Permian Resources Corp (Form: 8-K, Received: 09/08/2022 17:26:41)

Section 16.14

Right of Offset

Section 16.15

Effectiveness

Section 16.16

Entire Agreement

Section 16.17

Section 16.18

Descriptive Headings; Interpretation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 1, 2022

Permian Resources Corporation

(Exact name of registrant as specified in its charter)

Delaware

001-37697

47-5381253

(State or other jurisdiction of

incorporation or organization)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

300 N. Marienfeld St., Ste 1000

Midland, Texas

79701

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (432) 695-4222

Centennial Resource Development, Inc.

1001 Seventeenth Street, Suite 1800

Denver, Colorado 80202

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class

Trading

symbol

Name of each exchange

on which registered

Class A Common Stock, par value $0.0001 per share

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

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

Introductory Note

On September 1, 2022 (the “Closing Date”), Permian Resources Corporation, a Delaware corporation (formerly known as Centennial Resource Development, Inc.) (the “Company”), consummated the previously announced merger contemplated by the Business Combination Agreement, dated as of May 19, 2022 (the “Business Combination Agreement”), by and among the Company, Centennial Resource Production, LLC, a Delaware limited liability company (“OpCo”), Colgate Energy Partners III, LLC, a Delaware limited liability company (“Colgate”), and, solely for purposes of the specified provisions therein, Colgate Energy Partners III MidCo, LLC, a Delaware limited liability company (the “Colgate Unitholder”), pursuant to which OpCo merged with and into Colgate (the “Merger”), with OpCo continuing as the surviving entity (the “Surviving Company”) in the Merger as a subsidiary of the Company.

Pursuant to the terms of the Business Combination Agreement, at the effective time of the Merger (the “Effective Time”), (a) all membership interests of OpCo, issued and outstanding immediately prior to the Effective Time, were converted into a number of validly issued, fully paid and nonassessable (except as limited by the Delaware Limited Liability Company Act) units in the Surviving Company (“Surviving Company Units”) equal to the number of shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”), that were outstanding immediately prior to the Effective Time after giving effect to the transactions contemplated by the Business Combination Agreement, including the Merger (the “Transactions”), and the Company remained as the manager of the Surviving Company, and (b) all of the Colgate Unitholder’s sole membership interest in Colgate was exchanged for 269,300,000 shares of our Class C common stock, par value $0.0001 per share (“Class C Common Stock” and, together with the Class A Common Stock, “Common Stock”), 269,300,000 additional Surviving Company Units and $525,000,000 of cash. Immediately following the Merger, OpCo changed its name to Permian Resources Operating, LLC.

The Company’s stockholders immediately prior to the closing of the Transactions (the “Closing”) continue to hold their shares of Class A Common Stock. As a result of the Transactions, immediately following the Closing, (a) our current stockholders own 100% of our outstanding Class A Common Stock and approximately 52% of our total outstanding Class A Common Stock and Class C Common Stock taken together, (b) the Company and its wholly owned subsidiary, CRP Holdco Corp., collectively own approximately 52% of the Surviving Company, and (c) designees of the Colgate Unitholder own approximately 48% of the Surviving Company, 100% of our outstanding Class C Common Stock and approximately 48% of our total outstanding Class A Common Stock and Class C Common Stock taken together. Following the Transactions, there were 288,003,831 shares of Class A Common Stock outstanding and 269,300,000 shares of Class C Common Stock outstanding. As discussed below, the Company’s stockholders approved the adoption of the A&R Charter (as defined below) to, among other things, increase the authorized shares of (a) Class A Common Stock for issuance from 600,000,000 to 1,000,000,000 and (b) Class C Common Stock for issuance from 20,000,000 to 500,000,000.

In connection with the filing of the A&R Charter, the Company changed its name from “Centennial Resource Development, Inc.” to “Permian Resources Corporation” (the “Name Change”). Unless the context otherwise requires, “Centennial” refers to the registrant prior to the Closing and “we,” “us,” “our,” and the “Company” refer to the registrant and its subsidiaries following the Closing.

The Class A Common Stock began trading under the new symbol “PR” on the NASDAQ Capital Market LLC (“NASDAQ”) at the start of trading on September 2, 2022. The Company expects the listing of its Class A Common Stock to be transferred to the New York Stock Exchange (“NYSE”) on September 12, 2022 (the “Listing Transfer”), with the Class A Common Stock retaining the same ticker symbol “PR.” The Class A Common Stock will be delisted from NASDAQ in connection with the Listing Transfer. Our Class C Common Stock and the Surviving Company Units will not be listed on either NASDAQ or the NYSE or any other national securities exchange.

Item 1.01.

Entry into a Material Definitive Agreement.

Registration Rights Agreement

On the Closing Date, the Company entered into the Registration Rights Agreement (the “Registration Rights Agreement”), by and among the Company and each of the parties listed on the signature pages thereto (each such party, a “Holder” and collectively, the “Holders”).

The Registration Rights Agreement requires the Company to (a) register for resale (i) shares of Class A Common Stock issuable upon the redemption or exchange of the Surviving Company Units and corresponding shares of Class C Common Stock in accordance with the A&R LLC Agreement (as defined below), (ii) any outstanding shares of Class A Common Stock or any other equity security (including the shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by a Holder as of the Effective Time, and (iii) any other equity security of the Company issued or issuable with respect to any such share of Class A Common Stock by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization (collectively, the “Registrable Securities”), and (b) within five business days following the Closing Date, file with the U.S. Securities and Exchange Commission (“SEC”) a registration statement registering the resale of all Registrable Securities permitted to be registered for resale from time to time.

The Holders will also receive certain “piggyback” registration rights to participate in underwritten offerings of the Company, subject to customary exceptions, and rights to demand certain underwritten offerings.

Pursuant to the Registration Rights Agreement, the Holders have, subject to limited exceptions, agreed to a lock-up on their respective shares of Common Stock, Surviving Company Units (including the shares of Class A Common Stock issuable upon exchange of the Surviving Company Units in accordance with the A&R LLC Agreement) and any securities convertible into, exercisable for, exchangeable for or that represent the right to receive shares of Common Stock (collectively, the “Lock-Up Securities”), pursuant to which such parties will not transfer such Lock-Up Securities until March 1, 2023, subject to certain customary exceptions.

The foregoing description of the Registration Rights Agreement is a summary only and is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Sixth Amended and Restated Limited Liability Company Agreement of the Surviving Company

In connection with the Transactions, at the Effective Time, the Fifth Amended and Restated Limited Liability Company Agreement of OpCo, dated as of October 11, 2016 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, together with all schedules, exhibits and annexes thereto) was amended and restated in its entirety to, among other things, recapitalize the authorized equity securities of the Surviving Company (including the reclassification of all membership interests of OpCo into Surviving Company Units, with the rights, preferences and obligations set forth therein), permit the issuance and ownership of the Surviving Company Units as contemplated by the Transactions, with the rights, preferences, and obligations set forth therein and admit the Colgate Unitholder as a member of the Surviving Company (as amended and restated, the “A&R LLC Agreement”). Pursuant to the A&R LLC Agreement, each member of OpCo (other than the Company and CRP Holdco Corp.) has the right to cause OpCo to redeem all or a portion of its Surviving Company Units in exchange for, at the Surviving Company’s option, (i) an equal number of shares of Class A Common Stock or (ii) a cash amount, to be determined based on the volume weighted average price of a share of Class A Common Stock on NASDAQ or such stock exchange that the Company’s Class A Common Stock is then listed for the five trading days ending on, and including, the date on which such redeeming member delivers notice to OpCo of such member’s intention to redeem all or a portion of its Surviving Company Units, equal to the market value of an equal number of shares of Class A Common Stock.

The foregoing description of the A&R LLC Agreement is a summary only and is qualified in its entirety by reference to the A&R LLC Agreement, a copy of which is attached as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.

Supplemental Indentures

In connection with the Transactions, on the Closing Date, the Company, OpCo, Colgate and certain subsidiaries of OpCo and Colgate entered into (i) a supplemental indenture with Computershare Trust Company, N.A., as trustee (the “Colgate Trustee”), pursuant to which OpCo has agreed to assume all of the obligations of Colgate, and the Company and each of OpCo’s subsidiaries have agreed to guarantee such obligations, under that certain indenture, dated as of January 27, 2021 relating to Colgate’s 7.75% Senior Notes due 2026 in an aggregate principal amount of approximately $300 million and (ii) a supplemental indenture with the Colgate Trustee pursuant to which OpCo has agreed to assume all of the obligations of Colgate, and the Company and each of OpCo’s subsidiaries have agreed to guarantee such obligations, under that certain indenture, dated as of June 30, 2021 relating to Colgate’s 5.875% Senior Notes due 2029 in an aggregate principal amount of approximately $700 million.

Additionally, in connection with the Transactions, following the Effective Time, the Company, OpCo and each of OpCo’s subsidiaries entered into (i) a second supplemental indenture to that certain Indenture, dated March 19, 2021 by and between OpCo and UMB Bank, N.A., as trustee (the “Trustee”), as supplemented by that certain First Supplemental Indenture, dated March 19, 2021, by and among OpCo, the guarantors party thereto and the Trustee (as so supplemented, the “Exchangeable Notes Indenture”), pursuant to which the subsidiaries of OpCo acquired in connection with the Transactions (collectively, the “New Subsidiary Guarantors”) have each agreed to guarantee the obligations under the Exchangeable Notes Indenture; (ii) a second supplemental indenture to that certain Indenture, dated November 30, 2017, by and among OpCo, the guarantors party thereto and the Trustee, as supplemented by that certain First Supplemental Indenture, dated May 22, 2020, by and between the Company and the Trustee (as so supplemented, the “5.375% Notes Indenture”), pursuant to which the New Subsidiary Guarantors have agreed to guarantee the obligations under the 5.375% Notes Indenture; and (iii) a second supplemental indenture to that certain Indenture, dated March 15, 2019, by and among OpCo, the guarantors party thereto and the Trustee, as supplemented by that certain First Supplemental Indenture, dated May 22, 2020, by and between the Company and the Trustee (as so supplemented, the “6.875% Notes Indenture”), pursuant to which the New Subsidiary Guarantors have agreed to guarantee the obligations under the 6.875% Notes Indenture.

As a result of the supplemental indentures entered into in connection with the Transactions and as described in this section, on the Closing Date, the senior notes described above became pari passu senior unsecured debt of OpCo, which is guaranteed on a senior unsecured basis by the Company and each of OpCo’s subsidiaries.

The foregoing description of the supplemental indentures entered into by the Company, OpCo and certain of the Company’s subsidiaries does not purport to be complete and is qualified in its entirety by reference to the supplemental indentures, which are attached hereto as Exhibits 4.1, 4.2, 4.3, 4.4 and 4.5 and are incorporated herein by reference.

First Amendment to the Third Amended and Restated Credit Agreement

As previously disclosed, on July 15, 2022, the Company, OpCo and certain of the Company’s subsidiaries entered into the Limited Consent and Waiver and First Amendment to the Third Amended and Restated Credit Agreement (the “First Amendment”), which amended that certain Third Amended and Restated Credit Agreement, dated as of February 18, 2022, by and among OpCo, the Company, each of the lenders and guarantors from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”). On September 1, 2022, upon the closing of the Transactions and the fulfilment of certain other conditions specified in the First Amendment, the First Amendment became effective (the “First Amendment Effective Time”). At the First Amendment Effective Time, the Company was released from its guarantee of the Credit Agreement and certain of the Company’s subsidiaries agreed to guarantee the obligations under the Credit Agreement.

In addition, at the First Amendment Effective Time, the Credit Agreement’s (i) aggregate elected commitments increased from $750,000,000 to $1,500,000,000, (ii) borrowing base increased from $1,150,000,000 to $2,500,000,000 and (iii) aggregate maximum revolving credit amount increased from $1,500,000,000 to $3,000,000,000.

The foregoing description of the First Amendment entered into by the Company, OpCo and certain of the Company’s subsidiaries does not purport to be complete and is qualified in its entirety by reference to the Limited Consent and Waiver and First Amendment to the Third Amended and Restated Credit Agreement, which is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 21, 2022, and is incorporated herein by reference.

Item 2.01.

Completion of Acquisition or Disposition of Assets.

The disclosure set forth in the Introductory Note is incorporated into this Item 2.01 by reference.

On the Closing Date, the Company completed the Transactions. At the Closing, pursuant to the Business Combination Agreement, the limited liability company interests in Colgate converted into the right to receive an aggregate of (a) 269,300,000 shares of Class C Common Stock, (b) 269,300,000 Surviving Company Units and (c) $525,000,000 of cash.

The foregoing description of the Business Combination Agreement and the Transactions is a summary only and is subject to, and qualified in its entirety by reference to, the full text of the Business Combination Agreement, a copy of which was filed with the SEC on May 19, 2022 as Exhibit 2.1 to the Company’s Current Report on Form 8-K/A.

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.

The disclosure set forth in Item 1.01 under the headings “Supplemental Indentures” and “First Amendment to the Third Amended and Restated Credit Agreement” is incorporated by reference into this Item 2.03.

Item 3.01

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

In connection with the consummation of the Transactions, the Company provided written notice to NASDAQ of the consummation of the Merger and its intention to voluntarily withdraw the listing of its Class A Common Stock from NASDAQ and list its Class A Common Stock on the NYSE.

The Company also changed its name to Permian Resources Corporation, and its Class A Common Stock began trading under the ticker symbol “PR,” on September 2, 2022 on NASDAQ. The new CUSIP number for the Class A Common Stock following the Transactions (including the Name Change) is 71424F 105. The Company expects to transfer the listing of its Class A Common Stock to NYSE, on or about September 12, 2022, with the Class A Common Stock retaining the same “PR” ticker symbol.

Item 3.02.

Unregistered Sales of Equity Securities.

The disclosure set forth in the Introductory Note, Item 1.01, and Item 2.01, insofar as it relates to the issuance of Surviving Company Units and shares of Class C Common Stock and the terms by which such Surviving Company Units and shares of Class C Common Stock may be redeemed or exchanged for shares of Class A Common Stock, is incorporated into this Item 3.02 by reference.

The issuance of Surviving Company Units and shares of Class C Common Stock were made in reliance on the exemption from registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof.

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Directors

Effective as of the Closing Date, in connection with the Transactions, Steven J. Shapiro, Pierre F. Lapeyre, Jr., David M. Leuschen and Vidisha Prasad each resigned from the Board of Directors of Centennial (the “Centennial Board”). The resignations of Messrs. Shapiro, Lapeyre, Jr. and Leuschen and Ms. Prasad were not a result of any disagreement with the Company. Effective as of the Closing Date, the Centennial Board appointed William M. Hickey III, James H. Walter, William J. Quinn, Aron Marquez, Karan E. Eves and Steven D. Gray to the Board of Directors of the combined company (the “Board”) in addition to the current directors Maire A. Baldwin, Robert M. Tichio, Matthew G. Hyde, Jeffrey H. Tepper and Sean R. Smith. Biographical information for these individuals was set forth in the Company’s Current Report on Form 8-K filed with the SEC on August 22, 2022, which is incorporated herein by reference.

Independence of Directors

The Board has determined that each of Ms. Baldwin, Mr. Marquez, Mr. Hyde, Mr. Tepper, Ms. Eves and Mr. Gray are independent within the meaning of Nasdaq Rule 5605(a)(2), the NYSE listing rules following the Listing Transfer and the rules and regulations of the SEC (collectively, the “Independent Directors”).

Committees of the Board

As of and immediately following the Closing, the Board appointed the following directors to serve on the following committees:

•

Audit Committee: Jeffrey H. Tepper (Chair), Maire A. Baldwin, Karan E. Eves and Aron Marquez;

•

Compensation Committee: Maire A. Baldwin (Chair), Steven D. Gray, Matthew G. Hyde and Jeffrey H. Tepper; and

•

Nominating, Environmental, Social and Governance Committee: Matthew G. Hyde (Chair), Karan E. Eves, Steven D. Gray and Aron Marquez.

Mr. Tepper was appointed chairperson of the audit committee, Ms. Baldwin was appointed chairperson of the compensation committee and Mr. Hyde was appointed chairperson of the nominating, environmental, social and governance committee.

Compensation of Independent Directors

Messrs. Marquez, Hyde and Gray and Ms. Eves will be eligible to receive compensation in the same manner as the Company’s other current Independent Directors pursuant to the Company’s Non-Employee Director Compensation Program, which, effective as of the Closing Date, was amended and restated (as amended and restated, the “Fifth Amended and Restated Non-Employee Director Compensation Program”) to permit non-employee directors to elect to receive up to 100% of their annual retainers in the form of restricted stock rather than cash.

The foregoing description of the Fifth Amended and Restated Non-Employee Director Compensation Program is a summary only and is qualified in its entirety by reference to the Fifth Amended and Restated Non-Employee Director Compensation Program, a copy of which is attached as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference.

Executive Officers

On the Closing Date, in connection with the Transactions, Sean R. Smith resigned as the Chief Executive Officer of the Company and Davis O. O’Connor resigned as the Executive Vice President and General Counsel of the Company.

In connection with the Transactions, effective as of the Closing Date, William M. Hickey III and James H. Walter were appointed by the Board to serve as Co-Chief Executive Officers of the Company. In addition, Sean R. Smith was appointed by the Board as the Executive Chairman of the Board of the Company.

Each of Mr. Hickey and Mr. Walter will be eligible (i) to receive compensation solely in performance stock units with no cash salary or bonus and (ii) for severance benefits upon a qualifying termination of employment under and subject to the terms of the Company’s Second Amended and Restated Severance Plan. In connection with their appointments, Messrs. Hickey and Walter were each granted an award of 1,787,843 performance stock units (the “Initial PSUs”) which are eligible to vest based on both the Company’s total shareholder return (“TSR”) relative to a designated peer group of companies and the Company’s absolute annualized TSR over specified performance periods. The Initial PSUs will be divided into three tranches, and the performance period for each tranche will commence on September 1, 2022 and will end on December 31, 2025, 2026 and 2027 for the first, second and third tranches, respectively. The Initial PSUs represent a three-year grant for Messrs. Hickey and Walter, and the Board and its committees do not intend to make any additional equity grants to either of the Co-Chief Executive Officers until the end of such three-year period.

Biographical information for each of the foregoing individuals is set forth in the Proxy Statement in the section entitled “Management After the Transactions,” which is incorporated herein by reference.

Item 5.03

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

At the Special Meeting of Centennial held on August 29, 2022 (the “Special Meeting”), as described below, the Centennial stockholders approved amending and restating the Third Amended and Restated Certificate of Incorporation of Centennial (as amended and restated, the “A&R Charter”) to, among other things, (i) increase the authorized number of shares of (A) Class A Common Stock for issuance from 600,000,000 to 1,000,000,000 and (B) Class C Common Stock for issuance from 20,000,000 to 500,000,000, (ii) allow stockholders of the Company to act by written consent, subject to certain limitations, and (iii) designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for substantially all actions and proceedings that may be initiated by stockholders (the “A&R Charter Changes”).

On the Closing Date, the Company filed the A&R Charter with the Secretary of State of the State of Delaware to effect the (i) A&R Charter Changes and (ii) Name Change.

The material terms of the A&R Charter Changes and the general effect upon the rights of holders of the Company’s capital stock are described in Item 5.07 of the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2022 under “The A&R Charter Proposals” which information is incorporated herein by reference.

The foregoing description of the A&R Charter is not complete and is subject to and qualified in its entirety by reference to the Company’s Fourth Amended and Restated Certificate of Incorporation, a copy of which is attached as Exhibit 3.1 hereto and is incorporated herein by reference.

Item 7.01.

Regulation FD Disclosure

On September 1, 2022, the Company issued a press release announcing the Closing of the Transactions, a copy of which is furnished as Exhibit 99.1 and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information contained in this Current Report on Form 8-K under Item 7.01 and set forth in the attached Exhibit 99.1 is deemed to be “furnished” solely pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference into any filing under the Securities Act, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01.

Financial Statements and Exhibits.

(a) Financial Statements.

•

Audited consolidated financial statements of Colgate Energy Partners III, LLC, as of and for the years ended December 31, 2021 and 2020, and the related notes to the consolidated financial statements, attached as Exhibit 99.2 hereto and are incorporated herein by reference;

•

Unaudited consolidated financial statements of Colgate Energy Partners III, LLC, as of June 30, 2022 and December 31, 2021 and for the three and six months ended June 30, 2022 and 2021, and the related notes to the consolidated financial statements, attached as Exhibit 99.3 hereto and are incorporated herein by reference;

•

Consolidated financial statements of Luxe Energy LLC and Subsidiaries at and for the year ended December 31, 2020, and the related notes to the financial statements, attached as Exhibit 99.4 hereto and are incorporated herein by reference; and

•

The Statement of Revenues and Direct Operating Expenses of Properties Acquired by Colgate Energy Partners III, LLC, for the year ended December 31, 2020 and the six months ended June 30, 2021, and the related notes to the financial statements, attached as Exhibit 99.5 hereto and are incorporated herein by reference.

(b) Pro Forma Financial Information

•

Unaudited pro forma combined financial statements of the Company as of June 30, 2022 and for the six months ended June 30, 2022 and the year ended December 31, 2021, and the related notes to the pro forma combined financial statements, attached as Exhibit 99.6 hereto and are incorporated herein by reference.

(d) Exhibits.


Exhibit No.		Description

3.1		Fourth Amended and Restated Certificate of Incorporation.

4.1		First Supplemental Indenture, dated as of September 1, 2022, by and among Centennial Resource Production, LLC (now known as Permian Resources Operating, LLC), Colgate Energy Partners III, LLC, the guarantors party thereto and Computershare Trust Company, N.A., as Trustee (7.75% Senior Notes due 2026).

4.2		First Supplemental Indenture, dated as of September 1, 2022, by and among Centennial Resource Production, LLC (now known as Permian Resources Operating, LLC), Colgate Energy Partners III, LLC, the guarantors party thereto and Computershare Trust Company, N.A., as Trustee (5.875% Senior Notes due 2029).

4.3		Second Supplemental Indenture, dated as of September 1, 2022, by and among Permian Resources Operating, LLC (formerly known as Centennial Resource Production, LLC), the guarantors party thereto and UMB Bank, N.A., as Trustee (5.375% Senior Notes due 2026).

4.4		Second Supplemental Indenture, dated as of September 1, 2022, by and among Permian Resources Operating, LLC (formerly known as Centennial Resource Production, LLC), the guarantors party thereto and UMB Bank, N.A., as Trustee (6.875% Senior Notes due 2027).


Exhibit No.		Description

4.5		Second Supplemental Indenture, dated as of September 1, 2022, by and among Permian Resources Operating, LLC (formerly known as Centennial Resource Production, LLC), the guarantors party thereto and UMB Bank, N.A., as Trustee (3.25% Exchangeable Senior Notes due 2028).

10.1		Registration Rights Agreement, dated as of September 1, 2022, by and among Permian Resources Corporation (formerly known as Centennial Resource Development, Inc.), Colgate Energy Partners III MidCo, LLC and each of the parties designated by Colgate Energy Partners III MidCo, LLC and listed on the signature pages thereto.

10.2		Sixth Amended and Restated Limited Liability Company Agreement of Permian Resources Operating, LLC (formerly known as Centennial Resource Production, LLC), dated as of September 1, 2022.

10.3		Fifth Amended and Restated Non-Employee Director Compensation Program of Permian Resources Corporation (formerly known as Centennial Resource Development, Inc.), dated as of September 1, 2022.

23.1		Consent of KPMG, LLP with respect to the specified financial statements of Colgate Energy Partners III, LLC and its subsidiaries.

23.2		Consent of KPMG, LLP with respect to the specified financial statements of Properties Acquired by Colgate Energy Partners III, LLC.

23.3		Consent of Ernst & Young LLP with respect to the specified financial statements of Luxe Energy LLC and Subsidiaries.

99.1		Press Release of Permian Resources Corporation, dated September 1, 2022.

99.2		Historical audited financial statements of Colgate Energy Partners III, LLC as of and for the years ended December 31, 2021 and 2020.

99.3		Historical unaudited consolidated financial statements of Colgate Energy Partners III, LLC as of June 30, 2022 and December 31, 2021 and for the three and six months ended June 30, 2022 and 2021.

99.4		Historical audited financial statements of Luxe Energy LLC and Subsidiaries, at December 31, 2020, and for the year ended December 31, 2020.

99.5		Statement of revenues and direct operating expenses of Properties Acquired by Colgate Energy Partners III, LLC for the year ended December 31, 2020 and six months ended June 30, 2021.

99.6		Unaudited pro forma combined financial statements of the Company as of June 30, 2022 and for the six months ended June 30, 2022 and for the year ended December 31, 2021.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

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


	PERMIAN RESOURCES CORPORATION

Date: September 8, 2022

	By:	/s/ George S. Glyphis
		George S. Glyphis
		Executive Vice President and Chief Financial Officer

Exhibit 3.1

FOURTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

CENTENNIAL RESOURCE DEVELOPMENT, INC.

September 1, 2022

Centennial Resource Development, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS FOLLOWS:

1. The name of the Corporation is “Centennial Resource Development, Inc.”

2. The original Certificate of Incorporation of the Corporation (f/k/a Rockstream Corp.) was filed with the Secretary of State of the State of Delaware on November 4, 2015 (the “Original Certificate”). A Certificate of Amendment to the Original Certificate was filed with the Secretary of State of the State of Delaware on November 12, 2015 to change the name of the Corporation to Silver Run Acquisition Corporation (together with the Original Certificate, the “Amended Certificate”).

3. An Amended and Restated Certificate of Incorporation, which amended and restated the Amended Certificate in its entirety, was filed with the Secretary of State of the State of Delaware on February 23, 2016 (the “Amended and Restated Certificate”).

4. A Second Amended and Restated Certificate of Incorporation (the “Second Amended and Restated Certificate”), which amended and restated the Amended and Restated Certificate in its entirety and reflected a name change of the Corporation to Centennial Resource Development, Inc., was filed with the Secretary of State of the State of Delaware on October 11, 2016.

5. A Third Amended and Restated Certificate of Incorporation (the “Third Amended and Restated Certificate”), which amended and restated the Second Amended and Restated Certificate in its entirety, was filed with the Secretary of State of the State of Delaware on May 1, 2019.

6. This Fourth Amended and Restated Certificate of Incorporation (the “Fourth Amended and Restated Certificate”), which amends and restates the Third Amended and Restated Certificate in its entirety, was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, as amended from time to time (the “DGCL”), and by the Corporation’s stockholders in accordance with Section 212 of the DGCL.

7. This Fourth Amended and Restated Certificate shall become effective upon filing with the Secretary of State of the State of Delaware.

8. The text of the Third Amended and Restated Certificate is hereby amended and restated in its entirety to read as follows:

ARTICLE I.

NAME

The name of the corporation is Permian Resources Corporation.

ARTICLE II.

PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

ARTICLE III.

REGISTERED AGENT

The address of the Corporation’s registered office in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, State of Delaware, 19808, and the name of the Corporation’s registered agent at such address is Corporation Service Company.

ARTICLE IV.

CAPITALIZATION

Section 4.1 Authorized Capital Stock. The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which the Corporation is authorized to issue is 1,501,000,000 shares, consisting of (a) 1,500,000,000 shares of common stock (the “Common Stock”), consisting of (i) 1,000,000,000 shares of Class A Common Stock (the “Class A Common Stock”), and (ii) 500,000,000 shares of Class C Common Stock (the “Class C Common Stock”), and (b) 1,000,000 shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”).

Section 4.2 Preferred Stock. The Board of Directors of the Corporation (the “Board”) is hereby expressly authorized to provide out of the unissued shares of the Preferred Stock for one or more series of Preferred Stock and to establish from time to time the number of shares to be included in each such series and to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions thereof, as shall be stated in the resolution or resolutions adopted by the Board providing for the issuance of such series and included in a certificate of designation (a “Preferred Stock Designation”) filed pursuant to the DGCL, and the Board is hereby expressly vested with the authority to the full extent provided by law, now or hereafter, to adopt any such resolution or resolutions.

Section 4.3 Common Stock.

(a) Voting.

(i) Except as otherwise required by law or this Fourth Amended and Restated Certificate (including any Preferred Stock Designation), the holders of the Common Stock shall exclusively possess all voting power with respect to the Corporation.

(ii) Except as otherwise required by law or this Fourth Amended and Restated Certificate (including any Preferred Stock Designation), the holders of shares of Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of the Common Stock are entitled to vote.

(iii) Except as otherwise required by law or this Fourth Amended and Restated Certificate (including any Preferred Stock Designation), at any annual or special meeting of the stockholders of the Corporation, holders of the Class A Common Stock and holders of the Class C Common Stock, voting together as a single class, shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Fourth Amended and Restated Certificate (including any Preferred Stock Designation), holders of shares of any series of Common Stock shall not be entitled to vote on any amendment to this Fourth Amended and Restated Certificate (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock or other series of Common Stock if the holders of such affected series of Preferred Stock or Common Stock, as applicable, are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Fourth Amended and Restated Certificate (including any Preferred Stock Designation) or the DGCL.

(b) Class C Common Stock.

(i) Permitted Owners. Shares of Class C Common Stock may be issued only to, and registered in the name of, the Permitted Class C Owners (as defined below). As used in this Fourth Amended and Restated Certificate, (i) “Permitted Class C Owners” means the “Members” as defined in the LLC Agreement (as defined below) and (ii) “Common Unit” means a membership interest in Permian Resources Operating, LLC (formerly known as Centennial Resource Production, LLC), a Delaware limited liability company or any successor entities thereto (the “LLC”), authorized and issued under its Sixth Amended and Restated Limited Liability Company Agreement, dated as of September 1, 2022, as such agreement may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time (the “LLC Agreement”), and constituting a “Common Unit” as defined in the LLC Agreement as in effect as of the effective time of this Fourth Amended and Restated Certificate.

(ii) Voting. Except as otherwise required by law or this Fourth Amended and Restated Certificate (including any Preferred Stock Designation), for so long as any shares of Class C Common Stock shall remain outstanding, the Corporation shall not, without the prior vote or written consent of the holders of a majority of the shares of Class C Common Stock then outstanding, voting separately as a single class, amend, alter or repeal any provision of this Fourth Amended and Restated Certificate, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers, preferences or relative, participating, optional or other special rights of the Class C Common Stock. Any action required or permitted to be taken at any meeting of the holders of Class C Common Stock may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken,

shall be signed by the holders of the outstanding Class C Common 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 of Class C Common Stock were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand, or by certified or registered mail, return receipt requested. Prompt written notice of the taking of corporate action without a meeting by less than unanimous written consent of the holders of Class C Common Stock shall, to the extent required by law, be given to those holders of Class C Common Stock who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders of Class C Common Stock to take the action were delivered to the Corporation.

(iii) Dividends. Notwithstanding anything to the contrary in this Fourth Amended and Restated Certificate, other than as set forth in Section 4.3(d), dividends shall not be declared or paid on the Class C Common Stock.

(iv) Transfer of Class C Common Stock

(1) A Permitted Class C Owner may surrender shares of Class C Common Stock to the Corporation for no consideration at any time. Following the surrender of any shares of Class C Common Stock to the Corporation, the Corporation will take all actions necessary to retire such shares and such shares shall not be re-issued by the Corporation.

(2) A Permitted Class C Owner may transfer shares of Class C Common Stock to any transferee (other than the Corporation) only if, and only to the extent permitted by the LLC Agreement, such holder also simultaneously transfers an equal number of such holder’s Common Units to such transferee in compliance with the LLC Agreement. The transfer restrictions described in this Section 4.3(b)(iv)(2) are referred to as the “Restrictions.”

(3) Any purported transfer of shares of Class C Common Stock in violation of the Restrictions shall be null and void. If, notwithstanding the Restrictions, a person shall, voluntarily or involuntarily, purportedly become or attempt to become, the purported owner (“Purported Owner”) of shares of Class C Common Stock in violation of the Restrictions, then the Purported Owner shall not obtain any rights in and to such shares of Class C Common Stock (the “Restricted Shares”), and the purported transfer of the Restricted Shares to the Purported Owner shall not be recognized by the Corporation’s transfer agent (the “Transfer Agent”).

(4) Upon a determination by the Board that a person has attempted or may attempt to transfer or to acquire Restricted Shares in violation of the Restrictions, the Board may take such action as it deems advisable to refuse to give effect to such transfer or acquisition on the books and records of the Corporation, including without limitation to cause the Transfer Agent to record the Purported Owner’s transferor as the record owner of the Restricted Shares, and to institute proceedings to enjoin or rescind any such transfer or acquisition.

(5) The Board may, to the extent permitted by law, from time to time establish, modify, amend or rescind, by bylaw or otherwise, regulations and procedures that are consistent with the provisions of this Section 4.3(b)(iv) for determining whether any transfer or acquisition of shares of Class C Common Stock would violate the Restrictions and for the orderly application, administration and implementation of the provisions of this Section 4.3(b)(iv). Any such procedures and regulations shall be kept on file with the Secretary of the Corporation and with its Transfer Agent and shall be made available for inspection by any prospective transferee and, upon written request, shall be mailed to holders of shares of Class C Common Stock.

(6) The Board shall have all powers necessary to implement the Restrictions, including without limitation the power to prohibit the transfer of any shares of Class C Common Stock in violation thereof.

(v) Issuance of Class A Common Stock Upon Redemption; Cancellation of Class C Common Stock.

(1) To the extent that any Permitted Class C Owner exercises its rights pursuant to the LLC Agreement to have its Common Units redeemed by the LLC in accordance with the LLC Agreement, then simultaneous with the payment of the consideration due under the LLC Agreement to such Permitted Class C Owner, the Corporation shall cancel for no consideration a number of shares of Class C Common Stock registered in the name of the redeeming or exchanging Permitted Class C Owner equal to the number of Common Units held by such Permitted Class C Owner that are redeemed or exchanged in such redemption or exchange transaction. The Corporation will at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of issuance upon redemption of the Common Units for Class A Common Stock pursuant to the LLC Agreement, such number of shares of Class A Common Stock that shall be issuable upon any such redemption pursuant to the LLC Agreement; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such redemption of Common Units pursuant to the LLC Agreement by delivering to the holder of Common Units upon such redemption cash in lieu of shares of Class A Common Stock in the amount permitted by and provided in the LLC Agreement. All shares of Class A Common Stock that shall be issued upon any such redemption will, upon issuance in accordance with the LLC Agreement, be validly issued, fully paid and nonassessable.

(2) Notwithstanding the Restrictions, (A) in the event that an outstanding share of Class C Common Stock shall cease to be held by a registered holder of Common Units, such share of Class C Common Stock shall automatically and without further action on the part of the Corporation or any Permitted Class C Owner be cancelled for no consideration, and the Corporation will take all actions necessary to retire such share and such share shall not be re-issued by the Corporation, (B) in the event that one or more

of the Common Units held by a Permitted Class C Owner ceases to be held by such holder (other than as a result of a transfer of one or more Common Units together with an equal number of shares of Class C Common Stock as permitted by the LLC Agreement), a corresponding number of shares of Class C Common Stock registered in the name of such holder shall automatically and without further action on the part of the Corporation or such holder be cancelled for no consideration, and the Corporation will take all actions necessary to retire such shares and such shares shall not be re-issued by the Corporation and (C) in the event that no Permitted Class C Owner owns any Common Units that are redeemable pursuant to the LLC Agreement, then all shares of Class C Common Stock will be cancelled for no consideration, and the Corporation will take all actions necessary to retire such shares and such shares shall not be re-issued by the Corporation.

(vi) Restrictive Legend. All certificates or book entries representing shares of Class C Common Stock, as the case may be, shall bear a legend substantially in the following form (or in such other form as the Board may determine):

THE SECURITIES REPRESENTED BY THIS [CERTIFICATE][BOOK ENTRY] ARE SUBJECT TO THE RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER) SET FORTH IN THE FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PERMIAN RESOURCES CORPORATION (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION AND SHALL BE PROVIDED FREE OF CHARGE TO ANY STOCKHOLDER MAKING A REQUEST THEREFOR).

(vii) Amendment. At any time when there are no longer any shares of Class C Common Stock outstanding, this Fourth Amended and Restated Certificate automatically shall be deemed amended to delete this Section 4.3(b).

(viii) Liquidation, Dissolution or Winding Up of the Corporation. The holders of Class C Common Stock shall not be entitled to receive any assets of the Corporation in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

(c) Dividends. Subject to applicable law and the rights, if any, of the holders of any outstanding series of the Preferred Stock, the holders of shares of Common Stock (other than holders of shares of Class C Common Stock) shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions.

(d) Class A Common Stock and Class C Common Stock. In no event shall the shares of either Class A Common Stock or Class C Common Stock be split, divided, or combined (including by way of stock dividend) unless the outstanding shares of the other class shall be proportionately split, divided or combined.

(e) Liquidation, Dissolution or Winding Up of the Corporation. Subject to applicable law, and the rights, if any, of the holders of any outstanding series of the Preferred Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of Common Stock (other than holders of shares of Class C Common Stock) shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock (other than shares of Class C Common Stock) held by them.

Section 4.4 Rights and Options. The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to acquire from the Corporation any shares of its capital stock of any class or classes, with such rights, warrants and options to be evidenced by or in instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration, times for exercise and other terms and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any shares of capital stock issuable upon exercise thereof may not be less than the par value thereof.

ARTICLE V.

BOARD OF DIRECTORS

Section 5.1 Board Powers. The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the powers and authority expressly conferred upon the Board by statute, this Fourth Amended and Restated Certificate or the Second Amended and Restated Bylaws of the Corporation (“Bylaws”), the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Fourth Amended and Restated Certificate, and any Bylaws adopted by the stockholders; provided, however, that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted.

Section 5.2 Number, Election and Term.

(a) The number of directors of the Corporation, shall be fixed from time to time in the manner provided in the Bylaws.

(b) Subject to Section 5.5, the Board shall be divided into three classes, as nearly equal in number as possible and designated Class I, Class II and Class III. The Board is authorized to assign members of the Board already in office to Class I, Class II or Class III. The term of the initial Class I Directors shall expire at the first annual meeting of the stockholders of the Corporation following the effectiveness of this Fourth Amended and Restated Certificate; the term of the initial Class II Directors shall expire at the second annual meeting of the stockholders of the Corporation following the effectiveness of this Fourth Amended and Restated Certificate; and the term of the initial Class III Directors shall expire at the third annual meeting of the stockholders of the Corporation following the effectiveness of this Fourth Amended and Restated Certificate. At each succeeding annual meeting of the stockholders of the Corporation, beginning with the first annual meeting of the stockholders of the Corporation following the effectiveness of this Fourth Amended and Restated Certificate, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term or until the election and qualification of their respective successors in office, subject to their earlier death, resignation or removal. Subject to

Section 5.5, if the number of directors is changed, any increase or decrease shall be apportioned by the Board among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. The Board is hereby expressly authorized, by resolution or resolutions thereof, to assign members of the Board already in office to the aforesaid classes at the time this Fourth Amended and Restated Certificate (and therefore such classification) becomes effective in accordance with the DGCL.

(c) Subject to Section 5.5, a director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.

(d) Unless and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot.

(e) Except as otherwise required by law or this Fourth Amended and Restated Certificate (including any Preferred Stock Designation), at all duly called or convened meetings of stockholders, at which a quorum is present, a nominee for director shall be elected to the Board if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election (with any abstentions or broker non-votes not counted as a vote cast either for or against that nominee’s election); provided, however, that a plurality of the votes cast shall be sufficient to elect a director at any duly called or convened meeting of stockholders, at which a quorum is present, if the Secretary of the Corporation determines that the number of nominees exceeds the number of directors to be elected as of the record date for such meeting. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against a nominee.

Section 5.3 Newly Created Directorships and Vacancies. Subject to Section 5.5, newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely and exclusively by a majority vote of the remaining directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office for the remainder of the full term of the class of directors to which the new directorship was added or in which the vacancy occurred and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal. In the event of a vacancy on the Board, the remaining directors, except as otherwise provided by law, shall exercise the powers of the full Board until the vacancy is filled.

Section 5.4 Removal. Subject to Section 5.5, any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

Section 5.5 Preferred Stock - Directors. Notwithstanding any other provision of this Article V, and except as otherwise required by law, whenever the holders of one or more series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the terms of such series of the Preferred Stock as set forth in this Fourth Amended and Restated Certificate (including any Preferred Stock Designation) and such directors shall not be included in any of the classes created pursuant to this Article V unless expressly provided by such terms.

ARTICLE VI.

BYLAWS

In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power and is expressly authorized to adopt, amend, alter or repeal the Bylaws. The affirmative vote of a majority of the Board shall be required to adopt, amend, alter or repeal the Bylaws. The Bylaws also may be adopted, amended, altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by law or by this Fourth Amended and Restated Certificate (including any Preferred Stock Designation), the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the Bylaws; and provided further, however, that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted.

ARTICLE VII.

MEETINGS OF STOCKHOLDERS;

ACTION BY WRITTEN CONSENT

Section 7.1 Meetings. Subject to the rights, if any, of the holders of any outstanding series of the Preferred Stock, and to the requirements of applicable law, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, Chief Executive Officer of the Corporation, or the Board pursuant to a resolution adopted by a majority of the Board, and the ability of the stockholders to call a special meeting is hereby specifically denied. Except as provided in the foregoing sentence, special meetings of stockholders may not be called by another person or persons.

Section 7.2 Advance Notice. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws.

Section 7.3 Action by Written Consent. Except as may be otherwise provided for or fixed pursuant to this Fourth Amended and Restated Certificate (including any Preferred Stock Designation) relating to the rights of the holders of any outstanding series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected by a duly called annual or special meeting of such stockholders and may not be effected by written consent of the stockholders; provided, however, prior to the first date on which investment funds affiliated with Riverstone Energy Investments, Pearl Energy Investments and NGP Energy Capital and their respective successors and affiliates cease collectively to have beneficial ownership

(directly or indirectly) of more than 50% of the outstanding shares of Common Stock, any action required or permitted to be taken by the stockholders of the Corporation that is approved in advance by the Board may be effected without a meeting, without prior notice and without a vote of stockholders, if a consent or consents in writing, setting forth the action so taken, is or are signed by the holders of outstanding shares of Common 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.

ARTICLE VIII.

LIMITED LIABILITY; INDEMNIFICATION

Section 8.1 Limitation of Director Liability. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended unless they violated their duty of loyalty to the Corporation or its stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived improper personal benefit from their actions as directors. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.

Section 8.2 Indemnification and Advancement of Expenses.

(a) To the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this Section 8.2 or otherwise. The rights to indemnification and advancement of expenses conferred by this Section 8.2 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators.

Notwithstanding the foregoing provisions of this Section 8.2(a), except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.

(b) The rights to indemnification and advancement of expenses conferred on any indemnitee by this Section 8.2 shall not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Fourth Amended and Restated Certificate, the Bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.

(c) Any repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Fourth Amended and Restated Certificate inconsistent with this Section 8.2, shall, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.

(d) This Section 8.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than indemnitees.

ARTICLE IX.

CORPORATE OPPORTUNITY

The doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Corporation or any of its officers or directors, or any of their respective affiliates, in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have as of the date of this Fourth Amended and Restated Certificate or in the future. In addition to the foregoing, the doctrine of corporate opportunity shall not apply to any other corporate opportunity with respect to any of the directors or officers of the Corporation unless such corporate opportunity is offered to such person solely in his or her capacity as a director or officer of the Corporation and such opportunity is one the Corporation is legally and contractually permitted to undertake and would otherwise be reasonable for the Corporation to pursue.

ARTICLE X.

AMENDMENT OF THIS FOURTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Fourth Amended and Restated Certificate (including any Preferred Stock Designation), and other provisions authorized by the laws of the State of Delaware at the time in force that may be added or inserted, in the manner now or hereafter prescribed by

this Fourth Amended and Restated Certificate and the DGCL; and, except as set forth in Article VIII, all rights, preferences and privileges of whatever nature herein conferred upon stockholders, directors or any other persons by and pursuant to this Fourth Amended and Restated Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article X.

ARTICLE XI.

EXCLUSIVE JURISDICTION FOR CERTAIN ACTIONS

Unless the Corporation consents in writing to the selection of an alternative forum, (a) the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action, suit or proceeding brought on behalf of the Corporation, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the DGCL or the bylaws of the Corporation or this Fourth Amended and Restated Certificate (as either may be amended from time to time) or (iv) any action, suit or proceeding asserting a claim against the Corporation governed by the internal affairs doctrine; and (b) subject to the preceding provisions of this Article XI, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act of 1933, as amended, including all causes of action asserted against any defendant to such complaint. If any action the subject matter of which is within the scope of clause (a) of the immediately preceding sentence is filed in a court other than the courts in the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (x) the personal jurisdiction of the state and federal courts in the State of Delaware in connection with any action brought in any such court to enforce the provisions of clause (a) of the immediately preceding sentence and (y) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.

Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to this Article XI. Notwithstanding the foregoing, the provisions of this Article XI shall not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts of the United States have exclusive jurisdiction.

If any provision or provisions of this Article XI shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever, (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article XI (including, without limitation, each portion of any paragraph of this Article XI containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

IN WITNESS WHEREOF, the Corporation has caused this Fourth Amended and Restated Certificate to be duly executed and acknowledged in its name and on its behalf by an authorized officer as of the date first set forth above.


By:		/s/ Sean R. Smith
		Name: Sean R. Smith
		Title: Chief Executive Officer

[Signature Page to Fourth Amended and Restated Certificate of Incorporation]

Exhibit 4.1

FIRST SUPPLEMENTAL INDENTURE IN RESPECT OF ASSUMPTION OF NOTES AND

SUBSIDIARY GUARANTEES

CENTENNIAL RESOURCE PRODUCTION, LLC

COLGATE ENERGY PARTNERS III, LLC

THE GUARANTOR PARTIES HERETO

and

COMPUTERSHARE TRUST COMPANY, N.A.,

AS TRUSTEE,

DATED AS OF SEPTEMBER 1, 2022

This First Supplemental Indenture, dated as of September 1, 2022 (this “Supplemental Indenture”), is among (a) Centennial Resource Production, LLC, a Delaware limited liability company (the “Company” or the “New Issuer”), (b) Colgate Energy Partners III, LLC, a Delaware limited liability company (the “Original Issuer”), (c) each of the entities listed on the signature pages hereto as “Existing Guarantors” (collectively, the “Existing Guarantors”), (d) each of the entities listed on the signature pages hereto as “New Guarantors” (collectively, the “New Guarantors” and together with the Existing Guarantors, the “Guarantors”) and (e) Computershare Trust Company, N.A., as trustee (in such capacity, the “Trustee”).

W I T N E S S E T H

WHEREAS, the Original Issuer has heretofore executed and delivered to Wells Fargo Bank, National Association, as trustee (the “Former Trustee”), an indenture, dated as of January 27, 2021 (the “Indenture”), providing for the issuance of the Original Issuer’s 7.75% Senior Notes due 2026 (the “Notes”);

WHEREAS, pursuant to Section 7.09 of the Indenture, the Trustee acquired all or substantially all of the corporate trust business of the Former Trustee and became the successor Trustee under the Indenture;

WHEREAS, the New Issuer and the Original Issuer are party to that certain Business Combination Agreement, dated as of May 19, 2022 (the “Business Combination Agreement”), by and among the New Issuer, the Original Issuer, Centennial Resource Development, Inc., a Delaware corporation (“Parent”), and, solely for the limited purposes set for therein, Colgate Energy Partners III MidCo, LLC, a Delaware limited liability company, pursuant to which, among other things, the Original Issuer will merge with and into the New Issuer (the “Merger”), with the New Issuer surviving the Merger;

WHEREAS, Section 5.01(a) of the Indenture provides that, the Original Issuer may, among other things, merge with or into another Person if, among other things, (a) the Person formed by or surviving such merger (if other than the Original Issuer) is an entity organized or existing under the laws of the United States, (b) the Person formed by or surviving such merger (if other than the Original Issuer) assumes all the obligations of the Original Issuer under the Notes and the Indenture pursuant to a supplemental indenture, (c) immediately after such transaction, no Note Payment Default or Event of Default exists, (d) immediately after giving effect to such transaction and any related financing transaction on a pro forma basis, certain financial tests will be met and (e) the Original Issuer delivers to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such merger and such supplemental indenture, if any, do not violate the Indenture;

WHEREAS, Section 9.01(c) of the Indenture provides that, without the consent of any Holder of Notes, the Original Issuer, the Guarantors and the Trustee may amend or supplement the Indenture to provide for the assumption of the Original Issuer’s obligations to Holders of the Notes in the case of a merger of the Original Issuer;

WHEREAS, the parties hereto desire to enter into this Supplemental Indenture to evidence (a) the assumption by the New Issuer of all of the obligations of the Original Issuer under the Notes and the Indenture on the date hereof (the “Assumption”) and (b) in connection with the Assumption, the unconditional guarantee by the New Guarantors of all of the Original Issuer’s and the New Issuer’s obligations under the Notes and the Indenture;

WHEREAS, pursuant to Section 9.05 of the Indenture, the Trustee will sign any supplemental indenture authorized pursuant to Article 9 of the Indenture if the amendment or supplement does not adversely affect the rights, duties, liabilities, privileges, protections, benefits, indemnities or immunities of the Trustee; and

WHEREAS, each of the New Issuer, the Original Issuer and the Guarantors are duly authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

ARTICLE I

Definitions

SECTION 1.1 Defined Terms. Capitalized terms used but not defined in this Supplemental Indenture shall have the meanings ascribed to such terms in the Indenture. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.

ARTICLE II

Assumption of the Obligations

SECTION 2.1 Assumption of the Obligations. The New Issuer hereby agrees, as of the date hereof, to assume, to be bound by and to be liable, as a primary obligor and not as a guarantor or surety, with respect to any and all Obligations under the Indenture and the Notes on the terms and subject to the conditions set forth in the Indenture and all other obligations of the Original Issuer under the Indenture and the Notes as if it were the Original Issuer thereunder (so that from and after the date hereof, the provisions of the Indenture and the Notes referring to the Original Issuer (in each case, referred to as the “Company” therein) shall instead refer to the New Issuer).

ARTICLE III

Agreement to be Bound; Guarantee

SECTION 3.1 Agreement to be Bound. Each New Guarantor hereby becomes a party to the Indenture as a Guarantor and as such will have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. Each Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

SECTION 3.2 Guarantee. Each New Guarantor hereby, on a joint and several basis with all the Existing Guarantors, agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Note Guarantee and in the Indenture including but not limited to Article 10 thereof.

ARTICLE IV

Miscellaneous

SECTION 4.1 Notices. All notices and other communications to the New Issuer and/or the New Guarantors, as applicable, shall be given as provided in Section 12.02 of the Indenture.

SECTION 4.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained.

SECTION 4.3 Governing Law.

(a) THE LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.

(b) EACH OF THE NEW ISSUER, THE ORIGINAL ISSUER, THE GUARANTORS AND THE TRUSTEE HEREBY (AND EACH HOLDER OF A NOTE BY ITS ACCEPTANCE THEREOF) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE OR THE TRANSACTION CONTEMPLATED HEREBY.

SECTION 4.4 Severability Clause. In case any provision in this Supplemental Indenture is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

SECTION 4.6 Ratification of Indenture; Supplemental Indenture Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture or with respect to the recitals contained herein, all of which recitals are made solely by the other parties hereto.

SECTION 4.7 Counterparts. The parties may sign any number of copies of this Supplemental Indenture, and each party hereto may sign any number of separate copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

SECTION 4.8 Headings. The headings of the Articles and Sections of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part of this Supplemental Indenture and will in no way modify or restrict any of the terms or provisions hereof.

SECTION 4.9 Trustee’s Disclaimer. The recitals contained herein shall be taken as the statements of the New Issuer, the Original Issuer, and the Guarantors, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture and shall not be liable in connection therewith. The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture, but on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.


NEW ISSUER:

CENTENNIAL RESOURCE PRODUCTION, LLC, as the New Issuer

By:		/s/ George S. Glyphis
		Name: George S. Glyphis
		Title: Executive Vice President and Chief
		Financial Officer

[Signature page to Supplemental Indenture]


EXISTING ISSUER:

COLGATE ENERGY PARTNERS III, LLC, as the Existing Issuer

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting
		Officer

[Signature Page to Supplemental Indenture]


NEW GUARANTORS:

CENTENNIAL RESOURCE DEVELOPMENT, INC., as a New Guarantor

By:		/s/ George S. Glyphis
		Name: George S. Glyphis
		Title: Executive Vice President and Chief
		Financial Officer


ATLANTIC EXPLORATION, LLC, as a New Guarantor
ATLANTIC EXPLORATION, LLC, as a New Guarantor

By:		/s/ George S. Glyphis
		Name: George S. Glyphis
		Title: Executive Vice President and Chief
		Financial Officer


CENTENNIAL RESOURCE MANAGEMENT, LLC, a New Guarantor
CENTENNIAL RESOURCE MANAGEMENT, LLC, a New Guarantor

By:		/s/ George S. Glyphis
		Name: George S. Glyphis
		Title: Executive Vice President and Chief
		Financial Officer

[Signature page to Supplemental Indenture]


HERMOSA RANCH, LLC, as a New Guarantor

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting
		Officer


CL ENERGY, LLC, as a New Guarantor

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting Officer

[Signature page to Supplemental Indenture]


EXISTING GUARANTORS:

COLGATE RANCH, LLC, as an Existing
Guarantor

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting Officer


TUSKER MIDSTREAM, LLC, as an Existing
Guarantor

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting Officer


COLGATE ENERGY, LLC, as an Existing
Guarantor

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting Officer


COLGATE ENERGY DEVELOPMENT, LLC, as
an Existing Guarantor

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting

[Signature page to Supplemental Indenture]


COLGATE PRODUCTION, LLC, as an Existing
Guarantor

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting
		Officer


COLGATE II CORP, LLC, as an Existing
Guarantor

By:	/s/ Robert Shannon
	Name:	Robert Shannon
	Title:	Vice President & Chief Accounting
		Officer


COLGATE OPERATING, LLC, as an Existing
Guarantor

By:	/s/ Robert Shannon
	Name:	Robert Shannon
	Title:	Vice President & Chief Accounting
		Officer

COLGATE ROYALTIES, LP, as an Existing
Guarantor

By: Colgate II Corp, LLC, its general partner

By:	/s/ Robert Shannon
	Name:	Robert Shannon
	Title:	Vice President & Chief Accounting
		Officer

[Signature page to Supplemental Indenture]


COLGATE MINERALS, LLC, as an Existing
Guarantor

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting
		Officer


TREE SHAKER MINERALS, LLC, as an Existing
Guarantor

By:	/s/ Robert Shannon
	Name: Robert Shannon
	Title:	Vice President & Chief Accounting
		Officer

[Signature page to Supplemental Indenture]


TRUSTEE:

COMPUTERSHARE TRUST COMPANY, N.A.,
as Trustee

By:		/s/ Erik R. Starkman
		Name: Erik R. Starkman

		Title: Assistant Vice President

[Signature page to Supplemental Indenture]

Exhibit 4.2

FIRST SUPPLEMENTAL INDENTURE IN RESPECT OF ASSUMPTION OF NOTES AND SUBSIDIARY GUARANTEES

CENTENNIAL RESOURCE PRODUCTION, LLC

COLGATE ENERGY PARTNERS III, LLC

THE GUARANTOR PARTIES HERETO

and

COMPUTERSHARE TRUST COMPANY, N.A.,

AS TRUSTEE,

DATED AS OF SEPTEMBER 1, 2022

W I T N E S S E T H

WHEREAS, the Original Issuer has heretofore executed and delivered to Wells Fargo Bank, National Association, as trustee (the “Former Trustee”), an indenture, dated as of June 30, 2021 (the “Indenture”), providing for the issuance of the Original Issuer’s 5.875% Senior Notes due 2029 (the “Notes”);

WHEREAS, each of the New Issuer, the Original Issuer and the Guarantors are duly authorized to execute and deliver this Supplemental Indenture.

ARTICLE I

Definitions

ARTICLE II

Assumption of the Obligations

ARTICLE III

Agreement to be Bound; Guarantee

ARTICLE IV

Miscellaneous

SECTION 4.1 Notices. All notices and other communications to the New Issuer and/or the New Guarantors, as applicable, shall be given as provided in Section 12.02 of the Indenture.

SECTION 4.3 Governing Law.

(a) THE LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.


NEW ISSUER:

CENTENNIAL RESOURCE PRODUCTION, LLC, as the New Issuer

By:		/s/ George S. Glyphis
		Name: George S. Glyphis
		Title: Executive Vice President and Chief Financial Officer

[Signature page to Supplemental Indenture]


EXISTING ISSUER:

COLGATE ENERGY PARTNERS III, LLC,
as the Existing Issuer

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting Officer

[Signature Page to Supplemental Indenture]


NEW GUARANTORS:

CENTENNIAL RESOURCE DEVELOPMENT,
INC., as a New Guarantor

By:		/s/ George S. Glyphis
		Name: George S. Glyphis
		Title: Executive Vice President and Chief
		Financial Officer

ATLANTIC EXPLORATION, LLC, as a New
Guarantor

By:		/s/ George S. Glyphis
		Name: George S. Glyphis
		Title: Executive Vice President and Chief
		Financial Officer

CENTENNIAL RESOURCE MANAGEMENT,
LLC, a New Guarantor

By:		/s/ George S. Glyphis
		Name: George S. Glyphis
		Title: Executive Vice President and Chief
		Financial Officer

[Signature page to Supplemental Indenture]


EXISTING GUARANTORS:

COLGATE RANCH, LLC
TUSKER MIDSTREAM, LLC
COLGATE ENERGY, LLC
COLGATE ENERGY DEVELOPMENT, LLC
COLGATE PRODUCTION, LLC
COLGATE II CORP, LLC
COLGATE OPERATING, LLC
COLGATE MINERALS, LLC
TREE SHAKER MINERALS, LLC
HERMOSA RANCH, LLC
CL ENERGY, LLC

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting
		Officer

COLGATE ROYALTIES, LP

By: Colgate II Corp, LLC, its general partner

By:		/s/ Robert Shannon
		Name: Robert Shannon
		Title: Vice President & Chief Accounting
		Officer

[Signature Page to Supplemental Indenture]


TRUSTEE:

COMPUTERSHARE TRUST COMPANY, N.A.,
as Trustee

By:		/s/ Erik R. Starkman
		Name: Erik R. Starkman
		Title: Assistant Vice President

[Signature page to Supplemental Indenture]

Exhibit 4.3

Execution Version

SECOND SUPPLEMENTAL INDENTURE IN RESPECT OF SUBSIDIARY GUARANTEES

CENTENNIAL RESOURCE PRODUCTION, LLC

THE GUARANTOR PARTIES HERETO

and

UMB BANK, N.A.,

AS TRUSTEE,

DATED AS OF SEPTEMBER 1, 2022

This Second Supplemental Indenture, dated as of September 1, 2022 (this “Second Supplemental Indenture”), is among Colgate Ranch, LLC, a Texas limited liability company, Tusker Midstream, LLC, a Delaware limited liability company, Colgate Energy, LLC, a Delaware limited liability company, Colgate Energy Development, LLC, a Delaware limited liability company, Colgate Production, LLC, a Texas limited liability company, Colgate II Corp, LLC, a Delaware limited liability company, Colgate Operating, LLC, a Delaware limited liability company, Colgate Royalties, LP, a Delaware limited partnership, Colgate Minerals, LLC, a Texas limited liability company, Tree Shaker Minerals, LLC, a Texas limited liability company, Hermosa Ranch, LLC, a Delaware limited liability company, CL Energy, LLC, a Texas limited liability company (collectively, the “New Subsidiary Guarantors”), Centennial Resource Production, LLC, a Delaware limited liability company (together with its successors and assigns, the “Company”), each other existing Guarantor (the “Existing Guarantors”) under the Indenture referred to below, and UMB Bank, N.A., as trustee (the “Trustee”), under the Indenture referred to below.

W I T N E S S E T H:

WHEREAS, the Company and the Trustee have heretofore executed and delivered an Indenture, dated as of November 30, 2017 (the “Base Indenture”), by and among the Company, the guarantors party thereto and the Trustee, providing for the issuance and establishing the terms of the Company’s 5.375% Senior Notes due 2026 (the “Notes”);

WHEREAS, Centennial Resource Development, Inc., a Delaware corporation (the “Parent”), and the Trustee have heretofore executed and delivered that certain First Supplemental Indenture, dated as of May 22, 2020 (the “First Supplemental Indenture”), which supplemented the Base Indenture (the Base Indenture, as so supplemented, the “Indenture”), pursuant to which the Parent unconditionally guaranteed, on a joint and several basis with the other guarantors, the Guaranteed Obligations;

WHEREAS, Section 4.11 of the Indenture provides that, after the Issue Date, the Company is required to cause certain of its Subsidiaries to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiary will unconditionally guarantee, on a joint and several basis with the other guarantors, the Guaranteed Obligations;

WHEREAS, pursuant to Section 9.01(8) of the Indenture, the New Subsidiary Guarantors, the Trustee, the Existing Guarantors and the Company are authorized to execute and deliver this Second Supplemental Indenture to amend or supplement the Indenture, the Notes, or the Guarantees, without the consent of any Holder; and

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Subsidiary Guarantors, the Company, the Existing Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

ARTICLE I

Definitions

SECTION 1.1 Defined Terms. Capitalized terms used but not defined in this Second Supplemental Indenture shall have the meanings ascribed to such terms in the Indenture. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Second Supplemental Indenture refer to this Second Supplemental Indenture as a whole and not to any particular section hereof.

ARTICLE II

Agreement to be Bound; Guarantee

SECTION 2.1 Agreement to be Bound. Each New Subsidiary Guarantor hereby confirms it becomes a party to the Indenture as a Guarantor by its execution hereof and as such will have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. Each Guarantor hereby ratifies, as of the date hereof, and agrees to be bound by all of the terms, provisions and conditions of the Indenture, including Article 10, applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

SECTION 2.2 Guarantee. Pursuant to Article 10 of the Indenture, each New Subsidiary Guarantor hereby, on a joint and several basis with all the Existing Guarantors, irrevocably and unconditionally Guarantees, on a senior unsecured basis,to each Holder of the Securities and the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Guaranteed Obligations when due, whether at Stated Maturity, by acceleration, redemption or otherwise.

ARTICLE III

Miscellaneous

SECTION 3.1 Notices. All notices and other communications to the New Subsidiary Guarantors shall be given as provided in Section 12.02 of the Indenture.

SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Second Supplemental Indenture or the Indenture or any provision herein or therein contained.

SECTION 3.3 Governing Law. THIS SECOND SUPPLEMENTAL INDENTURE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS SECOND SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE COMPANY, EACH GUARANTOR AND THE TRUSTEE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECOND SUPPLEMENTAL INDENTURE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

jurisdiction of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail (to the extent allowed under any applicable statute or rule of court) to such party’s address set forth in Section 12.02 will be effective service of process for any such suit, action or proceeding brought in any such court. Each of the Company, each Guarantor the Trustee and each Holder (by its acceptance of any Note) irrevocably and unconditionally waives any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waives and agrees not to plead or claim any such suit, action or other proceeding has been brought in an inconvenient forum.

SECTION 3.4 Severability Clause. If any provision of this Second Supplemental Indenture is invalid, illegal or unenforceable, then the validity, legality and enforceability of the remaining provisions of this Second Supplemental Indenture will not in any way be affected or impaired thereby.

SECTION 3.5 Ratification of Indenture; Second Supplemental Indenture Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Second Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Second Supplemental Indenture or with respect to the recitals contained herein, all of which recitals are made solely by the other parties hereto.

SECTION 3.6 Counterparts. The parties may sign any number of copies of this Second Supplemental Indenture. Each signed copy will be an original, and all of them together represent the same agreement. Delivery of an executed counterpart of this Second Supplemental Indenture by facsimile, electronically in portable document format or in any other format will be effective as delivery of a manually executed counterpart.

SECTION 3.7 Headings. The headings of the Articles and Sections of this Second Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part of this Second Supplemental Indenture and will in no way modify or restrict any of the terms or provisions of this Second Supplemental Indenture.

SECTION 3.8 Trustee’s Disclaimer. The recitals contained herein shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Second Supplemental Indenture and shall not be liable in connection therewith. The Trustee accepts the amendments of the Indenture effected by this Second Supplemental Indenture, but on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed as of the date first above written.


Colgate Ranch, LLC as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Tusker Midstream, LLC as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Energy, LLC as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Energy Development, LLC as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

[Signature Page to Second Supplemental Indenture – 2026 Senior Notes]


Colgate Production, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate II Corp, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Operating, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Royalties, LP
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

[Signature Page to Second Supplemental Indenture – 2026 Senior Notes]


Colgate Minerals, LLC as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Tree Shaker Minerals, LLC as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Hermosa Ranch, LLC as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

CL Energy, LLC as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

[Signature Page to Second Supplemental Indenture – 2026 Senior Notes]


UMB BANK, N.A.,
as the Trustee

By:		/s/ Mauri J. Cowen
Name:		Mauri J. Cowen
Title:		Senior Vice President

[Signature Page to Second Supplemental Indenture – 2026 Senior Notes]


CENTENNIAL RESOURCE PRODUCTION, LLC as the Company

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief Financial Officer

[Signature Page to Second Supplemental Indenture – 2026 Senior Notes]


Centennial Resource Development, Inc. as an Existing Guarantor

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief Financial Officer

Atlantic Exploration, LLC as an Existing Guarantor

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief Financial Officer

Centennial Resource Management, LLC as an Existing Guarantor

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief Financial Officer

[Signature Page to Second Supplemental Indenture – 2026 Senior Notes]

Exhibit 4.4

Execution Version

SECOND SUPPLEMENTAL INDENTURE IN RESPECT OF SUBSIDIARY GUARANTEES

CENTENNIAL RESOURCE PRODUCTION, LLC

THE GUARANTOR PARTIES HERETO

and

UMB BANK, N.A.,

AS TRUSTEE,

DATED AS OF SEPTEMBER 1, 2022

W I T N E S S E T H:

WHEREAS, the Company and the Trustee have heretofore executed and delivered an Indenture, dated as of March 15, 2019 (the “Base Indenture”), by and among the Company, the guarantors party thereto and the Trustee, providing for the issuance and establishing the terms of the Company’s 6.875% Senior Notes due 2027 (the “Notes”);

ARTICLE I

Definitions

ARTICLE II

Agreement to be Bound; Guarantee

SECTION 2.2 Guarantee. Pursuant to Article 10 of the Indenture, ach New Subsidiary Guarantor hereby, on a joint and several basis with all the Existing Guarantors, irrevocably and unconditionally Guarantees, on a senior unsecured basis, to each Holder of the Securities and the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Guaranteed Obligations when due, whether at Stated Maturity, by acceleration, redemption or otherwise.

ARTICLE III

Miscellaneous

SECTION 3.1 Notices. All notices and other communications to the New Subsidiary Guarantors shall be given as provided in Section 12.02 of the Indenture.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed as of the date first above written.



Colgate Ranch, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Tusker Midstream, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Energy, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Energy Development, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

[Signature Page to Second Supplemental Indenture – 2027 Senior Notes]



Colgate Production, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate II Corp, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Operating, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Royalties, LP
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

[Signature Page to Second Supplemental Indenture – 2027 Senior Notes]



Colgate Minerals, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Tree Shaker Minerals, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Hermosa Ranch, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

CL Energy, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

[Signature Page to Second Supplemental Indenture – 2027 Senior Notes]



UMB BANK, N.A., as the Trustee

By:		/s/ Mauri J. Cowen
Name:		Mauri J. Cowen
Title:		Senior Vice President

[Signature Page to Second Supplemental Indenture – 2027 Senior Notes]



CENTENNIAL RESOURCE PRODUCTION, LLC as the Company

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief Financial Officer

[Signature Page to Second Supplemental Indenture – 2027 Senior Notes]



Centennial Resource Development, Inc. as an Existing Guarantor

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief
		Financial Officer

Atlantic Exploration, LLC as an Existing Guarantor

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief
		Financial Officer

Centennial Resource Management, LLC as an Existing Guarantor

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief
		Financial Officer

[Signature Page to Second Supplemental Indenture – 2027 Senior Notes]

Exhibit 4.5

Execution Version

SECOND SUPPLEMENTAL INDENTURE IN RESPECT OF SUBSIDIARY GUARANTEES

CENTENNIAL RESOURCE PRODUCTION, LLC

THE GUARANTOR PARTIES HERETO

and

UMB BANK, N.A.,

AS TRUSTEE,

DATED AS OF SEPTEMBER 1, 2022

W I T N E S S E T H:

WHEREAS, the Company and the Trustee have heretofore executed and delivered an Indenture, dated as of March 19, 2021 (the “Base Indenture”), providing for the issuance of the debentures, notes or other debt instruments of the Company of any series authenticated and delivered pursuant to the Indenture (the “Securities”);

WHEREAS, the Company, the Existing Guarantors and the Trustee have heretofore executed and delivered that certain First Supplemental Indenture, dated as of March 19, 2021 (the “First Supplemental Indenture”), which supplemented the Base Indenture (the Base Indenture, as so supplemented, the “Indenture”) to establish the terms, and provide for the issuance, of a new series of Securities constituting the Company’s 3.25% Exchangeable Senior Notes due 2028 (the “Notes”);

WHEREAS, Section 9.05 of the Indenture provides that, after the date of the First Supplemental Indenture, the Company is required to cause certain of its Subsidiaries to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiary will unconditionally guarantee, on a joint and several basis with the other guarantors, the Guaranteed Obligations;

WHEREAS, pursuant to Section 8.01(B) of the Indenture, the New Subsidiary Guarantors, the Trustee, the Existing Guarantors and the Company are authorized to execute and deliver this Second Supplemental Indenture to amend or supplement the Indenture, the Notes, or the Guarantees, without the consent of any Holder; and

ARTICLE I

Definitions

ARTICLE II

Agreement to be Bound; Guarantee

SECTION 2.1 Agreement to be Bound. Each New Subsidiary Guarantor hereby (i) acknowledges and agrees that it receives substantial benefits from the Company and that such New Subsidiary Guarantor is providing its Guarantee for good and valuable consideration, including such substantial benefits, and (ii) confirms it becomes a party to the Indenture as a Guarantor by its execution hereof and as such will have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. Each Guarantor hereby ratifies, as of the date hereof, and agrees to be bound by all of the terms, provisions and conditions of the Indenture, including Article 9 of the Indenture, applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

SECTION 2.2 Guarantee. Pursuant to Article 9 of the Indenture, each New Subsidiary Guarantor hereby, on a joint and several basis with all the Existing Guarantors, fully and unconditionally Guarantees to each Holder of the Securities and the Trustee and its successors and assigns, regardless of the validity or enforceability of the Indenture or the Notes, the Guaranteed Obligations, whether at maturity, by acceleration, on a Fundamental Change Repurchase Date, upon Redemption or otherwise.

ARTICLE III

Miscellaneous

SECTION 3.1 Notices. All notices and other communications to the New Subsidiary Guarantors shall be given as provided in Section 12.01 of the Indenture.

SECTION 3.4 Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Second Supplemental Indenture or the transactions contemplated hereby may be instituted in the federal courts of the United States of America located in the City of New York or the courts of the State of New York, in each case located in the City of New York (collectively, the “Specified Courts”), and each party irrevocably submits to the non-exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail (to the extent allowed under any applicable statute or rule of court) to such party’s address set forth in Section 12.01 will be effective service of process for any such suit, action or proceeding brought in any such court. Each of the Company, each Guarantor the Trustee and each Holder (by its acceptance of any Note) irrevocably and unconditionally waives any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waives and agrees not to plead or claim any such suit, action or other proceeding has been brought in an inconvenient forum.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed as of the date first above written.


Colgate Ranch, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Tusker Midstream, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Energy, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Energy Development, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

[Signature Page to Second Supplemental Indenture – 2028 Exchangeable Notes]


Colgate Production, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate II Corp, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Operating, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Colgate Royalties, LP
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

[Signature Page to Second Supplemental Indenture – 2028 Exchangeable Notes]


Colgate Minerals, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Tree Shaker Minerals, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

Hermosa Ranch, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

CL Energy, LLC
as a New Subsidiary Guarantor

By:		/s/ Robert Shannon
Name:		Robert Shannon
Title:		Vice President & Chief Accounting Officer

[Signature Page to Second Supplemental Indenture – 2028 Exchangeable Notes]


UMB BANK, N.A.,
as the Trustee

By:		/s/ Mauri J. Cowen
Name:		Mauri J. Cowen
Title:		Senior Vice President

[Signature Page to Second Supplemental Indenture – 2028 Exchangeable Notes]


CENTENNIAL RESOURCE PRODUCTION, LLC
as the Company

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief Financial Officer

[Signature Page to Second Supplemental Indenture – 2028 Exchangeable Notes]


Centennial Resource Development, Inc.
as an Existing Guarantor

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief Financial Officer

Atlantic Exploration, LLC
as an Existing Guarantor

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief Financial Officer

Centennial Resource Management, LLC
as an Existing Guarantor

By:		/s/ George S. Glyphis
Name:		George S. Glyphis
Title:		Executive Vice President and Chief Financial Officer

[Signature Page to Second Supplemental Indenture – 2028 Exchangeable Notes]

Exhibit 10.1

Execution Version

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of September 1, 2022, is made and entered into by and among Permian Resources Corporation (formerly known as Centennial Resource Development, Inc.), a Delaware corporation (the “Company”) and the parties listed on the signature pages hereto (each such party, a “Holder” and collectively, the “Holders”).

RECITALS

WHEREAS, the Company, Colgate Energy Partners III, LLC, a Delaware limited liability company (“Colgate”), Centennial Resource Production, LLC (now known as Permian Resources Operating, LLC), a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub”), and for the limited purposes set forth therein, Colgate Energy Partners III MidCo, LLC (“MidCo”), entered into that certain Business Combination Agreement, dated as May 19, 2022 (the “Business Combination Agreement”), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Colgate (the “Merger”), with Merger Sub surviving the Merger as a subsidiary of the Company (the “Surviving Company”);

WHEREAS, in connection with the closing of the transactions contemplated by the Business Combination Agreement (the “Closing” and such date of closing, the “Closing Date”), among other things, MidCo received and subsequently distributed to (the “Distribution”) the Holders an aggregate of 269,300,000 shares of Class C common stock, par value $0.0001 per share, of the Company (“Class C Common Stock”) and 269,300,000 units of the Surviving Company (“Units”);

WHEREAS, each Unit is redeemable or exchangeable for one share of Class A common stock, par value $0.0001 per share, of the Company (“Class A Common Stock”) in accordance with the Sixth Amended and Restated Limited Liability Company Agreement of Merger Sub, dated as of the date hereof (the “Merger Sub LLCA”);

WHEREAS, in connection with, and effective upon, the closing of the transactions contemplated by the Business Combination Agreement and the Distribution, the Company and each of the Holders have entered into this Agreement to set forth certain understandings among themselves with respect to, among other things, the registration of securities owned by the Holders; and

NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I DEFINITIONS

1.1 Definitions. The terms defined in this Article I shall, for all purposes of this Agreement, have the respective meanings set forth below:

“Adverse Disclosure” shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Chief Executive Officer or principal financial officer of the Company, after consultation with counsel to the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business purpose for not making such information public.

“Affiliate” means, with respect to a specified Person, each other 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 no Holder shall be deemed an Affiliate of any other Holder by reason of an investment in, or holding of Common Stock (or securities convertible or exchangeable for shares of Common Stock) of, the Company. As used in this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities or by contract or other agreement).

“Agreement” shall have the meaning given in the Preamble.

“Blackout Period” shall have the meaning given in subsection 3.4.2.

“Block Trade” shall have the meaning given in subsection 2.4.5.

“Business Combination Agreement” shall have the meaning given in the Recitals hereto.

“Class A Common Stock” shall have the meaning given in the Recitals hereto.

“Class C Common Stock” shall have the meaning given in the Recitals hereto.

“Closing” shall have the meaning given in the Recitals hereto.

“Closing Date” shall have the meaning given in the Recitals hereto.

“Colgate” shall have the meaning given in the Preamble.

“Commission” shall mean the Securities and Exchange Commission.

“Common Stock” means the Class A Common Stock and the Class C Common Stock, collectively.

“Company” shall have the meaning given in the Preamble hereto.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.

“Existing Holders” shall mean the parties to the Existing Registration Rights Agreement, other than the Company.

“Existing Registration Rights Agreement” shall mean that certain Amended and Restated Registration Rights Agreement, dated as of October 11, 2016, by and among the Company and the Existing Holders.

“Holder” and “Holders” shall have the meaning set forth in the Preamble hereto.

“Initial Shelf Registration Statement” shall have the meaning given in subsection 2.1.1.

“Lock-Up Period” shall mean the period commencing on the Closing Date and ending on the six (6) month anniversary of the Closing Date.

“Lock-Up Securities” shall mean shares of Common Stock, Units (including the shares of Class A Common stock issuable upon the exchange of the Units in accordance with the Merger Sub LLCA) and any securities convertible into, exercisable for, exchangeable for or that represent the right to receive shares of Common Stock.

“Maximum Number of Securities” shall have the meaning given in subsection 2.2.2.

“Management Holders” means those members of management so designated on Schedule I hereto.

“Member Distribution” shall have the meaning given in subsection 2.1.1.

“Merger” shall have the meaning given in the Recitals hereto.

“Merger Sub” shall have the meaning given in the Recitals hereto.

“Merger Sub LLCA” shall have the meaning given in the Recitals hereto.

“Minimum Takedown Threshold” shall have the meaning given in subsection 2.2.1.

“Misstatement” shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus in the light of the circumstances under which they were made not misleading.

“NGP Holder” means, collectively, funds or investment vehicles associated with NGP Energy Capital Management, L.L.C. or any Affiliate thereof (including, for the avoidance of doubt, Luxe Energy LLC), including those entities listed on Schedule I hereto.

“Other Coordinated Offering” shall have the meaning given in subsection 2.4.5.

“Pearl Holder” means, collectively, funds or investment vehicles associated with Pearl Energy Investments, L.P. or any Affiliate thereof, including those entities listed on Schedule I hereto.

“Permitted Transferees” shall mean, with respect to a Holder, a Person or entity to whom a Holder of Registrable Securities is permitted to Transfer such Registrable Securities prior to the expiration of the Lock-Up Period and any other applicable agreement between such Holder and the Company, and to any transferee thereafter.

“Person” means an individual or any corporation, partnership, limited liability company, trust, unincorporated organization, association, joint venture or any other organization or entity, whether or not a legal entity.

“Piggyback Underwritten Offering” shall have the meaning given in subsection 2.4.1.

“Prospectus” shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.

“Registrable Security” shall mean (a) the shares of Class A Common Stock issuable upon the redemption or exchange of the Units in accordance with the Merger Sub LLCA, (b) any outstanding share of Class A Common Stock or any other equity security (including the shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by a Holder as of the date of this Agreement, and (c) any other equity security of the Company issued or issuable with respect to any such share of Class A Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization; provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities shall have ceased to be outstanding; or (D) such securities have been sold pursuant to Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission).

“Registration” shall mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

“Registration Expenses” shall mean the out-of-pocket expenses of a Registration, including, without limitation, the following:

(A) all registration and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.) and any securities exchange on which the Class A Common Stock is then listed;

(B) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the Underwriters in connection with blue sky qualifications of Registrable Securities);

(D) reasonable fees and disbursements of counsel for the Company; and

(E) reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration.

“Registration Statement” shall mean any registration statement that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.

“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.

“Shelf” shall mean the Initial Shelf Registration Statement and any Subsequent Shelf Registration Statement, as the case may be.

“Shelf Registration” means a registration of securities pursuant to a registration statement filed with the SEC in accordance with and pursuant to Rule 415 promulgated under the Securities Act (or any successor rule then in effect).

“Subsequent Shelf Registration Statement” shall have the meaning given in subsection 2.1.2.

“Suspension Period” shall have the meaning given in subsection 3.4.1.

“Transfer” shall mean the (a) sale or assignment of, offer to sell, contract or agreement to sell, hypothecate, pledge, grant of any option to purchase or otherwise dispose of or agreement to dispose of, directly or indirectly, or establishment or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any security, (b) entry into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (c) public announcement of any intention to effect any transaction specified in clause (a) or (b).

“Underwriter” shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such dealer’s market-making activities.

“Underwritten Demand Holder” shall have the meaning given in subsection 2.2.1.

“Underwritten Offering” shall mean an offering in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public (which shall, for the avoidance of doubt, include any Underwritten Shelf Takedown).

“Underwritten Offering Filing” means (a) with respect to an Underwritten Shelf Takedown, a preliminary prospectus supplement (or prospectus supplement if no preliminary prospectus supplement is used) to the Shelf relating to such Underwritten Shelf Takedown, and (b) with respect to a Piggyback Underwritten Offering, (i) a preliminary prospectus supplement (or prospectus supplement if no preliminary prospectus supplement is used) to an effective shelf Registration Statement (other than the Shelf) in which Registrable Securities could be included and the Holders could be named as selling security holders without the filing of a post-effective amendment thereto (other than a post-effective amendment that becomes effective upon filing) or (ii) a Registration Statement (other than the Shelf), in each case relating to such Piggyback Underwritten Offering.

“Underwritten Shelf Takedown” shall have the meaning given in subsection 2.2.1.

“Units” shall have the meaning given in the Recitals hereto.

ARTICLE II REGISTRATIONS

2.1 Shelf Registration.

2.1.1 Initial Shelf Registration. The Company shall as soon as reasonably practicable, but in any event within five (5) business days after the Closing Date, file with the Commission a Registration Statement for a Shelf Registration (the “Initial Shelf Registration Statement”) covering, subject to Section 3.3, the public resale of all of the Registrable Securities (determined as of the Closing) on a delayed or continuous basis and shall use its commercially reasonable efforts to cause such Initial Shelf Registration Statement to be an automatic shelf registration statement (as defined in Rule 405 promulgated under the Securities Act) on Form S-3. The Initial Shelf Registration Statement shall be on Form S-3 or, if Form S-3 is not then available to the Company, on Form S-1 or such other form of registration statement as is then available to effect a registration for resale of the Registrable Securities and shall contain a prospectus in such form as to permit the resale of the Registrable Securities included therein pursuant to any method or combination of methods legally available to, and requested by, any Holder named therein, including a distribution to, and resale by, the members, partners, stockholders or other equity holders of any Holder (a “Member Distribution”). Further, the Company shall, at the reasonable request of any Holder seeking to effect a Member Distribution, file any prospectus supplement or post-effective amendments and otherwise take any action reasonably necessary to include such language, if such language was not included in the Initial Shelf Registration Statement, or revise such language if deemed reasonably necessary by any such Holder to effect any such Member Distribution. As soon as practicable following the effective date of the Initial Shelf Registration Statement, but in any event within three (3) business days of such date, the Company shall notify the Holders of the effectiveness of such Initial Shelf Registration Statement. When deemed effective, the Initial Shelf Registration Statement (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain a Misstatement.

2.1.2 Subsequent Shelf Registration. The Company shall maintain a Shelf for the benefit of the Holders in accordance with the terms hereof, and shall prepare and file with the SEC such amendments, including post-effective amendments, and supplements as may be necessary to keep a Shelf continuously effective, available for use and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities. If any Shelf ceases

to be effective under the Securities Act for any reason at any time while Registrable Securities are still outstanding, the Company shall, subject to Section 3.3 and Section 3.4, use its commercially reasonable efforts to as promptly as reasonably practicable cause such Shelf to again become effective under the Securities Act (including obtaining the prompt withdrawal of any order suspending the effectiveness of such Shelf), including, if necessary, amending such Shelf in a manner reasonably expected to result in the withdrawal of any order suspending the effectiveness of such Shelf or filing an additional registration statement as a Shelf Registration (a “Subsequent Shelf Registration”) registering the resale of all Registrable Securities (determined as of two (2) business days prior to such filing), and pursuant to any method or combination of methods legally available to, and requested by, any Holder named therein. If a Subsequent Shelf Registration is filed, the Company shall use its commercially reasonable efforts to (i) cause such Subsequent Shelf Registration to become effective under the Securities Act as promptly as reasonably practicable after the filing thereof (it being agreed that the Subsequent Shelf Registration shall be an automatic shelf registration statement (as defined in Rule 405 promulgated under the Securities Act) if the Company is a well-known seasoned issuer (as defined in Rule 405 promulgated under the Securities Act) at the most recent applicable eligibility determination date) and (ii) keep such Subsequent Shelf Registration continuously effective, available for use and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities. Any such Subsequent Shelf Registration shall be on Form S-3 to the extent that the Company is eligible to use such form. Otherwise, such Subsequent Shelf Registration shall be on another appropriate form. As soon as practicable following the effective date of any Subsequent Shelf Registration, but in any event within three (3) business days of such date, the Company shall notify the Holders of the effectiveness of such Subsequent Shelf Registration. When deemed effective, a Subsequent Shelf Registration (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain a Misstatement.

2.2 Underwritten Shelf Takedown.

2.2.1 Underwritten Shelf Takedown Request. At any time and from time to time following the effectiveness of a Shelf pursuant to Section 2.1, any Holder (each, an “Underwritten Demand Holder”) may request to sell all or any portion of its or their Registrable Securities in an Underwritten Offering that is registered pursuant to such Shelf (each, an “Underwritten Shelf Takedown”); provided, in each case, that the Company shall be obligated to effect an Underwritten Shelf Takedown only if such offering shall include Registrable Securities proposed to be sold by the Holder(s) making such request with a total offering price reasonably expected to exceed, in the aggregate, the lesser of (a) $50,000,000 or (b) all remaining Registrable Securities held by the Holders (the “Minimum Takedown Threshold”). All requests for Underwritten Shelf Takedowns shall be made by giving written notice to the Company, which shall specify the approximate number of Registrable Securities proposed to be sold in the Underwritten Shelf Takedown and the expected price range (net of underwriting discounts and commissions) of such Underwritten Offering. Within five (5) business days after receipt of a request for an Underwritten Shelf Takedown, the Company shall give written notice of the Underwritten Shelf Takedown to all other Holders of Registrable Securities and, subject to the provisions of subsection 2.2.2, the Company shall include in such Underwritten Shelf Takedown all Registrable Securities with respect to which the Company has received written requests for inclusion therein within five (5) business days after sending such notice to Holders. The Company and such Holders shall enter into an underwriting

agreement in a form as is customary in Underwritten Offerings of securities by such parties with the managing Underwriter or Underwriters selected by the Holders requesting such Underwritten Shelf Takedown (which managing Underwriter or Underwriters shall be subject to approval of the Company, which approval shall not be unreasonably withheld) and shall take all such other reasonable actions as are requested by the managing Underwriter or Underwriters in order to expedite or facilitate the disposition of such Registrable Securities in accordance with the terms of this Agreement. In connection with any Underwritten Shelf Takedown contemplated by this subsection 2.2.1, subject to subsection 3.4 and Article IV, the underwriting agreement into which each Holder and the Company shall enter shall contain such representations, covenants, indemnities and other rights and obligations as are customary in underwritten offerings of securities by the Company. Notwithstanding any other provision of this Agreement to the contrary, (i) no Holder may demand more than two (2) Underwritten Shelf Takedowns in the aggregate during any 12-month period, provided that this clause (i) shall not preclude the ability of any Holder to exercise their rights pursuant to section 2.4 hereof; (ii) the Company shall not be obligated to participate in more than seven (7) Underwritten Shelf Takedowns (the “Total Takedown Allocation”) in the aggregate, in each case, pursuant to this subsection 2.2.1; and (iii) notwithstanding anything to the contrary in this Agreement, the Company may effect an Underwritten Shelf Takedown pursuant to any then-effective Shelf that is then available for such offering. The Holders agree that each of the NGP Holder and Management Holders (such Management Holders, on a collective basis) shall be entitled to at least one (1) Underwritten Shelf Takedown request from the Total Takedown Allocation and the Pearl Holder shall be entitled to at least two (2) Underwritten Shelf Takedown requests from the Total Takedown Allocation.

2.2.2 Reduction of Underwritten Offering. If the managing Underwriter or Underwriters in an Underwritten Offering pursuant to an Underwritten Shelf Takedown, in good faith, advise the Company and the applicable Holders (if any) in writing that the dollar amount or number of Registrable Securities that any such Holders desire to sell, taken together with all other Class A Common Stock or other equity securities that the Company desires to sell and the Class A Common Stock, if any, as to which an Underwritten Offering has been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Offering, as follows:

(a) first, the Registrable Securities of the Underwritten Demand Holders (pro rata based on the respective number of Registrable Securities that each such Underwritten Demand Holder has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Underwritten Demand Holders have requested be included in such Underwritten Offering), that can be sold without exceeding the Maximum Number of Securities;

(b) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Registrable Securities of any other Holder (if any) (pro rata based on the respective number of Registrable Securities that each other Holder has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Underwritten Demand Holders and such other Holders have requested be included in such Underwritten Offering) that can be sold without exceeding the Maximum Number of Securities;

(c) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a) and clause (b), the Class A Common Stock or other equity securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Securities; and

(d) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), clause (b) and clause (c), the Class A Common Stock or other equity securities of other Persons or entities that the Company is obligated to register in a Registration pursuant to separate written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Securities.

2.3 Withdrawal. An Underwritten Demand Holder shall have the right to withdraw all or any portion of its Registrable Securities included in an Underwritten Shelf Takedown pursuant to Section 2.2 for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters of its intention to so withdraw at any time prior to prior to the pricing of such Underwritten Offering; provided, however, that upon withdrawal of an amount of Registrable Securities that results in the remaining amount of Registrable Securities included in such Underwritten Shelf Takedown being less than the Minimum Takedown Threshold, the Company may cease all efforts to complete the Underwritten Offering. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with an Underwritten Shelf Takedown prior to its withdrawal under this Section 2.3.

2.4 Piggyback Underwritten Offering.

2.4.1 Piggyback Rights. If the Company proposes to file an Underwritten Offering Filing for an Underwritten Offering of its own account or for the account of any other stockholders of the Company who have been granted registration rights (a “Piggyback Underwritten Offering”) then the Company shall give written notice of such proposed Piggyback Underwritten Offering to all of the Holders of Registrable Securities (other than any Holder of Registrable Securities who has previously requested in writing that the Company not provide it with notices of Piggyback Underwritten Offerings) as soon as practicable but not less than five (5) business days before the anticipated filing date of Underwritten Offering Filing, which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters in such offering, and (B) offer to all of the Holders of Registrable Securities the opportunity to include such number of Registrable Securities as such Holders may request in writing within five (5) days after receipt of such written notice. Each Holder of Registrable Securities shall then have four (4) business days after the date on which such Holder received notice pursuant to this subsection 2.4.1 to request inclusion of Registrable Securities in the Piggyback Underwritten Offering (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Holder and such other information as is reasonably required to effect the inclusion of such Registrable Securities). If no request for inclusion from a Holder is received within such period,

such Holder shall have no further right to participate in such Piggyback Underwritten Offering. All such Holders proposing to distribute their Registrable Securities through a Piggyback Underwritten Offering under this subsection 2.4.1 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company. The Company shall use its reasonable best efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holders pursuant to this subsection 2.4.1 to be included in a Piggyback Underwritten Offering on the same terms and conditions as any similar securities of the Company included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof, including via a Member Distribution. The Company shall, at the reasonable request of any Holder seeking to effect a Member Distribution, file any prospectus supplement or post-effective amendments and otherwise take any action reasonably necessary to include such language, if such language was not included in such registration statement, or revise such language if deemed reasonably necessary by any such Holder to effect any such Member Distribution.

2.4.2 Reduction of Piggyback Underwritten Offering. If the managing Underwriter or Underwriters in a Piggyback Underwritten Offering, in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Underwritten Offering in writing that the dollar amount or number of the Class A Common Stock that the Company desires to sell, taken together with (i) the Class A Common Stock, if any, as to which participation in the Piggyback Underwritten Offering has been demanded pursuant to separate written contractual arrangements with Persons or entities other than the Holders of Registrable Securities hereunder, (ii) the Registrable Securities as to which participation has been requested pursuant to subsection 2.4.1 and (iii) the Class A Common Stock, if any, as to which participation has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:

(a) If the Piggyback Underwritten Offering is undertaken for the Company’s account, the Company shall include in any such Piggyback Underwritten Offering: (i) first, the Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (ii) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), (A) the Registrable Securities of Holders exercising their rights to include their Registrable Securities pursuant to subsection 2.4.1 and (B) the Class A Common Stock, if any, as to which participation has been requested pursuant to written contractual piggy-back registration rights of other stockholders (pro rata based on the respective number of Registrable Securities or shares of Class A Common Stock that each Holder or other stockholder of the Company has requested be included in such Piggyback Underwritten Offering and the aggregate number of Registrable Securities and Class A Common Stock that the Holders and other stockholders of the Company have requested be included in such Piggyback Underwritten Offering), which can be sold without exceeding the Maximum Number of Securities;

(b) If the Piggyback Underwritten Offering is pursuant to a request by Persons or entities other than the Holders of Registrable Securities, then the Company shall include in any such Piggyback Underwritten Offering: (i) first, the Class A Common Stock or other equity securities, if any, of such requesting Persons or entities, other than the Holders of Registrable Securities, that can be sold without exceeding the Maximum Number of Securities; (ii) second, (A) the Registrable Securities of Holders exercising their rights to include their Registrable Securities pursuant to subsection 2.4.1 and (B) the Class A Common Stock, if any, as to which participation has been requested pursuant to written contractual piggy-back registration rights of other stockholders (pro rata based on the respective number of Registrable Securities or shares of Class A Common Stock that each Holder or other stockholder of the Company has requested be included in such Piggyback Underwritten Offering and the aggregate number of Registrable Securities and Class A Common Stock that the Holders and other stockholders of the Company have requested be included in such Piggyback Underwritten Offering); and (iii) third, the Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities.

2.4.3 Piggyback Underwritten Offering Withdrawal. Any Holder of Registrable Securities shall have the right to withdraw all or any portion of its Registrable Securities included in a Piggyback Underwritten Offering for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of such Holder’s intention to withdraw such Registrable Securities from such Piggyback Underwritten Offering prior to the pricing of such Underwritten Offering or Underwritten Shelf Takedown. The Company (whether on its own good faith determination or as the result of a request for withdrawal by Persons pursuant to separate written contractual obligations) may withdraw an Underwritten Offering Filing filed with the Commission in connection with a Piggyback Underwritten Offering at any time prior to the pricing of such Piggyback Underwritten Offering. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Underwritten Offering prior to its withdrawal under this subsection 2.4.3.

2.4.4 Unlimited Piggyback Underwritten Offerings. For purposes of clarity, any Piggyback Underwritten Offering effected pursuant to this Section 2.4 shall not be counted as an Underwritten Shelf Takedown effected under Section 2.2.

2.4.5 Block Trades; Other Coordinated Offerings.

(a) Notwithstanding any other provision of this Article II, but subject to Section 3.4, at any time and from time to time when an effective shelf registration statement is on file with the Commission, if a Holder wishes to engage in (a) an underwritten registered offering not involving a “roadshow,” an offer commonly known as a “block trade” (a “Block Trade”) consisting of Registrable Securities (x) with a total offering price reasonably expected to exceed the lesser of $25,000,000 or (y) representing all remaining Registrable Securities held by the Holders or (b) an “at the market” or similar non-marketed, non-underwritten registered offering through a broker, sales agent or distribution agent, whether as agent or principal, which shall not require the delivery of any comfort letters, execution of an underwriting agreement or the conducting of any underwriter due diligence (an “Other Coordinated Offering”), then such Holder only needs to notify the Company of the Block Trade or Other Coordinated Offering at least five (5) business days prior to the day such offering is to commence and the Company shall as expeditiously as

possible use its commercially reasonable efforts to facilitate such Block Trade or Other Coordinated Offering, including, (a) in the event of a Block Trade, the delivery of customary comfort letters, customary legal opinions and customary underwriter due diligence, subject to receipt by the Company, its auditors and legal counsel of representation and documentation by such persons to permit the delivery of such comfort letter and legal opinions and (b) in the event of an Other Coordinated Offering, the provision of any customary “legend removal” legal opinions in accordance with Section 5.2.

(b) Prior to the pricing of any Block Trade or Other Coordinated Offering, the Holders initiating such Block Trade or Other Coordinated Offering shall have the right to submit notice to the Company, the Underwriter or Underwriters (if any) and any brokers, sale agents or placement agents (if any) of their intention to withdraw from such Block Trade or Other Coordinated Offering for any or no reason whatsoever. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with a Block Trade or Other Coordinated Offering prior to its withdrawal under this Section 2.4.5.

(c) Notwithstanding anything to the contrary in this Agreement, Section 2.4 shall not apply to a Block Trade or Other Coordinated Offering initiated by a Demanding Holder pursuant to this Agreement.

(d) The Demanding Holder in a Block Trade or Other Coordinated Offering shall have the right to select the Underwriters and any brokers, sale agents or placement agents (if any) for such Block Trade or Other Coordinated Offering (in each case, which shall consist of one or more reputable nationally recognized investment banks).

(e) For the avoidance of doubt, any Block Trade or Other Coordinated Offering effected pursuant to this Section 2.4.5 shall not be counted as a demand for an Underwritten Shelf Takedown pursuant to Section 2.2.1 hereof.

ARTICLE III COMPANY PROCEDURES

3.1 General Procedures. Whenever required under Section 2.1 to use commercially reasonable efforts to effect the registration of any Registrable Securities, the Company shall:

3.1.1 as expeditiously as possible, subject to the other provisions of this Agreement, prepare and file a Registration Statement with respect to such Registrable Securities and use commercially reasonable efforts to cause such Registration Statement to become effective and remain effective until all Registrable Securities covered by such Registration Statement have been sold;

3.1.2 prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be requested by the Holders or any Underwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable to the registration form used by the Company or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus;

3.1.3 prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the Underwriters, if any, and the Holders of Registrable Securities included in such Registration, and one legal counsel to such Holders, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents as the Underwriters and the Holders of Registrable Securities included in such Registration or the one legal counsel for such Holders may request in order to facilitate the disposition of the Registrable Securities owned by such Holders;

3.1.4 prior to any public offering of Registrable Securities, use its reasonable best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;

3.1.5 use its reasonable best efforts to cause all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;

3.1.6 provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;

3.1.7 advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;

3.1.8 at least five (5) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus, furnish a copy thereof to each seller of such Registrable Securities or one counsel on behalf of such sellers;

3.1.9 promptly notify the Holders in writing at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then to correct such Misstatement as set forth in Section 3.4;

3.1.10 permit a representative of the Holders, the Underwriters, if any, and any attorney or accountant retained by such Holders or Underwriter to participate, at each such Person’s own expense, in the preparation of the Registration Statement, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; provided, however, that such representatives or Underwriters enter into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information;

3.1.11 obtain a “cold comfort” letter from the Company’s independent registered public accountants in the event of an Underwritten Offering, a Block Trade, an Other Coordinated Offering or sale by a broker, placement agent or sales agent pursuant to such Registration (subject to such broker, placement agent or sales agent providing such certification or representation reasonably requested by the Company’s independent registered public accountants and the Company’s counsel) in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the managing Underwriter may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders;

3.1.12 on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion, dated such date, of counsel representing the Company for the purposes of such Registration, addressed to the Holders, the placement agent or sales agent, if any, and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as the Holders, the broker, placement agents, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions and negative assurance letters, and reasonably satisfactory to a majority-in-interest of the participating Holders;

3.1.13 in the event of any Underwritten Offering, a Block Trade, an Other Coordinated Offering or sale by a broker, placement agent or sales agent pursuant to such Registration, enter into and perform its obligations under an underwriting or other purchase or sales agreement, in usual and customary form, with the managing Underwriter or the broker, placement agent or sales agent of such offering or sale;

3.1.14 make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the Commission);

3.1.15 if an Underwritten Offering is expected to yield gross proceeds of at least $50,000,000, use its commercially reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in such Underwritten Offering; and

3.1.16 otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Holders, in connection with such Registration.

3.2 Registration Expenses. The Registration Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Holders that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions and discounts, brokerage fees, Underwriter marketing costs and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holders.

3.3 Requirements for Participation in Underwritten Offerings. No Person may participate in any Underwritten Offering for equity securities of the Company unless such Person (i) agrees to sell such Person’s equity securities on the basis provided in any underwriting arrangements approved by the Company and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements.

3.4 Suspension of Sales; Adverse Disclosure.

3.4.1 Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, each of the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice), or until it is advised in writing by the Company that the use of the Prospectus may be resumed (any such period, a “Suspension Period”).

3.4.2 If the filing, initial effectiveness or continued use of (including in connection with any Underwritten Offering) a Registration Statement in respect of any Registration at any time would require the Company to make an Adverse Disclosure or would require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, then the Company may, upon giving prompt written notice to the Holders, delay the filing or initial effectiveness of, or suspend use of (including in connection with any Underwritten Offering), such Registration Statement for the shortest period of time, but in no event more than ninety (90) days, determined in good faith by the Company to be necessary for such purpose (any such period, a “Blackout Period”). In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities.

3.4.3 The Company shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 3.4. Notwithstanding anything to the contrary in this Section 3.4, in no event shall any Blackout Periods and any Suspension Periods continue for more than one hundred and twenty (120) days in the aggregate during any 365-day period.

3.5 Reporting Obligations. As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings (the delivery of which will be satisfied by the Company’s filing of such reports on the Commission’s EDGAR system). The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Class A Common Stock held by such Holder without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission), including providing any legal opinions.

ARTICLE IV INDEMNIFICATION AND CONTRIBUTION

4.1 Indemnification.

4.1.1 The Company agrees to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and each Person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including attorneys’ fees) caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein. The Company shall indemnify the Underwriters, their officers and directors and each Person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to the indemnification of the Holder.

4.1.2 In connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and agents and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such Holder expressly for use therein; provided, however, that the obligation to indemnify shall be several, not joint and several, among such Holders of Registrable Securities, and the liability of

each such Holder of Registrable Securities shall be in proportion to and limited to the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement. The Holders of Registrable Securities shall indemnify the Underwriters, their officers, directors and each Person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification of the Company.

4.1.3 Any person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

4.1.4 The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of securities. The Company and each Holder of Registrable Securities participating in an offering also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s or such Holder’s indemnification is unavailable for any reason.

4.1.5 If the indemnification provided under Section 4.1 from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and

indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that the liability of any Holder under this subsection 4.1.5 shall be limited to the amount of the net proceeds received by such Holder in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in subsections 4.1.1, 4.1.2 and 4.1.3, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection 4.1.5 were determined by pro rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in this subsection 4.1.5. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this subsection 4.1.5 from any person who was not guilty of such fraudulent misrepresentation.

ARTICLE V MISCELLANEOUS

5.1 Transfer Restrictions.

5.1.1 Except as permitted by subsection 5.1.2, during the Lock-Up Period, no Holder shall Transfer any Lock-Up Securities beneficially owned or owned of record by such Holder (including securities held as a custodian).

5.1.2 Notwithstanding the provisions set forth in subsection 5.1.1, Transfers of Lock-Up Securities are permitted (i) as a bona fide gift or charitable contribution; (ii) to a trust, or other entity formed for estate planning purposes for the primary benefit of the spouse, domestic partner, parent, sibling, child or grandchild of such Holder of Lock-Up Securities or any other person with whom such Holder has a relationship by blood, marriage or adoption not more remote than first cousin; (iii) by will or intestate succession upon the death of the Holder; (iv) pursuant to a qualified domestic order, court order or in connection with a divorce settlement; (v) if such Holder is a corporation, partnership (whether general, limited or otherwise), limited liability company, trust or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity that controls, is controlled by or is under common control or management with the Holder (including, but not limited to, any Member Distribution), or (B) to partners, limited liability company members, or stockholders of the Holder, including, for the avoidance of doubt, where the Holder is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership; (C) by virtue of the laws of the state or jurisdiction of the entity’s organization and the entity’s organizational documents upon dissolution of the entity; (vi) pursuant to transactions in the event of completion of a liquidation, merger, consolidation, stock exchange, reorganization, tender offer or other similar transaction which results in all of the Company’s security holders having the right to exchange their shares of Class A Common Stock for cash, securities or other property; or (vii) in connection with the grant and maintenance of a bona fide lien, security interest, pledge or other similar encumbrance to a nationally or internationally recognized financial institution with assets of not less than $10 billion in connection with a loan; provided that (A) the Holder shall provide the Company prior written notice informing them of any public filing, report or announcement made by or on behalf of the Holder with respect thereto and (B) any grant and maintenance of a bona fide lien, security interest, pledge or other similar encumbrance under this clause (x) shall not (1) be in violation of the Insider

Trading and Regulation FD Policy of the Company or (2) permit an exercise on the Class A Common Stock serving as collateral in the event of default; provided, however, that in the case of clauses (i) through (vii), such Permitted Transferees, to the extent not already party hereto, must enter into a written agreement agreeing to be bound by the restrictions in this Section 5.1.

5.1.3 Each Holder hereby represents and warrants that it now has and, except as contemplated by this subsection 5.1.3, for the duration of the Lock-Up Period will have good and marketable title to its Lock-Up Securities, free and clear of all liens, encumbrances, and claims that could impact the ability of such Holder to comply with the foregoing restrictions. Each Holder agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of any Lock-Up Securities during the Lock-Up Period.

5.2 Removal of Legends. The legend on any Registrable Securities covered by this Agreement shall be removed if (i) such Registrable Securities are sold pursuant to an effective registration statement, (ii) (A) a registration statement covering the resale of such Registrable Securities is effective under the Securities Act and the applicable holder of such Registrable Securities delivers to the Company a representation letter agreeing that such Registrable Securities will be sold under such effective registration statement, or (B) six (6) months after Closing, such Holder has held such Registrable Securities for at least six months and is not, and has not been in the preceding three (3) months, an Affiliate of the Company (as defined in Rule 144 under the Securities Act), and such Holder or Permitted Transferee provides to the Company any other information the Company deems reasonably necessary to deliver to the transfer agent an instruction to so remove such legend, (iii) such Registrable Securities may be sold by the holder thereof free of restrictions pursuant to Rule 144(b) under the Securities Act or (iv) such Registrable Securities are being sold, assigned or otherwise transferred pursuant to Rule 144 under the Securities Act; provided, that with respect to clause (ii)(A), (iii) or (iv) above, the Holder of such Registrable Securities has provided all necessary documentation and evidence (which may include an opinion of counsel) as may reasonably be required by the Company to confirm that the legend may be removed under applicable securities law. The Company shall cooperate with the applicable Holder of Registrable securities to effect removal of the legend on such shares pursuant to this Section 5.2 as soon as reasonably practicable after delivery of notice from such holder that the conditions to removal are satisfied (together with any documentation required to be delivered by such holder pursuant to the immediately preceding sentence). The Company shall bear all direct costs and expenses associated with the removal of a legend pursuant to this Section 5.2.

5.3 Notices. Any notice or communication under this Agreement must be in writing and given by (i) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) delivery in person or by courier service providing evidence of delivery, or (iii) transmission by hand delivery, electronic mail, telecopy, telegram or facsimile. Each notice or communication that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received, in the case of mailed notices, on the third business day following the date on which it is mailed and, in the case of notices delivered by courier service, hand delivery, electronic mail, telecopy, telegram or facsimile, at such time as it is delivered to the addressee (with the delivery receipt or the affidavit of messenger) or at such time as delivery is refused by the addressee upon presentation. Any notice or communication under this Agreement must be addressed, if to the Company, to: Permian Resources Corporation, 300 N. Marienfeld St., Suite 1000, Midland, Texas

79701, Attention: John Charles Bell and Chad MacDonald; Email: jbell@colgateenergy.com and Chad.MacDonald@cdevinc.com, with copies to (which shall not constitute notice) Ryan J. Maierson and John M. Greer, Latham & Watkins LLP, 811 Main Street, Suite 3700, Houston, Texas 7702; Email: ryan.maierson@lw.com; john.greer@lw.com and, if to any Holder, to the email and physical addresses set forth on Schedule I, with a copies to (which shall not constitute notice) Sean Wheeler, P.C. and Debbie Yee, P.C., Kirkland & Ellis LLP 609 Main Street #4700 Houston, TX 77002; Email: sean.wheeler@kirkland.com; debbie.yee@kirkland.com. Any party may change its address for notice at any time and from time to time by written notice to the other parties hereto, and such change of address shall become effective promptly after delivery of such notice as provided in this Section 5.3.

5.4 Assignment; No Third Party Beneficiaries.

5.4.1 This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part.

5.4.2 Prior to the expiration of the Lock-Up Period, no Existing Holder may assign or delegate such Holder’s rights, duties or obligations under this Agreement, in whole or in part, except in connection with a transfer of Registrable Securities by such Holder to a Permitted Transferee.

5.4.3 This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and its successors and the permitted assigns of the Holders, which shall include Permitted Transferees.

5.4.4 This Agreement shall not confer any rights or benefits on any persons that are not parties hereto, other than as expressly set forth in this Agreement and this Section 5.4.

5.4.5 No assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have received (i) written notice of such assignment as provided in Section 5.3 and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement). Any transfer or assignment made other than as provided in this Section 5.4 shall be null and void.

5.5 Counterparts; Electronic Signatures. This Agreement may be executed in multiple counterparts (including facsimile or PDF counterparts), each of which shall be deemed an original, and all of which together shall constitute the same instrument, but only one of which need be produced. Signatures to this Agreement transmitted by electronic mail in .pdf form, or by any other electronic means designed to preserve the original graphic and pictorial appearance of a document (including DocuSign), will be deemed to have the same effect as physical delivery of the paper document bearing the original signatures. No party shall be bound until such time as all of the Parties have executed counterparts of this Agreement.

5.6 Governing Law; Venue. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO AGREEMENTS AMONG NEW YORK RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION.

5.7 Amendments and Modifications. Upon the written consent of the Company and the Holders of at least a majority-in-interest of the Registrable Securities at the time in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided, however, that notwithstanding the foregoing, (i) any amendment hereto or waiver hereof that adversely affects one Holder, solely in its capacity as a holder of the shares of capital stock of the Company, in a manner that is materially different from the other Holders (in such capacity) shall require the consent of the Holder so affected and (ii) any amendment hereto or waiver hereof that adversely affects a Holder, solely in its capacity as a Holder, in a manner that is materially different from the other Holders, shall require the consent of the Holders of a majority-in-interest of the then-outstanding number of Registrable Securities held by the Holders. No course of dealing between any Holder or the Company and any other party hereto or any failure or delay on the part of a Holder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.

5.8 Other Registration Rights. Other than pursuant to the terms of the Existing Registration Rights Agreement, the Company represents and warrants that no Person, other than a Holder of Registrable Securities, has any right to require the Company to register any securities of the Company for sale or to include such securities of the Company in any Registration filed by the Company for the sale of securities for its own account or for the account of any other person. The Company (i) represents and warrants that the Existing Registration Rights Agreement has not been amended in any manner since its applicable effective date and (ii) shall not amend the Existing Registration Rights Agreement in any manner that would provide to any party thereto registration rights superior to the rights of the Holders set forth herein unless the Company amends this Agreement to provide substantially similar rights to the Holders. The Company further represents and warrants that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions among the parties hereto and in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.

Further, the Company shall not, without the prior written consent of Holders of a majority of the Registrable Securities under this Agreement, enter into any agreement with any current or future holder of any securities of the Company that would allow such current or future holder to require the Company to include securities in any registration statement filed by the Company for other Holders on a basis other than expressly subordinate to the rights of the Holders of Registrable Securities hereunder.

5.9 Term. This Agreement shall terminate upon the earlier of (a) the tenth anniversary of the date of this Agreement and (b) the date as of which the aggregate beneficial ownership of the Holders is less than 5% of the Registrable Securities in existence as the date hereof.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.


COMPANY:

PERMIAN RESOURCES CORPORATION, a Delaware corporation

By:		/s/ Sean R. Smith
Name:		Sean R. Smith
Title:		Chief Executive Officer

[Signature Page to Registration Rights Agreement]


HOLDERS:

By:		/s/ William M. Hickey, III
Name:		William M. Hickey, III

[Signature Page to Registration Rights Agreement]


HOLDERS:

By:		/s/ James Walter
Name:		James Walter

[Signature Page to Registration Rights Agreement]


HOLDERS:

By:		/s/ John Bell
Name:		John Bell

[Signature Page to Registration Rights Agreement]


HOLDERS:

By:		/s/ Brandon Gaynor
Name:		Brandon Gaynor

[Signature Page to Registration Rights Agreement]


HOLDERS:

NGP XI US HOLDINGS, L.P.

By: NGP XI Holdings GP, L.L.C., its general partner

By:		/s/ Craig S. Glick
Name:		Craig S. Glick
Title:		Authorized Person

NGP Pearl Holdings II, LLC

By:		/s/ Craig S. Glick
Name:		Craig S. Glick
Title:		Authorized Person

Luxe Energy, LLC

By:		/s/ Ryley Hegarty
Name:		Ryley Hegarty
Title:		CFO

Signature Page to Registration Rights Agreement


HOLDERS:

PEARL ENERGY INVESTMENTS, LP

By: Pearl Energy Investment GP, LP., its general partner

By: Pearl Energy Investment UGP, LLC, its general partner

By:		/s/ William J. Quinn
Name:		William J. Quinn
Title:		Authorized Person

PEARL ENERGY INVESTMENTS II, LP

By: Pearl Energy Investment II GP, LP., its general partner

By: Pearl Energy Investment II UGP, LLC, its general partner

By:		/s/ William J. Quinn
Name:		William J. Quinn
Title:		Authorized Person

PEARL CIII HOLDINGS, LP

By: Pearl Energy Investment II GP, LP., its general partner

By: Pearl Energy Investment II UGP, LLC, its general partner

By:		/s/ William J. Quinn
Name:		William J. Quinn
Title:		Authorized Person

Signature Page to Registration Rights Agreement

Schedule I

Management Holders

[Redacted]

Schedule I

Exhibit 10.2

Execution Version

PERMIAN RESOURCES OPERATING, LLC

SIXTH AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

Dated as of September 1, 2022

THE LIMITED LIABILITY COMPANY INTERESTS REPRESENTED BY THIS SIXTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH LIMITED LIABILITY COMPANY INTERESTS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.

TABLE OF CONTENTS


		Page
ARTICLE I. DEFINITIONS			2

ARTICLE II. ORGANIZATIONAL MATTERS			13

Section 2.01	Formation of Company		13
Section 2.02	Sixth Amended and Restated Limited Liability Company Agreement		13
Section 2.03	Name		13
Section 2.04	Purpose		14
Section 2.05	Principal Office; Registered Office		14
Section 2.06	Term		14
Section 2.07	No State-Law Partnership		14

ARTICLE III. MEMBERS; UNITS; CAPITALIZATION			14

Section 3.01	Members		14
Section 3.02	Units		15
Section 3.03	Recapitalization; the MidCo Unitholder Issuance		15
Section 3.04	Authorization and Issuance of Additional Units		15
Section 3.05	Repurchases or Redemptions		17
Section 3.06	Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units		17
Section 3.07	Negative Capital Accounts		18
Section 3.08	No Withdrawal		18
Section 3.09	Loans From Members		18
Section 3.10	Tax Treatment of Corporate Stock Option Plans and Equity Plans		18
Section 3.11	Dividend Reinvestment Plan, Cash Option Purchase Plan, Stock Incentive Plan or Other Plan		20

ARTICLE IV. DISTRIBUTIONS			20

Section 4.01	Distributions		20
Section 4.02	Restricted Distributions		21

ARTICLE V. CAPITAL ACCOUNTS; ALLOCATIONS; TAX MATTERS			21

Section 5.01	Capital Accounts		21
Section 5.02	Allocations		22
Section 5.03	Regulatory and Special Allocations		22
Section 5.04	Tax Allocations		24
Section 5.05	Withholding; Indemnification and Reimbursement for Payments on Behalf of a Member		26


ARTICLE VI. MANAGEMENT		27

Section 6.01	Authority of Manager	27
Section 6.02	Actions of the Manager	28
Section 6.03	Resignation; No Removal	28
Section 6.04	Vacancies	28
Section 6.05	Transactions Between Company and Manager	28
Section 6.06	Reimbursement for Expenses	28
Section 6.07	Delegation of Authority	29
Section 6.08	Limitation of Liability of Manager	29
Section 6.09	Investment Company Act	30
Section 6.10	Outside Activities of the Manager	30
Section 6.11	Standard of Care	31

ARTICLE VII. RIGHTS AND OBLIGATIONS OF MEMBERS		31

Section 7.01	Limitation of Liability and Duties of Members; Investment Opportunities	31
Section 7.02	Lack of Authority	32
Section 7.03	No Right of Partition	33
Section 7.04	Indemnification	33
Section 7.05	Members Right to Act	34
Section 7.06	Inspection Rights	35

ARTICLE VIII. BOOKS, RECORDS, ACCOUNTING AND REPORTS, AFFIRMATIVE COVENANTS		35

Section 8.01	Records and Accounting	35
Section 8.02	Fiscal Year	35
Section 8.03	Reports	36

ARTICLE IX. TAX MATTERS		36

Section 9.01	Preparation of Tax Returns	36
Section 9.02	Tax Elections	36
Section 9.03	Tax Controversies	37

ARTICLE X. RESTRICTIONS ON TRANSFER OF UNITS; PREEMPTIVE RIGHTS		38

Section 10.01	Transfers by Members	38
Section 10.02	Permitted Transfers	38
Section 10.03	Restricted Units Legend	39
Section 10.04	Transfer	39
Section 10.05	Assignee’s Rights	39
Section 10.06	Assignor’s Rights and Obligations	40
Section 10.07	Overriding Provisions	40


ARTICLE XI. REDEMPTION AND EXCHANGE RIGHTS		41

Section 11.01	Redemption Right of a Member	41
Section 11.02	Contribution of the Corporation	45
Section 11.03	Exchange Right of the Corporation	45
Section 11.04	Reservation of Shares of Class A Common Stock; Listing; Certificate of the Corporation	46
Section 11.05	Effect of Exercise of Redemption or Exchange Right	46
Section 11.06	Tax Treatment	46

ARTICLE XII. ADMISSION OF MEMBERS		46

Section 12.01	Substituted Members	46
Section 12.02	Additional Members	47

ARTICLE XIII. WITHDRAWAL AND RESIGNATION; TERMINATION OF RIGHTS		47

Section 13.01	Withdrawal and Resignation of Members	47

ARTICLE XIV. DISSOLUTION AND LIQUIDATION		47

Section 14.01	Dissolution	47
Section 14.02	Liquidation and Termination	48
Section 14.03	Deferment; Distribution in Kind	48
Section 14.04	Cancellation of Certificate	49
Section 14.05	Reasonable Time for Winding Up	49
Section 14.06	Return of Capital	49

ARTICLE XV. VALUATION		49

Section 15.01	Determination	49
Section 15.02	Dispute Resolution	49

ARTICLE XVI. GENERAL PROVISIONS		50

Section 16.01	Power of Attorney	50
Section 16.02	Confidentiality	51
Section 16.03	Amendments	51
Section 16.04	Title to Company Assets	52
Section 16.05	Addresses and Notices	52
Section 16.06	Binding Effect; Intended Beneficiaries	52
Section 16.07	Creditors	52
Section 16.08	Waiver	53
Section 16.09	Counterparts	53
Section 16.10	Applicable Law	53
Section 16.11	Severability	53
Section 16.12	Further Action	53
Section 16.13	Delivery by Electronic Transmission	54

iii

Schedules

Schedule 1 – Schedule of Members

Exhibits

Exhibit A – Form of Joinder Agreement

PERMIAN RESOURCES OPERATING, LLC

SIXTH AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

This SIXTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”), dated as of September 1, 2022, is entered into by and among Permian Resources Operating, LLC (formerly known as Centennial Resource Production, LLC), a Delaware limited liability company (the “Company”), and its Members (as defined herein).

WHEREAS, the Company was formed as a limited liability company pursuant to and in accordance with the Delaware Act (as defined herein) by the filing of the Certificate (as defined herein) with the Secretary of State of the State of Delaware pursuant to Section 18-201 of the Delaware Act on August 10, 2012;

WHEREAS, the Company entered into a Limited Liability Company Agreement of the Company, dated as of August 30, 2012 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding December 17, 2012, together with all schedules, exhibits and annexes thereto, the “Initial LLC Agreement”), with the members of the Company party thereto;

WHEREAS, the Company entered into an Amended and Restated Limited Liability Company Agreement of the Company, dated as of December 17, 2012 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding May 16, 2013, together with all schedules, exhibits and annexes thereto, the “First A&R LLC Agreement”), with the members of the Company party thereto;

WHEREAS, the Company entered into a Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of May 16, 2013 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding October 15, 2014, together with all schedules, exhibits and annexes thereto, the “Second A&R LLC Agreement”), with the members of the Company party thereto;

WHEREAS, the Company entered into a Third Amended and Restated Limited Liability Company Agreement of the Company, dated as of October 15, 2014 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding April 15, 2015, together with all schedules, exhibits and annexes thereto, the “Third A&R LLC Agreement”), with the members of the Company party thereto;

WHEREAS, the Company entered into a Fourth Amended and Restated Limited Liability Company Agreement of the Company, dated as of April 15, 2015 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding the date hereof, together with all schedules, exhibits and annexes thereto, the “Fourth A&R LLC Agreement”), with the members of the Company party thereto;

WHEREAS, the Company entered into a Fifth Amended and Restated Limited Liability Company Agreement of the Company, dated as of October 11, 2016 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time to but excluding the date hereof, together with all schedules, exhibits and annexes thereto, the “Fifth A&R LLC Agreement”), with the members of the Company party thereto;

WHEREAS, immediately prior to the Effective Time, the Manager (as defined herein) and CRP Holdco Corp., a Delaware corporation (“CRP Holdco Corp.”) held Common Units (as defined in the Fourth A&R LLC Agreement) in the Company (the “Original Interests”);

WHEREAS, each of the Company, Permian Resources Corporation (formerly known as Centennial Resource Development, Inc.), a Delaware corporation (the “Corporation”) and CRP Holdco Corp. desires to amend and restate the Fifth A&R LLC Agreement as of the Effective Time (as defined herein) to reflect (a) the Recapitalization (as defined herein) and the consummation of the transactions contemplated by the Business Combination Agreement (as defined herein), (b) the admission of each of the MidCo Unitholders as a Member and (c) the rights and obligations of the Members that are enumerated and agreed upon in the terms of this Agreement effective as of the Effective Time, at which time the Fifth A&R LLC Agreement shall be superseded entirely by this Agreement; and

WHEREAS, in connection with the Recapitalization and as of the Effective Time, the Original Interests of the Corporation will be canceled and Common Units (as defined herein) will be issued as contemplated by this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Members, intending to be legally bound, hereby agree as follows:

ARTICLE I.

DEFINITIONS

The following definitions shall be applied to the terms used in this Agreement for all purposes, unless otherwise clearly indicated to the contrary.

“Additional Member” has the meaning set forth in Section 12.02.

“Adjusted Capital Account Deficit” means with respect to the Capital Account of any Member as of the end of any Taxable Year, the amount by which the balance in such Capital Account is less than zero. For this purpose, such Member’s Capital Account balance shall be:

(a) reduced for any items described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6); and

increased for any amount such Member is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to minimum gain).

“Admission Date” has the meaning set forth in Section 10.06.

“Affiliate” means, with respect to a specified Person, each other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. As used in this definition and the definition of Majority Member, “control” (including with correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities or by contract or other agreement). Notwithstanding anything to the contrary herein, (a) with respect to the Company Unitholder, “Affiliate” shall not include any portfolio companies of Pearl Energy Investments or NGP Energy Capital and (b) with respect to the Corporation and its Subsidiaries, “Affiliate” shall not include any portfolio companies of Riverstone Energy Investments.

“Agreement” has the meaning set forth in the preamble to this Agreement.

“Appraisers” has the meaning set forth in Section 15.02.

“Assignee” means a Person to whom a Company Interest has been transferred but who has not become a Member pursuant to Article XII.

“Base Rate” means, on any date, a variable rate per annum equal to the rate of interest most recently published by The Wall Street Journal as the “prime rate” at large U.S. money center banks.

“Black-Out Period” means any “black-out” or similar period under the Corporation’s policies covering trading in the Corporation’s securities to which the applicable Redeemed Member is subject, which period restricts the ability of such Redeemed Member to immediately resell shares of Class A Common Stock to be delivered to such Redeemed Member in connection with a Share Settlement.

“Book Value” means, with respect to any Company property, the Company’s adjusted basis for U.S. federal income tax purposes, adjusted from time to time to reflect the adjustments required or permitted by Treasury Regulations Sections 1.704-1(b)(2)(iv)(d)-(g) and 1.704-1(b)(2)(iv)(s); provided, that if any noncompensatory options are outstanding upon the occurrence of any adjustment described herein, the Company shall adjust the Book Values of its properties in accordance with Treasury Regulations Sections 1.704-1(b)(2)(iv)(f)(1) and 1.704-1(b)(2)(iv)(h)(2).

“Business Combination Agreement” means that certain Business Combination Agreement, dated as of May 19, 2022, by and among the Corporation, the Company, Colgate Energy Partners III, LLC, a Delaware limited liability company, and, solely for purposes of the specified provisions therein, Colgate Energy Partners III MidCo, LLC, a Delaware limited liability company (as may be amended or supplemented from time to time).

“Business Combination Closing” means the consummation of the transactions contemplated by the Business Combination Agreement.

“Business Day” means any day other than a Saturday or a Sunday or a day on which banks located in New York City, New York generally are authorized or required by Law to close.

“Capital Account” means the capital account maintained for a Member in accordance with Section 5.01.

“Capital Contribution” means, with respect to any Member, the amount of any cash, cash equivalents, promissory obligations or the Fair Market Value of other property that such Member contributes (or is deemed to contribute) to the Company pursuant to Article III hereof.

“Cash Settlement” means immediately available funds in U.S. dollars in an amount equal to the product of (a) the Share Settlement and (b) the Common Unit Redemption Price.

“Certificate” means the Company’s Certificate of Formation as filed with the Secretary of State of Delaware.

“Change of Control Transaction” means (a) a sale of all or substantially all of the Company’s assets determined on a consolidated basis, (b) a sale of a majority of the Company’s outstanding Units (other than (i) to the Corporation or (ii) in connection with a Redemption or Direct Exchange in accordance with Article XI) or (c) a sale of a majority of the outstanding voting securities of any Material Subsidiary of the Company; in any such case, whether by merger, recapitalization, consolidation, reorganization, combination or otherwise; provided, however, that neither (w) a transaction solely between the Company or any of its Subsidiaries, on the one hand, and the Company or any of its Subsidiaries, on the other hand, nor (x) a transaction solely for the purpose of changing the jurisdiction of domicile of the Company, nor (y) a transaction solely for the purpose of changing the form of entity of the Company, nor (z) a sale of a majority of the outstanding shares of Class A Common Stock, whether by merger, recapitalization, consolidation, reorganization, combination or otherwise, shall in each case of clauses (w), (x), (y) and (z) constitute a Change of Control Transaction.

“Class A Common Stock” means the Class A Common Stock, par value $0.0001 per share, of the Corporation.

“Class C Common Stock” means the Class C Common Stock, par value $0.0001 per share, of the Corporation.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Common Stock” means all classes and series of common stock of the Corporation, including the Class A Common Stock and the Class C Common Stock.

“Common Unit” means a Unit designated as a “Common Unit” and having the rights and obligations specified with respect to the Common Units in this Agreement.

“Common Unit Redemption Price” means, with respect to any Redemption, the arithmetic average of the volume-weighted closing price for a share of Class A Common Stock (or any class of stock into which it has been converted) on the Stock Exchange, or any other exchange or automated or electronic quotation system on which the Class A Common Stock trades, as reported by Bloomberg, L.P., or its successor, for each of the five (5) consecutive full Trading Days ending on and including the last full Trading Day immediately prior to the Redemption Notice Date, subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends

or similar events affecting the Class A Common Stock. If the Class A Common Stock no longer trades on a securities exchange or automated or electronic quotation system, then the Common Unit Redemption Price shall be the fair market value of one share of Class A Common Stock, as determined by a majority of the Independent Directors in good faith, that would be obtained in an arms-length transaction between an informed and willing buyer and an informed and willing seller, with neither party having any compulsion to buy or sell, and without regard to the particular circumstances of the buyer or seller.

“Company” has the meaning set forth in the preamble to this Agreement.

“Company Interest” means the interest of a Member in Profits, Losses and Distributions.

“Company Minimum Gain” means “partnership minimum gain” determined pursuant to Treasury Regulations Section 1.704-2(d).

“Corporate Board” means the Board of Directors of the Corporation.

“Corporation” has the meaning set forth in the recitals to this Agreement, together with its successors and assigns.

“Credit Agreement” means that certain Amended and Restated Credit Agreement, dated as of February 18, 2022, by and among the Company, as borrower, the Corporation, as Parent, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto as may be subsequently amended, restated, supplemented or otherwise modified from time to time and including any one or more refinancings or replacements thereof, in whole or in part, with any other debt facility or debt obligation).

“Delaware Act” means the Delaware Limited Liability Company Act, 6 Del.L. § 18-101, et seq., as it may be amended from time to time, and any successor thereto.

“Depletable Property” means each separate oil and gas property as defined in Code Section 614.

“Depreciation” means, for each Taxable Year or other Fiscal Period, an amount equal to the depreciation, amortization or other cost recovery deduction (excluding depletion) allowable for U.S. federal income tax purposes with respect to property for such Taxable Year or other Fiscal Period, except that (a) with respect to any such property the Book Value of which differs from its adjusted tax basis for U.S. federal income tax purposes and which difference is being eliminated by use of the “remedial method” pursuant to Treasury Regulations Section 1.704-3(d), Depreciation for such Taxable Year or other Fiscal Period shall be the amount of book basis recovered for such Taxable Year or other Fiscal Period under the rules prescribed by Treasury Regulations Section 1.704-3(d)(2), and (b) with respect to any other such property, the Book Value of which differs from its adjusted tax basis at the beginning of such Taxable Year or other Fiscal Period, Depreciation for such Taxable Year or other Fiscal Period shall be an amount which bears the same ratio to such beginning Book Value as the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such Taxable Year or other Fiscal Period bears to such beginning adjusted tax basis; provided, however, that if the adjusted tax basis of any property at the beginning of such Taxable Year or other Fiscal Period is zero dollars ($0.00), Depreciation with respect to such property shall be determined with reference to such beginning Book Value using any reasonable method selected by the Manager.

“Direct Exchange” has the meaning set forth in Section 11.03(a).

“Discount” has the meaning set forth in Section 6.06.

“Distributable Cash” shall mean, as of any relevant date on which a determination is being made by the Manager regarding a potential distribution pursuant to Section 4.01(a), the amount of cash that could be distributed by the Company for such purposes in accordance with the Credit Agreement (and without otherwise violating any applicable provisions of the Credit Agreement).

“Distribution” (and, with a correlative meaning, “Distribute”) means each distribution made by the Company to a Member with respect to such Member’s Units, whether in cash, property or securities of the Company and whether by liquidating distribution or otherwise; provided, however, that none of the following shall be a Distribution: (a) any recapitalization that does not result in the distribution of cash or property to Members or any exchange of securities of the Company, and any subdivision (by Unit split or otherwise) or any combination (by reverse Unit split or otherwise) of any outstanding Units, (b) any other payment made by the Company to a Member in redemption of all or a portion of such Member’s Units or (c) any amounts payable pursuant to Section 6.06.

“Effective Time” has the meaning set forth in Section 16.15.

“Equity Plan” means any stock or equity purchase plan, restricted stock or equity plan or other similar equity compensation plan now or hereafter adopted by the Company or the Corporation.

“Equity Securities” means (i) with respect to the Company or any of its Subsidiaries, (a) Units or other equity interests in the Company or any Subsidiary of the Company (including other classes or groups thereof having such relative rights, powers and duties as may from time to time be established by the Manager pursuant to the provisions of this Agreement, including rights, powers and/or duties senior to existing classes and groups of Units and other equity interests in the Company or any Subsidiary of the Company), (b) obligations, evidences of indebtedness or other securities or interests convertible or exchangeable into Units or other equity interests in the Company or any Subsidiary of the Company, and (c) warrants, options or other rights to purchase or otherwise acquire Units or other equity interests in the Company or any Subsidiary of the Company and (ii) with respect to the Corporation, any and all shares, interests, participation or other equivalents (however designated) of corporate stock, including all common stock and preferred stock, or warrants, options or other rights to acquire any of the foregoing, including any debt instrument convertible or exchangeable into any of the foregoing.

“Event of Withdrawal” means the expulsion, bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the Company. “Event of Withdrawal” shall not include an event that does not terminate the existence of such Member under applicable state law (or, in the case of a trust that is a Member, does not terminate the trusteeship of the fiduciaries under such trust with respect to all the Company Interests of such trust that is a Member).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Election Notice” has the meaning set forth in Section 11.03(b).

“Fair Market Value” means, with respect to any asset, its fair market value determined according to Article XV.

“Fifth A&R LLC Agreement” has the meaning set forth in the recitals to this Agreement.

“First A&R LLC Agreement” has the meaning set forth in the recitals to this Agreement.

“Fiscal Period” means any interim accounting period within a Taxable Year established by the Company and which is permitted or required by Section 706 of the Code.

“Fiscal Year” means the Company’s annual accounting period established pursuant to Section 8.02.

“Fourth A&R LLC Agreement” has the meaning set forth in the recitals to this Agreement.

“Governmental Entity” means (a) the United States of America, (b) any other sovereign nation, (c) any state, province, district, territory or other political subdivision of (a) or (b) of this definition, including any county, municipal or other local subdivision of the foregoing, or (d) any entity exercising executive, legislative, judicial, regulatory or administrative functions of government on behalf of (a), (b) or (c) of this definition.

“Indemnified Person” has the meaning set forth in Section 7.04(a).

“Independent Directors” means the members of the Corporate Board who are “independent” under the standards set forth in Rule 10A-3 promulgated under the Securities Act and the corresponding rules of the applicable exchange on which the Class A Common Stock is traded or quoted.

“Initial LLC Agreement” has the meaning set forth in the recitals to this Agreement.

“Investment Company Act” means the U.S. Investment Company Act of 1940, as amended from time to time.

“Joinder” means a joinder to this Agreement, in form and substance substantially similar to Exhibit A to this Agreement.

“Law” means all laws, statutes, ordinances, rules and regulations of the United States, any foreign country and each state, commonwealth, city, county, municipality, regulatory body, agency or other political subdivision thereof.

“LLC Employee” means an employee of, or other service provider to, the Company or any Subsidiary, in each case acting in such capacity.

“Losses” means items of Company loss or deduction determined according to Section 5.01(b).

“Majority Members” means the Members (which may include the Manager) holding a majority of the Units then outstanding; provided that, if as of any date of determination, a majority of the Units are then held by the Manager or any Affiliates controlled by the Manager, then “Majority Members” shall mean the Manager together with Members holding a majority of the Units (excluding Units held by the Manager and its controlled Affiliates) then outstanding.

“Manager” has the meaning set forth in Section 6.01.

“Manager Change of Control” shall be deemed to have occurred if or upon:

(a) both the stockholders of the Corporation and the Corporate Board approve, in accordance with the Corporation’s certificate of incorporation and applicable law, the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Corporation’s assets (determined on a consolidated basis), including a sale of all of the equity interests in the Company, to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than to any directly or indirectly wholly owned subsidiary of the Corporation, and such sale, lease or transfer is consummated;

(b) both the stockholders of the Corporation and the Corporate Board approve, in accordance with the Corporation’s certificate of incorporation and applicable law, a merger or consolidation of the Corporation with any other Person, other than a merger or consolidation which would result in the Voting Securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50.01% of the total voting power represented by the Voting Securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, and such merger or consolidation is consummated; or

(c) the acquisition, directly or indirectly, by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than (a) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or (b) a corporation or other entity owned, directly or indirectly, by all of the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of at least 50.01% of the aggregate voting power of the Voting Securities of the Corporation; provided, that the Corporate Board recommends or otherwise approves or determines that such acquisition is in the best interests of the Corporation and its stockholders.

“Market Price” means, with respect to a share of Class A Common Stock as of a specified date, the last sale price per share of Class A Common Stock, regular way, or if no such sale took place on such day, the average of the closing bid and asked prices per share of Class A Common Stock, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Stock Exchange or, if the Class A Common Stock is not listed or admitted to trading on the Stock Exchange, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Class A Common Stock is listed or admitted to trading or, if the Class A Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low

asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if the Class A Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Class A Common Stock selected by the Corporate Board or, in the event that no trading price is available for the shares of Class A Common Stock, the fair market value of a share of Class A Common Stock, as determined in good faith by the Corporate Board.

“Material Subsidiary” means any direct or indirect Subsidiary of the Company that, as of any date of determination, represents more than (a) 50% of the consolidated net tangible assets of the Company or (b) 50% of the consolidated net income of the Company before interest, taxes, depreciation and amortization (calculated in a manner substantially consistent with the definition of “Consolidated Net Income” and “EBITDAX” or similar definition(s) appearing in the Credit Agreement, including such additional adjustments that are permitted to be made to such measure as described in “EBITDAX” or a similar definition appearing in the Credit Agreement).

“Member” means, as of any date of determination, (a) each of the members named on the Schedule of Members and (b) any Person admitted to the Company as a Substituted Member or Additional Member in accordance with Article XII, but in each case only so long as such Person is shown on the Company’s books and records as the owner of one or more Units.

“Member Minimum Gain” means “partner nonrecourse debt minimum gain” as defined in Treasury Regulations Section 1.704-2(i)(3).

“MidCo Unitholder” means each of Colgate Energy Partners III MidCo, LLC, Colgate Energy Partners, LLC, Colgate Energy Partners II, LLC and CEP Holdings, LLC, and their successors and assigns.

“Officer” has the meaning set forth in Section 6.01(b).

“Optionee” means a Person to whom a stock option is granted under any Stock Option Plan.

“Original Interests” has the meaning set forth in the recitals to this Agreement.

“Other Agreements” has the meaning set forth in Section 10.04.

“Partnership Audit Provisions” shall mean Sections 6221 through 6241 of the Code, together with any guidance issued thereunder or successor provisions and any similar provision of state or local tax laws.

“Partnership Representative” has the meaning set forth in Section 9.03(a).

“Percentage Interest” means, with respect to a Member at a particular time, such Member’s percentage interest in the Company determined by dividing such Member’s Units by the total Units of all Members at such time. The Percentage Interest of each member shall be calculated to the 4th decimal place.

“Permitted Transfer” has the meaning set forth in Section 10.02.

“Pro rata,” “proportional,” “in proportion to,” and other similar terms, means, with respect to the holder of Units, pro rata based upon the number of such Units held by such holder as compared to the total number of Units outstanding.

“Profits” means items of Company income and gain determined according to Section 5.01(b).

“Recapitalization” has the meaning set forth in Section 3.02.

“Reclassification Event” means any of the following: (i) any reclassification or recapitalization of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination or any transaction subject to Section 3.04), (ii) any merger, consolidation or other combination involving the Corporation, or (iii) any sale, conveyance, lease, or other disposal of all or substantially all the properties and assets of the Corporation to any other Person, in each of clauses (i), (ii) or (iii), as a result of which holders of Common Stock shall be entitled to receive cash, securities or other property for their shares of Common Stock.

“Redeemed Member” has the meaning set forth in Section 11.01(a).

“Redeemed Units” has the meaning set forth in Section 11.01(a).

“Redemption” has the meaning set forth in Section 11.01(a).

“Redemption Date” has the meaning set forth in Section 11.01(a).

“Redemption Notice” has the meaning set forth in Section 11.01(a).

“Redemption Notice Date” has the meaning set forth in Section 11.01(a).

“Redemption Right” has the meaning set forth in Section 11.01(a).

“Registration Rights Agreement” means that certain Registration Rights Agreement, dated as of the date hereof, by and among the Corporation, MidCo Unitholder and the other parties named therein (together with any joinder thereto from time to time by any successor or assign to any party to such Agreement).

“Related Person” has the meaning set forth in Section 7.01(c).

“Relative” means, with respect to any natural person: (a) such natural person’s spouse; (b) any lineal descendant, parent, grandparent, great grandparent or sibling or any lineal descendant of such sibling (in each case whether by blood or legal adoption); and (c) the spouse of a natural person described in clause (b) of this definition.

“Retraction Notice” has the meaning set forth in Section 11.01(b).

“Schedule of Members” has the meaning set forth in Section 3.01(b).

“SEC” means the U.S. Securities and Exchange Commission, including any governmental body or agency succeeding to the functions thereof.

“Second A&R LLC Agreement” has the meaning set forth in the recitals to this Agreement.

“Securities Act” means the U.S. Securities Act of 1933, as amended, and applicable rules and regulations thereunder, and any successor to such statute, rules or regulations. Any reference herein to a specific section, rule or regulation of the Securities Act shall be deemed to include any corresponding provisions of future Law.

“Settlement Method Notice” has the meaning set forth in Section 11.01(b).

“Share Settlement” means a number of shares of Class A Common Stock equal to the number of Redeemed Units.

“Simulated Basis” means, with respect to each Depletable Property, the Book Value of such property. For purposes of such computation, the Simulated Basis of each Depletable Property (including any additions to such Simulated Basis resulting from expenditures required to be capitalized in such Simulated Basis) shall be allocated to each Member in accordance with such Member’s relative Percentage Interest as of the time such Depletable Property (or such addition to such Simulated Basis resulting from expenditures required to be capitalized in such Simulated Basis) is acquired (or expended) by the Company, and shall be reallocated among the Members in accordance with the such Members’ Percentage Interest as determined immediately following the occurrence of an event giving rise to an adjustment to the Book Value of the Company’s Depletable Properties pursuant to the definition of Book Value. Upon a transfer by a Member of any Units, a portion of the Simulated Basis allocated to such Member shall be reallocated to the transferee in accordance with the relative Percentage Interest transferred.

“Simulated Depletion” means, with respect to each Depletable Property, a depletion allowance computed in accordance with U.S. federal income tax principles and in a manner specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2). For purposes of computing Simulated Depletion with respect to any Depletable Property, in no event shall such allowance, in the aggregate, exceed the Simulated Basis of such Depletable Property. If the Book Value of a Depletable Property is adjusted pursuant to the definition of Book Value during a Taxable Year or other Fiscal Period, following such adjustment Simulated Depletion shall thereafter be calculated under the foregoing provisions based upon such adjusted Book Value.

“Simulated Gain” means the excess, if any, of the amount realized from the sale or other disposition of a Depletable Property over the Book Value of such Depletable Property and determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2).

“Simulated Loss” means the excess, if any, of the Book Value of a Depletable Property over the amount realized from the sale or other disposition of such Depletable Property and determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2).

“Sponsor Person” has the meaning set forth in Section 7.04(d).

“Stock Exchange” means the NASDAQ Capital Market.

“Stock Option Plan” means any stock option plan now or hereafter adopted by the Company or by the Corporation.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of the voting interests thereof are at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, references to a “Subsidiary” of the Company shall be given effect only at such times that the Company has one or more Subsidiaries, and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Company.

“Substituted Member” means a Person that is admitted as a Member to the Company pursuant to Section 12.01.

“Taxable Year” means the Company’s accounting period for U.S. federal income tax purposes determined pursuant to Section 9.02.

“Third A&R LLC Agreement” has the meaning set forth in the recitals to this Agreement.

“Trading Day” means a day on which the Stock Exchange or such other principal United States securities exchange on which the Class A Common Stock is listed or admitted to trading is open for the transaction of business (unless such trading shall have been suspended for the entire day).

“Transfer” (and, with a correlative meaning, “Transferring”) means any sale, transfer, assignment, pledge, encumbrance or other disposition of (whether directly or indirectly, whether with or without consideration and whether voluntarily or involuntarily or by operation of Law) (a) any interest (legal or beneficial) in any Equity Securities of the Company or (b) any equity or other interest (legal or beneficial) in any Member if substantially all of the assets of such Member consist solely of Units.

“Treasury Regulations” means the regulations promulgated under the Code and any corresponding provisions of succeeding regulations.

“Unit” means a Company Interest of a Member or a permitted Assignee in the Company representing a fractional part of the Company Interests of all Members and Assignees as may be established by the Manager from time to time in accordance with Section 3.02; provided, however, that any class or group of Units issued shall have the relative rights, powers and duties set forth in this Agreement, and the Company Interest represented by such class or group of Units shall be determined in accordance with such relative rights, powers and duties.

“Value” means (a) for any Stock Option Plan, the Market Price for the trading day immediately preceding the date of exercise of a stock option under such Stock Option Plan and (b) for any Equity Plan other than a Stock Option Plan, the Market Price for the trading day immediately preceding the Vesting Date.

“Vesting Date” has the meaning set forth in Section 3.10(c).

“Voting Securities” means any Equity Securities of the Corporation that are entitled to vote generally in matters submitted for a vote of the Corporation’s stockholders or generally in the election of the Corporate Board.

ARTICLE II.

ORGANIZATIONAL MATTERS

Section 2.01 Formation of Company. The Company was formed on August 10, 2012 pursuant to the provisions of the Delaware Act.

Section 2.02 Sixth Amended and Restated Limited Liability Company Agreement. The Members hereby execute this Agreement for the purpose of amending, restating and superseding the Fifth A&R LLC Agreement in its entirety and otherwise establishing the affairs of the Company and the conduct of its business in accordance with the provisions of the Delaware Act. The Members hereby agree that during the term of the Company set forth in Section 2.06 the rights and obligations of the Members with respect to the Company will be determined in accordance with the terms and conditions of this Agreement and the Delaware Act. On any matter upon which this Agreement is silent, the Delaware Act shall control. No provision of this Agreement shall be in violation of the Delaware Act and to the extent any provision of this Agreement is in violation of the Delaware Act, such provision shall be void and of no effect to the extent of such violation without affecting the validity of the other provisions of this Agreement; provided, however, that where the Delaware Act provides that a provision of the Delaware Act shall apply “unless otherwise provided in a limited liability company agreement” or words of similar effect, the provisions of this Agreement shall in each instance control; provided further, that notwithstanding the foregoing, Section 18-210 of the Delaware Act shall not apply or be incorporated into this Agreement.

Section 2.03 Name. The name of the Company shall be “Permian Resources Operating, LLC.” The Manager in its sole discretion may change the name of the Company at any time and from time to time. Notification of any such change shall be given to all of the Members and, to the extent practicable, to all of the holders of any Equity Securities then outstanding. The Company’s business may be conducted under its name and/or any other name or names deemed advisable by the Manager.

Section 2.04 Purpose; Powers. The primary business and purpose of the Company shall be to engage in such activities as are permitted under the Delaware Act and determined from time to time by the Manager in accordance with the terms and conditions of this Agreement. The Company shall have the power and authority to take (directly or indirectly through its Subsidiaries) any and all actions and engage in any and all activities necessary, appropriate, desirable, advisable, ancillary or incidental to accomplish the foregoing purpose.

Section 2.05 Principal Office; Registered Office. The principal office of the Company shall be located at such place or places as the Manager may from time to time designate. The address of the registered office of the Company in the State of Delaware shall be 251 Little Falls Drive, Wilmington, County of New Castle, DE 19808, and the registered agent for service of process on the Company in the State of Delaware at such registered office shall be Corporation Service Company. The Manager may from time to time change the Company’s registered agent and registered office in the State of Delaware.

Section 2.06 Term. The term of the Company commenced upon the filing of the Certificate in accordance with the Delaware Act and shall continue in existence until termination and dissolution of the Company in accordance with the provisions of Article XIV.

Section 2.07 No State-Law Partnership. The Members intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member by virtue of this Agreement, for any purposes other than as set forth in the last sentence of this Section 2.07, and neither this Agreement nor any other document entered into by the Company or any Member relating to the subject matter hereof shall be construed to suggest otherwise. The Members intend that the Company shall be treated as a partnership for U.S. federal (and applicable state and local) income tax purposes, and that each Member and the Company shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment.

ARTICLE III.

MEMBERS; UNITS; CAPITALIZATION

Section 3.01 Members.

(a) The Corporation and CRP Holdco Corp. were previously admitted as Members and shall remain Members of the Company upon the Effective Time. At the Effective Time and concurrently with the Business Combination Closing, each of the MidCo Unitholders shall be admitted to the Company as a Member.

(b) The Company shall maintain a schedule setting forth: (i) the name and address of each Member; (ii) the aggregate number of outstanding Units and the number and class of Units held by each Member; (iii) the aggregate amount of cash Capital Contributions that has been made by the Members with respect to their Units; and (iv) the Fair Market Value of any property other than cash contributed by the Members with respect to their Units (including, if applicable, a description and the amount of any liability assumed by the Company or to which contributed property is subject) (such schedule, the “Schedule of Members”). The applicable Schedule of Members in effect as of the Effective Time (after giving effect to the Recapitalization) is set forth as Schedule 1 to this Agreement. The Schedule of Members shall be the definitive record of ownership of each Unit of the Company and all relevant information with respect to each Member. The Company shall be entitled to recognize the exclusive right of a Person registered on its records as the owner of Units for all purposes and shall not be bound to recognize any equitable or other claim to or interest in Units on the part of any other Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the Delaware Act.

(c) No Member shall be required or, except as approved by the Manager pursuant to Section 6.01 and in accordance with the other provisions of this Agreement, permitted to loan any money or property to the Company or borrow any money or property from the Company.

Section 3.02 Units. Interests in the Company shall be represented by Units, or such other securities of the Company, in each case as the Manager may establish in its discretion in accordance with the terms and subject to the restrictions hereof. Immediately after the Effective Time, the Units will be comprised of a single class of Common Units. To the extent required pursuant to Section 3.04(a), the Manager may create one or more classes or series of Common Units or preferred Units solely to the extent they are in the aggregate substantially equivalent to a class of common stock of the Corporation or class or series of preferred stock of the Corporation.

Section 3.03 Recapitalization; the MidCo Unitholder Issuance.

(a) Recapitalization. Pursuant to the Business Combination Agreement, at the Business Combination Closing, the Original Interests that were held by the Corporation prior to the execution and effectiveness of this Agreement are hereby converted into the number of Common Units set forth next to the Corporation’s name on Schedule 1 (collectively, the “Recapitalization”).

(b) Issuance to MidCo Unitholder. In connection with the Business Combination Closing, at the Business Combination Closing, MidCo Unitholder was issued the number of Common Units set forth next to such MidCo Unitholder’s name on Schedule 1.

Section 3.04 Authorization and Issuance of Additional Units.

(a) If at any time the Corporation issues a share of its Class A Common Stock or any other Equity Security of the Corporation, (i) the Company shall issue to the Corporation one Common Unit (if the Corporation issues a share of Class A Common Stock), or such other Equity Security of the Company (if the Corporation issues Equity Securities other than Class A Common Stock) corresponding to the Equity Securities issued by the Corporation, and with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Corporation and (ii) the net proceeds received by the Corporation with respect to the corresponding share of Class A Common Stock or other Equity Security, if any, shall be concurrently contributed by the Corporation to the Company as a Capital Contribution; provided, that if the Corporation issues any shares of Class A Common Stock in order to directly purchase from another Member (other than the Corporation) a number of Common Units pursuant to Section 11.03(a) (and a corresponding number of shares of Class C Common Stock), then the Company shall not issue any new Common Units in connection therewith and the Corporation shall not be required to transfer such net proceeds to the Company (it being understood that such net proceeds shall instead be transferred

to such other Member as consideration for such purchase). Notwithstanding the foregoing, this Section 3.04(a) shall not apply to (i) (A) the issuance and distribution to holders of shares of Class A Common Stock of rights to purchase Equity Securities of the Corporation under a “poison pill” or similar shareholders rights plan or (B) the issuance under the Corporation’s Equity Plans or Stock Option Plans of any warrants, options, other rights to acquire Equity Securities of the Corporation or rights or property that may be converted into or settled in Equity Securities of the Corporation, but shall in each of the foregoing cases apply to the issuance of Equity Securities of the Corporation in connection with the exercise or settlement of such rights, warrants, options or other rights or property or (ii) the issuance of Equity Securities pursuant to any Equity Plan (other than a Stock Option Plan) that are restricted, subject to forfeiture or otherwise unvested upon issuance, but shall apply on the applicable Vesting Date with respect to such Equity Securities. Except pursuant to Article XI, (x) the Company may not issue any additional Common Units to the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary issues or sells an equal number of shares of the Corporation’s Class A Common Stock to another Person, and (y) the Company may not issue any other Equity Securities of the Company to the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary issues or sells, to another Person, an equal number of shares of a new class or series of Equity Securities of the Corporation or such Subsidiary with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Company.

(b) The Company shall only be permitted to issue additional Units or other Equity Securities in the Company to the Persons and on the terms and conditions provided for in Section 3.02, this Section 3.04 and Section 3.11.

(c) The Company shall not in any manner effect any subdivision (by equity split, equity distribution, reclassification, recapitalization or otherwise) or combination (by reverse equity split, reclassification, recapitalization or otherwise) of the outstanding Common Units unless accompanied by an identical subdivision or combination, as applicable, of the outstanding Common Stock, with corresponding changes made with respect to any other exchangeable or convertible securities. The Corporation shall not in any manner effect any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of the outstanding Common Stock unless accompanied by an identical subdivision or combination, as applicable, of the outstanding Common Units, with corresponding changes made with respect to any other exchangeable or convertible securities. The Company shall not in any manner effect any subdivision (by equity split, equity distribution, reclassification, recapitalization or otherwise) or combination (by reverse equity split, reclassification, recapitalization or otherwise) of any outstanding Equity Securities of the Company (other than the Common Units) unless accompanied by an identical subdivision or combination, as applicable, of the corresponding Equity Securities of the Corporation, with corresponding changes made with respect to any other exchangeable or convertible securities. The Corporation shall not in any manner effect any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of any outstanding Equity Securities of the Corporation (other than the Common Stock) unless accompanied by an identical subdivision or combination, as applicable, of the corresponding Equity Securities of the Company, with corresponding changes made with respect to any other exchangeable or convertible securities.

Section 3.05 Repurchases or Redemptions. The Corporation or any of its Subsidiaries may not redeem, repurchase or otherwise acquire (i) any shares of Class A Common Stock unless substantially simultaneously the Company redeems, repurchases or otherwise acquires from the Corporation an equal number of Common Units for the same price per security or (ii) any other Equity Securities of the Corporation unless substantially simultaneously the Company redeems, repurchases or otherwise acquires from the Corporation an equal number of Equity Securities of the Company of a corresponding class or series with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Corporation for the same price per security. The Company may not redeem, repurchase or otherwise acquire (A) any Common Units from the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary redeems, repurchases or otherwise acquires an equal number of shares of Class A Common Stock for the same price per security from holders thereof, or (B) any other Equity Securities of the Company from the Corporation or any of its Subsidiaries unless substantially simultaneously the Corporation or such Subsidiary redeems, repurchases or otherwise acquires for the same price per security an equal number of Equity Securities of the Corporation of a corresponding class or series with substantially the same rights to dividends and distributions (including distribution upon liquidation) and other economic rights as those of such Equity Securities of the Corporation. Notwithstanding the foregoing, to the extent that any consideration payable by the Corporation in connection with the redemption or repurchase of any shares of Class A Common Stock or other Equity Securities of the Corporation or any of its Subsidiaries consists (in whole or in part) of shares of Class A Common Stock or such other Equity Securities (including, for the avoidance of doubt, in connection with the cashless exercise of an option or warrant), then the redemption or repurchase of the corresponding Common Units or other Equity Securities of the Company shall be effectuated in an equivalent manner.

Section 3.06 Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units.

(a) Units shall not be certificated unless otherwise determined by the Manager. If the Manager determines that one or more Units shall be certificated, each such certificate shall be signed by or in the name of the Company, by the Chief Executive Officer, Chief Financial Officer, General Counsel, Secretary or any other officer designated by the Manager, representing the number of Units held by such holder. Such certificate shall be in such form (and shall contain such legends) as the Manager may determine. Any or all of such signatures on any certificate representing one or more Units may be a facsimile, engraved or printed, to the extent permitted by applicable Law. The Manager agrees that it shall not elect to treat any Unit as a “security” within the meaning of Article 8 of the Uniform Commercial Code unless thereafter all Units then outstanding are represented by one or more certificates.

(b) If Units are certificated, the Manager may direct that a new certificate representing one or more Units be issued in place of any certificate theretofore issued by the Company alleged to have been lost, stolen or destroyed, upon delivery to the Manager of an affidavit of the owner or owners of such certificate, setting forth such allegation. The Manager may require the owner of such lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.

(c) To the extent Units are certificated, upon surrender to the Company or the transfer agent of the Company, if any, of a certificate for one or more Units, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, in compliance with the provisions hereof, the Company shall issue a new certificate representing one or more Units to the Person entitled thereto, cancel the old certificate and record the transaction upon its books. Subject to the provisions of this Agreement, the Manager may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, Transfer and registration of Units.

Section 3.07 Negative Capital Accounts. No Member shall be required to pay to any other Member or the Company any deficit or negative balance which may exist from time to time in such Member’s Capital Account (including upon and after dissolution of the Company).

Section 3.08 No Withdrawal. No Person shall be entitled to withdraw any part of such Person’s Capital Contribution or Capital Account or to receive any Distribution from the Company, except as expressly provided in this Agreement.

Section 3.09 Loans From Members. Loans by Members to the Company shall not be considered Capital Contributions. Subject to the provisions of Section 3.01(c), the amount of any such advances shall be a debt of the Company to such Member and shall be payable or collectible in accordance with the terms and conditions upon which such advances are made.

Section 3.10 Tax Treatment of Corporate Stock Option Plans and Equity Plans.

(a) Options Granted to Persons other than LLC Employees. If at any time or from time to time, in connection with any Stock Option Plan, a stock option granted over shares of Class A Common Stock to a Person other than an LLC Employee is duly exercised, notwithstanding the amount of the Capital Contribution actually made pursuant to Section 3.04(a), solely for U.S. federal (and applicable state and local) income tax purposes, the Corporation shall be deemed to have contributed to the Company as a Capital Contribution, in lieu of the Capital Contribution actually made and in consideration of additional Common Units, an amount equal to the Value of a share of Class A Common Stock as of the date of such exercise multiplied by the number of shares of Class A Common Stock then being issued by the Corporation in connection with the exercise of such stock option.

(b) Options Granted to LLC Employees. If at any time or from time to time, in connection with any Stock Option Plan, a stock option granted over shares of Class A Common Stock to an LLC Employee is duly exercised, solely for U.S. federal (and applicable state and local) income tax purposes, the following transactions shall be deemed to have occurred:

(i) The Corporation shall sell to the Optionee, and the Optionee shall purchase from the Corporation, for a cash price per share equal to the Value of a share of Class A Common Stock at the time of the exercise, the number of shares of Class A Common Stock equal to the quotient of (x) the exercise price payable by the Optionee in connection with the exercise of such stock option divided by (y) the Value of a share of Class A Common Stock at the time of such exercise.

(ii) The Corporation shall sell to the Company (or if the Optionee is an employee of, or other service provider to, a Subsidiary, the Corporation shall sell to such Subsidiary), and the Company (or such Subsidiary, as applicable) shall purchase from the Corporation, a number of shares of Class A Common Stock equal to the excess of (x) the number of shares of Class A Common Stock as to which such stock option is being exercised over (y) the number of shares of Class A Common Stock sold pursuant to Section 3.10(b)(i) hereof. The purchase price per share of Class A Common Stock for such sale of shares of Class A Common Stock to the Company (or such Subsidiary) shall be the Value of a share of Class A Common Stock as of the date of exercise of such stock option.

(iii) The Company shall transfer to the Optionee (or if the Optionee is an employee of, or other service provider to, a Subsidiary, the Subsidiary shall transfer to the Optionee) at no additional cost to such LLC Employee and as additional compensation to such LLC Employee, the number of shares of Class A Common Stock described in Section 3.10(b)(ii).

(iv) The Corporation shall be deemed to have contributed any amounts received by the Corporation pursuant to Section 3.10(b)(i) and any amount deemed to be received by the Company pursuant to Section 3.10(b)(ii) in connection with the exercise of such stock option.

The transactions described in this Section 3.10(b) are intended to comply with the provisions of Treasury Regulations Section 1.1032-3 and shall be interpreted consistently therewith.

(c) Restricted Stock Granted to LLC Employees. If at any time or from time to time, in connection with any Equity Plan (other than a Stock Option Plan), any shares of Class A Common Stock are issued to an LLC Employee (including any shares of Class A Common Stock that are subject to forfeiture in the event such LLC Employee terminates his or her employment with the Company or any Subsidiary) in consideration for services performed for the Company or any Subsidiary, on the date (such date, the “Vesting Date”) that the Value of such shares is includible in taxable income of such LLC Employee, the following events will be deemed to have occurred solely for U.S. federal (and applicable state and local) income tax purposes: (a) the Corporation shall be deemed to have sold such shares of Class A Common Stock to the Company (or if such LLC Employee is an employee of, or other service provider to, a Subsidiary, to such Subsidiary) for a purchase price equal to the Value of such shares of Class A Common Stock, (b) the Company (or such Subsidiary) shall be deemed to have delivered such shares of Class A Common Stock to such LLC Employee, (c) the Corporation shall be deemed to have contributed the purchase price for such shares of Class A Common Stock to the Company as a Capital Contribution, and (d) in the case where such LLC Employee is an employee of a Subsidiary, the Company shall be deemed to have contributed such amount to the capital of the Subsidiary.

(d) Future Stock Incentive Plans. Nothing in this Agreement shall be construed or applied to preclude or restrain the Corporation from adopting, modifying or terminating stock incentive plans for the benefit of employees, directors or other business associates of the Corporation, the Company or any of their respective Affiliates. The Members acknowledge and agree that, in the event that any such plan is adopted, modified or terminated by the Corporation, amendments to this Section 3.10 may become necessary or advisable and that any approval or consent to any such amendments requested by the Corporation shall be deemed granted by the Manager without the requirement of any further consent or acknowledgement of any other Member.

(e) Anti-dilution adjustments. For all purposes of this Section 3.10, the number of shares of Class A Common Stock and the corresponding number of Common Units shall be determined after giving effect to all anti-dilution or similar adjustments that are applicable, as of the date of exercise or vesting, to the option, warrant, restricted stock or other equity interest that is being exercised or becomes vested under the applicable Stock Option Plan or other Equity Plan and applicable award or grant documentation.

Section 3.11 Dividend Reinvestment Plan, Cash Option Purchase Plan, Stock Incentive Plan or Other Plan. Except as may otherwise be provided in this Article III, all amounts received or deemed received by the Corporation in respect of any dividend reinvestment plan, cash option purchase plan, stock incentive or other stock or subscription plan or agreement, either (a) shall be utilized by the Corporation to effect open market purchases of shares of Class A Common Stock, or (b) if the Corporation elects instead to issue new shares of Class A Common Stock with respect to such amounts, shall be contributed by the Corporation to the Company in exchange for additional Units. Upon such contribution, the Company will issue to the Corporation a number of Units equal to the number of new shares of Class A Common Stock so issued.

ARTICLE IV.

DISTRIBUTIONS

Section 4.01 Distributions.

(a) Distributable Cash; Other Distributions. To the extent permitted by applicable Law and hereunder, Distributions to Members may be declared by the Manager out of Distributable Cash or other funds or property legally available therefor in such amounts and on such terms (including the payment dates of such Distributions) as the Manager shall determine using such record date as the Manager may designate; such Distributions shall be made to the Members as of the close of business on such record date on a pro rata basis in accordance with each Member’s Percentage Interest as of the close of business on such record date; provided, however, that the Manager shall have the obligation to make Distributions as set forth in Sections 4.01(b) and 14.02; and provided further that, notwithstanding any other provision herein to the contrary, no Distributions shall be made to any Member to the extent such Distribution would violate Section 18-607 of the Delaware Act. Promptly following the designation of a record date and the declaration of a Distribution pursuant to this Section 4.01(a), the Manager shall give notice to each Member of the record date, the amount and the terms of the Distribution and the payment date thereof. In furtherance of the foregoing, it is intended that the Manager shall, to the extent permitted by applicable Law and hereunder, have the right in its sole discretion to make Distributions to the Members pursuant to this Section 4.01(a) in such amounts as shall enable the Corporation to pay dividends or to meet its obligations (to the extent such obligations are not

otherwise able to be satisfied as a result of tax distributions required to be made pursuant to Section 4.01(b) or reimbursements required to be made pursuant to Section 6.06).

(b) Tax Distributions. The Company shall make distributions to all Members pro rata, in accordance with each Member’s Percentage Interest, at such times and in such amounts as necessary to enable the Corporation to timely satisfy all of its U.S. federal, state and local and non-U.S. tax liabilities.

Section 4.02 Restricted Distributions. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make any Distribution to any Member on account of any Company Interest if such Distribution would violate any applicable Law or the terms of the Credit Agreement.

ARTICLE V.

CAPITAL ACCOUNTS; ALLOCATIONS; TAX MATTERS

Section 5.01 Capital Accounts.

(a) The Company shall maintain a separate Capital Account for each Member according to the rules of Treasury Regulations Section 1.704-1(b)(2)(iv). For this purpose, the Company may (in the discretion of the Manager), upon the occurrence of the events specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(f), increase or decrease the Capital Accounts in accordance with the rules of such Treasury Regulations and Treasury Regulations Section 1.704-1(b)(2)(iv)(g) to reflect a revaluation of Company property. The Capital Account balance of each of the Members as of the date hereof, as adjusted in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f) and Section 3.04(c) of this Agreement, is its respective “Business Combination Closing Capital Account Balance” set forth on the Schedule of Members.

(b) For purposes of computing the amount of any item of Company income, gain, loss or deduction to be allocated pursuant to this Article V and to be reflected in the Capital Accounts of the Members, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for U.S. federal income tax purposes (including any method of depreciation, cost recovery or amortization used for this purpose); provided, however, that:

(i) The computation of all items of income, gain, loss and deduction shall include those items described in Code Section 705(a)(l)(B) or Code Section 705(a)(2)(B) and Treasury Regulations Section 1.704-1(b)(2)(iv)(i), without regard to the fact that such items are not includable in gross income or are not deductible for U.S. federal income tax purposes.

(ii) If the Book Value of any Company property is adjusted pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(e) or (f), the amount of such adjustment shall be taken into account as gain or loss from the disposition of such property.

(iii) Items of income, gain, loss or deduction attributable to the disposition of Company property having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the Book Value of such property.

(iv) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing Profits or Losses (excluding depletion with respect to a Depletable Property), there shall be taken into account Depreciation for such Taxable Year or other Fiscal Period.

(v) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis).

(vi) Simulated Gains with respect to Depletable Properties shall be taken into account in computing Profits and Losses in lieu of actual gains on such Depletable Properties.

(vii) Items specifically allocated under Section 5.03 shall be excluded from the computation of Profits and Losses.

Section 5.02 Allocations. After giving effect to the allocations under Section 5.03, and subject to Section 5.04, Profits and Losses for any Taxable Year or other Fiscal Period shall be allocated among the Capital Accounts of the Members pro rata in such a manner that, after giving effect to the special allocations set forth in Section 5.03 and all other distributions through the end of such Taxable Year or other Fiscal Period, the Capital Account balance of each Member, immediately after making such allocation, is as nearly as possible equal to (a) the amount such Member would receive pursuant to Section 14.02(d) if all of the assets of the Company on hand at the end of such Taxable Year or other Fiscal Period were sold for cash equal to their Book Values, all liabilities of the Company were satisfied in cash in accordance with their terms (limited with respect to each nonrecourse liability to the Book Value of the assets securing such liability), and all remaining or resulting cash were distributed, in accordance with Section 14.02(d), to the Members immediately after making such allocation, minus (b) such Member’s share of the Company Minimum Gain and Member Minimum Gain, computed immediately prior to the hypothetical sale of assets, and the amount any such Member is treated as obligated to contribute to the Company, computed immediately after the hypothetical sale of assets. Notwithstanding any contrary provision in this Agreement, the Manager shall make appropriate adjustments to allocations of Profits and Losses to (or, if necessary, allocate items of gross income, gain, loss or deduction of the Company among) the Members such that, to the maximum extent possible, the Capital Accounts of the Members are proportionate to their Percentage Interests. In each case, such adjustments or allocations shall occur, to the maximum extent possible, in the Taxable Year or other Fiscal Period of the event requiring such adjustments or allocations.

Section 5.03 Regulatory and Special Allocations.

(a) Losses attributable to partner nonrecourse debt (as defined in Treasury Regulations Section 1.704-2(b)(4)) shall be allocated in the manner required by Treasury Regulations Section 1.704-2(i). If there is a net decrease during a Taxable Year in Member Minimum Gain, Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) shall be allocated to the Members in the amounts and of such character as determined according to Treasury Regulations Section 1.704-2(i)(4).

(b) Nonrecourse deductions (as determined according to Treasury Regulations Section 1.704-2(b)(1)) for any Taxable Year shall be allocated pro rata among the Members in accordance with their Percentage Interests. Except as otherwise provided in Section 5.03(g), if there is a net decrease in the Company Minimum Gain during any Taxable Year, each Member shall be allocated Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) in the amounts and of such character as determined according to Treasury Regulations Section 1.704-2(f). This Section 5.03(b) is intended to be a minimum gain chargeback provision that complies with the requirements of Treasury Regulations Section 1.704-2(f), and shall be interpreted in a manner consistent therewith.

(c) If any Member that unexpectedly receives an adjustment, allocation or Distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) has an Adjusted Capital Account Deficit as of the end of any Taxable Year, computed after the application of Sections 5.03(a) and 5.03(b) but before the application of any other provision of this Article V, then Profits for such Taxable Year shall be allocated to such Member in proportion to, and to the extent of, such Adjusted Capital Account Deficit. This Section 5.03(c) is intended to be a qualified income offset provision as described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.

(d) If the allocation of Losses to a Member as provided in Section 5.02 would create or increase an Adjusted Capital Account Deficit, there shall be allocated to such Member only that amount of Losses as will not create or increase an Adjusted Capital Account Deficit. The Losses that would, absent the application of the preceding sentence, otherwise be allocated to such Member shall be allocated to the other Members in accordance with their relative Percentage Interests, subject to this Section 5.03(d).

(e) Profits and Losses described in Section 5.01(b)(v) shall be allocated in a manner consistent with the manner that the adjustments to the Capital Accounts are required to be made pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(j) and (m).

(f) Simulated Depletion for each Depletable Property and Simulated Loss upon the disposition of a Depletable Property shall be allocated among the Members in proportion to their shares of the Simulated Basis in such property.

(g) The allocations set forth in Section 5.03(a) through and including Section 5.03(d) (the “Regulatory Allocations”) are intended to comply with certain requirements of Sections 1.704-1(b) and 1.704-2 of the Treasury Regulations. The Regulatory Allocations may not be consistent with the manner in which the Members intend to allocate Profit and Loss of the Company or make Distributions. Accordingly, notwithstanding the other provisions of this Article V, but subject to the Regulatory Allocations, income, gain, deduction and loss shall be reallocated among the Members so as to eliminate the effect of the Regulatory Allocations and thereby cause the respective Capital Accounts of the Members to be in the amounts (or as close thereto as possible) they would have been if Profit and Loss (and such other items of income, gain, deduction and loss) had been allocated without reference to the Regulatory Allocations. In general,

the Members anticipate that this will be accomplished by specially allocating other Profit and Loss (and such other items of income, gain, deduction and loss) among the Members so that the net amount of the Regulatory Allocations and such special allocations to each such Member is zero. In addition, if in any Taxable Year or other Fiscal Period there is a decrease in Company Minimum Gain, or in Member Minimum Gain, and application of the minimum gain chargeback requirements set forth in Section 5.03(a) or Section 5.03(b) would cause a distortion in the economic arrangement among the Members, the Members may, if they do not expect that the Company will have sufficient other income to correct such distortion, request the Internal Revenue Service to waive either or both of such minimum gain chargeback requirements. If such request is granted, this Agreement shall be applied in such instance as if it did not contain such minimum gain chargeback requirement.

Section 5.04 Tax Allocations.

(a) The income, gains, losses, deductions and credits of the Company will be allocated, for U.S. federal (and applicable state and local) income tax purposes, among the Members in accordance with the allocation of such income, gains, losses, deductions and credits among the Members for computing their Capital Accounts; provided that if any such allocation is not permitted by the Code or other applicable Law, the Company’s subsequent income, gains, losses, deductions and credits will be allocated among the Members so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.

(b) Cost and percentage depletion deductions with respect each Depletable Property shall be computed separately by the Members rather than the Company. For purposes of such computations, the U.S. federal income tax basis of each Depletable Property shall be allocated to each Member in accordance with such Member’s Percentage Interest as of the time such Depletable Property is acquired by the Company, and shall be reallocated among the Members in accordance with such Member’s Percentage Interest as determined immediately following the occurrence of an event giving rise to an adjustment to the Book Values of the Company’s Depletable Properties pursuant to the definition of Book Value (or at the time of any material additions to the U.S. federal income tax basis of such Depletable Property). Such allocations are intended to be applied in accordance with the “partners’ interests in partnership capital” under Section 613A(c)(7)(D) of the Code; provided that the Members understand and agree that the Manager may authorize special allocations of tax basis, income, gain, deduction or loss, as computed for U.S. federal income tax purposes, in order to eliminate differences between Simulated Basis and adjusted U.S. federal income tax basis with respect to Depletable Properties, in such manner as determined consistent with the principles of Section 704(c) of the Code, the Treasury Regulations thereunder and the portions of the Treasury Regulations under Section 704(b) that apply the principles of Section 704(c). For the purposes of applying the “remedial allocation method” to Depletable Properties (i) the amount by which any Member’s Capital Account is adjusted for Simulated Depletion shall be treated as an amount of book depletion allocated to such Member and (ii) the amount of cost depletion computed by such Member under section 613A(c)(7)(D) of the Code shall be treated as an amount of tax depletion allocated to such Member.

(c) For purposes of the separate computation of gain or loss by each Member on a taxable disposition of Depletable Property, the amount realized from such disposition shall be allocated (i) first, to the Members in an amount equal to the Simulated Basis in such Depletable Property and in the same proportion as their shares thereof were allocated and (ii) second, any remaining amount realized shall be allocated consistent with the allocation of Simulated Gains; provided, however, that the Members understand and agree that the Board of Managers may authorize special allocations of tax basis, income, gain, deduction or loss, as computed for U.S. federal income tax purposes, in order to eliminate differences between Simulated Basis and adjusted U.S. federal income tax basis with respect to Depletable Properties, in such manner as determined consistent with the principles of Section 704(c) of the Code, the Treasury Regulations thereunder and the portions of the Treasury Regulations under Section 704(b) that apply the principles of Section 704(c). The provisions of this Section 5.04(c) and the other provisions of this Agreement relating to allocations under Section 613A(c)(7)(D) of the Code are intended to comply with Treasury Regulations Section 1.704-1(b)(4)(v) and shall be interpreted and applied in a manner consistent with such Treasury Regulations.

(d) Each Member shall, in a manner consistent with this Article V, separately keep records of its share of the adjusted tax basis in each Depletable Property, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its gain or loss on the disposition of such property by the Company. Upon the request of the Company, each Member may advise the Company of its adjusted tax basis in each Depletable Property and any depletion computed with respect thereto, both as computed in accordance with the provisions of this subsection. The Company may rely on such information and, if it is not provided by the Member, may make such reasonable assumptions as it shall determine with respect thereto.

(e) Items of Company taxable income, gain, loss and deduction with respect to any property contributed or deemed contributed to the capital of the Company shall be allocated among the Members in accordance with Code Section 704(c) so as to take account of any variation between the adjusted basis of such property to the Company for U.S. federal income tax purposes and its Book Value as of the date of the applicable contribution using the traditional method set forth in Treasury Regulations Section 1.704-3(b); provided that, any items of Company taxable income, gain, loss and deduction with respect to any property contributed or deemed contributed to the capital of the Company by each of the MidCo Unitholders shall be allocated among the Members in accordance with Code Section 704(c) so as to take account of any variation between the adjusted basis of such property to the Company for U.S. federal income tax purposes and its Book Value as of the date of the applicable contribution using the remedial method set forth in Treasury Regulations Section 1.704-3(d).

(f) If the Book Value of any Company asset is adjusted pursuant to Section 5.01(b), subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for U.S. federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) using the the traditional method set forth in Treasury Regulations Section 1.704-3(b).

(g) If, as a result of an exercise of a noncompensatory option to acquire an interest in the Company, a Capital Account reallocation is required under Treasury Regulations Section 1.704-1(b)(2)(iv)(s)(3), the Company shall make corrective allocations pursuant to Treasury Regulations Section 1.704-1(b)(4)(x).

(h) Allocations of tax credits, tax credit recapture, and any items related thereto shall be allocated to the Members pro rata as determined by the Manager taking into account the principles of Treasury Regulations Section 1.704-1(b)(4)(ii).

(i) For purposes of determining a Member’s pro rata share of the Company’s “excess nonrecourse liabilities” within the meaning of Treasury Regulations Section 1.752-3(a)(3), each Member’s interest in income and gain shall be in proportion to the Units held by such Member.

(j) Allocations pursuant to this Section 5.05 are solely for purposes of U.S. federal (and applicable state and local) income taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Profits, Losses, Distributions or other Company items pursuant to any provision of this Agreement.

Section 5.05 Withholding; Indemnification and Reimbursement for Payments on Behalf of a Member. If requested by the Manager, each Member shall, if able to do so, deliver to the Manager: (A) an affidavit in form satisfactory to the Company, such as an IRS Form W-9 or applicable IRS Form W-8, that the applicable Member (or its beneficial owners, as the case may be) is not subject to withholding under the provisions of any U.S. federal, state, local, foreign or other Law; (B) any certificate that the Company may reasonably request with respect to any such Laws; and/or (C) any other form or instrument reasonably requested by the Company relating to any Member’s status under such Law. In the event that a Member fails or is unable to deliver to the Company an affidavit described in subclause (A), for the avoidance of doubt, the Company may withhold amounts from such Member in accordance with this Section 5.05. To the extent the Corporation, the Company and its Subsidiaries is required by Law to withhold or to make tax payments on behalf of or with respect to any Member (including the delivery of consideration in connection with a Redemption or Direct Exchange, backup withholding, Section 1445 of the Code, Section 1446 of the Code or any “imputed underpayment” within the meaning of the Code or, in each case, similar provisions of state, local or other tax Law) the Corporation, the Company or the applicable Subsidiary, as the case may be, may withhold such amounts and make such tax payments as so required, and each Member hereby authorizes the Corporation, the Company and its Subsidiaries to withhold or pay on behalf of or with respect to such Member any amount of U.S. federal, state, or local or non-U.S. taxes that the Manager determines, in good faith, that the Company or any of its Subsidiaries is required to withhold or pay with respect to any amount distributable, allocable or payable by or with respect to such Member pursuant to this Agreement. In addition, if the Company is obligated to pay any other amount to a Governmental Entity (or otherwise makes a payment to a Governmental Entity) that is specifically attributable to a Member (including U.S. federal income taxes as a result of Company obligations pursuant to the Partnership Audit Provisions with respect to items of income, gain, loss deduction or credit allocable or attributable to such Member, state personal property taxes and state unincorporated business taxes, but excluding payments such as professional association fees and the like made voluntarily by the Company on behalf of any Member based upon such Member’s status as an

employee of the Company), then such tax shall be treated as an amount of taxes withheld or paid with respect to such Member pursuant to this Section 5.05. For all purposes under this Agreement, any amounts withheld or paid with respect to a Member pursuant to this Section 5.05 shall be treated as having been distributed to such Member at the time such withholding or payment is made. Further, to the extent that the cumulative amount of such withholding or payment for any period exceeds the distributions to which such Member is entitled for such period, such Member shall indemnify the Company in full for the amount of such excess. The Manager may offset Distributions to which a Person is otherwise entitled under this Agreement against such Person’s obligation to indemnify the Company under this Section 5.05. A Member’s obligation to indemnify the Company under this Section 5.05 shall survive the termination, dissolution, liquidation and winding up of the Company, and for purposes of this Section 5.05, the Company shall be treated as continuing in existence. The Company may pursue and enforce all rights and remedies it may have against each Member under this Section 5.05, including instituting a lawsuit to collect amounts owed under such indemnity with interest accruing from the date such withholding or payment is made by the Company at a rate per annum equal to the sum of the Base Rate (but not in excess of the highest rate per annum permitted by Law). Any income from such indemnity (and interest) shall not be allocated to or distributed to the Member paying such indemnity (and interest). Each Member hereby agrees to furnish to the Company such information and forms as required or reasonably requested in order to comply with any laws and regulations governing withholding of tax or in order to claim any reduced rate of, or exemption from, withholding to which the Member is legally entitled.

ARTICLE VI.

MANAGEMENT

Section 6.01 Authority of Manager.

(a) Except for situations in which the approval of any Member(s) is specifically required by this Agreement, (i) all management powers over the business and affairs of the Company shall be exclusively vested in the Corporation, as the sole managing member of the Company (the Corporation, in such capacity, the “Manager”) and (ii) the Manager shall conduct, direct and exercise full control over all activities of the Company. The Manager shall be the “manager” of the Company for the purposes of the Delaware Act. Except as otherwise expressly provided for herein and subject to the other provisions of this Agreement, the Members hereby consent to the exercise by the Manager of all such powers and rights conferred on the Members by the Delaware Act with respect to the management and control of the Company. Any vacancies in the position of Manager shall be filled in accordance with Section 6.04.

(b) Without limiting the authority of the Manager to act on behalf of the Company, the day-to-day business and operations of the Company shall be overseen and implemented by officers of the Company (each, an “Officer” and collectively, the “Officers”), subject to the limitations imposed by the Manager. An Officer may, but need not, be a Member. Each Officer shall be appointed by the Manager and shall hold office until his or her successor shall be duly designated and shall qualify or until his or her death or until he shall resign or shall have been removed in the manner hereinafter provided. Any one Person may hold more than one office. Subject to the other provisions in this Agreement (including in Section 6.07 below), the salaries or other compensation, if any, of the Officers of the Company shall be fixed from time to

time by the Manager. The authority and responsibility of the Officers shall include, but not be limited to, such duties as the Manager may, from time to time, delegate to them and the carrying out of the Company’s business and affairs on a day-to-day basis. An Officer may also perform one or more roles as an officer of the Manager.

(c) The Manager shall have the power and authority to effectuate the sale, lease, transfer, exchange or other disposition of any, all or substantially all of the assets of the Company (including the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Company) or the merger, consolidation, conversion, division, reorganization or other combination of the Company with or into another entity.

Section 6.02 Actions of the Manager. The Manager may act through any Officer or through any other Person or Persons to whom authority and duties have been delegated pursuant to Section 6.07.

Section 6.03 Resignation; No Removal. The Manager may resign at any time by giving written notice to the Members. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the Members, and the acceptance of the resignation shall not be necessary to make it effective. For the avoidance of doubt, the Members have no right under this Agreement to remove or replace the Manager.

Section 6.04 Vacancies. Vacancies in the position of Manager occurring for any reason shall be filled by the Corporation (or, if the Corporation has ceased to exist without any successor or assign, then by the holders of a majority in interest of the voting capital stock of the Corporation immediately prior to such cessation). For the avoidance of doubt, the Members (other than the Corporation) have no right under this Agreement to fill any vacancy in the position of Manager.

Section 6.05 Transactions Between Company and Manager. The Manager may cause the Company to contract and deal with the Manager, or any Affiliate of the Manager, provided such contracts and dealings are on terms comparable to and competitive with those available to the Company from others dealing at arm’s length or are approved by the Members holding a majority of the Units (excluding Units held by the Manager and its controlled Affiliates) then outstanding and otherwise are permitted by the Credit Agreement.

Section 6.06 Reimbursement for Expenses. The Manager shall not be compensated for its services as Manager of the Company except as expressly provided in this Agreement. The Members acknowledge and agree that the Manager’s Class A Common Stock is and will continue to be publicly traded and therefore the Manager will have access to the public capital markets and that such status and the services performed by the Manager will inure to the benefit of the Company and all Members; therefore, the Manager shall be reimbursed by the Company for any reasonable out-of-pocket expenses incurred on behalf of the Company, including all fees, expenses and costs of being a public company (including public reporting obligations, proxy statements, stockholder meetings, stock exchange fees, transfer agent fees, SEC and FINRA filing fees and offering expenses) and maintaining its corporate existence. In the event that (i) shares of Class A Common Stock are sold to underwriters in any public offering after the Effective Time at a price per share that is lower than the price per share for which such shares of Class A Common Stock are sold to

the public in such public offering after taking into account underwriters’ discounts or commissions and brokers’ fees or commissions (including, for the avoidance of doubt, any deferred discounts or commissions and brokers’ fees or commissions payable in connection with or as a result of the Business Combination Closing) (such difference, the “Discount”) and (ii) the proceeds from such public offering are used to fund the Cash Settlement for any Redeemed Units or otherwise contributed to the Company, the Company shall reimburse the Manager for such Discount by treating such Discount as an additional Capital Contribution made by the Manager to the Company, issuing Common Units in respect of such deemed Capital Contribution in accordance with Section 11.02, and increasing the Manager’s Capital Account by the amount of such Discount. To the extent practicable, expenses incurred by the Manager on behalf of or for the benefit of the Company shall be billed directly to and paid by the Company and, if and to the extent any reimbursements to the Manager or any of its Affiliates by the Company pursuant to this Section 6.06 constitute gross income to such Person (as opposed to the repayment of advances made by such Person on behalf of the Company), such amounts shall be treated as “guaranteed payments” within the meaning of Code Section 707(c) and shall not be treated as distributions for purposes of computing the Members’ Capital Accounts.

Section 6.07 Delegation of Authority. The Manager (a) may, from time to time, delegate to one or more Persons such authority and duties as the Manager may deem advisable, and (b) may assign titles (including chief executive officer, president, chief executive officer, chief financial officers, chief operating officer, vice president, secretary, assistant secretary, treasurer or assistant treasurer) and delegate certain authority and duties to such Persons as the same may be amended, restated or otherwise modified from time to time. Any number of titles may be held by the same individual. The salaries or other compensation, if any, of such agents of the Company shall be fixed from time to time by the Manager, subject to the other provisions in this Agreement.

Section 6.08 Limitation of Liability of Manager.

(a) Except as otherwise provided herein or in an agreement entered into by such Person and the Company, neither the Manager nor any of the Manager’s Affiliates or Manager’s officers, employees or other agents shall be liable to the Company, to any Member or to any other Person bound by this Agreement that is not the Manager for any act or omission performed or omitted by the Manager or such Person in its capacity as the sole managing member of the Company or as an Affiliate, officer, employee or other agent of the Manager, as applicable, pursuant to authority granted to the Manager by this Agreement; provided, however, that, except as otherwise provided herein, such limitation of liability shall not apply to the extent the act or omission was attributable to the Manager’s willful misconduct or knowing violation of Law or for any present or future material breaches of any representations, warranties or covenants by the Manager or its Affiliates contained herein or in the other agreements with the Company. The Manager may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and shall not be responsible for any misconduct or negligence on the part of any such agent (so long as such agent was selected in good faith and with reasonable care). The Manager and each of its Affiliates, officers, employees and other agents shall be entitled to rely upon the advice of legal counsel, independent public accountants and other experts, including financial advisors, as to matters such Person reasonably believes are within such other Person’s professional or expert competence and any act of or failure to act by the Manager or such other Person in good faith reliance on such advice shall in no event subject the Manager or such other Person to liability to the Company or any Member or to any other Person bound by this Agreement.

(b) To the fullest extent permitted by applicable Law, whenever this Agreement or any other agreement contemplated herein provides that the Manager shall act in a manner which is, or provide terms which are, “fair and reasonable” to the Company or any Member that is not the Manager, the Manager shall determine such appropriate action or provide such terms considering, in each case, the relative interests of each party to such agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable United States generally accepted accounting practices or principles, notwithstanding any other provision of this Agreement or in any agreement contemplated herein or applicable provisions of Law or equity or otherwise.

(c) To the fullest extent permitted by applicable Law and notwithstanding any other provision of this Agreement or in any agreement contemplated herein or applicable provisions of Law or equity or otherwise, whenever in this Agreement or any other agreement contemplated herein, the Manager is permitted or required to take any action or to make a decision in its “sole discretion” or “discretion,” with “complete discretion,” with its “approval” or “consent” or under a grant of similar authority or latitude, the Manager shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Company, other Members or any other Person.

(d) To the fullest extent permitted by applicable Law and notwithstanding any other provision of this Agreement or in any agreement contemplated herein or applicable provisions of law or equity or otherwise, (i) whenever in this Agreement the Manager is permitted or required to take any action or to make a decision in “good faith” or under another express standard, the Manager shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement or any other agreement contemplated herein, and (ii) so long as the Manager acts in good faith or in accordance with such other express standard, the resolution, action or terms so made, taken or provided by the Manager shall not constitute a breach of this Agreement or impose liability upon the Manager or any of the Manager’s Affiliates and shall be deemed approved by all Members..

Section 6.09 Investment Company Act. The Manager shall use its best efforts to ensure that the Company shall not be subject to registration as an investment company pursuant to the Investment Company Act.

Section 6.10 Outside Activities of the Manager. The Manager shall not, directly or indirectly, enter into or conduct any business or operations, other than in connection with (a) the ownership, acquisition and disposition of Common Units, (b) the management of the business and affairs of the Company and its Subsidiaries, (c) the operation of the Manager as a reporting company with a class (or classes) of securities registered under Section 12 of the Exchange Act and listed on a securities exchange, (d) the offering, sale, syndication, private placement or public offering of stock, bonds, securities or other interests, (e) financing or refinancing of any type related to the Company, its Subsidiaries or their assets or activities, and (f) such activities as are incidental to the foregoing; provided, however, that, except as otherwise provided herein, the net

proceeds of any sale of Equity Securities of the Corporation pursuant to the preceding clauses (d) and (e) shall be made available to the Company as Capital Contributions and the proceeds of any other financing raised by the Manager pursuant to the preceding clauses (d) and (e) shall be made available to the Company as loans or otherwise as appropriate and, provided further, that the Manager may, in its sole and absolute discretion, from time to time hold or acquire assets in its own name or otherwise other than through the Company and its Subsidiaries so long as the Manager takes all necessary measures to ensure that the economic benefits and burdens of such assets are otherwise vested in the Company or its Subsidiaries, through assignment, mortgage loan or otherwise. Nothing contained herein shall be deemed to prohibit the Manager from executing any guarantee of indebtedness of the Company or its Subsidiaries.

Section 6.11 Standard of Care. Except to the extent otherwise expressly set forth in this Agreement, the Manager shall, in connection with the performance of its duties in its capacity as the Manager, have the same fiduciary duties to the Company and the Members as would be owed to a Delaware corporation and its stockholders by its directors, and shall be entitled to the benefit of the same presumptions in carrying out such duties as would be afforded to a director of a Delaware corporation (as such duties and presumptions are defined, described and explained under the Laws of the State of Delaware as in effect from time to time). The provisions of this Agreement, to the extent that they restrict or eliminate the duties (including fiduciary duties) and liabilities of the Manager otherwise existing at law or in equity, are agreed by the Members to replace, to the fullest extent permitted by applicable Law, such other duties and liabilities of the Manager.

ARTICLE VII.

RIGHTS AND OBLIGATIONS OF MEMBERS

Section 7.01 Limitation of Liability and Duties of Members; Investment Opportunities.

(a) Except as provided in this Agreement or in the Delaware Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company and no Member or Manager shall be obligated personally for any such debts, obligations, contracts or liabilities of the Company solely by reason of being a Member or the Manager; provided that, in the case of the Manager, this sentence shall not in any manner limit the liability of the Manager to the Company or any Member (other than the Manager) attributable to a breach by the Manager of any obligations of the Manager under this Agreement. Notwithstanding anything contained herein to the contrary, to the fullest extent permitted by applicable Law, the failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business and affairs under this Agreement or the Delaware Act shall not be grounds for imposing personal liability on the Members or the Manager for liabilities of the Company.

(b) In accordance with the Delaware Act and the laws of the State of Delaware, a Member may, under certain circumstances, be required to return amounts previously distributed to such Member. It is the intent of the Members that no Distribution to any Member pursuant to Article IV shall be deemed a return of money or other property paid or distributed in violation of the Delaware Act. The payment of any such money or Distribution of any such property to a Member shall be deemed to be a compromise within the meaning of Section 18-502(b) of the Delaware Act, and, to the fullest extent permitted by Law, any Member receiving any such money

or property shall not be required to return any such money or property to the Company or any other Person, unless such distribution was made by the Company to its Members in clerical error. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Member is obligated to make any such payment, such obligation shall be the obligation of such Member and not of any other Member.

(c) To the fullest extent permitted by applicable Law, including Section 18-1101(c) of the Delaware Act, and notwithstanding any other provision of this Agreement (but subject, and without limitation, to Section 6.08 with respect to the Manager) or in any agreement contemplated herein or applicable provisions of Law or equity or otherwise, the parties hereto hereby agree that to the extent that any Member (other than the Manager in its capacity as such) (or any Member’s Affiliate or any manager, managing member, general partner, director, officer, employee, agent, fiduciary or trustee of any Member or of any Affiliate of a Member) has duties (including fiduciary duties) to the Company, to the Manager, to another Member, to any Person who acquires an interest in a Unit or to any other Person bound by this Agreement, all such duties (including fiduciary duties) are hereby eliminated, to the fullest extent permitted by Law, and replaced with the duties or standards expressly set forth herein, if any; provided, however, that the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing. The elimination of duties (including fiduciary duties) to the Company, the Manager, each of the Members, each other Person who acquires an interest in a Unit and each other Person bound by this Agreement and replacement thereof with the duties or standards expressly set forth herein, if any, are approved by the Company, the Manager, each of the Members, each other Person who acquires an interest in a Unit and each other Person bound by this Agreement.

(d) Notwithstanding any duty (including any fiduciary duty) otherwise applicable at law or in equity, the doctrine of corporate opportunity, or any analogous doctrine, will not apply to any Member (including the Manager) or to any Related Person of such Member, and no Member (or any Related Person of such Member) that acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for the Company or the Members will have any duty to communicate or offer such opportunity to the Company or the Members, or to develop any particular investment, and such Person will not be liable to the Company or the Members for breach of any fiduciary or other duty by reason of the fact that such Person pursues or acquires for, or directs such opportunity to, another Person or does not communicate such investment opportunity to the Members. Notwithstanding any duty (including any fiduciary duty) otherwise applicable at law or in equity, neither the Company nor any Member has any rights or obligations by virtue of this Agreement or the relationships created hereby in or to such independent ventures or the income or profits or losses derived therefrom, and the pursuit of any such ventures outside the Company, even if competitive with the activities of the Company or the Members, will not be deemed wrongful or improper.

Section 7.02 Lack of Authority. No Member, other than the Manager or a duly appointed Officer, in each case in its capacity as such, has the authority or power to act for or on behalf of the Company, to do any act that would be binding on the Company or to make any expenditure on behalf of the Company. The Members hereby consent to the exercise by the Manager of the powers conferred on them by Law and this Agreement.

Section 7.03 No Right of Partition. No Member, other than the Manager, shall have the right to seek or obtain partition by court decree or operation of Law of any Company property, or the right to own or use particular or individual assets of the Company.

Section 7.04 Indemnification.

(a) Subject to Section 5.05, the Company shall indemnify and hold harmless any Person (each an “Indemnified Person”) to the fullest extent permitted by applicable Law (including as it presently exists or may hereafter be amended, substituted or replaced but, to the fullest extent permitted by applicable Law, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Company to provide broader indemnification rights than such Law permitted the Company to provide immediately prior to such amendment, substitution or replacement), against all expenses, liabilities and losses (including attorneys’ fees, judgments, fines, excise taxes or penalties, and amounts paid in settlement) reasonably incurred or suffered by such Person by reason of the fact that such Person is or was a Member or an Affiliate thereof (other than as a result of an ownership interest in the Corporation) or is or was serving as the Manager or a director, officer, employee or other agent of the Manager, or a director, manager, Officer, employee or other agent of the Company or is or was serving at the request of the Company as a manager, officer, director, principal, member, employee or agent of another Person; provided, however, that no Indemnified Person shall be indemnified for any expenses, liabilities and losses suffered that are attributable to such Indemnified Person’s or its Affiliates’ bad faith, willful misconduct or knowing violation of Law or for any present or future breaches of any representations, warranties or covenants by such Indemnified Person or its Affiliates contained herein or in the other agreements with the Company. Reasonable expenses, including out-of-pocket attorneys’ fees, incurred by any such Indemnified Person in defending a proceeding shall be paid by the Company in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that such Indemnified Person is not entitled to be indemnified by the Company.

(b) The right to indemnification and the advancement of expenses conferred in this Section 7.04 shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute, agreement, bylaw, action by the Manager or otherwise.

(c) The Company shall maintain directors’ and officers’ liability insurance, or substantially equivalent insurance, at its expense, to protect any Indemnified Person (and the investment funds, if any, they represent) against any expense, liability or loss described in Section 7.04(a) whether or not the Company would have the power to indemnify such Indemnified Person against such expense, liability or loss under the provisions of this Section 7.04. The Company shall use its commercially reasonable efforts to purchase and maintain property, casualty and liability insurance in types and at levels customary for companies of similar size engaged in similar lines of business, as determined in good faith by the Manager, and the Company shall use its commercially reasonable efforts to purchase directors’ and officers’ liability insurance (including employment practices coverage) with a carrier and in an amount determined necessary or desirable as determined in good faith by the Manager.

(d) Notwithstanding anything contained herein to the contrary (including in this Section 7.04), the Company agrees that any indemnification and advancement of expenses available to any current or former Indemnified Person from any investment fund that is an Affiliate of the Company who served as a director of the Company or as a Member of the Company by virtue of such Person’s service as a member, director, partner or employee of any such fund prior to or following the Effective Time (any such Person, a “Sponsor Person”) shall be secondary to the indemnification and advancement of expenses to be provided by the Company pursuant to this Section 7.04 which shall be provided out of and to the extent of Company assets only and no Member (unless such Member otherwise agrees in writing or is found in a final decision by a court of competent jurisdiction to have personal liability on account thereof) shall have personal liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such indemnity of the Company and the Company (i) shall be the primary indemnitor of first resort for such Sponsor Person pursuant to this Section 7.04 and (ii) shall be fully responsible for the advancement of all expenses and the payment of all damages or liabilities with respect to such Sponsor Person which are addressed by this Section 7.04.

(e) If this Section 7.04 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Indemnified Person pursuant to this Section 7.04 to the fullest extent permitted by any applicable portion of this Section 7.04 that shall not have been invalidated and to the fullest extent permitted by applicable Law.

Section 7.05 Members Right to Act. For matters that require the approval of the Members, the Members shall act through meetings and written consents as described in paragraphs (a) and (b) below:

(a) Except as otherwise expressly provided by this Agreement, acts by the Members holding a majority of the outstanding Units, voting together as a single class, shall be the acts of the Members. Any Member entitled to vote at a meeting of Members may authorize another person or persons to act for it by proxy. An electronic mail, telegram, telex, cablegram or similar transmission by the Member, or a photographic, photostatic, facsimile or similar reproduction of a writing executed by the Member shall (if stated thereon) be treated as a proxy executed in writing for purposes of this Section 7.05(a). No proxy shall be voted or acted upon after eleven months from the date thereof, unless the proxy provides for a longer period. A proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and that the proxy is coupled with an interest. Should a proxy designate two or more Persons to act as proxies, unless that instrument shall provide to 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, the Company shall not be required to recognize such proxy with respect to such issue if such proxy does not specify how the votes that are the subject of such proxy are to be voted with respect to such issue.

(b) The actions by the Members permitted hereunder may be taken at a meeting called by the Manager or by the Members holding a majority of the Units entitled to vote on such matter on at least 48 hours’ prior written notice to the other Members entitled to vote, which notice shall state the purpose or purposes for which such meeting is being called. The actions taken by the Members entitled to vote or consent at any meeting (as opposed to by written consent), however called and noticed, shall be as valid as though taken at a meeting duly held after regular call and notice if (but not until), either before, at or after the meeting, the Members entitled to vote or consent as to whom it was improperly held signs a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof. The actions by the Members entitled to vote or consent may be taken by vote of the Members entitled to vote or consent at a meeting or by written consent, so long as such consent is signed by Members having not less than the minimum number of Units that would be necessary to authorize or take such action at a meeting at which all Members entitled to vote thereon were present and voted. Prompt notice of the action so taken, which shall state the purpose or purposes for which such consent is required and may be delivered via email, without a meeting shall be given to those Members entitled to vote or consent who have not consented in writing; provided, however, that the failure to give any such notice shall not affect the validity of the action taken by such written consent. Any action taken pursuant to such written consent of the Members shall have the same force and effect as if taken by the Members at a meeting thereof.

Section 7.06 Inspection Rights. The Company shall permit each Member and each of its designated representatives to (i) visit and inspect any of the properties of the Company and its Subsidiaries, all at reasonable times and upon reasonable notice, (ii) examine the corporate and financial records of the Company or any of its Subsidiaries and make copies thereof or extracts therefrom, (iii) consult with the managers, officers, employees and independent accountants of the Company or any of its Subsidiaries concerning the affairs, finances and accounts of the Company or any of its Subsidiaries. The presentation of an executed copy of this Agreement by any Member to the Company’s independent accountants shall constitute the Company’s permission to its independent accountants to participate in discussions with such Persons and their respective designated representatives.

ARTICLE VIII.

BOOKS, RECORDS, ACCOUNTING AND REPORTS, AFFIRMATIVE COVENANTS

Section 8.01 Records and Accounting. The Company shall keep, or cause to be kept, appropriate books and records with respect to the Company’s business, including all books and records necessary to provide any information, lists and copies of documents required to be provided pursuant to Section 8.03 or pursuant to applicable Laws. All matters concerning (a) the determination of the relative amount of allocations and Distributions among the Members pursuant to Articles III and IV and (b) accounting procedures and determinations, and other determinations not specifically and expressly provided for by the terms of this Agreement, shall be determined by the Manager, whose determination shall be final and conclusive as to all of the Members absent manifest clerical error.

Section 8.02 Fiscal Year. The Fiscal Year of the Company shall end on December 31 of each year or such other date as may be established by the Manager; provided that the Company shall have the same Fiscal Year for accounting purposes as its Taxable Year for U.S. federal income tax purposes.

Section 8.03 Reports. The Company shall deliver or cause to be delivered, within ninety (90) days after the end of each Fiscal Year, to each Person who was a Member at any time during such Fiscal Year, all information reasonably necessary for the preparation of such Person’s United States federal and applicable state income tax returns.

ARTICLE IX.

TAX MATTERS

Section 9.01 Preparation of Tax Returns. The Manager shall arrange, at the Company’s expense, for the preparation and timely filing of all tax returns required to be filed by the Company. On or before March 15, June 15, September 15, and December 15 of each Taxable Year, the Company shall send to each Person who was a Member at any time during the prior quarter, an estimate of such Member’s state tax apportionment information and allocations to the Members of taxable income, gains, losses, deductions and credits for the prior quarter, which estimate shall have been reviewed by the Company’s outside tax accountants. For so long as any Member owns 5% or more of the outstanding Common Units, the Company shall (a) send a draft of any income tax return of the Company to such Member, at least fifteen days prior to filing, for review and comment, and (b) consider in good faith all reasonable comments received from such Member at least five days prior to the due date for the filing of any such tax return. In addition, no later than the later of (i) March 15 following the end of the prior Taxable Year, and (ii) thirty (30) Business Days after the issuance of the final financial statement report for a Fiscal Year by the Company’s auditors, the Company shall send to each Person who was a Member at any time during such Taxable Year, a statement showing such Member’s (A) final state tax apportionment information, (B) allocations to the Members of taxable income, gains, losses, deductions and credits for such Taxable Year, (C) a completed IRS Schedule K-1 and (D) all other information reasonably requested and necessary for the preparation of such Person’s U.S. federal (and applicable state and local) income tax returns. Each Member shall notify the Company, and the Company shall take reasonable efforts to notify each of the other Members, upon receipt of any notice of tax examination of the Company by U.S. federal, state or local authorities. Subject to the terms and conditions of this Agreement, in its capacity as Partnership Representative, the Corporation shall have the authority to prepare the tax returns of the Company using the elections set forth in Section 9.02 and such other permissible methods and elections as it determines in its reasonable discretion.

Section 9.02 Tax Elections. The Company and any eligible Subsidiary shall make an election pursuant to Section 754 of the Code and shall not thereafter revoke such election. In addition, the Company (and any eligible Subsidiary) shall make the following elections on the appropriate forms or tax returns:

(a) to adopt the calendar year as the Company’s Taxable Year, if permitted under the Code;

(b) to adopt the accrual method of accounting for U.S. federal income tax purposes; and

Each Member will upon request supply any information reasonably necessary to give proper effect to any such elections.

Section 9.03 Tax Controversies.

(a) The Corporation shall be designated and may, on behalf of the Company, at any time, and without further notice to or consent from any Member, act as the “partnership representative” of the Company, within the meaning given to such term in Section 6223 of the Code and any corresponding or similar role for relevant state and local tax purposes (the Corporation, in such capacity, the “Partnership Representative”). The Partnership Representative shall designate a “designated individual” in accordance with Treasury Regulations Section 301.6223-1(b)(3)(i). The Company and the Members (including any Member designated as the Partnership Representative prior to the date hereof) shall reasonably cooperate with each other and shall use reasonable best efforts to cause the Manager (or any Person subsequently designated) to become the Partnership Representative with respect to any taxable period of the Company with respect to which the statute of limitations has not yet expired, including (as applicable) by filing certifications pursuant to Treasury Regulations Section 301.6231(a)(7)-1(d). The Partnership Representative may retain, at the Company’s expense, such outside counsel, accountants and other professional consultants as it may reasonably deem necessary in the course of fulfilling its obligations as the Partnership Representative. Subject to the other terms of this Agreement, the Partnership Representative is authorized to take such actions and execute and file all statements and forms on behalf of the Company that are approved by the Manager and are permitted or required by the applicable provisions of the Partnership Audit Provisions. The Partnership Representative will have discretion to determine whether the Company (either in its own behalf or on behalf of the Members) will contest or continue to contest any tax deficiencies assessed or proposed to be assessed by any taxing authority. Each Member agrees to reasonably cooperate with the Partnership Representative and to use commercially reasonable efforts to do or refrain from doing any or all things requested by the Partnership Representative (including paying any and all resulting taxes, additions to tax, penalties and interest in a timely fashion) in connection with any examination of the Company’s affairs by any U.S. federal, state, or local tax authorities, including resulting administrative and judicial proceedings. Any deficiency for taxes imposed on any Member (including penalties, additions to tax or interest imposed with respect to such taxes) will be paid by such Member, and if required to be paid (and actually paid) by the Company, will be recoverable from such Member as provided in Section 5.06. The Partnership Representative shall be entitled to cause the Company to elect the application of Section 6226 of the Code with respect to any imputed underpayment or make any other decision or election, or take any action pursuant to Sections 6221 through 6235 and 6241 of the Code. The Partnership Representative shall keep the Members reasonably informed of any material audit or administrative or judicial proceedings and any decisions or elections described in the previous sentence that are material in nature. The Company shall reimburse the Partnership Representative for all reasonable and documented out-of-pocket expenses incurred by the Partnership Representative, including reasonable fees of any professional attorneys, in carrying out its duties as the Partnership Representative. In the event that the Manager determines that the foregoing provisions are no longer applicable to the Company, either due to a change of controlling law or the enactment of applicable Treasury Regulations, the Manager is authorized to take any reasonable actions as may be required concerning tax matters of the Company not otherwise addressed in this Section 9.03(a). The provisions of this Section 9.03(a) shall survive the termination of any Member’s interest in

the Company, the termination of this Agreement and the termination of the Company and shall remain binding on each Member for the period of time necessary to resolve with any applicable taxing authority any income tax matters relating to the Company. Notwithstanding anything to the contrary herein (except for elections and Section 704(c) methods expressly provided for herein), the Partnership Representative shall not settle any tax controversy that would reasonably be expected to have a disproportionate and adverse impact on any Member (or subset of Members) without the prior written consent of such Member (or subset of Members).

ARTICLE X.

RESTRICTIONS ON TRANSFER OF UNITS; PREEMPTIVE RIGHTS

Section 10.01 Transfers by Members. No holder of Units may Transfer any interest in any Units, except Transfers (a) pursuant to and in accordance with Section 10.02 or (b) approved in writing by the Manager. Notwithstanding the foregoing, “Transfer” shall not include an event that does not terminate the existence of such Member under applicable state law (or, in the case of a trust that is a Member, does not terminate the trusteeship of the fiduciaries under such trust with respect to all the Company Interests of such trust that is a Member).

Section 10.02 Permitted Transfers. The restrictions contained in Section 10.01 shall not apply to any Transfer (each, a “Permitted Transfer”) (i) by a Member to an Affiliate of such Member, (ii) by a Member to any of its partners, limited liability company members, stockholders or other equity holders of such Member, (iii) by the Corporation to the holders of equity interests in the Corporation in connection with the dissolution of the Corporation, (iv) by any transferee pursuant to clause (ii) or (iii) of this sentence to any by a Member to any of its partners, limited liability company members, stockholders or other equity holders of such Member or Affiliate of such transferee or any trust, family partnership or family limited liability company, the sole beneficiaries, partners or members of which are such transferee or Relatives of such transferee, (iv) pursuant to a Redemption or Direct Exchange in accordance with Article XI hereof, or (v) by any Member to the holders of equity interests in such Member in connection with a Permitted Transfer or a dissolution of such Member; provided, however, that (A) the restrictions contained in this Agreement will continue to apply to Units after any Permitted Transfer of such Units and (B) in the case of the foregoing clauses (i), (ii), (iii) and (v), the transferees of the Units so Transferred shall agree in writing to be bound by the provisions of this Agreement, and the transferor will deliver a written notice to the Company and the Members, which notice will disclose in reasonable detail the identity of the proposed transferee. In the case of a Permitted Transfer (other than a Redemption or Direct Exchange) by the Corporation of Common Units to a transferee in accordance with this Section 10.02, the Corporation shall be required to also transfer a number of shares of Class C Common Stock corresponding to the number of such Member’s (or subsequent transferee’s) Common Units that were transferred in the transaction to such transferee; and, in the case of a Redemption or Direct Exchange, a number of shares of Class C Common Stock corresponding to the number of such Member’s Common Units that were transferred in such Redemption or Direct Exchange shall be cancelled. All Permitted Transfers are subject to the additional limitations set forth in Section 10.07(b).

Section 10.03 Restricted Units Legend. The Units have not been registered under the Securities Act and, therefore, in addition to the other restrictions on Transfer contained in this Agreement, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is then available. To the extent such Units have been certificated, each certificate evidencing Units and each certificate issued in exchange for or upon the Transfer of any Units (if such securities remain Units as defined herein after such Transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON [ ● ], 2022, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER SPECIFIED IN THE SIXTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF PERMIAN RESOURCES OPERATING, LLC, AS MAY BE AMENDED AND MODIFIED FROM TIME TO TIME, AND PERMIAN RESOURCES OPERATING, LLC RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO ANY TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY PERMIAN RESOURCES OPERATING, LLC TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.”

The Company shall imprint such legend on certificates (if any) evidencing Units. The legend set forth above shall be removed from the certificates (if any) evidencing any units which cease to be Units in accordance with the definition thereof.

Section 10.04 Transfer. Prior to Transferring any Units (other than (i) in connection with a Redemption or Direct Exchange in accordance with Article XI or (ii) pursuant to a Change of Control Transaction), the Transferring holder of Units shall cause the prospective transferee to be bound by this Agreement and any other agreements executed by the holders of Units and relating to such Units in the aggregate (collectively, the “Other Agreements”), and shall cause the prospective transferee to execute and deliver to the Company and the other holders of Units a Joinder (or other counterpart to this Agreement acceptable to the Manager) and counterparts of any applicable Other Agreements. Any Transfer or attempted Transfer of any Units in violation of any provision of this Agreement (including any prohibited indirect Transfers) (a) shall be void, and (b) the Company shall not record such Transfer on its books or treat any purported transferee of such Units as the owner of such securities for any purpose.

Section 10.05 Assignee’s Rights.

(a) The Transfer of a Company Interest in accordance with this Agreement shall be effective as of the date of its assignment (assuming compliance with all of the conditions to such Transfer set forth herein), and such Transfer shall be shown on the books and records of the Company. Profits, Losses and other Company items shall be allocated between the transferor and the Assignee according to Code Section 706, using any permissible method as determined in the reasonable discretion of the Manager. Distributions made before the effective date of such Transfer shall be paid to the transferor, and Distributions made after such date shall be paid to the Assignee.

(b) Unless and until an Assignee becomes a Member pursuant to Article XII, the Assignee shall not be entitled to any of the rights granted to a Member hereunder or under applicable Law, other than the rights granted specifically to Assignees pursuant to this Agreement; provided, however, that, without relieving the transferring Member from any such limitations or obligations as more fully described in Section 10.06, such Assignee shall be bound by any limitations and obligations of a Member contained herein that a Member would be bound on account of the Assignee’s Company Interest (including the obligation to make Capital Contributions on account of such Company Interest).

Section 10.06 Assignor’s Rights and Obligations. Any Member who shall Transfer any Company Interest in a manner in accordance with this Agreement shall cease to be a Member with respect to such Units or other interest and shall no longer have any rights or privileges, or, except as set forth in this Section 10.06, duties, liabilities or obligations, of a Member with respect to such Units or other interest (it being understood, however, that the applicable provisions of Section 6.08, Section 7.01 and Section 7.04 shall continue to inure to such Person’s benefit), except that unless and until the Assignee (if not already a Member) is admitted as a Substituted Member in accordance with the provisions of Article XII (the “Admission Date”), (i) such assigning Member shall retain all of the duties, liabilities and obligations of a Member with respect to such Units or other interest, and (ii) the Manager may, in its sole discretion, reinstate all or any portion of the rights and privileges of such Member with respect to such Units or other interest for any period of time prior to the Admission Date. Nothing contained herein shall relieve any Member who Transfers any Units or other interest in the Company from any liability of such Member to the Company with respect to such Company Interest that may exist on the Admission Date or that is otherwise specified in the Delaware Act and incorporated into this Agreement or for any liability to the Company or any other Person for any materially false statement made by such Member (in its capacity as such) or for any present or future breaches of any representations, warranties or covenants by such Member (in its capacity as such) contained herein or in the other agreements with the Company.

Section 10.07 Overriding Provisions.

(a) Any Transfer in violation of this Article X shall be null and void ab initio, and the provisions of Sections 10.05 and 10.06 shall not apply to any such Transfers. For the avoidance of doubt, any Person to whom a Transfer is made or attempted in violation of this Article X shall not become a Member, shall not be entitled to vote on any matters coming before the Members and shall not have any other rights in or with respect to any rights of a Member of the Company. The approval of any Transfer in any one or more instances shall not limit or waive the requirement for such approval in any other or future instance. The Manager shall promptly amend the Schedule of Members to reflect any Permitted Transfer pursuant to this Article X.

(b) Notwithstanding anything contained herein to the contrary (including, for the avoidance of doubt, the provisions of Section 10.01 and Article XI and Article XII), in no event shall any Member Transfer any Units to the extent such Transfer would:

(i) result in the violation of the Securities Act, or any other applicable U.S. federal or state or non-U.S. Laws;

(ii) subject the Company to registration as an investment company under the Investment Company Act;

(iii) in the reasonable determination of the Manager, be a violation of or a default (or an event that, with notice or the lapse of time or both, would constitute a default) under, or result in an acceleration of any indebtedness under, any promissory note, mortgage, loan agreement, indenture or similar instrument or agreement to which the Company or the Manager is a party; provided that the payee or creditor to whom the Company or the Manager owes such obligation is not an Affiliate of the Company or the Manager;

(iv) in the reasonable determination of the Manager, cause the Company to lose its status as a partnership for U.S. federal income tax purposes or, without limiting the generality of the foregoing, cause the Company to be treated as a “publicly traded partnership” or to be taxed as a corporation pursuant to Section 7704 of the Code and any applicable Treasury Regulations issued thereunder, or any successor provision of the Code;

(v) be a Transfer to a Person who is not legally competent or who has not achieved his or her majority under applicable Law (excluding trusts for the benefit of minors); or

(vi) in the reasonable determination of the Manager, result in the Company having more than one hundred (100) partners, within the meaning of Treasury Regulations Section 1.7704-1(h)(1) (determined pursuant to the rules of Treasury Regulations Section 1.7704-1(h)(3)).

ARTICLE XI.

REDEMPTION AND EXCHANGE RIGHTS

Section 11.01 Redemption Right of a Member.

(a) Each Member (other than the Corporation and CRP Holdco Corp.) shall be entitled to cause the Company to redeem (a “Redemption”) all or any portion of its Common Units (the “Redemption Right”) at any time. A Member desiring to exercise its Redemption Right (the “Redeemed Member”) shall exercise such right by giving written notice (the “Redemption Notice”) to the Company with a copy to the Corporation (the date of the delivery of such Redemption Notice, the “Redemption Notice Date”). The Redemption Notice shall specify the number of Common Units (the “Redeemed Units”) that the Redeemed Member intends to have the Company redeem. The Redemption shall be completed on the date that is three (3) Business Days following delivery of the applicable Redemption Notice, unless the Company elects to make the redemption payment by means of a Cash Settlement, in which case the Redemption shall be completed as promptly as

practicable following delivery of the applicable Redemption Notice, but in any event, no more than ten (10) Business Days after delivery of such Redemption Notice (unless and to the extent that the Manager in its sole discretion agrees in writing to waive such time periods) (the date of such completion, the “Redemption Date”); provided that the Company, the Corporation and the Redeemed Member may change the number of Redeemed Units and/or the Redemption Date specified in such Redemption Notice to another number and/or date by mutual agreement signed in writing by each of them; provided further that a Redemption Notice may be conditioned on the closing of an underwritten distribution of the shares of Class A Common Stock that may be issued in connection with such proposed Redemption. Unless the Redeemed Member timely has delivered a Retraction Notice as provided in Section 11.01(b) or has delayed a Redemption as provided in Section 11.01(c) or the Corporation has elected to effect a Direct Exchange as provided in Section 11.03, on the Redemption Date (to be effective immediately prior to the close of business on the Redemption Date) (i) the Redeemed Member shall transfer and surrender the Redeemed Units to the Company and a corresponding number of shares of Class C Common Stock to the Corporation, in each case free and clear of all liens and encumbrances, (ii) the Company shall (x) cancel the Redeemed Units, (y) transfer to the Redeemed Member the consideration to which the Redeemed Member is entitled under Section 11.01(b), and (z) if the Units are certificated, issue to the Redeemed Member a certificate for a number of Common Units equal to the difference (if any) between the number of Common Units evidenced by the certificate surrendered by the Redeemed Member pursuant to clause (i) of this Section 11.01(a) and the Redeemed Units and (iii) the Corporation shall cancel such shares of Class C Common Stock.

(b) In exchange for its Redeemed Units, a Redeemed Member shall be entitled to receive the Share Settlement or, at the Company’s election, the Cash Settlement from the Company. Within one (1) Business Day of delivery of the Redemption Notice, the Company shall give written notice (the “Settlement Method Notice”) to the Redeemed Member (with a copy to the Corporation) of its intended settlement method; provided that if the Company does not timely deliver a Settlement Method Notice, the Company shall be deemed to have elected the Share Settlement method. The Redeemed Member may retract its Redemption Notice by giving written notice (the “Retraction Notice”) to the Company (with a copy to the Corporation) at any time prior to 5:00 p.m., New York City time, on the Business Day after delivery of the Settlement Method Notice. The timely delivery of a Retraction Notice shall terminate all of the Redeemed Member’s, the Company’s and the Corporation’ rights and obligations under this Section 11.01 arising from the retracted Redemption Notice.

(c) Notwithstanding anything to the contrary in Section 11.01(b), in the event the Company elects a Share Settlement in connection with a Redemption, a Redeemed Member shall be entitled, at any time prior to the consummation of a Redemption, to revoke its Redemption Notice or delay the consummation of a Redemption if any of the following conditions exists: (i) any registration statement pursuant to which the resale of the Class A Common Stock to be registered for such Redeemed Member at or immediately following the consummation of the Redemption shall have ceased to be effective pursuant to any action or inaction by the SEC or no such resale registration statement has yet become effective; (ii) the Corporation shall have failed to cause any related prospectus to be supplemented by any required prospectus supplement necessary to effect such Redemption; (iii) the Corporation shall have exercised its right to defer, delay or suspend the filing or effectiveness of a registration statement and such deferral, delay or suspension shall affect the ability of such Redeemed Member to have the resale of its Class A

Common Stock registered at or immediately following the consummation of the Redemption; (iv) the Corporation shall have disclosed to such Redeemed Member any material non-public information concerning the Corporation, the receipt of which results in such Redeemed Member being prohibited or restricted from selling Class A Common Stock at or immediately following the Redemption without disclosure of such information (and the Corporation does not permit disclosure); (v) any stop order relating to the registration statement pursuant to which the Class A Common Stock was to be registered by such Redeemed Member at or immediately following the Redemption shall have been issued by the SEC; (vi) there shall have occurred a material disruption in the securities markets generally or in the market or markets in which the Class A Common Stock is then traded; (vii) there shall be in effect an injunction, a restraining order or a decree of any nature of any Governmental Entity that restrains or prohibits the Redemption; (viii) the Corporation shall have failed to comply in all material respects with its obligations under the Registration Rights Agreement, and such failure shall have affected the ability of such Redeemed Member to consummate the resale of Class A Common Stock to be received upon such redemption pursuant to an effective registration statement; or (ix) the Redemption Date would occur three (3) Business Days or less prior to, or during, a Black-Out Period; provided further, that in no event shall the Redeemed Member seeking to delay the consummation of such Redemption and relying on any of the matters contemplated in clauses (i) through (ix) above have controlled or intentionally materially influenced any facts, circumstances, or Persons in connection therewith (except in the good faith performance of his or her duties as an officer or director of the Corporation) in order to provide such Redeemed Member with a basis for such delay or revocation. If a Redeemed Member delays the consummation of a Redemption pursuant to this Section 11.01(c), (A) the Redemption Date shall occur on the third Business Day following the date on which the conditions giving rise to such delay cease to exist (or such earlier day as the Corporation, the Company and such Redeemed Member may agree in writing) and (B) notwithstanding anything to the contrary in Section 7.01(b), the Redeemed Member may retract its Redemption Notice by giving a Retraction Notice to the Company (with a copy to the Corporation) at any time prior to 5:00 p.m., New York City time, on the second Business Day following the date on which the conditions giving rise to such delay cease to exist.

(d) The amount of the Share Settlement or the Cash Settlement that a Redeemed Member is entitled to receive under Section 11.01(b) shall not be adjusted on account of any Distributions previously made with respect to the Redeemed Units or dividends previously paid with respect to Class A Common Stock; provided, however, that if a Redeemed Member causes the Company to redeem Redeemed Units and the Redemption Date occurs subsequent to the record date for any Distribution with respect to the Redeemed Units but prior to payment of such Distribution, the Redeemed Member shall be entitled to receive such Distribution with respect to the Redeemed Units on the date that it is made notwithstanding that the Redeemed Member transferred and surrendered the Redeemed Units to the Company prior to such date.

(e) In the event of a distribution (by dividend or otherwise) by the Corporation to all holders of Class A Common Stock of evidences of its indebtedness, securities, or other assets (including Equity Securities of the Corporation), but excluding any cash dividend or distribution of any such assets received by the Corporation in respect of its Units, then in exchange for its Redeemed Units, a Redeemed Member shall be entitled to receive, in addition to the consideration set forth in Section 11.01(b), the amount of such security, securities or other property that the Redeemed Member would have received if such Redemption Right had been exercised and the

Redemption Date had occurred immediately prior to the record date or effective time of any such transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after such record date or effective time. For the avoidance of doubt, subsequent to any such transaction, this Article XI shall apply mutatis mutandis with respect to any such security, securities or other property received by holders of Class A Common Stock in such transaction.

(f) If a Reclassification Event occurs, the Manager or its successor, as the case may be, shall, as and to the extent necessary, amend this Agreement in compliance with Section 16.03, and enter into any necessary supplementary or additional agreements, to ensure that, following the effective date of the Reclassification Event: (i) the rights of holders of Common Units (other than the Corporation) set forth in this Section 11.01 provide that each Common Unit is redeemable for the same amount and same type of property, securities or cash (or combination thereof) that one share of Class A Common Stock becomes exchangeable for or converted into as a result of the Reclassification Event (taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the record date or effective time for such Reclassification Event) and (ii) the Corporation or the successor to the Corporation, as applicable, is obligated to deliver such property, securities or cash upon such redemption. The Corporation shall not consummate or agree to consummate any Reclassification Event unless the successor Person, if any, becomes obligated to comply with the obligations of the Corporation (in whatever capacity) under this Agreement.

(g) In connection with a Manager Change of Control, the Corporation shall have the right to require each Member (other than the Corporation) to effect a Redemption of some or all of such Member’s Common Units and a corresponding number of shares of Class C Common Stock. Any Redemption pursuant to this Section 11.01(g) shall be effective immediately prior to the consummation of the Manager Change of Control (and, for the avoidance of doubt, shall not be effective if such Manager Change of Control is not consummated) (the “Change of Control Redemption Date”). From and after the Change of Control Redemption Date, (i) the Common Units and shares of Class C Common Stock subject to such Redemption shall be deemed to be transferred to the Corporation on the Change of Control Redemption Date and (ii) such Member shall cease to have any rights with respect to the Common Units and shares of Class C Common Stock subject to such Redemption (other than the right to receive shares of Class A Common Stock pursuant to such Redemption). The Corporation shall provide written notice of an expected Manager Change of Control to all Members within the earlier of (x) five (5) Business Days following the execution of the agreement with respect to such Manager Change of Control and (y) ten (10) Business Days before the proposed date upon which the contemplated Manager Change of Control is to be effected, indicating in such notice such information as may reasonably describe the Manager Change of Control transaction, subject to applicable law, including the date of execution of such agreement or such proposed effective date, as applicable, the amount and types of consideration to be paid for shares of Class A Common Stock in the Manager Change of Control, any election with respect to types of consideration that a holder of shares of Class A Common Stock, as applicable, shall be entitled to make in connection with such Manager Change

of Control, and the number of Common Units and shares of Class C Common Stock held by such Member that the Corporation intends to require to be subject to such Redemption. Following delivery of such notice and on or prior to the Change of Control Redemption Date, the Members shall take all actions reasonably requested by the Corporation to effect such Redemption, including taking any action and delivering any document required pursuant to Section 11.01(a) to effect a Redemption.

Section 11.02 Contribution of the Corporation. Subject to Section 11.03, in connection with the exercise of a Redeemed Member’s Redemption Rights under Section 11.01(a), the Corporation shall contribute to the Company the consideration the Redeemed Member is entitled to receive under Section 11.01(b). Unless the Redeemed Member has timely delivered a Retraction Notice as provided in Section 11.01(b) or has delayed a Redemption as provided in Section 11.01(c), or the Corporation has elected to effect a Direct Exchange as provided in Section 11.03, on the Redemption Date (to be effective immediately prior to the close of business on the Redemption Date) (i) the Corporation shall make its Capital Contribution to the Company (in the form of the Share Settlement or the Cash Settlement) required under this Section 11.02, and (ii) the Company shall issue to the Corporation a number of Common Units equal to the number of Redeemed Units surrendered by the Redeemed Member. Notwithstanding any other provisions of this Agreement to the contrary, in the event that the Company elects a Cash Settlement, the Corporation shall only be obligated to contribute to the Company an amount in respect of such Cash Settlement equal to the net proceeds (after deduction of any underwriters’ discounts or commissions and brokers’ fees or commissions) from the sale by the Corporation of a number of shares of Class A Common Stock equal to the number of Redeemed Units to be redeemed with such Cash Settlement; provided that the Corporation’s Capital Account shall be increased by an amount equal to any such discounts, commissions and fees relating to such sale of shares of Class A Common Stock in accordance with Section 6.06.

Section 11.03 Exchange Right of the Corporation.

(a) Notwithstanding anything to the contrary in this Article XI, the Corporation may, in its sole and absolute discretion, elect to effect on the Redemption Date the exchange of Redeemed Units for the Share Settlement or Cash Settlement, at the Corporation’s option, through a direct exchange of such Redeemed Units and such consideration between the Redeemed Member and the Corporation (a “Direct Exchange”). Upon such Direct Exchange pursuant to this Section 11.03, the Corporation shall acquire the Redeemed Units and shall be treated for all purposes of this Agreement as the owner of such Units.

(b) The Corporation may, at any time prior to a Redemption Date, deliver written notice (an “Exchange Election Notice”) to the Company and the Redeemed Member setting forth its election to exercise its right to consummate a Direct Exchange; provided that such election does not prejudice the ability of the parties to consummate a Redemption or Direct Exchange on the Redemption Date. An Exchange Election Notice may be revoked by the Corporation at any time; provided that any such revocation does not prejudice the ability of the parties to consummate a Redemption on the Redemption Date. The right to consummate a Direct Exchange in all events shall be exercisable for all the Redeemed Units that would have otherwise been subject to a Redemption. Except as otherwise provided by this Section 11.03, a Direct Exchange shall be consummated pursuant to the same timeframe and in the same manner as the relevant Redemption would have been consummated if the Corporation had not delivered an Exchange Election Notice.

Section 11.04 Reservation of Shares of Class A Common Stock; Listing; Certificate of the Corporation. At all times the Corporation shall reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of issuance upon a Redemption or Direct Exchange, such number of shares of Class A Common Stock as shall be issuable upon any such Redemption or Direct Exchange pursuant to Share Settlements; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such Redemption or Direct Exchange by delivery of purchased Class A Common Stock (which may or may not be held in the treasury of the Corporation) or the delivery of cash pursuant to a Cash Settlement. The Corporation shall deliver Class A Common Stock that has been registered under the Securities Act with respect to any Redemption or Direct Exchange to the extent a registration statement is effective and available for such shares. The Corporation shall use its commercially reasonable efforts to list the Class A Common Stock required to be delivered upon any such Redemption or Direct Exchange prior to such delivery upon each national securities exchange upon which the outstanding shares of Class A Common Stock are listed at the time of such Redemption or Direct Exchange (it being understood that any such shares may be subject to transfer restrictions under applicable securities Laws). The Corporation covenants that all Class A Common Stock issued upon a Redemption or Direct Exchange will, upon issuance, be validly issued, fully paid and non-assessable. The provisions of this Article XI shall be interpreted and applied in a manner consistent with the corresponding provisions of the Corporation’s certificate of incorporation.

Section 11.05 Effect of Exercise of Redemption or Exchange Right. This Agreement shall continue notwithstanding the consummation of a Redemption or Direct Exchange and all governance or other rights set forth herein shall be exercised by the remaining Members and the Redeemed Member (to the extent of such Redeemed Member’s remaining interest in the Company). No Redemption or Direct Exchange shall relieve such Redeemed Member of any prior breach of this Agreement.

Section 11.06 Tax Treatment. Unless otherwise required by applicable Law, the parties hereto acknowledge and agree that a Redemption or a Direct Exchange, as the case may be, shall be treated as a direct exchange between the Corporation and the Redeemed Member for U.S. federal (and applicable state and local) income tax purposes and no party shall take a position inconsistent with such intended tax treatment on any tax return, amendment thereof or any other communication with a taxing authority, in each case unless otherwise required by a “determination” within the meaning of Section 1313 of the Code. The issuance of shares of Class A Common Stock or other securities upon a Redemption or Direct Exchange shall be made without charge to the Redeemed Member for any stamp or other similar tax in respect of such issuance.

ARTICLE XII.

ADMISSION OF MEMBERS

Section 12.01 Substituted Members. Subject to the provisions of Article X, in connection with the Permitted Transfer of a Company Interest hereunder, the transferee shall become a substituted Member (“Substituted Member”) on the effective date of such Transfer, which effective date shall not be earlier than the date of compliance with the conditions to such Transfer, and such admission shall be shown on the books and records of the Company.

Section 12.02 Additional Members. Subject to the provisions of Article III and Article X, any Person that is not the Corporation or a MidCo Unitholder may be admitted to the Company as an additional Member (any such Person, an “Additional Member”) only upon furnishing to the Manager (a) a Joinder (or other counterpart to this Agreement acceptable to the Manager) and counterparts of any applicable Other Agreements and (b) such other documents or instruments as may be reasonably necessary or appropriate to effect such Person’s admission as a Member (including entering into such documents as the Manager may deem appropriate in its reasonable discretion). Such admission shall become effective on the date on which the Manager determines in its reasonable discretion that such conditions have been satisfied and when any such admission is shown on the books and records of the Company.

ARTICLE XIII.

WITHDRAWAL AND RESIGNATION; TERMINATION OF RIGHTS

Section 13.01 Withdrawal and Resignation of Members. No Member shall have the power or right to withdraw or otherwise resign as a Member from the Company prior to the dissolution and winding up of the Company pursuant to Article XIV. Any Member, however, that attempts to withdraw or otherwise resign as a Member from the Company without the prior written consent of the Manager upon or following the dissolution and winding up of the Company pursuant to Article XIV, but prior to such Member receiving the full amount of Distributions from the Company to which such Member is entitled pursuant to Article XIV, shall be liable to the Company for all damages (including all lost profits and special, indirect and consequential damages) directly or indirectly caused by the withdrawal or resignation of such Member. Upon a Transfer of all of a Member’s Units in a Transfer permitted by this Agreement, subject to the provisions of Section 10.06, such Member shall cease to be a Member.

ARTICLE XIV.

DISSOLUTION AND LIQUIDATION

Section 14.01 Dissolution. The Company shall not be dissolved by the admission of Additional Members or Substituted Members or the attempted withdrawal or resignation of a Member. The Company shall dissolve, and its affairs shall be wound up, upon:

(a) the unanimous decision of the Manager together with all the Members to dissolve the Company;

(b) a Change of Control Transaction that is not approved by the Majority Members;

(d) the entry of a decree of judicial dissolution of the Company under Section 18-802 of the Delaware Act.

Except as otherwise set forth in this Article XIV, the Company is intended to have perpetual existence. An Event of Withdrawal shall not cause a dissolution of the Company and the Company shall continue in existence subject to the terms and conditions of this Agreement.

Section 14.02 Liquidation and Termination. On dissolution of the Company, the Manager shall act as liquidator or may appoint one or more Persons as liquidator. The liquidators shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Delaware Act. The costs of liquidation shall be borne as a Company expense. Until final distribution, the liquidators shall continue to operate the Company properties with all of the power and authority of the Manager. The steps to be accomplished by the liquidators are as follows:

(a) as promptly as possible after dissolution and again after final liquidation, the liquidators shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company’s assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable;

(b) the liquidators shall cause the notice described in the Delaware Act to be mailed to each known creditor of and claimant against the Company in the manner described thereunder;

(c) the liquidators shall pay, satisfy or discharge from Company funds, or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash fund for contingent liabilities in such amount and for such term as the liquidators may reasonably determine): first, all expenses incurred in liquidation; and second, all of the debts, liabilities and obligations of the Company; and

(d) all remaining assets of the Company shall be distributed to the Members in accordance with Article IV by the end of the Taxable Year during which the liquidation of the Company occurs (or, if later, by ninety (90) days after the date of the liquidation). The distribution of cash and/or property to the Members in accordance with the provisions of this Section 14.02 and Section 14.03 below constitutes a complete return to the Members of their Capital Contributions, a complete distribution to the Members of their interest in the Company and all the Company’s property and constitutes a compromise to which all Members have consented within the meaning of the Delaware Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds.

Section 14.03 Deferment; Distribution in Kind. Notwithstanding the provisions of Section 14.02, but subject to the order of priorities set forth therein, if upon dissolution of the Company the liquidators determine that an immediate sale of part or all of the Company’s assets would be impractical or would cause undue loss (or would otherwise not be beneficial) to the Members, the liquidators may, in their sole discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy Company liabilities (other than loans to the Company by Members) and reserves. Subject to the order of priorities set forth in Section 14.02, the liquidators may, in their sole discretion, distribute to the Members, in lieu of cash, either (a) all or any portion of such remaining Company assets in-kind in accordance with the provisions of Section 14.02(d), (b) as tenants in common and in accordance with the provisions of

Section 14.02(d), undivided interests in all or any portion of such Company assets or (c) a combination of the foregoing. Any such Distributions in kind shall be subject to (x) such conditions relating to the disposition and management of such assets as the liquidators deem reasonable and equitable and (y) the terms and conditions of any agreements governing such assets (or the operation thereof or the holders thereof) at such time. Any Company assets distributed in kind will first be written up or down to their Fair Market Value, thus creating Profit or Loss (if any), which shall be allocated in accordance with Article V. The liquidators shall determine the Fair Market Value of any property distributed in accordance with the valuation procedures set forth in Article XV.

Section 14.04 Cancellation of Certificate. On completion of the distribution of Company assets as provided herein, the Company is terminated (and the Company shall not be terminated prior to such time), and the Manager (or such other Person or Persons as the Delaware Act may require or permit) shall file a certificate of cancellation with the Secretary of State of Delaware, cancel any other filings made pursuant to this Agreement that are or should be canceled and take such other actions as may be necessary to terminate the Company. The Company shall be deemed to continue in existence for all purposes of this Agreement until it is terminated pursuant to this Section 14.04.

Section 14.05 Reasonable Time for Winding Up. A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to Sections 14.02 and 14.03 in order to minimize any losses otherwise attendant upon such winding up.

Section 14.06 Return of Capital. The liquidators shall not be personally liable for the return of Capital Contributions or any portion thereof to the Members (it being understood that any such return shall be made solely from Company assets).

ARTICLE XV.

VALUATION

Section 15.01 Determination. “Fair Market Value” of a specific Company asset will mean the amount which the Company would receive in an all-cash sale of such asset in an arms-length transaction with a willing unaffiliated third party, with neither party having any compulsion to buy or sell, consummated on the day immediately preceding the date on which the event occurred which necessitated the determination of the Fair Market Value (and after giving effect to any transfer taxes payable in connection with such sale), as such amount is determined by the Manager (or, if pursuant to Section 14.02, the liquidators) in its good faith judgment using all factors, information and data it deems to be pertinent.

Section 15.02 Dispute Resolution. If any Member or Members dispute the accuracy of any determination of Fair Market Value in accordance with Section 15.01, and the Manager and such Member(s) are unable to agree on the determination of the Fair Market Value of any asset of the Company, the Manager and such Member(s) shall each select a nationally recognized investment banking firm experienced in valuing securities of closely-held companies such as the Company in the Company’s industry (the “Appraisers”), who shall each determine the Fair Market Value of the asset or the Company (as applicable) in accordance with the provisions of Section 15.01. The

Appraisers shall be instructed to give written notice of their determination of the Fair Market Value of the asset or the Company (as applicable) within thirty (30) days of their appointment as Appraisers. If Fair Market Value as determined by an Appraiser is higher than Fair Market Value as determined by the other Appraiser by 10% or more, and the Manager and such Member(s) do not otherwise agree on a Fair Market Value, the original Appraisers shall designate a third Appraiser meeting the same criteria used to select the original two. If Fair Market Value as determined by an Appraiser is within 10% of the Fair Market Value as determined by the other Appraiser (but not identical), and the Manager and such Member(s) do not otherwise agree on a Fair Market Value, the Manager shall select the Fair Market Value of one of the Appraisers. The fees and expenses of the Appraisers shall be borne by the Company.

ARTICLE XVI.

GENERAL PROVISIONS

Section 16.01 Power of Attorney.

(a) Each Member who is an individual hereby constitutes and appoints the Manager (or the liquidator, if applicable) with full power of substitution, as his or her true and lawful agent and attorney-in-fact, with full power and authority in his, her or its name, place and stead, to:

(i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) this Agreement, all certificates and other instruments and all amendments thereof which the Manager deems appropriate or necessary to form, qualify, or continue the qualification of, the Company as a limited liability company in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property; (B) all instruments which the Manager deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (C) all conveyances and other instruments or documents which the Manager deems appropriate or necessary to reflect the dissolution and liquidation of the Company pursuant to the terms of this Agreement, including a certificate of cancellation; and (D) all instruments relating to the admission, withdrawal or substitution of any Member pursuant to Article XII or Article XIII; and

(ii) sign, execute, swear to and acknowledge all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the reasonable judgment of the Manager, to evidence, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Members hereunder or is consistent with the terms of this Agreement, in the reasonable judgment of the Manager, to effectuate the terms of this Agreement.

(b) The foregoing power of attorney is irrevocable and coupled with an interest, and shall survive the death, disability, incapacity, dissolution, bankruptcy, insolvency or termination of any Member who is an individual and the transfer of all or any portion of his, her or its Company Interest and shall extend to such Member’s heirs, successors, assigns and personal representatives.

Section 16.02 Confidentiality. The Manager and each of the Members agree to hold the Company’s Confidential Information in confidence and may not use such information except in furtherance of the business of the Company or as otherwise authorized separately in writing by the Manager. “Confidential Information” as used herein includes, but is not limited to, ideas, financial product structuring, business strategies, innovations and materials, all aspects of the Company’s business plan, proposed operation and products, corporate structure, financial and organizational information, analyses, proposed partners, software code and system and product designs, employees and their identities, equity ownership, the methods and means by which the Company plans to conduct its business, all trade secrets, trademarks, tradenames and all intellectual property associated with the Company’s business, in each case obtained by a Member from the Company or any of its Affiliates or representatives. With respect to the Manager and each Member, Confidential Information does not include information or material that: (a) is rightfully in the possession of the Manager or each Member at the time of disclosure by the Company; (b) before or after it has been disclosed to the Manager or each Member by the Company, becomes part of public knowledge, not as a result of any action or inaction of the Manager or such Member, respectively, in violation of this Agreement; (c) is approved for release by written authorization of the Chief Executive Officer of the Company or of the Corporation; (d) is disclosed to the Manager or such Member or their representatives by a third party not, to the knowledge of the Manager or such Member, respectively, in violation of any obligation of confidentiality owed to the Company with respect to such information; or (e) is or becomes independently developed by the Manager or such Member or their respective representatives without use or reference to the Confidential Information.

Section 16.03 Amendments. This Agreement may be amended or modified solely by the Manager, subject to the prior written consent of both (a) the Majority Members and (b) the Audit Committee of the Corporate Board; provided, that, solely for purposes of this Section 16.03, the second reference to “a majority” in the definition of Majority Members shall be deemed to be “thirty-three percent (33%) or more.” Notwithstanding the foregoing, no amendment or modification (a) to this Section 16.03 may be made without the prior written consent of each of the Members, (b) that modifies the limited liability of any Member, or increases the liabilities or obligations of any Member, in each case, may be made without the consent of each such affected Member, (c) that materially alters or changes any rights, preferences or privileges of any Company Interests in a manner that is different or prejudicial relative to any other Company Interests, may be made without the approval of a majority in interest of the Members holding the Company Interests affected in such a different or prejudicial manner, (d) that materially alters or changes any rights, preferences or privileges of a holder of any class of Company Interests in a manner that is different or prejudicial relative to any other holder of the same class of Company Interests, may be made without the approval of the holder of Company Interests affected in such a different or prejudicial manner and (e) to any of the terms and conditions of this Agreement which terms and conditions expressly require the approval or action of certain Persons may be made without obtaining the consent of the requisite number or specified percentage of such Persons who are entitled to approve or take action on such matter; provided, that the Manager, acting alone, may amend this Agreement to reflect the issuance of additional Units or Equity Securities in accordance with Section 3.04.

Section 16.04 Title to Company Assets. Company assets shall be deemed to be owned by the Company as an entity, and no Member, individually or collectively, shall have any ownership interest in such Company assets or any portion thereof. The Company shall hold title to all of its property in the name of the Company and not in the name of any Member. All Company assets shall be recorded as the property of the Company on its books and records, irrespective of the name in which legal title to such Company assets is held. The Company’s credit and assets shall be used solely for the benefit of the Company, and no asset of the Company shall be transferred or encumbered for, or in payment of, any individual obligation of any Member.

Section 16.05 Addresses and Notices. Any notice, request, demand or instruction specified or permitted by this Agreement shall be in writing and shall be either personally delivered, or received by certified mail, return receipt requested, or sent by reputable overnight courier service (charges prepaid) to the Company or by electronic mail at the address set forth below and to any other recipient and to any Member at such address as indicated by the Company’s records, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices shall be deemed to have been given hereunder when delivered personally or sent by telecopier (provided confirmation of transmission is received), three (3) days after deposit in the U.S. mail and one (1) day after deposit with a reputable overnight courier service or if sent by electronic mail, upon confirmed receipt. Whenever any notice is required to be given by Law or this Agreement, a written waiver thereof signed by the Person entitled to such notice, whether before or after the time stated at which such notice is required to be given, shall be deemed equivalent to the giving of such notice.. The Company’s address is:

to the Company:

Permian Resources Operating, LLC

300 N. Marienfeld St., Suite 1000

Midland, Texas 79701

with a copy (which copy shall not constitute notice) to:

Latham & Watkins LLP

811 Main Street, Suite 3700

Houston, Texas 77002

Attn: Ryan J. Maierson

John M. Greer

E-mail: ryan.maierson@lw.com

john.greer@lw.com

Section 16.06 Binding Effect; Intended Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

Section 16.07 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company or any of its Affiliates, and no creditor who makes a loan to the Company or any of its Affiliates may have or acquire (except pursuant to the terms of a separate agreement executed by the Company in favor of such creditor) at any time as a result of making the loan any direct or indirect interest in Company Profits, Losses, Distributions, capital or property other than as a secured creditor.

Section 16.08 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

Section 16.09 Counterparts. This Agreement may be executed in separate counterparts, each of which will be an original and all of which together shall constitute one and the same agreement binding on all the parties hereto.

Section 16.10 Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any suit, dispute, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement shall be heard in the state or federal courts of the State of Delaware, and the parties hereby consent to the exclusive jurisdiction of such court (and of the appropriate appellate courts) in any such suit, action or proceeding and waives any objection to venue laid therein. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD, WHETHER WITHIN OR WITHOUT THE JURISDICTION OF ANY SUCH COURT (INCLUDING BY PREPAID CERTIFIED MAIL WITH A VALIDATED PROOF OF MAILING RECEIPT) AND SHALL HAVE THE SAME LEGAL FORCE AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN THE STATE OF DELAWARE. WITHOUT LIMITING THE FOREGOING, TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTIES AGREE THAT SERVICE OF PROCESS UPON SUCH PARTY AT THE ADDRESS REFERRED TO IN SECTION 16.05 (INCLUDING BY PREPAID CERTIFIED MAIL WITH A VALIDATED PROOF OF MAILING RECEIPT), TOGETHER WITH WRITTEN NOTICE OF SUCH SERVICE TO SUCH PARTY, SHALL BE DEEMED EFFECTIVE SERVICE OF PROCESS UPON SUCH PARTY.

Section 16.11 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

Section 16.12 Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking such actions as may be reasonably necessary or appropriate to achieve the purposes of this Agreement.

Section 16.13 Delivery by Electronic Transmission. This Agreement and any signed agreement or instrument entered into in connection with this Agreement or contemplated hereby, or entered into by the Company in accordance herewith, and any amendments hereto or thereto, to the extent signed and delivered by means of an electronic signature and/or an electronic transmission, including by a facsimile machine or via email, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of electronic signature or electronic transmission to execute and/or deliver a document or the fact that any signature or agreement or instrument was transmitted or communicated through such electronic transmission as a defense to the formation of a contract and each such party forever waives any such defense..

Section 16.14 Right of Offset. Whenever the Company is to pay any sum (other than pursuant to Article IV) to any Member, any amounts that such Member owes to the Company which are not the subject of a good faith dispute may be deducted from that sum before payment. For the avoidance of doubt, the distribution of Units to the Corporation shall not be subject to this Section 16.14.

Section 16.15 Effectiveness. This Agreement shall be effective immediately upon the Business Combination Closing (the “Effective Time”). The Fifth A&R LLC Agreement shall govern the rights and obligations of the Company and the other parties to this Agreement in their capacity as Members prior to the Effective Time.

Section 16.16 Entire Agreement. This Agreement, those documents expressly referred to herein (including the Registration Rights Agreement), the Business Combination Agreement, any indemnity agreements entered into in connection with the Fifth A&R LLC Agreement with any member of the board of managers at that time and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. For the avoidance of doubt, the Fifth A&R LLC Agreement is superseded by this Agreement as of the Effective Time and shall be of no further force and effect thereafter.

Section 16.17 Remedies. Each Member shall have all rights and remedies set forth in this Agreement and all rights and remedies which such Person has been granted at any time under any other agreement or contract and all of the rights which such Person has under any Law. Any Person having any rights under any provision of this Agreement or any other agreements contemplated hereby shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by Law.

Section 16.18 Descriptive Headings; Interpretation. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. The use of the word “including” in this Agreement shall be by way of example rather than by limitation. Reference to any agreement, document or

instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. Without limiting the generality of the immediately preceding sentence, no amendment or other modification to any agreement, document or instrument that requires the consent of any Person pursuant to the terms of this Agreement or any other agreement will be given effect hereunder unless such Person has consented in writing to such amendment or modification. Wherever required by the context, references to a Fiscal Year shall refer to a portion thereof. The use of the words “or,” “either” and “any” shall not be exclusive. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Wherever a conflict exists between this Agreement and any other agreement, this Agreement shall control but solely to the extent of such conflict.

[Signature Pages Follow]

IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Sixth Amended and Restated Limited Liability Company Agreement as of the date first written above.


COMPANY:

PERMIAN RESOURCES OPERATING, LLC

By:		/s/ George S. Glyphis
Name: George S. Glyphis
Title: Executive Vice President and Chief
Financial Officer

[Signature Page to Sixth Amended and Restated Limited Liability Company Agreement]


MEMBERS:

PERMIAN RESOURCES CORPORATION

By:		/s/ Sean R. Smith
Name: Sean R. Smith
Title: Chief Executive Officer

CRP HOLDCO CORP.

By:		/s/ Sean R. Smith
Name: Sean R. Smith
Title: Chief Executive Officer

[Signature Page to Sixth Amended and Restated Limited Liability Company Agreement]


COLGATE ENERGY PARTNERS III MIDCO,
LLC

By:		/s/ James H. Walter
Name: James H. Walter
Title: President & Co-Chief Executive Officer

[Signature Page to Sixth Amended and Restated Limited Liability Company Agreement]

SCHEDULE 1

SCHEDULE OF MEMBERS

The Schedule of Members is on file with the Company.

EXHIBIT A

FORM OF JOINDER AGREEMENT

This JOINDER AGREEMENT, dated as of [ ● ], 2022 (this “Joinder”), is delivered pursuant to that certain Sixth Amended and Restated Limited Liability Company Agreement, dated as of [ ● ], 2022 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “LLC Agreement”) by and among Permian Resources Operating, LLC, a Delaware limited liability company (the “Company”), Permian Resources Corporation, a Delaware corporation and the managing member of the Company (the “Manager”), CRP Holdco Corp., a Delaware corporation, Colgate Energy Partners III MidCo, LLC, a Delaware limited liability company, and each of the Members from time to time party thereto. Capitalized terms used but not otherwise defined herein have the respective meanings set forth in the LLC Agreement.

1. Joinder to the LLC Agreement. Upon the execution of this Joinder by the undersigned and delivery hereof to the Manager, the undersigned hereby is and hereafter will be a Member under the LLC Agreement and a party thereto, with all the rights, privileges and responsibilities of a Member thereunder. The undersigned hereby agrees that it shall comply with and be fully bound by the terms of the LLC Agreement as if it had been a signatory thereto as of the date thereof.

2. Incorporation by Reference. All terms and conditions of the LLC Agreement are hereby incorporated by reference in this Joinder as if set forth herein in full.

3. Address. All notices under the LLC Agreement to the undersigned shall be direct to:

[Name]

[Address]

[City, State, Zip Code]

Attn:

Facsimile:

E-mail:

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Joinder as of the day and year first above written.


[NAME OF NEW MEMBER]

By:
Name:
Title:


Acknowledged and agreed as of the date first set forth above:

PERMIAN RESOURCES OPERATING, LLC

By: PERMIAN RESOURCES CORPORATION, its Managing Member

By:
Name:
Title:

Exhibit 10.3

Permian Resources Corporation

FIFTH AMENDED AND RESTATED

NON-EMPLOYEE DIRECTOR COMPENSATION PROGRAM

Effective Date: September 1, 2022

Each member of the board of directors (the “Board”) of Permian Resources Corporation (the “Company”) who is not an employee of the Company or any parent or subsidiary of the Company and is not affiliated with Riverstone Investment Group LLC, NGP Energy Capital Management, L.L.C. or Pearl Energy Investments, L.P. (each, a “Non-Employee Director”) will receive the compensation in this Fifth Amended and Restated Non-Employee Director Compensation Program (this “Program”) for service as a Non-Employee Director. The compensation described in this Program will be paid or be made, as applicable, automatically and without further action of the Board to each Non-Employee Director who is entitled to receive the compensation, unless the Non-Employee Director declines receipt of the compensation by written notice to the Company. The terms and conditions of this Program will supersede any prior cash or equity compensation arrangements for service as a member of the Board between the Company and any of its Non-Employee Directors. This Program will become effective on the effective date set forth above (the “Effective Date”) and remain in effect until it is revised or rescinded by further action of the Board. This Program may be amended, modified or terminated by the Board at any time in its sole discretion. No Non-Employee Director will have any rights under this Program.

I. CASH COMPENSATION

A. Annual Retainers. Each Non-Employee Director will receive an annual retainer of $87,500 (the “Retainer”).

B. Payment of Retainers. The Retainer will be earned on a quarterly basis based on a calendar quarter and paid in cash by the Company in arrears not later than the fifteenth day following the end of each calendar quarter. If a Non-Employee Director does not serve as a Non-Employee Director for an entire calendar quarter, the Non-Employee Director’s Retainer will be prorated for the portion of the calendar quarter actually served as a Non-Employee Director. In addition, the Retainer payable under this Program will be prorated for the first quarter in which the Effective Date occurs, based on the number of days remaining in such calendar quarter after the Effective Date.

C. Annual Retainer Election.

1. Election. Prior to 5:00 p.m. Central time on the final business day preceding an Annual Grant Date (defined below) (the “Election Deadline”), by delivery to the Company of a written election in a form provided by the Company (an “Election”), a Non-Employee Director may elect to receive payment of the entire Retainer payable to the Non-Employee Director under this Program for services performed during the 12-month period beginning on such Annual Grant Date (each such period, a “Service Year”) in the form of an award of Restricted Stock (as defined in the Company’s 2016 Long Term Incentive Plan or any other applicable Company equity incentive plan then-maintained by the Company (the “Equity Plan”)) as set forth in this Section I(C) (each, an “Elective Restricted Stock Award”) rather than in cash in accordance with Section I(B). Any timely delivered Election for a given Service Year shall remain in effect for subsequent Service Years until the Election is modified or withdrawn, provided that such modification or withdrawal is delivered prior to the Election Deadline for a given Service Year.

2. Terms of Elective Restricted Stock Award. Each Elective Restricted Stock Award will be granted automatically, without further action of the Board, on the Annual Grant Date or on the date the Non-Employee Director commences service as a Non-Employee Director during a Service Year (as applicable, the “Issue Date”), under and subject to the terms of the Company’s Equity Plan and an award agreement in substantially the form previously approved by the Board. The number of shares of Elective Restricted Stock granted to a Non-Employee Director on the Issue Date will be equal to the quotient obtained by dividing (i) the full amount of the Retainer as in effect on the Issue Date for Elective Restricted Stock Awards issued on an Annual Grant Date or a prorated portion of such Retainer based on the remaining time in the applicable Service Year for Elective Restricted Stock Awards issued on the date a Non-Employee Director commences service as a Non-Employee Director during a Service Year by (ii) the average daily closing price of one share of the Company’s Common Stock on the NASDAQ Capital Market (or other applicable securities exchange on which the Common Stock is then traded) over the five consecutive trading days ending on the day before the applicable Issue Date. Each Elective Restricted Stock Award shall vest in a single installment on the earlier to occur of (i) the first anniversary of the grant date of the Elective Restricted Stock Award and (ii) immediately prior to and contingent upon the closing of a Change in Control (as defined in the Equity Plan), subject in each case to the Non-Employee Director continuing in service as a Non-Employee Director through the vesting date. Unless the Board otherwise determines, any Elective Restricted Stock Award that is unvested at the time of a Non-Employee Director’s termination of service on the Board as a Non-Employee Director will be immediately forfeited upon such termination of service and will not thereafter become vested.

3. Withdrawal and Service. A Non-Employee Director may withdraw his or her Election at any time prior to the Election Deadline for a given Service Year, and thereafter, any Elections delivered to the Company and not previously withdrawn will become irrevocable with respect to the Service Year. Notwithstanding anything in this Section I(C) or any Election to the contrary, if a Non-Employee Director is not serving as a Non-Employee Director on the Annual Grant Date or if the grant of an Elective Restricted Stock Award described in this Section I(C) is otherwise prohibited under applicable laws, exchange listing rules or the terms of the Equity Plan, the Non-Employee Director’s Retainer, to the extent earned, shall be paid in cash under and subject to the terms of Section I(A).

4. Special Rules for New Non-Employee Directors. Notwithstanding the foregoing to the contrary, for any Non-Employee Director whose service as a Non-Employee Director commences during a Service Year, such Non-Employee Director may elect to receive payment of the portion of the prorated Retainer payable to the Non-Employee Director under this Program for services performed during the remainder of such Service Year in the form of an Elective Restricted Stock Award, provided that such election is made prior to the Non-Employee Director’s commencement of service.

II. EQUITY COMPENSATION

Non-Employee Directors will be granted the awards of Restricted Stock described below (each, a “Restricted Stock Award”). The Restricted Stock Awards will be granted under and subject to the terms of the Plan and award agreements in substantially the form approved by the Board. All applicable terms of the Equity Plan apply to this Program as if fully set forth herein, and all Restricted Stock Awards under this Program are subject in all respects to the terms of the Equity Plan and the applicable award agreement.

A. Restricted Stock Awards. A Non-Employee Director who is serving as a Non-Employee Director at the close of business on the date of the Company’s annual meeting of shareholders or a special meeting in lieu of an annual meeting of shareholders (in each case, an “Annual Grant Date”) will be automatically granted on each Annual Grant Date a number of shares of Restricted Stock equal to the

quotient obtained by dividing (i) the applicable Annual Award Amount (as defined below) by (ii) the average daily closing price of one share of the Company’s Common Stock on the NASDAQ Capital Market (or other applicable securities exchange on which the Common Stock is then traded) over the five consecutive trading days ending on the day before the applicable Annual Grant Date. If a Non-Employee Director is first appointed or elected on a date other than an Annual Grant Date, or a member of the Board first becomes a Non-Employee Director as described in clause B below on a date other than an Annual Grant Date (in either case, a “Mid-Year Grant Date”), the Non-Employee Director will be automatically granted on the Mid-Year Grant Date a number of shares of Restricted Stock equal to the quotient obtained by dividing (x) the product of the applicable Annual Award Amount and the difference between 365 and the number of days in the period between the most recent Annual Grant Date and such the Mid-Year Grant Date, by (y) the product of 365 and the average daily closing price of one share of the Company’s Common Stock on the NASDAQ Capital Market over the five consecutive trading days ending on the day before the Mid-Year Grant Date. Each Annual Grant Date and Mid-Year Grant Date shall be referred to individually as a “Grant Date.” For each Non-Employee Director, the “Annual Award Amount” determined on the applicable Grant Date shall equal (a) $162,500, plus (b) $20,000, if the Non-Employee Director is the chair of the Audit Committee of the Board on the Grant Date, plus (c) $15,000, if the Non-Employee Director is the chair of the Compensation Committee of the Board on the Grant Date, and plus (d) $15,000, if the Non-Employee Director is the chair of the Nominating, Environmental, Social and Governance Committee of the Board on the Grant Date.

B. Termination of Employment of Employee Directors. Members of the Board who are employees of the Company or any parent or subsidiary of the Company who subsequently terminate their employment with the Company and any parent or subsidiary of the Company and remain on the Board will, to the extent that they are otherwise eligible, be eligible to receive Restricted Stock Awards under this Program on Grant Dates occurring on or after their termination of employment with the Company and any parent or subsidiary of the Company.

C. Vesting. Each Restricted Stock Award shall vest in a single installment on the earlier to occur of (i) the first anniversary of the Grant Date and (ii) immediately prior to and contingent upon the closing of a Change in Control (as defined in the Equity Plan), subject in each case to the Non-Employee Director continuing in service as a Non-Employee Director through the vesting date. Unless the Board otherwise determines, any Restricted Stock Award that is unvested at the time of a Non-Employee Director’s termination of service on the Board as a Non-Employee Director will be immediately forfeited upon such termination of service and will not thereafter become vested.

III. COMPENSATION LIMITS

Notwithstanding anything to the contrary in this Program, all compensation payable under this Program will be subject to any limits on the maximum amount of Non-Employee Director compensation set forth in the Equity Plan, as in effect from time to time.

* *

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 333-215119, 333-231514, and 333-238798) and S-3 (Nos. 333-215621, 333-214355, 333-219739, 333-241649, and 333-254300) of Permian Resources Corporation (formerly Centennial Resource Development, Inc.) of our report dated March 21, 2022, with respect to the consolidated financial statements of Colgate Energy Partners III, LLC, which report appears in this Current Report on Form 8-K of Permian Resources Corporation dated September 8, 2022.

/s/ KPMG LLP

Dallas, Texas

September 8, 2022

Exhibit 23.2

Consent of Independent Auditors

We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 333-215119, 333-231514, and 333-238798) and S-3 (Nos. 333-215621, 333-214355, 333-219739, 333-241649, and 333-254300) of Permian Resources Corporation (formerly Centennial Resource Development, Inc.) of our report dated December 14, 2021, with respect to the Statement of Revenues and Direct Operating Expenses of Properties Acquired by Colgate Energy Partners III, LLC, for the year ended December 31, 2020, which report appears in the Current Report on Form 8-K of Permian Resources Corporation dated September 8, 2022.

/s/ KPMG LLP

Dallas, Texas

September 8, 2022

Exhibit 23.3

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form S-3) of Permian Resources Corporation (formerly Centennial Resource Development, Inc.) and in the related Prospectus of our report dated May 13, 2021, with respect to the consolidated financial statements of Luxe Energy LLC and Subsidiaries, included in this Current Report on Form 8-K.

/s/ Ernst & Young LLP

Denver, Colorado

September 8, 2022

Exhibit 99.1

LOGO

Centennial Resource Development and Colgate Energy Complete Combination,

Forming Permian Resources Corporation

MIDLAND, Sep. 1, 2022 (GLOBE NEWSWIRE) – Permian Resources Corporation (“Permian Resources” or the “Company”) today announced the successful completion of the combination of Centennial Resource Development, Inc. (“Centennial”) (NASDAQ: CDEV) and Colgate Energy Partners III, LLC (“Colgate”).

Permian Resources Highlights

•

Largest pure-play E&P company in the Delaware Basin

•

Deep inventory of high-quality drilling locations on ~180,000 net acres

•

Unique combination of attractive growth profile and robust shareholder returns framework

•

Strong balance sheet protects the business and return of capital program across commodity price cycles

•

Industry-leading shareholder alignment, with employee ownership exceeding 13%

•

Management compensation highly weighted towards equity and performance

Management Commentary

“Permian Resources brings together two successful E&P companies, creating a better, stronger and more strategically compelling company. The combined asset base is highly complementary with a deep inventory of high-quality locations that generate robust free cash flow across commodity price cycles,” said Will Hickey, Co-CEO of Permian Resources. “Additionally, we are excited to establish Permian Resources’ headquarters in Midland, Texas and are committed to being good stewards of the Permian Basin community in which we live, work and operate.”

“As significant owners of the business, we are closely aligned with shareholders and are focused on maximizing returns. We are excited to continue our track record of generating robust cash-on-cash returns and returning capital to shareholders. The Company’s capital return program is underpinned by our high-quality asset base, attractive growth profile, strong balance sheet and value-driven investment strategy,” said James Walter, Co-CEO of the Company.

Operational Plans

Permian Resources is currently operating an eight-rig drilling program and expects to reduce to a seven-rig program in November. This development program is expected to deliver total equivalent production of 140 to 150 MBoe/d (~52% oil) during the fourth quarter of 2022. Assuming anticipated activity levels of approximately 38 to 42 gross wells spud and completed, total capital expenditures are estimated to be $300 million to $325 million during the quarter.

For the full year 2023, Permian Resources expects to spud and complete approximately 145 and 150 gross wells, respectively, with an average working interest (“WI”) of approximately 80% and 8/8ths net revenue interest (“NRI”) of approximately 78%. The Company plans to begin 2023 operating a seven-rig drilling program with the potential to reduce its rig count during the year, assuming expected operational efficiencies are achieved. Based on planned activity levels, the Company is targeting crude oil production growth of approximately 10% in the fourth quarter of 2023 compared to the fourth quarter of 2022. This development plan is estimated to generate approximately $1.1 billion to $1.3 billion of free cash flow¹ during the full year 2023, assuming current strip prices.

During 2023, the Company anticipates its operating activity to be split relatively evenly between New Mexico and Texas. The Company will focus the majority of its New Mexico activity in the Second and Third Bone Spring Sand intervals, while its Texas development will concentrate in the Third Bone Spring Sand and Wolfcamp intervals. Permian Resources plans to continue the efficient development of its Delaware Basin acreage position through larger well packages with extended laterals.

“Our 2023 plan focuses on allocating capital in a way that maximizes capital efficiency,” said Will Hickey, Co-CEO. “Importantly, this will deliver an attractive production growth profile and significant free cash flow without having to add incremental rigs or completion crews in this challenging operational environment.”

Full Year 2023 Outlook

•

Total daily production: 150 – 165 MBoe/d (~52% oil; ~71% liquids)

•

Total capital expenditures: $1,150 – $1,350 million

•

Controllable cash costs (LOE, cash G&A and GP&T): $7.25 – $8.75 per Boe

•

Production taxes (as a % of revenue): 6.5% – 8.5%

•

135 – 155 gross wells spud and 140 – 160 gross wells completed

•

~9,000-foot average lateral length with ~80% WI and 8/8ths NRI of ~78%

•

Oil realizations: 96 – 99% of WTI

•

~$1.1 – $1.3 billion of free cash flow, assuming current strip prices

Merger Synergies

Permian Resources is targeting annual corporate synergies of approximately $65 million, equating to greater than $450 million of total net present value over the next decade. The Company expects to realize operational savings from drilling and completion design modifications, improved cycle times and the implementation of other best practices. Permian Resources also expects additional savings from leasehold optimization, water recycling, midstream contract opportunities and G&A reductions. Both Centennial and Colgate have proven operational track records and will combine best practices to further advance efficiencies across all operating expenses and capital expenditures.

Capital Structure and Liquidity

Permian Resources is focused on maintaining a robust liquidity position and strong balance sheet to support capital investment and the return of capital to shareholders. The Company’s Net Debt-to-LQA EBITDAX² ratio is anticipated to be approximately 0.9x at the end of the third quarter of 2022 and expected to decline further in the near-term based on projected free cash flow at current strip prices. The Company’s liquidity profile is supported by continued free cash flow generation as well as a $2.5 billion borrowing base with $1.5 billion of elected commitments under its new revolving credit facility. The Company’s maturity profile provides financial flexibility with no maturities until 2026. Additionally, the Company has an attractive hedge position that protects cash flow, operating activity and its shareholder return program.

“Maintaining low leverage and preserving liquidity are critical to running a successful business in a cyclical industry,” said James Walter, Co-CEO. “Our leverage target range of 0.5 – 1.0x is established so that the Company can sustain its return of capital program and retain a healthy balance sheet during periods of weaker oil prices.”

Shareholder Return Program

Permian Resources plans to return capital to shareholders through a combination of a base dividend plus a variable return framework, comprised of variable dividends and / or share repurchases. The Company plans to initiate a quarterly base dividend of $0.05 per share, which is expected to be formally declared and paid commencing in the fourth quarter of 2022. Utilizing yesterday’s closing price, the base dividend represents a 2.4% yield making this base return competitive with other industry peers and the S&P 500. Importantly, the Company believes the base dividend is supported below $40 per barrel WTI over a multi-year period.

The variable return program is structured to distribute at least 50% of free cash flow after the base dividend through a variable dividend, share repurchases or a combination of both. The mix between variable dividends and share repurchases will be dependent upon market conditions during a given quarter. Any future variable dividends will be declared on or around the Company’s quarterly earnings and paid shortly thereafter. Permian Resources plans to begin its variable return program in the second quarter of 2023, which will be based on first quarter 2023 results. In support of its new capital return program, the Company is also increasing its previously announced share repurchase program to $500 million from $350 million and is extending the program through year-end 2024. To note, the Company’s share repurchase program is not dependent upon the timing of its variable return program and is effective immediately.

“Our shareholder return framework is designed to provide a significant return to shareholders while also providing flexibility to continue to invest in our business, strengthen the balance sheet, increase per share cash flow and drive overall value creation through various commodity price cycles,” said James Walter, Co-CEO.

Industry-Leading Shareholder Alignment and Executive Compensation

The Company believes that alignment between members of management and shareholders is critical to creating long-term value and strong returns for investors. The Company’s performance-focused compensation philosophy, combined with its significant senior management ownership, drives differentiated shareholder alignment. Mr. Hickey and Mr. Walter own approximately 6% of total shares outstanding, representing one of the largest CEO ownership levels in the industry. Furthermore, Permian Resources employees together own over 13% of the Company, further solidifying its alignment with shareholders.

Permian Resources has implemented a compensation structure that creates a high degree of alignment between its management team, shareholders and other key stakeholders. Highlights of its executive compensation plan include:

•

The Company’s Co-CEOs will receive compensation solely in performance stock units (PSUs) with no cash salary or bonus

•

Director compensation has been redesigned to increase weighting of equity compensation for the Company’s Board of Directors

•

PSUs will be increasingly used for equity awards to the Company’s leadership team (CEO, EVP, SVP and VP) to further align officer compensation with shareholders

Senior Leadership Team

As previously announced, Will Hickey and James Walter are leading the Company as Co-CEOs. George Glyphis, Centennial’s former Chief Financial Officer, and Matt Garrison, Centennial’s former Chief Operating Officer, continue to serve in their respective roles at Permian Resources. Additional members of the Company’s senior leadership team include:

•

John Bell – Executive Vice President & General Counsel

•

Brandon Gaynor – Executive Vice President of Business Development and Strategy

•

Robert Shannon – Executive Vice President of Corporate Services

•

Brent Jensen – Senior Vice President & Chief Accounting Officer

•

Chad MacDonald – Senior Vice President, Deputy General Counsel & Corporate Secretary

•

Casey McCain – Senior Vice President of Production Operations

•

Kathleen Phillips – Senior Vice President of People Strategy and Integration

•

Clayton Smith – Senior Vice President of Development Operations

•

Will Weidig – Senior Vice President of Finance

Board of Directors

Permian Resources’ Board of Directors consists of eleven highly qualified members and was selected to ensure the Company has the diverse skills, experience and perspectives to provide strong corporate governance and oversight. These members include:

•

Sean Smith, Executive Chair

•

Will Hickey, Co-CEO

•

James Walter, Co-CEO

•

Maire Baldwin

•

Karan Eves

•

Steven Gray

•

Matthew Hyde

•

Aron Marquez

•

William Quinn

•

Jeffrey Tepper

•

Robert Tichio

For more information on Permian Resources’ Board of Directors and senior leadership team, please visit the Company’s website at www.permianres.com.

Stock Exchange Listing Transfer

Permian Resources’ Class A common stock is expected to begin trading on the Nasdaq under the ticker symbol “PR” on September 2, 2022. Subsequently, the Company plans to transfer the listing of its Class A common stock from Nasdaq to the New York Stock Exchange (“NYSE”) on or about September 12, 2022, where the Company’s Class A common stock will retain the same ticker symbol “PR”. The Company’s Class A common stock will be delisted from Nasdaq in connection with listing on the NYSE.

Upcoming Conference Participation

Will Hickey and James Walter are scheduled to present at the Barclays CEO Energy-Power Conference in New York City, New York on September 6, 2022 at 12:05 p.m. Eastern Time. The live webcast and presentation materials used at the conference will be available on the Company’s website at www.permianres.com under the Investor Relations tab.

About Permian Resources Corporation

Headquartered in Midland, Texas, Permian Resources Corporation is an independent oil and natural gas company focused on the responsible acquisition, optimization and development of high-return oil and natural gas properties. The Company’s operations are located in the Permian Basin, with concentration in the core of the Delaware Basin. Permian Resources is listed on the Nasdaq under the ticker symbol “PR”. For more information, please visit www.permianres.com.

Cautionary Note Regarding Forward-Looking Statements

The information in this press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact included in this press release, 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 press release, the words “could,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “goal,” “plan,” “target” 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.

Forward-looking statements may include statements about:

•

volatility of oil, natural gas and NGL prices or a prolonged period of low oil, natural gas or NGL prices and the effects of actions by, or disputes among or between, members of the Organization of Petroleum Exporting Countries (“OPEC”), such as Saudi Arabia, and other oil and natural gas producing countries, such as Russia, with respect to production levels or other matters related to the price of oil;

•

the effects of excess supply of oil and natural gas resulting from reduced demand caused by the COVID-19 pandemic and the actions taken in response by certain oil and natural gas producing countries;

•

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

•

our business strategy and future drilling plans;

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

•

our ability to identify, complete and effectively integrate acquisitions of properties or businesses, including the recently completed merger between Centennial and Colgate;

•

our drilling prospects, inventories, projects and programs;

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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 competition and government regulations;

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our ability to obtain permits and governmental approvals;

•

our pending legal or environmental matters;

•

the marketing and transportation of our oil, natural gas and NGLs;

•

our leasehold or business acquisitions;

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costs of developing or operating our properties;

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our anticipated rate of return;

•

general economic conditions;

•

weather conditions in the areas where we operate;

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credit markets;

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uncertainty regarding our future operating results;

•

our plans, objectives, expectations and intentions contained in this press release that are not historical; and

•

the other factors described in our most recent Annual Report on Form 10-K, and any updates to those factors set forth in our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

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 oil and gas reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks described in our filings with the U.S. Securities and Exchange Commission.

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 oil and gas 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 press release 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 press release 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 press release.

(1) The company does not provide guidance on the items used to reconcile between forecasted free cash flow to forecasted net cash provided by operating activities due to the uncertainty regarding timing and estimates of certain items. Therefore, we cannot reconcile forecasted free cash flow to net cash provided by operating activities without unreasonable effort.

(2) The company does not provide guidance on the items used to reconcile between forecasted net debt-to-EBITDAX (or “leverage”) to forecasted long-term debt, net, or forecasted net income due to the uncertainty regarding timing and estimates of certain items. Therefore, we cannot reconcile forecasted leverage to long-term debt, net, or net income without unreasonable effort.

Contact:

Hays Mabry

Sr. Director, Investor Relations

(832) 240-3265

ir@permianres.com

SOURCE Permian Resources Corporation

Exhibit 99.2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Member

Colgate Energy Partners III, LLC:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Colgate Energy Partners III, LLC and subsidiaries (the Company) as of December 31, 2021 and December 31, 2020, the related consolidated statements of operations, members’ capital, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and December 31, 2020, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2018.

Dallas, Texas

March 21, 2022

Colgate Energy Partners III, LLC

Consolidated Balance Sheets


	December 31,
(in thousands)	2021			2020
Assets
Current assets:
Cash	$	210,276		$	8,245
Accounts receivable		125,161			49,203
Prepaids		22,790			1,119
Short-term derivative instruments		—			9,733

Total current assets		358,227			68,300
Oil & gas properties and equipment:
Oil and gas properties and equipment		2,185,445			834,074
Accumulated depreciation, depletion, and amortization		(279,593	)		(146,318	)

Net oil and gas properties and equipment		1,905,852			687,756
Other assets:
Other property and equipment, net		989			1,138

Total assets	$	2,265,068		$	757,194

Liabilities and members’ capital
Current liabilities:
Accounts payable	$	156,483		$	41,912
Accounts payable to affiliates		191			5,802
Revenue payable		79,565			32,906
Accrued expenses		38,866			618
Short-term derivative instruments		60,505			15,978

Total current liabilities		335,610			97,216
Other liabilities:
Long-term debt, net		977,451			173,701
Asset retirement obligations		20,294			6,968
Long-term derivative instruments		116,535			12,038

Total liabilities		1,449,890			289,923
Members’ capital:
Capital contributions		812,377			303,488
Capital distributions		(277,359	)		(134,687	)
Retained earnings		280,160			298,470

Total members’ capital		815,178			467,271

Total liabilities and members’ capital	$	2,265,068		$	757,194

See accompanying notes to the consolidated financial statements.

Colgate Energy Partners III, LLC

Consolidated Statements of Operations


	Years Ended December 31,
(in thousands)	2021			2020
Revenues:
Crude oil sales	$	508,368		$	157,959
Natural gas sales		92,096			9,199
Natural gas liquid sales		97,225			12,476
Other		1,962			1,911

Total revenues		699,651			181,545

Operating expenses:
Lease operating expenses		80,067			30,595
Gathering, processing, and transportation costs		9,566			2,242
Production and ad valorem taxes		40,271			9,622
Depreciation, depletion, and amortization		133,701			68,161
Exploration and abandonment costs		5,714			1,895
Accretion of asset retirement obligations		780			323
General and administrative		15,336			9,751
Profit sharing by affiliates		3,330			—
Gain on sale of assets		(4,824	)		(8,719	)

Total operating expenses		283,941			113,870

Income from operations		415,710			67,675

Other income (expenses):
Interest income		191			308
Interest expense		(43,722	)		(9,002	)
Gain (loss) on commodity derivatives, net		(390,489	)		77,187
Income from equity method investments		—			1,623

Total other income (expense)		(434,020	)		70,116

Net income (loss)	$	(18,310	)	$	137,791

See accompanying notes to the consolidated financial statements.

Colgate Energy Partners III, LLC

Consolidated Statements of Members’ Capital


(in thousands)
Balance at December 31, 2019	$	414,250

Capital contributions		40
Capital distributions		(50,036	)
Capital distributions (equity method investments)		(34,774	)
Net income		137,791

Balance at December 31, 2020	$	467,271

Capital contributions		250
Capital contributions (Luxe Acquisition)		508,639
Capital contributions (Profit sharing by affiliates)		3,330
Capital distributions		(146,002	)
Net loss		(18,310	)

Balance at December 31, 2021	$	815,178

See accompanying notes to the consolidated financial statements.

Colgate Energy Partners III, LLC

Consolidated Statements of Cash Flows


	Years Ended December 31,
(in thousands)	2021			2020
Cash flows from operating activities:
Net income (loss)	$	(18,310	)	$	137,791
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion, amortization		133,701			68,161
Accretion of asset retirement obligations		780			323
Abandonment of oil and gas properties		—			666
Gain on sale of assets		(4,824	)		(8,719	)
Amortization of deferred financing costs and issue premium / discount		3,497			634
(Gain) loss on commodity derivatives, net		390,489			(77,187	)
Loss on interest rate derivatives, net		39			2,577
Net settlements received from (paid on) commodity derivatives		(278,761	)		87,966
Net settlements paid on interest rate derivatives		(1,624	)		(991	)
Income from equity method investments		—			(1,623	)
Profit sharing by affiliates		3,330			—
Changes in operating assets and liabilities:
Accounts receivable and prepaids		(85,331	)		(436	)
Accounts payable, revenue payable, and accrued expenses		114,821			(366	)

Net cash provided by operating activities	$	257,807		$	208,796

Cash flows from investing activities:
Capital expenditures to develop oil and gas properties and equipment		(268,638	)		(139,314	)
Capital expenditures to acquire oil and gas properties and equipment		(546,087	)		(36,482	)
Investment in affiliates		—			(11,994	)
Proceeds from sale of oil and gas properties and equipment		104,634			13,829
Capital expenditures for other property and equipment		(185	)		(711	)

Net cash used in investing activities	$	(710,276	)	$	(174,672	)

Cash flows from financing activities:
Contributions from members		250			40
Distributions to members		(146,002	)		(50,036	)
Proceeds from issuance of long-term debt		1,000,410			—
Proceeds from credit facility		60,000			—
Repayments of credit facility		(235,000	)		(5,000	)
Deferred financing costs		(25,158	)		(277	)

Net cash provided by (used in) financing activities	$	654,500		$	(55,273	)

Net increase (decrease) in cash		202,031			(21,149	)
Cash at beginning of period		8,245			29,394

Cash at end of period	$	210,276		$	8,245

Supplemental disclosures of cash flow information:
Accrued capital expenditures for oil and gas properties at period end	$	96,026		$	31,309
Asset retirement obligation	$	12,547		$	1,827
Interest paid	$	17,249		$	6,219
Non-cash contribution (distribution)	$	508,639		$	(34,775	)

See accompanying notes to the consolidated financial statements.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

(1)

Nature of Operations

Colgate Energy Partners III, LLC (together with its subsidiaries, the Company) was formed on December 4, 2017 as a Delaware limited liability company pursuant to the Delaware Limited Liability Company Act, as amended (the Act). Upon formation, the Company was managed by Pearl Energy Investments II, LP, the sole member.

On December 30, 2020, the Company reorganized per the terms of the Third Amended and Restated Limited Liability Company Agreement (the Company Agreement). In accordance with the Company Agreement, the members of the Company contributed their Members’ Equity to CEP III Holdings, LLC (Holdings), in exchange for equity interests in Holdings.

Under the terms of the Company Agreement, Holdings became the sole member of the Company and governs the actions of the Company. Holdings is governed by a seven-member board of managers.

The Company is a Midland, Texas-based oil and gas company focused on the acquisition, development, exploration and production of oil and natural gas properties. The Company’s operations are focused in the Permian Basin throughout Texas and New Mexico.

(2)

Summary of Significant Accounting Policies

(a)

Basis of Presentation

The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and include the assets, liabilities, revenue, expenses, and related note disclosures of the Company and its consolidated subsidiaries.

These consolidated financial statements were approved by management and available for issuance on March 21, 2022. Subsequent events have been evaluated through this date.

(b)

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries since their acquisition or formation. All intercompany transactions and balances have been eliminated in consolidation.

(c)

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Depletion of oil and gas properties is determined using estimates of proved oil and gas reserves. There are numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures. Other significant estimates include but are not limited to, asset retirement obligations, fair value of business combinations, and fair value of derivative financial instruments.

The estimates of proved oil and natural gas reserves utilized in the preparation of the consolidated financial statements are estimated in accordance with the guidelines established by the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB), which require that reserve estimates be prepared under existing economic and operating conditions using a 12-month

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

historical average first of month price with no provision for price and cost escalations in future periods except by contractual arrangements. The Company’s reserve estimates at December 31, 2021 and 2020 were prepared by Netherland, Sewell, & Associates, Inc (NSAI).

Reserve engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact manner. The accuracy of a reserve estimate depends on the quality of available geological and engineering data, the precision of and the interpretation of that data, and judgment based on experience and training.

(d)

Cash

The Company’s cash includes depository accounts held by banks.

(e)

Accounts Receivable

Accounts receivable consist of receivables from joint interest owners on properties the Company operates and crude oil, natural gas, and natural gas liquid (“NGL”) production delivered to purchasers. The purchasers remit payment for production directly to the Company. Most payments are received within two months after the production date. For receivables from joint interest owners, the Company typically has the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company recognizes an allowance for doubtful accounts in an amount equal to anticipated future uncollectible receivables. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the debtor’s current ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole. The Company writes off specific accounts receivable when they become uncollectible and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. As of December 31, 2021 and 2020, management believes all accounts receivable are collectible and no allowance is required.

(f)

Oil and Natural Gas Properties

The Company uses the successful efforts method of accounting for oil producing activities, as further defined under ASC 932, Extractive Activities – Oil and Gas. Under this method, all costs associated with productive wells and nonproductive development wells are capitalized, while nonproductive exploration costs are expensed. There were no exploratory wells capitalized pending determinations of whether the wells have proved reserves at December 31, 2021 and 2020.

The capitalized costs of proved properties are depleted using the unit-of-production method based on proved reserves. Capitalized drilling and development costs of producing oil and natural gas properties are depleted over proved developed reserves and leasehold costs are depleted over total proved reserves.

Proceeds from the sales of individual properties and the capitalized costs of individual properties sold or abandoned are credited and charged, respectively, to accumulated depletion, if doing so does not materially impact the depletion rate of an amortization base. Generally, no gain or loss is recorded until an entire amortization base is sold.

The Company reviews its long-lived assets to be held and used, including proved oil and natural gas properties, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. The Company reviews its oil and natural gas properties by depletion base. An

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than the carrying amount of the assets. For each property determined to be impaired, an impairment loss equal to the difference between the carrying value of the properties and the estimated fair value (discounted future cash flows) of the properties would be recognized at that time. Estimating future cash flows involves the use of judgments, including estimation of the proved and risk-adjusted unproved oil and natural gas reserve quantities, timing of development and production, expected future commodity prices, capital expenditures and production costs and cash flows from integrated assets. The Company recognized an impairment expense of $0.6 million during the year ended December 31, 2020 related to its proved oil and natural gas properties, but did not recognize an impairment expense during the year ended December 31, 2021.

Unproved oil and natural gas properties are periodically assessed for impairment by considering future drilling and exploration plans, results of exploration activities, commodity price outlooks, planned future sales and expiration of all or a portion of the projects. During the years ended December 31, 2021 and 2020, the Company did not recognize any unproved impairment expense.

Geological and geophysical costs, including seismic studies and costs of carrying and retaining unproved properties, are charged to expense as incurred. Costs incurred to maintain wells and related equipment are charged to expense as incurred.

(g)

Asset Retirement Obligations

The Company estimates the present value of the amount it will incur to plug, abandon and remediate its producing properties at the end of their productive lives in accordance with ASC 410, Asset Retirement and Environmental Obligations (ASC 410). The Company computes its liability for asset retirement obligations by calculating the present value of estimated future cash flows related to each property. This requires the Company to use significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells, and its risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligations.

Under ASC 410, an asset retirement obligation is recorded as a liability at its estimated present value at the asset’s inception, with an offsetting increase to producing properties in the consolidated balance sheets which is allocated to expense over the useful life of the asset. Periodic accretion of the discount on asset retirement obligations is recorded as an expense in the consolidated statements of operations.

(h)

Derivative Instruments

The Company’s derivatives are accounted for as non-hedge derivatives and are recorded at estimated fair value in the consolidated balance sheets. All changes in the fair values of its derivative contracts are recorded as gains or losses in the earnings of the periods in which they occur. The Company periodically enters into commodity price derivative positions, including oil production derivatives, natural gas production derivatives and NGL production derivatives. The company does not have any derivatives designated as fair value or cash flow hedges. See note 6 for additional information regarding the Company’s derivatives.

(i)

Deferred Financing Costs

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

is recorded within Interest expense in the consolidated statements of operations. Deferred financing costs were $23.5 million as of December 31, 2021, net of accumulated amortization of $4.2 million. Deferred financing costs were $1.3 million as of December 31, 2020, net of accumulated amortization of $1.2 million. The deferred financing costs and accumulated amortization are presented in the consolidated balance sheets as a direct deduction to the face amount of the borrowings.

(j)

Revenue Recognition

Substantially all of the Company’s revenue is from the sale of crude oil, natural gas, and natural gas liquids. See note 3 for additional information regarding the Company’s revenue recognition.

(k)

Income Taxes

The Company is a limited liability company and therefore is treated as a flow-through entity for federal income tax purposes. As a result, the net taxable income of the Company and any related tax credits, for federal income tax purposes, are deemed to pass to the members and are included in their tax returns even though such net taxable income or tax credits may not have actually been distributed. Accordingly, no federal tax provision has been made in the consolidated financial statements of the Company.

In 2006, the state of Texas enacted the Texas Margin Tax Bill effective January 1, 2007 for the tax year ended December 31, 2007. At December 31, 2021 and 2020, the Company had not accrued a liability for the Texas margin tax as the liability, if any, is not expected to be material.

The Company is required to determine whether its tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2021 and 2020. However, the Company’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, ongoing analyses of and changes to tax laws, regulations, and interpretations thereof.

The Company recognizes interest and penalties related to unrecognized tax benefits in the General and administrative account within the consolidated statements of operations. No interest expense or penalties have been recognized for the years ended December 31, 2021 and 2020.

The Company may be subject to potential examination by U.S. federal or U.S. states jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance with U.S. federal and U.S. state tax laws.

(l)

Concentrations of Credit Risk

The Company’s oil and gas operations have a concentration of purchasers in the energy industry. This customer concentration may impact the Company’s overall exposure to credit risk, either positively or negatively, in that the purchasers may be similarly affected by changes in economic or other conditions. As of December 31, 2021 and 2020, the Company did not experience any material credit losses or write-offs of receivables. See note 11 for a list of significant purchasers as a percentage of total sales.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

(m)

Overhead Reimbursement

The Company records gross overhead charges billed to working interest owners as a reduction to General and administrative expenses in the consolidated statements of operations. The Company recorded $4.5 million and $1.9 million of overhead charges during the years ended December 31, 2021 and 2020, respectively. The Company records overhead charges as they relate to its net share of properties owned in the Lease operating expenses account in the consolidated statements of operations and the Oil and gas properties and equipment account in the consolidated balance sheets. The Company recorded $2.6 million and $1.2 million of net overhead charges in Lease operating expenses for the years ended December 31, 2021 and 2020, respectively. The Company recorded $1.2 million and $0.5 million of net overhead charges in Oil and gas properties and equipment for the years ended December 31, 2021 and 2020, respectively.

(n)

Related Party Transactions

Transactions between related parties are considered to be related party transactions though they may not be given accounting recognition. The FASB ASC Topic 850, Related Party Disclosures (ASC Topic 850), requires that transactions with related parties that would make a difference in decision making shall be disclosed so that users of the consolidated financial statements can evaluate their significance. See note 10 for additional information about the Company’s related parties.

(o)

Segment Reporting

Operating segments are defined as components of an enterprise that (i) engage in activities from which it may earn revenues and incur expenses and (ii) for which separate operational information is available and is regularly evaluated by the chief decision maker for the purpose of allocating resources and assessing performance.

Based on the organization and management of the Company, the Company has only one reportable operating segment, which is oil and natural gas exploration and production.

(p)

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). Topic 842 was issued to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company plans to adopt Topic 842 on January 1, 2022 using the modified retrospective approach-effective date method. Upon adoption of Topic 842, the Company will recognize lease assets and lease liabilities of approximately $15.0 million each, as of January 1, 2022.

(3)

Revenue from Contracts with Customers

Revenue is measured based on considerations specified in contracts with customers, excluding any sales incentives or amounts collected on behalf of third parties. The Company recognizes revenue when a performance obligation is satisfied by the transfer of control over a product to the ultimate customer. Sales of oil, natural gas and NGLs are recognized at the time that control of the product is transferred to the customer and collectability is reasonably assured. Generally, the pricing provisions in the Company’s contracts are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil or natural gas, and prevailing supply and demand conditions. As a result, the prices of the Company’s oil, natural gas and NGLs fluctuate to remain competitive with other available oil, natural gas and NGLs supplies. The Company reports revenues disaggregated by product on its consolidated statements of operations.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

(a)

Oil Sales

Oil production is sold at the wellhead and the Company collects an agreed-upon index price, net of pricing differentials. In this scenario, revenue is recognized when control transfers to the purchaser at the wellhead at the net price received by the Company.

(b)

Natural Gas and Natural Gas Liquid Sales

Under the Company’s natural gas processing contracts, it delivers natural gas to a midstream processing company at the wellhead or the inlet of the midstream processing company’s gathering system. The midstream processing company gathers and processes the natural gas and remits proceeds to the Company for the resulting natural gas sales and natural gas liquid sales. In these scenarios, the Company evaluates whether it is the principal or the agent in the transaction, which includes considerations of product redelivery, take-in-kind rights and risk of loss. For those contracts where the Company has concluded that control of the product transfers at the tailgate of the plant, meaning that the Company is the principal and the ultimate third party is its customer, the Company recognizes revenue on a gross basis, with transportation and processing fees presented as Gathering, processing, and transportation costs on the Company’s consolidated statements of operations. Alternatively, for those contracts where the Company has concluded control of the product transfers at the inlet of the plant, meaning that the Company is the agent and the midstream processing company is the Company’s customer, the Company recognizes natural gas sales and natural gas liquid sales based on the net amount of proceeds received from the midstream processing company. The Company also determined that losses associated with shrinkage and line loss (“FL&U”) occur prior to the change in control. As a result, natural gas and NGLs sales are presented net of FL&U costs.

(c)

Contract Balances

Under the Company’s product sales contracts, the Company invoices customers once performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s product sales contracts do not give rise to contract assets or liabilities under ASC Topic 606, Revenue from Contracts with Customers.

(4)

Acquisitions and Divestitures

Luxe Acquisition

On June 1, 2021 (the Luxe Closing Date), the Company received an equity contribution of CL Energy, LLC (CL) and Hermosa Ranch, LLC (Hermosa) from Holdings. CL and Hermosa own the majority of the oil and gas properties and equipment previously owned by Luxe Energy, LLC (Luxe). Upon completion of the transaction, Luxe owns an equity interest in Holdings. This transaction will be referred to as the Luxe Acquisition throughout this report.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

The Luxe Acquisition has been accounted for as a business combination, using the acquisition method. The following table represents the allocation of the total purchase price to the identifiable assets acquired and liabilities assumed based on the fair values as of the Luxe Closing Date.


Fair value of assets acquired: (in thousands)
Accounts receivable	$	26,764
Proved properties		485,140
Unproved properties		76,885

Total assets acquired	$	588,789

Fair value of liabilities assumed:
Accounts payable	$	13,369
Revenue payable		15,425
Derivatives		48,615
Asset retirement obligations		2,741

Total liabilities assumed		80,150

Total purchase price plus liabilities assumed	$	508,639

The Luxe Acquisition was deemed material for purposes of the following unaudited pro forma disclosures. The financial impact of the net assets acquired are included in the Company’s Consolidated Statements of Operations beginning with the Luxe Closing Date. The following pro forma financial information for the years ended December 31, 2020 and 2021 represents the results of the Company’s operations as if the Luxe Acquisition had occurred on January 1, 2020. This information is based on historical results of operations, adjusted for certain estimated accounting adjustments, and certain assumptions that the Company believes are reasonable, and does not purport to show the Company’s actual results of operations if the transaction would have occurred on January 1, 2020, nor is it necessarily indicative of future results. The financial information is derived from the Company’s Consolidated Statements of Operations for the years ended December 31, 2021 and 2020, Luxe’s Consolidated Statements of Operations for the year ended December 31, 2020 and for the three months ended March 31, 2020 and management’s estimate of the revenues and direct operating expense attributable to the assets acquired in the Luxe Acquisition for the period from April 1, 2021 to May 31, 2021.


	Years Ended December 31,
(in thousands)	2021			2020
Revenues	$	770,329		$	272,704
Income from operations	$	452,971		$	55,149
Net income (loss)	$	(58,540	)	$	194,005

Oxy Acquisition

On July 29, 2021 (the Oxy Closing Date), the Company closed an acquisition of proved and unproved oil and gas properties and equipment in Reeves County, Texas and Ward County, Texas from Occidental Petroleum (the Oxy Acquisition).

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

The Oxy Acquisition has been accounted for as an asset acquisition. The following table represents the allocation of the total purchase price to the identifiable assets acquired and liabilities assumed based on the fair values as of the Oxy Closing Date.


Fair value of assets acquired: (in thousands)
Proved properties	$	443,259
Unproved properties		49,678

Total assets acquired	$	492,937

Fair value of liabilities assumed:
Asset retirement obligations	$	13,030

Total liabilities assumed		13,030

Total purchase price plus liabilities assumed	$	479,907

Collie Field Divestiture

On July 30, 2021, the Company closed a divestiture of proved oil and gas properties and equipment in Reeves County, Texas and Ward County, Texas to a privately-held company (the Collie Field Divestiture). The Collie Field Divestiture resulted in proceeds of approximately $61 million and is subject to customary post-closing adjustments. The transaction did not result in the recording of a gain or loss on the Company’s consolidated statement of operations for the year ended December 31, 2021.

Water Infrastructure Divestiture

On August 27, 2021, the Company signed and closed a divestiture of salt water disposal assets and equipment in Reeves County, Texas and Ward County, Texas to a private third-party for a purchase price of approximately $28 million. The transaction did not result in the recording of a gain or loss on the Company’s consolidated statement of operations for the year ended December 31, 2021.

New Mexico Divestiture

In December 2021, the Company closed a divestiture of certain unproved oil and gas properties and equipment in Lea County, New Mexico. This divestiture resulted in net proceeds of approximately $10.2 million and a net gain of approximately $5.4 million in the Company’s consolidated statement of operations for the year ended December 31, 2021.

(5)

Fair Value

(a)

Assets and Liabilities that Approximate Fair Value on a Recurring Basis

(i)

Derivative Instruments

The fair market values of the derivative financial instruments reflected in the consolidated balance sheets were based on observable inputs obtained from the counterparties to the agreements. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. Further, the

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

Company presents asset and liability positions on a net basis by counterparty. The three input levels of the fair value hierarchy are as follows:

Level 1 – quoted prices for identical assets or liabilities in active markets.

Level 2 – quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates) and inputs derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – unobservable inputs for the asset or liability, typically reflecting management’s estimate of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore, determined using model-based techniques, including discounted cash flow models.

The following table presents the fair value hierarchy for those derivative instruments measured at fair value on a recurring basis at December 31, 2021:


	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)		Total
Liability – current:
Commodity contracts	$	—	$	(60,505	)	$	—	$	(60,505	)
Interest rate contracts		—		—			—		—

Total liability – current		—		(60,505	)		—		(60,505	)

Liability – noncurrent:
Commodity contracts		—		(116,535	)		—		(116,535	)
Interest rate contracts		—		—			—		—

Total liability – noncurrent		—		(116,535	)		—		(116,535	)

Net financial assets	$	—	$	(177,040	)	$	—	$	(177,040	)

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

The following table presents the fair value hierarchy for those derivative instruments measured at fair value on a recurring basis at December 31, 2020:


	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)		Total
Asset – current:
Commodity contracts	$	—	$	9,733		$	—	$	9,733

Total asset – current		—		9,733			—		9,733

Liability – current:
Commodity contracts		—		(14,393	)		—		(14,393	)
Interest rate contracts		—		(1,585	)		—		(1,585	)

Total liability – current		—		(15,978	)		—		(15,978	)

Liability – noncurrent:
Commodity contracts		—		(12,038	)		—		(12,038	)
Interest rate contracts		—		—			—		—

Total liability – noncurrent		—		(12,038	)		—		(12,038	)

Net financial assets	$	—	$	(18,283	)	$	—	$	(18,283	)

(b)

Assets and Liabilities that Approximate Fair Value on a Nonrecurring Basis

Certain assets and liabilities are reported at fair value on a nonrecurring basis in the Company’s balance sheets. The following methods and assumptions were used to estimate the fair values:

(i)

Properties Acquired in Business Combinations

If sufficient market data is not available, the Company determines the fair values of proved and unproved properties acquired in transactions accounted for as business combinations by preparing estimates of discounted cash flow projections. The factors to determine fair value include, but are not limited to, estimates of proved reserves, future commodity prices, the timing of future production and capital expenditures, and a discount rate commensurate with the risk reflective of the lives remaining for the respective oil and gas properties.

(ii)

Proved Oil and Natural Gas Properties

Proved oil and natural gas properties are reviewed for impairment when events and circumstances indicate the carrying value of such properties may not be recoverable. The factors used to determine fair value include, but are not limited to, estimates of proved reserves, future commodity prices, the timing of future production and capital expenditures, and a discount rate commensurate with the risk reflective of the lives remaining for the respective oil and gas properties. The Company did not recognize any impairments of proved properties during the year ended December 31, 2021. The Company recognized an impairment of proved properties of $0.6 million during the year ended December 31, 2020.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

(iii)

Unproved Properties

Other Fair Value Measurement

The carrying value of the Company’s credit facility approximates fair value, as it is subject to short-term floating interest rates that approximate the rates available for those periods. The Company also has other financial instruments consisting primarily of cash, accounts receivable, other current assets, and accounts payable that approximate fair value due to the short maturity of these instruments.

(6)

Derivative Instruments and Hedging Activities

The Company uses derivative financial instruments to manage commodity price risk associated with the sales of oil and gas production and to manage interest rate risk associated with the outstanding borrowings on the Company’s credit facility. The Company does not hold or issue derivative financial instruments for speculative or trading purposes.

The Company accounts for derivatives in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activity (as amended). Currently, the Company does not designate its derivative instruments to qualify for hedge accounting. Accordingly, the Company reflects changes in fair value of its derivative instruments in its consolidated statements of operations as they occur. Commodity hedging instruments may take the form of collars, swaps, or other derivatives indexed to the New York Mercantile Exchange (NYMEX) or other commodity price indexes. Such derivative instruments will not exceed anticipated production volumes and are expected to have a reasonable correlation between price movements in the futures market and the spot markets where the Company’s production is sold.

The Company records its derivative activities at fair value. Gains and losses due to changes in fair value of commodity derivatives are included in Gain (loss) on commodity derivatives, net in the consolidated statements of operations. Gains and losses due to changes in fair value of interest rate derivatives are included in Interest expense in the consolidated statements of operations.

During the year ended December 31, 2021, the Company recorded a net loss on commodity derivatives of $390.5 million and a net gain of $77.2 million during the same period in 2020.

The following table represents the Company’s net cash receipts from (payments on) settled derivatives for the years ended December 31, 2021 and 2020:


	Years Ended December 31,
(in thousands)	2021			2020
Oil derivative net settlements received (paid)	$	(242,422	)	$	84,893
Gas derivative net settlements received (paid)		(25,454	)		3,073
NGL derivative net settlements received (paid)		(10,885	)		—

Total	$	(278,761	)	$	87,966

On September 29, 2021, the Company entered into several crude WTI swap transactions that increased the average strike price on 5.5 million barrels of existing crude WTI swaps from $45.74/Bbl to $69.82/Bbl. These transactions resulted in a $132.3 million loss that is included in the Gain (loss) on commodity derivatives, net account in the accompanying consolidated statement of operations for the year ended

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

December 31, 2021. The impacted commodity contracts have settlement dates that occur throughout 2022. This transaction will be referred to as the Hedge Re-strike Transaction throughout this report.

(a)

Swap Contracts

Generally, a swap contract is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified notional amount of the underlying assets. The payment flows are usually netted.

(b)

Collar Contracts

Generally, a collar contract is an agreement between two parties where one party (the Producer) buys a put option and sells a call option to the second party (the Counterparty). The premium owed by the Producer to purchase the put option is typical offset by the premium due to the Producer for selling the call option such that the collar contract is typically costless at the time of purchase. The strike price of the put option sets a floor where the Producer will be in the money should the commodity price drop below the strike price in a given period. Similarly, the strike price of the call option sets a ceiling where the Counterparty will be in the money should the commodity price rise above the strike price in a given period.

The Company has entered into a series of crude oil, natural gas and natural gas liquids price swap derivatives and collar contracts to mitigate a portion of the exposure to commodity price risk. The following table sets forth the Company’s outstanding oil derivative contracts as of December 31, 2021. When aggregating multiple contracts, the weighted average contract price is disclosed.


	2022		2023		2024		Total
Oil Price Swap – WTI
Volume (MBbl)		6,577		5,110		2,196		13,883
Price per Bbl	$	68.01	$	48.13	$	54.98	$	58.63
Oil Basis Swap – Mid/Cush
Volume (MBbl)		5,397		3,968		—		9,365
Price per Bbl	$	0.40	$	0.37	$	—	$	0.39
Oil WTI Roll Swap
Volume (MBbl)		6,577		—		—		6,577
Price per Bbl	$	0.19	$	—	$	—	$	0.19

The following table sets forth the Company’s outstanding natural gas derivative contracts as of December 31, 2021. When aggregating multiple contracts, the weighted average contract price is disclosed.


	2022			2023			2024			Total
Gas Price Swap – Henry Hub
Volume (BBtu)		12,221			6,143			1,755			20,118
Price per MMBtu	$	2.55		$	2.49		$	2.52		$	2.53
Gas Price Collar – Henry Hub
Volume (BBtu)		1,527			—			—			1,527
Ceiling Price per MMBtu	$	3.36		$	—		$	—		$	3.36
Floor Price per MMBtu	$	2.90		$	—		$	—		$	2.90
Gas Basis Swap – WAHA
Volume (BBtu)		8,368			2,090			1,755			12,213
Price per MMBtu	$	(0.43	)	$	(0.41	)	$	(0.40	)	$	(0.42	)

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

The following table sets forth the Company’s outstanding natural gas liquids derivative contracts as of December 31, 2021. When aggregating multiple contracts, the weighted average contract price is disclosed.


	2022		2023		Total
Ethane Price Swap
Volume (Bbl)		234,490		67,398		301,888
Price per Bbl	$	8.52	$	8.72	$	8.56
Propane Price Swap
Volume (Bbl)		239,358		—		239,358
Price per Bbl	$	22.40	$	—	$	22.04
i-Butane Swap
Volume (Bbl)		41,207		11,843		53,050
Price per Bbl	$	24.28	$	24.47	$	24.32
n-Butane Swap
Volume (Bbl)		103,430		29,728		133,158
Price per Bbl	$	24.39	$	25.10	$	24.55
Natural Gasoline Swap
Volume (Bbl)		172,963		49,713		222,676
Price per Bbl	$	41.49	$	45.05	$	42.28

(7)

Oil and Gas Properties and Equipment

The Company had net capitalized costs of $1,905.9 million and $687.8 million in oil and gas properties and equipment as of December 31, 2021 and 2020, respectively. The components are summarized in the table below:


	Years Ended December 31,
(in thousands)	2021			2020
Oil and gas properties and equipment
Proved	$	1,951,878		$	723,059
Unproved		233,567			111,015

Total		2,185,445			834,074
Less: accumulated DD&A		(279,593	)		(146,318	)

Net capitalized costs for oil and gas properties and equipment	$	1,905,852		$	687,756

The Company transferred $15.1 million and $33.9 million of oil and gas properties and equipment from the unproved leasehold account to the proved leasehold account during the years ended December 31, 2021 and 2020, respectively.

(8)

Asset Retirement Obligation

The Company’s asset retirement obligation represents the estimated present value of the estimated cash flows the Company will incur to plug, abandon and remediate its producing properties at the end of their productive lives, in accordance with applicable state laws. The present value of the estimated asset retirement obligation has been capitalized as part of the carrying amount of the related oil properties. The liability has been accreted to its present value as of December 31, 2021 and 2020.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

The following table presents the changes in the asset retirement obligation during the years ended December 31, 2021 and 2020:


	Years Ended December 31,
(in thousands)	2021			2020
Asset retirement obligation, beginning of period	$	6,968		$	5,102
Liabilities incurred		12,621			1,936
Dispositions of wells		(122	)		(233	)
Accretion expense		780			323
Liabilities settled		—			(51	)
Revision of estimates		47			(109	)

Asset retirement obligation, end of period	$	20,294		$	6,968

(9)

Investment in affiliates

(a)

Investment in CM Resources, LLC

CM Resources, LLC (CM) is a Texas limited liability company that owns oil and gas properties and equipment in Eddy County, New Mexico and Lea County, New Mexico. During 2020, the Company distributed its investment in CM to Holdings (see note 14). Prior to the distribution, the investment in CM was accounted for using the equity method of accounting. Income and losses from the investment were presented in the Income from equity method investments account in the consolidated statements of operations. During the year ended December 31, 2020, the Company recognized income of $2.9 million from the investment in CM.

(b)

Investment in LM Touchdown, LLC

LM Touchdown, LLC (LM) is a Delaware limited liability company that owns crude and natural gas gathering infrastructure in Eddy County, New Mexico. During 2020, the Company distributed its investment in LM to Holdings (see note 14). Prior to the distribution, the investment in LM was accounted for using the equity method of accounting. Income and losses from the investment in LM were presented in the Income from equity method investments account in the consolidated statements of operations. During the year ended December 31, 2020, the Company recognized a loss of $1.3 million from the investment in LM.

(10)

Related Party Transactions

The Company incurs related party transactions with Pearl Energy Investments and its affiliates (Pearl), NGP Energy Capital and its affiliates (NGP), Holdings and its affiliates, CM, LM, and Luxe Energy, LLC and its affiliates (Luxe). These transactions include revenues and operating expenses incurred in connection with operating oil and gas properties and equipment, cash advances for capital projects, fees related to gathering crude oil and natural gas, and general and administrative expenses. The Company had payables to related parties of $0.2 million and $5.8 million at December 31, 2021 and 2020, respectively.

Members of management own profit interests at Holdings and its affiliates. These profit interests are subject to various performance and forfeiture provisions, and they become payable once certain distribution hurdles are met. Once certain hurdles are achieved, payments will be made to members of management directly by Holdings and its affiliates, respectively. Payments from profits interests at affiliates are not funded by the Company. These payments are not considered probable of occurring until paid. During 2021, the Company recognized a charge of approximately $3.3 million in the Profit sharing from affiliates account within the Consolidated Statement of Operations as a result of the profit interests described herein.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

(11)

Significant Concentrations

As of December 31, 2021 and December 31, 2020, substantially all of the Company’s accounts receivable and sales were related to oil and gas production. This concentration may impact the Company’s business risk, either positively or negatively, in that commodity prices, customers and suppliers may be similarly affected by changes in economic, political, or other conditions related to the industry. The Company does not believe that the loss of a purchaser would have an adverse effect on its ability to sell its crude oil and natural gas production due to the competitive nature of the oil and gas industry and availability of marketing alternatives.

The table below sets forth the significant purchasers as a percentage of total crude oil sales, natural gas sales, and natural gas liquid sales for the years ended December 31, 2021 and 2020:


	Years Ended December 31,
		2021		2020
Enterprise Products Partners		63	%	82	%
EagleClaw Midstream		16	%	9	%
Plains All American		6	%	5	%
Occidental Energy Marketing, Inc.		6	%	—
Other		9	%	4	%

		100	%	100	%

Further, the Company regularly maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any losses with respect to the related risks to cash and does not believe its exposure to such risk is more than nominal.

(12)

Commitments and Contingencies

(a)

Legal Matters

In the ordinary course of business, the Company may at times be subject to claims and legal actions. Management does not believe the impact of such matters will have a material adverse effect on the Company’s financial position or results of operations. The Company had no legal matters requiring specific disclosure or recognition of a liability as of December 31, 2021 and December 31, 2020.

(b)

Environmental

The Company is subject to extensive federal, state, and local environmental laws and regulations, which may materially affect its operations. These laws, which are constantly changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites.

In the Company’s acquisition of existing or previously drilled well bores, the Company may not be aware of what environmental safeguards were taken at the time such wells were drilled or during such time the wells were operated.

The Company maintains comprehensive insurance coverage that it believes is adequate to mitigate the risk of any adverse financial effects associated with these risks.

However, should it be determined that a liability exists with respect to any environmental cleanup or restoration, the liability to cure such a violation could still fall upon the Company. No claim has been made, nor is the Company aware of any such liability, as it relates to any environmental cleanup, restoration, or the violation of any rules or regulations relating thereto.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that related to an existing condition caused by past operations and that have no future economic benefits are expensed as incurred. Liabilities for expenditures of a noncapital nature are recorded when environmental assessment and/or remediation is probable, and the cost can be reasonably estimated.

(c)

Employment Agreements

The Company has employment agreements with certain executives. These executives, either directly or indirectly, also have membership interests in the Company. These agreements provide for a base salary, incentive compensation, and health benefits.

(d)

Noncompete Agreements

The Company entered into noncompete agreements with certain key employees, which, in the event of the employee’s termination for a reason other than cause (as defined in the noncompete agreements), provide for payments equal to the employee’s regular monthly salary for a time period to be determined by the Company, but not to exceed 9 months.

(e)

Defined Contribution Plan

The Company sponsors a 401(k) defined contribution plan for the benefit of substantially all employees who have attained 21 years of age. The plan allows for eligible employees to make tax-deferred contributions not to exceed annual limits established by the Internal Revenue Service. The Company makes matching contributions of up to 5 percent of an employee’s compensation and may make additional discretionary contributions for eligible employees meeting certain plan requirements. Company contributions to the plan were approximately $0.4 million and $0.2 million during the years ended December 31, 2021 and 2020, respectively.

(f)

Severance tax, royalty, joint interest and sales and use tax audits

The Company is subject to routine severance tax, royalty, joint interest and sales and use tax audits from regulatory bodies and non-operators. Additionally, the Company is subject to various possible contingencies that arise primarily from interpretations affecting the oil and natural gas industry. Such contingencies include differing interpretations as to the prices at which oil and natural gas sales may be made, the prices at which royalty owners may be paid for production from their leases, allowable costs under joint interest arrangements and other matters. Although the Company believes that it has estimated its exposure with respect to the various laws and regulations, administrative rulings and interpretations thereof, adjustments could be required as new interpretations and regulations are issued.

(g)

Operating Leases

The Company incurred $0.8 million and $0.6 million in rent expense for office space during the years ended December 31, 2021 and 2020, respectively. The rental agreement for the Company’s corporate office is effective until January 31, 2032. Commitments for future minimum lease payments related to this non-cancellable lease as of December 31, 2021 were as follows:


(in thousands)	2022		2023		2024		2025		Thereafter
Non-cancellable lease payments	$	1,534	$	1,718	$	1,755	$	1,793	$	11,709

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

(13)

Debt

The Company’s debt consisted of the following at December 31, 2021 and December 31, 2020:


	December 31,
(in thousands)	2021			2020
Credit Facility due 2025	$	—		$	175,000
5.875% senior notes due 2029		700,000			—
7.75% senior notes due 2026		300,000			—
Deferred financing costs and issue premium / discount, net		(22,549	)		(1,299	)

Long-term debt	$	977,451		$	173,701

Credit Facility. The Company’s credit facility has a maturity date of June 15, 2025. The credit facility is collateralized by all of the oil and gas properties of the Company and requires compliance with certain financial covenants. As of December 31, 2021, the Company was in compliance with all financial covenants.

On November 8, 2021, the Company entered into the Fifteenth Amendment to the Credit Agreement to allow for the issuance of up to $200 million of additional senior notes prior to the next scheduled redetermination date without any impact to the borrowing base.

On September 27, 2021, the Company entered into the Fourteenth Amendment to the Credit Agreement. At that time, the definition of Consolidated EBITDAX was changed to add back the negative impact of the Hedge Re-strike Transaction (see note 6) when calculating the Consolidated Net Leverage Ratio Financial Covenant for the quarter ended September 30, 2021.

On August 26, 2021, the Company entered into the Thirteenth Amendment to the Credit Agreement. At that time, the borrowing base increased to $625 million with elected commitments of $500 million.

On June 30, 2021, the borrowing base automatically decreased to $427.5 million in connection with the issuance of $500 million of senior notes due 2029.

On June 16, 2021, the Company entered into the Twelfth Amendment to the Credit Agreement to allow for the issuance of up to $450 million of additional senior notes without any impact to the borrowing base. Further, any issuance of senior notes beyond an additional $450 million would be accompanied by a corresponding 25% decrease to the borrowing base.

On June 15, 2021, the Company entered into the Eleventh Amendment to the Credit Agreement. At that time, the borrowing base increased to $440 million, the pricing grid on outstanding borrowings increased by 50 basis points, and the maturity date was extended to June 15, 2025.

On January 22, 2021, the Company entered into the Tenth Amendment to the Credit Agreement. At that time, the maximum credit limit decreased to $265 million, and the permitted debt was changed to allow for the issuance of unsecured senior notes.

5.875% Senior Notes. On June 30, 2021, the Company issued $500 million aggregate principal amount of 5.875% senior unsecured notes due 2029 (the 5.875% Notes) in an offering that was exempt from registration under the Securities Act of 1933. The 5.875% Notes resulted in net proceeds to the Company, after deducting estimated fees and expenses, of approximately $491 million. The Company used the proceeds to fund substantially all of the Oxy Acquisition (see note 4).

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

and expenses, of approximately $200 million. The Company used the proceeds to repay borrowings under its credit facility and to fund a portion of the Parkway Acquisition (see note 15).

7.75% Senior Notes. On January 27, 2021, the Company issued $300 million aggregate principal amount of 7.75% senior unsecured notes due 2026 (the 7.75% Notes) in an offering that was exempt from registration under the Securities Act of 1933. The 7.75% Notes resulted in net proceeds to the Company, after deducting estimated fees and expenses, of approximately $292 million. The Company used the proceeds along with cash on hand to pay down the credit facility by $150 million and to make a $146 million cash distribution to Holdings.

Interest Expense. The following amounts have been incurred and charged to interest expense for the years ended December 31, 2021 and 2020:


	Years Ended December 31,
(in thousands)	2021		2020
Cash payments for interest	$	15,625	$	6,220
Non-cash interest		1,916		2,220
Settled interest rate hedges		1,624		991
Net changes in accruals		24,557		(429	)

Interest expense	$	43,722	$	9,002

(14)

Members’ Equity Accounts

Capital contributions and distributions are governed by the Company Agreement. Cash earnings on profits and any items in nature of income or loss will be applied to the member’s capital account in accordance with their earnings interest.

During 2021, the Company received a $508.6 million contribution of net assets related to the Luxe Acquisition (see note 4). The Company also received a $3.3 million contribution related to payments by Holdings and its affiliates to the owners of certain profit interests (see note 10).

During 2020, the Company made non-cash distributions of its investments in CM and LM to Holdings.

(15)

Subsequent Events

(a)

Parkway Acquisition

In January 2022, the Company closed an acquisition of proved and unproved oil and gas properties and equipment in Eddy County, New Mexico and Lea County, New Mexico for approximately $170.4 million, subject to customary post-closing adjustments.

(b)

Recent Divestitures

In January 2022, the Company closed a divestiture of proved and unproved oil and gas properties and equipment for approximately $215.5 million, subject to customary post-closing adjustments.

(c)

Sixteenth Amendment to the Credit Facility

On March 9, 2022, the Company entered into the Sixteenth Amendment to the Credit Agreement to adjust the borrowing base redetermination schedule to May 1^st and November 1^st of each year, beginning on May 1, 2022.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

(16)

Supplemental Disclosure of Oil and Natural Gas Operations (unaudited)

Costs incurred for oil and natural gas producing activities


	Years Ended December 31,
(in thousands)	2021		2020
Acquisition Costs:
Proved	$	1,011,527	$	32,035
Unproved		94,627		2,902
Development costs		332,482		140,859
Exploratory costs (a)		5,714		—

Total costs incurred for oil and natural gas properties (b)	$	1,444,350	$	175,796

(a)	Exploratory costs incurred are primarily related to the acquisition of seismic data.

(b)	For the year ended December 31, 2021, the Company’s total costs incurred included approximately $559.3 million related to the Luxe acquisition.

Reserve Quantity Information

Estimated quantities of proved oil and gas reserves as of December 31, 2021 and 2020 were based on an SEC pricing case prepared by Colgate’s independent reservoir engineers, Netherland, Sewell, & Associates, Inc (NSAI). Estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development, price changes and other factors. All of the Company’s proved reserves are located in the continental United States.

Guidelines prescribed in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 932 (“ASC 932”), Extractive Activities — Oil and Gas, have been followed for computing a standardized measure of future net cash flows and changes therein relating to estimated proved reserves. Future cash inflows and future production and development costs are determined by applying prices and costs, including transportation, quality, and basis differentials, to the period-end estimated quantities of oil and gas to be produced in the future. The resulting future net cash flows are reduced to present value amounts by applying a 10 percent annual discount factor. Future operating costs are determined based on estimates of expenditures to be incurred in producing the proved oil and gas reserves in place at the end of the period using period-end costs and assuming continuation of existing economic conditions, plus overhead incurred. Future development costs are determined based on estimates of capital expenditures to be incurred in developing proved oil and gas reserves and includes costs for future dismantlement, abandonment and rehabilitation obligations.

The assumptions used to compute the standardized measure are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect the Company’s expectations of actual revenues to be derived from those reserves, nor their present value. The limitations inherent in the reserve quantity estimation process, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process. Reserve estimates are inherently imprecise and estimates of new discoveries and undeveloped reserves are more imprecise than estimates of established proved producing oil and natural gas properties. Accordingly, these estimates are expected to change as future information becomes available. The Company is a pass-through entity for tax purposes. Thus, the effect of future U.S. federal income taxes has been excluded from the standardized measure of discounted future net cash flows. However, the Company is subject to Texas franchise tax, and the expected impact of such taxes has been included.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

oil and natural gas reserves less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, discounted using a rate of 10 percent per year to reflect the estimated timing of the future cash flows.

Discounted future cash flow estimates like those shown below are not intended to represent estimates of the fair value of oil and natural gas properties. Estimates of fair value would also consider probable and possible reserves, anticipated future oil and natural gas prices, interest rates, changes in development and production costs and risks associated with future production. Because of these and other considerations, any estimate of fair value is necessarily subjective and imprecise.

The following table provides the changes in proved reserves for the year ended December 31, 2021:


	Oil			Gas			NGL			Total
	(MBbl)			(MMcf)			(MBbl)			(MBoe)
Total proved reserves at December 31, 2020		82,828			206,757			26,554			143,842
Revisions		(19,816	)		(30,611	)		(4,082	)		(29,000	)
Extensions and discoveries		7,836			19,063			3,131			14,144
Purchases of minerals-in-place		62,320			263,515			31,498			137,737
Sales of minerals-in-place		(1,563	)		(3,311	)		(505	)		(2,620	)
Production		(7,403	)		(26,011	)		(3,181	)		(14,919	)

Total proved reserves at December 31, 2021		124,202			429,402			53,415			249,184

Proved Developed Reserves:
January 1, 2021		22,909			73,193			9,373			44,481
December 31, 2021		62,906			262,080			31,836			138,422

Proved Undeveloped Reserves:
January 1, 2021		59,919			133,564			17,181			99,361
December 31, 2021		61,296			167,322			21,579			110,762

The change in total proved reserves was primarily the result of recording approximately 138 MMBoe of purchases of minerals in place primarily consisting of approximately 67 MMBoe attributable to the Luxe Acquisition, approximately 64 MMBoe attributable to the Oxy Acquisition and 7 MMBoe related to other acquisitions during the year. The Company recorded approximately 14 MMBoe of extensions and discoveries during the year which were a result of our successful drilling and completion program during 2021. Additionally, the Company recorded reductions of proved reserves of approximately 29 MMBoe during the year which consisted of approximately 41 MMBoe decrease due the removal of proved undeveloped locations as a result of an adoption of a development plan partially offset by an increase of 9 MMBoe related to the increase in commodity prices and an increase related to technical revisions due to observed well performance exceeding previous estimates of approximately 3 MMBoe. The Company also had approximately 15 MMBoe of production during the year.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

The following table provides the changes in proved reserves for the year ended December 31, 2020:


	Oil			Gas			NGL			Total
	(MBbl)			(MMcf)			(MBbl)			(MBoe)
Total proved reserves at December 31, 2019		75,628			175,452			36,111			140,981
Revisions		53			24,244			(9,457	)		(5,363	)
Extensions and discoveries		7,862			18,232			2,337			13,238
Purchases of minerals-in-place		8,525			11,696			1,482			11,956
Sales of minerals-in-place		(5,123	)		(12,290	)		(2,554	)		(9,725	)
Production		(4,117	)		(10,577	)		(1,365	)		(7,245	)

Total proved reserves at December 31, 2020		82,828			206,757			26,554			143,842

Proved Developed Reserves:
January 1, 2020		16,941			39,695			8,077			31,634
December 31, 2020		22,909			73,193			9,373			44,481

Proved Undeveloped Reserves:
January 1, 2020		58,687			135,757			28,034			109,347
December 31, 2020		59,919			133,564			17,181			99,361

The change in total proved reserves during 2020 was primarily the result of recording extensions and discoveries of approximately 13 MMBoe which were a result of our successful drilling and completion program during 2020. We also recorded an increase in proved reserves of approximately 12 MMBoe related to our acquisitions during 2020 and a decrease of approximately 10 MMBoe related to our divestitures during the year. The Company recorded negative revisions of approximately 5 MMBoe which was primarily the result of approximately 4 MMBoe decrease due to the decrease in commodity prices and a decrease of approximately 2 MMBoe related to the removal of proved undeveloped locations due to a change in a previously adopted development plan partially offset by an increase of approximately 1 MMBoe related to well performance exceeding previous estimates. The Company also had production of approximately 7 MMBoe during the year.

For oil and NGL volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2021 was based on the SEC pricing of $66.55 per Bbl West Texas Intermediate posted oil. For gas volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2021 was based on the SEC pricing of $3.60 per MMBtu Henry Hub spot natural gas price for natural gas reserves. For oil and NGL volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2020 was based on the SEC pricing of $38.29 per Bbl West Texas Intermediate posted oil. For gas volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2020 was based on the SEC pricing of $1.99 per MMBtu Henry Hub spot natural gas price for natural gas reserves. All prices have been adjusted for transportation, quality and basis differentials.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

The following table provides the standardized measure of discounted future net cash flows at December 31, 2021 and 2020:


	Years Ended December 31,
(in thousands)	2021			2020
Oil and gas producing activities:
Future cash inflows	$	10,693,423		$	3,495,550
Future production costs		(3,448,976	)		(1,192,660	)
Future development costs		(1,167,130	)		(803,139	)
Future income tax expense		(49,967	)		(16,981	)

Future net cash flows		6,027,350			1,482,770
10% annual discount factor		(2,996,753	)		(811,404	)

Standardized measure of discounted future net cash flows	$	3,030,597		$	671,366

The following table provides a rollforward of the standardized measure of discounted future net cash flows for the years ended December 31, 2021 and 2020:


	Years Ended December 31,
(in thousands)	2021			2020
Oil and gas producing activities:
Balance, beginning of year	$	671,366		$	893,350
Purchases of minerals-in-place		1,499,825			45,034
Sales of minerals-in-place		(33,406	)		(42,319	)
Extensions and discoveries		247,599			51,551
Estimated development costs incurred		137,161			95,504
Net changes in prices and production costs		1,063,818			(308,644	)
Oil and natural gas sales, net of production costs		(567,785	)		(137,180	)
Changes in future development costs		(17,604	)		105,093
Revisions of previous estimates		(32,120	)		(59,666	)
Accretion of discount		67,914			87,395
Net change to income taxes		(16,769	)		1,470
Changes in timing and other		10,598			(60,222	)

Standardized measure of discounted future net cash flows	$	3,030,597		$	671,366

Exhibit 99.3

Colgate Energy Partners III, LLC

Consolidated Balance Sheets

Unaudited


(in thousands)	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash	$	63,586		$	210,276
Accounts receivable from affiliates		776			—
Accounts receivable		204,649			125,161
Prepaids		6,017			22,790
Short-term derivative instruments		46,546			—

Total current assets		321,574			358,227
Oil & gas properties and equipment:
Oil and gas properties and equipment		2,666,338			2,185,445
Accumulated depreciation, depletion, and amortization		(431,830	)		(279,593	)

Net oil and gas properties and equipment		2,234,508			1,905,852
Other assets:
Long-term derivative instruments		14,424			—
Other property and equipment, net		17,736			989

Total assets	$	2,588,242		$	2,265,068

Liabilities and members’ capital
Current liabilities:
Accounts payable	$	183,296		$	156,483
Accounts payable to affiliates		489			191
Revenue payable		142,739			79,565
Accrued expenses		87,821			38,866
Short-term derivative instruments		1,567			60,505

Total current liabilities		415,912			335,610
Other liabilities:
Long-term debt, net		1,428,598			977,451
Asset retirement obligations and other		38,470			20,294
Long-term derivative instruments		353			116,535

Total liabilities		1,883,333			1,449,890
Members’ capital:
Capital contributions		812,377			812,377
Capital distributions		(505,014	)		(277,359	)
Retained earnings		397,546			280,160

Total members’ capital		704,909			815,178

Total liabilities and members’ capital	$	2,588,242		$	2,265,068

See accompanying notes to the unaudited consolidated financial statements.

Colgate Energy Partners III, LLC

Consolidated Statements of Operations

Unaudited


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2022			2021			2022			2021
Revenues:
Crude oil sales	$	322,639		$	102,723		$	574,151		$	182,070
Natural gas sales		67,503			10,966			107,418			25,817
Natural gas liquid sales		58,634			15,572			109,159			25,662
Other		1,271			489			2,196			829

Total revenues		450,047			129,750			792,924			234,378
Operating expenses:
Lease operating expenses		40,374			14,721			73,614			26,320
Gathering, processing, and transportation costs		3,850			1,763			8,808			2,249
Production and ad valorem taxes		25,518			7,129			44,460			12,451
Depreciation, depletion, and amortization		70,367			28,057			120,371			51,338
Exploration and abandonment costs		437			2,613			491			3,251
Accretion of asset retirement obligations		329			113			643			219
General and administrative		5,451			2,090			11,050			4,196
Profit sharing by affiliates		2,530			—			22,346			3,330
Gain on sale of assets		(44,458	)		—			(53,718	)		(7	)

Total operating expenses		104,398			56,486			228,065			103,347

Income from operations		345,649			73,264			564,859			131,031

Other income (expenses):
Interest income		3			83			10			163
Interest expense		(20,104	)		(7,139	)		(37,992	)		(12,525	)
Loss on commodity derivatives, net		(76,304	)		(162,971	)		(409,491	)		(268,201	)

Total other income (expense)		(96,405	)		(170,027	)		(447,473	)		(280,563	)

Net income (loss)	$	249,244		$	(96,763	)	$	117,386		$	(149,532	)

See accompanying notes to the unaudited consolidated financial statements.

Colgate Energy Partners III, LLC

Consolidated Statements of Members’ Capital

Unaudited


(in thousands)
Balance at December 31, 2020	$	467,271
Capital distributions		(146,002	)
Capital contributions (Profit sharing by affiliates)		3,330
Net loss		(52,769	)

Balance at March 31, 2021	$	271,830
Capital contributions		513,686
Net loss		(96,763	)

Balance at June 30, 2021	$	688,753

Balance at December 31, 2021	$	815,178
Capital distributions		(225,000	)
Capital contributions (Profit sharing by affiliates)		19,815
Net loss		(131,858	)

Balance at March 31, 2022	$	478,135
Capital distributions		(25,000	)
Capital contributions (Profit sharing by affiliates)		2,530
Net income		249,244

Balance at June 30, 2022	$	704,909

See accompanying notes to the unaudited consolidated financial statements.

Colgate Energy Partners III, LLC

Consolidated Statements of Cash Flows

Unaudited


	Six Months Ended June 30,
(in thousands)	2022			2021
Cash flows from operating activities:
Net income (loss)	$	117,386		$	(149,532	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion, amortization		120,371			51,338
Accretion of asset retirement obligations		643			219
Gain on sale of assets		(53,718	)		(7	)
Amortization of deferred financing costs and issue premium / discount		2,411			1,252
Loss on commodity derivatives, net		409,491			268,201
Gain on interest rate derivatives, net		—			23
Net settlements paid on commodity derivatives		(645,580	)		(34,377	)
Net settlements paid on interest rate derivatives		—			(782	)
Profit sharing by affiliates		22,346			3,330
Other		203			—
Changes in operating assets and liabilities:
Accounts receivable and prepaids		(63,491	)		(92,086	)
Accounts payable, revenue payable, and accrued expenses		103,340			76,526

Net cash provided by operating activities	$	13,402		$	124,105
Cash flows from investing activities:
Capital expenditures to develop oil and gas properties and equipment		(304,155	)		(101,960	)
Capital expenditures to acquire oil and gas properties and equipment		(320,891	)		(13,791	)
Proceeds from sale of oil and gas properties and equipment		266,138			5,008
Capital expenditures for other property and equipment		80			(84	)

Net cash used in investing activities	$	(358,828	)	$	(110,827	)
Cash flows from financing activities:
Distributions to members		(250,000	)		(146,002	)
Proceeds from issuance of long-term debt		—			796,910
Proceeds from credit facility		565,000			50,000
Repayments of credit facility		(115,000	)		(160,000	)
Deferred financing costs		(1,264	)		(20,546	)

Net cash provided by financing activities	$	198,736		$	520,362

Net increase (decrease) in cash		(146,490	)		533,640
Cash at beginning of period		210,276			8,245

Cash at end of period	$	63,586		$	541,885

Supplemental disclosures of cash flow information:
Accrued capital expenditures for oil and gas properties at period end	$	128,891		$	33,098
Asset retirement obligation	$	2,294		$	3,130
Interest paid	$	35,530		$	2,241
Non-cash equity contribution	$	—		$	513,686

See accompanying notes to the unaudited consolidated financial statements.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

(1)

Nature of Operations

On May 18, 2022, Holdings contributed its Members’ Equity to Colgate Energy Partners III MidCo, LLC (MidCo). At this time, MidCo became the sole member of the Company and Holdings became the sole member of MidCo. Holdings is governed by a seven-member board of managers.

(2)

Summary of Significant Accounting Policies

A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report for the year ended December 31, 2021.

(a)

Basis of Presentation

These consolidated financial statements were approved by management and available for issuance on August 15, 2022. Subsequent events have been evaluated through this date.

(b)

Principles of Consolidation

(c)

Interim Financial Statements and Use of Estimates

The accompanying consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the consolidated balance sheet at December 31, 2021 is derived from audited consolidated financial statements. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments necessary to present fairly the Company’s consolidated financial statements. All such adjustments are of a normal, recurring nature. In preparing the accompanying consolidated financial statements, management has made certain estimates and assumptions that affect reported amounts in the consolidated financial statements. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results.

(d)

Cash

The Company’s cash includes depository accounts held by banks.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

(e)

Accounts Receivable

The Company’s Accounts receivable balance consists of receivables from joint interest owners on properties the Company operates and receivables from the sale of crude oil, natural gas, and natural gas liquids (NGL) production delivered to purchasers. The purchasers remit payment for production directly to the Company. Most payments are received within two months after the production date. For receivables from joint interest owners, the Company typically has the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company recognizes an allowance for doubtful accounts in an amount equal to anticipated future uncollectible receivables. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the debtor’s current ability to pay its obligation to the Company and historical creditworthiness, the condition of the general economy and the industry as a whole. The Company writes off specific accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. As of June 30, 2022 and December 31, 2021, management believes all accounts receivable are collectible and no allowance is required.

(f)

Deferred Financing Costs

Deferred financing costs consist of fees incurred to secure debt financing and are amortized over the life of the related loans using a method consistent with the effective interest method; such amortization is recorded within Interest expense in the consolidated statements of operations. Deferred financing costs were $22.4 million as of June 30, 2022, net of accumulated amortization of $6.5 million. Deferred financing costs were $23.5 million as of December 31, 2021, net of accumulated amortization of $4.2 million. The deferred financing costs and accumulated amortization are presented in the consolidated balance sheets as a direct deduction to the face amount of the borrowings.

(g)

Revenue Recognition

(h)

Concentrations of Credit Risk

The Company’s oil and gas operations have a concentration of purchasers in the energy industry. This customer concentration may impact the Company’s overall exposure to credit risk, either positively or negatively, in that the purchasers may be similarly affected by changes in economic or other conditions. Our principal exposures to credit risk are through receivables resulting from joint interest owners and from the sale of our oil and natural gas production. As of June 30, 2022 and 2021, the Company did not experience any material credit losses or write-offs of receivables. See note 10 for a list of significant purchasers as a percentage of total sales.

(i)

Overhead Reimbursement

The Company records gross overhead charges billed to working interest owners as a reduction to General and administrative expenses in the consolidated statements of operations. The Company recorded overhead charges of $1.8 million and $0.8 million during the three months ended June 30, 2022 and 2021, respectively, and $4.2 million and $1.5 million during the six months ended June 30, 2022 and 2021, respectively. The Company records overhead charges as they relate to its net share of properties owned in the Lease operating expenses account in the consolidated statements of operations and the Oil and gas properties and equipment account in the consolidated balance sheets. The Company recorded net overhead charges of $0.9 million and $0.4 million in Lease operating expenses for the three months ended June 30, 2022 and 2021, respectively, and $2.5 million and $0.7 million for the six months ended June 30, 2022 and 2021, respectively. The Company recorded net overhead charges of $0.5 million and $0.2 million in Oil and gas properties and equipment for the three months ended June 30, 2022 and 2021, respectively, and $1.1 million and $0.4 million for the six months ended June 30, 2022 and 2021, respectively.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

(j)

Related Party Transactions

Transactions between related parties are considered to be related party transactions though they may not be given accounting recognition. The Financial Accounting Standards Board (FASB) ASC Topic 850, Related Party Disclosures (ASC Topic 850), requires that transactions with related parties that would make a difference in decision making shall be disclosed so that users of the consolidated financial statements can evaluate their significance. See note 9 for additional information about the Company’s related parties.

(k)

Segment Reporting

Based on the organization and management of the Company, the Company has only one reportable operating segment, which is oil and natural gas exploration and production.

(l)

Reclassifications

Certain amounts in prior period financial statements have been reclassified to conform to current period presentation.

(m)

Recently Adopted Accounting Pronouncements

During the first quarter of 2022, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (Topic 842) and the amendments provided for in ASU No. 2018-11, “Targeted Improvements” (ASU 2018-11). Topic 842 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that the Company chose to apply. These practical expedients relate to (i) the identification and classification of leases that commenced before the effective date, (ii) the treatment of initial direct costs for leases that commenced before the effective date, (iii) the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset and (iv) the ability to initially apply the new lease standard at the adoption date. ASU 2018-01 is a land easement practical expedient which allowed the Company to begin evaluating land easements entered into or modified after December 31, 2021. ASU 2018-11 provides a transition election not to restate comparative periods for the effects of applying the new lease standard. This transition election permits entities to change the date of initial application to the beginning of the year of adoption and to recognize the effects of applying the new standard as a cumulative-effect adjustment to the opening balance of retained earnings. The Company elected this transition approach, however the cumulative impact of adoption to the opening balance of retained earnings as of January 1, 2022 was zero. See note 8 for additional disclosures related to leases.

(3)

Revenue from Contracts with Customers

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

(a)

Oil Sales

(b)

Natural Gas and Natural Gas Liquid Sales

(c)

Contract Balances

(4)

Acquisitions and Divestitures

Business Combination Agreement

On May 19, 2022, the Company entered into a business combination agreement (the Business Combination Agreement) with MidCo, Centennial Resource Production, LLC (CRP) and Centennial Resource Development, Inc. (CDEV) which provides for the combination of CRP and Colgate in a merger of equals transaction (the Merger), with CRP surviving the Merger (the Surviving Company) as a subsidiary of CDEV. Per the terms of the Business Combination Agreement, MidCo will receive 269.3 million shares of CDEV stock and $525 million of cash. The Merger has been unanimously approved by the Boards of Directors of CDEV and the Company. CDEV has filed its Definitive Proxy Statement with the Securities and Exchange Commission and the shareholder meeting is scheduled for August 29,2022, where the Merger will be voted on by CDEV’s shareholders. The Merger is expected to close shortly after the shareholder meeting and is subject customary closing conditions including receipt of the required approval from CDEV’s shareholders.

Texas Asset Exchange

In April of 2022, the Company closed on a transaction in Reeves and Ward Counties in which the Company received proved and unproved oil and natural gas properties and equipment consisting of approximately 13,000 net acres and approximately 2.0 MBoe per day from producing wells. In exchange, the Company conveyed certain proved and unproved oil and natural gas properties and equipment consisting of approximately 6,000 net acres and approximately 0.5 MBoe per day from producing wells, and $115 million in cash. The Company recognized a gain on the transaction of approximately $44.5 million.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

Parkway Acquisition

In January 2022, the Company closed an acquisition of proved and unproved oil and gas properties and equipment in Eddy County, New Mexico and Lea County, New Mexico for approximately $189.3 million.

Recent Divestitures

In January 2022, the Company closed a divestiture of proved and unproved oil and gas properties and equipment in Ward County, Texas for approximately $231.9 million. The Company recognized a gain on the sale of approximately $7.7 million.

(5)

Fair Value

The Company determines fair value based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities are classified based on inputs that market participants use in pricing an asset or liability. The inputs are characterized according to a hierarchy that prioritizes observability. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The three input levels of the fair value hierarchy are as follows:

•

Level 1 – quoted prices for identical assets or liabilities in active markets.

•

Level 3 – unobservable inputs for the asset or liability, typically reflecting management’s estimate of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including discounted cash flow models.

The following table presents the carrying values and fair values of the Company’s financial instruments at June 30, 2022 and December 31, 2021:


	June 30, 2022				December 31, 2021
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Derivative instruments	$	60,970	$	60,970	$	—	$	—
Liabilities:
Derivative instruments	$	1,920	$	1,920	$	177,040	$	177,040
5.875% senior notes due 2029 (a)	$	690,410	$	616,329	$	690,028	$	725,266
7.75% senior notes due 2026 (a)	$	292,562	$	288,600	$	291,527	$	324,639

(a)

The carrying value includes associated deferred loan costs and any discount/premium. The fair values of the Company’s senior notes are based on quoted market prices.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

Credit facility. The carrying amount of the Company’s credit facility approximates its fair value, as the applicable interest rates are variable and reflective of market rates.

(a)

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

(i)

Derivative instruments.

The fair market values of the derivative financial instruments reflected in the consolidated balance sheets were based on observable inputs obtained from the counterparties to the agreements. Further, the Company presents asset and liability positions on a net basis by counterparty. The following tables present the fair value hierarchy for those derivative financial instruments measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021:


June 30, 2022

(in thousands)	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)		Total Fair Value			Gross Amounts Offset in the Consolidated Balance Sheet			Net Fair Value Presented in the Consolidated Balance Sheet
Assets:
Current:
Commodity contracts	$	—		64,800			—		64,800			(18,254	)	$	46,546
Long-term:
Commodity contracts		—		15,556			—		15,556			(1,132	)		14,424
Liabilities:
Current:
Commodity contracts		—		(19,821	)		—		(19,821	)		18,254			(1,567	)
Long-term:
Commodity contracts		—		(1,485	)		—		(1,486	)		1,132			(353	)

Net financial assets	$	—		59,050			—		59,050			—		$	59,050

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)


December 31, 2021

(in thousands)	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)		Total Fair Value			Gross Amounts Offset in the Consolidated Balance Sheet			Net Fair Value Presented in the Consolidated Balance Sheet
Assets:
Current:
Commodity contracts	$	—		848			—		848			(848	)	$	—
Long-term:
Commodity contracts		—		862			—		862			(862	)		—
Liabilities:
Current:
Commodity contracts		—		(61,353	)		—		(61,353	)		848			(60,505	)
Long-term:
Commodity contracts		—		(117,397	)		—		(117,397	)		862			(116,535	)

Net financial liabilities	$	—		(177,040	)		—		(177,040	)		—		$	(177,040	)

(b)

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are reported at fair value on a nonrecurring basis in the Company’s balance sheets. The following methods and assumptions were used to estimate the fair values:

(i)

Properties Acquired in Business Combinations

(ii)

Proved Oil and Natural Gas Properties

(iii)

Unproved Properties

Unproved oil and natural gas properties are periodically assessed for impairment by considering future drilling and exploration plans, results of exploration activities, commodity price outlooks, planned future sales and expiration of all or a portion of the projects. During the three and six months ended June 30, 2022 and 2021, the Company did not recognize unproved impairment expense.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

(c)

Other Financial Instruments Recorded at Cost

The Company has other financial instruments that are not carried at fair value in the consolidated balance sheets, consisting primarily of cash, accounts receivable, accounts payable, and other current assets and liabilities. The carrying values of these instruments approximate their fair values due to the short-term maturities and/or liquid nature of these assets and liabilities.

(6)

Derivative Instruments and Hedging Activities

The Company accounts for derivatives in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activity (as amended). Currently, the Company does not designate its derivative instruments to qualify for hedge accounting. Accordingly, the Company reflects changes in fair value of its derivative instruments in its consolidated statements of operations as they occur. Commodity hedging instruments may take the form of collars, swaps, or other derivatives indexed to the New York Mercantile Exchange (NYMEX) or other commodity price indices. Such derivative instruments will not exceed anticipated production volumes and are expected to have a reasonable correlation between price movements in the futures market and the spot markets where the Company’s production is sold.

The Company records its derivative activities at fair value. Gains and losses due to changes in fair value of commodity derivatives are included in Loss on commodity derivatives, net in the consolidated statements of operations. Gains and losses due to changes in fair value of interest rate derivatives are included in Interest expense in the consolidated statements of operations. Non-cash gains and losses associated with the Company’s commodity price derivatives and interest rate derivatives are separately presented in operating activities within the consolidated statements of cash flows.

During the three months ended June 30, 2022 and 2021, the Company recorded a net loss on commodity derivatives of $76.3 million and $163.0 million, respectively, and a net loss of $409.5 million and $268.2 million during the six months ended June 30, 2022 and 2021, respectively. The following table summarizes the amounts related to the Company’s derivative financial instruments that are recorded in Loss on commodity derivatives, net and Interest expense in the consolidated statements of operations for the three and six months ended June 30, 2022 and 2021:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2022			2021			2022			2021
Commodity derivatives:
Non-cash commodity derivative gain (loss), net	$	504,933		$	(139,682	)	$	236,089		$	(233,824	)
Net cash settlements paid on commodity derivatives		(581,237	)		(23,289	)		(645,580	)		(34,377	)

Loss on commodity derivatives, net	$	(76,304	)	$	(162,971	)	$	(409,491	)	$	(268,201	)

Interest rate derivatives:
Non-cash interest rate derivative gain, net	$	—		$	377		$	—		$	759
Net cash settlements paid on interest rate derivatives		—			(404	)		—			(782	)

Interest expense	$	—		$	(27	)	$	—		$	(23	)

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

On May 18, 2022, the Company entered into a hedge re-strike transaction that impacted several crude oil, natural gas, and natural gas liquids hedges. The transaction, among other changes, increased the average strike price on 10.6 million barrels of existing crude WTI swaps from $56.07/Bbl to $93.55/Bbl and added an additional 1.1 million barrels in new crude WTI swaps to its hedge position and in total resulted in a $460.1 million settlement paid. This amount is included Net cash settlements paid on commodity derivatives in the table above. The impacted commodity contracts have settlement dates beginning in July of 2022 through December 2024. This transaction will be referred to as the Hedge Re-strike Transaction throughout this report.

(a)

Swap Contracts

The Company has entered into a series of crude oil, natural gas and natural gas liquids price swap derivative contracts to mitigate a portion of the exposure to commodity price risk. The following table sets forth the Company’s outstanding oil derivative contracts as of June 30, 2022. When aggregating multiple contracts, the weighted average contract price is disclosed.


	2022		2023		2024		Total
Oil Price Swap - WTI
Volume (MBbl)		3,680		5,475		2,562		11,717
Price per Bbl	$	101.31	$	88.86	$	79.54	$	90.73
Oil Basis Swap - Mid/Cush
Volume (MBbl)		3,680		5,475		2,562		11,717
Price per Bbl	$	0.68	$	0.47	$	0.43	$	0.53
Oil WTI Roll Swap
Volume (MBbl)		3,680		5,475		2,562		11,717
Price per Bbl	$	2.92	$	1.26	$	0.74	$	1.67

The following table sets forth the Company’s outstanding natural gas derivative contracts as of June 30, 2022. When aggregating multiple contracts, the weighted average contract price is disclosed.


	2022			2023			2024			Total
Gas Price Swap - Henry Hub
Volume (BBtu)		3,899			6,143			1,755			11,797
Price per MMBtu	$	8.05		$	5.55		$	4.33		$	6.19
Gas Price Collar - Henry Hub
Volume (BBtu)		6,221			9,369			5,566			21,156
Ceiling Price per MMBtu	$	11.84		$	10.34		$	8.77		$	10.37
Floor Price per MMBtu	$	7.00		$	4.07		$	3.19		$	4.70
Gas Basis Swap - WAHA
Volume (BBtu)		10,120			15,513			7,320			32,953
Price per MMBtu	$	(0.77	)	$	(1.33	)	$	(0.64	)	$	(1.00	)

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

(7)

Oil and Gas Properties and Equipment

The Company had net capitalized costs of $2,234.5 million and $1,905.9 million in oil and gas properties and equipment as of June 30, 2022 and December 31, 2021, respectively. The components are summarized in the table below:


(in thousands)	June 30, 2022			December 31, 2021
Oil and gas properties and equipment
Proved	$	2,394,130		$	1,951,878
Unproved		272,208			233,567

Total		2,666,338			2,185,445
Less: accumulated DD&A		(431,830	)		(279,593	)

Net capitalized costs for oil and gas properties and equipment	$	2,234,508		$	1,905,852

(8)

Leases

The Company has entered into operating leases for office space and office equipment. The Company’s leases have lease terms that include options to extend to future years, and some of which include options to terminate within one year. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. The Company’s short-term leases are primarily composed of drilling rigs and field equipment such as compressors. The exercise of lease renewal and termination options are at the Company’s sole discretion. The Company determines whether a contract arrangement contains a lease at inception. The lease classification and lease measurement are determined upon lease commencement. The lease commencement date is evaluated based on when the key lease terms are available and when the Company takes possession of the underlying asset. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Because the majority of the Company’s leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on the information available at the commencement date of the lease in determining the present value of lease payments. The incremental borrowing rate is not a quoted rate and is derived from the Company’s credit facility agreement.

The Company has operating lease agreements with lease and non-lease components that are accounted for as a single lease component. Right-of-use assets and lease liabilities are initially recorded at the commencement date based on the present value of lease payments over the lease term. Certain leases contain variable costs above the minimum required payments and are not included in the right-of-use assets or lease liabilities. Options to extend or terminate a lease are included in the lease term when it is reasonably certain the Company will exercise that option. For operating leases, lease cost is recognized on a straight-line basis over the term of the lease.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

Lease payments represent gross payments to vendors, which, for certain of the Company’s operating assets, are partially offset by amounts billed to other working interest owners based on their percent ownership. The components of the Company’s lease costs as of June 30, 2022 were as follows:


(in thousands)	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Operating leases:
General and administrative	$	549	$	1,098

Total operating leases		549		1,098
Short-term leases:
Lease operating expenses		2,274		4,178
Oil and gas properties and equipment		10,590		25,847
General and administrative		75		128

Total short-term leases		12,939		30,153

Total lease expense	$	13,488	$	31,251

Supplemental cash flow information related to the Company’s leases as of June 30, 2022 was as follows:


	Six Months Ended
(in thousands)	June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	895

Supplemental balance sheet information related to the Company’s operating leases as of June 30, 2022 was as follows (in thousands):


Type	Consolidated Balance Sheet Location	As of June 30, 2022
Assets:
Operating lease right-of-use assets, net	Other property and equipment, net	$	17,070
Liabilities:
Operating lease liabilities, current	Accrued expenses	$	2,035
Operating lease liabilities, noncurrent	Asset retirement obligations and other	$	15,238
Weighted average remaining lease term			9.2 years
Weighted average discount rate			2.9	%

Maturities of the Company’s lease liabilities as of June 30, 2022 were as follows:


	June 30, 2022
(in thousands)	Operating leases
2023	$	1,008
2024		2,058
2025		2,103
2026		2,150
2027		2,153
Thereafter		10,305

Total lease payments		19,777
Less imputed interest		(2,504	)

Total lease obligations		17,273
Less current obligations		(2,035	)

Long-term lease obligations	$	15,238

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

As discussed in note 2, the Company elected a transition method to recognize the effects of adopting the new lease standard as a cumulative-effect adjustment to the opening balance of retained earnings. Per Topic 842, an entity electing this transition method should provide the required disclosures under Topic 840 for all periods that continue to be in accordance with Topic 840. As such, the Company included the future minimum lease commitments table below as of December 31, 2021:


	December 31, 2021
(in thousands)	Operating leases
2022	$	1,534
2023		1,718
2024		1,755
2025		1,793
Thereafter		11,709

Total lease payments		18,509
Less imputed interest		(2,539	)

Total lease obligations		15,970
Less current obligations		(1,534	)

Long-term lease obligations	$	14,436

(9)

Related Party Transactions

The Company incurs related party transactions with Pearl Energy Investments and its affiliates (Pearl), NGP Energy Capital and its affiliates (NGP), Holdings and its affiliates, CM Resources, LLC, LM Touchdown, LLC and Luxe Energy. These transactions include revenues and operating expenses incurred in connection with operating oil and gas properties and equipment, cash advances for capital projects, fees related to gathering crude oil and natural gas, and general and administrative expenses. The Company had receivables from related parties of $0.8 million at June 30, 2022 and payables to related parties of $0.5 million and $0.2 million at June 30, 2022 and December 31, 2021, respectively. The Company had no receivables from relates parties at December 31, 2021.

Members of management own profit interests at Holdings and its affiliates. These profit interests are subject to various performance and forfeiture provisions, and they become payable once certain distribution hurdles are met. Once certain hurdles are achieved, payments will be made to members of management directly by Holdings and its affiliates. Payments are not funded by the Company. These payments are generally not considered probable of occurring until paid. During the three and six months ended June 30, 2022, the Company recognized charges of approximately $2.5 million and $22.3 million, respectively, and $3.3 million during the six months ended June 30, 2021 in the Profit sharing from affiliates account within the consolidated statements of operations as a result of the profit interests described herein.

(10)

Significant Concentrations

As of the periods presented on the consolidated balance sheets and statements of operations, substantially all of the Company’s accounts receivable and sales were related to oil and gas production. This concentration may impact the Company’s business risk, either positively or negatively, in that commodity prices, customers and suppliers may be similarly affected by changes in economic, political, or other conditions related to the industry. The Company does not believe that the loss of a purchaser would have an adverse effect on its ability to sell its crude oil and natural gas production due to the competitive nature of the oil and gas industry and availability of marketing alternatives.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

The table below sets forth the significant purchasers as a percentage of total crude oil sales, natural gas sales, and natural gas liquid sales for the three and six months ended June 30, 2022 and 2021:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Enterprise Products Partners		72	%		65	%		70	%		68	%
EagleClaw Midstream		13	%		11	%		13	%		15	%
Occidental Energy Marketing, Inc.		7	%		—	%		7	%		—	%
Brazos Permian II, LLC		3	%		2	%		4	%		2	%
Plains All American		—	%		17	%		—	%		12	%
Other		5	%		5	%		6	%		3	%

		100	%		100	%		100	%		100	%

(11)

Commitments and Contingencies

(a)

Legal Matters

(b)

Environmental

The Company maintains comprehensive insurance coverage that it believes is adequate to mitigate the risk of any adverse financial effects associated with these risks.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

(c)

Severance tax, royalty, joint interest and sales and use tax audits

(12)

Debt

The Company’s debt consisted of the following at June 30, 2022 and December 31, 2021:


(in thousands)	June 30, 2022			December 31, 2021
Credit Facility due 2025	$	450,000		$	—
5.875% senior notes due 2029		700,000			700,000
7.75% senior notes due 2026		300,000			300,000
Deferred financing costs and issue premium / discount, net		(21,402	)		(22,549	)

Long-term debt, net	$	1,428,598		$	977,451

Credit Facility. The Company’s credit facility has a maturity date of June 15, 2025. At June 30, 2022, the Company had a $1 billion borrowing base with elected commitments of $600 million, of which $150 million was available at June 30, 2022. The credit facility is collateralized by the Company’s oil and gas properties and requires compliance with certain financial covenants.

As of June 30, 2022, the Company was in compliance with all financial covenants.

On June 10, 2022, the Company entered into the Eighteenth Amendment to the Credit Agreement. The amendment increased the borrowing base from $625 million to $1 billion and increased elected commitments from $500 million to $600 million. Further, the LIBOR borrowing option was replaced by a SOFR borrowing option. Last, the interest rate pricing grid was reduced by 50 basis points.

On May 18, 2022, the Company entered into the Seventeenth Amendment to the Credit Agreement. At that time, the definition of Consolidated EBITDAX was changed to add back the negative impact of the Hedge Re-strike Transaction (see note 6) when calculating the Consolidated Net Leverage Ratio Financial Covenant for the quarter ended June 30, 2022.

On March 9, 2022, the Company entered into the Sixteenth Amendment to the Credit Agreement to adjust the borrowing base redetermination schedule to May 1 and November 1 of each year, beginning on May 1, 2022.

Colgate Energy Partners III, LLC

Notes to Consolidated Financial Statements

June 30, 2022

(Unaudited)

On November 12, 2021, the Company issued $200 million aggregate principal amount of 5.875% senior unsecured notes due 2029 under the same indenture as the previously issued 5.875% Notes. The additional notes were issued at a premium and resulted in net proceeds to the Company, after deducting estimated fees and expenses, of approximately $200 million. The Company used the proceeds to repay borrowings under its credit facility and to fund a portion of the Parkway Acquisition (see note 4).

Interest Expense. The following amounts have been incurred and charged to interest expense for the three and six months ended June 30, 2022 and 2021:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Cash payments for interest	$	3,033	$	389	$	35,530	$	1,459
Non-cash interest		1,255		724		2,413		1,255
Settled interest rate hedges		—		27		—		23
Net changes in accruals		15,816		5,999		49		9,788

Interest expense	$	20,104	$	7,139	$	37,992	$	12,525

(13)

Members’ Equity Accounts

During the three and six months ended June 30, 2022, the Company received contributions of $2.5 million and $22.3 million, respectively, and $3.3 million during the six months ended June 30, 2021, each of which is related to payments by Holdings and its affiliates to the owners of certain profit interests (see note 9).

Exhibit 99.4

LOGO

Report of Independent Auditors

To the Board of Managers

Luxe Energy LLC

We have audited the accompanying consolidated financial statements of Luxe Energy LLC and subsidiaries, which comprise the consolidated balance sheet as of December 31, 2020, and the related consolidated statements of operations, members’ equity and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Luxe Energy LLC and subsidiaries at December 31, 2020, and the consolidated results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Denver, Colorado

May 13, 2021

LUXE ENERGY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)


	December 31, 2020
	(in thousands)
ASSETS
Current assets
Cash and cash equivalents		68,129
Accounts receivable, net of allowance for doubtful accounts of $8,980 and $0, respectively		26,400
Derivative instruments		—
Prepaid expenses and other		259

Total current assets		94,788

Oil and natural gas properties, other property and equipment
Oil and natural gas properties, successful efforts method		770,368
Accumulated depreciation, depletion and amortization		(159,710	)
Unproved oil and natural gas properties		192,537
Other property and equipment, net of accumulated depreciation of $2,164 and $1,746, respectively		13,619

Total property and equipment, net		816,814

Noncurrent assets
Derivative instruments		—
Other noncurrent assets		6,823

Total assets		918,425

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable		1,333
Accrued Expenses		17,306
Revenue and royalties payable		22,484
Current portion of long-term debt		—
Derivative instruments		11,304
Other liabilities		3,435

Total current liabilities		55,862

Noncurrent liabilities
Revolving credit facility		—
Term loan		62,549
Asset retirement obligations		3,352
Deferred tax liability		2,272
Derivative instruments		2,700
Deferred royalty payment and drilling incentive		24,239
Other long-term liabilities		—

Total liabilities		150,974

Members’ equity		767,451

Total liabilities and members’ equity		918,425

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

LUXE ENERGY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS)


	December 31, 2020
Revenues
Oil sales		97,500
Natural gas sales		8,084
Natural gas liquid sales		4,429
Other Revenues		—

Total revenues		110,013

Operating expenses
Lease operating expenses		44,542
Production taxes		4,589
Depreciation, depletion, amortization and accretion of asset retirement obligations		82,456
Impairment and abandonment expense		56,155
General and administrative expenses		10,856
Bad debt expenses		8,980

Total operating expenses		207,578
Gain on sale of oil and natural gas properties		(3,717	)

Total operating loss		(93,848	)

Other income (expense)
Interest expense		(9,327	)
Net gain (loss) on derivative instruments		72,969
Other income		423

Total other income (expense)		64,065

Income tax expense		(2,272	)

Net loss	$	(32,055	)

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

LUXE ENERGY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF MEMBERS’ EQUITY

(IN THOUSANDS)


	Total Members’ Equity
Balance at December 31, 2019	$	674,506
Contributions		125,000
Net loss		(32,055	)

Balance at December 31, 2020	$	767,451

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

LUXE ENERGY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)


	For the Year Ended December 31, 2020
	(in thousands)
Cash flows from operating activities
Net loss	$	(32,055	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Accretion of asset retirement obligations		140
Depreciation, depletion and amortization		82,316
Gain on sale of oil and natural gas properties		(3,717	)
Amortization of drilling incentive		184
Deferred royalty payment		24,724
Amortization of deferred royalty payment		1,530
(Gain) loss on derivative instruments		(72,969	)
Net cash received (paid) for derivative settlements		89,399
Deferred taxes		2,272
Unproved property impairment		56,120
Amortization of debt issuance costs		519
Bad debt expense		8,980
Changes in operating assets and liabilities:
Accounts receivable		(13,318	)
Prepaid and other assets		670
Accounts payable and other liabilities		(4,691	)
Other liabilities		28,975

Net cash provided by operating activities		169,079

Cash flows from investing activities
Acquisition of oil and natural gas properties		(5,508	)
Development of oil and natural gas properties		(100,990	)
Proceeds from sales of oil and natural gas properties and other assets		33
Purchases of other property and equipment		(330	)
Acquisitions of Land		—

Net cash used in investing activities		(106,795	)

Cash flows from financing activities
Capital contributions		125,000
Proceeds from revolving credit facility		—
Repayment of revolving credit facility		(140,583	)
Proceeds from term loan		—
Cost of debt financing		(374	)

Net cash (used in) provided by financing activities		(15,957	)

Increase in cash and cash equivalents		46,327
Cash and cash equivalents, beginning of period		21,802

Cash and cash equivalents, end of period	$	68,129

Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,000

Supplemental disclosure of noncash activity:
Development of oil and natural gas properties—changes in related accruals	$	15,674

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

LUXE ENERGY LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Organization and Nature of Operations

Luxe Energy LLC, a Delaware limited liability company (“Luxe”), and its subsidiaries (collectively, “the Company”) was formed on April 30, 2015. The Company is an oil and gas exploration and production company focused on the acquisition, development, exploration and exploitation of unconventional oil and natural gas reserves in liquids rich basins in the Permian Basin.

Note 2—Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our significant accounting policies are discussed below. All intercompany accounts and transactions were eliminated in consolidation.

Certain prior period amounts have been reclassified to conform to the current period presentation.

Segment Information

The Company operates in only one industry segment, which is the exploration and production of oil, natural gas and natural gas liquids (“NGLs”). All of its operations are conducted in one geographic area of the United States. All revenue are derived from customers located in the United States.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures of commitments and contingencies. Areas of significance requiring the use of management’s judgement include the estimation of proved oil and natural gas reserves used in calculating depletion, cash flow estimates used in impairment tests of long-lived assets, the estimation of future abandonment obligations used in recording asset retirement obligations, fair value measurements and contingencies. The Company evaluates its estimates on an on-going basis and bases them on historical experience and various other assumptions the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The process of estimating quantities of oil and gas reserves is complex, requiring significant decisions in the evaluation of all available geological, geophysical, engineering, and economic data. The data for a given field may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history, and continual reassessment of the viability of production under varying economic conditions. As a result, material revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure that our reserve estimates represent the most accurate assessments possible, subjective decisions, and available data for our various fields make these estimates generally less precise than other estimates included in financial statement disclosures.

Cash and cash equivalents

Cash and cash equivalents consist of cash in banks and investments readily convertible into cash, which have original maturities of three months or less. The carrying value of cash and cash equivalents approximates fair value.

Oil and Natural Gas Properties

The Company’s oil and natural gas producing activities are accounted for using the successful efforts method of accounting. Under this method, the costs incurred to acquire, drill and complete development wells are capitalized to proved properties. Exploration costs, including personnel and other internal costs, geological and geophysical expenses, delay rentals for oil and natural gas 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 unsuccessful. As of December 31, 2020, no costs were capitalized in connection with exploratory wells in progress. Costs to operate, repair and maintain wells and field equipment are expensed as incurred.

Proved Properties

Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing oil and natural gas 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. Capitalized costs are depleted on a unit-of production method based on proved oil, natural gas and NGL reserves.

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 depletion, depreciation and amortization and accretion of asset retirement unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized. Gains or losses from the disposal of complete units of depreciable property are recorded in the Consolidated Statements of Operations.

The Company 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. There were no impairments of proved oil and natural gas properties for the year ended December 31, 2020.

Unproved Properties

Unproved properties consist of costs to acquire undeveloped leases as well as costs to acquire unproved reserves. 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 on or otherwise attributed to the property, at which time related costs are transferred to proved oil and natural gas properties.

The Company evaluates significant unproved properties for impairment on a property-by-property basis, and any impairment in value is charged to expense. Impairment is assessed based on remaining lease term, drilling results, reservoir performance, seismic interpretation or future plans to develop acreage. Impairment of unproved properties was $56.1 million as of December 31, 2020.

Other Property and Equipment

Other property and equipment such as office furniture and equipment, buildings, vehicles and other 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.

Asset Retirement Obligations

The Company recognizes the present value of the fair value of liabilities for retirement obligations associated with tangible long-lived assets in the period in which there is a legal obligation associated with the retirement of such assets and the amount can be reasonably estimated. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This liability includes costs related to the abandonment of wells, the removal of facilities and equipment, and site restorations. In periods subsequent to the initial measurement of an asset retirement obligation at present value, a period-to-period increase in the carrying amount of the liability is recognized as accretion expense, which represents the effect of the passage of time on the amount of the liability. An equivalent amount is added to the carrying amount of the liability. If the fair value of a recorded asset retirement obligation changes, a revision is recorded to both the asset retirement obligation and the asset retirement capitalized cost. Capitalized costs are included as a component of the depletion, depreciation and amortization (DD&A) calculations. Cash payments for settlements of retirement obligations are classified as cash used in operating activities in the accompanying consolidated statements of cash flows. For additional discussion, please refer to Note 9—Asset Retirement Obligations.

Derivative Financial Instruments

The Company’s derivative contracts are recorded on the consolidated balance sheets at fair value and records changes in the fair value of derivatives in current earnings as they occur. The Company’s derivatives have not been designated as hedges for accounting purposes. For additional discussion, please refer to Note 7—Derivative Financial Instruments.

Revenue Recognition

Revenue is recognized from the sales of oil, gas, and NGLs when the customer obtains control of the product, when we have no further obligations to perform related to the sale. All of our sales of oil, gas, and NGLs are made under contracts, which typically include variable consideration based on monthly pricing tied to local indices and monthly volumes delivered. The nature of our contracts with customers does not require us to constrain that variable consideration or to estimate the amount of transaction price attributable to future performance obligations for accounting purposes. Transportation and gathering fees included in the contract incurred after control transfers are included as a reduction to the transaction price. Performance obligations are met at a point-in-time through monthly delivery of oil, gas, and/or NGLs. We receive payment for product sales one to two months after delivery.

At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are accrued in accounts receivable in the consolidated balance sheets. Variances between the Company’s estimated revenue and actual payments are recorded in the month the payment is received; however, differences have been historically insignificant.

Revenue from sale of natural gas is recorded on the basis of gas actually sold by the Company. If the Company’s aggregate sales volumes for a well are greater (or less) than our proportionate share of production from the well, a liability (or receivable) is established to the extent there are insufficient proved reserves available to make-up the overproduced (or underproduced) imbalance. Imbalances have not been significant in the periods presented.

Incentive Units

Incentive units are accounted for as profit interests under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 710, Compensation—General and ASC Topic 718, Compensation—Stock Compensation. No incentive compensation expense was recorded at December 31, 2020, because it was not probable that the performance criterion would be met. For additional discussion, please refer to Note 10—Members’ Equity and Incentive Units.

Income Taxes

The Company is a limited liability company treated as a pass-through entity for U.S. federal income tax purposes. Accordingly, members are taxed on their allocable share of taxable income or loss as determined under the Company’s operating agreement.

Beginning January 1, 2018, new rules apply to IRS audits of partnerships. Under these rules, adjustments resulting from an IRS audit may be assessed at the partnership level on behalf of its members. As of December 31, 2020, the Company has no tax years under audit.

The Company is subject to the Texas margin tax, at a statutory rate of .75% of income. Deferred tax assets and liabilities are recognized for future Texas margin tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective Texas margin tax bases. A deferred tax liability of $2.3 million was recorded as of December 31, 2020 related solely to carrying value differences associated with oil & gas property for book and tax purposes.

The Company 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 Company’s management does not believe that any tax positions included in its tax returns would not meet this threshold. The Company’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.

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases. This update applies to any entity that enters into a lease, with some specified scope exemptions. Under this update, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. While there were no major changes to the lessor accounting, changes were made to align key aspects with the revenue recognition guidance. The FASB issued ASU 2020-05, which defers the effective date for private entities with fiscal years beginning after December 15, 2021, and interim reporting periods beginning after December 15, 2022. Entities will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is reviewing the provisions of ASU 2016-02 to determine the impact on its consolidated financial statements and related disclosures.

Note 3—Accounts Receivable and Accrued Expenses

Accounts receivable are comprised of the following for the period indicated (in thousands):


	December 31, 2020
Oil, natural gas and NGL sales	$	15,705
Joint interest billings		17,173
Allowance for doubtful accounts		(8,980	)
Other		2,502

Total	$	26,400

Accrued expenses are comprised of the following for the period indicated (in thousands):


	December 31, 2020
Accrued capital expenditures	$	6,573
Accrued lease operating expenses		8,234
Other		2,499

Total	$	17,306

Revenue payables are comprised of the following for the period indicated (in thousands):


	December 31, 2020
Revenue Suspense	$	17,411
Accrued transportation, processing, gathering and other operating expense		4,496
Accrued production taxes		412
Other		165

Total	$	22,484

Note 4—Acquisitions and Divestitures

2020 Acquisition Activity

During the year ended December 31, 2020, the Company acquired from third-parties, a combination of new leases and additional working interests in wells it operates through a number of separate, individually insignificant negotiated transactions for aggregate cash consideration of $5.5 million, all of which were accounted for as asset acquisitions. The Company reflected the total consideration as $5.5 million in unproved oil and natural gas properties.

Note 5—Other Liabilities

In August 2020, in connection with the SUA, the Company exercised the put option in exchange for the water royalties the Company had acquired from WaterBridge Texas Midstream LLC (“WaterBridge”). In exchange for relinquishing the water royalties, the Company received $26.3 million from WaterBridge. The deferred royalty payment will be recognized as a deduction to lease operating expenses and capital expenditures over 10 years in connection with the Water Transaction, refer to Note 4—Acquisitions and Divestitures. As of December 31, 2020, the total deferred royalty payment is $24.7 million, of which $3.1 million is included as other current liabilities and $21.7 million is included in deferred royalty payment and drilling incentive on the accompanying consolidated balance sheet.

In 2018, the Company signed a natural gas gathering and processing agreement with Salt Creek Midstream LLC, a Delaware limited liability company (“Salt Creek”). As part of the natural gas gathering and processing agreement Salt Creek provided Luxe the opportunity to earn drilling incentive payments for up to $12.5 million by November 20, 2023, for each well the Company drills, completes, and delivers gas. During the year ended December 31, 2020, the Company earned $3.1 million of incentive payments. The Company deferred recognition of the incentive payments and will recognize it over 10 years as a deduction to gathering, processing and transportation expense, which is presented net of revenue on the accompanying consolidated income statement. As of December 31, 2020, the deferred amount is $2.9 million of which $0.4 million is included as other current liabilities and $2.5 million is included in deferred royalty payment and drilling incentive on the accompanying consolidated balance sheet.

Note 6—Long-Term Debt

Credit Facility

On May 10, 2018, the Company entered into a credit agreement with JPMorgan Chase Bank, N.A. and Wells Fargo Securities, LLC (“Creditors”) as Joint Lead Arrangers (“the Credit Agreement”). The Credit Agreement, which allows for a maximum borrowing base of $175.0 million, had an original borrowing base of $55.0 million and a maturity date of May 10, 2023. At December 31, 2020, the Credit Agreement, as amended, had a borrowing base of $85.0 million, with $85.0 million in unused borrowing capacity, net of outstanding letters of credit. The borrowing base is redetermined semi-annually on each May 1 and November 1.

Borrowings under the revolving credit facility comprising of Eurodollar Loans shall bear interest at the Adjusted LIBOR Rate plus an applicable margin ranging from 250 to 350 basis points, depending on the percentage of the borrowing base utilized. Borrowings under the revolving credit facility comprising of Alternate Base Rate Loans shall bear interest at the Alternate Base Rate plus an applicable margin ranging from 75 to 175 basis points, depending on the percentage of the borrowing base utilized. The Company also pays a commitment fee on the unused amounts under its facility of a range of 37.5 to 50.0 basis points, depending on the percentage of the borrowing base utilized. The Company may repay any borrowing amounts prior to the maturity date without any premium or penalty other than the customary LIBOR breakage costs.

The Credit Agreement requires the Company to maintain compliance with the following financial ratios: (i) a current ratio of not less than 1.0 to 1.0 and (ii) a leverage ratio, which, as defined in the Credit Agreement, as the ratio of Total Net Debt to Consolidated EBITDAX of not greater than 3.50 to 1.00 commencing with the fiscal year December 31, 2020. The Credit Agreement also contains restrictive covenants that limit the Company’s ability to, among other things: incur additional indebtedness; make investments, loans, and advances; make or declare dividends and distributions; enter into commodity hedges exceeding a specified percentage of our expected production; enter into interest rate hedges exceeding a specified percentage of its outstanding indebtedness; incur liens; sell assets; engage in transactions with affiliates; and enter into take-or-pay agreements exceeding a specified percentage of our expected production. For the year ended December 31, 2020, the Company received a waiver from its Creditors that permitted liens to remain in place against certain non-operated oil and gas properties owed by the Company. These liens exceeded the threshold amount permitted by the Credit Agreement. Refer to Note 11—Commitments and Contingencies for details of the liens. At December 31, 2020, the Company was in compliance with these covenants.

Debt issuance costs consist of costs directly associated with obtaining credit with financial institutions. These costs are capitalized and are included in other non-current assets on the consolidated balance sheet. The capitalized costs are amortized over the life of the credit agreement, which approximates the effective-interest method. Any unamortized debt issuance costs are expensed in the year when the associated debt instrument is terminated. Amortization expense for debt issuance costs was $0.4 million for the year ended December 31, 2020 and is included in interest expense in the consolidated statements of operations.

DrillShip Agreement

On October 30, 2019, the Company entered into a Note Purchase Agreement (“NPA”) with EIG Global Energy Partners (“EIG”) to fund the development of 25 wellbores (“DrillShip Wells”). At closing, the Company contributed 13 wellbores (“Contributed Wells”) into a wholly owned, unrestricted subsidiary, Luxe DrillShip Operating, LLC (“Luxe DrillShip”). The Company also committed to contribute to Luxe DrillShip 12 additional wellbores in two separate tranches upon successfully passing as asset coverage test. Luxe DrillShip is primarily funded by a $175 million commitment (“Notes”) from EIG. The Notes mature on October 30, 2024 and are non-recourse to the other subsidiaries of the Company.

As part of the NPA, the Company is required to fund 15% and Luxe DrillShip is required to fund 85% of the development capital associated with the Contributed Wells. If a monthly asset coverage test is triggered and met, the Company will receive 15% of the monthly cash flows from the Contributed Wells. Once the Notes achieve a certain payout threshold, the interests in the wellbores fully revert to the Company. The repayment of the Notes at a predetermined value is required under the NPA at the earlier of maturity of the Notes on October 30, 2024, a change of control by the Company, or an event of default. Luxe DrillShip also pays and 8% interest rate that is attributable to the payout threshold.

At December 31, 2020, Luxe DrillShip had approximately $59.4 million Notes outstanding and the monthly asset coverage ratio had not been triggered. The total amount of assets collateralized by the Notes was $110.8 million at December 31, 2020. Debt issuance costs of $3.1 million were recorded as debt issuance costs and will be amortized over the life of the Notes.

At closing, the Company also conveyed an overriding royalty interest on the Contributed Wells to EIG that had a fair value of $4.3 million. During the year ended December 31, 2020 this balance was reclassed as a debt payable, the outstanding balance as of December 31, 2020 is $3.1 million, included in the Term loan on the accompanying Consolidated Balance Sheet.

Note 7—Derivative Financial Instruments

The Company uses derivative instruments to mitigate volatility in commodity prices. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future cash flow from favorable price changes.

The Company may use commodity derivative instruments known as fixed price swaps to realize a known price for a specific volume of production, basis swaps to hedge the difference between the index price and a local index price, or collars to establish fixed price floors and ceilings. All transactions are settled in cash with one party paying the other for the resulting difference in price multiplied by the contract volume.

The following table summarizes the approximate volumes and average contract prices of swap contracts the Company had in place as of December 31, 2020:


	2021			2022
Crude Oil Fixed Price Swaps:
Notional volumes (Bbl)		923,163			580,067
Weighted average floor price ($/Bbl)	$	43.44		$	44.98
Crude Oil Basis Swaps:
Notional volumes (Bbl)		923,163			580,067
Weighted average fixed price ($/Bbl)	$	0.25		$	0.30
Natural Gas Fixed Price Swaps:
Notional volumes (MMBtu)		6,592,362			4,327,903
Weighted average fixed price ($/MMBtu)	$	2.61		$	2.54
Natural Gas Basis Fixed Price Swaps:
Notional volumes (MMBtu)		6,592,362			4,327,903
Weighted average fixed price ($/MMBtu)	$	(0.70	)	$	(0.55	)
Natural Gas Liquids Fixed Price Swaps:
Notional volumes (Bbl)		397,201			294,501
Weighted average fixed price ($/Bbl)	$	18.90		$	19.60

Derivative Gains and Loses

Net gains and losses on our derivative instruments are a function of fluctuations in the underlying commodity index prices as compared to the contracted prices and the monthly cash settlements (if any) of the instruments. The Company has elected not to designate its derivatives as hedging instruments for accounting purposes and, therefore, the Company does not apply hedge accounting treatment to its derivative instruments. Consequently, changes in the fair value of its derivative instruments and cash settlements on the instruments are included as a component of operating costs and expenses as either a net gain or loss on derivative instruments. Cash settlements of our contracts are included in cash flows from operating activities in our statements of cash flows.

The following table presents gains and losses for derivative instruments for the period indicated:


	For the Year Ended December 31, 2020
Net gain (loss) on derivative instruments (in thousands)		72,969

Derivative Fair Value

The Company’s commodity derivatives are carried at their fair value on the consolidated balance sheets using level 2 inputs and are subject to master netting arrangements, which allows the Company to offset recognized asset and liability fair value amounts on contracts with the same counterparty.

The table below presents the amounts and classification of the Company’s derivative assets and liabilities in the consolidated balance sheets, including commodity and interest swaps, as well as the gross recognized derivative assets, liabilities and amounts offset:


	Balance Sheet Classification		Gross Amounts		Netting Adjustments			Net Amounts Presented on the Balance Sheet
December 31, 2020:
Assets:
Derivative instruments		Current assets	$	1,630	$	(1,630	)	$	—
Derivative instruments		Non-current assets		567		(567	)		—

Total assets			$	2,197	$	(2,197	)	$	—

Liabilities:
Derivative instruments		Current liabilities	$	12,934	$	(1,630	)	$	11,304
Derivative instruments		Non-current liabilities		3,267		(567	)		2,700

Total liabilities			$	16,201	$	(2,197	)	$	14,004

The Company is exposed to financial risks associated with our derivative contracts from non-performance by our counterparties. The Company minimizes the credit risk from counterparties by: (i) limiting its exposure to any single counterparty; and (ii) monitoring the creditworthiness of its counterparties on an ongoing basis. The Company’s counterparties do not require it to post collateral for its derivative liability positions, nor does the Company require its counterparties to post collateral for its benefit. The Company believes all counterparties are currently acceptable credit risks. As of December 31, 2020, the Company had commodity derivative contracts with four counterparties, all of which are members of the Company’s credit facility lender group.

Note 8—Fair Value Measurements

Assets and Liabilities Measured at Fair Value

The Company 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 Company’s assets and liabilities that are measured at fair value and where they were classified within the fair value hierarchy as of December 31, 2020 (in thousands):


	Level 1		Level 2		Level 3
Assets:
2020 Derivative instruments(1)	$	—	$	—	$	—
Liabilities:
2020 Derivative instruments(1)	$	—	$	14,004	$	—

(1)	This represents a financial asset or liability that is measured at fair value on a recurring basis.

Assessing the significance of a particular input to the fair value measurement requires judgment, including the consideration of factors specific to the asset or liability. The fair value of our derivative instruments (Level 2) was estimated using discounted cash flow. These models use certain observable variables including forward prices, volatility curves, interest rates, and credit ratings and spreads. The fair value estimates are adjusted relative to non-performance risk as appropriate. Refer to Note 7—Derivative Financial Instruments for further information on the fair value of our derivative instruments.

Nonrecurring Fair Value Measurements

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 natural 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 Company’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 the year ended December 31, 2020.

The initial measurement of ARO at fair value is calculated using discounted cash flow techniques and is based on internal estimates of future retirement costs associated with long-lived assets. Significant Level 3 inputs used in the calculation of ARO include plugging costs and reserve lives. Refer to Note 9—Asset Retirement Obligations for additional information on the Company’s ARO.

Other Financial Instruments

The carrying amounts of our cash, 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 revolving credit facilities approximate fair value because the variable interest rates are reflective of current market conditions.

The Company relied on current information including interest rates and the specific terms of the Notes to estimate the fair value. The fair value of the Notes on December 31, 2020 is the same as the carrying value, which approximates the principal less the unamortized discount, refer to Note 6—Long-Term Debt.

Accounts Receivable

Most of the Company’s accounts receivable balances are uncollateralized and result from transactions with other companies in the oil and natural gas industry. Concentration of customers may impact the Company’s overall credit risk because its customers may be similarly affected by changes in economic or other conditions within the industry. The Company conducts credit analyses prior to making any sales to new customers or increasing credit for existing customers and may require parent company guarantees, letters of credit, or prepayments when deemed necessary. For properties the Company operates, it typically has the right to realize amounts due to the Company from non-operators by netting the non-operators’ share of production revenues from those properties.

The Company routinely assesses the recoverability of all material accounts receivable and accrue a reserve to the allowance for credit losses based on its estimation of expected losses over the life of the receivables.

Major Customers

The Company is subject to credit risk resulting from the concentration of its oil, natural gas and NGL receivables with several significant purchasers. The future availability of a ready market for oil, natural gas and

NGLs depends on numerous factors outside the Company’s control, none of which can be predicted with certainty. The Company does not believe the loss of any single purchaser would materially impact its results of operations because oil, natural gas and NGLs are fungible products with well-established markets and numerous purchasers. For the year ended December 31, 2020, three purchasers accounted for approximately 78.8% of revenue.

Note 9—Asset Retirement Obligations

The following table summarizes the changes in the Company’s asset retirement obligations for the periods indicated (in thousands):


	December 31, 2020
Asset retirement obligations, beginning of period	$	930
Liabilities incurred(1)		70
Accretion expense		104
Revisions of estimated liabilities(2)		2,248

Asset retirement obligations, end of period	$	3,352

(1)	Reflects liabilities incurred through drilling activities and acquisitions of drilled wells.

(2)	Primarily reflects changes in estimated plug and abandonment costs.

Note 10—Members’ Equity and Incentive Units

Members’ Equity

The Company was formed with equity capital commitments from NGP XI U.S. Holdings, L.P. and Luxe management via Class A Equity. Following the divestiture of the significant majority of the Company’s assets on September 1, 2016, the Company distributed $472 million to Class A shareholders and terminated the Class A Incentive Units. As of December 31, 2020, $220.2 million of contributions relate to the original Class A Equity investment.

On October 5, 2016, the Company executed an Amended and Restated Limited Liability Company Agreement (the “A&R LLC Agreement”). The A&R LLC Agreement created a new class of equity (the “Class B Equity”) and received new Class B equity capital commitments from NGP XI U.S. Holdings, L.P. and Luxe management, respectively. In February 2017, NGP XI Luxe Holdings, L.P. created NGP XI Luxe Holdings, LLC as the investor in Luxe Energy LLC with the funds coming from the existing commitment from NGP.

As of December 31, 2020, NGP XI U.S. Holdings, LLC and Luxe management had contributed $801 million and $11.3 million, respectively, to Class B Equity.

The A&R LLC Agreement authorizes the issuance of Class B Member Company Interests and Incentive Interests. The Class B Member Company Interests each contain separate rights, privileges, preferences, restrictions and obligations as provided in the A&R LLC Agreement.

In general, cash distributions are allocated in accordance with the provisions of the A&R LLC Agreement whereby the Class B Members receive payment until they have received cumulative cash distributions equal to the amount of their respective cumulative capital contributed plus a preferred return. Once the capital and certain rate of returns are achieved, distributions will be made to Class B Members and the Incentive Interest holders in accordance with the A&R LLC Agreement. Subsequent to the preferred return, distributions allocable to Incentive Interest holders increase based on stated return thresholds.

Class B Member Company Interests

Class B Member Company Interests are issued in exchange for capital contributions by each Class B Member. Any distributions to Class B Members will be in accordance with the Class B Sharing Ratio, as defined in the A&R LLC Agreement. At December 31, 2020, the Class B Sharing Ratio was approximately 98.6% for NGP XI Luxe Holdings LLC and 1.4% for Luxe management’s aggregate Class B interests. At December 31, 2019, the Class B Sharing ratio was approximately 98.4% for NGP XI Luxe Holdings LLC and 1.6% for Luxe management’s aggregate Class B interests.

Incentive Units

The Incentive Interests are Company Interests that provide economic incentives to our employees who receive them. The Incentive Interests are intended to be “profits interests.” The Incentive Interests vest over a three-year or five-year period, as provided in the A&R LLC Agreement, and may be forfeited or repurchased by the Company under certain circumstances as set forth in the plan governing the Incentive Interests and individual Incentive Interests grant agreements.

The Incentive Interests do not represent a substantive class of equity. Due to the awards’ forfeiture provisions, the unit holders are primarily entitled to profit-sharing distributions while employed and such awards are forfeited upon voluntary termination. Accordingly, these Incentive Interests are accounted for as a profit-sharing arrangement pursuant to FASB ASC 710, Compensation—General.

The Company has granted Incentive Interests to select employees of the Company. The Incentive Interests are treated as conditionally vesting equity but are deemed to be a profit-sharing arrangement due to certain forfeiture or repurchase features of the plan. Award recipients may derive economic value in the instrument through profit sharing distributions. As such, the Company accounts for these Incentive Interests as profit-sharing arrangements and no liability or compensation expense will be recognized until amounts payable under such awards become probable and reasonably estimable.

For the year ended December 31, 2020, the Company recognized no compensation expense related to the Incentive Interests.

Note 11—Commitments and Contingencies

Commitments

The following is a schedule of minimum future lease payments with commitments that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2020 (in thousands):


	Year Ending December 31,
2021	$	393
2022		297
2023		302
2024		311
2025		320

Total	$	1,623

Office Leases

The Company leases office space in Austin, Houston, and Midland, Texas. The Company recognized rent expense of $0.9 million for the year ended December 31, 2020.

Contingencies

The Company is subject to litigation and claims arising in the ordinary course of business. The Company 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 Company.

On November 8, 2019, the Company’s largest non-operated partner, MDC Energy, LLC (“MDC”) filed Chapter 11 bankruptcy. Prior to filing bankruptcy protection, some of MDC’s vendors placed statutory liens (“MDC Liens”) against the leases operated by MDC. The Company owned an interest in a portion of the leases that are subject to the MDC Liens. The Company has balances in accounts receivable and accounts payable with MDC that are pending the outcome of the bankruptcy proceedings. At December 31, 2020, the Company had a net receivable of $3.9 million due from MDC and expects to receive the amounts owed by MDC for revenues and joint interest billings during the next year. For the year ended December 31, 2020, the Company received a waiver from its Creditors to permit the temporary existence of liens related to the Company’s non-operated properties operated by MDC.

Note 12—Transactions with Affiliates

During the year-ended December 31, 2020, the Company shares certain general and administrative services with Luxe Minerals LLC and collects payments for any allocated expenses. The amount of general and administrative expense allocated to Luxe Minerals LLC during 2020 was $1.7 million. There were no outstanding accounts receivable with Luxe Minerals LLC as of December 31, 2020.

In July 2020, the Company entered into a Management Services Agreement with Camino Natural Resources, LLC, a Delaware limited liability company, and its subsidiaries (“Camino”). As compensation for services rendered in the management of the Luxe, Luxe pays Camino an annual management fee based on the Management Service Agreement. For the year ended December 31, 2020 Luxe paid $2.0 million in management fees, included in general and administrative expenses on the accompanying combined and consolidated income statement. As of December 31, 2020, accounts payable on the accompanying balance sheet includes $1.2 million to Camino, Note 3—Accounts Receivable and Accrued Expenses.

Note 13—Subsequent Events

On April 7, 2021, the Company paid off the outstanding debt and interest associated with the NPA for $56.8 million. At closing, the Company also purchased from EIG the originally conveyed overriding royalty interests on the Contributed Wells for $4.3 million. The initial accounting for this transaction is incomplete as of the date of this filing.

The Company entered into a Limited Consent and Seventh Amendment to the Credit Agreement with the requisite lenders to its Credit Facility on April 21, 2021, which provided an extension of time for the delivery of its audited and consolidated financial statements and related certificate of compliance for the year ended December 31, 2020 as required by Section 8.01(a) and 8.01(c) of the Credit Agreement until May 31, 2021. The Company received an additional waiver from its Creditors that permitted liens to remain in place against certain non-operated oil and gas properties owed by the Company. These liens exceeded the threshold amount permitted by the Credit Agreement.

The Company has evaluated subsequent events through May 13, 2021, the date the consolidated financial statements were available to be issued. No other subsequent events were identified requiring additional recognition or disclosure in the accompanying consolidated financial statements.

Supplemental Disclosure of Oil and Natural Gas Operations (unaudited)

Reserve Quantity Information

The following information represents estimates of the Company’s proved reserves. Proved oil and natural gas reserves were calculated based on the prices for oil and natural gas during the 12-month period before the reporting date, determined as the unweighted average of the first-day-of-the-month pricing. For oil and NGL volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2020 and 2019 was $39.54 per Bbl and $55.85 per Bbl, respectively. For gas volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2020 and 2019 was $1.99 per MMBtu and $2.58 per MMBtu, respectively. All prices have been adjusted for transportation, quality and basis differentials.

Subject to limited exceptions, proved undeveloped reserves may only be recognized if they relate to wells scheduled to be drilled within five years of the date of their initial recognition. This rule limited, and may continue to limit, the Company’s potential to record additional proved undeveloped reserves. Moreover, the Company may be required to write down its proved undeveloped reserves if it does not drill on those reserves within the required five-year timeframe. All of the Company’s recorded proved undeveloped reserves are scheduled to be drilled within five years of the date of their initial recognition.

The Company’s proved oil and natural gas reserves are all located in the United States, in the Permian Basin of West Texas. All of the estimates of the proved reserves at December 31, 2020 are based on reports prepared by Netherland, Sewell & Associates, Inc., independent petroleum engineers. Proved reserves were estimated in accordance with the guidelines established by the SEC and the FASB.

Oil and natural gas reserve quantity estimates are subject to numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures. The accuracy of such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of subsequent drilling, testing and production may cause either upward or downward revision of previous estimates. Further, the volumes considered to be commercially recoverable fluctuate with changes in prices and operating costs. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of currently producing oil and natural gas properties. Accordingly, these estimates are expected to change as additional information becomes available in the future.

The following table provides the changes in the proved reserves for the period ended December 31, 2020:


	Oil			Gas			NGL			Total
	(MBbl)			(MMcf)			(MBbl)			(MBoe)
Total proved reserves at December 31, 2019		39,705			166,595			23,142			90,613
Revisions		(22,170	)		(8,004	)		(7,530	)		(31,034	)
Extensions and discoveries		4,627			32,632			3,053			13,119
Production		(2,592	)		(16,512	)		(1,292	)		(6,636	)

Total proved reserves at December 31, 2020		19,570			174,711			17,373			66,063

Proved Developed Reserves:
January 1, 2020		13,107			70,069			10,445			35,230
December 31, 2020		9,366			103,628			10,386			37,024
Proved Undeveloped Reserves:
January 1, 2020		26,598			96,526			12,697			55,383
December 31, 2020		10,204			71,083			6,987			29,038

The change in total proved reserves during 2020 was primarily the result of recording approximately 31 MMBoe of negative revisions. The negative revisions were primarily the result of an approximate 33 MMBoe

decrease related to the removal of proved undeveloped locations due to an adoption of a development plan and a decrease of approximately 2 MMBoe related to the decrease in commodity prices partially offset by an increase of 4 MMBoe related to well performance exceeding previous estimates. The Company recorded extensions and discoveries during 2020 of approximately 13 MMBoe which were a result of our successful drilling and completion program during 2020. The Company also had production of approximately 7 MMBoe,

Standardized Measure of Discounted Future Net Cash Flows

The standardized measure of discounted future net cash flows is computed by applying the 12-month unweighted average of the first-day-of-the-month pricing for oil and natural gas (with consideration of price changes only to the extent provided by contractual arrangements) to the estimated future production of proved oil and natural gas reserves less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves (including cost for future dismantlement, abandonment and rehabilitation obligations), discounted using a rate of 10 percent per year to reflect the estimated timing of the future cash flows. Future income taxes are calculated by comparing undiscounted future cash flows to the tax basis of oil and natural gas properties plus any available carryforwards and credits and applying the applicable current tax rates to the difference.

The following table provides the standardized measure of discounted future net cash flows of the at December 31, 2020:


	Year Ended December 31, 2020
	(in thousands)
Oil and gas producing activities:
Future cash inflows	$	1,190,309
Future production costs		(620,610	)
Future development costs		(185,957	)
Future income tax expense		(6,249	)

Future net cash flows		377,493
10% annual discount factor		(201,507	)

Standardized measure of discounted future net cash flows	$	175,986

The following table provides a rollforward of the standardized measure of discounted future net cash flows of the for the year ended December 31, 2020:


	Year Ended December 31, 2020
	(in thousands)
Oil and gas producing activities:
Balance, beginning of year	$	588,744
Extensions and discoveries		9,715
Previously estimated development costs incurred		54,689
Net changes in prices and production costs		(314,254	)
Oil and natural gas sales, net of production costs		(60,882	)
Changes in future development costs		24,349
Revisions of previous estimates		(158,859	)
Accretion of discount		52,104
Net change to income taxes		1,363
Changes in timing and other		(20,983	)

Standardized measure of discounted future net cash flows	$	175,986

Exhibit 99.5

Independent Auditors’ Report

The Member

Colgate Energy Partners III, LLC:

Report on the Financial Statements

We have audited the accompanying Statement of Revenues and Direct Operating Expenses of Properties Acquired by Colgate Energy Partners III, LLC, for the year ended December 31, 2020, and the related notes to the Statement.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the Statement in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of Statement that are free from material misstatement.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenues and direct operating expenses of properties acquired by Colgate Energy Partners III, LLC as of December 31, 2020, for the year then ended in accordance with U.S. generally accepted accounting principles.

Emphasis of Matter 1

As described in note 1, the accompanying statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of the operations of the properties.

Emphasis of Matter 2

Accounting principles generally accepted in the United States of America require that the supplemental information relating to oil and natural gas producing activities be presented to supplement the basic

financial statements. Such information, although not a part of the basic financial statements, is required by the United States Financial Accounting Standards Board who as described in Accounting Standards Codification Topic 932-235-50 considers the supplemental information to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with managements responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

/s/ KPMG

Dallas, Texas

December 14, 2021

Statement of Revenues and Direct Operating Expenses

of Properties Acquired by Colgate Energy Partners III, LLC


	Year Ended December 31,		Six Months Ended June 30,
(in thousands)	2020		2021
			(unaudited)
Revenues:
Oil, Natural Gas and NGL sales	$	100,124	$	74,807

Total revenues		100,124		74,807

Direct Operating expenses:
Lease Operating Expenses		50,063		25,107
Production and ad valorem taxes		8,488		6,084

Total direct operating expenses		58,551		31,191


Excess revenues over operating expenses	$	41,573	$	43,616

See accompanying notes to the Statement of Revenues and Direct Operating Expenses

(1)

Summary of Significant Accounting Policies

(a)

Basis of Presentation

On July 29, 2021, Colgate Energy Partners III, LLC (the “Company”) acquired (the “Acquisition”) certain proved and unproved oil and natural gas properties (the “Acquired Properties”) from Occidental Petroleum (“Seller”). The effective date for the Acquisition was April 1, 2021. The aggregate purchase price for the Acquisition was $478.5 million, subject to customary post-closing adjustments, all of which was paid in cash.

The accompanying Statement of Revenues and Direct Operating Expenses (the “Statement”) of the Acquired Properties were prepared based on carved-out financial information and data from the Seller’s historical accounting records and are presented on the accrual basis of accounting. Because the Acquired Properties are not separate legal entities, complete financial statements under United States generally accepted accounting principles (“GAAP”) are not available or practicable to produce. The Statement is not intended to be a complete presentation of the results of operations of the Acquired Properties and may not be representative of future operations as they do not reflect certain expenses that were incurred in connection with the ownership and operation of the Acquired Properties including, but not limited to (i) general and administrative expenses, (ii) interest expense, (iii) depreciation, depletion, and amortization and (iv) other indirect expenses. These costs were not separately allocated to the Acquired Properties in the accounting records of the Seller. In addition, these allocations, if made using historical general and administrative structures, would not produce allocations that would be indicative of the historical performance of the Acquired Properties had they been owned by the Company due to the differing size, structure, operations and accounting policies of the Seller and the Company. For these reasons, the Statement is not indicative of the results of operations of the Acquired Properties on a going forward basis due to changes in the business and the omission of various operating expenses.

(b)

Use of Estimates in Preparation of Financial Statements

The preparation of this Statement in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of revenues and direct operating expenses during the respective reporting periods. These estimates and assumptions are based on management’s best estimates and judgements. Actual results may differ from the estimates and assumptions used in the preparation of the Statement.

(c)

Revenue recognition

Seller records revenue from the sales of crude oil, natural gas and natural gas liquids (“NGL”) when they are produced and sold. The Seller recognizes revenue when a performance obligation is satisfied by the transfer of control over a product to the ultimate customer. Sales of oil, natural gas and NGLs are recognized at the time that control of the product is transferred to the customer and collectability is reasonably assured. Generally, the pricing provisions in the Seller’s contracts are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil or natural gas, and prevailing supply and demand conditions. As a result, the prices of the Company’s oil, natural gas and NGLs fluctuate to remain competitive with other available oil, natural gas and NGLs supplies.

(d)

Direct Operating Expenses

Direct operating expenses are recorded when the related liability is incurred. Direct operating expenses include lease operating expenses, ad valorem taxes and severance taxes. Certain costs such as depletion, depreciation and amortization, accretion of asset retirement obligations, general and administrative expense and interest expense were not allocated to the Acquired Properties.

(2)

Related Party Transactions

All of the Seller’s operated crude oil and natural gas production and a portion of the Seller’s natural gas liquids are sold to a marketing affiliate, Occidental Energy Marketing, Inc (“OEMI”), who then subsequently markets the production to third parties which may be at a different delivery point and would be commingled with other Seller’s oil and natural gas production

(3)

Commitments and Contingencies

As represented by the Seller in the Acquisition Agreement, there are no known claims, litigation or disputes pending as of the effective date of the Acquisition Agreement, or any matters arising in connection with indemnification, and neither the Company nor the Seller are aware of any legal, environmental or other commitments or contingencies that would have a material adverse effect on the Statement.

(4)

Subsequent Events

Management has evaluated subsequent events through December 14, 2021, the date the Statement was available to be issued, and has concluded there are no material subsequent events that would require disclosure in these financial statements.

(5)

Supplemental Disclosure of Oil and Natural Gas Operations (unaudited)

Estimated quantities of proved oil and gas reserves of the Acquired Properties were derived from reserve estimates prepared by the Company’s reserve engineers, as of December 31, 2020. Estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development, price changes and other factors. All of the Acquired Properties proved reserves are located in the continental United States.

Guidelines prescribed in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 932 (“ASC 932”), Extractive Activities — Oil and Gas, have been followed for computing a standardized measure of future net cash flows and changes therein relating to estimated proved reserves. Future cash inflows and future production and development costs are determined by applying prices and costs, including transportation, quality, and basis differentials, to the period-end estimated quantities of oil and gas to be produced in the future. The resulting future net cash flows are reduced to present value amounts by applying a ten percent annual discount factor. Future operating costs are determined based on estimates of expenditures to be incurred in producing the proved oil and gas reserves in place at the end of the period using period-end costs and assuming continuation of existing economic conditions, plus overhead incurred. Future development costs are determined based on estimates of capital expenditures to be incurred in developing proved oil and gas reserves.

The assumptions used to compute the standardized measure are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect the Company’s expectations of actual revenues to be derived from those reserves, nor their present value. The limitations inherent in the reserve quantity estimation process, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process. Reserve estimates are inherently imprecise and estimates of new discoveries and undeveloped reserves are more imprecise than estimates of established proved producing oil and natural gas properties. Accordingly, these estimates are expected to change as future information becomes available. The Company is a pass through entity for tax purposes. Thus, the effect of future U.S. federal income taxes has been excluded from the standardized measure of discounted future net cash flows. However, the Company is subject to Texas franchise tax, and the expected impact of such taxes has been included.

The standardized measure of discounted future net cash flows is computed by applying the 12-month unweighted average of the first-day-of-the-month pricing for oil and natural gas to the estimated future production of proved oil and natural gas reserves less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves (including cost for future dismantlement, abandonment and rehabilitation obligations), discounted using a rate of 10 percent per year to reflect the estimated timing of the future cash flows.

The following table provides the changes in the Acquired Properties’ proved reserves for the period ended December 31, 2020:


	Oil (MBbl)			Gas (MMcf)			NGL (MBbl)			Total (MBoe)
Total proved reserves at December 31, 2019		15,187			33,778			4,825			25,642
Revisions		(972	)		(3,269	)		188			(1,329	)
Extensions		26,311			36,713			6,467			38,897
Production		(2,488	)		(5,535	)		(883	)		(4,294	)

Total proved reserves at December 31, 2020		38,038			61,687			10,597			58,916


Proved Developed Reserves:
January 1, 2020		15,187			33,778			4,825			25,642
December 31, 2020		11,727			24,974			4,130			20,019

Proved Undeveloped Reserves:
January 1, 2020		—			—			—			—
December 31, 2020		26,311			36,713			6,467			38,897

The change in total proved reserves was primarily the result of recording approximately 39 MMBoe of new proved undeveloped reserves, which was a result of our successful drilling and completion program during 2020, partially offset by approximately 1 MMBoe reduction in revisions and approximately 4 MMBoe reduction in production during the year. The negative revisions were primarily the result of an approximate 6 MMBoe decrease in commodity prices partially offset by an increase of approximately 5 MMBoe related to well performance exceeding previous estimates.

For oil and NGL volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2020 was based on the SEC pricing of $38.29 per Bbl West Texas Intermediate posted oil. For gas volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2020 was based on the SEC pricing of $1.99 per MMBtu Henry Hub spot natural gas price

for natural gas reserves. For oil and NGL volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2019 was based on the SEC pricing of $55.85 per Bbl West Texas Intermediate posted oil. For gas volumes, the pricing that was used for estimates of the Company’s proved reserves as of December 31, 2019 was based on the SEC pricing of $2.58 per MMBtu Henry Hub spot natural gas price for natural gas reserves. All prices have been adjusted for transportation, quality and basis differentials.

The following table provides the standardized measure of discounted future net cash flows of the Acquired Properties at December 31, 2020:


(in thousands)	Year Ended December 31, 2020
Oil and gas producing activities:
Future cash inflows	$	1,516,728
Future production costs		(583,626	)
Future development costs		(520,558	)
Future income tax expense		(7,963	)

Future net cash flows		404,581
10% annual discount factor		(248,268	)

Standardized measure of discounted future net cash flows	$	156,313

The following table provides a rollforward of the standardized measure of discounted future net cash flows of the Acquired Properties for the year ended December 31, 2020:


(in thousands)	Year Ended December 31, 2020
Oil and gas producing activities:
Balance, beginning of year	$	264,856
Extensions and discoveries		42,623
Estimated development costs incurred		—
Net changes in prices and production costs		(121,545	)
Oil and natural gas sales, net of production costs		(41,573	)
Changes in future development costs		165
Revisions of previous estimates		(9,091	)
Accretion of discount		26,753
Net change to income taxes		(1,585	)
Changes in timing and other		(4,290	)

Standardized measure of discounted future net cash flows	$	156,313

Exhibit 99.6

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

On September 1, 2022 (the “Closing Date”), Permian Resources Corporation, a Delaware corporation (formerly known as Centennial Resource Development, Inc. (“Centennial”)) (“the “Company”) consummated its previously announced merger (the “Merger”) between Centennial, Centennial Resource Production, LLC (“OpCo”) (Centennial’s wholly-owned consolidated subsidiary), and Colgate Energy Partners III, LLC (“Colgate”) and Colgate Energy Partners III MidCo, LLC ( the “Colgate Unitholders”), pursuant to the Business Combination Agreement (the “Business Combination Agreement”), dated as of May 19, 2022. Pursuant to the Business Combination Agreement, OpCo merged with and into Colgate, with OpCo continuing as the surviving entity (the “Surviving Company”) in the Merger as a subsidiary of the Company. At the effective time of the Merger, all membership interests in OpCo issued and outstanding were converted into units in the Surviving Company equal to the number of shares of the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”) that were outstanding at such time, and all of the Colgate Unitholder’s membership interest in Colgate was exchanged for 269,300,000 shares of the Company’s Class C common stock, par value $0.0001 per share (“Class C Common Stock”) with underlying Surviving Company Units and $525 million in cash. The shares of Class C Common Stock issued to the Colgate Unitholders pursuant to the Business Combination Agreement represent a noncontrolling interest in the Company.

The following unaudited pro forma combined financial statements of the Company (which we refer to as the “pro forma combined financial statements”) have been prepared from the respective historical consolidated financial statements of Centennial and Colgate and have been adjusted to reflect the Merger. The Merger will be accounted for as a business combination using the acquisition method of accounting, with Centennial as the accounting acquirer. The pro forma combined financial statements have been prepared to reflect transaction accounting adjustments to Centennial’s historical financial information that management believes are factually supportable and that are expected to have a continuing impact on results of operations, with the exception of certain nonrecurring items incurred in connection with the Merger.

The unaudited pro forma combined balance sheet is presented as of June 30, 2022, giving effect to the Merger as if it had been completed on June 30, 2022. The unaudited pro forma combined statements of operations are presented for the year ended December 31, 2021, and for the six months ended June 30, 2022, giving effect to the Merger as if it had been completed on January 1, 2021.

The pro forma purchase price allocation is preliminary and is based upon estimates of the fair market values of the assets and liabilities of Colgate as of June 30, 2022, utilizing currently available information. Assumptions and estimates underlying the pro forma adjustments and preliminary purchase price allocations are described in the accompanying notes, which should be read in conjunction with the pro forma combined financial statements.

As of the date of this filing, the Company has not completed the necessary valuations of the Merger in order to arrive at the required final estimates of the fair value and the related allocations of purchase price, nor has it identified all adjustments necessary to conform Colgate’s accounting policies to those of the Company. A final determination of the fair value of Colgate’s assets and liabilities will be based on those that exist as of the Closing Date. The pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed. The final purchase price allocation will be performed subsequent to closing and may be materially different than that reflected herein.

The unaudited pro forma combined financial statements and related notes are presented to reflect the Merger for illustrative purposes only. If the Merger had occurred in the past, the operating results might have been materially different from those presented in the pro forma combined financial statements. The pro forma combined statements of operations should not be relied upon as an indication of operating results that would have been achieved if the Merger contemplated herein had taken place on the specified date. In addition, future results may vary significantly from the results reflected in the pro forma combined statements of operations and should not be relied on as an indication of the future results the Company will have after the completion of the Merger.

PERMIAN RESOURCES CORPORATION

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

As of June 30, 2022

(in thousands)


							Transaction Accounting Adjustments
	Historical											Pro forma
	Centennial			Colgate (a)								Combined
ASSETS
Current assets
Cash and cash equivalents	$	201,092		$	63,586		$	(264,678	)	(b	)	$	—
Accounts receivable, net		141,598			205,425			—					347,023
Prepaid and other current assets		7,189			52,563			—					59,752

Total current assets		349,879			321,574			(264,678	)				406,775
Property and Equipment
Oil and natural gas properties, successful efforts method
Unproved properties		984,264			272,208			688,522		(c	)		1,944,994
Proved properties		4,929,108			2,394,130			791,911		(c	)		8,115,149
Accumulated depreciation, depletion and amortization		(2,140,982	)		(431,830	)		431,830		(c	)		(2,140,982	)

Total oil and natural gas properties, net		3,772,390			2,234,508			1,912,263					7,919,161
Other property and equipment, net		13,167			666			—					13,833

Total property and equipment, net		3,785,557			2,235,174			1,912,263					7,932,994
Noncurrent assets
Operating lease right-of-use assets		54,934			17,070			203		(c	)		72,207
Other noncurrent assets		33,660			14,424			—					48,084

TOTAL ASSETS	$	4,224,030		$	2,588,242		$	1,647,788				$	8,460,060

LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	208,222		$	412,310		$	45,448		(d	)	$	697,980
								32,000		(e	)
Operating lease liabilities		21,124			2,035			—					23,159
Derivative Instruments		83,541			1,567			—					85,108
Other current liabilities		3,214			—			—					3,214

Total current liabilities		316,101			415,912			77,448					809,461
Noncurrent liabilities
Long-term debt, net		801,849			1,428,598			260,322		(b	)		2,414,034
								(76,735	)	(c	)
Asset retirement obligations		18,151			23,232			(6,834	)	(c	)		34,549
Deferred income taxes		50,293			—			—					50,293
Operating lease liabilities		35,724			15,238			—					50,962
Other noncurrent liabilities		32,344			353			—					32,697

Total liabilities		1,254,462			1,883,333			254,201					3,391,996
Shareholders’ equity
Common stock
Class A		30			—			—					30
Class C		—			—			27		(f	)		27
Additional paid-in capital		3,024,236			—			(286,373	)	(f	)		2,737,863
Capital contributions		—			812,377			(812,377	)	(c	)		—
Capital distributions		—			(505,014	)		505,014		(c	)		—
Retained earnings (accumulated deficit)		(54,698	)		397,546			(397,546	)	(c	)		(132,146	)
								(45,448	)	(d	)
								(32,000	)	(e	)

Total shareholders’ equity		2,969,568			704,909			(1,068,703	)				2,605,774
Noncontrolling interest		—			—			2,462,290		(f	)		2,462,290

Total equity		2,969,568			704,909			1,393,587					5,068,064

TOTAL LIABILITIES AND EQUITY	$	4,224,030		$	2,588,242		$	1,647,788				$	8,460,060

The accompanying notes are an integral part of the pro forma combined financial statements

PERMIAN RESOURCES CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2022

(in thousands, except per share data)


							Transaction Accounting Adjustments					Pro forma Combined
	Historical
	Centennial			Colgate
Operating revenues
Oil and gas sales	$	819,931		$	792,924		$	—				$	1,612,855
Operating expenses
Lease operating expenses		57,634			73,614			—					131,248
Severance and ad valorem taxes		59,746			44,460			—					104,206
Gathering, processing and transportation expenses		47,647			8,808			—					56,455
Depreciation, depletion and amortization		153,126			121,014			(944	)	(g	)		273,196
Impairment and abandonment expense		3,133			—			—					3,133
Exploration and other expenses		4,261			491			—					4,752
General and administrative expenses		40,550			11,050			14,328		(o	)		65,928
Merger and integration expense		5,685			—			(5,685	)	(d	)		—
Profit sharing by affiliates		—			22,346			(22,346	)	(h	)		—

Total operating expenses		371,782			281,783			(14,647	)				638,918

Net gain (loss) on sale of long-lived assets		(1,324	)		53,718			(53,718	)	(i	)		(1,324	)

Income (loss) from operations		446,825			564,859			(39,071	)				972,613
Other income (expense)
Interest expense		(27,480	)		(37,992	)		(12,964	)	(j	)		(78,436	)
Net gain (loss) on derivative instruments		(163,657	)		(409,491	)		—					(573,148	)
Other income (expense)		203			10			—					213

Total other income (expense)		(190,934	)		(447,473	)		(12,964	)				(651,371	)

Income (loss) before income taxes		255,891			117,386			(52,035	)				321,242
Income tax (expense) benefit		(48,263	)		—			6,046		(k	)		(42,217	)

Net income (loss)		207,628			117,386			(45,989	)				279,025
Less: Net income (loss) attributable to noncontrolling interest		—			—			156,074		(l	)		156,074

Net income (loss) attributable to Class A Common Stock	$	207,628		$	117,386		$	(202,063	)			$	122,951

Income (loss) per share of Class A Common Stock:
Basic	$	0.73										$	0.43

Diluted	$	0.66										$	0.39

Weighted average common shares outstanding:
Basic		284,922						1,057		(o	)		285,979
Diluted		319,893						1,667		(m	)		321,560

The accompanying notes are an integral part of the pro forma combined financial statements

PERMIAN RESOURCES CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2021

(in thousands, except per share data)


							Colgate Acquisitions Pro Forma (n)			Transaction Accounting Adjustments					Pro forma Combined
	Historical
	Centennial			Colgate
Operating revenues
Oil and gas sales	$	1,029,892		$	699,651			168,035		$	—				$	1,897,578
Operating expenses
Lease operating expenses		106,419			80,067			40,755			—					227,241
Severance and ad valorem taxes		67,140			40,271			10,306			—					117,717
Gathering, processing and transportation expenses		85,896			9,566			—			—					95,462
Depreciation, depletion and amortization		289,122			134,481			48,201			55,443		(g	)		527,247
Impairment and abandonment expense		32,511			590			—			—					33,101
Exploration and other expenses		7,883			5,124			—			—					13,007
General and administrative expenses		110,454			15,336			3,141			53,494		(e	)		211,318
											28,893		(o	)
Merger and integration expense		—			—			—			51,133		(d	)		51,133
Profit sharing by affiliates		—			3,330			—			(3,330	)	(h	)		—

Total operating expenses		699,425			288,765			102,403			185,633					1,276,226

Net gain (loss) on sale of long-lived assets		34,168			4,824			—			(4,824	)	(i	)		34,168
Proceeds from terminated sale of assets		5,983			—			—			—					5,983

Income (loss) from operations		370,618			415,710			65,632			(190,457	)				661,503
Other income (expense)
Interest expense		(61,288	)		(43,722	)		(195	)		(67,028	)	(j	)		(172,233	)
Gain (loss) on extinguishment of debt		(22,156	)		—			—			—					(22,156	)
Net gain (loss) on derivative instruments		(148,825	)		(390,489	)		(77,605	)		—					(616,919	)
Other income (expense)		395			191			(21	)		—					565

Total other income (expense)		(231,874	)		(434,020	)		(77,821	)		(67,028	)				(810,743	)

Income (loss) before income taxes		138,744			(18,310	)		(12,189	)		(257,485	)				(149,240	)
Income tax (expense) benefit		(569	)		—			330			31,336		(k	)		31,097

Net income (loss)		138,175			(18,310	)		(11,859	)		(226,149	)				(118,143	)
Less: Net income (loss) attributable to noncontrolling interest		—			—			—			(72,508	)	(l	)		(72,508	)

Net income (loss) attributable to Class A Common Stock	$	138,175		$	(18,310	)	$	(11,859	)	$	(153,641	)			$	(45,635	)

Income (loss) per share of Class A Common Stock:
Basic	$	0.49													$	(0.16	)

Diluted	$	0.46													$	(0.16	)

Weighted average common shares outstanding:
Basic		280,871									—					280,871
Diluted		310,170									(29,299	)	(m	)		280,871

The accompanying notes are an integral part of the pro forma combined financial statements

NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

The pro forma combined financial statements were prepared utilizing the historical financial information of Centennial and Colgate in accordance with Article 11 of the Security and Exchange Commission’s (“SEC”) Regulation S-X. Certain transaction accounting adjustments have been computed in order to show the effects of the Merger on the combined historical financial information of Centennial and Colgate. These adjustments are preliminary and based upon the Merger Consideration and management’s estimates of fair value of the assets acquired and liabilities assumed. The pro forma combined balance sheet assumes the Merger occurred on June 30, 2022. The pro forma combined statements of operations assumes the Merger occurred on January 1, 2021.

The pro forma combined financial statements reflect pro forma adjustments that are described in the accompanying notes and are based on currently available information. The pro forma combined financial statements do not represent what the combined business’ financial position or results of operations would have been if the Merger had actually occurred on the dates indicated, nor are they indicative of future financial position or results of operations. Actual results may differ materially from the assumptions and estimates reflected in these pro forma combined financial statements.

Note 2 - Preliminary Purchase Price Allocation

The Merger will be accounted for as a business combination using the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations, with Centennial being identified as the accounting acquirer. The allocation of the preliminary estimated purchase price with respect to the Merger is based upon management’s estimates and assumptions related to the fair value of assets acquired and liabilities assumed as of June 30, 2022 using currently available information. As the pro forma combined financial statements have been prepared based on these preliminary estimates, the final purchase price allocation may be materially different from the pro forma amounts included herein.

Adjustments to the estimated amounts or recognition of additional assets acquired or liabilities assumed may occur as additional information is obtained and as more detailed analyses are completed after the Closing Date. The purchase price allocation will be finalized as soon as reasonably practicable after the Closing Date.

The preliminary purchase price allocation is subject to change due to several factors, including, but not limited to:

•

Changes in the estimated fair value of the identifiable assets acquired and liabilities assumed as of the Closing Date, which could result from changes in future oil and gas commodity prices, reserve estimates, discount rates, cost assumptions and other factors; and/or

•

Changes to the tax basis of Colgate’s assets and liabilities as of the Closing Date.

The following table presents the Merger Consideration and preliminary purchase price allocation of the assets acquired and liabilities assumed in the Merger:


(in thousands, expect per share amounts)	Merger Consideration
Cash Consideration	$	525,000
Share Consideration
Shares of Class C Common Stock issued to Colgate Unitholders		269,300
Centennial Common Stock price on September 1, 2022	$	8.08

Total Share Consideration	$	2,175,944

Total Merger Consideration	$	2,700,944


(in thousands)	Preliminary Purchase Price Allocation
Fair value of assets acquired:
Cash and cash equivalents	$	63,586
Accounts receivable, net		205,425
Prepaid and other current assets		6,017
Derivative instruments		60,970
Unproved oil and natural gas properties		960,730
Proved oil and natural gas properties		3,186,041
Other property and equipment		666

Total assets acquired	$	4,483,435

Fair value of liabilities assumed:
Accounts payable and accrued expenses	$	412,310
Derivative Instruments		1,920
Long-term debt, net		1,351,863
Asset retirement obligations		16,398

Total liabilities assumed	$	1,782,491

Net assets acquired	$	2,700,944

Note 3 - Preliminary Accounting and Pro forma Adjustments

The following adjustments included in the column labeled “Transaction Accounting Adjustments” have been made to the accompanying unaudited pro forma financial statements:

(a)

Certain reclassifications have been made to adjust and conform Colgate’s historical financial information to Centennial’s financial statement classification as follows:

•

reclassification of $46.6 million from derivative instruments to prepaid and other current assets;

•

reclassification of $17.1 million from other property and equipment, net to operating lease right-of-use assets;

•

reclassification of $2.0 million from accounts payable and accrued expenses to operating lease liabilities; and

•

reclassification of $15.2 million from asset retirement obligations to operating lease liabilities.

(b)

Reflects the Cash Consideration of $525 million paid to Colgate Unitholders consisting of:

•

cash and cash equivalents of $264.7 million; and

•

borrowings of $260.3 million under the Company’s credit facility.

(c)

Reflects the preliminary purchase price allocation to adjust Colgate’s assets acquired and liabilities assumed to their estimated fair values as follows:

•

an increase in unproved and proved oil and natural gas properties of $688.5 million and $791.9 million, respectively, to reflect their estimated fair values;

•

the elimination of Colgate’s historical accumulated depreciation, depletion, and amortization (“DD&A”) balances of $431.8 million;

•

an increase to operating lease right-of-use assets to reflect the value of the underlying leases as if they were executed as of the balance sheet date;

•

a decrease of $76.7 million to long-term debt to reflect Colgate’s outstanding Senior Notes at their estimated fair value;

•

a decrease of $6.8 million to reflect Colgate’s asset retirement obligations at their estimated fair value; and

•

the elimination of Colgate’s historical equity balances in accordance with the acquisition method of accounting.

(d)

Represents total estimated nonrecurring transaction costs of $51.1 million that are expected to be incurred related to the Merger including, among others, advisory, legal, accounting and other professional fees. As of June 30, 2022, actual transaction costs of $5.7 million had been incurred and were thereby included in the historical financial statements of Centennial. Therefore, $45.4 million of estimated transaction costs were incrementally reflected in the pro forma balance sheet as of June 30, 2022, as an increase to Accounts payable and accrued expenses. However, the $5.7 million of actual transaction costs incurred were eliminated from the combined statement of operations for the six months ended June 30, 2022, to give effect to the Merger as if it had been completed on January 1, 2021.

(e)

Reflects i) the estimated nonrecurring expense of $32.0 million associated with expected cash payments for severance and associated benefits to all employees who are not continuing employment with the Company and ii) $21.5 million for the estimated stock compensation expense associated with the accelerated vesting of equity awards for Centennial’s Chief Executive Officer and General Counsel, which is expected to be incurred when those executives cease to serve in those roles with the Surviving Company.

All other employees of both Centennial and Colgate are parties to certain employment agreements that would entitle each employee to certain benefits in the event of a change in control and subsequent termination due to the Merger. This could result in additional material expenses, primarily related to acceleration of equity awards; however, at this time, employment decisions around the organization of the Surviving Company have not yet been finalized. Due to this uncertainty, an estimate of additional termination costs cannot be made nor has it been included in these pro forma combined financial statements.

(f)

Reflects the issuance of 269.3 million shares of Class C Common Stock for the Share Consideration to Colgate Unitholders including underlying OpCo Units. The issuance of these units creates a noncontrolling interest in the Company, which is equal to 48.6% of the Company’s Common Stock issued and outstanding as of June 30, 2022.

(g)

Reflects pro forma DD&A expense calculated in accordance with the successful efforts method of accounting for oil and gas properties utilizing the combined companies’ production, estimated proved reserves and the preliminary estimated fair value of oil and natural gas properties as follows:

•

an increase in DD&A expense of $0.9 million in the pro forma combined statement of operations for the six months ended June 30, 2022 consisting of (i) the elimination of $121.0 million of Colgate’s historical DD&A expense, and (ii) pro forma DD&A expense for the combined companies, of $120.1 million for the first half of 2022; and

•

an increase in DD&A expense of $55.4 million in the pro forma combined statement of operations for the year ended December 31, 2021 consisting of (i) the elimination of $134.5 million of Colgate’s historical DD&A expense, (ii) the elimination of $48.2 million of the Colgate Acquisitions’ historical DD&A expense, and (iii) pro forma DD&A expense for the combined companies of $238.1 million for the year ended December 31, 2021.

(h)

Colgate’s historical profit sharing by affiliates expense represents cash payments made directly by affiliates of Colgate to members of its management team for profit interests that they were granted and now own at the CEP III Holdings, LLC and affiliated entities. These payments are not made directly by Colgate and in the future will not be made by the Surviving Company. The final payment related to the profit sharing by affiliates was triggered by the shareholder approval of the Merger that occurred on August 29, 2022. The associated expense was incurred and recorded by Colgate prior to the closing of the Merger. Therefore, $3.3 million and $22.3 million for the year end December 31, 2021 and six months ended June 30, 2022, respectively, were eliminated from the statements of operations as these payments would not have been incurred giving effect to the Merger as if it had been completed on January 1, 2021.

(i)

Reflects the elimination of Colgate’s historical gain on sale of long-lived assets that would not have been incurred giving effect to the Merger as if it had been completed on January 1, 2021.

(j)

Reflects pro forma interest expense resulting from i) additional borrowings under the Company’s credit facility for the Cash Consideration paid to Colgate Unitholders, ii) the assumption of Colgate’s borrowing outstanding under their existing facility as of the Closing Date, and iii) the adjustment to Colgate’s Senior Notes to reflect their estimated fair value, which in aggregate resulted in the following adjustments:

•

an increase in interest expense of $13.0 million in the pro forma combined statement of operations for the six months ended June 30, 2022 consisting of (i) the elimination of $38.0 million of Colgate’s historical interest expense, (ii) pro forma interest expense of $38.1 million for the Senior Notes reflected at their fair value, (iii) pro forma interest expense of $14.5 million for additional borrowings under the credit facility, and (iv) the elimination of $1.6 million of Centennial’s interest expense related to a commitment fee that would have been expensed on January 1, 2021 given the assumed date of the Merger; and

•

an increase in interest expense of $67.0 million in the pro forma combined statement of operations for the year ended December 31, 2021 consisting of (i) the elimination of $43.9 million of Colgate’s and Luxe’s historical interest expense, (ii) pro forma interest expense of $76.8 million for the Senior Notes reflected at their fair value, (iii) pro forma interest expense of $29.1 million for additional borrowings under the credit facility, and (iv) pro forma interest expense of $5.0 million related to a commitment fee paid by Centennial in conjunction with the Merger.

Pro forma interest expense for the additional borrowings under the Company’s credit facility was calculated using the effective interest rate under the Company’s credit facility of 3.7%. The Company’s credit facility interest rate is based on a market-based benchmark interest rate plus an applicable margin that is dependent on the percentage of the borrowing base utilized. As a result, the Company’s credit facility interest rate is subject to market fluctuations.

The impact on net income (loss) attributable to Class A Common Stock of a 0.125% increase or decrease in the interest rate would be approximately $0.4 million for the year ended December 31, 2021 and approximately $0.2 million for the six months ended June 30, 2022.

(k)

Reflects the income tax effects of the transaction accounting adjustments and the Colgate Acquisitions pro forma adjustments, where presented (which have been reduced by the corresponding net loss attributable to noncontrolling interest that is not taxable to the c-corporation) at the blended federal and state statutory tax rate of 22.6%, for the year ended December 31, 2021 and six months ended June 30, 2022. The blended tax rate of 22.6% is calculated at the federal statutory rate of 21% plus the Company’s state-apportioned statutory rate of 1.6%.

(l)

Reflects net income (loss) attributable to noncontrolling interest owners discussed in item (f) above, which is not subject to U.S. federal or state income tax within the c-corporation.

(m)

Considers the effect of potentially dilutive securities from (i) the Class C Common Stock issued for Merger Consideration using the “if-converted” method; and (ii) unvested equity-based restricted stock and performance stock units granted in connection with the Merger (see item (o) below for more details on these grants) using the treasury stock method. For the year ended December 31, 2021, the pro forma combined statement of operations reflects an estimated pro forma net loss, and therefore all potentially dilutive securities are anti-dilutive and excluded from the calculation of diluted earnings per share.

(n)

Represents pro forma adjustments related to certain historical acquisitions by Colgate that were determined to be material to the pro forma combined financial statements. Refer to the Note 4 for further information.

(o)

Reflects the expected incremental stock compensation expense related to equity-based restricted stock and performance stock units granted to employees in connection with and on the Closing Date. As a portion of these awards vest one year after issuance, 1,057,000 shares were added to the weighted average shares outstanding for the six months ended June 30, 2022.

Note 4 - Colgate Historical Acquisitions

On June 1, 2021, Colgate acquired the assets owned by Luxe Energy, LLC (“Luxe”) through an all stock transaction (the “Luxe Acquisition”). This acquisition was accounted for as a business combination using the acquisition method and Colgate recognized the acquired assets and liabilities at their estimated fair value at the closing date. On July 29, 2021, Colgate additionally acquired certain proved and unproved oil and gas properties owned by Occidental Petroleum (the “Oxy Acquisition” and together with the Luxe Acquisition, the “Colgate Acquisitions”). The Oxy Acquisition was accounted for as an asset acquisition, and Colgate therefore recognized the acquired assets and liabilities based on the purchase price of the oil and gas properties. The Colgate Acquisitions were deemed to be material to an investor’s understanding of Colgate’s business that is being acquired in the Merger, and they have therefore been included in the pro forma combined financial statements.

The financial impact of the net assets acquired in the Colgate Acquisitions is included in Colgate’s statements of operations following the Luxe Acquisition closing date of June 1, 2021 and the Oxy Acquisition closing date of July 29, 2021, and both acquisitions were included in the fair value of assets acquired in the Merger. The following pro forma financial information represents the results of (i) the Luxe Acquisition from January 1, 2021 through the June 1, 2021 Luxe Acquisition closing date and (ii) the results of the Oxy Acquisition from January 1, 2021 through the July 29, 2021 Oxy Acquisition closing date. The financial information for the Luxe Acquisition below is derived from Luxe’s unaudited interim financial information for the three months ended March 31, 2021 and estimates of the revenues and expenses attributable to the assets acquired in the Luxe Acquisition for the period from April 1, 2021 to May 31, 2021. The financial information for the Oxy Acquisition below is derived from unaudited interim financial information for the six months ended June 30, 2021 and estimates of the revenues and expenses attributable to the assets acquired in the Oxy Acquisition for the period from July 1, 2021 to July 29, 2021. This information is based on historical results of operations, adjusted for certain estimated accounting adjustments, and certain assumptions that management believes are reasonable, and does not represent the actual results of operations if the transactions would have occurred on January 1, 2021, nor is it necessarily indicative of future results.


	Luxe Acquisition (January 1, 2021 to June 1, 2021)			Oxy Acquisition (January 1, 2021 to July 29, 2021)		Pro Forma Adjustments					Colgate Acquisitions Pro Forma
Crude oil sales	$	51,154		$	74,026	$	—				$	125,180
Natural gas sales		13,273			6,864		—					20,137
Natural gas liquid sales		13,855			8,876		—					22,731
Income (loss) from midstream operations		(13	)		—		—					(13	)

Total Revenue		78,269			89,766		—					168,035
Lease operating expenses		13,372			27,383		—					40,755
Production and ad valorem taxes		3,513			6,793		—					10,306
Depreciation, depletion, amortization and accretion		33,293			—		14,908		(a	)		48,201
General and administrative expenses		3,141			—		—					3,141
Other		1,107			—		(1,107	)	(b	)		—

Total operating expense		54,426			34,176		13,801					102,403

Operating Income		23,843			55,590		(13,801	)				65,632
Interest expense and other		(2,460	)		—		2,265		(c	)		(195	)
Loss on commodity derivatives		(77,605	)		—		—					(77,605	)
Other income (expense)		(21	)		—							(21	)

Total other loss		(80,086	)		—		2,265					(77,821	)

Income tax benefit (expense)		330			—		—					330

Net Income (loss)	$	(55,913	)	$	55,590	$	(11,536	)			$	(11,859	)

The following adjustments included in the column labeled “Pro Forma Adjustments” have been made to the unaudited pro forma financial statements immediately above:

(a)

Reflects pro forma DD&A expense calculated in accordance with the successful efforts method of accounting for oil and gas properties utilizing estimated proved reserves and management’s estimated fair value of oil and natural gas properties acquired resulting in an increase in DD&A expense of $14.9 million consisting of: (i) the elimination of $33.3 million of Luxe’s historical DD&A expense and (ii) pro forma DD&A expense of $48.2 million.

(b)

Reflects the elimination of Luxe’s historical bad debt expense that would not have been incurred giving effect to the Luxe Acquisition as if it had been completed on January 1, 2021.

(c)

Reflects the elimination of $2.3 million in interest expense recorded during the three months ended March 31, 2021 by Luxe related to a note purchase agreement which was paid off by Luxe in connection with the closing of the Luxe Acquisition.

Note 5 - Supplemental Pro Forma Information About Oil and Natural Gas Producing Activities

The following tables present estimated pro forma combined proved oil and gas reserve information as of and for the year ended December 31, 2021. The amounts included below represent the respective estimates made as of December 31, 2021 by Centennial and Colgate while they were separate companies. These estimates have not been updated for changes in development plans or other factors, which may have occurred subsequent to December 31, 2021, or the Merger. This pro forma information has been prepared for illustrative purposes and is not intended to be a projection of future results. Future results may vary significantly from the results presented.

Estimated Quantities of Proved Oil and Gas Reserves

The following tables present the estimated pro forma combined net estimated proved developed and undeveloped oil and gas reserves information as of December 31, 2021, along with a summary of changes in quantities of proved oil and gas reserves:


	Crude Oil (MBbls)
	Centennial Historical			Colgate Historical⁽¹⁾			Pro Forma Combined
Total proved reserves:
Balance - December 31, 2020		150,492			82,828			233,320
Extensions and discoveries		19,405			7,836			27,241
Revisions to previous estimates		(1,948	)		(19,816	)		(21,764	)
Purchases of reserves in place		—			62,320			62,320
Divestitures of reserves in place		(2,795	)		(1,563	)		(4,358	)
Production		(11,701	)		(7,403	)		(19,104	)

Balance - December 31, 2021		153,453			124,202			277,655

Proved developed reserves:
December 31, 2020		70,716			22,909			93,625
December 31, 2021		77,973			62,906			140,879
Proved undeveloped reserves:
December 31, 2020		79,776			59,919			139,695
December 31, 2021		75,480			61,296			136,776


	Natural Gas (MMcf)
	Centennial Historical			Colgate Historical⁽¹⁾			Pro Forma Combined
Total proved reserves:
Balance - December 31, 2020		527,787			206,757			734,544
Extensions and discoveries		55,820			19,063			74,883
Revisions to previous estimates		40,697			(30,611	)		10,086
Purchases of reserves in place		—			263,515			263,515
Divestitures of reserves in place		(6,558	)		(3,311	)		(9,869	)
Production		(40,741	)		(26,011	)		(66,752	)

Balance - December 31, 2021		577,005			429,402			1,006,407

Proved developed reserves:
December 31, 2020		279,556			73,193			352,749
December 31, 2021		326,223			262,080			588,303
Proved undeveloped reserves:
December 31, 2020		248,231			133,564			381,795
December 31, 2021		250,782			167,322			418,104


	Natural Gas Liquids (MBbls)
	Centennial Historical			Colgate Historical⁽¹⁾			Pro Forma Combined
Total proved reserves:
Balance - December 31, 2020		60,445			26,554			86,999
Extensions and discoveries		6,242			3,131			9,373
Revisions to previous estimates		(6,703	)		(4,082	)		(10,785	)
Purchases of reserves in place		—			31,498			31,498
Divestitures of reserves in place		(649	)		(505	)		(1,154	)
Production		(3,752	)		(3,181	)		(6,933	)

Balance - December 31, 2021		55,583			53,415			108,998

Proved developed reserves:
December 31, 2020		31,672			9,373			41,045
December 31, 2021		30,318			31,836			62,154
Proved undeveloped reserves:
December 31, 2020		28,773			17,181			45,954
December 31, 2021		25,265			21,579			46,844

⁽¹⁾

Reserves acquired as part of the Colgate Acquisitions discussed in Note 4 are included within Colgate’s purchases of reserves in place. If the Colgate Acquisitions had been completed on January 1, 2021, a portion of these reserves would have been included in the December 31, 2020 reserve balance. No adjustments have been made to Colgate’s reserve quantities as this has no impact on Colgate’s reserve balances as of December 31, 2021.

Standardized Measure of Discounted Future Net Cash Flows

The pro forma combined standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves as of December 31, 2021 is as follows:


	Year Ended December 31, 2021
(in thousands)	Centennial Historical			Colgate Historical			Pro Forma Combined
Future cash inflows	$	13,224,260		$	10,693,423		$	23,917,683
Future development costs		(984,827	)		(1,167,130	)	$	(2,151,957	)
Future production costs		(4,404,841	)		(3,448,976	)	$	(7,853,817	)
Future income tax expenses		(1,162,657	)		(49,967	)	$	(1,212,624	)

Future net cash flows		6,671,935			6,027,350		$	12,699,285
10% discount to reflect timing of cash flows		(3,275,615	)		(2,996,753	)	$	(6,272,368	)

Standardized measure of discounted future net cash flows	$	3,396,320		$	3,030,597		$	6,426,917

The changes in the pro forma combined standardized measure of discounted future net cash flows relating to proved reserves for the year ended December 31, 2021 are as follows:


	Year Ended December 31, 2021
(in thousands)	Centennial Historical			Colgate Historical⁽¹⁾			Pro Forma Combined
Standardized measure of discounted future net cash flows, beginning of period	$	1,184,675		$	671,366		$	1,856,041
Sales of oil, natural gas and NGLs, net of production costs		(770,437	)		(567,785	)		(1,338,222	)
Purchase of minerals in place		—			1,499,825			1,499,825
Divestiture of minerals in place		(34,334	)		(33,406	)		(67,740	)
Extensions and discoveries, net of future development costs		445,256			247,599			692,855
Previously estimated development costs incurred during the period		216,526			137,161			353,687
Net change in prices and production costs		2,859,463			1,063,818			3,923,281
Change in estimated future development costs		(3,747	)		(17,604	)		(21,351	)
Revisions of previous quantity estimates		(29,946	)		(32,120	)		(62,066	)
Accretion of discount		118,914			67,914			186,828
Net change in income taxes		(476,681	)		(16,769	)		(493,450	)
Net change in timing of production and other		(113,369	)		10,598			(102,771	)

Standardized measure of discounted future net cash flows, end of period	$	3,396,320		$	3,030,597		$	6,426,917

⁽¹⁾

Cash flows attributable to the Colgate Acquisitions discussed in Note 4 are included within Colgate’s purchases of minerals in place. If the Colgate Acquisitions had been completed on January 1, 2021, a portion of these cash flows would have been included in the standardized measure of discounted future net cash flows as of December 31, 2020. No adjustments have been made to Colgate’s standardized measure of discounted future net cash flows as this has no impact on Colgate’s balance as of December 31, 2021.