agreements contained in this First Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement shall be amended effective as of the First Amendment Effective Date in the manner provided in this Section 2 .

2.1 Additional Definitions . Section 1.02 of the Credit Agreement is hereby amended to add thereto in alphabetical order the following definitions which shall read in full as follows:

“ First Amendment ” means that certain First Amendment to Amended and Restated Credit Agreement dated as of the First Amendment Effective Date, among the Borrower, the Guarantors party thereto, the Administrative Agent and the Lenders party thereto.

Page 1

“ First Amendment Effective Date ” means May 6, 2015.

2.2 Amended Definitions . The definitions of “ Loan Documents ” and “ Term Loan Maturity Date ” contained in Section 1.02 of the Credit Agreement are hereby amended and restated in their entirety to read in full as follows:

“ Loan Documents ” means this Agreement, the First Amendment, the Notes, the Letter of Credit Agreements, the Letters of Credit, the Engagement Letter and the Security Instruments.

“ Term Loan Maturity Date ” means April 15, 2018.

2.3 Replacement of Annex I . Annex I to the Credit Agreement is hereby replaced in its entirety with Annex I attached hereto and Annex I attached hereto shall be deemed to be attached as Annex I to the Credit Agreement. After giving effect to this First Amendment and any Borrowings made on the First Amendment Effective Date, (a) each Lender who holds Term Loans in an aggregate amount less than its Applicable Term Loan Percentage (after giving effect to this First Amendment) of all Term Loans shall advance new Term Loans which shall be disbursed to the Administrative Agent and used to repay Term Loans outstanding to each Lender (or Exiting Lender (as defined below), as applicable), who holds Term Loans in an aggregate amount greater than its Applicable Term Loan Percentage of all Term Loans (or, in the case of the Exiting Lender, in an amount greater than $0.00), (b) each Lender who holds Revolving Loans in an aggregate amount less than its Applicable Revolving Credit Percentage (after giving effect to this First Amendment) of all Revolving Loans shall advance new Revolving Loans which shall be disbursed to the Administrative Agent and used to repay Revolving Loans outstanding to each Lender (or Exiting Lender, as applicable) who holds Revolving Loans in an aggregate amount greater than its Applicable Revolving Credit Percentage of all Revolving Loans (or, in the case of the Exiting Lender, in an amount greater than $0.00), (c) each Lender’s participation in each Letter of Credit, if any, shall be automatically adjusted to equal its Applicable Revolving Credit Percentage (after giving effect to this First Amendment), (d) such other adjustments shall be made as the Administrative Agent shall specify so that (i) the Revolving Credit Exposure applicable to each Lender equals its Applicable Revolving Credit Percentage (after giving effect to this First Amendment) of the aggregate Revolving Credit Exposure of all Lenders, (ii) the principal amount of Term Loans held by each Lender equals its Applicable Term Loan Percentage (after giving effect to this First Amendment) of the aggregate Term Loans of all Lenders, and (iii) the Revolving Credit Exposure and the principal amount of Term Loans held by the Exiting Lender are each $0.00, and (e) upon request to the Borrower by each applicable Lender, the Borrower shall be required to make any break-funding payments owing to such Lender that are required under Section 5.02 of the Credit Agreement resulting from the Loans and adjustments described in this Section 2.3.

Section 3. Conditions Precedent . The effectiveness of this First Amendment is subject to the following:

Page 2

3.1 The Administrative Agent shall have received counterparts of this First Amendment from the Credit Parties and each of the Lenders.

3.2 The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the First Amendment Effective Date including, without limitation, an extension fee, for the ratable account of the Term Lenders, in an amount equal to 0.12% of the aggregate principal amount of the Term Loans outstanding on the First Amendment Effective Date.

3.3 The Administrative Agent shall have received duly executed Notes payable to each Lender with a new Maximum Revolving Credit Amount or principal amount of Term Loans after giving effect to Section 2.3 hereof that requests a Note in principal amounts equal to such Lender’s Maximum Revolving Credit Amount or principal amount of Term Loans, respectively, dated as of the First Amendment Effective Date.

3.4 The Administrative Agent shall have received one or more certificates of the Secretary or an Assistant Secretary of the Borrower and each Guarantor setting forth (a) resolutions of its board of directors (or comparable governing body) with respect to the authorization of the Borrower or such Guarantor to execute and deliver the First Amendment and to enter into the transactions contemplated herein and (b) the articles or certificate of incorporation and bylaws (or comparable organizational documents for any Credit Parties that are not corporations) of the Borrower and such Guarantor, certified as being true and complete (or, alternatively with respect to this clause (b), a certification that there have been no changes to the organizational documents most recently delivered and certified to under the Credit Agreement). The Administrative Agent and the Lenders may conclusively rely on such certificates until the Administrative Agent receives notice in writing from the Borrower to the contrary.

3.5 The Administrative Agent shall have received certificates of the appropriate State agencies in the jurisdiction where such Person is organized with respect to the existence, qualification and good standing of the Borrower and each Guarantor.

3.6 Since April 1, 2015, the Borrower’s equity capital shall have been increased (or shall be concurrently increased in connection with this First Amendment) by an aggregate amount of not less than $48,000,000, with such increased equity capital having been increased by means of cash proceeds received from capital contributions to the Borrower.

3.7 After giving effect to the equity capital contribution under Section 3.6 hereof, the Borrower shall have not less than $96,000,000 in remaining commitments to purchase or cause to be purchased its Equity Interests.

3.8 The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying as to the foregoing Sections 3.6 and 3.7 .

3.9 The Administrative Agent shall have received such other documents as the Administrative Agent or counsel to the Administrative Agent may reasonably request.

Page 3

Section 4. Miscellaneous .

4.1 Confirmation and Effect . The provisions of the Credit Agreement (as amended by this First Amendment) shall remain in full force and effect in accordance with its terms following the effectiveness of this First Amendment, and this First Amendment shall not constitute a waiver of any provision of the Credit Agreement or any other Loan Document, except as expressly provided for herein. Each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof’, “herein”, or words of like import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference to the Credit Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Credit Agreement shall mean and be a reference to the Credit Agreement as amended hereby.

4.2 Ratification and Affirmation of Credit Parties . Each of the Credit Parties hereby expressly (a) acknowledges the terms of this First Amendment, (b) ratifies and affirms its obligations under the Credit Agreement, the Guaranty Agreement and the other Loan Documents to which it is a party, (c) acknowledges, renews and extends its continued liability under the Credit Agreement, the Guaranty Agreement and the other Loan Documents to which it is a party, (d) agrees that its guarantee under the Guaranty Agreement and the other Loan Documents to which it is a party remains in full force and effect with respect to the Indebtedness as amended hereby, (e) represents and warrants to the Lenders and the Administrative Agent that each representation and warranty of such Credit Party contained in the Credit Agreement, the Guaranty Agreement and the other Loan Documents to which it is a party is true and correct in all material respects as of the date hereof and after giving effect to the amendments set forth in Section 2 hereof except (i) to the extent any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the date hereof, such representations and warranties shall continue to be true and correct as of such specified earlier date, and (ii) to the extent that any such representation and warranty is expressly qualified by materiality or by reference to Material Adverse Effect, such representation and warranty (as so qualified) shall continue to be true and correct in all respects, (f) represents and warrants to the Lenders and the Administrative Agent that the execution, delivery and performance by such Credit Party of this First Amendment are within such Credit Party’s corporate, limited partnership or limited liability company powers (as applicable), have been duly authorized by all necessary action and that this First 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 or similar laws affecting creditor’s rights generally, and (g) represents and warrants to the Lenders and the Administrative Agent that, after giving effect to this First Amendment, no Borrowing Base Deficiency or Event of Default exists.

4.3 Counterparts . This First Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of this First Amendment by facsimile or electronic (e.g. pdf) transmission shall be effective as delivery of a manually executed original counterpart hereof.

4.4 No Oral Agreement . This written First Amendment, the Credit Agreement and the other Loan Documents executed in connection herewith and therewith

Page 4

REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR , CONTEMPORANEOUS , OR UNWRITTEN ORAL AGREEMENTS OF THE PARTIES . T HERE ARE NO SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES THAT MODIFY THE AGREEMENTS OF THE PARTIES IN THE C REDIT A GREEMENT AND THE OTHER L OAN D OCUMENTS .

4.5 Governing Law . T HIS F IRST A MENDMENT ( INCLUDING , BUT NOT LIMITED TO , THE VALIDITY AND ENFORCEABILITY HEREOF ) SHALL BE GOVERNED BY , AND CONSTRUED IN ACCORDANCE WITH , THE LAWS OF THE S TATE OF N EW Y ORK .

4.6 Payment of Expenses . The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with this First Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent.

4.7 Severability . Any provision of this First Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

4.8 Successors and Assigns . This First Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

4.9 Exiting Lender . Guaranty Bank and Trust Company (the “ Exiting Lender ”) hereby (a) consents to this First Amendment as required under Section 12.02 of the Credit Agreement and (b) acknowledges and agrees to Section 2.3 of this First Amendment. Each of the parties hereto hereby agrees and confirms that after giving effect to Section 2.3 of this First Amendment, the Exiting Lender’s Maximum Revolving Credit Amount shall be $0.00, the principal amount of Term Loans held by the Exiting Lender shall be $0.00, the Exiting Lender’s Commitments to lend and all obligations under the Credit Agreement shall be terminated, and the Exiting Lender shall cease to be a Lender for all purposes under the Loan Documents.

[Signature Pages Follow.]

Page 5

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

S IGNATURE P AGE TO F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

C ENTENNIAL R ESOURCE P RODUCTION , LLC

S IGNATURE P AGE TO F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

C ENTENNIAL R ESOURCE P RODUCTION , LLC


JPMORGAN CHASE BANK, N.A. , as Administrative Agent and a Lender

By:		/s/ David Morris
Name:		David Morris
Title:		Authorized Officer

S IGNATURE P AGE TO F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

C ENTENNIAL R ESOURCE P RODUCTION , LLC


WELLS FARGO BANK, N.A. , as a Lender

By:		/s/ Joseph T. Rottinghaus
Name:		Joseph T. Rottinghaus
Title:		Vice President

S IGNATURE P AGE TO F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

C ENTENNIAL R ESOURCE P RODUCTION , LLC


COMERICA BANK , as a Lender

By:		/s/ Devin S. Eaton
Name:		Devin S. Eaton
Title:		Relationship Manager

S IGNATURE P AGE TO F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

C ENTENNIAL R ESOURCE P RODUCTION , LLC


BMO HARRIS BANK, N.A. , as a Lender

By:		/s/ Matthew L. Davis
Name:		Matthew L. Davis
Title:		Vice President

S IGNATURE P AGE TO F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

C ENTENNIAL R ESOURCE P RODUCTION , LLC


CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK BRANCH, as a Lender

By:		/s/ William M. Reid
Name:		William M. Reid
Title:		Authorized Signatory

By:		/s/ Trudy Nelson
Name:		Trudy Nelson
Title:		Authorized Signatory

S IGNATURE P AGE TO F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

C ENTENNIAL R ESOURCE P RODUCTION , LLC


U.S. BANK NATIONAL ASSOCIATION , as a Lender

By:		/s/ John C. Lozano
Name:		John C. Lozano
Title:		Vice President

S IGNATURE P AGE TO F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

C ENTENNIAL R ESOURCE P RODUCTION , LLC

The undersigned is executing this First Amendment as of the date and year first above written for the sole purpose of Section 4.9 hereof.


GUARANTY BANK AND TRUST COMPANY , as Exiting Lender

By:		/s/ Gail J. Nofsinger
Name:		Gail J. Nofsinger
Title:		Senior Vice President

S IGNATURE P AGE TO F IRST A MENDMENT TO

A MENDED AND R ESTATED C REDIT A GREEMENT

C ENTENNIAL R ESOURCE P RODUCTION , LLC

ANNEX I

ALLOCATION OF TERM LOANS AND

MAXIMUM REVOLVING CREDIT AMOUNTS


Name of Lender	Applicable Term Loan Percentage			Principal Amount of Term Loans as of the First Amendment Effective Date		Applicable Revolving Credit Percentage			Maximum Revolving Credit Amount
JPMorgan Chase Bank, N.A.		20.23809524	%	$	13,154,761.91		20.23809524	%	$	101,190,476.22
Wells Fargo Bank, N.A.		20.23809524	%	$	13,154,761.91		20.23809524	%	$	101,190,476.22
Comerica Bank		20.23809524	%	$	13,154,761.90		20.23809524	%	$	101,190,476.21
BMO Harris Bank, N.A.		13.09523809	%	$	8,511,904.76		13.09523809	%	$	65,476,190.45
Canadian Imperial Bank of Commerce, New York Branch		13.09523809	%	$	8,511,904.76		13.09523809	%	$	65,476,190.45
U.S. Bank National Association		13.09523809	%	$	8,511,904.76		13.09523809	%	$	65,476,190.45
TOTAL		100.00000000	%	$	65,000,000.00		100.00000000	%	$	500,000,000.00

A NNEX I

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Centennial Resource Development, Inc.:

We consent to the use of our report dated May 17, 2016, with respect to the balance sheet of Centennial Resource Development, Inc. as of April 30, 2016, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

Denver, Colorado

June 22, 2016

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Centennial Resource Development, Inc.:

We consent to the use of our report dated April 5, 2016, except as to Note 14, which is as of May 17, 2016, with respect to the consolidated and combined balance sheets of Centennial Resource Production, LLC and Celero Energy Company, LP (Predecessor) as of December 31, 2015 and 2014, and the related consolidated and combined statements of operations, changes in owners’ equity, and cash flows for each of the years in the two-year period ended December 31, 2015, included herein, and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

Denver, Colorado

June 22, 2016

Exhibit 23.3

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CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

We hereby consent to the inclusion in the Registration Statement on Form S-1 of Centennial Resource Development, Inc. (the “Registration Statement”) of our reports, dated May 12, 2016, and August 4, 2015, to the Centennial Resource Production, LLC interest with respect to estimates of oil and gas reserves and future revenue thereof, as of December 31, 2015, and as of December 31, 2014, and the information contained therein. We hereby further consent to all references to our firm and such report included in the Registration Statement.


NETHERLAND, SEWELL & ASSOCIATES, INC.

By:		/s/ Danny D. Simmons
		Danny D. Simmons, P.E.
		President and Chief Operating Officer

Houston, Texas

June 22, 2016

Please be advised that the digital document you are viewing is provided by Netherland, Sewell & Associates, Inc. (NSAI) as a convenience to our clients. The digital document is intended to be substantively the same as the original signed document maintained by NSAI. The digital document is subject to the parameters, limitations, and conditions stated in the original document. In the event of any differences between the digital document and the original document, the original document shall control and supersede the digital document.

Exhibit 99.1

E XECUTIVE C OMMITTEE

C HAIRMAN & CEO

C.H. (S COTT ) R EES III

P RESIDENT & COO

D ANNY D. S IMMONS

E XECUTIVE VP

G. L ANCE B INDER

R OBERT C. B ARG

P. S COTT F ROST

J OHN G. H ATTNER

J. C ARTER H ENSON , J R .

M IKE K. N ORTON

D AN P AUL S MITH

J OSEPH J. S PELLMAN

D ANIEL T. W ALKER

August 4, 2015

Mr. Ward Polzin

Centennial Resource Development, LLC

1401 Seventeenth Street, Suite 1000

Denver, Colorado 80202

Dear Mr. Polzin:

In accordance with your request, we have estimated the proved reserves and future revenue, as of December 31, 2014, to the Centennial Resource Development, LLC (CRD) interest in certain oil and gas properties located in Reeves and Ward Counties, Texas. We completed our evaluation on or about February 6, 2015. It is our understanding that the proved reserves estimated in this report constitute all of the proved reserves owned by CRD. The estimates in this report have been prepared in accordance with the definitions and regulations of the U.S. Securities and Exchange Commission (SEC) and, with the exception of the exclusion of future income taxes, conform to the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas. Definitions are presented immediately following this letter. This report has been prepared for Centennial Resource Development, Inc.’s use in filing with the SEC; in our opinion the assumptions, data, methods, and procedures used in the preparation of this report are appropriate for such purpose.

We estimate the net reserves and future net revenue to the CRD interest in these properties, as of December 31, 2014, to be:


	Net Reserves						Future Net Revenue (M$)
	Oil		NGL		Gas				Present Worth
Category	(MBBL)		(MBBL)		(MMCF)		Total		at 10%
Proved Developed Producing		7,989.5		763.6		11,910.3		534,287.2		297,584.5
Proved Developed Non-Producing		36.9		2.5		48.3		2,680.5		1,637.4
Proved Undeveloped		11,823.0		785.3		15,455.1		415,635.3		71,142.8

Total Proved		19,849.5		1,551.4		27,413.6		952,603.0		370,364.7

Totals may not add because of rounding.

The oil volumes shown include crude oil and condensate. Oil and natural gas liquids (NGL) volumes are expressed in thousands of barrels (MBBL); a barrel is equivalent to 42 United States gallons. Gas volumes are expressed in millions of cubic feet (MMCF) at standard temperature and pressure bases.

The estimates shown in this report are for proved reserves. No study was made to determine whether probable or possible reserves might be established for these properties. This report does not include any value that could be attributed to interests in undeveloped acreage beyond those tracts for which undeveloped reserves have been estimated. Reserves categorization conveys the relative degree of certainty; reserves subcategorization is based on development and production status. The estimates of reserves and future revenue included herein have not been adjusted for risk.

Gross revenue is CRD’s share of the gross (100 percent) revenue from the properties prior to any deductions. Future net revenue is after deductions for CRD’s share of production taxes, ad valorem taxes, capital costs, abandonment costs, and operating expenses but before consideration of any income taxes. The future net revenue has been discounted at an annual rate of 10 percent to determine its present worth, which is shown to indicate the effect of time on the value of money. Future net revenue presented in this report, whether discounted or undiscounted, should not be construed as being the fair market value of the properties.

2100 R OSS A VENUE , S UITE 2200 • D ALLAS , T EXAS 75201 • P H : 214-969-5401 • F AX : 214-969-5411

1301 M C K INNEY S TREET , S UITE 3200 • H OUSTON , T EXAS 77010 • P H : 713-654-4950 • F AX : 713-654-4951

info@nsai-petro.com

netherlandsewell.com

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Prices used in this report are based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January through December 2014. For oil and NGL volumes, the average West Texas Intermediate posted price of $91.48 per barrel is adjusted for quality, transportation fees, and market differentials. For gas volumes, the average Henry Hub spot price of $4.350 per MMBTU is adjusted for energy content, transportation fees, and market differentials. All prices are held constant throughout the lives of the properties. The average adjusted product prices weighted by production over the remaining lives of the properties are $84.94 per barrel of oil, $22.70 per barrel of NGL, and $4.704 per MCF of gas.

Operating costs used in this report are based on operating expense records of CRD. These costs include the per-well overhead expenses allowed under joint operating agreements along with estimates of costs to be incurred at and below the district and field levels. Operating costs have been divided into per-well costs and per-unit-of-production costs. Headquarters general and administrative overhead expenses of CRD are included to the extent that they are covered under joint operating agreements for the operated properties. Operating costs are not escalated for inflation.

Capital costs used in this report were provided by CRD and are based on authorizations for expenditure and actual costs from recent activity. Capital costs are included as required for well completions, new development wells, and production equipment. Based on our understanding of future development plans, a review of the records provided to us, and our knowledge of similar properties, we regard these estimated capital costs to be reasonable. Abandonment costs used in this report are CRD’s estimates of the costs to abandon the wells and production facilities, net of any salvage value. Capital costs and abandonment costs are not escalated for inflation.

For the purposes of this report, we did not perform any field inspection of the properties, nor did we examine the mechanical operation or condition of the wells and facilities. We have not investigated possible environmental liability related to the properties; therefore, our estimates do not include any costs due to such possible liability.

We have made no investigation of potential volume and value imbalances resulting from overdelivery or underdelivery to the CRD interest. Therefore, our estimates of reserves and future revenue do not include adjustments for the settlement of any such imbalances; our projections are based on CRD receiving its net revenue interest share of estimated future gross production.

The reserves shown in this report are estimates only and should not be construed as exact quantities. Proved reserves are those quantities of oil and gas which, by analysis of engineering and geoscience data, can be estimated with reasonable certainty to be economically producible; probable and possible reserves are those additional reserves which are sequentially less certain to be recovered than proved reserves. Estimates of reserves may increase or decrease as a result of market conditions, future operations, changes in regulations, or actual reservoir performance. In addition to the primary economic assumptions discussed herein, our estimates are based on certain assumptions including, but not limited to, that the properties will be developed consistent with current development plans as provided to us by CRD, that the properties will be operated in a prudent manner, that no governmental regulations or controls will be put in place that would impact the ability of the interest owner to recover the reserves, and that our projections of future production will prove consistent with actual performance. If the reserves are recovered, the revenues therefrom and the costs related thereto could be more or less than the estimated amounts. Because of governmental policies and uncertainties of supply and demand, the sales rates, prices received for the reserves, and costs incurred in recovering such reserves may vary from assumptions made while preparing this report.

For the purposes of this report, we used technical and economic data including, but not limited to, well logs, geologic maps, well test data, production data, historical price and cost information, and property ownership interests. The reserves in this report have been estimated using deterministic methods; these estimates have

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been prepared in accordance with the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers (SPE Standards). We used standard engineering and geoscience methods, or a combination of methods, including performance analysis and analogy, that we considered to be appropriate and necessary to categorize and estimate reserves in accordance with SEC definitions and regulations. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geoscience data; therefore, our conclusions necessarily represent only informed professional judgment.

The data used in our estimates were obtained from CRD, public data sources, and the nonconfidential files of Netherland, Sewell & Associates, Inc. (NSAI) and were accepted as accurate. Supporting work data are on file in our office. We have not examined the titles to the properties or independently confirmed the actual degree or type of interest owned. The technical persons responsible for preparing the estimates presented herein meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the SPE Standards. Neil H. Little, a Licensed Professional Engineer in the State of Texas, has been practicing consulting petroleum engineering at NSAI since 2011 and has over 9 years of prior industry experience. Mike K. Norton, a Licensed Professional Geoscientist in the State of Texas, has been practicing consulting petroleum geoscience at NSAI since 1989 and has over 10 years of prior industry experience. We are independent petroleum engineers, geologists, geophysicists, and petrophysicists; we do not own an interest in these properties nor are we employed on a contingent basis.


		Sincerely,

		NETHERLAND, SEWELL & ASSOCIATES, INC.
		Texas Registered Engineering Firm F-2699

		By:	/s/ C.H. (Scott) Rees III
			C.H. (Scott) Rees III, P.E.
			Chairman and Chief Executive Officer

By:	/s/ Neil H. Little	By:	/s/ Mike K. Norton
	Neil H. Little, P.E. 117966		Mike K. Norton, P.G. 441
	Vice President		Senior Vice President

Date Signed: August 4, 2015		Date Signed: August 4, 2015

NHL:SMD

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

The following definitions are set forth in U.S. Securities and Exchange Commission (SEC) Regulation S-X Section 210.4-10(a). Also included is supplemental information from (1) the 2007 Petroleum Resources Management System approved by the Society of Petroleum Engineers, (2) the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas, and (3) the SEC’s Compliance and Disclosure Interpretations.

(1) Acquisition of properties. Costs incurred to purchase, lease or otherwise acquire a property, including costs of lease bonuses and options to purchase or lease properties, the portion of costs applicable to minerals when land including mineral rights is purchased in fee, brokers’ fees, recording fees, legal costs, and other costs incurred in acquiring properties.

(2) Analogous reservoir . Analogous reservoirs, as used in resources assessments, have similar rock and fluid properties, reservoir conditions (depth, temperature, and pressure) and drive mechanisms, but are typically at a more advanced stage of development than the reservoir of interest and thus may provide concepts to assist in the interpretation of more limited data and estimation of recovery. When used to support proved reserves, an “analogous reservoir” refers to a reservoir that shares the following characteristics with the reservoir of interest:

(i)

Same geological formation (but not necessarily in pressure communication with the reservoir of interest);

(ii)

Same environment of deposition;

(iii)

Similar geological structure; and

(iv)

Same drive mechanism.

Instruction to paragraph (a)(2) : Reservoir properties must, in the aggregate, be no more favorable in the analog than in the reservoir of interest.

(3) Bitumen . Bitumen, sometimes referred to as natural bitumen, is petroleum in a solid or semi-solid state in natural deposits with a viscosity greater than 10,000 centipoise measured at original temperature in the deposit and atmospheric pressure, on a gas free basis. In its natural state it usually contains sulfur, metals, and other non-hydrocarbons.

(4) Condensate . Condensate is a mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure, but that, when produced, is in the liquid phase at surface pressure and temperature.

(5) Deterministic estimate . The method of estimating reserves or resources is called deterministic when a single value for each parameter (from the geoscience, engineering, or economic data) in the reserves calculation is used in the reserves estimation procedure.

(6) Developed oil and gas reserves . Developed oil and gas reserves are reserves of any category that can be expected to be recovered:

(i)

Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and

(ii)

Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

Supplemental definitions from the 2007 Petroleum Resources Management System:

Developed Producing Reserves – Developed Producing Reserves are expected to be recovered from completion intervals that are open and producing at the time of the estimate. Improved recovery reserves are considered producing only after the improved recovery project is in operation.

Developed Non-Producing Reserves – Developed Non-Producing Reserves include shut-in and behind-pipe Reserves. Shut-in Reserves are expected to be recovered from (1) completion intervals which are open at the time of the estimate but which have not yet started producing, (2) wells which were shut-in for market conditions or pipeline connections, or (3) wells not capable of production for mechanical reasons. Behind-pipe Reserves are expected to be recovered from zones in existing wells which will require additional completion work or future recompletion prior to start of production. In all cases, production can be initiated or restored with relatively low expenditure compared to the cost of drilling a new well.

Definitions - Page 1 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(7) Development costs. Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas. More specifically, development costs, including depreciation and applicable operating costs of support equipment and facilities and other costs of development activities, are costs incurred to:

(i)

Gain access to and prepare well locations for drilling, including surveying well locations for the purpose of determining specific development drilling sites, clearing ground, draining, road building, and relocating public roads, gas lines, and power lines, to the extent necessary in developing the proved reserves.

(ii)

Drill and equip development wells, development-type stratigraphic test wells, and service wells, including the costs of platforms and of well equipment such as casing, tubing, pumping equipment, and the wellhead assembly.

(iii)

Acquire, construct, and install production facilities such as lease flow lines, separators, treaters, heaters, manifolds, measuring devices, and production storage tanks, natural gas cycling and processing plants, and central utility and waste disposal systems.

(iv)

Provide improved recovery systems.

(8) Development project . A development project is the means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single reservoir or field, an incremental development in a producing field, or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a development project.

(9) Development well . A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.

(10) Economically producible . The term economically producible, as it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. The value of the products that generate revenue shall be determined at the terminal point of oil and gas producing activities as defined in paragraph (a)(16) of this section.

(11) Estimated ultimate recovery (EUR) . Estimated ultimate recovery is the sum of reserves remaining as of a given date and cumulative production as of that date.

(12) Exploration costs . Costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects of containing oil and gas reserves, including costs of drilling exploratory wells and exploratory-type stratigraphic test wells. Exploration costs may be incurred both before acquiring the related property (sometimes referred to in part as prospecting costs) and after acquiring the property. Principal types of exploration costs, which include depreciation and applicable operating costs of support equipment and facilities and other costs of exploration activities, are:

(i)

Costs of topographical, geographical and geophysical studies, rights of access to properties to conduct those studies, and salaries and other expenses of geologists, geophysical crews, and others conducting those studies. Collectively, these are sometimes referred to as geological and geophysical or “G&G” costs.

(ii)

Costs of carrying and retaining undeveloped properties, such as delay rentals, ad valorem taxes on properties, legal costs for title defense, and the maintenance of land and lease records.

(iii)

Dry hole contributions and bottom hole contributions.

(iv)

Costs of drilling and equipping exploratory wells.

(v)

Costs of drilling exploratory-type stratigraphic test wells.

(13) Exploratory well . An exploratory well is a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. Generally, an exploratory well is any well that is not a development well, an extension well, a service well, or a stratigraphic test well as those items are defined in this section.

(14) Extension well. An extension well is a well drilled to extend the limits of a known reservoir.

Definitions - Page 2 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(15) Field . An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field which are separated vertically by intervening impervious strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field. The geological terms “structural feature” and “stratigraphic condition” are intended to identify localized geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc.

(16) Oil and gas producing activities.

(i)

Oil and gas producing activities include:

(A)

The search for crude oil, including condensate and natural gas liquids, or natural gas (“oil and gas”) in their natural states and original locations;

(B)

The acquisition of property rights or properties for the purpose of further exploration or for the purpose of removing the oil or gas from such properties;

(C)

The construction, drilling, and production activities necessary to retrieve oil and gas from their natural reservoirs, including the acquisition, construction, installation, and maintenance of field gathering and storage systems, such as:

(1)

Lifting the oil and gas to the surface; and

(2)

Gathering, treating, and field processing (as in the case of processing gas to extract liquid hydrocarbons); and

(D)

Extraction of saleable hydrocarbons, in the solid, liquid, or gaseous state, from oil sands, shale, coalbeds, or other nonrenewable natural resources which are intended to be upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction.

Instruction 1 to paragraph (a)(16)(i): The oil and gas production function shall be regarded as ending at a “terminal point”, which is the outlet valve on the lease or field storage tank. If unusual physical or operational circumstances exist, it may be appropriate to regard the terminal point for the production function as:

The first point at which oil, gas, or gas liquids, natural or synthetic, are delivered to a main pipeline, a common carrier, a refinery, or a marine terminal; and

In the case of natural resources that are intended to be upgraded into synthetic oil or gas, if those natural resources are delivered to a purchaser prior to upgrading, the first point at which the natural resources are delivered to a main pipeline, a common carrier, a refinery, a marine terminal, or a facility which upgrades such natural resources into synthetic oil or gas.

Instruction 2 to paragraph (a)(16)(i): For purposes of this paragraph (a)(16), the term saleable hydrocarbons means hydrocarbons that are saleable in the state in which the hydrocarbons are delivered.

(ii)

Oil and gas producing activities do not include:

(A)

Transporting, refining, or marketing oil and gas;

(B)

Processing of produced oil, gas, or natural resources that can be upgraded into synthetic oil or gas by a registrant that does not have the legal right to produce or a revenue interest in such production;

(C)

Activities relating to the production of natural resources other than oil, gas, or natural resources from which synthetic oil and gas can be extracted; or

(D)

Production of geothermal steam.

(17) Possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves.

(i)

When deterministic methods are used, the total quantities ultimately recovered from a project have a low probability of exceeding proved plus probable plus possible reserves. When probabilistic methods are used, there should be at least a 10% probability that the total quantities ultimately recovered will equal or exceed the proved plus probable plus possible reserves estimates.

Definitions - Page 3 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(ii)

Possible reserves may be assigned to areas of a reservoir adjacent to probable reserves where data control and interpretations of available data are progressively less certain. Frequently, this will be in areas where geoscience and engineering data are unable to define clearly the area and vertical limits of commercial production from the reservoir by a defined project.

(iii)

Possible reserves also include incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than the recovery quantities assumed for probable reserves.

(iv)

The proved plus probable and proved plus probable plus possible reserves estimates must be based on reasonable alternative technical and commercial interpretations within the reservoir or subject project that are clearly documented, including comparisons to results in successful similar projects.

(v)

Possible reserves may be assigned where geoscience and engineering data identify directly adjacent portions of a reservoir within the same accumulation that may be separated from proved areas by faults with displacement less than formation thickness or other geological discontinuities and that have not been penetrated by a wellbore, and the registrant believes that such adjacent portions are in communication with the known (proved) reservoir. Possible reserves may be assigned to areas that are structurally higher or lower than the proved area if these areas are in communication with the proved reservoir.

(vi)

Pursuant to paragraph (a)(22)(iii) of this section, where direct observation has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves should be assigned in the structurally higher portions of the reservoir above the HKO only if the higher contact can be established with reasonable certainty through reliable technology. Portions of the reservoir that do not meet this reasonable certainty criterion may be assigned as probable and possible oil or gas based on reservoir fluid properties and pressure gradient interpretations.

(18) Probable reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.

(i)

When deterministic methods are used, it is as likely as not that actual remaining quantities recovered will exceed the sum of estimated proved plus probable reserves. When probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the proved plus probable reserves estimates.

(ii)

Probable reserves may be assigned to areas of a reservoir adjacent to proved reserves where data control or interpretations of available data are less certain, even if the interpreted reservoir continuity of structure or productivity does not meet the reasonable certainty criterion. Probable reserves may be assigned to areas that are structurally higher than the proved area if these areas are in communication with the proved reservoir.

(iii)

Probable reserves estimates also include potential incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than assumed for proved reserves.

(iv)

See also guidelines in paragraphs (a)(17)(iv) and (a)(17)(vi) of this section.

(19) Probabilistic estimate. The method of estimation of reserves or resources is called probabilistic when the full range of values that could reasonably occur for each unknown parameter (from the geoscience and engineering data) is used to generate a full range of possible outcomes and their associated probabilities of occurrence.

(20) Production costs.

(i)

Costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. They become part of the cost of oil and gas produced. Examples of production costs (sometimes called lifting costs) are:

(A)

Costs of labor to operate the wells and related equipment and facilities.

(B)

Repairs and maintenance.

(C)

Materials, supplies, and fuel consumed and supplies utilized in operating the wells and related equipment and facilities.

Definitions - Page 4 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(D)

Property taxes and insurance applicable to proved properties and wells and related equipment and facilities.

(E)

Severance taxes.

(ii)

Some support equipment or facilities may serve two or more oil and gas producing activities and may also serve transportation, refining, and marketing activities. To the extent that the support equipment and facilities are used in oil and gas producing activities, their depreciation and applicable operating costs become exploration, development or production costs, as appropriate. Depreciation, depletion, and amortization of capitalized acquisition, exploration, and development costs are not production costs but also become part of the cost of oil and gas produced along with production (lifting) costs identified above.

(21) Proved area. The part of a property to which proved reserves have been specifically attributed.

(22) Proved oil and gas reserves. Proved oil and gas reserves are those quantities of oil and gas, 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.

(i)

The area of the reservoir considered as proved includes:

(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.

(ii)

In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii)

Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.

(iv)

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

(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.

(v)

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 prior to 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.

(23) Proved properties. Properties with proved reserves.

(24) Reasonable certainty. If deterministic methods are used, reasonable certainty means a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90%

Definitions - Page 5 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

probability that the quantities actually recovered will equal or exceed the estimate. A high degree of confidence exists if the quantity is much more likely to be achieved than not, and, as changes due to increased availability of geoscience (geological, geophysical, and geochemical), engineering, and economic data are made to estimated ultimate recovery (EUR) with time, reasonably certain EUR is much more likely to increase or remain constant than to decrease.

(25) Reliable technology. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.

(26) Reserves. Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project.

Note to paragraph (a)(26) : Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir, or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).

Excerpted from the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas:

932-235-50-30 A standardized measure of discounted future net cash flows relating to an entity’s interests in both of the following shall be disclosed as of the end of the year:

Proved oil and gas reserves (see paragraphs 932-235-50-3 through 50-11B)

Oil and gas subject to purchase under long-term supply, purchase, or similar agreements and contracts in which the entity participates in the operation of the properties on which the oil or gas is located or otherwise serves as the producer of those reserves (see paragraph 932-235-50-7).

The standardized measure of discounted future net cash flows relating to those two types of interests in reserves may be combined for reporting purposes.

932-235-50-31 All of the following information shall be disclosed in the aggregate and for each geographic area for which reserve quantities are disclosed in accordance with paragraphs 932-235-50-3 through 50-11B:

Future cash inflows. These shall be computed by applying prices used in estimating the entity’s proved oil and gas reserves to the year-end quantities of those reserves. Future price changes shall be considered only to the extent provided by contractual arrangements in existence at year-end.

Future development and production costs. These costs shall be computed by estimating the expenditures to be incurred in developing and producing the proved oil and gas reserves at the end of the year, based on year-end costs and assuming continuation of existing economic conditions. If estimated development expenditures are significant, they shall be presented separately from estimated production costs.

Future income tax expenses. These expenses shall be computed by applying the appropriate year-end statutory tax rates, with consideration of future tax rates already legislated, to the future pretax net cash flows relating to the entity’s proved oil and gas reserves, less the tax basis of the properties involved. The future income tax expenses shall give effect to tax deductions and tax credits and allowances relating to the entity’s proved oil and gas reserves.

Future net cash flows. These amounts are the result of subtracting future development and production costs and future income tax expenses from future cash inflows.

Discount. This amount shall be derived from using a discount rate of 10 percent a year to reflect the timing of the future net cash flows relating to proved oil and gas reserves.

Standardized measure of discounted future net cash flows. This amount is the future net cash flows less the computed discount.

(27) Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

Definitions - Page 6 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(28) Resources. Resources are quantities of oil and gas estimated to exist in naturally occurring accumulations. A portion of the resources may be estimated to be recoverable, and another portion may be considered to be unrecoverable. Resources include both discovered and undiscovered accumulations.

(29) Service well. A well drilled or completed for the purpose of supporting production in an existing field. Specific purposes of service wells include gas injection, water injection, steam injection, air injection, salt-water disposal, water supply for injection, observation, or injection for in-situ combustion.

(30) Stratigraphic test well. A stratigraphic test well is a drilling effort, geologically directed, to obtain information pertaining to a specific geologic condition. Such wells customarily are drilled without the intent of being completed for hydrocarbon production. The classification also includes tests identified as core tests and all types of expendable holes related to hydrocarbon exploration. Stratigraphic tests are classified as “exploratory type” if not drilled in a known area or “development type” if drilled in a known area.

(31) Undeveloped oil and gas reserves. Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

(i)

Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

(ii)

Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.

From the SEC’s Compliance and Disclosure Interpretations (October 26, 2009):

Although several types of projects — such as constructing offshore platforms and development in urban areas, remote locations or environmentally sensitive locations — by their nature customarily take a longer time to develop and therefore often do justify longer time periods, this determination must always take into consideration all of the facts and circumstances. No particular type of project per se justifies a longer time period, and any extension beyond five years should be the exception, and not the rule.

Factors that a company should consider in determining whether or not circumstances justify recognizing reserves even though development may extend past five years include, but are not limited to, the following:

•

The company’s level of ongoing significant development activities in the area to be developed (for example, drilling only the minimum number of wells necessary to maintain the lease generally would not constitute significant development activities);

•

The company’s historical record at completing development of comparable long-term projects;

•

The amount of time in which the company has maintained the leases, or booked the reserves, without significant development activities;

•

The extent to which the company has followed a previously adopted development plan (for example, if a company has changed its development plan several times without taking significant steps to implement any of those plans, recognizing proved undeveloped reserves typically would not be appropriate); and

•

The extent to which delays in development are caused by external factors related to the physical operating environment (for example, restrictions on development on Federal lands, but not obtaining government permits), rather than by internal factors (for example, shifting resources to develop properties with higher priority).

(iii)

Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in paragraph (a)(2) of this section, or by other evidence using reliable technology establishing reasonable certainty.

(32) Unproved properties . Properties with no proved reserves.

Definitions - Page 7 of 7

Exhibit 99.2


		C HAIRMAN & CEO C.H. (S COTT ) R EES III
E XECUTIVE C OMMITTEE		C HAIRMAN & CEO C.H. (S COTT ) R EES III
R OBERT C. B ARG	M IKE K. N ORTON	P RESIDENT & COO
P. S COTT F ROST	D AN P AUL S MITH	D ANNY D. S IMMONS
J OHN G. H ATTNER	J OSEPH J. S PELLMAN	E XECUTIVE VP
J. C ARTER H ENSON , J R .	D ANIEL T. W ALKER	G. L ANCE B INDER

May 12, 2016

Mr. Ward Polzin

Centennial Resource Development, LLC

1401 Seventeenth Street, Suite 1000

Denver, Colorado 80202

Dear Mr. Polzin:

In accordance with your request, we have estimated the proved reserves and future revenue, as of December 31, 2015, to the Centennial Resource Production, LLC (CRP) interest in certain oil and gas properties located in Reeves and Ward Counties, Texas. CRP is a subsidiary of Centennial Resource Development, LLC (CRD). We completed our evaluation on or about March 3, 2016. It is our understanding that the proved reserves estimated in this report constitute all of the proved reserves owned by CRP. The estimates in this report have been prepared in accordance with the definitions and regulations of the U.S. Securities and Exchange Commission (SEC) and, with the exception of the exclusion of future income taxes, conform to the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas. Definitions are presented immediately following this letter. This report has been prepared for CRP’s use in filing with the SEC; in our opinion the assumptions, data, methods, and procedures used in the preparation of this report are appropriate for such purpose.

We estimate the net reserves and future net revenue to the CRP interest in these properties, as of December 31, 2015, to be:


	Net Reserves						Future Net Revenue (M$)
Category	Oil (MBBL)		NGL (MBBL)		Gas (MMCF)		Total		Present Worth at 10%
Proved Developed Producing		9,346.9		1,603.1		12,711.1		216,269.6		141,416.4
Proved Undeveloped		13,852.2		2,248.2		19,730.5		135,797.3		4,057.0

Total Proved		23,199.0		3,851.4		32,441.6		352,066.9		145,473.4

Totals may not add because of rounding.

The oil volumes shown include crude oil only. Oil and natural gas liquids (NGL) volumes are expressed in thousands of barrels (MBBL); a barrel is equivalent to 42 United States gallons. Gas volumes are expressed in millions of cubic feet (MMCF) at standard temperature and pressure bases.

The estimates shown in this report are for proved developed producing and proved undeveloped reserves. Our study indicates that there are no proved developed non-producing reserves for these properties at this time. No study was made to determine whether probable or possible reserves might be established for these properties. This report does not include any value that could be attributed to interests in undeveloped acreage beyond those tracts for which undeveloped reserves have been estimated. Reserves categorization conveys the relative degree of certainty; reserves subcategorization is based on development and production status. The estimates of reserves and future revenue included herein have not been adjusted for risk.

Gross revenue is CRP’s share of the gross (100 percent) revenue from the properties prior to any deductions. Future net revenue is after deductions for CRP’s share of production taxes, ad valorem taxes, capital costs, abandonment costs, and operating expenses but before consideration of any income taxes. The future net revenue has been discounted at an annual rate of 10 percent to determine its present worth, which is shown to indicate the effect of time on the value of money. Future net revenue presented in this report, whether discounted or undiscounted, should not be construed as being the fair market value of the properties.



2100 R OSS A VENUE , S UITE 2200 ● D ALLAS , T EXAS 75201 ● P H : 214-969-5401 ● F AX : 214-969-5411		info@nsai-petro.com
1301 M C K INNEY S TREET , S UITE 3200 ● H OUSTON , T EXAS 77010 ● P H : 713-654-4950 ● F AX : 713-654-4951		netherlandsewell.com

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Prices used in this report are based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January through December 2015. For oil and NGL volumes, the average West Texas Intermediate posted price of $46.79 per barrel is adjusted for quality, transportation fees, and market differentials. For gas volumes, the average Henry Hub spot price of $2.587 per MMBTU is adjusted for energy content, transportation fees, and market differentials. All prices are held constant throughout the lives of the properties. The average adjusted product prices weighted by production over the remaining lives of the properties are $41.85 per barrel of oil, $13.94 per barrel of NGL, and $1.707 per MCF of gas.

Operating costs used in this report are based on operating expense records of CRP. These costs include the per-well overhead expenses allowed under joint operating agreements along with estimates of costs to be incurred at and below the district and field levels. Operating costs have been divided into field-level costs, per-well costs, and per-unit-of-production costs. Headquarters general and administrative overhead expenses of CRP are included to the extent that they are covered under joint operating agreements for the operated properties. Operating costs are not escalated for inflation.

Capital costs used in this report were provided by CRP and are based on authorizations for expenditure and actual costs from recent activity. Capital costs are included as required for new development wells and production equipment. Based on our understanding of future development plans, a review of the records provided to us, and our knowledge of similar properties, we regard these estimated capital costs to be reasonable. Abandonment costs used in this report are CRP’s estimates of the costs to abandon the wells and production facilities, net of any salvage value. Capital costs and abandonment costs are not escalated for inflation.

We have made no investigation of potential volume and value imbalances resulting from overdelivery or underdelivery to the CRP interest. Therefore, our estimates of reserves and future revenue do not include adjustments for the settlement of any such imbalances; our projections are based on CRP receiving its net revenue interest share of estimated future gross production.

The reserves shown in this report are estimates only and should not be construed as exact quantities. Proved reserves are those quantities of oil and gas which, by analysis of engineering and geoscience data, can be estimated with reasonable certainty to be economically producible; probable and possible reserves are those additional reserves which are sequentially less certain to be recovered than proved reserves. Estimates of reserves may increase or decrease as a result of market conditions, future operations, changes in regulations, or actual reservoir performance. In addition to the primary economic assumptions discussed herein, our estimates are based on certain assumptions including, but not limited to, that the properties will be developed consistent with current development plans as provided to us by CRP, that the properties will be operated in a prudent manner, that no governmental regulations or controls will be put in place that would impact the ability of the interest owner to recover the reserves, and that our projections of future production will prove consistent with actual performance. If the reserves are recovered, the revenues therefrom and the costs related thereto could be more or less than the estimated amounts. Because of governmental policies and uncertainties of supply and demand, the sales rates, prices received for the reserves, and costs incurred in recovering such reserves may vary from assumptions made while preparing this report.

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The data used in our estimates were obtained from CRP, public data sources, and the nonconfidential files of Netherland, Sewell & Associates, Inc. (NSAI) and were accepted as accurate. Supporting work data are on file in our office. We have not examined the titles to the properties or independently confirmed the actual degree or type of interest owned. The technical persons primarily responsible for preparing the estimates presented herein meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the SPE Standards. Neil H. Little, a Licensed Professional Engineer in the State of Texas, has been practicing consulting petroleum engineering at NSAI since 2011 and has over 9 years of prior industry experience. Mike K. Norton, a Licensed Professional Geoscientist in the State of Texas, has been practicing consulting petroleum geoscience at NSAI since 1989 and has over 10 years of prior industry experience. We are independent petroleum engineers, geologists, geophysicists, and petrophysicists; we do not own an interest in these properties nor are we employed on a contingent basis.


		Sincerely, NETHERLAND, SEWELL & ASSOCIATES, INC. Texas Registered Engineering Firm F-2699

			/s/ C.H. (Scott) Rees III
		By:
			C.H. (Scott) Rees III, P.E.
			Chairman and Chief Executive Officer

	/s/ Neil H. Little		/s/ Mike K. Norton
By:		By:
	Neil H. Little, P.E. 117966		Mike K. Norton, P.G. 441
	Vice President		Senior Vice President

Date Signed: May 12, 2016		Date Signed: May 12, 2016

NHL:SMD

LOGO

DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(i)

Same geological formation (but not necessarily in pressure communication with the reservoir of interest);

(ii)

Same environment of deposition;

(iii)

Similar geological structure; and

(iv)

Same drive mechanism.

Instruction to paragraph (a)(2) : Reservoir properties must, in the aggregate, be no more favorable in the analog than in the reservoir of interest.

(6) Developed oil and gas reserves . Developed oil and gas reserves are reserves of any category that can be expected to be recovered:

(i)

Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and

(ii)

Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

Supplemental definitions from the 2007 Petroleum Resources Management System:

Developed Producing Reserves—Developed Producing Reserves are expected to be recovered from completion intervals that are open and producing at the time of the estimate. Improved recovery reserves are considered producing only after the improved recovery project is in operation.

Developed Non-Producing Reserves—Developed Non-Producing Reserves include shut-in and behind-pipe Reserves. Shut-in Reserves are expected to be recovered from (1) completion intervals which are open at the time of the estimate but which have not yet started producing, (2) wells which were shut-in for market conditions or pipeline connections, or (3) wells not capable of production for mechanical reasons. Behind-pipe Reserves are expected to be recovered from zones in existing wells which will require additional completion work or future recompletion prior to start of production. In all cases, production can be initiated or restored with relatively low expenditure compared to the cost of drilling a new well.

Definitions - Page 1 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(i)

(ii)

(iii)

(iv)

Provide improved recovery systems.

(9) Development well . A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.

(11) Estimated ultimate recovery (EUR) . Estimated ultimate recovery is the sum of reserves remaining as of a given date and cumulative production as of that date.

(i)

(ii)

Costs of carrying and retaining undeveloped properties, such as delay rentals, ad valorem taxes on properties, legal costs for title defense, and the maintenance of land and lease records.

(iii)

Dry hole contributions and bottom hole contributions.

(iv)

Costs of drilling and equipping exploratory wells.

(v)

Costs of drilling exploratory-type stratigraphic test wells.

(14) Extension well. An extension well is a well drilled to extend the limits of a known reservoir.

Definitions - Page 2 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(15) Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field which are separated vertically by intervening impervious strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field. The geological terms “structural feature” and “stratigraphic condition” are intended to identify localized geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc.

(16) Oil and gas producing activities.

(i)

Oil and gas producing activities include:

(A)

The search for crude oil, including condensate and natural gas liquids, or natural gas (“oil and gas”) in their natural states and original locations;

(B)

The acquisition of property rights or properties for the purpose of further exploration or for the purpose of removing the oil or gas from such properties;

(C)

(1)

Lifting the oil and gas to the surface; and

(2)

Gathering, treating, and field processing (as in the case of processing gas to extract liquid hydrocarbons); and

(D)

The first point at which oil, gas, or gas liquids, natural or synthetic, are delivered to a main pipeline, a common carrier, a refinery, or a marine terminal; and

(ii)

Oil and gas producing activities do not include:

(A)

Transporting, refining, or marketing oil and gas;

(B)

(C)

Activities relating to the production of natural resources other than oil, gas, or natural resources from which synthetic oil and gas can be extracted; or

(D)

Production of geothermal steam.

(17) Possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves.

(i)

Definitions - Page 3 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(ii)

(iii)

Possible reserves also include incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than the recovery quantities assumed for probable reserves.

(iv)

(v)

(vi)

(i)

(ii)

(iii)

Probable reserves estimates also include potential incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than assumed for proved reserves.

(iv)

See also guidelines in paragraphs (a)(17)(iv) and (a)(17)(vi) of this section.

(20)	Production costs .

(i)

(A)

Costs of labor to operate the wells and related equipment and facilities.

(B)

Repairs and maintenance.

(C)

Materials, supplies, and fuel consumed and supplies utilized in operating the wells and related equipment and facilities.

Definitions - Page 4 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(D)

Property taxes and insurance applicable to proved properties and wells and related equipment and facilities.

(E)

Severance taxes.

(ii)

(21) Proved area . The part of a property to which proved reserves have been specifically attributed.

(22) Proved oil and gas reserves . Proved oil and gas reserves are those quantities of oil and gas, 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.

(i)

The area of the reservoir considered as proved includes:

(A)

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

(B)

(ii)

(iii)

(iv)

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

(A)

(B)

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

(v)

(23) Proved properties . Properties with proved reserves.

(24) Reasonable certainty . If deterministic methods are used, reasonable certainty means a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90%

Definitions - Page 5 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(25) Reliable technology . Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.

(26) Reserves . Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project.

Excerpted from the FASB Accounting Standards Codification Topic 932, Extractive Activities—Oil and Gas:

932-235-50-30 A standardized measure of discounted future net cash flows relating to an entity’s interests in both of the following shall be disclosed as of the end of the year:

Proved oil and gas reserves (see paragraphs 932-235-50-3 through 50-11B)

The standardized measure of discounted future net cash flows relating to those two types of interests in reserves may be combined for reporting purposes.

Future net cash flows. These amounts are the result of subtracting future development and production costs and future income tax expenses from future cash inflows.

Discount. This amount shall be derived from using a discount rate of 10 percent a year to reflect the timing of the future net cash flows relating to proved oil and gas reserves.

Standardized measure of discounted future net cash flows. This amount is the future net cash flows less the computed discount.

(27) Reservoir . A porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

Definitions - Page 6 of 7

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DEFINITIONS OF OIL AND GAS RESERVES

Adapted from U.S. Securities and Exchange Commission Regulation S-X Section 210.4-10(a)

(i)

(ii)

From the SEC’s Compliance and Disclosure Interpretations (October 26, 2009):

•

The company’s historical record at completing development of comparable long-term projects;

•

The amount of time in which the company has maintained the leases, or booked the reserves, without significant development activities;

•

(iii)

(32) Unproved properties. Properties with no proved reserves.

Definitions - Page 7 of 7