Jagged Peak Energy Inc. (Form: 10-Q, Received: 05/12/2017 06:13:07)

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

(Do not check if a smaller reporting company)

Smaller reporting company o

Emerging growth company x

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2017

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

Commission File Number: 001-37995

Jagged Peak Energy Inc.

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)				81-3943703 (IRS Employer Identification Number)



1125 17th Street, Suite 2400 Denver, Colorado (Address of principal executive offices)				80202 (Zip Code)

(720) 215-3700

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

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. x

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

The registrant had 212,930,655 shares of common stock outstanding at May 5, 2017 .

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TABLE OF CONTENTS



Glossary of Oil and Natural Gas Terms		1
Cautionary Statement Regarding Forward-Looking Statements		2

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Consolidated and Combined Balance Sheets as of March 31, 2017 and December 31, 2016	4

	Consolidated and Combined Statements of Operations for the Three Months Ended March 31, 2017 and 2016	5

	Consolidated and Combined Statement of Changes in Equity for the Three Months Ended March 31, 2017	6

	Consolidated and Combined Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016	7

	Notes to Consolidated and Combined Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4.	Controls and Procedures	32

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	34


Signatures		35
Exhibit Index		36

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GLOSSARY OF OIL AND NATURAL GAS TERMS

The following are abbreviations and definitions of certain terms used in this document, which are commonly used in the oil and natural gas industry:

Bbl . One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in reference to crude oil, condensate or NGLs.

Boe . One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil. This is an energy content correlation and does not reflect a value or price relationship between the commodities.

Boe/d . One Boe per day.

Completion . The installation of permanent equipment for production of oil, natural gas or NGLs or, in the case of a dry well, reporting to the appropriate authority that the well has been abandoned.

Differential . An adjustment to the price of oil or natural gas from an established spot market price to reflect differences in the quality and/or location of oil or natural gas.

Gross acres or gross wells . The total acres or wells, as the case may be, in which a working interest is owned.

MBbl . One thousand barrels of crude oil, condensate or NGLs.

MBoe . One thousand Boe.

Mcf . One thousand cubic feet of natural gas.

Mcf/d . One Mcf per day.

MMBbl . One million barrels of crude oil, condensate or NGLs.

MMcf . One million cubic feet of natural gas.

MMcf/d. One MMcf per day.

Net acres or net wells . The sum of the fractional working interest owned in gross acres or gross wells, as the case may be. For example, an owner who has 50% interest in 100 acres owns 50 net acres. Likewise, an owner who has a 50% working interest in a well has a 0.50 net well.

NGL(s) . Natural gas liquid(s). Hydrocarbons found in natural gas which may be extracted as liquefied petroleum gas and natural gasoline.

NYMEX . The New York Mercantile Exchange.

Proved properties . Properties with proved reserves.

Realized price . The cash market price less all expected quality, transportation and demand adjustments.

Spud . Commenced drilling operations on an identified location.

Unproved properties . Lease acreage with no proved reserves.

Working interest . The right granted to the lessee of a property to develop and produce and own oil, natural gas or other minerals. The working interest owners bear the exploration, development and operating costs on either a cash, penalty or carried basis.

Workover . Operations on a producing well to restore or increase production.

WTI . West Texas Intermediate. A market index price for oil that is widely quoted by financial markets.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information in this Form 10-Q includes “forward-looking statements.” All statements, other than statements of historical fact included in or incorporated by reference into this Quarterly Report on Form 10-Q, 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 report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, and in “Item 1A. Risk Factors” of this Quarterly Report.

Forward-looking statements include statements about:


•	our business strategy;


•	our reserves;


•	our drilling prospects, inventories, projects and programs;


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


•	our ability to convert PUDs to proved producing properties within five years of their initial proved booking date:


•	our financial strategy, liquidity and capital required for our drilling program, including our assessment of the sufficiency of our liquidity to fund our capital program and the amount and allocation of our capital program in 2017;


•	our expected pricing and realized oil, natural gas and NGL prices;


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


•	our future drilling plans, including the number of wells anticipated to be spud in 2017 and the number of rigs and fracturing fleets anticipated to be in operation in 2017, and anticipated well economics;


•	our competition and government regulations;


•	our ability to obtain permits and governmental approvals;


•	our pending legal or environmental matters;


•	our marketing of oil, natural gas and NGLs;


•	our leasehold or business acquisitions;


•	our costs of developing our properties, including our anticipated lease operating expenses for the second quarter of 2017;


•	our hedging strategy and results;


•	general economic conditions;


•	credit markets;


•	uncertainty regarding our future operating results; and


•	our plans, objectives, expectations and intentions contained in this annual report that are not historical.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of oil, natural gas and NGLs. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, and in “Item 1A. Risk Factors” of this Quarterly Report.

Reserve engineering is a process of estimating underground accumulations of hydrocarbons that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may

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justify revisions of estimates that were made previously. If significant, such revisions could impact our strategy and 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 Form 10-Q 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 Form 10-Q 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 Quarterly Report on Form 10-Q.

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PART I—FINANCIAL INFORMATION


Item 1.	Financial Statements

JAGGED PEAK ENERGY INC.

CONSOLIDATED AND COMBINED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)



	March 31,			December 31,
	2017			2016
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	198,809		$	11,727
Accounts receivable	16,124			10,327
Derivative instruments	4,858			—
Other current assets	1,298			3,412
Total current assets	221,089			25,466
PROPERTY AND EQUIPMENT
Oil and natural gas properties, successful efforts method	653,300			531,121
Accumulated depletion	(71,194		)	(57,529		)
Total oil and gas properties, net	582,106			473,592
Other property and equipment, net	3,092			3,001
Total property and equipment, net	585,198			476,593
OTHER NONCURRENT ASSETS
Unamortized debt issuance costs	2,386			1,503
Derivative instruments	5,691			—
Other assets	117			14,830
Total noncurrent assets	8,194			16,333
TOTAL ASSETS	$	814,481		$	518,392
LIABILITIES AND STOCKHOLDERS’ / MEMBERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	7,939		$	7,629
Accrued liabilities	59,826			39,225
Derivative instruments	4,601			9,567
Total current liabilities	72,366			56,421
LONG-TERM LIABILITIES
Senior secured revolving credit facility	—			132,000
Derivative instruments	689			3,287
Asset retirement obligations	500			448
Deferred income taxes	89,368			—
Other long-term liabilities	84			124
Total long-term liabilities	90,641			135,859
Commitments and contingencies
STOCKHOLDERS’ / MEMBERS’ EQUITY
Members' equity	—			346,098
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued at March 31, 2017; no shares authorized or issued at December 31, 2016	—			—
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 212,937,746 shares issued at March 31, 2017; no shares authorized or issued at December 31, 2016	2,129			—
Additional paid-in capital	739,750			—
Accumulated deficit	(90,405		)	(19,986		)
Total stockholders’ / members’ equity	651,474			326,112
TOTAL LIABILITIES AND STOCKHOLDERS’ / MEMBERS’ EQUITY	$	814,481		$	518,392

The accompanying Notes are an integral part of these unaudited consolidated and combined financial statements.

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JAGGED PEAK ENERGY INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)



	Three Months Ended March 31,
	2017			2016
REVENUES
Oil sales	$	36,765		$	9,274
Natural gas sales	917			280
NGL sales	1,518			428
Other operating revenues	188			263
Total revenues	39,388			10,245
OPERATING EXPENSES
Lease operating expenses	1,610			1,796
Gathering and transportation expenses	392			150
Production and ad valorem taxes	2,640			701
Depletion, depreciation, amortization and accretion	14,062			8,712
Impairment of oil and natural gas properties and dry hole costs	7			246
General and administrative expenses (including equity-based compensation of $408,964 and $0 for the three months ended March 31, 2017 and 2016, respectively)	413,551			3,332
Other operating expenses	141			1,466
Total operating expenses	432,403			16,403
INCOME (LOSS) FROM OPERATIONS	(393,015		)	(6,158		)
OTHER INCOME (EXPENSE)
Gain (loss) on commodity derivatives	17,042			(1,059		)
Interest expense, net	(711		)	(233		)
Other, net	171			—
Total other income (expense)	16,502			(1,292		)
INCOME (LOSS) BEFORE INCOME TAX	(376,513		)	(7,450		)
Income tax expense (benefit)	89,368			—
NET INCOME (LOSS)	(465,881		)	(7,450		)
Less: Net loss attributable to Jagged Peak Energy LLC (predecessor)	(375,476		)	(7,450		)
NET INCOME (LOSS) ATTRIBUTABLE TO JAGGED PEAK ENERGY INC. STOCKHOLDERS	$	(90,405	)	$	—

Net income (loss) attributable to Jagged Peak Energy Inc. Stockholders per common share:
Basic	$	(0.42	)
Diluted	$	(0.42	)

Weighted-average common shares outstanding:
Basic	212,938
Diluted	212,938

The accompanying Notes are an integral part of these unaudited consolidated and combined financial statements.

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JAGGED PEAK ENERGY INC.

CONSOLIDATED AND COMBINED STATEMENT OF CHANGES IN EQUITY

(Unaudited)

(in thousands)



	Members' Equity			Common Stock			Additional Paid-in Capital		Accumulated Deficit			Total Stockholders' Equity / Members' Equity
	Members' Equity			Shares	Amount		Additional Paid-in Capital		Accumulated Deficit			Total Stockholders' Equity / Members' Equity
BALANCE AT DECEMBER 31, 2016	$	346,098		—	$	—	$	—	$	(19,986	)	$	326,112
Deemed contribution - incentive unit compensation	364,314			—	—		—		—			364,314
Net income (loss) for the period prior to the corporate reorganization	—			—	—		—		(375,476		)	(375,476		)
Balance prior to corporate reorganization and initial public offering	710,412			—	—		—		(395,462		)	314,950
Issuance of common stock in corporate reorganization	(710,412		)	184,605	1,846		313,104		395,462			—
Issuance of common stock in initial public offering, net of offering costs	—			28,333	283		396,708		—			396,991
Equity-based compensation	—			—	—		29,938		—			29,938
Net income (loss)	—			—	—		—		(90,405		)	(90,405		)
BALANCE AT MARCH 31, 2017	$	—		212,938	$	2,129	$	739,750	$	(90,405	)	$	651,474

The accompanying Notes are an integral part of these unaudited consolidated and combined financial statements.

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JAGGED PEAK ENERGY INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)



	Three Months Ended March 31,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(465,881	)	$	(7,450	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depletion, depreciation, amortization and accretion expense	14,062			8,712
Impairment of oil and natural gas properties and dry hole costs	7			246
Amortization of debt issuance costs	117			31
Deferred income taxes	89,368			—
Equity-based compensation	408,964			—
(Gain) loss on commodity derivatives	(17,042		)	1,059
Net cash receipts (payments) on settled derivatives	(1,071		)	—
Other	(39		)	(39		)
Change in operating assets and liabilities:
Accounts receivable and other current assets	(6,325		)	2,272
Other assets	—			10
Accounts payable and accrued liabilities	(459		)	223
Net cash provided by operating activities	21,701			5,064
CASH FLOWS FROM INVESTING ACTIVITIES
Leasehold and acquisition costs	(25,628		)	(16,989		)
Development of oil and natural gas properties	(74,293		)	(17,282		)
Other capital expenditures	(763		)	(677		)
Net cash used in investing activities	(100,684		)	(34,948		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock in initial public offering, net of underwriting fees	401,625			—
Proceeds from common units issued	—			16,600
Proceeds from credit facility	10,000			15,000
Repayment of credit facility	(142,000		)	—
Debt issuance costs	(1,000		)	(26		)
Costs relating to initial public offering	(2,560		)	—
Net cash provided by financing activities	266,065			31,574
NET CHANGE IN CASH AND CASH EQUIVALENTS	187,082			1,690
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	11,727			14,165
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	198,809		$	15,855
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid, net of capitalized interest	$	697		$	166
Cash paid for income taxes	—			—
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Accrued capital expenditures	$	58,518		$	23,237
Asset retirement obligations	40			147
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
Accrued offering costs	$	657		$	—

The accompanying Notes are an integral part of these unaudited consolidated and combined financial statements.

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JAGGED PEAK ENERGY INC.

Notes to Consolidated and Combined Financial Statements

(Unaudited)

Note 1—Organization, Operations and Basis of Presentation

Organization and Operations

Jagged Peak Energy Inc. (either individually or together with its subsidiaries, as the context requires, “Jagged Peak” or the “Company”) is a growth-oriented, independent oil and natural gas company focused on the acquisition and development of unconventional oil and associated liquids-rich natural gas reserves in the Southern Delaware Basin, a sub-basin of the Permian Basin of West Texas. The Company’s acreage is located on large, contiguous blocks in the adjacent counties of Winkler, Ward, Reeves and Pecos, with significant oil-in-place within multiple stacked hydrocarbon-bearing formations.

Corporate Reorganization and Initial Public Offering

Jagged Peak is a Delaware corporation formed in September 2016, as a wholly owned subsidiary of Jagged Peak Energy LLC (“JPE LLC”), a Delaware limited liability company formed in April 2013. JPE LLC was formed by an affiliate of Quantum Energy Partners (“Quantum”) and key members of Jagged Peak’s management team. Jagged Peak was formed to become the holding company of JPE LLC in connection with Jagged Peak’s initial public offering (the “IPO”).

Immediately prior to the IPO, all capital interests and management incentive units (“MIUs”) in JPE LLC were converted into a single class of units which were then converted into our common stock. Certain members of management and employees contributed common stock received upon the conversion of unvested or unallocated MIUs to JPE Management Holdings LLC, a limited liability company formed in connection with the IPO for the purpose of holding the unvested or unallocated common stock. Also immediately prior to the IPO, a corporate reorganization (the “corporate reorganization”) took place whereby Jagged Peak, initially formed as a subsidiary of JPE LLC, formed JPE Merger Sub LLC as a subsidiary. JPE LLC merged into JPE Merger Sub LLC, with JPE LLC as the surviving entity. As a result, JPE LLC became a wholly owned subsidiary of Jagged Peak. Prior to the corporate reorganization, Quantum owned 98.6% of the membership interests of JPE LLC. Following the corporate reorganization and IPO, Quantum owned 68.7% of the outstanding common stock of Jagged Peak. As all power and authority to control the core functions of Jagged Peak and JPE LLC were, and continue to be, controlled by Quantum, the corporate reorganization was treated as a reorganization of entities under common control and the results of JPE LLC have been consolidated and combined for all periods.

On January 27, 2017, the Company initiated its IPO of common stock to the public, and began trading on the New York Stock Exchange. During the IPO, the Company and selling stockholders sold 31,599,334 shares at $15.00 per share, raising $474.0 million of gross proceeds. Of the 31,599,334 shares issued to the public, 28,333,334 shares were sold by the Company, and 3,266,000 shares were sold by the selling stockholders. The gross proceeds of the IPO to the Company, based on the public offering price of $15.00 per share, were approximately $425.0 million , which resulted in net proceeds to the Company of $397.0 million after deducting expenses and underwriting discounts and commissions of approximately $28.0 million . The Company did not receive any proceeds from the sale of the shares by the selling stockholders. A portion of the proceeds from the IPO were used to repay the entire outstanding balance on JPE LLC’s credit facility of $142.0 million , as of the date the IPO proceeds were received. The remainder of the net proceeds from the IPO are being used to fund a portion of the Company’s 2017 capital expenditures program, and for other general corporate purposes.

Basis of Presentation

The accompanying unaudited consolidated and combined financial statements include the accounts of Jagged Peak and JPE LLC, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and should be read in conjunction with the financial statements, summary of significant accounting policies and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 , as amended (the “ 2016 Form 10-K”). Accordingly, certain disclosures required by GAAP and normally included in Annual Reports on Form 10-K have been condensed or omitted from this report; however, except as disclosed herein, there has been no material change in the information disclosed in the notes to consolidated financial statements included in the Company’s 2016 Form 10-K. All significant intercompany and intra-company balances and transactions have been eliminated.

It is the opinion of management that all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of interim financial information, have been included. The Company has no items of other comprehensive income or loss; therefore, its net income or loss is identical to its comprehensive income or loss. Operating results for the

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JAGGED PEAK ENERGY INC.

Notes to Consolidated and Combined Financial Statements

(Unaudited)

periods presented are not necessarily indicative of expected results for the full year because of the impact of fluctuations in prices received for oil, natural gas, and NGLs, natural production declines, the uncertainty of exploration and development drilling results, the fair value of derivative instruments, and other factors.

The unaudited consolidated and combined financial statements for periods prior to January 27, 2017 reflect the historical results of JPE LLC, other than the equity-based compensation expense and deferred tax expense, as further described in Notes 6 and 8, respectively.

Certain reclassifications have been made to prior period amounts to conform to the current presentation.

Note 2—Significant Accounting Policies and Related Matters

Significant Accounting Policies

The significant accounting policies followed by the Company are set forth in Note 2 to the Company’s consolidated financial statements in its 2016 Form 10-K, and are supplemented by the notes to the consolidated and combined financial statements in this Quarterly Report on Form 10-Q. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in these notes to our consolidated and combined financial statements.

Use of Estimates

In the course of preparing the consolidated and combined financial statements, management makes various assumptions, judgments and estimates to determine the reported amounts of assets, liabilities, revenue and expenses, and in the disclosures of commitments and contingencies. Changes in these assumptions, judgments and estimates will occur as a result of the passage of time and the occurrence of future events. Although management believes these estimates are reasonable, actual results could differ from these estimates.

Estimates made in preparing these consolidated and combined financial statements include, among other things, (1) estimates relating to certain oil and natural gas revenue and costs, (2) estimates of oil and natural gas reserve quantities, which impact depreciation, depletion and amortization and impairment calculations, (3) estimates of timing and costs used in calculating asset retirement obligations and impairment, (4) estimates used in developing fair value assumptions and estimates, and (5) estimates and assumptions used in the disclosure of commitments and contingencies. Changes in the assumptions could have a significant impact on results in future periods.

Oil and Natural Gas Properties

A summary of the Company’s oil and natural gas properties, net is as follows:



	March 31, 2017			December 31, 2016
	(in thousands)
Proved oil and natural gas properties	$	480,743		$	375,129
Unproved oil and natural gas properties	172,557			155,992
Total oil and natural gas properties	653,300			531,121
Less: Accumulated depletion	(71,194		)	(57,529		)
Total oil and natural gas properties, net	$	582,106		$	473,592

Capitalized leasehold costs attributable to proved properties are depleted using the units-of-production method based on proved reserves on a field basis. For the three months ended March 31, 2017 and 2016 , the Company recorded depletion for oil and natural gas properties of $13.7 million and $8.6 million , respectively.

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JAGGED PEAK ENERGY INC.

Notes to Consolidated and Combined Financial Statements

(Unaudited)

Equity-based Compensation

The Company recognizes compensation cost related to all equity-based awards in the financial statements based on their estimated grant-date fair value. The Company may grant various types of equity-based awards including stock options, restricted stock (including awards with service-based vesting and market condition-based vesting provisions) and restricted stock units. Service-based restricted stock and units are valued using the market price of Jagged Peak’s common stock on the grant date. The fair value of the market condition-based restricted stock units are based on the grant-date market value of the award utilizing a statistical analysis. Compensation cost is recognized ratably over the applicable vesting period, and is recognized in general and administrative expense on the consolidated and combined statements of operations. The Company has elected to account for forfeitures in compensation expense as they occur. See Note 6 for additional information regarding equity-based compensation.

Income Taxes

The Company is a subchapter C corporation and is subject to U.S. federal and state income taxes. Income taxes are accounted for under the asset and liability method. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating losses and tax credit carryforwards, using enacted tax rates in effect for the taxing jurisdiction in which the Company operates for the year in which those temporary differences are expected to be recovered or settled. The Company classifies all deferred tax assets and liabilities as noncurrent. The Company recognizes the financial statement effects of a tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination. Net deferred tax assets are then reduced by a valuation allowance if the Company believes it is more-likely-than-not such net deferred tax assets will not be realized.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new guidance will require a company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. In May 2016, the FASB issued ASU 2016-11, which rescinds the U.S. Securities and Exchange Commission (“SEC”) accounting guidance regarding the use of the entitlements method for recognition of natural gas revenues. The new standards are effective for the Company on January 1, 2018. Early adoption is permitted for fiscal years beginning after December 31, 2016. The standards can be adopted using either a full retrospective method or a modified retrospective method, as outlined in ASU 2014-09. The Company intends to adopt this standard on January 1, 2018, but has not yet selected a transition method. The Company does not believe the effect of adoption will be material to its financial statements because it follows the sales method of accounting for its oil, natural gas and NGL production, which is generally consistent with the new revenue recognition model. However, the Company anticipates the new standard will result in expanded disclosure requirements, although it cannot yet determine the extent of those disclosure requirements on the Company.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires all leases with a term greater than one year to be recognized on the balance sheet as lease assets and lease liabilities. This ASU retains a distinction between finance and operating leases concerning the recognition and presentation of the expense and payments related to leases in the statements of operations and cash flows. The new standard is effective for the Company on January 1, 2019. Although early adoption is permitted, the Company does not plan to early adopt the standard. The ASU requires the use of the modified retrospective approach, whereby lessees will be required to recognize and measure leases at the beginning of the earliest period presented. The Company is still in the process of evaluating the impact of this new standard; however, the Company believes the initial impact of adopting the standard will result in increases to its assets and liabilities on its consolidated balance sheets, and changes to the presentation of certain operating expenses on its consolidated statements of operations.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting (ASU 2017-09). This ASU clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The standard is effective for the Company on January 1, 2018,

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JAGGED PEAK ENERGY INC.

Notes to Consolidated and Combined Financial Statements

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with early adoption permitted. The impact of this new standard will depend on the extent and nature of future changes to the terms of Company's share-based payment awards.

Note 3—Derivative Instruments

The Company hedges a portion of its crude oil sales through derivative instruments to mitigate volatility in commodity prices. The use of these instruments exposes the Company to market basis differential risk if the WTI price does not move in parity with the Company’s underlying sales of crude oil produced in the Southern Delaware Basin.

The Company’s derivative instruments are carried at fair value on the consolidated and combined balance sheets. The Company estimates the fair value using risk adjusted discounted cash flow calculations. Cash flows are based on published future commodity price curves for the underlying commodity as of the date of the estimate. Due to the volatility of commodity prices, the estimated fair values of the Company’s derivative instruments are subject to fluctuation from period to period, which could result in significant differences between the current estimated fair value and the ultimate settlement price. For more information, refer to Note 4 , Fair Value Measurements .

As of March 31, 2017 , the Company hedged the commodity prices associated with a portion of its expected future oil volumes by entering into swap and basis swap derivative financial instruments. With swaps, the Company typically receives an agreed upon fixed price for a specified notional quantity of oil or natural gas, and the Company pays the hedge counterparty a floating price for that same quantity based upon published index prices. Basis swap contracts establish the differential between Cushing WTI prices and Midland WTI prices. The Company’s commodity derivatives may expose it to the risk of financial loss in certain circumstances. The Company’s derivative arrangements provide protection on the hedged volumes if market prices decline below the prices at which these derivatives are set. If market prices rise above the prices at which the Company has hedged, the Company will receive less income on the hedged volumes than it would receive in the absence of hedges.

The following table summarizes the Company’s derivative contracts as of March 31, 2017 :



Contract Period	Volumes (Bbls)	Wtd Avg Price ($/Bbl)
Oil Swaps ⁽¹⁾ :
Second quarter 2017	588,175	$	50.75
Third quarter 2017	836,450	$	51.85
Fourth quarter 2017	873,200	$	52.17
Total 2017	2,297,825	$	51.69
Year ending December 31, 2018	2,708,350	$	53.36
Year ending December 31, 2019	365,000	$	55.55
Oil Basis Swaps ⁽²⁾ :
Year ending December 31, 2018	365,000	$	(1.39	)

_______________________________________________________________________________


(1)	The index prices for the oil swaps are based on the NYMEX–WTI monthly average futures price.


(2)	The basis differential price is between Midland–WTI and Cushing–WTI.

The Company has elected to not apply hedge accounting, and as a result, its earnings are affected by the use of the mark-to-market method of accounting for derivative financial instruments. The changes in fair value of these instruments are recognized through earnings as other income or expense rather than deferred until the anticipated transaction affects earnings. The use of mark-to-market accounting for financial instruments can cause noncash earnings volatility due to changes in the underlying commodity price indices. The ultimate gain or loss upon settlement of these transactions is recognized in earnings as other income or expense. Cash settlements of the Company’s contracts are included in cash flows from operating activities in the Company’s statements of cash flows.

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Notes to Consolidated and Combined Financial Statements

(Unaudited)

Subsequent to March 31, 2017 , the Company entered into the following derivative contracts:



Contract Period	Volumes (Bbls)	Wtd Avg Price ($/Bbl)
Oil Swaps ⁽¹⁾ :
Third quarter 2017	61,000	$	54.00
Fourth quarter 2017	161,000	$	53.70
Total 2017	222,000	$	53.78
Year ending December 31, 2018	365,000	$	53.48
Year ending December 31, 2019	912,500	$	52.70

_______________________________________________________________________________


(1)	The index prices for the oil swaps are based on the NYMEX–WTI monthly average futures price.

The Company recognized the following gains (losses) in earnings for the periods indicated:



	Three Months Ended March 31,
	2017		2016
	(in thousands)
Gain (loss) on derivatives instruments, net	$	17,042	$	(1,059	)
Cash settlements of derivatives (received) paid, net	$	1,071	$	—

The Company’s derivative contracts are carried at their fair value on the Company’s consolidated and combined balance sheets using Level 2 inputs, and are subject to industry standard master netting arrangements, which allow the Company to offset recognized asset and liability fair value amounts on contracts with the same counterparty. The Company’s policy is to not offset these positions in its consolidated and combined balance sheets.

The following tables present the amounts and classifications of the Company’s derivative assets and liabilities as of March 31, 2017 and December 31, 2016 :



March 31, 2017	Balance Sheet Location	Asset			Liability
		(in thousands)
Commodity contracts	Current assets – derivative instruments	$	4,858		$	—
Commodity contracts	Noncurrent assets – derivative instruments	5,691			—
Commodity contracts	Current liabilities – derivative instruments	—			4,601
Commodity contracts	Noncurrent liabilities – derivative instruments	—			689
Total gross amounts presented in accompanying balance sheets		10,549			5,290
Less: amounts not offset in the accompanying balance sheets		(5,290		)	(5,290		)
Net amounts		$	5,259		$	—



December 31, 2016	Balance Sheet Location	Asset		Liability
		(in thousands)
Commodity contracts	Current liabilities – derivative instruments	$	—	$	9,567
Commodity contracts	Noncurrent liabilities – derivative instruments	—		3,287
Total gross amounts presented in accompanying balance sheets		—		12,854
Less: amounts not offset in the accompanying balance sheets		—		—
Net amounts		$	—	$	12,854

Derivative Counterparty Risk

Where the Company is exposed to credit risk in its financial instrument transactions, management analyzes the counterparty’s financial condition prior to entering into an agreement, establishes credit limits and monitors the appropriateness

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of these limits on an ongoing basis. Generally, the Company does not require collateral and does not anticipate nonperformance by its counterparties.

At March 31, 2017 , the Company had commodity derivative contracts with three counterparties, all of which were lenders under the Company’s amended and restated credit facility and all of which had investment grade credit ratings. These counterparties accounted for all the Company’s counterparty credit exposure related to commodity derivative assets.

Note 4—Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Financial assets and liabilities are measured at fair value on a recurring basis. Nonfinancial assets and liabilities, such as the initial measurement of asset retirement obligations and proved oil and natural gas properties upon acquisition or impairment, are recognized at fair value on a nonrecurring basis.

The Company categorizes the inputs to the fair value of its financial assets and liabilities using a three-tier fair value hierarchy, established by the FASB, that prioritizes the significant inputs used in measuring fair value:

Level 1—Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, listed securities and U.S. government treasury securities.

Level 2—Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry standard models that consider various assumptions, including quoted prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in the category include nonexchange-traded derivatives such as over-the-counter forwards, swaps and options.

Level 3—Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value, and the company does not have sufficient corroborating market evidence to support classifying these assets and liabilities as Level 2.

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

Assets and liabilities measured on a recurring basis

Certain assets and liabilities are reported at fair value on a recurring basis, including the Company’s derivative instruments. The Company’s open commodity derivative instruments were in a net asset position at March 31, 2017 . To determine the fair value at the end of each reporting period, the Company computes discounted cash flows for the duration of each commodity derivative instrument using the terms of the related contract. Inputs consist of published forward commodity price curves as of the date of the estimate. The Company compares these prices to the price parameters contained in our hedge contracts to determine estimated future cash inflows or outflows, which are then discounted. The fair values of the Company’s commodity derivative assets and liabilities include a measure of credit risk. These valuations are Level 2 inputs.

The following table is a listing of the Company’s assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016 :



	Level 2
	March 31, 2017		December 31, 2016
	(in thousands)
Assets from commodity derivative contracts	$	10,549	$	—
Liabilities from commodity derivative contracts	5,290		12,854

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Notes to Consolidated and Combined Financial Statements

(Unaudited)

Assets and liabilities measured on a nonrecurring basis

The Company applies the provisions of the fair value measurement standard on a nonrecurring basis to its nonfinancial assets and liabilities, such as the acquisition or impairment of proved and unproved oil and gas properties and the inception value of asset retirement obligations. These assets and liabilities are subject to fair value adjustments only in certain circumstances and are not subject to recurring revaluations.

The Company reviews its proved oil and natural gas properties for impairment whenever facts and circumstances indicate their carrying value may not be recoverable. In such circumstances, the income approach is used to determine the fair value of proved oil and natural gas reserves. Under this approach, the Company estimates the expected future cash flows of oil and natural gas properties and compares these undiscounted cash flows to the carrying amount of the oil and natural gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will write down the carrying amount of the oil and natural gas properties to estimated fair value. The factors used to determine fair value may include, but are not limited to, estimates of reserves, future commodity prices, future production estimates, estimated future capital expenditures and a commensurate discount rate. These assumptions and estimates represent Level 3 inputs. No impairments were recorded on proved properties during the three months ended March 31, 2017 and 2016 .

Unproved oil and natural gas property costs are evaluated for impairment and reduced to fair value when there is an indication that the carrying costs may not be recoverable. To measure the fair value of the unproved properties, the Company uses a market approach, and takes into account future development plans, remaining lease term, drilling results, and reservoir performance. The Company recorded impairment of unproved oil and gas properties expense of $7,000 and $0.2 million for the three months ended March 31, 2017 and 2016 , respectively, resulting from lease expirations.

The inception value of the Company’s AROs are also measured at fair value on a nonrecurring basis. The inputs used to determine such fair value are based primarily on the present value of estimated future cash inflows and outflows. Given the unobservable nature of these inputs, they represent within Level 3 inputs.

The fair value measurements of assets acquired and liabilities assumed are measured on a nonrecurring basis on the acquisition date using an income valuation approach based on inputs that are non-observable in the market and therefore represent Level 3 inputs. Significant inputs to the valuation of acquired oil and gas properties include estimates of future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development and operating costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation.

Fair Value of Other Financial Instruments

The Company has other financial instruments consisting primarily of cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued liabilities that approximate fair value due to the nature of the instrument and the short-term maturities of these instruments.

Note 5—Debt Obligations

In June 2015, JPE LLC entered into a five -year $500.0 million senior secured revolving credit facility (“JPE LLC’s credit facility”). At December 31, 2016 , JPE LLC’s credit facility, as amended, had a borrowing base of $160.0 million , with $132.0 million outstanding under the credit facility, and $28.0 million in unused borrowing capacity.

In January 2017, JPE LLC’s credit facility borrowing base was increased to $180.0 million , and the number of lenders was increased from five banks to nine banks.

In February 2017, the Company, as parent guarantor, and JPE LLC, as borrower, entered into an amended and restated credit facility with Wells Fargo Bank, N.A., as administrative agent and the lenders and other parties thereto (the “amended and restated credit facility”). The borrowing base under the amended and restated credit facility remained at $180.0 million , and borrowings bear interest, at the Company’s option, at either (i) the greatest of (a) the prime rate as determined by the

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Notes to Consolidated and Combined Financial Statements

(Unaudited)

administrative agent, (b) the federal funds effective rate plus 0.50% , and (c) the thirty-day adjusted LIBOR plus 1.0% , in each case, plus a margin that varies from 1.25% to 2.25% per annum according to the total facility utilization, (ii) the adjusted LIBOR rate plus a margin that varies from 2.25% to 3.25% per annum according to the total facility utilization or (iii) the applicable LIBOR market index rate plus a margin that varies from 2.25% to 3.25% per annum according to the Company’s total facility utilization. The Company pays a commitment fee of 0.50% per annum on the unutilized portion of the amended and restated credit facility. Further, the amended and restated credit facility no longer contains the minimum hedging requirements that existed in JPE LLC’s credit facility.

The amended and restated credit facility matures on February 1, 2022, and is subject to semiannual borrowing base redeterminations on or around April 1 and October 1 of each year. The most recent redetermination was completed in April 2017, which resulted in an increase to the borrowing base from $180.0 million to $250.0 million .

The amended and restated credit facility is secured by oil and natural gas properties representing at least 80% of the value of the Company’s proved reserves. The amended and restated credit facility contains certain covenants, including among others, restrictions on indebtedness, restrictions on liens, restrictions on investments, restrictions on mergers, restrictions on sales of assets, restrictions on dividends and payments to the Company’s capital interest holders, and restrictions on the Company’s hedging activity.

The amended and restated credit facility contains financial covenants, which are measured on a quarterly basis. The covenants, as defined in the amended and restated credit agreement, include requirements to comply with the following financial ratios:

•

a current ratio, which is the ratio of consolidated current assets (including unused commitments under the credit facility and excluding noncash assets related to asset retirement obligations and derivatives) to consolidated current liabilities (excluding the current portion of long-term debt under the credit agreement and noncash liabilities related to asset retirement obligations and derivatives), as of the last day of each fiscal quarter, of not less than 1.0 to 1.0 ; and


•	a leverage ratio, which is the ratio of consolidated Debt (as defined in our credit agreement) as of the last day of each fiscal quarter, subject to certain exclusions (as described in the credit agreement) to EBITDAX (as defined in the credit agreement) for the last 12 months ending on the last day of that fiscal quarter, of not greater than 4.0 to 1.0 .

As of March 31, 2017 , the Company was in compliance with its financial covenants.

Following the IPO, the outstanding balance under JPE LLC’s credit facility was paid in full, and there was no outstanding balance under the amended and restated credit facility as of March 31, 2017 .

Note 6—Equity-based Compensation

In connection with the IPO, the Company adopted the Jagged Peak Energy Inc. 2017 Long Term Incentive Plan (the “Plan”), which allows the Company to grant up to 21,200,000 equity-based compensation awards to employees and directors of the Company. The Plan provides for grants of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, performance awards, and other types of awards. The terms and conditions of the awards granted are established by the Company’s Board of Directors. As of March 31, 2017 , no awards had been granted under the Plan.

Equity-based compensation expense, which is recorded in general and administrative expense in the accompanying consolidated and combined statements of operations, was as follows for the periods indicated:



	Three Months Ended March 31,
	2017		2016
	(in thousands)
Profits interests awards	$	408,964	$	—
Total equity-based compensation expense	$	408,964	$	—

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Notes to Consolidated and Combined Financial Statements

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Profits Interests Awards

In connection with its formation in April 2013, JPE LLC established an incentive pool plan, whereby JPE LLC granted MIUs to employees and selected other participants. The MIUs were considered “profits interests” that participated in certain events whereupon distributions would be made to MIU holders (only after certain return thresholds were achieved by the capital interests) following a qualifying initial public offering, sale, merger, or other qualifying transaction involving the stock or assets of JPE LLC (“Vesting Event”).

The MIUs were accounted for under FASB ASC Topic 710, Compensation–General , which requires compensation expense for the MIUs to be recognized when all performance, market and service conditions are probable of being satisfied, which is generally upon a Vesting Event. As of and through December 31, 2016, the vesting of the MIUs was not deemed probable, therefore no expense was recognized through December 31, 2016.

The corporate reorganization provided a mechanism by which all capital interests and MIUs in JPE LLC were converted into a single class of units, which were then converted into the Company’s common stock. A portion of these shares vested and a portion were transferred to JPE Management Holdings LLC (“Management Holdco”) and became subject to the terms and conditions of the amended and restated JPE Management Holdings LLC limited liability company agreement (the “Management Holdco LLC Agreement”). As a result of the IPO, the satisfaction of all conditions relating to MIUs in JPE LLC held by the current and former officers and employees who owned equity interests in JPE LLC, was deemed probable. As a result, based on the Company’s IPO price of $15.00 per share, compensation expense of $379.0 million was recognized for the vested shares of common stock at the IPO date, all of which was noncash except for $14.7 million related to a management incentive advance payment made in April 2016.

The shares of common stock transferred to Management Holdco are accounted for under ASC 718, Compensation–Stock Compensation , and generally vest over three years. The grant-date fair value of these awards was $15.00 , and the remaining compensation expense will be recognized ratably according to the terms of the Management Holdco LLC Agreement. Accordingly, the Company recognized $7.7 million of equity-based compensation expense related to the shares held by Management Holdco. The Company also recognized an additional $22.2 million of equity-based compensation related to awards held by Management Holdco which were modified in conjunction with a March 2017 separation agreement of a former executive officer. The Company will recognize the remaining noncash compensation expense related to awards held at Management Holdco of approximately $108.3 million over the approximate three years of remaining vesting term. Any unallocated shares of Company common stock held at Management Holdco will be valued using the stock price on the date of grant, and the Company will recognize expense over the related service period. The equity-based compensation relative to these shares of common stock transferred to Management Holdco is not deductible for Federal or state income tax purposes in 2017 or in the future.

Note 7—Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net earnings by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share is similarly computed, except that the denominator includes the effect, using the treasury stock method, of unvested restricted stock units, if any, if including such potential shares of common stock units is dilutive. Through March 31, 2017 , the Company did not issue any shares under its long-term incentive plan; as such, there are no potentially dilutive shares as of that date.

For the three months ended March 31, 2017 , the Company’s EPS calculation includes only the net loss for the period subsequent to the corporate reorganization and IPO, and omits income or loss prior to these events. In addition, the basic weighted average shares outstanding calculation is based on the actual days in which the shares were outstanding for the period from January 27, 2017, to March 31, 2017 .

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Notes to Consolidated and Combined Financial Statements

(Unaudited)

A reconciliation of the components of basic and diluted earnings per common share is presented in the table below:



	From January 27, 2017, to
	March 31, 2017
	(in thousands)
Net income (loss) attributable to Jagged Peak Energy Inc. stockholders	$	(90,405	)

Weighted average shares outstanding - basic	212,938
Effect of diluted securities:	—
Weighted average shares outstanding - diluted	212,938

Net income (loss) per common share:
Basic	$	(0.42	)
Diluted	$	(0.42	)

Note 8—Income Taxes

JPE LLC was organized as a limited liability company and treated as a pass-through entity for federal income tax purposes. As such, taxable income and any related tax credits were passed through to its members and included in their tax returns. Accordingly, provision for federal and state corporate income taxes has been made only for the operations of the Company from January 27, 2017 through March 31, 2017 in the accompanying consolidated and combined financial statements. Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates. Upon the change in tax status as a result of the corporate reorganization, the Company established a $79.1 million provision for deferred income taxes, which was recognized as tax expense from continuing operations.

The components of the Company’s provision for income taxes are as follows:



	Three Months Ended
	March 31, 2017
	(in thousands)
Current income tax expense:
Federal	$	—
State	—
	—
Deferred income tax expense:
Federal	87,479
State	1,889
	89,368
Provision for income taxes	$	89,368

Included in the deferred federal income tax provision above is the $79.1 million related to the Company’s change in tax status.

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A reconciliation of the income tax expense calculated at the federal statutory rate of 35% to the total income tax expense is as follows:



	Three Months Ended
	March 31, 2017
	(in thousands)
Income (loss) before income taxes	$	(376,513	)
Less: net loss prior to corporate reorganization	(375,476		)
Income (loss) before income taxes subsequent to corporate reorganization	$	(1,037	)

Income taxes at the federal statutory rate	$	(363	)
Income tax expense relating to change in tax status	78,019
State income taxes, net of federal benefit	1,228
Nondeductible equity-based compensation	10,478
Other permanent differences	6
Income tax expense (benefit)	$	89,368
Effective tax rate	(23.7		)%

Prior to the Company’s change in tax status in January 2017, income taxes did not significantly impact the results of operations.

The components of the Company’s deferred tax assets and liabilities as of March 31, 2017 are as follows:



	March 31, 2017
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	2,796
Other	555
Total deferred tax assets	3,351
Deferred tax liabilities:
Oil and natural gas properties	90,853
Commodity derivatives	1,866
Total deferred tax liabilities	92,719
Net deferred tax liabilities	$	(89,368	)

The Company had U.S. net operating losses of approximately $7.9 million , which expire in 2036. Deferred tax assets are reduced by a valuation allowance if the Company believes it is more likely than not such deferred tax assets will not be realized. At March 31, 2017 , the Company did not have a valuation allowance.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. At March 31, 2017 , the Company had no unrecognized tax benefits that would impact the effective tax rate and has made no provisions for interest or penalties related to uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction, Texas and Colorado. There are currently no federal or state income tax examinations underway. The Company’s U.S. federal income tax returns remain open to examination by the taxing authorities for tax years 2014 through 2016, and its Texas and Colorado tax returns remain open to examination for the years 2013 through 2016.

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Notes to Consolidated and Combined Financial Statements

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Note 9—Asset Retirement Obligations

The following table summarizes the changes in asset retirement obligations in the carrying amount of the asset retirement obligation for the three months ended March 31, 2017 :



(in thousands)
Asset retirement obligations at January 1, 2017	$	448
Liabilities incurred and assumed	45
Liability settlements and disposals	—
Revisions of estimated liabilities	(5		)
Accretion	12
Asset retirement obligations at March 31, 2017	500
Less current portion of asset retirement obligations	—
Long-term asset retirement obligations	$	500

Note 10—Commitments and Contingencies

Commitments

There were no material changes in commitments during the first three months of 2017, except as discussed below. Please refer to Note 9, Commitments and Contingencies , in the 2016 Form 10-K for additional discussion.

During the first quarter of 2017 , the Company entered into one new drilling rig contract, to bring the total rigs under contract to six at March 31, 2017 . If the Company were to terminate these contracts at March 31, 2017 , it would be required to pay early termination penalties of $8.2 million . In the first quarter of 2016, the Company terminated one drilling rig and incurred early termination charges of approximately $0.2 million . These charges are reflected as other operating costs in the consolidated and combined statements of operations.

The Company has commitments for office space and equipment under operating lease arrangements totaling $1.3 million .

Contingencies

Legal Matters

In the ordinary course of business, the Company may at times be subject to claims and legal actions. Management believes it is remote that the impact of such matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Environmental Matters

The Company accounts for environmental contingencies in accordance with the accounting guidance related to accounting for contingencies. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, which do not contribute to current or future revenue generation, are expensed.

Liabilities are recorded when environmental assessments and/or clean-ups are probable and the costs can be reasonably estimated. Such liabilities are generally undiscounted unless the timing of cash payments is fixed and readily determinable. At both March 31, 2017 and December 31, 2016 , the Company had no environmental matters requiring specific disclosure or requiring the recognition of a liability.

Note 11—Related Party Transactions

Quantum employs certain members of the Company’s board of directors and had significant capital interests in JPE LLC. After giving effect to the IPO, Quantum owns 68.7% of the Company’s common stock.

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Quantum owns a 41.5% interest in Oryx Midstream Services, LLC (together with Oryx Southern Delaware Holdings, LLC, “Oryx”). The Company has a 12 -year crude oil gathering agreement with Oryx whereby Oryx provides midstream gathering services to the Company. Under that agreement, the Company has the right to designate, and has designated, a third-party shipper to market the Company’s crude oil. During the three months ended March 31, 2017 , the Company’s third-party shipper paid Oryx $1.4 million in transportation fees pursuant to this agreement. In addition, during the first quarter ended March 31, 2017 , the Company paid fees to Oryx of $0.3 million for the purchase and maintenance of connecting equipment. For the same period of 2016, the Company paid fees to Oryx of $0.8 million for the purchase and maintenance of connecting equipment.

Quantum also owns a 61% interest in Phoenix Lease Services, LLC (“Phoenix”), and an indirect interest in Trident Water Services, LLC (“Trident”), a wholly owned subsidiary of Phoenix. The Company regularly leases frac tanks and other oil field equipment from Phoenix, and also regularly uses water transfer services provided by Trident. The Company is under no obligation to use either provider, and both provide services only when selected as a vendor through the normal bidding process. During the three months ended March 31, 2017 , the Company paid fees of $0.1 million and $0.2 million related to such services provided by Phoenix and Trident, respectively. During the same period of 2016, the Company paid fees of $0.1 million and $0.3 million related to such services provided by Phoenix and Trident, respectively.

At March 31, 2017 and December 31, 2016 , the Company had outstanding payables to the aforementioned related parties of $0.8 million and $0.7 million , respectively.


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

The following discussion and analysis should be read in conjunction with our consolidated and combined financial statements and related notes presented in this Quarterly Report on Form 10-Q as well as our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016 . The following discussion and analysis contains forward-looking statements, including, without limitation, statements related to our future plans, estimates, beliefs and expected performance. Please see “Cautionary Statement Concerning Forward-Looking Statements” elsewhere in this Quarterly Report on Form 10-Q and “Part 1, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 .

In this section, references to “Jagged Peak,” “the Company,” “we,” “us” and “our” refer to Jagged Peak Energy Inc. and its subsidiaries, after the initial public offering of Jagged Peak (the “IPO”) and, prior to the IPO, to Jagged Peak Energy LLC (“JPE LLC”).

Jagged Peak Energy Inc. and our Predecessor

Jagged Peak was formed in September 2016 and, prior to the consummation of our IPO, did not have historical financial operating results. For purposes of this Quarterly Report, our accounting predecessor reflects the results of JPE LLC, which was formed in 2013 to engage in the acquisition, development, exploration and exploitation of oil and natural gas reserves in the Southern Delaware Basin of the Permian Basin. In connection with the IPO, a corporate reorganization took place whereby JPE LLC became a wholly owned subsidiary of Jagged Peak.

Overview

We are a growth-oriented, independent oil and natural gas company focused on the acquisition and development of unconventional oil and associated liquids-rich natural gas reserves. Our operations are entirely located in the United States, within the Permian Basin of West Texas. Our primary area of focus is the Southern Delaware Basin, a sub-basin of the Permian Basin and one of the most prolific unconventional resource plays in North America. Our acreage is located on large, contiguous blocks in the adjacent Texas counties of Winkler, Ward, Reeves and Pecos, with significant original oil-in-place within multiple stacked hydrocarbon-bearing formations.

We have assembled a portfolio of contiguous acreage in the core oil window of the Southern Delaware Basin. This acreage is characterized by a multi-year, oil-weighted inventory of horizontal drilling locations that provide attractive growth and return opportunities. At March 31, 2017 , our acreage position was approximately 68,546 net acres. We divide our current areas of operation into three distinct areas: (1) Cochise, with 13,319 net acres, (2) Whiskey River, with 33,218 net acres, and (3) Big Tex, with 22,009 net acres.

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We seek to maintain operational control of our properties in order to better execute on our strategy of enhancing returns through operating improvements and cost efficiencies. As the operator of approximately 97% of our acreage, we have the flexibility to manage our development program, which allows us to optimize our field-level returns and profitability.

Our revenue, profitability and future growth are highly dependent on the prices we receive for our oil, natural gas and NGL production. Compared to the first three months of 2016 , our realized oil price for the first three months of 2017 increased 65% to $49.33 per barrel, our realized natural gas price improved 39% to $2.48 per Mcf, and our realized price for NGLs improved by 73% to $20.61 per barrel between the same periods. See “Sources of Our Revenues” below for further information regarding our realized commodity prices.

Factors Affecting the Comparability of Our Results of Operations

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

Equity-based Compensation

In conjunction with the closing of the IPO, we recognized equity-based compensation expense of: (1) $379.0 million related to MIUs in JPE LLC; and (2) $7.7 million related to shares of common stock transferred to Management Holdco that will vest over the terms of the Management Holdco LLC Agreement. Please refer to Note 6, Equity-based Compensation , for additional information on equity-based compensation.

Public Company Expenses

As a result of our IPO, we will incur direct, incremental general and administrative (“G&A”) expenses as a result of being a publicly traded company, including, but not limited to, costs associated with hiring new personnel, implementation of compensation programs that are competitive with our public company peer group, annual and quarterly reports to stockholders, corporate tax return preparation, increased independent auditor fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and independent director compensation. These direct, incremental G&A expenses are not included in the predecessor’s historical results of operations.

Income Taxes

As a result of our corporate reorganization, we became subject to federal and state income tax. The change in tax status required the recognition of deferred tax assets and liabilities for the temporary differences at the time of the change in status. The resulting net deferred tax liability of approximately $79.1 million was recognized as tax expense from continuing operations. For periods following completion of the corporate reorganization, we began recording income taxes associated with our status as a corporation. From the date of the corporate reorganization through March 31, 2017 , we recognized $10.3 million of income tax expense. Please refer to Note 8, Income Taxes , for more information on income taxes.

Increased Drilling Activity

Since commencing our drilling program in late 2013, we operated an average of one horizontal drilling rig through June 2016.We began operating our second and third rigs in July of 2016. At March 31, 2017 , we were operating six horizontal rigs. During the remainder of 2017, we expect to operate a five to six -rig drilling program, but may have more or less than these depending on operating requirements and conditions. We also expect to operate two to four fracturing fleets, as needed, to complete wells in a timely manner. During the three months ended March 31, 2017 , we completed 7 gross ( 6.9 net) wells. Our average daily production has grown from 4,102 Boe/d during the first three months of 2016 to 9,785 Boe/d for the same period of 2017 . In the three months ended March 31, 2017 , we spent $99.7 million for drilling and completing wells and on infrastructure costs. This compares to $29.4 million that we spent in the three months ended March 31, 2016 , and $158.3 million that we spent in all of 2016 for drilling and completion.

Summary of Operating and Financial Results Comparing the Three Months Ended March 31, 2017 and 2016


•	Successfully drilled and completed 7 gross ( 6.9 net) wells, all within the Southern Delaware Basin;


•	Increased average daily production by 139% to 9,785 Boe/d, comprised of 85% oil;


•	Daily oil production grew 142% to 8,281 barrels per day, natural gas volumes increased by 137% to 4.1 MMcf/d and NGL volumes rose 108% to 819 barrels per day;

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•	Production revenues increased 293% to $39.2 million ;


•	Expanded our borrowing base under our amended and restated credit facility from $160.0 million , at December 31, 2016, to $180.0 million , at March 31, 2017 ;


•	Cash flow from operating activities of $21.7 million was 329% higher than the same period of the previous year;


•	Recorded a $17.0 million gain on commodity derivative instruments; and


•	Incurred equity-based compensation expense of $409.0 million , all of which was noncash except for $14.7 million related to an advance made in April 2016.

In addition, in April 2017, we completed our most recent borrowing base redetermination, which resulted in an increase to the borrowing base from $180.0 million to $250.0 million .

Sources of Our Revenues

Our revenues are derived from the sale of our oil and natural gas production, including the sale of NGLs that are extracted from our natural gas during processing. For the three months ended March 31, 2017 , our production revenues were derived 94% from oil sales, 2% from natural gas sales and 4% from NGL sales. Our oil, natural gas and NGL revenues do not include the effects of derivatives.

Increases or decreases in our revenue, profitability and future production growth are highly dependent on the commodity prices we receive. Oil, natural gas and NGL prices are market driven and have been historically volatile, and we expect that future prices will continue to fluctuate due to supply and demand factors, seasonality and geopolitical and economic factors. A $1.00 per barrel change in our realized oil price would have resulted in a $0.7 million change in oil revenues. A $0.10 per Mcf change in our realized natural gas price would have resulted in a $37 thousand change in our natural gas revenues. A $1.00 per barrel change in NGL prices would have changed NGL revenue by $0.1 million .

The following table presents our average realized commodity prices, the effects of derivative settlements on our realized prices, and certain major U.S index prices.



	Three Months Ended March 31,
	2017		2016
Crude Oil (per Bbl):
Average NYMEX price	$	51.62	$	33.35
Realized price, before the effects of derivative settlements	$	49.33	$	29.81
Realized price, after the effects of derivative settlements	$	47.89	$	29.81
Natural Gas (per Mcf):
Average NYMEX price	$	3.02	$	1.99
Realized price	$	2.48	$	1.78
NGLs (per Bbl):
Average realized NGL price	$	20.61	$	11.92

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

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

In addition to sales of oil, natural gas, and NGLs, we derive a minimal portion of our revenues from third party sales of fresh water and produced water disposal services. These revenues are reflected as other operating revenues in the consolidated and combined statements of operations.

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Production Results

The following table presents production volumes for the three months ended March 31, 2017 and 2016 :



	Three Months Ended March 31,
	2017	2016
Oil (MBbls)	745	311
Natural gas (MMcf)	370	158
NGLs (MBbls)	74	36
Total (MBoe)	881	373
Average net daily production (Boe/d)	9,785	4,102

Production Volumes Directly Impact Our Results of Operations

As reservoir pressures decline, production from a given well or formation decreases. Growth in our future production and reserves will depend on our ability to continue to add proved reserves in excess of our production. Accordingly, we plan to maintain our focus on adding reserves through drilling, as well as acquisitions. Our ability to add reserves through drilling projects and acquisitions is dependent on many factors, including our ability to increase our levels of cash flow from operations, borrow or raise capital, obtain regulatory approvals, procure materials, services and personnel and successfully identify and consummate acquisitions.

Derivative Activity

Pricing for oil and natural gas production has been volatile and unpredictable for several years, and we expect this volatility to continue in the future. As of March 31, 2017 , we had entered into derivative oil swap contracts covering periods from April 1, 2017 through December 31, 2019 for approximately 5.4 MMbls of our projected oil production at a weighted average WTI oil price of $52.79 per barrel. We also have a basis differential contract between Midland, TX and Cushing, OK covering 0.4 MMbls in 2018 at a weighted average price of $(1.39) per barrel. These hedging instruments allow us to reduce, but not eliminate, the potential variability in cash flow from operations due to fluctuations in oil prices. This will provide increased certainty of cash flows for funding our drilling program and debt service requirements. These instruments provide only partial price protection against declines in oil prices and may partially limit our potential gains from future increases in prices. In the future, we may seek to hedge price risk associated with our natural gas and NGL production. See “Item 3—Quantitative and Qualitative Disclosure About Market Risk—Commodity Price Risk” for information regarding our exposure to market risk, including the effects of changes in commodity prices, and our commodity derivative contracts.

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Results of Operations

Comparison of the three months ended March 31, 2017 versus March 31, 2016

Oil and Natural Gas Revenues. The following table provides the components of our production revenues for the three months ended March 31, 2017 and 2016 , as well as each period’s respective average prices and production volumes:



	Three Months Ended March 31,
(in thousands or as indicated)	2017		2016		Change		% Change
Production Revenues:
Oil sales	$	36,765	$	9,274	$	27,491	296	%
Natural gas sales	917		280		637		228	%
NGL sales	1,518		428		1,090		255	%
Total production revenues	$	39,200	$	9,982	$	29,218	293	%
Average sales price ⁽¹⁾ :
Oil (per Bbl)	$	49.33	$	29.81	$	19.52	65	%
Natural gas (per Mcf)	$	2.48	$	1.78	$	0.70	39	%
NGLs (per Bbl)	$	20.61	$	11.92	$	8.69	73	%
Total (per Boe)	$	44.52	$	26.74	$	17.78	66	%
Production volumes:
Oil (MBbls)	745		311		434		140	%
Natural gas (MMcf)	370		158		212		134	%
NGLs (MBbls)	74		36		38		106	%
Total (MBoe)	881		373		508		136	%
Average daily production volume:
Oil (Bbls/d)	8,281		3,418		4,863		142	%
Natural gas (Mcf/d)	4,109		1,734		2,375		137	%
NGLs (Bbls/d)	819		394		425		108	%
Total (Boe/d)	9,785		4,102		5,683		139	%

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

As reflected in the table above, our total production revenue for the first three months of 2017 was 293% , or $29.2 million , higher than that of the same period from 2016 . The increase is primarily due to higher sales volumes, along with higher realized commodity prices during the first three months of 2017 . Our aggregate production volumes in the first three months of 2017 were 881 MBoe, comprised of 85% oil, 7% natural gas and 8% NGLs. This represents an increase of 136% over the first three months of 2016 aggregate production volumes of 373 MBoe, consisting of 83% oil, 7% natural gas and 10% NGLs.

Increased production volumes accounted for an approximate $13.8 million increase in quarter-over-quarter production revenues, while increases in our total average sales prices accounted for an approximate $15.4 million increase in production revenues for the same period. Production increases are largely related to our active drilling program over the last 12 months.

During the three months ended March 31, 2017 , oil revenues increased 296% , or $27.5 million , due to a 140% increase in production volumes and a 65% increase in the average realized price when compared to the same period from the prior year. Natural gas revenues increased 228% to $0.9 million during the three months ended March 31, 2017 from $0.3 million during the three months ended March 31, 2016 . The increase is attributable to a 134% increase in volumes and a 39% increase in the average sales price. During the first three months of 2017 , NGL revenues increased 255% , or $1.1 million , due to a 106% increase in sales volumes and a 73% increase in the average realized price.

Other operating revenues relate to sales of fresh water and water disposal services to third parties. During the first three months of 2017 and 2016 , we recognized other operating revenue of $0.2 million and $0.3 million , respectively.

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

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The following table summarizes our expenses for the periods indicated:



	Three Months Ended March 31,									Per Boe
(in thousands)	2017		2016		Change			% Change		2017		2016
Operating expenses:
Lease operating expenses	$	1,610	$	1,796	$	(186	)	(10	)%	$	1.83	$	4.81
Gathering and transportation expenses	392		150		242			161	%	$	0.45	$	0.40
Production and ad valorem taxes	2,640		701		1,939			277	%	$	3.00	$	1.88
Depletion, depreciation, amortization and accretion	14,062		8,712		5,350			61	%	$	15.97	$	23.34
Impairment of oil and natural gas properties and dry hole costs	7		246		(239		)	(97	)%	NM		NM
Other operating expenses	141		1,466		(1,325		)	(90	)%	$	0.16	$	3.93
General and administrative (before equity-based compensation)	4,587		3,332		1,255			38	%	$	5.21	$	8.93
Total operating expenses (before equity-based compensation)	23,439		16,403		7,036			43	%	$	26.62	$	43.95
Equity-based compensation	408,964		—		408,964
Total operating expenses	$	432,403	$	16,403	$	416,000

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NM—Not meaningful.

Lease Operating Expenses. Our LOE varies in conjunction with our level of production, the timing of our workover expenses and variations in industry activity that cause fluctuations in service provider costs. LOE decreased 10% to $1.6 million in the first three months of 2017 , compared to $1.8 million for the same period of 2016 . The decrease primarily related to the timing of workover and maintenance costs, which decreased in the first three months of 2017 compared to those in the first three months of 2016. We expect our total 2017 second quarter LOE to increase from the levels of the first quarter. Our LOE per Boe of $1.83 decreased significantly during the three months ended March 31, 2017 , compared to the same period of 2016, due primarily to the 136% increase in total production between those two periods, nearly all of which came from the addition of high-producing low-operating cost wells.

Gathering and Transportation Expenses. Gathering and transportation expenses increased $0.2 million through the first three months of 2017 compared to the same period of 2016 due to increased production as well as an increase in our per unit gathering and transportation expense. The period over period increase in our per unit gathering and transportation expense is due to a shift away from marketing our natural gas under percent-of-proceeds contracts toward marketing a larger portion of our natural gas under fixed fee contracts. Under percent-of-proceeds contracts, we receive a percentage of the total proceeds received by the marketer, which is net of transportation expense which includes gathering and transportation costs. Conversely, under our fixed fee natural gas marketing contracts, our gas sales revenue is determined after transporting gas to a downstream sales point and we are separately charged for the associated gathering and transportation costs.

Production and Ad Valorem Taxes. Production and ad valorem taxes increased 277% between the three months ended March 31, 2017 and 2016 , from $0.7 million in 2016 to $2.6 million in 2017 . The increase is due to an increase in revenues and the addition of several new high-volume wells. The effective tax rate was 6.7% of production revenue in 2017 compared to 7.0% in 2016.

Depletion, Depreciation, Amortization and Accretion. DD&A expense increased $5.4 million , or 61% , through the first three months of 2017 compared to the same period of 2016 . The increase in DD&A was largely due to an increase in production, partially offset by a decrease in our DD&A rate. Our DD&A rate can vary due to changes in proved reserve volumes, acquisition and disposition activity, development costs and impairments. The DD&A rate per Boe decreased 32% to $15.97 per Boe, compared to $23.34 per Boe in the first three months of 2016 . The decrease in our DD&A rate was largely due to an increase in reserve volumes due to continued successful drilling activities, whereas the rate of increase in capitalized costs related to those drilling activities were lower than the rate of reserve increase.

Impairment of Oil and Natural Gas Properties and Dry Hole Costs. During the first three months of 2017 we incurred $7,000 of impairment costs related to the expiration of certain leases on unproved properties. During the same period in 2016 ,

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we recorded $0.2 million of impairment expense related to the expiration of certain leases on unproved properties. No impairments were recorded on proved properties in either period of 2017 or 2016 .

Other Operating Expenses. Other operating expenses decreased $1.3 million from the first three months of 2016 compared to the same period of 2017 . We incurred $0.1 million of other operating expenses in the first three months of 2017 due to sales of fresh water and water disposal to third parties. During the first three months of 2016 , we incurred other operating expenses of $1.5 million , due to $1.3 million in delay rentals on certain unproved properties and $0.2 million of water sales costs.

General and Administrative and equity-based compensation. G&A (before equity-based compensation) increased 38% to $4.6 million for the three months ended March 31, 2017 , from $3.3 million for the same period of 2016 . The increase is primarily due to a $1.0 million increase in costs related to salaries, employee benefits, contract personnel and other general business expenses required to support the growth of our capital expenditure program and production levels. The number of our full-time employees grew from 24 at March 31, 2016 to 41 at March 31, 2017 .

Equity-based compensation expense in the first three months of 2017 was $409.0 million , all of which related to the common stock issued to MIU holders. During the first three months of 2017, we recognized approximately $379.0 million of equity-based compensation expense relative to the common stock issued to MIU holders that vested upon the IPO. After the IPO, we recognized $7.7 million related to the common stock transferred to Management Holdco, which is subject to the terms of the Management Holdco LLC Agreement. We also recognized an additional $22.2 million of equity-based compensation related to awards held at Management Holdco, which were modified in conjunction with a March 2017 separation agreement of a former executive officer. We will recognize additional noncash compensation expense of approximately $108.3 million over the approximate three years of remaining service related to the shares held by Management Holdco.

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



	Three Months Ended March 31,
(in thousands)	2017			2016			Change
Other income (expense):
Gain (loss) on commodity derivatives	$	17,042		$	(1,059	)	$	18,101
Interest expense, net	(711		)	(233		)	(478		)
Other, net	171			—			171
Total other income (expense)	$	16,502		$	(1,292	)	$	17,794

Gain (loss) on Commodity Derivatives. Net gains and losses on our derivative instruments, as reflected in our statements of operations, are a function of fluctuations in the underlying commodity prices and the monthly settlement, if any, of the instruments. As a result, settlements on the contracts are included as a component of other income and expense as either a net gain or loss on derivative instruments. To the extent the future commodity price outlook declines between measurement periods, we will have noncash mark-to-market gains during the period. Conversely, to the extent future commodity price outlook increases between measurement periods, we will have noncash mark-to-market losses during the period.

The following table sets forth the net gain (loss) from settlements and changes in the fair value of our derivative contracts, as well as the net cash settlements (received) paid for the three months ended March 31, 2017 and 2016 .



	Three Months Ended March 31,
	2017		2016
(in thousands)
Gain (loss) on derivatives instruments, net	$	17,042	$	(1,059	)
Cash settlements of derivatives (received) paid, net	$	1,071	$	—

Interest Expense, net. Interest expense relates to interest on our credit facility and amortization of financing costs on this facility, net of capitalized interest. During the first three months of 2017 and 2016 , we recorded $0.7 million and $0.2 million , respectively, of interest expense, net of capitalized interest, related to borrowings on our credit facility. Interest expense includes interest paid on the outstanding balance of the credit facility, commitment fees paid on the unused borrowing base, and amortization of debt issuance costs. The terms of our credit facility require us to pay higher interest rate margins as we utilize a larger percentage of our available commitments. The increased interest expense primarily relates to higher interest paid, as our maximum outstanding balance during the first three months of 2017 was $142.0 million, which we repaid in full with a portion

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of the proceeds of the IPO, compared to a maximum outstanding of $35.0 million during the first three months of 2016 . We also had increased commitment fees due to a higher borrowing base, and higher amortization of debt issuance costs related to additional financing costs incurred throughout 2016 related to borrowing base increases.

Liquidity and Capital Resources

Historically, our predecessor’s primary sources of liquidity were capital contributions from our equity owners, borrowings under our predecessor’s credit facility and cash flows from operations. During the first three months of 2017 , our primary sources of liquidity were the proceeds from our IPO of $397.0 million , and cash flows from operations of $21.7 million . Historically, our predecessor’s and our primary use of cash has been for the development and acquisition of oil, natural gas and NGL properties, as well as for development of water handling and treatment infrastructure. As we pursue reserve and production growth, we continually monitor what capital resources, including equity and debt financings, are available to meet our future financial obligations, planned capital expenditure activities, and liquidity requirements. Our future success in growing proved reserves and production will be highly dependent on the capital resources available to us.

Capital Expenditures

Capital expenditures for oil and gas acquisitions, exploration, development and infrastructure activities are summarized below:



	Three Months Ended March 31,
(in thousands)	2017		2016
Acquisitions
Proved properties	$	—	$	—
Unproved properties ⁽¹⁾	22,810		10,396
Development costs	91,281		27,325
Infrastructure costs	8,371		2,048
Exploration costs	6		1,548
Total oil and gas capital expenditures	$	122,468	$	41,317

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(1)	Relates to acquisition of undeveloped leaseholds and oil and natural gas mineral interest leasing activity.

For the three months ended March 31, 2017 and 2016 , our capital expenditures have been focused on the development of our properties in the Southern Delaware Basin. As of March 31, 2017 , we had approximately 77,216 gross ( 68,546 net) acres. In the first three months 2017 , we completed and began production on seven gross ( 6.9 net) wells, all of which we operated, compared to the two gross ( 1.9 net) wells from the same period in 2016 . At March 31, 2017 , we were in the process of drilling eight gross ( 7.5 net) wells and had nine gross ( 8.1 net) wells waiting on completion.

2017 Capital Budget

Our 2017 capital budget for development of oil and gas properties and infrastructure is projected to range from $525.0 million to $570.0 million , excluding leasehold additions. Our drilling and completion and infrastructure budget is unchanged, and we expect to allocate between $510.0 million and $550.0 million of our 2017 capital budget for the drilling and completion of operated and non-operated wells. Additionally, we expect to allocate between $15.0 million and $20.0 million of our 2017 capital budget for water infrastructure costs, excluding any potential additions for surface acreage. Based on our 2017 capital budget, we anticipate that we will spud approximately 54 to 58 gross operated wells, and approximately 11 to 15 gross non-operated wells. We periodically review our capital expenditures and adjust our budget and its allocation based on liquidity, drilling results, leasehold acquisition opportunities, and commodity prices.

Because we operate a high percentage of our acreage, capital expenditure amounts and timing are largely discretionary and within our control. We determine our capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated prices for oil and natural gas, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other working interest owners. A deferral of planned capital expenditures, particularly with respect to drilling and completing new wells, could result in a reduction in anticipated production and cash flows. Additionally, if we curtail our drilling program, we may lose a portion of our acreage through lease expirations. In addition, we may be required to reclassify some portion of our reserves currently booked as proved undeveloped

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reserves to no longer be proved reserves if such a deferral of planned capital expenditures means we will be unable to develop such reserves within five years of their initial booking.

Based on current expectations, we believe we have sufficient liquidity through our existing cash balances, cash flow from operations and additional borrowing capacity under our credit facility to execute our planned 2017 capital program. However, future cash flows are subject to a number of variables, including the level of oil and natural gas production and prices, and significant additional capital expenditures will be required to more fully develop our properties. If we require additional capital for capital expenditures, acquisitions or other reasons, we may seek such capital through borrowings under our credit facility, joint venture partnerships, production payment financings, asset sales, offerings of debt and equity securities or other means. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current drilling program, which could result in a loss of acreage through lease expirations. In addition, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to maintain our production or replace our reserves.

Working Capital

Our working capital, which we define as current assets minus current liabilities, fluctuates primarily as a result of our realized commodity prices, increases or decreases in our production volumes, changes in receivables and payables related to our operating and development of oil and natural gas activities, changes in our hedging activities and changes in our cash and cash equivalents. At March 31, 2017 , our working capital was a surplus of $148.7 million , compared to a deficit of $31.0 million at December 31, 2016 .

We may incur additional working capital deficits in the future due to liabilities that accrue related to our drilling program. Our collection of receivables has historically been timely, and losses associated with uncollectible receivables have historically not been significant. Our cash and cash equivalents balance totaled approximately $198.8 million and $11.7 million at March 31, 2017 and December 31, 2016 , respectively. We expect that our existing cash balances, cash flows from operating activities and availability under our credit facility will be sufficient to fund our working capital needs. We expect that our pace of development, production volumes, and commodity prices for our oil and natural gas production will be the largest variables affecting our working capital.

Cash Flows

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



	Three Months Ended March 31,
(in thousands)	2017			2016
Net cash provided by operating activities	$	21,701		$	5,064
Net cash used in investing activities	$	(100,684	)	$	(34,948	)
Net cash provided by financing activities	$	266,065		$	31,574

Operating Activities. Net cash provided by operating activities is primarily affected by the price of oil, natural gas and NGLs, production volumes and changes in working capital. The $16.6 million increase in net cash provided by operating activities for the first three months of 2017 compared to 2016 primarily resulted due to a period-over-period increase in revenues. This was partially offset by higher operating costs due to increased production and net cash payments for settlements of derivatives, and higher operating costs primarily due to increased production.

Investing Activities. For the first three months of 2017 , net cash flow used in investing activities was $100.7 million , an increase of $65.7 million ( 188% ) from $34.9 million for the same period of 2016 . In the first three months of 2017 , net cash used for investing activities included investments in developing our acreage of $74.3 million and leasehold and acquisition costs of $25.6 million . In the first three months of 2016 , net cash used for investing activities included $17.0 million and $17.3 million for the acquisition and development of oil and natural gas properties, respectively.

Financing Activities. Net cash provided by financing activities during the first three months of 2017 was primarily due to $399.1 million of net proceeds from the sale of common stock in our IPO, which was partially offset by net repayments on our credit facility of $132.0 million. Net cash provided by financing activities in 2016 included $16.6 million of cash provided by equity issuances and $15.0 million of borrowings under our credit facility.

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Credit Facility

On June 19, 2015, our predecessor entered into a credit agreement that provided for a senior secured revolving credit facility with an aggregate commitment of $500.0 million (subject to the then-effective borrowing base). In January 2017, this credit facility was amended, which increased the aggregate principal commitment to $1.0 billion and the borrowing base to $180.0 million . In connection with our IPO, we, as parent guarantor, and our predecessor, as borrower, entered into an amended and restated credit facility. The amended and restated credit facility matures on February 1, 2022. After giving effect to such amendment and restatement, the borrowing base under the amended and restated credit facility remained at $180.0 million . Also in connection with the IPO, we fully repaid the outstanding borrowings under the credit facility of $142.0 million.

The amount available to be borrowed under our amended and restated credit facility is subject to a borrowing base that is redetermined semiannually by each April 1 and October 1 by the lenders at their sole discretion. Additionally, at our option, we may request up to two additional redeterminations per year, to be effective on or about January 1 and July 1, respectively. The borrowing base depends on, among other things, the volumes of our proved reserves and estimated cash flows from these reserves and our commodity hedge positions as well as any other outstanding debt. Upon a redetermination of the borrowing base, if borrowings in excess of the revised borrowing capacity are outstanding, we could be required to immediately repay a portion of the debt outstanding under our credit agreement. The most recent redetermination was completed in April 2017, which resulted in an increase to the borrowing base from $180.0 million to $250.0 million , which as of the date of this filing remains undrawn.

We pay a commitment fee on unused amounts of our amended and restated credit facility of 0.50% per annum. We may repay any amounts borrowed prior to the maturity date without any premium or penalty other than customary LIBOR breakage costs.

Our credit agreement contains restrictive covenants that limit our ability to, among other things:


•	incur additional indebtedness;


•	incur liens;


•	make investments;


•	make loans to others;


•	merge or consolidate with another entity;


•	sell assets;


•	make certain payments;


•	enter into transactions with affiliates;


•	hedge interest rates; and


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

At March 31, 2017 , our credit agreement also requires us to maintain compliance with the following financial ratios:

•

a current ratio, which is the ratio of our consolidated current assets (including unused commitments under our credit facility and excluding noncash assets related to asset retirement obligations and derivatives) to our consolidated current liabilities (excluding the current portion of long-term debt under our credit agreement and noncash liabilities related to asset retirement obligations and derivatives), as of the last day of each fiscal quarter, of not less than 1.0 to 1.0; and


•	a leverage ratio, which is the ratio of our consolidated Debt (as defined in our credit agreement) as of the last day of each fiscal quarter, subject to certain exclusions (as described in our credit agreement) to EBITDAX (as defined in our credit agreement) for the last 12 months ending on the last day of that fiscal quarter, of not greater than 4.0 to 1.0.

As of March 31, 2017 , we were in compliance with all financial covenants.

The amended and restated credit facility permits us to hedge up to the greater of 85% of proved reserves and 75% of our reasonably anticipated production for up to 24 months in the future, and up to the greater of 75% of our proved reserves and 50% of our reasonably anticipated production for 25 to 60 months in the future, provided that no hedges may have a term beyond five years.

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Contractual Obligations

A summary of our contractual obligations as of March 31, 2017 is provided in the following table:



	Remainder		Payments Due by Period for the Year Ending December 31,
(in thousands)	of 2017		2018		2019		2020		2021		2022		Thereafter		Total
Credit facility ⁽¹⁾	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Operating leases ⁽²⁾	745		555		6		1		—		—		—		1,307
Service and purchase contracts ⁽³⁾	902		9		1		—		—		—		—		912
Rig contracts ⁽⁴⁾	13,577		—		—		—		—		—		—		13,577
Total	$	15,224	$	564	$	7	$	1	$	—	$	—	$	—	$	15,796

_______________________________________________________________________________

(1)

This table does not include future commitment fees, amortization of deferred financing costs, interest expense or other fees on our credit facility because obligations thereunder are floating rate instruments and we cannot determine with accuracy the timing of future loan advances, repayments or future interest rates to be charged. As of March 31, 2017 , we had nothing outstanding under our amended and restated credit facility and $180.0 million of borrowing capacity available.


(2)	Primarily relates to the lease of our corporate offices.


(3)	Primarily relates to our obligation to purchase lease automatic custody transfer units in conjunction with oil gathering for current and future wells.


(4)	Relates to six drilling rig contracts entered into as of March 31, 2017 . If we were to terminate these contracts at March 31, 2017 , we would be required to pay early termination penalties of approximately $8.2 million .

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of March 31, 2017 . Please read Note 10 , Commitments and Contingencies , included in the notes to our consolidated and combined financial statements included in this Quarterly Report on Form 10-Q, for a discussion of our commitments and contingencies, some of which are not recognized in the balance sheets under GAAP.

Critical Accounting Policies and Estimates

Our management makes a number of significant estimates, assumptions and judgments in the preparation of our financial statements. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2016 Annual Report on Form 10-K for a discussion of the estimates and judgments necessary in our accounting for successful efforts method of accounting for oil and natural gas activities, impairment of oil and natural gas properties, oil and natural gas reserve quantities, derivative instruments, and asset retirement obligations. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in the notes to our consolidated and combined financial statements contained in this Quarterly Report on Form 10-Q. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the consolidated and combined financial statements. Management uses historical experience and all available information to make these estimates and judgments. Different amounts could be reported using different assumptions and estimates.

Equity-Based Compensation

In connection with the IPO, we adopted the Jagged Peak Energy Inc. 2017 Long Term Incentive Plan (the “Plan”) for the employees, consultants and directors of the Company and its affiliates who perform services for the Company. See “Part III, Item 11. Executive Compensation” in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2016 for additional information related to the Plan.

We recognize compensation cost related to all equity-based awards in the financial statements based on their estimated grant-date fair value. We may grant various types of equity-based awards including stock options, restricted stock (including awards with service-based vesting and market condition-based vesting provisions) and restricted stock units (including awards with service-based vesting and market condition-based vesting provisions). Service-based restricted stock units are valued using the market price of our common stock on the grant date. The fair value of the market condition-based restricted stock units are based on the grant-date market value of the award utilizing a statistical analysis. Compensation cost is recognized ratably over the applicable vesting period, and forfeitures are recognized as they occur.

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Income Taxes

We are a subchapter C-corporation and are subject to U.S. federal and state income taxes. Income taxes are accounted for under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating losses and tax credit carryforwards, using enacted tax rates in effect for the taxing jurisdiction in which we operate for the year in which those temporary differences are expected to be recovered or settled. We classify all deferred tax assets and liabilities as noncurrent. We recognize the financial statement effects of a tax position when it is more-likely-than-not, based on technical merits, that the position will be sustained upon examination. Deferred tax assets are then reduced by a valuation allowance if we believe it is more-likely-than-not such deferred tax assets will not be realized.

Recent Accounting Pronouncements

Please refer to Note 2, Significant Accounting Policies and Related Matters – Recent Accounting Pronouncements , to the consolidated and combined financial statements included in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements and their anticipated effect on our business.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

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

Commodity Price Risk

Our major market risk exposure is in the pricing that we receive for our oil, natural gas and NGL production. Pricing for oil, natural gas and NGLs has been volatile and unpredictable for several years, and we expect this volatility to continue in the future. The prices we receive for our oil, natural gas and NGLs production depend on numerous factors beyond our control, such as the strength of the global economy and global supply and demand for the commodities we produce.

For the three months ended March 31, 2017 , oil sales contributed 94% of our total production revenue, while natural gas sales contributed 2% and NGL sales contributed 4% . A $1.00 per barrel change in our realized oil price would have resulted in a $0.7 million change in oil revenues through the three months ended March 31, 2017 . A $0.10 per Mcf change in our realized natural gas price would have resulted in a $37 thousand change in our natural gas revenues for the three months ended March 31, 2017 . A $1.00 per barrel change in NGL prices would have changed NGL revenue by $0.1 million for the three months ended March 31, 2017 . Our oil, natural gas and NGL revenues do not include the effects of derivatives.

Due to this volatility, we use commodity derivative instruments such as swaps, basis swaps and collars to hedge price risk associated with our oil production. These hedging instruments allow us to reduce, but not eliminate, the potential variability in cash flow from operations due to fluctuations in oil prices. This provides increased certainty of cash flows for funding our drilling program and debt service requirements. These instruments provide only partial price protection against declines in oil prices and may partially limit our potential gains from future increases in prices. We may seek to hedge price risk associated with our natural gas and NGL production in the future.

Under our credit agreement as of March 31, 2017 , we are permitted to hedge up to the greater of 85% of our proved reserves and 75% of our reasonably anticipated production for up to 24 months in the future, and up to the greater of 75% of our proved reserves and 50% of our reasonably anticipated production for 25 to 60 months in the future, provided that no hedges may have a term beyond five years.

At March 31, 2017 , we had a net asset position of $5.3 million related to our oil derivatives in place for the years 2017 through 2019 . Based on our open oil derivative positions at March 31, 2017 , a 10% increase in the NYMEX WTI price would decrease our net oil derivative asset by approximately $27.4 million . Conversely, a 10% decrease in the NYMEX WTI price would increase our net oil derivative asset by approximately $27.4 million .

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See Note 3 , Derivative Instruments , and Note 4 , Fair Value Measurements , to our consolidated and combined financial statements included elsewhere in this report for a summary of our open derivative positions, as well as a discussion of how we determine the fair value of and account for our derivative contracts.

Counterparty and Customer Credit Risk

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

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

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

Interest Rate Risk

We are subject to market risk exposure related to changes in interest rates on our indebtedness under our credit facility. The terms of our credit facility require us to pay higher interest rate margins as we utilize a larger percentage of our available commitments. At March 31, 2017 , however, we had no of debt outstanding under our credit facility, and therefore an increase in interest rates would not result in increased interest expense until such time that we determine to make borrowings under our credit facility.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2017 . Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2017 at the reasonable assurance level. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of all possible controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION


Item 1.	Legal Proceedings

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

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


Item 1A.	Risk Factors

Our business faces many risks. Any of the risk factors discussed in this report or our other SEC filings could have a material impact on our business, financial position or results of operations. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operation. For a discussion of our potential risks and uncertainties, see the information in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016 . There have been no material changes to our risk factors from those described in our Annual Report on Form 10-K for the year ended December 31, 2016 .


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

In connection with the completion of the IPO, a corporate reorganization took place whereby JPE LLC became a wholly owned subsidiary of Jagged Peak. The equity holders of JPE LLC, including the holders of capital interests and management incentive units, received an aggregate of 184,604,412 shares of common stock, in accordance with the distribution mechanics set forth in the Amended & Restated Limited Liability Company Agreement of JPE LLC.

The issuance of common stock to these equity holders did not involve any underwriters, underwriting discounts or commissions or a public offering, and such issuance was exempt from registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Use of Proceeds

On January 26, 2017, our registration statement on Form S-1 (SEC Registration No. 333-215179), as amended through the time of its effectiveness, that we filed with the SEC relating to the IPO was declared effective pursuant to which we and the selling stockholders sold 31,599,334 shares of our common stock. Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC served as representatives of the several underwriters for the IPO. The offering did not terminate before all of the shares in the IPO that were registered in the registration statement were sold. Upon completion of our IPO, we and the selling stockholders sold 31,599,334 shares at $15.00 per share, raising $474.0 million of gross proceeds. Of the 31,599,334 shares sold to the public, 28,333,334 shares were sold by Jagged Peak, and 3,266,000 shares were sold by the selling stockholders. The gross proceeds of the IPO to Jagged Peak, based on the public offering price of $15.00 per share, were approximately $425.0 million, which resulted in net proceeds to us of $397.0 million after deducting expenses and underwriting discounts and commissions of approximately $28.0 million. None of the expenses associated with our IPO were paid to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. We did not receive any proceeds from the sale of the shares by the selling stockholders.

A portion of the proceeds from the IPO were used to repay the entire outstanding balance on JPE LLC’s credit facility of $142.0 million, as of the date the IPO proceeds were received. The remainder of the net proceeds from the IPO will be used to fund a portion of our 2017 capital expenditures program, and for other general corporate purposes.


Item 3.	Defaults Upon Senior Securities

None.

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Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

None.


Item 6.	Exhibits

The exhibits required to be filed or furnished pursuant to the requirements of Item 6 are set forth in the Exhibit Index accompanying this Quarterly Report on Form 10-Q and are incorporated herein by reference.

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SIGNATURES

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



		JAGGED PEAK ENERGY INC.
Date:	May 11, 2017	By:	/s/ JOSEPH N. JAGGERS
			Name:	Joseph N. Jaggers
			Title:	Chairman, Chief Executive Officer and President

Date:	May 11, 2017	By:	/s/ ROBERT W. HOWARD
			Name:	Robert W. Howard
			Title:	Executive Vice President, Chief Financial Officer

Date:	May 11, 2017	By:	/s/ SHONN D. STAHLECKER
			Name:	Shonn D. Stahlecker
			Title:	Controller

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Exhibit Index



Exhibit Number		Description of Exhibit
2.1††		Master Reorganization Agreement, dated January 25, 2017, by and among Jagged Peak Energy Inc., Jagged Peak Energy LLC, Q-Jagged Peak Energy Investment Partners, LLC, JPE Management Holdings LLC and the other parties named therein (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed with the SEC on January 31, 2017).
3.1		Amended and Restated Certificate of Incorporation of Jagged Peak Energy Inc., filed with the Secretary of State of the State of Delaware on February 1, 2017 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on February 7, 2017).
3.2		Amended and Restated Bylaws of Jagged Peak Energy Inc., effective February 1, 2017 (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed with the SEC on February 7, 2017).
4.1		Registration Rights Agreement, dated as of February 1, 2017, by and among Jagged Peak Energy Inc. and the stockholders named therein (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on February 7, 2017).
4.2		Stockholders’ Agreement, dated as of February 1, 2017, by and among Jagged Peak Energy Inc., Q-Jagged Peak Energy Investment Partners, LLC, JPE Management Holdings LLC, and the individuals party thereto (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed with the SEC on February 7, 2017).
10.1		Credit Agreement, by and among Jagged Peak Energy Inc., as parent guarantor, Jagged Peak Energy LLC, as borrower, Wells Fargo Bank, National Association, as administrative agent and issuing lender, and the lenders named therein (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on February 7, 2017).
10.2†		Amended and Restated Limited Liability Company Agreement of JPE Management Holdings LLC, dated February 1, 2017(incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on February 7, 2017).
10.3†		Form of Indemnification Agreement entered into by our Officers and Directors.
*10.4†		Separation and Release Agreement, dated as of March 14, 2017, between Jagged Peak Energy Inc. and Gregory S. Hinds.
10.5†		Jagged Peak Energy Inc. 2017 Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on January 31, 2017).
*31.1		Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act Rules, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2		Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act Rules, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**32.1		Certifications by Chief Executive Officer pursuant to Title 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
**32.2		Certifications by Chief Financial Officer pursuant to Title 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
*101.INS		XBRL Instance Document
*101.SCH		XBRL Schema Document
*101.CAL		XBRL Calculation Linkbase Document
*101.LAB		XBRL Label Linkbase Document
*101.PRE		XBRL Presentation Linkbase Document
*101.DEF		XBRL Taxonomy Extension Definition Linkbase Document


†		Compensatory plan or arrangement.
††		Schedules and similar attachments to the Master Reorganization Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant will furnish a supplemental copy of any omitted schedule or similar attachment to the SEC upon request.
*		Filed herewith.
**		Furnished herewith.

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“ Agreement ”) is made as of [•], 2017, by and between Jagged Peak Energy Inc., a Delaware corporation (the “ Company ”), and [•] (“ Indemnitee ”).

RECITALS :

WHEREAS, directors, officers and other persons in service to corporations or business enterprises are subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself;

WHEREAS, highly competent persons have become more reluctant to serve as directors, officers or in other capacities unless they are provided with adequate protection through insurance and adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (the “ Board ”) has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, (i) the Amended and Restated Bylaws of the Company (as may be amended, the “ Bylaws ”) require indemnification of the officers and directors of the Company, (ii) Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“ DGCL ”) and (iii) the Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws and the Amended and Restated Certificate of Incorporation of the Company (as may be amended, the “ Certificate of Incorporation ”) and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefore, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, (i) Indemnitee does not regard the protection available under the Bylaws and insurance as adequate in the present circumstances, (ii) Indemnitee may not be willing to serve or continue to serve as a director or officer of the Company without adequate protection, (iii) the Company desires Indemnitee to serve in such capacity, and (iv) Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified.

AGREEMENT :

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Definitions . (i) As used in this Agreement:

“ Affiliate ” of any specified Person shall mean any other Person controlling, controlled by or under common control with such specified Person.

“ Corporate Status ” describes the status of a person who is or was a director, officer, employee or agent of (i) the Company or (ii) any other corporation, limited liability company, partnership or joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company.

“ Disinterested Director ” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

“ Enterprise ” shall mean the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary.

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

“ Expenses ” shall mean all reasonable costs, expenses, fees and charges, including, without limitation, attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include, without limitation, (i) expenses incurred in connection with any appeal resulting from, incurred by Indemnitee in connection with, arising out of, or in respect of or relating to, any Proceeding, including, without limitation, the premium, security for, and other costs relating to any cost bond, supersedes bond, or other appeal bond or its equivalent, (ii) for purposes of Section 13(d) hereof only, expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise, (iii) any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, and (iv) any interest, assessments or other charges in respect of the foregoing. “Expenses” shall not include “Liabilities.”

“ Indemnity Obligations ” shall mean all obligations of the Company to Indemnitee under this Agreement, including the Company’s obligations to provide indemnification to Indemnitee and advance Expenses to Indemnitee under this Agreement.

“ Independent Counsel ” shall mean a law firm of fifty (50) or more attorneys, or a member of a law firm of fifty (50) or more attorneys, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder; provided , however , that the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

“ Liabilities ” shall mean all claims, liabilities, damages, losses, judgments, orders, fines, penalties and other amounts payable in connection with, arising out of, or in respect of or relating to any Proceeding, including, without limitation, amounts paid in settlement in any Proceeding and all costs and expenses in complying with any judgment, order or decree issued or entered in connection with any Proceeding or any settlement agreement, stipulation or consent decree entered into or issued in settlement of any Proceeding.

“ Person ” shall mean any individual, corporation, partnership, limited partnership, limited liability company, trust, governmental agency or body or any other legal entity.

“ Proceeding ” shall mean any threatened, pending or completed action, claim, suit, arbitration, alternate dispute resolution mechanism, formal or informal hearing, inquiry or investigation, litigation, inquiry, administrative hearing or any other actual, threatened or completed judicial, administrative or arbitration proceeding (including, without limitation, any such proceeding under the Securities Act of 1933, as amended, or the Exchange Act or any other federal law, state law, statute or regulation), whether brought in the right of the Company or otherwise, and whether of a civil, criminal, administrative or investigative nature, in each case, in which Indemnitee was, is or will be, or is threatened to be, involved as a party, witness or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any actual or alleged action taken by Indemnitee or of any action on Indemnitee’s part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement can be provided under this Agreement.

“ Sponsor Entities ” means (i) Q-Jagged Peak Energy Investment Partners, LLC, a Delaware limited liability company, and (ii) any of its respective Affiliates and any investment fund or other Person advised or managed by any Sponsor Entity; provided , however , that neither the Company nor any of its subsidiaries shall be considered Sponsor Entities hereunder.

(a) For the purpose hereof, references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a Person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

Section 2. Indemnity in Third-Party Proceedings . The Company shall indemnify and hold harmless Indemnitee, to the fullest extent permitted by applicable law, from and against all Liabilities and Expenses suffered or reasonably incurred (and, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding (other than any Proceeding brought by or in the right of the Company to procure a judgment in its favor), or any claim, issue or matter therein.

Section 3. Indemnity in Proceedings by or in the Right of the Company . The Company shall indemnify and hold harmless Indemnitee, to the fullest extent permitted by applicable law, from and against all Liabilities and Expenses suffered or incurred by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding brought by or in the right of the Company to procure a judgment in its favor, or any claim, issue or matter therein. No indemnification for Liabilities and Expenses shall be made under this Section 3 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to such indemnification.

Section 4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful . Notwithstanding any other provisions of this Agreement, and without limiting the rights of Indemnitee under any other provision hereof, including any rights to indemnification pursuant to Sections 2 or 3 hereof, to the fullest extent permitted by applicable law, to the extent that Indemnitee is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved Proceeding, claim, issue or matter. For purposes of this Section 4 and without limitation, the termination of any Proceeding or claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 5. Indemnification For Expenses of a Witness . Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness or otherwise a participant in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses suffered or incurred (or, in the case of retainers, reasonably expected to be incurred) by Indemnitee or on Indemnitee’s behalf in connection therewith.

Section 6. Additional Indemnification . Notwithstanding any limitation in Sections 2, 3 or 4 hereof, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Liabilities and Expenses suffered or reasonably incurred by Indemnitee in connection with such Proceeding, including but not limited to:

(a) the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL; and

(b) the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

Section 7. Spousal Indemnification . The Company shall indemnify Indemnitee’s spouse to whom Indemnitee is legally married at any time Indemnitee is covered under the indemnification provided in this Agreement (even if Indemnitee does not remain married to such spouse during the entire period of coverage) against third-party Proceedings or direct or derivative actions or suits for the same period, to the same extent and subject to the same standards, limitations, obligations and conditions under which Indemnitee is provided indemnification herein, if Indemnitee’s spouse (or former spouse) becomes involved in a Proceeding solely by reason of his or her status as Indemnitee’s spouse, including, without limitation, any Proceeding that seeks damages recoverable from marital community property, jointly-owned property or property purported to have been transferred from Indemnitee to such spouse (or former spouse). Indemnitee’s spouse or former spouse also may be entitled to advancement of expenses to the same extent that Indemnitee is entitled to advancement of expenses herein. The Company may maintain insurance to cover its obligation hereunder with respect to Indemnitee’s spouse (or former spouse) or set aside assets in a trust or escrow fund for that purpose. For the purposes described in this Section 7, any such indemnified spouse of the Indemnitee shall, as applicable, be deemed to be included in the meaning of the term “Indemnitee” as used in this Agreement.

Section 8. Exclusions . Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to indemnify or hold harmless Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy obtained by the Company except with respect to any excess beyond the amount paid under such insurance policy;

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law;

(c) except as provided in Section 13(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee or, if Indemnitee was nominated to the Board by a Sponsor Entity, such Sponsor Entity, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee or, if Indemnitee was nominated to the Board by a Sponsor Entity, such Sponsor Entity against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law; or

(d) if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful.

Section 9. Advancement . Notwithstanding any provision of this Agreement to the contrary, the Company shall advance, to the fullest extent permitted by applicable law, the Expenses and Liabilities reasonably incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all Expenses reasonably incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that Indemnitee undertakes to repay the amounts advanced to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. This Section 9 shall not apply to any claim made by Indemnitee for which indemnity has been determined pursuant to Section 11 to be excluded pursuant to Section 8 hereof.

Section 10. Procedure for Notification and Defense of Claim .

(a) Indemnitee shall promptly notify the Company in writing of any Proceeding with respect to which Indemnitee intends to seek indemnification or advancement hereunder following the receipt by Indemnitee of written notice thereof. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. Any delay or failure by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay or failure in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) In the event Indemnitee is entitled to indemnification and/or advancement with respect to any Proceeding, Indemnitee may, at Indemnitee’s option, (i) retain counsel selected by Indemnitee and approved by the Company to defend Indemnitee in such Proceeding, at the sole expense of the Company (which approval shall not be unreasonably withheld, conditioned or delayed), or (ii) have the Company assume the defense of Indemnitee in such Proceeding, in which case the Company shall assume the defense of such Proceeding with counsel selected by the Company and approved by Indemnitee (which approval shall not be unreasonably withheld, conditioned or delayed) within ten (10) days of the Company’s receipt of written notice of Indemnitee’s election to cause the Company to do so. If the Company is required to assume the defense of any such Proceeding, it shall engage legal counsel for such defense, and the Company shall be solely responsible for all fees and expenses of such legal counsel and otherwise of such defense. Such legal counsel may represent both Indemnitee and the Company (and any other party or parties entitled to be indemnified by the Company with respect to such matter) unless, in the reasonable opinion of legal counsel to Indemnitee, there is a conflict of interest between Indemnitee and the Company (or any other such party or parties) or there are legal defenses available to Indemnitee that are not available to the Company (or any such other party or parties), in which case Indemnitee shall be entitled to obtain separate counsel and the Company shall be responsible for all reasonable fees and expenses of such separate legal counsel. Notwithstanding either party’s assumption of responsibility for defense of a Proceeding, each party shall have the right to engage separate counsel at its own expense. The party having responsibility for defense of a Proceeding shall provide the other party and its counsel with all copies of pleadings and material correspondence relating to the Proceeding. Indemnitee and the Company shall reasonably cooperate in the defense of any Proceeding with respect to which indemnification is sought hereunder, regardless of whether the Company or Indemnitee assumes the defense thereof. Indemnitee may not settle or compromise any Proceeding without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed. The Company may not settle or compromise any Proceeding without the prior written consent of Indemnitee, which consent shall not be unreasonably withheld, conditioned or delayed.

Section 11. Procedure Upon Application for Indemnification .

(a) Upon written request by Indemnitee for indemnification pursuant to Section 10(a) hereof, if any determination by the Company is required by applicable law with respect to Indemnitee’s entitlement thereto, such determination shall be made (i) if Indemnitee shall request such determination be made by Independent Counsel, by Independent Counsel, and (ii) in all other circumstances, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (D) if so directed by the Board, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company will not deny any written request for indemnification hereunder made in good faith by Indemnitee unless a determination as to Indemnitee’s entitlement to such indemnification described in this Section 11(a) has been made. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Liabilities and Expenses arising out of or relating to this Agreement or its engagement pursuant hereto.

(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) hereof, (i) the Independent Counsel shall be selected by the Company within ten (10) days of the Submission Date (the cost of such Independent Counsel to be paid by the Company), (ii) the Company shall give written notice to Indemnitee advising it of the identity of the Independent Counsel so selected and (iii) Indemnitee may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company Indemnitee’s written objection to such selection. Such objection by Indemnitee may be asserted only on the ground that the Independent Counsel selected does not meet the requirements of “Independent Counsel” as defined in this Agreement. If such written objection is made and substantiated, the Independent Counsel selected shall not serve as Independent Counsel unless and until Indemnitee withdraws the objection or a court has determined that such objection is without merit. Absent a timely objection, the person so selected shall act as Independent Counsel. If no Independent Counsel shall have been selected and not objected to before the later of (i) thirty (30) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 11(a) hereof (the “ Submission Date ”) and (ii) ten (10) days after the final disposition of the Proceeding, each of the Company and Indemnitee shall select a law firm or member of a law firm meeting the qualifications to serve as Independent Counsel, and such law firms or members of law firms shall select the Independent Counsel. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

Section 12. Presumptions and Effect of Certain Proceedings .

(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall, to the fullest extent not prohibited by applicable law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by applicable law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) Subject to Section 13(e) hereof, if the person, persons or entity empowered or selected under Section 11 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefore, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by applicable law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent a prohibition of such indemnification under applicable law; provided , however , that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if (i) the determination is to be made by Independent Counsel and Indemnitee objects to the Company’s selection of Independent Counsel and (ii) the Independent Counsel ultimately selected requires such additional time for the obtaining or evaluating of documentation or information relating thereto; provided further, however , that such 60-day period may also be extended for a reasonable time, not to exceed an additional sixty (60) days, if the determination of entitlement to indemnification is to be made by the stockholders of the Company.

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d) Reliance as Safe Harbor . For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Enterprise. The provisions of this Section 12(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) Actions of Others . The knowledge or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

Section 13. Remedies of Indemnitee .

(a) Subject to Section 13(e) hereof, in the event that (i) a determination is made pursuant to Section 11 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement is not timely made pursuant to Section 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 11(a) of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 4 or 5 or the last sentence of Section 11(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Sections 2, 3 or 6 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other Person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of Indemnitee’s entitlement to such indemnification or advancement. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) In the event that a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.

(c) If a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13, absent a prohibition of such indemnification under applicable law.

(d) The Company shall, to the fullest extent not prohibited by applicable law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that Indemnitee not be required to incur Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to Indemnitee hereunder. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the fullest extent permitted by applicable law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement or insurance recovery, as the case may be.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding; provided that, in absence of any such determination with respect to such Proceeding, the Company shall advance Expenses with respect to such Proceeding.

Section 14. Non-Exclusivity; Survival of Rights; Insurance; Subrogation .

(a) The rights of indemnification and to receive advancement as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement than would be afforded currently under the Bylaws or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement and insurance provided by one or more Persons with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity). The Company hereby acknowledges and agrees that (i) the Company shall be the indemnitor of first resort with respect to any Proceeding, Expense, Liability or matter that is the subject of the Indemnity Obligations, (ii) the Company shall be primarily liable for all Indemnity Obligations and any indemnification afforded to Indemnitee in respect of any Proceeding, Expense, Liability or matter that is the subject of Indemnity Obligations, whether created by applicable law, organizational or constituent documents, contract (including this Agreement) or otherwise, (iii) any obligation of any other Persons with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) to indemnify Indemnitee or advance Expenses or Liabilities to Indemnitee in respect of any Proceeding shall be secondary to the obligations of the Company hereunder, (iv) the Company shall be required to indemnify Indemnitee and advance Expenses or Liabilities to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any other Person with whom or which Indemnitee may be associated (including, any Sponsor Entity) or insurer of any such Person and (v) the Company irrevocably waives, relinquishes and releases any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) from any claim of contribution, subrogation or any other recovery of any kind in respect of amounts paid by the Company hereunder. In the event any other Person with whom or which Indemnitee may be associated (including, without limitations, any Sponsor Entity) or their insurers advances or extinguishes any liability or loss which is the subject of any Indemnity Obligation owed by the Company or payable under any Company insurance policy, the payor shall have a right of subrogation against the Company or its insurer or insurers for all amounts so paid which would otherwise be payable by the Company or its insurer or insurers under this Agreement. In no event will payment of an Indemnity Obligation by any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) or their insurers affect the obligations of the Company hereunder or shift primary liability for any Indemnity Obligation to any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity). Any indemnification, insurance or advancement provided by any other Person with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) with respect to any liability arising as a result of Indemnitee’s Corporate Status or capacity as an officer or director of any Person is specifically in excess over any Indemnity Obligation of the Company or valid and any collectible insurance (including but not limited to any malpractice insurance or professional errors and omissions insurance) provided by the Company under this Agreement.

(c) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies and such policies shall provide for and recognize that the insurance policies are primary to any rights to indemnification, advancement or insurance proceeds to which Indemnitee may be entitled from one or more Persons with whom or which Indemnitee may be associated (including, without limitation, any Sponsor Entity) to the same extent as the Company’s indemnification and advancement obligations set forth in this Agreement. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(d) In the event of any payment under this Agreement, the Company shall not be subrogated to the rights of recovery of Indemnitee, including rights of indemnification provided to Indemnitee from any other person or entity with whom Indemnitee may be associated (including, without limitation, any Sponsor Entity); provided , however , that the Company shall be subrogated to the extent of any such payment of all rights of recovery of Indemnitee under insurance policies of the Company or any of its subsidiaries.

(e) The indemnification and contribution provided for in this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of Indemnitee.

Section 15. Duration of Agreement; Not Employment Contract . This Agreement shall continue until and terminate upon the latest of: (i) ten (10) years after the date that Indemnitee shall have ceased to serve as a director, officer, employee or agent of the Company or any other Enterprise and (ii) the date of final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement hereunder and of any proceeding commenced by Indemnitee pursuant to Section 13 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns. As used in this Section 15, the term “Company” shall include, in addition to the surviving corporation, any merging corporation (including any corporation having merged with a merging corporation) absorbed in a merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers and employees or agents, so that any person who was a director or officer of such merging corporation, or was serving at the request of such merging corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Agreement with respect to the surviving corporation as such person would have with respect to such merging corporation if its separate existence had continued. This Agreement shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors and administrators. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any other Enterprise) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment with the Company (or any of its subsidiaries or any other Enterprise), if any, is at will, and Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries or any other Enterprise), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director of the Company, by the Certificate of Incorporation, the Bylaws or the DGCL.

Section 16. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by applicable law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 17. Enforcement .

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director, officer, employee or agent of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer, employee or agent of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided , however , that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws and applicable law, and shall not be deemed a substitute therefore, nor diminish or abrogate any rights of Indemnitee thereunder.

Section 18. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provision of this Agreement nor shall any waiver constitute a continuing waiver.

Section 19. Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.

(b) If to the Company to

Jagged Peak Energy Inc.
1125 17th Street, Suite 2400

Denver, Colorado 80202
Attention: Board of Directors

or to any other address as may have been furnished to Indemnitee by the Company.

Section 20. Contribution . To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for Liabilities or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and transaction(s) giving cause to such Proceeding; and (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and transaction(s).

Section 21. Applicable Law and Consent to Jurisdiction . This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 13(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “ Delaware Court ”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

Section 22. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

Section 23. Third-Party Beneficiaries . The Sponsor Entities are intended third-party beneficiaries of this Agreement and shall have all of the rights afforded to Indemnitee under this Agreement.

Section 24. Miscellaneous . Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.



JAGGED PEAK ENERGY INC. By:_______________________ Name: Title:	INDEMNITEE By:__________________________ Name: Title:

Address:

_______________________________

Exhibit 10.4

SEPARATION AGREEMENT AND GENERAL RELEASE

This SEPARATION AGREEMENT AND GENERAL RELEASE (this “ Agreement ”) is entered into by GREGORY S. HINDS (“ Hinds ”), JAGGED PEAK ENERGY INC. , a Delaware corporation (the “ Company ”), JAGGED PEAK ENERGY MANAGEMENT LLC , a Delaware limited liability company (“ Employer ”), JAGGED PEAK ENERGY LLC (“ JPE ”) and JPE MANAGEMENT HOLDINGS LLC (“ Holdco ”); and is effective as of the Effective Date (as defined below). The Company, Employer, JPE, and Holdco may be referred to below as the “ Company Parties ” or individually as a “ Company Party .” Hinds and the Company Parties are each referred to herein as a “ Party ” and collectively as the “ Parties .”

Reference is made to (i) the Limited Liability Company Agreement of Holdco, dated as of February 1, 2017 (the “ Holdco Agreement ”) and (ii) that certain Executive Employment Agreement made effective as of April 1, 2013 by and between Hinds and Employer (the “ Employment Agreement ”). Capitalized terms used herein and not otherwise defined have the meaning given to such terms in the Holdco Agreement or the Employment Agreement, as applicable.

Recitals

WHEREAS, Hinds has been employed by the Employer pursuant to the Employment Agreement;

WHEREAS, Hinds and the Company Parties now desire to set forth the mutually agreed terms by which the employment of Hinds by the Employer will end as of the Separation Date (as such term is defined below); and

NOW, THEREFORE, in consideration of the promises and benefits set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties agree as follows:

Agreements

1. Separation from Employment . The Parties acknowledge and agree that Hinds has voluntarily resigned without Good Reason (as defined in the Employment Agreement), and the last day of Hinds’ employment with Employer was March 13, 2017 (the “ Separation Date ”). The Parties further acknowledge and agree that, as of the Separation Date, Hinds resigns (a) as an officer of each Company Party and each of their respective affiliates (as applicable), and (b) from the board of managers, board of directors, or similar governing body of each Company Party and each of their respective affiliates (as applicable).

2. Satisfaction of Obligations; Receipt of Leaves, Bonuses, and Other Compensation . In entering into this Agreement, Hinds expressly acknowledges and agrees that Hinds has received all leaves (paid and unpaid) to which Hinds was entitled during Hinds employment and, as of the date that Hinds executes this Agreement, Hinds has received all wages,

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been provided all benefits, and been paid all sums that Hinds is owed by any Company Party as of the Separation Date; provided that within ten (10) business days of the Separation Date Hinds shall be paid all accrued and unpaid salary and all accrued and unused vacation time earned through the Separation Date, and his 2016 bonus of $148,706.50, in each case, subject to standard payroll deductions and withholdings. Hinds further acknowledges and agrees that, with the exception of any amounts owed to Hinds pursuant to this Agreement, Hinds has no entitlement to any further sums from the Company Parties with respect to Hinds’ employment or the Employment Agreement, including any severance amounts, bonuses or other compensatory payments. This Agreement extinguishes all rights, if any, that Hinds may have, contractual or otherwise, relating to or arising out of the Employment Agreement (except for benefits that survive termination of his employment, such as regarding the Employer’s or other Company Party’s 401(k) plan), as Hinds acknowledges that, in entering this Agreement, all of Employer’s and, as applicable, each other Company Party’s obligations under the Employment Agreement have been satisfied in full; and Hinds is not entitled to any severance, bonus, or other sums, either now or in the future, pursuant to the Employment Agreement; except as specified in this Section.

3. Stock of the Company; Interests in Holdco.

a. The Company Parties each agree as follows: All common stock of the Company owned by Hinds or the Greg & Carol Hinds Family Trust U/A, dated December 30, 2016 (the “ Trust ”) as of the date Hinds signs this Agreement (the “ Stock ”) can be sold or otherwise transferred by Hinds or the Trust at any time or from time to time, subject only to compliance with applicable securities laws and the lockup agreement between Hinds, the Trust and the underwriters of the Company’s initial public offering (the “ Lockup ”). After the expiration of the Lockup, the Company will promptly provide its transfer agent all documents requested by such transfer agent from the Company in order to remove the legend referencing the Lockup and have a new certificate delivered to Hinds or the Trust, as applicable, without such legend.

b. The Company Parties each agree as follows: Effective as of the Separation Date and notwithstanding anything to the contrary in the Holdco Agreement, Hinds will retain Hinds’ 1,938,881 unvested Series A Units in Holdco (the “ Retained Units ”). The Retained Units will continue to vest as set forth in the Holdco Agreement notwithstanding anything to the contrary contained therein.

d. Hinds expressly acknowledges and agrees that, other than as may be applicable to the Stock and the Retained Units, Hinds has no right to receive any additional equity interest in any Company Party.

4. Company Parties’ Obligations. On the express condition that Hinds does not revoke this Agreement and in consideration of the restrictive covenants, releases, representations and the Services (as defined below) set forth in this Agreement:

a. Severance . The Company Parties will pay Hinds (i) $297,413 in a lump sum within three hundred sixty five (365) days of the Separation Date, representing his annual salary for one year; and (ii) an amount equal to the premiums for Hinds and Hinds’ eligible dependents to have insurance coverage equivalent to the coverage that they have under the Company

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Parties’ health plans, as elected by Hinds prior to the Separation Date, pursuant to COBRA or similar state law, for six (6) months, paid by the Company Parties to Hinds in a lump sum within thirty (30) days of the Separation Date; in each case, subject to standard payroll deductions and withholding (collectively, the “ Severance ”).

b. Expense Reimbursement . The Company shall pay or reimburse Hinds for up to $5,000 of legal fees and expenses incurred in connection with the subject matter of this Agreement.

c. Severance: Reporting and Payment. Reporting of and withholding on the Severance for tax purposes shall be at the discretion of the Company Parties in conformance with applicable tax laws and the past practices of the Company Parties. If a claim is made against any of the Company Parties for any additional tax or withholding in connection with or arising out of the Severance, that should have been withheld or that is a tax payable by Hinds, Hinds shall pay any such claim within thirty (30) days of being notified by the Company Parties of the amount owed.

d. Late Payment. If any amounts owed by any of the Company Parties to Hinds are not paid when due, following notice and failure to cure with fifteen (15) days, the past due amount will incur interest at the rate of the lesser of 12% per annum or the highest rate permitted by law, until paid in full.

5. Default by Hinds. If Hinds breaches any of the restrictive covenants, representations, or warranties of this Agreement, and Hinds does not cure the breach within ten (10) days after the Company gives him written notice of the breach, and specifying the breach, then Hinds will be in default under this Agreement and Hinds will forfeit future payments of the Severance.

6. Return of Company Parties’ Property. Hinds represents that he has, or will within 5 business days of signing this Agreement, (a) return to the Company Parties all property of the Company Parties in his possession or control or known or suspected by him to be in his possession or control, including, but not limited to, the Company laptop computer, access cards, and office keys, and (b) delete all Company electronic mail or Company documents from any personal devices.

7. Restrictive Covenant Obligations.

a. Confidentiality . Hinds agrees that, during his employment, he has been provided access to trade secrets and other proprietary and confidential knowledge, data and information of the Company Parties (the “ Confidential Information ”). Hinds agrees to continue to keep such Confidential Information confidential and not disclose such Confidential Information to any third party without the Company’s prior written consent. Hinds further acknowledges that the unauthorized disclosure of Confidential Information could place the Company at a competitive disadvantage. Despite the language above, Hinds is not restricted by this provision from disclosure to his attorney; and disclosure of Confidential Information by Hinds is permitted if such disclosure is required by law, subpoena, or a court or agency order.

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b. Nondisparagement .

1. Hinds agrees not to make any statements, unless required by law, that are critical, disparaging or derogatory, or which injure the business, or personal or business reputation (as applicable) about/of any of the Company Parties, or Quantum Energy Partners or any of their respective directors, officers, or limited liability company managers known to Hinds to be in that capacity, as applicable (collectively, the “ Affiliated Persons ”).

2. The Company Parties agree (i) to not make any statement in any press release or filing with any regulatory body and (ii) on behalf of the Affiliated Persons not to make any statements, in each case, unless required by law, that are critical, disparaging, or derogatory, or which injure the business or personal reputation (as applicable) about/of Hinds. The Company Parties agree to instruct the Affiliated Persons not to make any statements in violation of this provision.

3. Despite the language above (a) the Parties are not precluded from correcting any misstatement of fact made by another Party and (b) and neither Hinds, the Company Parties, nor the Affiliated Persons are precluded from making true statements, or statements of opinion made in good faith, that are made in response to a subpoena or in connection with any investigation by any governmental agency.

c. Covenant Not to Solicit . Hinds agrees that Hinds shall not, for the one-year period following the Effective Date (i) directly or indirectly, on behalf of himself or any third party, solicit, encourage, facilitate or induce any supplier, service provider, partner, vendor, agent, employee, contractor, consultant, or licensee of the Company Parties or their affiliates, who is known to Hinds to be in that capacity, to breach any agreement or contract with, or discontinue or curtail their respective business relationships with any of the Company Parties or their affiliates; or (ii) directly or indirectly, solicit, recruit, induce, hire, or otherwise engage as an employee, independent contractor or otherwise, either for himself or any other third party, any person who is employed by any of the Company Parties or any of their affiliates, and who is known to Hinds to be in that capacity, at the time of such solicitation, recruitment, engagement, hiring or inducement.

d. Covenant Not to Compete . Hinds agrees that Hinds shall not, for the one-year period following the Effective Date, engage or participate in any manner, whether directly or indirectly for Hinds’ benefit, through a family member, or as an employee, employer, consultant, agent, principal, partner, shareholder, officer, director, licensor, lender, lessor, or in any other individual or representative capacity, in any business engaged in leasing, acquiring, exploring, developing, or producing hydrocarbons and related products within the boundaries of, or within a fifty (50) mile radius of the boundaries of any mineral property interest of the Company Parties (a “ Competitive Business ”); including, without limitation, a mineral lease, overriding royalty interest, production payment, net profits interest, mineral fee interest, or option or right to acquire any of the foregoing, or an area of mutual interest as designated pursuant to contractual agreement between any of the Company Parties and any third party, or any other property on which any of the Company Parties have a right, license, or authority to conduct or direct exploratory activities, such as three dimensional seismic acquisitions or other seismic, geophysical or geochemical activities as of the Separation Date (the “ Geographic Scope ”); provided , however , that this subparagraph shall not be

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construed to preclude Hinds from investing in any opportunity that is first offered to, and subsequently declined by, the Company (acting through its board of directors). Despite the language above, this provision does not restrict Hinds from owning securities in any Competitive Business if (1) Hinds owns the securities as of the date he signs this Agreement; or (2) the securities are listed on a stock exchange or publicly traded on the over-the-counter market and represent not more than 2% of the total securities of that entity issued and outstanding.

e. Hinds’ Representations; Reformation. Hinds acknowledges and agrees that he was a member of some of the Company Parties’ executive and management personnel, and that the restrictions in this Section 7 are reasonable in all respects and no greater than necessary to protect the Company’s trade secrets and other Confidential Information and its other legitimate business interests. Hinds further agrees that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Section 7 would cause irreparable injury to the Company. Hinds acknowledges that his skills are such that he can be gainfully employed in non-competitive employment during the restricted period, and that the agreement not to compete and not to solicit herein will not prevent him from earning a living. Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the Parties intend for the restrictions set forth in this Section 7 to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced.

8. Release of Liability for Claims .

a. In entering into this Agreement, Hinds hereby releases, discharges and forever acquits the Company Parties, Q-Jagged Peak Energy Investments, LLC and its respective affiliates (collectively, “ Quantum ”), and each of the foregoing entities’ respective past present and future affiliates, owners, members, managers, partners, directors, officers, employees, agents, attorneys, heirs, successors and representatives, in their personal and representative capacities as well as all employee benefit plans maintained by the Company, Employer or any of their respective affiliates and all fiduciaries and administrators of any such plans, in their personal and representative capacities (collectively, the “ Released Parties ”), from liability for, and hereby waives, any and all claims, damages, or causes of action of any kind related to Hinds’ employment or affiliation with any Company Party, the termination of such employment or affiliation, and any other acts or omissions related to any matter occurring or existing on or prior to Hinds signing this Agreement, including, without limitation, any allegation arising out of or relating to: (i) Title VII of the Civil Rights Act of 1964, as amended; (ii) the Age Discrimination in Employment Act, as amended (including as amended by the Older Workers Benefit Protection Act) (“ ADEA ”); (iii) the Civil Rights Act of 1991; (iv) Sections 1981 through 1988 of Title 42 of the United States Code, as amended; (v) the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”); (vi) the Immigration Reform Control Act, as amended; (vii) the Americans with Disabilities Act of 1990, as amended; (viii) the National Labor Relations Act, as amended; (ix) the Occupational Safety and Health Act, as amended; (x) the Family and Medical Leave Act of 1993; (x) the Colorado Anti-Discrimination Act, and other statutes and the common law of the state of Colorado; (xi) any federal, state or local anti-discrimination or anti-retaliation law; (xii) any federal, state or local wage and hour law; (xiii) any other local, state or federal law, regulation or ordinance; (xiv) any public policy,

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contract, tort, or common law claim; (xv) any allegation for costs, fees, or other expenses including attorneys’ fees incurred in or relating to any Released Claim (as defined below); (xvi) any and all rights, benefits or claims Hinds may have under any employment contract (including the Employment Agreement), incentive compensation plan or equity-based plan with any Company Party or to any ownership interest in any Company Party except as expressly provided in this Agreement; (xvii) any and all matters arising out of Hinds’ status as a holder, awardee or grantee of any Management Incentive Units of JPE, units of Holdco or equity interests in any Company Party, other than with respect to rights arising from, or related to, Hinds’ ownership of Stock or the Retained Units; (xviii) any and all matters arising out of or relating to the Company Agreement, as modified hereby; and (xix) any claim for compensation or benefits of any kind not expressly set forth in this Agreement (collectively, the “ Released Claims ”). THIS RELEASE INCLUDES MATTERS ATTRIBUTABLE TO THE SOLE OR PARTIAL NEGLIGENCE (WHETHER GROSS OR SIMPLE) OR OTHER FAULT, INCLUDING STRICT LIABILITY, OF ANY OF THE COMPANY PARTIES ARISING BEFORE HINDS SIGNS THIS AGREEMENT.

b. Hinds acknowledges and understands that this Agreement does not prohibit or prevent Hinds from filing a charge with the Equal Employment Opportunity Commission, or equivalent state agency, or from participating in a federal or state agency investigation. Should Hinds file or cause to be filed an action, suit, proceeding, investigation or arbitration based on any of the Released Claims (collectively, a “ Proceeding ”), but which Hinds cannot waive due to public policy reasons, or should such a Proceeding be filed by or on behalf of a third party, including, without limitation, any federal, state or local governmental entity or administrative agency, Hinds waives any right to any monetary recovery or other relief from the Proceeding, and he agrees to donate any monies that Hinds might be entitled to or receive from such Proceeding to the American Red Cross.

c. It is Hinds’ intention that this release is a general release which shall be effective as a bar to each and every claim, demand or cause of action it releases. Hinds recognizes that Hinds may have some claim, demand or cause of action against the Released Parties of which Hinds is totally unaware and unsuspecting, that Hinds is giving up by execution of this release. It is Hinds intention in executing this release that it will deprive Hinds of each Released Claim and prevent Hinds from asserting it against the Released Parties.

d. Notwithstanding the foregoing, nothing in this Agreement prohibits or restricts Hinds from filing a charge or complaint with, or cooperating in any investigation with, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, or any other securities regulatory agency or authority (each, a “ Government Agency ”). This Agreement does not limit Hinds’ right to receive an award for information provided to a Government Agency.

e. The Released Claims include all claims known and unknown as of the date of this Agreement but do not include any claim arising after Hinds signs this Agreement, including any breach of this Agreement by Hinds or any of the Company Parties.

f. The Company Parties, on behalf of themselves and the other Released Parties, fully release and discharge forever Hinds and his heirs, agents, and representatives from any and all manner of claims, causes of action, complaints, grievances, demands, allegations, promises, and

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obligations for damages, losses, expenses, fees, salary paid to Hinds, bonuses paid to Hinds, other compensation paid to Hinds, attorneys’ fees or costs, loss of revenues, loss of profits, and debts, whether known or unknown, suspected or concealed, and whether presently asserted or otherwise, arising from conduct before the Effective Date of this Agreement; except for (i) fraud, embezzlement, or other intentional misconduct by Hinds; (ii) claims arising under this Agreement (including a misrepresentation or a breach of this Agreement by Hinds); and (iii) any other claim arising after the Effective Date of this Agreement.

9. Hinds’ Representations .

a. Hinds represents and warrants that as of the date on which Hinds signed this Agreement, Hinds has not filed any claims, complaints, charges, or lawsuits against any of the Released Parties with any governmental agency or with any state or federal court for or with respect to a matter, claim, or incident, which occurred or arose out of one or more occurrences that took place on or prior to the date on which Hinds signed this Agreement. Hinds further represents and warrants that as of the date he signed this Agreement, Hinds has made no assignment, sale, delivery, transfer or conveyance of any rights Hinds has asserted or may have against any of the Released Parties with respect to any Released Claim.

b. Hinds represents and warrants that (i) as of the Separation Date, Hinds had good and valid title to all of the Stock issued to Hinds, and the Trust had good and valid title to all of the Stock that has been issued to the Trust; (ii) as of the date on which Hinds signed this Agreement, Hinds has good and valid title to all of the Retained Units held by Hinds, and (iii) as of the date Hinds signed this Agreement, Hinds has never made any assignment, sale, delivery, transfer or conveyance of such Retained Units.

c. By executing and delivering this Agreement, Hinds acknowledges that Hinds has carefully read this Agreement and that some of the consideration Hinds is receiving under this Agreement he was not otherwise entitled to receive, but for Hinds’ entry into this Agreement. Hinds further represents that Hinds fully understands the final and binding effect of this Agreement; the only promises made to Hinds to sign this Agreement are those stated in this Agreement; and Hinds is signing this Agreement knowingly, voluntarily and of Hinds’ own free will and with full understanding of the legal and tax consequences of this Agreement; and Hinds understands and agrees to each of the terms of this Agreement.

d. Hinds acknowledges that Hinds has fulfilled all obligations known to him to raise any and all legal, regulatory or compliance concerns known to Hinds while Hinds was employed with any of the Company Parties, and that as of the time Hinds signed this Agreement Hinds was not aware of any legal, regulatory or compliance related issues that Hinds has not previously raised with the Company Parties. Hinds further acknowledges that as of the time Hinds signed this Agreement Hinds was aware of no conduct by any of the Released Parties that Hinds reasonably believed constitutes a violation of any federal, state or local law, rule, ordinance or regulation.

e. Hinds represents that as of the time Hinds signed this Agreement Hinds has no knowledge of the existence of any Proceeding against any of the Released Parties. In the event

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that any such Proceeding has been filed, Hinds will promptly take all reasonable actions necessary to withdrawal or terminate that Proceeding unless prohibited by law.

10. Public Statements and Documents Related to this Agreement. Hinds agrees to reasonably cooperate with the Company Parties in connection with any public statements that the Company Parties desire to make with respect to the subject matter of this Agreement.. In response to any inquiries about the circumstances of the termination of Hinds’ employment by the Company Parties, or his other affiliations with the Company Parties (such as an officer or limited liability company manager), Hinds and the Company Parties and their respective representatives will limit the response to the following: Hinds’ dates of service as an employee and in each other capacity; his final pay rate; his final job title (Executive Vice President, Development Planning & Acquisitions), and any information regarding Hinds’ separation set forth in the press release issued by the Company Parties. The Parties waive their right to claim disparagement associated with either Party citing the contents of the press release.

11. Provision of Services During the Transition Period .

a. During the period between the Separation Date and August 31, 2017 (the “ Transition Period ”), Hinds agrees to provide, for no additional consideration, as and when reasonably requested by one of the Authorized Representatives of the Consulting Recipients (as defined below), services in the capacity of an independent contractor relating to the Company Parties and their respective affiliates (the “ Consulting Recipients ”), (i) which are within the scope of duties he performed while he was employed by the Employer; (ii) which may include, when reasonably requested by the Company, consultation to the Consulting Recipients as may be necessary to transition Hinds’ duties to a person or persons as one of the Authorized Representatives of the Consulting Recipients may designate; or (iii) which are otherwise within his skills and education (the “ Services ”).

b. “ Authorized Representatives of the Consulting Recipients ” are up to a total of three directors, or officers who are not directors of the Company Parties, specified in writing to Hinds. The initial Authorized Representative of the Consulting Recipients is Joe Jaggers.

c. Hinds shall not be required to provide the Services for more than 80 hours per month during the Transition Period, unless Hinds shall agree to do so (the “ Maximum Hours ”). In providing the Services, Hinds shall provide the Consulting Recipients with such of Hinds’ services as the Authorized Representatives of the Consulting Recipients reasonably deem necessary and have requested from Hinds; including, without limitation, attending such meetings as the Consulting Recipients may reasonably require upon reasonable advance notice; as further discussed below.

d. A Company Party shall pay, or reimburse Hinds, (i) for Hinds’ reasonable expenses incurred by him related to Hinds attending such meeting; and (ii) for such other reasonable expenses as Hinds shall incur in the performance of the Services. Without limiting the generality of the prior sentence, a Company Party shall pay the cost of airfare, other transportation, lodging, and meals (as applicable) incurred by Hinds in connection with any travel out of the Denver Metropolitan Area to provide any Services; or reimburse Hinds for those expenses. Reimbursement

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of Hinds’ expenses covered by this Section shall be made by a Company Party to Hinds within ten (10) days after Hinds submits a receipts or other evidence of expenditures to a Company Party.

e. Hinds shall coordinate the furnishing of the Services with the Authorized Representatives of the Consulting Recipients in order that such services can be provided in such a way as to generally conform to the business schedules of the Consulting Recipients, subject to the Maximum Hours; but the method of performance, time of performance, place of performance, hours utilized in such performance, and other details of the manner of performance of Hinds’ provision of the Services shall be within the sole control of Hinds.

f. During the Transition Period, Hinds shall have the right to devote Hinds’ business day and working efforts to personal matters, and to business and professional opportunities other than the performance of the Services; including the provision of services to a for profit or a nonprofit entity that is not a Competitive Business, even if the services are rendered by him for compensation; provided that Hinds is available to perform the Services for up to the Maximum Hours. In addition, Hinds agrees that if he is given reasonable advance written notification of a request by any of the Authorized Representatives of the Consulting Recipients to (i) travel from his home to any other location to perform any of the Services on a particular day, and if applicable for an overnight period of more than one day, or (ii) to be available to provide any of the Services on a particular day or days and/or time period during that day or those days, he will not unreasonably refuse to do so. Without limiting the generality of the prior sentence, it will not be unreasonable for Hinds to refuse the request if (1) it would result in Hinds having to perform the Services for more than the Maximum Hours; (2) Hinds has, as of the time the request is made, already scheduled a personal, business, or other activity during that period; (3) he receives less than one business day advance written notice of travel from home to a location within the Denver Metropolitan Area; or (4) he receives less than three business days advance written notice of travel from home to a location outside the Denver Metropolitan Area.

g. Hinds shall not be deemed to be an agent of any Consulting Recipient or any of their respective subsidiaries, nor have any power to bind or commit a Consulting Recipient or any of its subsidiaries to any obligation or otherwise act on its behalf.

h. As of the Separation Date, Hinds and the Company Parties intend that Hinds shall be an independent contractor of the Company Parties; and not an employee of Employer or any of the other Consulting Recipients or the other Company Parties. Nothing in this Agreement shall be deemed to change that status. During the Transition Period, Hinds shall not be entitled to participate in any pension or welfare benefit plans, or other benefit plans of any Company Party; unless such benefits are made available to Hinds by operation of law as a result of Hinds’ former employment status with Employer.

i. The Transition Period will automatically terminate upon the death, if applicable, of Hinds. The Transition Period will automatically terminate upon written notice by Hinds or a designee of Hinds to the Company Parties, or upon any of the Company Parties otherwise becoming aware of the situation, if Hinds becomes mentally or physically disabled in a manner and extent that he cannot continue to provide the Services; unless his inability to perform the Services

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is not expected to, and does not, continue for a period that would render Hinds in breach of this Section 11 .

12. Applicable Law and Venue . This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Colorado without reference to the principles of conflicts of law. The Parties agree that any appropriate state or federal court located in Colorado has exclusive jurisdiction over any case or controversy arising under or in connection with this Agreement and is the proper forum in which to adjudicate the case or controversy.

13. Attorneys’ Fees; Costs. The prevailing party(ies) in any suit or action arising out of or related to this Agreement will be entitled to recover from the other party(ies) its/their attorney fees, costs and expenses in the amount that the court determines reasonable in both the trial court and appellate courts (as applicable).

14. Counterparts; Signatures . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. A facsimile signature, whether sent by e-mail or other electronic medium, will have the same force and effect as an original signature.

15. Amendment; Entire Agreement . This Agreement cannot be modified other than by an agreement in writing signed by (a) Hinds; and (b) the Company Party, or if applicable each of the Company Parties, effected by the modification. This Agreement, and those other agreements referenced in this Agreement that have not been terminated or otherwise superseded by this Agreement, but only to the extent that they have not been amended by this Agreement, constitute the entire agreement of the Parties with regard to the subject matter of this Agreement.

16. Third-Party Beneficiaries .

a. Hinds expressly acknowledges and agrees that each Released Party that is not a signatory to this Agreement shall be a third-party beneficiary of this Agreement.

b. The Company Parties each acknowledge and agree that the Trust is a third-party beneficiary of this Agreement.

17. Invalidity; Severability . If a court of competent jurisdiction determines that any term or provision of this Agreement (or part thereof) is invalid or unenforceable in any respect, the court shall modify the term or provision to the extent necessary to avoid rendering such term or provision (or part thereof) invalid or unenforceable, and such modification shall be accomplished in the manner that most nearly preserves the benefit of the Parties’ bargain hereunder; or the term or provision, or part thereof, will severed from this Agreement. In either situation, the other terms or provisions of this Agreement will remain in effect.

18. Acknowledgments and Revocation Right . Hinds acknowledges that Hinds is knowingly and voluntarily waiving and releasing any rights Hinds may have under the ADEA and that some of the consideration given for the waiver and release contained in this Agreement is in addition to anything of value to which Hinds is already entitled. Hinds further acknowledges that

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Hinds has been advised by this writing, as required by the ADEA, that: (a) Hinds’ waiver and release contained herein do not apply to any rights or claims that may arise after the execution date of this Agreement; (b) Hinds has been advised hereby that Hinds has the right to consult with an attorney prior to executing this Agreement; (c) Hinds has twenty-one (21) days to consider this Agreement (although Hinds may choose to voluntarily execute this Agreement earlier, thereby waiving Hinds’ right to review this Agreement for a full 21 days); (d) Hinds has seven (7) days following the execution of this Agreement to revoke this Agreement (the “ Revocation Period ”); and (e) this Agreement will not be effective until the date upon which the Revocation Period has expired, which will be the eighth (8 ^th ) day after this Agreement is executed by Hinds and delivered to the Company; provided that it has been dated and signed on behalf of all of the Company Parties, and a copy of the fully executed Agreement has been delivered to Hinds before the expiration of the Revocation Period (the “ Effective Date ”). Revocation of this Agreement by Hinds must be in writing and e-mailed to Joseph N. Jaggers, President & Chief Executive Officer, Jagged Peak Energy Inc., 1125 17th Street, Suite 2400, Denver, Co 80202, jjaggers@jaggedpeakenergy.com, prior to the end of the Revocation Period.

19. Interpretation . The headings to Sections and Subsection hereof are for the purpose of reference only and shall in no way limit, define, or otherwise affect the provisions hereof. The word “or” as used herein is not exclusive and is deemed to have the meaning “and/or,” unless the context indicates that it only means “or.” The words “herein”, “hereof”, “hereunder,” and other compounds of the word “here” shall refer to this entire Agreement and not to any particular provision hereof. The use herein of the word “including” following any general statement, term, or matter shall not be construed to limit such statement, term, or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term, or matter. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any Party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the Parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the Parties.

20. Reports of Potential Violations of Law. Notwithstanding anything in this Agreement to the contrary, nothing herein will prevent Hinds from: (a) making a good faith report of possible violations of applicable law to any governmental agency or entity; or (b) making disclosures that are protected under the whistleblower provisions of any applicable law. Further, Hinds shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret of a Company Party that: (i) is made (A) to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting, or in connection with an investigation of, a suspected violation of law; or (C) in response to a subpoena or court or agency order, or as otherwise required by law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, provided that (1) Hinds promptly gives the applicable Company Party notice of any such demand made on Hinds, unless Hinds is prohibited by law or court or agency order from doing so; and (2) Hinds uses reasonable and lawful means, if

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any, to resist or limit disclosure until the applicable Company Party has had a reasonable opportunity to intervene or has advised Hinds that it does not object to the disclosure. An individual who files a lawsuit for retaliation by an employer of reporting a suspected violation of law may disclose a trade secret of the employer to the attorney of the individual and use the trade secret information in the court proceeding, provided that the individual promptly gives the applicable Company Party notice of any such disclosure, unless individual is prohibited by law or court order from doing so; and the individual uses reasonable and lawful means (if any) to resist or limit disclosure until the Company Party has had a reasonable opportunity to intervene or has advised the individual that it does not object to the disclosure.

21. Notices. All notices under this Agreement must be given in writing. Any notice required or permitted by this Agreement or by law may be personally delivered; or sent via e-mail with confirmation of receipt, or sent by courier with delivery charges prepaid, and addressed to the intended recipient as set forth below.



(a)	If to Hinds:	With a copy to:

Gregory Hinds		Daniel Block
1625 Ease Adobe Place		Robinson Waters & O’Dorisio, P.C.
Highlands Ranch, CO 80126		1099 18th Street, Suite 2600
E-mail: gshinds@yahoo.com		Denver, CO 80202
		E-mail: dblock@rwolaw.com

(b)	If to one or more Company Parties:	With a copy to:

Joseph Jaggers		Chris Humber
Jagged Peak Energy Inc.		Jagged Peak Energy Inc.
1125 17th Street, Suite 2400		1125 17th Street, Suite 2400
Denver, CO 80202		Denver, CO 80202
E-mail: jjaggers@jaggedpeakenergy.com		E-mail: chumber@jaggedpeakenergy.com

Any party or its authorized representative specified above may change the address to which notices are to be delivered by giving the other party and its representative specified above notice in a manner permitted above.

[REMAINDER INTENTIONALLY LEFT BLANK; SIGNATURES FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective for all purposes as provided above.



	Gregory S. Hinds

March 14, 2017	/s/ Gregory S. Hinds
Date	Gregory S. Hinds

	JAGGED PEAK ENERGY INC.:

March 14, 2017	By:	/s/ Joseph N. Jaggers, III
Date		Joseph N. Jaggers, III
		President & Chief Executive Officer

	JAGGED PEAK ENERGY LLC:

March 14, 2017	By:	/s/ Joseph N. Jaggers, III
Date		Joseph N. Jaggers, III
		President & Chief Executive Officer

	JAGGED PEAK ENERGY MANAGEMENT LLC:

March 14, 2017	By:	/s/ Joseph N. Jaggers, III
Date		Joseph N. Jaggers, III
		President & Chief Executive Officer

	JPE MANAGEMENT HOLDINGS LLC:

March 14, 2017	By:	/s/ Joseph N. Jaggers, III
Date		Joseph N. Jaggers, III
		Manager

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Exhibit 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

I, Joseph N. Jaggers, certify that:


1)	I have reviewed this quarterly report on Form 10-Q of Jagged Peak Energy Inc.;


2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


a)	D esigned such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	E valuated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


c)	D isclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and


5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	A ll significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	A ny fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	May 11, 2017	/s/ JOSEPH N. JAGGERS
		Name:	Joseph N. Jaggers
		Title:	Chief Executive Officer and President

Exhibit 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

I, Robert W. Howard, certify that:


1)	I have reviewed this quarterly report on Form 10-Q of Jagged Peak Energy Inc.;


2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


a)	D esigned such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	E valuated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


c)	D isclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and


5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	A ll significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	A ny fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	May 11, 2017	/s/ ROBERT W. HOWARD
		Name:	Robert W. Howard
		Title:	Executive Vice President and Chief Financial Officer

Exhibit 32.1

Certification

I, Joseph N. Jaggers, Chief Executive Officer and President of Jagged Peak Energy Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:


1.	the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and


2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	May 11, 2017	/s/ JOSEPH N. JAGGERS
		Name:	Joseph N. Jaggers
		Title:	Chief Executive Officer and President

Exhibit 32.2

Certification

I, Robert W. Howard, Executive Vice President and Chief Financial Officer of Jagged Peak Energy Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:


1.	the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and


2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	May 11, 2017	/s/ ROBERT W. HOWARD
		Name:	Robert W. Howard
		Title:	Executive Vice President and Chief Financial Officer