Jagged Peak Energy Inc. (Form: 10-Q, Received: 08/10/2017 06:07:53)

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 June 30, 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 August 4, 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 June 30, 2017 and December 31, 2016	4

	Consolidated and Combined Statements of Operations for the Three and Six Months Ended June 30, 2017 and 2016	5

	Consolidated and Combined Statement of Changes in Equity for the Six Months Ended June 30, 2017	6

	Consolidated and Combined Statements of Cash Flows for the Six Months Ended June 30, 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	22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	38

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	40


Signatures		41
Exhibit Index		42

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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 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 drilling rigs and fracturing fleets anticipated to be in operation in 2017, and anticipated well economics;


•	government regulations and 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;


•	our hedging strategy and results;


•	general economic conditions;


•	uncertainty regarding our future operating results; and


•	our plans, objectives, expectations and intentions contained in this quarterly 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 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.

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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)



	June 30,			December 31,
	2017			2016
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	86,996		$	11,727
Accounts receivable	18,392			10,327
Derivative instruments	18,829			—
Other current assets	1,416			3,412
Total current assets	125,633			25,466
PROPERTY AND EQUIPMENT
Oil and natural gas properties, successful efforts method	836,979			531,121
Accumulated depletion	(93,068		)	(57,529		)
Total oil and gas properties, net	743,911			473,592
Other property and equipment, net	3,365			3,001
Total property and equipment, net	747,276			476,593
OTHER NONCURRENT ASSETS
Unamortized debt issuance costs	2,664			1,503
Derivative instruments	12,945			—
Other assets	235			14,830
Total noncurrent assets	15,844			16,333
TOTAL ASSETS	$	888,753		$	518,392
LIABILITIES AND STOCKHOLDERS’ / MEMBERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	3,559		$	7,629
Accrued liabilities	100,833			39,225
Derivative instruments	1,261			9,567
Total current liabilities	105,653			56,421
LONG-TERM LIABILITIES
Senior secured revolving credit facility	—			132,000
Derivative instruments	249			3,287
Asset retirement obligations	609			448
Deferred income taxes	103,637			—
Other long-term liabilities	41			124
Total long-term liabilities	104,536			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 June 30, 2017; no shares authorized or issued at December 31, 2016	—			—
Common stock, $0.01 par value; 1,000,000,000 shares authorized, 212,930,655 shares issued at June 30, 2017; no shares authorized or issued at December 31, 2016	2,129			—
Additional paid-in capital	750,437			—
Accumulated deficit	(74,002		)	(19,986		)
Total stockholders’ / members’ equity	678,564			326,112
TOTAL LIABILITIES AND STOCKHOLDERS’ / MEMBERS’ EQUITY	$	888,753		$	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 June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
REVENUES
Oil sales	$	48,388		$	17,609		$	85,153		$	26,883
Natural gas sales	1,841			439			2,758			719
NGL sales	2,663			776			4,181			1,204
Other operating revenues	159			512			347			775
Total revenues	53,051			19,336			92,439			29,581
OPERATING EXPENSES
Lease operating expenses	3,890			1,173			5,500			2,969
Gathering and transportation expenses	655			218			1,047			368
Production and ad valorem taxes	3,537			1,131			6,177			1,832
Exploration	2			1,192			8			2,474
Depletion, depreciation, amortization and accretion	22,311			9,566			36,373			18,278
Impairment of unproved oil and natural gas properties	101			64			108			310
General and administrative expenses (including equity-based compensation of $10,775 and $0 for the three months ended June 30, 2017 and 2016, respectively, and $419,739 and $0 for the six months ended June 30, 2017 and 2016, respectively)	18,220			2,171			431,771			5,503
Other operating expenses	47			214			182			398
Total operating expenses	48,763			15,729			481,166			32,132
INCOME (LOSS) FROM OPERATIONS	4,288			3,607			(388,727		)	(2,551		)
OTHER INCOME (EXPENSE)
Gain (loss) on commodity derivatives	26,573			(8,877		)	43,615			(9,936		)
Interest expense, net	(432		)	(479		)	(1,143		)	(712		)
Other, net	243			—			414			—
Total other income (expense)	26,384			(9,356		)	42,886			(10,648		)
INCOME (LOSS) BEFORE INCOME TAX	30,672			(5,749		)	(345,841		)	(13,199		)
Income tax expense (benefit)	14,269			—			103,637			—
NET INCOME (LOSS)	16,403			(5,749		)	(449,478		)	(13,199		)
Less: Net loss attributable to Jagged Peak Energy LLC (predecessor)	—			(5,749		)	(375,476		)	(13,199		)
NET INCOME (LOSS) ATTRIBUTABLE TO JAGGED PEAK ENERGY INC. STOCKHOLDERS	$	16,403		$	—		$	(74,002	)	$	—

Net income (loss) attributable to Jagged Peak Energy Inc. Stockholders per common share:
Basic	$	0.08					$	(0.35	)
Diluted	$	0.08					$	(0.35	)

Weighted-average common shares outstanding:
Basic	212,932						212,934
Diluted	213,051						212,934

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
Common stock reacquired and retired	—			(7	)	—		(88		)	—			(88		)
Equity-based compensation	—			—		—		40,713			—			40,713
Net income (loss)	—			—		—		—			(74,002		)	(74,002		)
BALANCE AT JUNE 30, 2017	$	—		212,931		$	2,129	$	750,437		$	(74,002	)	$	678,564

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)



	Six Months Ended June 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(449,478	)	$	(13,199	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation, amortization and accretion expense	36,373			18,278
Management incentive unit advance	—			(14,711		)
Impairment of unproved oil and natural gas properties	108			310
Exploratory dry hole costs	—			1,192
Amortization of debt issuance costs	260			87
Deferred income taxes	103,637			—
Equity-based compensation	419,739			—
(Gain) loss on commodity derivatives	(43,615		)	9,936
Net cash receipts (payments) on settled derivatives	496			(822		)
Other	(83		)	(79		)
Change in operating assets and liabilities:
Accounts receivable and other current assets	(8,710		)	(810		)
Other assets	(119		)	11
Accounts payable and accrued liabilities	1,397			1,111
Net cash provided by operating activities	60,005			1,304
CASH FLOWS FROM INVESTING ACTIVITIES
Leasehold and acquisition costs	(52,968		)	(23,934		)
Development of oil and natural gas properties	(195,212		)	(54,155		)
Other capital expenditures	(1,456		)	(1,691		)
Net cash used in investing activities	(249,636		)	(79,780		)
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	—			31,542
Proceeds from credit facility	10,000			40,000
Repayment of credit facility	(142,000		)	—
Debt issuance costs	(1,421		)	(738		)
Costs relating to initial public offering	(3,216		)	—
Employee tax withholding for settlement of equity compensation awards	(88		)	—
Net cash provided by financing activities	264,900			70,804
NET CHANGE IN CASH AND CASH EQUIVALENTS	75,269			(7,672		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	11,727			14,165
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	86,996		$	6,493
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid, net of capitalized interest	$	1,001		$	522
Cash paid for income taxes	—			—
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Accrued capital expenditures	$	93,834		$	12,446
Asset retirement obligations	246			165

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 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 common stock. Certain members of management and employees contributed a portion of 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. Immediately 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 its common stock 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, expected production increases due to development activities, 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 the 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.

Accounts Receivable

At June 30, 2017 and December 31, 2016 , accounts receivable was comprised of the following:



(in thousands)	June 30, 2017		December 31, 2016
Oil and gas sales	$	17,086	$	8,861
Other	1,306		1,466
Total accounts receivable	$	18,392	$	10,327

At June 30, 2017 and December 31, 2016 , the Company did no t have any reserves for doubtful accounts and did not incur any bad debt expense in any period presented.

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JAGGED PEAK ENERGY INC.

Notes to Consolidated and Combined Financial Statements

(Unaudited)

Oil and Natural Gas Properties

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



(in thousands)	June 30, 2017			December 31, 2016
Proved oil and natural gas properties	$	648,408		$	375,129
Unproved oil and natural gas properties	188,571			155,992
Total oil and natural gas properties	836,979			531,121
Less: Accumulated depletion	(93,068		)	(57,529		)
Total oil and natural gas properties, net	$	743,911		$	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 June 30, 2017 and 2016 , the Company recorded depletion for oil and natural gas properties of $21.9 million and $9.4 million , respectively. For the six months ended June 30, 2017 and 2016 , the Company recorded depletion for oil and natural gas properties of $35.5 million and $18.0 million , respectively.

Accrued Liabilities

The components of accrued liabilities are shown below:



(in thousands)	June 30, 2017		December 31, 2016
Accrued capital expenditures	$	84,888	$	28,490
Accrued accounts payable	3,754		3,312
Revenue payable	4,033		2,653
Other current liabilities	8,158		4,770
Total accrued liabilities	$	100,833	$	39,225

Equity-based Compensation

The Company recognizes compensation cost related to equity-based awards granted to employees, members of the Company’s board of directors and non-employee contractors 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 and restricted stock units (including awards with service-based vesting and market condition-based vesting provisions). 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 fair 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 in the consolidated and combined statements of operations. The Company has elected to account for forfeitures in compensation expense as they occur. Equity-based compensation arrangements to nonemployees are recognized as expense over the related service period and are subject to remeasurement at the end of each reporting period until they vest.

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,

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Notes to Consolidated and Combined Financial Statements

(Unaudited)

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, and will apply the modified retrospective method. The Company is in process of evaluating the effect on its existing contracts, but 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. The Company expects that certain additional disclosures will be required upon adoption of this standard.

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 timing and 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 . The 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, 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 June 30, 2017 , the Company hedged 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 revenue on the hedged volumes than it would receive in the absence of hedges.

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Notes to Consolidated and Combined Financial Statements

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The following table summarizes the Company’s derivative contracts as of June 30, 2017 :



Contract Period	Volumes (Bbls)	Wtd Avg Price ($/Bbl)
Oil Swaps ⁽¹⁾ :
Third quarter 2017	897,450	$	51.99
Fourth quarter 2017	1,034,200	$	52.41
Total 2017	1,931,650	$	52.21
Year ending December 31, 2018	3,073,350	$	53.38
Year ending December 31, 2019	1,277,500	$	53.51
Oil Basis Swaps ⁽²⁾ :
Year ending December 31, 2018	1,825,000	$	(1.20	)
Year ending December 31, 2019	1,460,000	$	(1.15	)


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


(2)	The oil basis swap 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 derivative contracts are included in cash flows from operating activities in the Company’s statements of cash flows.

Subsequent to June 30, 2017 , the Company entered into the following derivative contracts:



Contract Period	Volumes (Bbls)	Wtd Avg Price ($/Bbl)
Oil Swaps ⁽¹⁾ :
Third quarter 2017	186,750	$	48.24
Fourth quarter 2017	358,500	$	48.24
Total 2017	545,250	$	48.24
Year ending December 31, 2018	1,642,500	$	50.00
Year ending December 31, 2019	1,095,000	$	50.00
Oil Basis Swaps ⁽²⁾ :
Year ending December 31, 2018	365,000	$	(1.17	)
Year ending December 31, 2019	365,000	$	(1.22	)


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


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

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



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2017			2016			2017			2016
Gain (loss) on derivatives instruments, net	$	26,573		$	(8,877	)	$	43,615		$	(9,936	)
Cash settlements of derivatives (received) paid, net	$	(1,567	)	$	822		$	(496	)	$	822

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.

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Notes to Consolidated and Combined Financial Statements

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The following tables present the amounts and classifications of the Company’s commodity contract derivative assets and liabilities as of June 30, 2017 and December 31, 2016 (in thousands):



As of June 30, 2017:	Balance Sheet Location	Gross amounts presented on the balance sheet		Netting adjustments not offset on the balance sheet			Net amounts
Assets
Commodity contracts	Current assets - derivative instruments	$	18,829	$	(1,261	)	$	17,568
Commodity contracts	Noncurrent assets - derivative instruments	12,945		(249		)	12,696
Total assets		$	31,774	$	(1,510	)	$	30,264
Liabilities
Commodity contracts	Current liabilities - derivative instruments	$	1,261	$	(1,261	)	$	—
Commodity contracts	Noncurrent liabilities - derivative instruments	249		(249		)	—
Total liabilities		$	1,510	$	(1,510	)	$	—



As of December 31, 2016:	Balance Sheet Location	Gross amounts presented on the balance sheet		Netting adjustments not offset on the balance sheet		Net amounts
Liabilities
Commodity contracts	Current liabilities - derivative instruments	$	9,567	—		$	9,567
Commodity contracts	Noncurrent liabilities - derivative instruments	3,287		—		3,287
Total liabilities		$	12,854	$	—	$	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, and monitors the appropriateness of these counterparties on an ongoing basis. Generally, the Company does not require collateral and does not anticipate nonperformance by its counterparties.

At June 30, 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

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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 June 30, 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 its 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 June 30, 2017 and December 31, 2016 :



	Level 2
(in thousands)	June 30, 2017		December 31, 2016
Assets from commodity derivative contracts	$	31,774	$	—
Liabilities from commodity derivative contracts	1,510		12,854

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 and six months ended June 30, 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 expense on unproved oil and gas properties of $0.1 million and $0.1 million for the three months ended June 30, 2017 and 2016 , respectively, and $0.1 million and $0.3 million for the six months ended June 30, 2017 and 2016 , respectively. These impairments resulted from the expirations of certain undeveloped leases.

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Notes to Consolidated and Combined Financial Statements

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The inception value and revision value, if any, of the Company’s asset retirement obligations 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 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 thereto (the “amended and restated credit facility”). The number of banks remained at nine , while the aggregate principal commitment increased to $1.0 billion . 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 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, or (ii) the adjusted LIBOR rate plus a margin that varies from 2.25% to 3.25% per annum according to the 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 90% 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

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Notes to Consolidated and Combined Financial Statements

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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 the 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 June 30, 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 June 30, 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 shares to employees, consultants and directors of the Company and its affiliates who perform services for 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.

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 June 30,				Six Months Ended June 30,
(in thousands)	2017		2016		2017		2016
Incentive unit awards	$	9,929	$	—	$	418,893	$	—
Restricted stock unit awards	377		—		377		—
Performance stock unit awards	339		—		339		—
Restricted stock unit awards issued to nonemployee directors	130		—		130		—
Total equity-based compensation expense	$	10,775	$	—	$	419,739	$	—

Incentive Unit 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 units 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.

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Notes to Consolidated and Combined Financial Statements

(Unaudited)

The shares of common stock transferred to Management Holdco are accounted for under ASC 718, Compensation–Stock Compensation , and generally vest over three years. During the three and six months ended June 30, 2017 , the Company recognized $9.9 million and $39.9 million , respectively, of equity-based compensation expense related to the shares held by Management Holdco. Included in the $39.9 million for the six months ended June 30, 2017 , is $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 remaining compensation expense of these awards will be recognized ratably according to the terms of the Management Holdco LLC Agreement. 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.

A summary of incentive unit award activity for the six months ended June 30, 2017 is as follows:



				Weighted Average
				Grant-date
	Incentive Units			Fair Value
Unvested at Corporate Reorganization	9,570,291			$	15.00
Granted	169,664			$	12.48
Vested	(1,961,104		)	$	14.97
Forfeited	—			$	—
Unvested at June 30, 2017	7,778,851			$	14.95
Compensation costs remaining at June 30, 2017 (in millions)	$	100.5
Weighted average remaining period at June 30, 2017 (in years)	2.6

The total fair value of incentive units that vested during the six months ended June 30, 2017 was $24.0 million .

At June 30, 2017 , there were 497,003 of unallocated shares of Company common stock held at Management Holdco, which when granted, will be valued using the closing stock price on the date of grant, and the Company will recognize expense over the requisite service period.

Restricted Stock Unit Awards

Restricted stock unit awards (“RSUs”) vest subject to the satisfaction of service requirements. Expense related to each RSU award is recognized on a straight-line basis over the requisite service period of the entire award. Forfeitures are accounted for as they occur through reversal of expense on awards that were forfeited during the period. The grant date fair values of these awards are determined based on the closing price of the Company’s common stock on the date of the grant.

A summary of RSU award activity for the six months ended June 30, 2017 is as follows:



			Weighted Average
			Grant-date
	RSUs		Fair Value
Unvested at December 31, 2016	—		$	—
Granted	479,213		$	12.54
Vested	—		$	—
Forfeited	—		$	—
Unvested at June 30, 2017	479,213		$	12.54
Compensation costs remaining at June 30, 2017 (in millions)	$	5.5
Weighted average remaining period at June 30, 2017 (in years)	2.5

Of the 479,213 RSUs granted during the six months ended June 30, 2017 , 55,744 of which related to nonemployee directors, who received them at a weighted average grant-date fair value of $12.54 .

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Notes to Consolidated and Combined Financial Statements

(Unaudited)

Performance Stock Unit Awards

In the second quarter of 2017, the Company granted performance stock unit awards (“PSUs”) to certain of its executive officers, which vest based on continuous employment and satisfaction of a performance metric based on the total shareholder return (“TSR”) of the Company’s common stock relative to the TSR of a peer group of companies over an approximate three -year performance period ending December 31, 2019. The number of shares which may ultimately be earned ranges from zero to 200% of the PSUs granted. Expense related to these PSUs is recognized on a straight-line basis over approximately three years. All compensation cost related to the market-based awards will be recognized if the requisite service period is fulfilled, even if the market condition is not achieved.

A summary of PSU award activity for the six months ended June 30, 2017 is as follows:



			Weighted Average
			Grant-date
	PSUs		Fair Value
Unvested at December 31, 2016	—		$	—
Granted	267,204		$	16.32
Vested	—		$	—
Forfeited	—		$	—
Unvested at June 30, 2017	267,204		$	16.32
Compensation costs remaining at June 30, 2017 (in millions)	$	4.0
Weighted average remaining period at June 30, 2017 (in years)	2.5

The grant-date fair value of the PSUs was determined using a Monte Carlo simulation, which uses a probabilistic approach for estimating the fair value of the awards. The expected volatility was derived from a weighted combination of implied volatility and historical volatility. The risk-free interest rate was determined using the yield available for zero-coupon U.S. government issues with remaining terms corresponding to the service periods of the PSUs.

The following table presents information regarding the weighted average fair value for PSUs granted during the six months ended June 30, 2017 and the assumptions used to determine the fair values:



	Six Months Ended
	June 30, 2017
Dividend yield	—		%
Volatility	55.7		%
Risk-free interest rate	1.34		%
Weighted average fair value of awards granted	$	16.32

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 RSUs and PSUs, if including such potential shares of common stock units is dilutive. The PSUs included in the calculation of diluted weighted average shares outstanding based on the number of shares of common stock that would be issuable if the end of the reporting period was the end of the performance period required for the vesting of such PSU awards. During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effect of all awards is anti-dilutive.

For the six months ended June 30, 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 June 30, 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:



	Three Months Ended		From January 27, 2017, to
(in thousands, except per share amounts)	June 30, 2017		June 30, 2017
Net income (loss) attributable to Jagged Peak Energy Inc. stockholders	$	16,403	$	(74,002	)

Basic weighted average shares outstanding	212,932		212,934
Effect of dilutive securities:
Restricted stock units	—		—
Performance stock units	119		—
Diluted weighted average shares outstanding	213,051		212,934

Net income (loss) per common share:
Basic	$	0.08	$	(0.35	)
Diluted	$	0.08	$	(0.35	)

The following table presents amounts that have been excluded from the computation of diluted earnings per common share as their inclusion would be anti-dilutive:



	Three Months Ended	From January 27, 2017, to
(in thousands)	June 30, 2017	June 30, 2017
Weighted average number of outstanding equity awards excluded from diluted earnings per share calculation: ⁽¹⁾
Restricted stock units	65	231
Performance stock units	—	267


(1)	When the Company incurs a net loss, all outstanding equity awards are excluded from the calculation of diluted loss per common share because the inclusion of these awards would be anti-dilutive.

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 June 30, 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 in the first quarter of 2017.

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



	Three Months Ended		Six Months Ended
(in thousands)	June 30, 2017		June 30, 2017
Current income tax expense:
Federal	$	—	$	—
State	—		—
	—		—
Deferred income tax expense:
Federal	13,968		101,447
State	301		2,190
	14,269		103,637
Provision for income taxes	$	14,269	$	103,637

Included in the deferred federal income tax provision above for the six months ended June 30, 2017 , is the $79.1 million related to the Company’s change in tax status.

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			Six Months Ended
(in thousands)	June 30, 2017			June 30, 2017
Income (loss) before income taxes	$	30,672		$	(345,841	)
Less: net loss prior to corporate reorganization	—			(375,476		)
Income (loss) before income taxes subsequent to corporate reorganization	$	30,672		$	29,635

Income taxes at the federal statutory rate	$	10,735		$	10,372
Income tax expense relating to change in tax status	—			78,019
State income taxes, net of federal benefit	195			1,423
Nondeductible equity-based compensation	3,330			13,808
Other permanent differences	9			15
Income tax expense (benefit)	$	14,269		$	103,637
Effective tax rate	46.5		%	(30.0		)%

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 June 30, 2017 are as follows:



(in thousands)	June 30, 2017
Deferred tax assets:
Net operating loss carryforwards	$	3,721
Other	1,493
Total deferred tax assets	5,214
Deferred tax liabilities:
Oil and natural gas properties	98,111
Commodity derivatives	10,740
Total deferred tax liabilities	108,851
Net deferred tax liabilities	$	(103,637	)

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The Company had U.S. net operating losses of approximately $10.5 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 June 30, 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 June 30, 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.

Note 9 —Asset Retirement Obligations

The following table summarizes the changes in the carrying amount of the asset retirement obligations for the six months ended June 30, 2017 :



(in thousands)
Asset retirement obligations at January 1, 2017	$	448
Liabilities incurred and assumed	251
Liability settlements and disposals	—
Revisions of estimated liabilities	(5		)
Accretion	27
Asset retirement obligations at June 30, 2017	721
Less current portion of asset retirement obligations	(112		)
Long-term asset retirement obligations	$	609

The current portion of the asset retirement obligation liability is included in accrued liabilities on the consolidated and combined balance sheets.

Note 10 —Commitments and Contingencies

Commitments

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

At June 30, 2017 , the Company had five drilling rigs under contract. If the Company were to terminate these contracts at June 30, 2017 , it would be required to pay early termination penalties of $5.5 million . In the first six months 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.

At June 30, 2017 , the Company had three frac fleets under contract through December 31, 2018. The remaining commitment for these contracts is $25.4 million in 2017, and $73.2 million in 2018. The majority of the contracts allow for reassignment of the frac fleets if the Company were to terminate their services prior to the end of the contract, at which point the Company would not be required to pay termination fees. However, if the fleets were not able to be reassigned, the Company would be required to pay termination fees of $73.0 million as of June 30, 2017 .

During the second quarter of 2017, the Company entered into a new lease agreement of its corporate offices, which is expected to take effect in December 2017 and go through May 2028. Including this new lease agreement, the Company has commitments for office space and equipment under operating lease arrangements totaling $16.9 million .

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JAGGED PEAK ENERGY INC.

Notes to Consolidated and Combined Financial Statements

(Unaudited)

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 June 30, 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.

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. In addition, the Company paid fees to Oryx for the purchase and maintenance of connecting equipment.

Quantum also owns a 60.9% 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 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.

The following table summarizes fees paid to Oryx, Phoenix and Trident for the periods indicated:



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2017		2016		2017		2016
Oryx via 3rd party shipper ⁽¹⁾	$	2,379	$	99	$	3,798	$	99
Oryx ⁽²⁾	$	303	$	82	$	652	$	925
Phoenix	$	117	$	57	$	202	$	149
Trident	$	—	$	15	$	236	$	323


(1)	Transportation fees paid by the Company’s third party shipper to Oryx pursuant to the crude oil gathering agreement.


(2)	Fees paid to Oryx for the purchase and maintenance of connecting equipment.

At June 30, 2017 and December 31, 2016 , the Company had outstanding payables to the 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 , as amended. The following discussion and analysis contains forward-looking statements, including, without limitation, statements related to

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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 the 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 currently 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 June 30, 2017 , our acreage position was approximately 70,400 net acres. We divide our current areas of operation into three distinct areas: (1) Cochise, with approximately 12,900 net acres, (2) Whiskey River, with approximately 35,300 net acres, and (3) Big Tex, with approximately 22,200 net acres.

We seek to maintain operational control of our properties in order to better execute on our strategy of enhancing returns through operational 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 six months of 2016 , our realized oil price for the first six months of 2017 increased 26% to $46.67 per barrel, our realized natural gas price improved 37% to $2.53 per Mcf, and our realized price for NGLs improved by 40% to $19.56 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.

Incentive Unit Awards

Related to the closing of the IPO, we recognized equity-based compensation expense for: (1) a day-one charge of $379.0 million related to MIUs in JPE LLC; and (2) a charge for the six months ended June 30, 2017 of $39.9 million related to shares of common stock transferred to Management Holdco. Please refer to Note 6 , Equity-based Compensation , for additional information on equity-based compensation.

Public Company Expenses

As a result of the 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

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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 June 30, 2017 , we recognized $24.5 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 June 30, 2017 , we were operating five horizontal rigs. During the remainder of 2017, we expect to operate a five to six -rig drilling program, but may adjust the number of rigs depending on operating requirements and conditions. We also expect to operate two to four fracturing fleets for the remainder of 2017, as needed, to complete wells in a timely manner. During the six months ended June 30, 2017 , we completed 21 gross ( 20.7 net) operated wells. Our average daily production has grown from 4,816 Boe/d during the first six months of 2016 to 12,263 Boe/d for the same period of 2017 . In the six months ended June 30, 2017 , we spent $258.4 million for drilling and completing wells and on infrastructure costs. This compares to $49.2 million that we spent in the six months ended June 30, 2016 , and $158.3 million that we spent in all of 2016 for drilling and completion.

Summary of Operating and Financial Results Comparing the Six Months Ended June 30, 2017 and 2016


•	Successfully completed, or participated in completing, 23 gross ( 21.2 net) wells, of which we operated 21 gross ( 20.7 net), all within the Southern Delaware Basin;


•	Increased average daily production by 155% to 12,263 Boe/d, comprised of 82% oil;


•	Production revenues increased 220% to $92.1 million ;


•	Expanded our borrowing base under our amended and restated credit facility from $160.0 million , at December 31, 2016, to $250.0 million , at June 30, 2017 ;


•	Cash flow from operating activities of $60.0 million increased from $1.3 million for the same period of 2016 ;


•	Recorded a $43.6 million gain on commodity derivative instruments compared to a $9.9 million loss from the same period in 2016 ; and


•	Incurred equity-based compensation expense of $419.7 million , all of which was noncash except for $14.7 million related to an advance made in April 2016.

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 six months ended June 30, 2017 , our production revenues were derived 92% from oil sales, 3% from natural gas sales and 5% 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.

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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 June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Crude Oil (per Bbl):
Average NYMEX price	$	48.10	$	45.46	$	49.85	$	39.55
Realized price, before the effects of derivative settlements	$	44.84	$	42.44	$	46.67	$	37.03
Realized price, after the effects of derivative settlements	$	46.29	$	40.46	$	46.95	$	35.90
Natural Gas (per Mcf):
Average NYMEX price	$	3.08	$	2.15	$	3.05	$	2.07
Realized price	$	2.56	$	1.91	$	2.53	$	1.85
NGLs (per Bbl):
Average realized NGL price	$	19.00	$	15.50	$	19.56	$	14.01

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.

Production Results

The following table presents production volumes for the three and six months ended June 30, 2017 and 2016 :



	Three Months Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
Oil (MBbls)	1,079	415	1,824	726
Natural gas (MMcf)	719	230	1,088	388
NGLs (MBbls)	140	50	214	86
Total (MBoe)	1,339	503	2,220	877
Average net daily production (Boe/d)	14,714	5,530	12,263	4,816

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 June 30, 2017 , we had entered into derivative oil swap contracts covering periods from July 1, 2017 through December 31, 2019 for approximately 6.3 MMbls of our projected oil production at a weighted average WTI oil price of $53.05 per barrel. We also have basis differential contracts between Midland, TX and Cushing, OK for the periods from January 1, 2018 through December 31, 2019 covering 3.3 MMbls at a weighted average basis differential of $(1.18) per barrel. These derivative 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

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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.

Results of Operations

Comparison of the three months ended June 30, 2017 versus June 30, 2016

Oil and Natural Gas Revenues. The following table provides the components of our production revenues for the three months ended June 30, 2017 and 2016 , as well as each period’s respective average prices and production volumes:



	Three Months Ended June 30,
(in thousands or as indicated)	2017		2016		Change		% Change
Production Revenues:
Oil sales	$	48,388	$	17,609	$	30,779	175	%
Natural gas sales	1,841		439		1,402		319	%
NGL sales	2,663		776		1,887		243	%
Total production revenues	$	52,892	$	18,824	$	34,068	181	%
Average sales price ⁽¹⁾ :
Oil (per Bbl)	$	44.84	$	42.44	$	2.40	6	%
Natural gas (per Mcf)	$	2.56	$	1.91	$	0.65	34	%
NGLs (per Bbl)	$	19.00	$	15.50	$	3.50	23	%
Total (per Boe)	$	39.50	$	37.40	$	2.10	6	%
Production volumes:
Oil (MBbls)	1,079		415		664		160	%
Natural gas (MMcf)	719		230		489		212	%
NGLs (MBbls)	140		50		90		180	%
Total (MBoe)	1,339		503		836		166	%
Average daily production volume:
Oil (Bbls/d)	11,858		4,559		7,299		160	%
Natural gas (Mcf/d)	7,896		2,527		5,369		212	%
NGLs (Bbls/d)	1,540		550		990		180	%
Total (Boe/d)	14,714		5,530		9,184		166	%


(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 three months ended June 30, 2017 was 181% , or $34.1 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 three months ended June 30, 2017 . Our aggregate production volumes in the three months ended June 30, 2017 were 1,339 MBoe, comprised of 81% oil, 9% natural gas and 10% NGLs. This represents an increase of 166% over the aggregate production volumes from the three months ended June 30, 2016 , of 503 MBoe.

Increased production volumes accounted for an approximate $30.5 million increase in quarter-over-quarter production revenues, while increases in our total average sales prices accounted for an approximate $3.5 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 June 30, 2017 , oil revenues increased 175% , or $30.8 million , due to a 160% increase in production volumes and a 6% increase in the average realized price when compared to the same period from the prior year. Natural gas revenues increased 319% to $1.8 million during the three months ended June 30, 2017 from $0.4 million during the three months ended June 30, 2016 . The increase is attributable to a 212% increase in volumes and a 34% increase in the average sales price. During the three months ended June 30, 2017 , NGL revenues increased 243% , or $1.9 million , due to a 180% increase in sales volumes and a 23% increase in the average realized price.

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Other operating revenues relate to sales of fresh water and water disposal services to third parties. During the three months ended June 30, 2017 and 2016 , we recognized other operating revenues of $0.2 million and $0.5 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.

The following table summarizes our operating expenses for the periods indicated:



	Three Months Ended June 30,									Per Boe
(in thousands, except per Boe)	2017		2016		Change			% Change		2017		2016
Lease operating expenses	$	3,890	$	1,173	$	2,717		232	%	$	2.90	$	2.33
Gathering and transportation expenses	655		218		437			200	%	$	0.49	$	0.43
Production and ad valorem taxes	3,537		1,131		2,406			213	%	$	2.64	$	2.25
Exploration	2		1,192		(1,190		)	(100	)%	$	—	$	2.37
Depletion, depreciation, amortization and accretion	22,311		9,566		12,745			133	%	$	16.66	$	19.01
Impairment of unproved oil and natural gas properties	101		64		37			58	%	NM		NM
Other operating expenses	47		214		(167		)	(78	)%	$	0.04	$	0.43
General and administrative (before equity-based compensation)	7,445		2,171		5,274			243	%	$	5.56	$	4.31
Total operating expenses (before equity-based compensation)	37,988		15,729		22,259			142	%	$	28.37	$	31.25
Equity-based compensation	10,775		—		10,775
Total operating expenses	$	48,763	$	15,729	$	33,034

NM—Not meaningful.

Lease Operating Expenses. Our lease operating expense (“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 increased to $3.9 million in the three months ended June 30, 2017 , compared to $1.2 million for the same period of 2016 . The increase in LOE is generally associated with our increased level of production and well counts between periods, including costs for contract labor, equipment repair and maintenance, chemicals and electricity. LOE per Boe increased 24% between periods to $2.90 for the three months ended June 30, 2017 , primarily because of the timing of workovers and other repairs, as well as the hiring of additional operating staff to handle our increasing well count.

Gathering and Transportation Expenses. Gathering and transportation expenses increased $0.4 million during the three months ended June 30, 2017 , compared to the same period of 2016 , primarily due to increased production over the same period. In addition, we experienced a slight 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 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 213% between the three months ended June 30, 2017 and 2016 , from $1.1 million in 2016 to $3.5 million in 2017 . The increase in production taxes is due to an increase in revenues, and the increase in ad valorem taxes is primarily due to the addition of several new high-volume wells.

Exploration. Exploration expense decreased $1.2 million from June 30, 2016 to June 30, 2017 , due to exploratory dry hole costs of $1.2 million recorded in the three months ended June 30, 2016 , which related to an unproductive vertical test well drilled to a shallow horizon.

Depletion, Depreciation, Amortization and Accretion. Depletion, depreciation, amortization and accretion (“DD&A”) expense increased $12.7 million , or 133% , during the three months ended June 30, 2017 compared to the same period of 2016 . The increase in DD&A expense 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

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impairments. The DD&A rate per Boe decreased 12% to $16.66 per Boe, compared to $19.01 per Boe in the three months ended June 30, 2016 . The decrease in our DD&A rate was largely due to an increase in reserve volumes due to continued successful drilling activities, partly offset by an increase in capitalized costs in proved property related to those drilling activities.

Impairment of Unproved Oil and Natural Gas Properties. During the three months ended June 30, 2017 and 2016 , we incurred $0.1 million of impairment costs 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 $0.2 million from the three months ended June 30, 2016 compared to the same period of 2017 . We incurred $19 thousand of other operating expenses in the three months ended June 30, 2017 , due to sales of fresh water and water disposal to third parties. During the same period of 2016, we incurred other operating expenses of $0.2 million primarily due to a rig termination fee.

General and Administrative and equity-based compensation. G&A (excluding equity-based compensation) increased 243% to $7.4 million for the three months ended June 30, 2017 , from $2.2 million for the same period of 2016 . The increase is primarily due to a $4.4 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 27 at June 30, 2016 to 52 at June 30, 2017 . Additionally, we incurred $0.3 million in higher audit, tax and legal fees, which generally increased since we became a public company.

Equity-based compensation expense for the three months ended June 30, 2017 was $10.8 million , of which $9.9 million related to the common stock transferred to Management Holdco, which is subject to the terms of the Management Holdco LLC Agreement. We also granted RSUs and PSUs during the quarter, for which we recognized $0.5 million and $0.3 million , respectively. Please refer to Note 6 , Equity-based Compensation , for additional information on equity-based compensation.

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



	Three Months Ended June 30,
(in thousands)	2017			2016			Change		% Change
Gain (loss) on commodity derivatives	$	26,573		$	(8,877	)	$	35,450	NM
Interest expense, net	(432		)	(479		)	47		(10	)%
Other, net	243			—			243		NM
Total other income (expense)	$	26,384		$	(9,356	)	$	35,740	(382	)%

NM—Not meaningful.

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 June 30, 2017 and 2016 .



	Three Months Ended June 30,
(in thousands)	2017			2016
Gain (loss) on derivatives instruments, net	$	26,573		$	(8,877	)
Cash settlements of derivatives (received) paid, net	$	(1,567	)	$	822

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second quarter of 2017. This was partially offset by 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.

Comparison of the six months ended June 30, 2017 versus June 30, 2016

Oil and Natural Gas Revenues. The following table provides the components of our production revenues for the six months ended June 30, 2017 and 2016 , as well as each period’s respective average prices and production volumes:



	Six Months Ended June 30,
(in thousands or as indicated)	2017		2016		Change		% Change
Production Revenues:
Oil sales	$	85,153	$	26,883	$	58,270	217	%
Natural gas sales	2,758		719		2,039		284	%
NGL sales	4,181		1,204		2,977		247	%
Total production revenues	$	92,092	$	28,806	$	63,286	220	%
Average sales price ⁽¹⁾ :
Oil (per Bbl)	$	46.67	$	37.03	$	9.64	26	%
Natural gas (per Mcf)	$	2.53	$	1.85	$	0.68	37	%
NGLs (per Bbl)	$	19.56	$	14.01	$	5.55	40	%
Total (per Boe)	$	41.49	$	32.86	$	8.63	26	%
Production volumes:
Oil (MBbls)	1,824		726		1,098		151	%
Natural gas (MMcf)	1,088		388		700		180	%
NGLs (MBbls)	214		86		128		149	%
Total (MBoe)	2,220		877		1,343		153	%
Average daily production volume:
Oil (Bbls/d)	10,080		3,989		6,091		153	%
Natural gas (Mcf/d)	6,013		2,131		3,882		182	%
NGLs (Bbls/d)	1,181		472		709		150	%
Total (Boe/d)	12,263		4,816		7,447		155	%


(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 six months of 2017 was 220% , or $63.3 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 six months of 2017 . Our aggregate production volumes in the first six months of 2017 were 2,220 MBoe, comprised of 82% oil, 8% natural gas and 10% NGLs. This represents an increase of 153% over the first six months of 2016 aggregate production volumes of 877 MBoe.

Increased production volumes accounted for an approximate $43.8 million increase in year-over-year production revenues, while increases in our total average sales prices accounted for an approximate $19.5 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 six months ended June 30, 2017 , oil revenues increased 217% , or $58.3 million , due to a 151% increase in production volumes and a 26% increase in the average realized price when compared to the same period from the prior year. Natural gas revenues increased 284% to $2.8 million during the six months ended June 30, 2017 from $0.7 million during the six months ended June 30, 2016 . The increase is attributable to a 180% increase in volumes and a 37% increase in the average sales price. During the first six months of 2017 , NGL revenues increased 247% , or $3.0 million , due to a 149% increase in sales volumes and a 40% 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 six months of 2017 and 2016 , we recognized other operating revenues of $0.3 million and $0.8 million , respectively.

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The following table summarizes our operating expenses for the periods indicated:



	Six Months Ended June 30,									Per Boe
(in thousands, except per Boe)	2017		2016		Change			% Change		2017		2016
Lease operating expenses	$	5,500	$	2,969	$	2,531		85	%	$	2.48	$	3.39
Gathering and transportation expenses	1,047		368		679			185	%	$	0.47	$	0.42
Production and ad valorem taxes	6,177		1,832		4,345			237	%	$	2.78	$	2.09
Exploration	8		2,474		(2,466		)	(100	)%	$	—	$	2.82
Depletion, depreciation, amortization and accretion	36,373		18,278		18,095			99	%	$	16.39	$	20.85
Impairment of unproved oil and natural gas properties	108		310		(202		)	(65	)%	NM		NM
Other operating expenses	182		398		(216		)	(54	)%	$	0.08	$	0.46
General and administrative (before equity-based compensation)	12,032		5,503		6,529			119	%	$	5.42	$	6.28
Total operating expenses (before equity-based compensation)	61,427		32,132		29,295			91	%	$	27.68	$	36.66
Equity-based compensation	419,739		—		419,739
Total operating expenses	$	481,166	$	32,132	$	449,034

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 increased 85% to $5.5 million in the first six months of 2017 , compared to $3.0 million for the same period of 2016 . The increase largely relates to higher costs for equipment repair and maintenance, contract labor, chemicals, electricity, water disposal and equipment rental, all of which generally correspond to our increased production and well counts between periods. LOE per Boe decreased 27% between periods to $2.48 for the six months ended June 30, 2017 , primarily due to the 153% increase in production between those two periods, largely coming from the addition of high-producing, low-operating cost wells.

Gathering and Transportation Expenses. Gathering and transportation expenses increased $0.7 million through the first six months of 2017 compared to the same period of 2016 primarily due to increased production. In addition, we experienced a slight 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 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 237% between the six months ended June 30, 2017 and 2016 , from $1.8 million in 2016 to $6.2 million in 2017 . The increase in production taxes is due to an increase in revenues, and the increase in ad valorem taxes relates to the addition of several new high-volume wells.

Exploration. The $2.5 million decrease in exploration expense between the six months ended June 30, 2017 and 2016 , is due to decreases in delay rentals on certain unproved properties of $1.3 million , as well as exploratory dry hole costs of $1.2 million incurred in 2016. The exploratory dry hole costs related to an unproductive vertical test well drilled to a shallow horizon.

Depletion, Depreciation, Amortization and Accretion. DD&A expense increased $18.1 million , or 99% , through the first six months of 2017 compared to the same period of 2016 . The increase in DD&A expense 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 21% to $16.39 per Boe, compared to $20.85 per Boe in the first six 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 was lower than the rate of reserve increase.

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Impairment of Unproved Oil and Natural Gas Properties. During the first six months of 2017 , we incurred $0.1 million of impairment costs related to the expiration of certain leases on unproved properties. During the same period in 2016 , we recorded $0.3 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 $0.2 million from the first six months of 2016 compared to the same period of 2017 . We incurred $0.2 million of other operating expenses in the first six months of 2017 primarily due to sales of fresh water and water disposal to third parties. During the first six months of 2016 , we incurred other operating expenses of $0.4 million due to rig termination fees of $0.2 million and $0.2 million of water sales costs.

General and Administrative and equity-based compensation. G&A (excluding equity-based compensation) increased 119% to $12.0 million for the six months ended June 30, 2017 , from $5.5 million for the same period of 2016 . The increase is primarily due to a $5.3 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 increased from 23 at January 1, 2016 to 52 at June 30, 2017 . Additionally, we incurred $0.6 million in higher audit, tax and legal fees, which increase is largely driven from expenses as a result of becoming a publicly traded company.

Equity-based compensation expense in the first six months of 2017 was $419.7 million , as summarized in the table below:



(in thousands)
Incentive unit awards	$	418,893
Restricted stock unit awards	507
Performance stock unit awards	339
Total equity-based compensation expense	$	419,739

The equity-based compensation expense for the incentive unit awards relates to the common stock transferred to Management Holdco, which is subject to the terms of the Management Holdco LLC Agreement, and includes approximately $379.0 million of equity-based compensation expense relative to the common stock issued to MIU holders that vested upon the IPO. Also included in the $418.9 million is an additional $22.2 million of equity-based compensation recognized during the first quarter of 2017 related to incentive unit awards, which were modified in conjunction with a March 2017 separation agreement of a former executive officer. The RSUs and PSUs were granted during the second quarter of 2017. We expect to recognize additional noncash compensation expense of approximately $100.5 million over approximately 2.6 years for the incentive unit awards, and $9.5 million over approximately 2.5 years for the RSUs and PSUs.

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



	Six Months Ended June 30,
(in thousands)	2017			2016			Change			% Change
Gain (loss) on commodity derivatives	$	43,615		$	(9,936	)	$	53,551		NM
Interest expense, net	(1,143		)	(712		)	(431		)	61	%
Other, net	414			—			414			NM
Total other income (expense)	$	42,886		$	(10,648	)	$	53,534		(503	)%

NM—Not meaningful.

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	Six Months Ended June 30,
(in thousands)	2017			2016
Gain (loss) on derivatives instruments, net	$	43,615		$	(9,936	)
Cash settlements of derivatives (received) paid, net	$	(496	)	$	822

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 six months of 2017 and 2016 , we recorded $1.1 million and $0.7 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 six months of 2017 was $142.0 million, which we repaid in full with a portion of the proceeds of the IPO, compared to a maximum outstanding of $60.0 million during the first six 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 six months of 2017 , our primary sources of liquidity were the proceeds from the IPO of $397.0 million , and cash flows from operations of $60.0 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 sourcing and disposal 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 June 30,				Six Months Ended June 30,
(in thousands)	2017		2016		2017		2016
Acquisitions
Proved properties	$	—	$	—	$	—	$	—
Unproved properties ⁽¹⁾	25,709		13,255		48,519		23,651
Development costs	148,906		18,481		240,187		45,806
Infrastructure costs	9,821		1,307		18,192		3,355
Exploration costs	2		37		8		1,585
Total oil and gas capital expenditures	$	184,438	$	33,080	$	306,906	$	74,397


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

For the six months ended June 30, 2017 and 2016 , our capital expenditures have been focused on the development of our properties in the Southern Delaware Basin. As of June 30, 2017 , we had approximately 78,300 gross ( 70,400 net) acres.

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The following table reflects wells that began producing in the periods indicated:



	Three Months Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
Gross wells
Operated	14	2	21	4
Non-operated	2	—	2	—
	16	2	23	4
Net wells
Operated	13.8	2.0	20.7	3.9
Non-operated	0.5	—	0.5	—
	14.3	2.0	21.2	3.9

At June 30, 2017 , we were in the process of drilling four gross ( 4.0 net) wells and had eight gross ( 7.1 net) wells waiting on completion, including four gross ( 3.5 net) wells that were in process of being completed.

2017 Capital Budget

Our 2017 capital budget for development of oil and gas properties and infrastructure is as follows:



(in millions)
Drilling and completion	$	510.0	—	$	550.0
Water infrastructure	15.0		—	20.0
Total	$	525.0	—	$	570.0

Our 2017 capital budget excludes potential leasehold and/or surface acreage additions. 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 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 funding 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

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our operating and development of oil and natural gas activities, changes in our hedging activities and changes in our cash and cash equivalents. At June 30, 2017 , our working capital was a surplus of $20.0 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 $87.0 million and $11.7 million at June 30, 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:



	Six Months Ended June 30,
(in thousands)	2017			2016
Net cash provided by operating activities	$	60,005		$	1,304
Net cash used in investing activities	$	(249,636	)	$	(79,780	)
Net cash provided by financing activities	$	264,900		$	70,804

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. For the first six months of 2017 compared to 2016 , the $58.7 million increase in net cash provided by operating activities primarily resulted from a period-over-period increase in revenues. This was partially offset by higher operating costs primarily due to increased production.

Investing Activities. For the first six months of 2017 , net cash flow used in investing activities was $249.6 million , an increase of $169.9 million , or 213% , from $79.8 million for the same period of 2016 . In the first six months of 2017 , net cash used for investing activities included investments in developing our acreage of $195.2 million and leasehold and acquisition costs of $53.0 million . In the first six months of 2016 , net cash used for investing activities included $54.2 million and $23.9 million for the development and acquisition of oil and natural gas properties, respectively.

Financing Activities. Net cash provided by financing activities during the first six months of 2017 was primarily due to $398.4 million of net proceeds from the sale of common stock in the IPO, which was partially offset by a net repayment on our credit facility of $132.0 million. Net cash provided by financing activities in 2016 included $31.5 million of cash provided by equity issuances and $40.0 million of borrowings under our credit facility.

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, the borrowing base increased to $180.0 million . In connection with the 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 aggregate principal commitment increased to $1.0 billion and 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. In April 2017, the borrowing base was increased to $250.0 million , which as of the date of this filing remains undrawn.

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 and resulted in the increase of the borrowing base to $250.0 million .

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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 June 30, 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 June 30, 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.

Contractual Obligations

A summary of our contractual obligations as of June 30, 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⁾	564		1,535		1,286		1,513		1,534		1,551		8,962		16,945
Service and purchase contracts ⁽³⁾	553		9		1		—		—		—		—		563
Rig contracts ⁽⁴⁾	7,938		2,508		—		—		—		—		—		10,446
Frac fleet contracts ⁽⁵⁾	25,350		73,200		—		—		—		—		—		98,550
Total	$	34,405	$	77,252	$	1,287	$	1,513	$	1,534	$	1,551	$	8,962	$	126,504

(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 June 30, 2017 , we had nothing outstanding under our amended and restated credit facility and $250.0 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.

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(4)	Relates to five drilling rig contracts as of June 30, 2017 . If we were to terminate these contracts at June 30, 2017 , we would be required to pay early termination penalties of approximately $5.5 million .

(5)

Relates to three frac fleets under contract at June 30, 2017 . The majority of the contracts allow for reassignment of the frac fleets if we were to terminate their services prior to the end of the contract, at which point we would not be required to pay termination fees. However, if the fleets were not able to be reassigned, we would be required to pay termination fees of $73.0 million as of June 30, 2017 .

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of June 30, 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.

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.

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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 six months ended June 30, 2017 , oil sales contributed 92% of our total production revenue, while natural gas sales contributed 3% and NGL sales contributed 5% . A $1.00 per barrel change in our realized oil price would have resulted in a $1.8 million change in oil revenues through the six months ended June 30, 2017 . A $0.10 per Mcf change in our realized natural gas price would have resulted in a $0.1 million change in our natural gas revenues for the six months ended June 30, 2017 . A $1.00 per barrel change in NGL prices would have changed NGL revenue by $0.2 million for the six months ended June 30, 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 development 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 June 30, 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 from the contract date.

At June 30, 2017 , we had a net asset position of $30.3 million related to our oil derivatives in place for the years 2017 through 2019 . Based on our open oil derivative positions at June 30, 2017 , a 10% increase in the NYMEX WTI price would decrease our net oil derivative asset by approximately $29.4 million . Conversely, a 10% decrease in the NYMEX WTI price would increase our net oil derivative asset by approximately $29.4 million .

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.

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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 June 30, 2017 , however, we had no 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 June 30, 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 June 30, 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

Recent sales of unregistered securities

None.

Purchases of equity securities by the issuer and affiliated purchasers

The following table summarizes the repurchase of our common stock during the three months ended June 30, 2017 :



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
April 1, 2017 - April 30, 2017	7,091	$	12.44	—	—
May 1, 2017 - May 31, 2017	—	$	—	—	—
June 1, 2017 - June 30, 2017	—	$	—	—	—
Total	7,091	$	12.44	—	—


(1)	Shares purchased represent shares of our common stock transferred to us to satisfy tax withholding obligations incurred upon the vesting of equity awards held by our employees.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

None.

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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:	August 9, 2017	By:	/s/ JOSEPH N. JAGGERS
			Name:	Joseph N. Jaggers
			Title:	Chairman, Chief Executive Officer and President

Date:	August 9, 2017	By:	/s/ ROBERT W. HOWARD
			Name:	Robert W. Howard
			Title:	Executive Vice President, Chief Financial Officer

Date:	August 9, 2017	By:	/s/ SHONN D. STAHLECKER
			Name:	Shonn D. Stahlecker
			Title:	Controller

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Exhibit Index



Exhibit Number		Description of Exhibit
*10.1†		Executive Severance Plan.
*10.2†		Form of Employment Letter Agreement.
10.3†		Form of Director Notice of Grant of Restricted Stock Units (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed with the SEC on April 20, 2017).
10.4†		Form of Director Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed with the SEC on April 20, 2017).
10.5†		Form of Employee Notice of Grant of Restricted Stock Units (incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed with the SEC on April 20, 2017).
10.6†		Form of Employee Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed with the SEC on April 20, 2017).
10.7†		Form of Employee Notice of Grant of Performance Stock Units (incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K filed with the SEC on April 20, 2017).
10.8†		Form of Employee Performance Stock Unit Agreement (incorporated by reference to Exhibit 10.8 to the Company’s Form 8-K filed with the SEC on April 20, 2017).
10.9†		Form of Series B Restricted Unit Agreement (incorporated by reference to Exhibit 10.9 to the Company’s Form 8-K filed with the SEC on April 20, 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.
*		Filed herewith.
**		Furnished herewith.

Exhibit 10.1

JAGGED PEAK ENERGY INC.

EXECUTIVE SEVERANCE PLAN

1. Purpose and Effective Date . Jagged Peak Energy Inc. (the “ Company ”) has adopted this Executive Severance Plan (this “ Plan ”) to provide for the payment of severance or change in control benefits to Eligible Individuals (as defined below). The Plan was approved by the Board of Directors of the Company (the “ Board ”) to be effective as of June 13, 2017 (the “ Effective Date ”).

2. Definitions . For purposes of this Plan, the terms listed below will have the meanings specified herein:

(a) “ Accrued Obligations ” means (i) payment to an Eligible Individual of all earned but unpaid Base Salary through the Date of Termination prorated for any partial period of employment; (ii) payment to an Eligible Individual, in accordance with the terms of the applicable benefit plan of the Company or its Affiliates or to the extent required by law, of any benefits to which such Eligible Individual has a vested entitlement as of the Date of Termination; (iii) payment to an Eligible Individual of any accrued unused vacation; and (iv) payment to an Eligible Individual of any approved but not yet reimbursed business expenses incurred in accordance with applicable policies of the Company and its Affiliates, including this Plan.

(b) “ Administrator ” means the Board or a person or committee appointed by the Board to administer this Plan.

(c) “ Affiliate ” means (i) with respect to the Company, any person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company and any predecessor to any such entity; provided¸ however , that a natural person shall not be considered an Affiliate; and (ii) with respect to an Eligible Individual, any person that directly, or through one or more intermediaries, is controlled by such Eligible Individual or members of such Eligible Individual’s immediate family.

(d) “ Base Salary ” means an Eligible Individual’s annual base salary as of a Notice of Termination (without regard to any reduction in such Base Salary which constitutes Good Reason).

(e) “ Cause ” means one or more of the following events: (i) an Eligible Individual’s continued failure, after written notice is given and a reasonable opportunity to cure has been granted, to comply with the reasonable written directives of such Eligible Individual’s Jagged Peak Employer, (ii) an Eligible Individual’s failure to comply in any material respect with the written terms of employment with such Eligible Individual’s Jagged Peak Employer, (iii) an Eligible Individual’s willful misconduct resulting in material and demonstrable damage to such Eligible Individual’s Jagged Peak Employer, including, without limitation, theft, embezzlement or material misrepresentations or concealments on any written reports submitted to such Eligible Individual’s Jagged Peak Employer,

(iv) an Eligible Individual’s conviction of, or plea of nolo contendere to, any felony or to any crime or offense involving acts of theft, fraud, embezzlement or similar conduct or (v) an Eligible Individual’s material breach of written policies of such Eligible Individual’s Jagged Peak Employer concerning employee discrimination or harassment, after written notice is given and a reasonable opportunity to cure been granted, if such breach is capable of being cured without penalty or damages to such Eligible Individual’s Jagged Peak Employer.

(f) “ Change in Control ” means:

(i) the acquisition by any individual, entity or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act) (a “ Person ”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then outstanding shares of common stock of the Company (the “ Outstanding Company Common Stock ”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Outstanding Company Voting Securities ”); provided, however, that the following acquisitions by a Person shall not constitute a Change in Control: (I) any acquisition directly from the Company; (II) any acquisition by the Company; (III) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (IV) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B), and (C) of Section 1(f)(iii) below;

(ii) the individuals who, as of the later of the date of the Effective Date or the last amendment to this Plan approved by the Board, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board. Any individual becoming a director subsequent to the later of the Effective Date or the date of the last amendment to this Plan approved by the Board whose election, or nomination for election by the Company’s stockholders, is approved by the vote of at least a majority of the directors then comprising the Incumbent Board will be considered a member of the Incumbent Board as of the later of the Effective Date or the last amendment to the date of this Plan approved by the Board, but any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board will not be deemed a member of the Incumbent Board as of the later of the Effective Date or the date of the last amendment to this Plan approved by the Plan;

(iii) the consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “ Business Combination ”), unless following such Business Combination: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then

outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock (or, for non- corporate entity, equivalent securities) of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(iv) the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(g) “ CIC Effective Date ” means the date upon which a Change in Control occurs.

(h) “ COBRA ” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time.

(i) “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

(j) “ Date of Termination ” means (i) if the Eligible Individual’s employment with the Company and its Affiliates is terminated by death, the date of such Eligible Individual’s death; (ii) if the Eligible Individual’s employment is terminated because of the Eligible Individual becoming Disabled, then 30 days after the Notice of Termination is given; or (iii) if (A) the Eligible Individual’s employment is terminated by the Company or any of its Affiliates with or without Cause or (B) the Eligible Individual’s employment by the Eligible Individual with or without Good Reason, then, in each case, the date specified in the Notice of Termination, which shall comply with the applicable notice requirements set forth herein. Transfer of employment between and among the Company and its Affiliates, by itself, shall not constitute a termination of employment for purposes of this Plan.

(k) “ Disability ” or “ Disabled ” as it relates to an Eligible Individual means when such Eligible Individual (i) receives disability benefits under either Social Security or the applicable long- term disability plan of the Company or its Affiliates, if any, or (ii) the Administrator, upon the written report of a qualified physician designated by the Administrator or the insurer of the applicable long-term disability plan of the Company or its Affiliates, shall have determined (after a complete

physical examination of the Eligible Individual at any time after he has been absent from employment with the Company or its Affiliates for 90 or more consecutive calendar days) that such Eligible Individual has become physically and/or mentally incapable of performing such Eligible Individual’s essential job functions with or without reasonable accommodation as required by law due to injury, illness, or other incapacity (physical or mental).

(l) “ Employment Letter ” means a letter agreement executed by an Eligible Individual regarding such Eligible Individual’s employment with a Jagged Peak Employer and participation in this Plan.

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

(n) “ Good Reason ” means the occurrence, without an Eligible Individual’s express written consent of (i) a material reduction in such Eligible Individual’s annual base salary; (ii) a relocation of your principal place of employment outside of the area in which you are currently working; (iii) any breach by such Eligible Individual’s Jagged Peak Employer of any material provision of this Plan or any agreement entered into between such such Eligible Individual and such entity, if any; or (iv) a material diminution in such Eligible Individual’s authority, duties or responsibilities or an adverse change in such Eligible Individual’s reporting relationship; provided, however, that such Eligible Individual gives written notice to such Eligible Individual’s Jagged Peak Employer of the existence of such a condition described in (i) – (iv) above within ninety (90) days of the initial existence of the condition, such Eligible Individual’s Jagged Peak Employer has at least thirty (30) days from the date when such notice is provided to cure the condition (if such condition can be cured) without being required to make payments due to termination of employment, and such Eligible Individual actually terminates such Eligible Individual’s employment for Good Reason within six (6) months of the initial occurrence of any of the conditions above.

(o) “ Group 1 Executive ” means an Eligible Individual identified as a “Group 1 Executive” in accordance with such individual’s Employment Letter.

(p) “ Group 2 Executive ” means an Eligible Individual identified as a “Group 2 Executive” in accordance with such individual’s Employment Letter.

(q) “ Group 3 Executive ” means an Eligible Individual identified as a “Group 2 Executive” in accordance with such individual’s Employment Letter.

(r) “ Group ” means the level at which an Eligible Individual is identified immediately prior to the Eligible Individual’s termination of employment (without regard to any reduction in such Group which constitutes Good Reason).

(s) “ Jagged Peak Employer ” means any member of the Jagged Peak Group that employs any Eligible Individual.

(t) “ Jagged Peak Group ” means all and any of the Company and its subsidiaries.

(u) “ LTIP ” means the Company’s 2017 Long Term Incentive Plan, but expressly excludes the Jagged Peak Energy Inc. Management Incentive Plan of JPE Management Holdings LLC (the “ Holdco Plan ”).

(v) “ Notice of Termination ” means a notice that indicates the specific termination provision in this Plan relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated; provided, however, that any failure to provide such detail shall not delay the effectiveness of the termination.

(w) “ Post Termination Non-Compete Term ” means one year; provided that in the event that an Eligible Individual voluntarily resigns without Good Reason such that the Company has no Severance Obligations to such Eligible Individual, then there shall be no Post Termination Non-Compete Term.

(x) “ Post Termination Obligations ” means any obligations owed by an Eligible Individual to the Company or any of its Affiliates which survive such Eligible Individual’s employment with the Company or its Affiliates, including, without limitation, those obligations and restrictive covenants (including covenants not to compete and not to solicit) set forth in such Eligible Individual’s Employment Letter.

(y) “ Section 409A ” means Section 409A of the Code and the regulations and administrative guidance issued thereunder.

(z) “ Section 4999 ” means Section 4999 of the Code.

(aa) “ Separation from Service ” shall mean a “separation from service” as such term is defined for purposes of Section 409A.

(bb) “ Severance Obligations ” means (i) in the Case of a Group 1 Executive, those Severance Obligations identified in Section 5(b)(i)(1)-(2) of this Plan; (ii) in the case of a Group 2 Executive, those Severance Obligations identified in Section 5(b)(ii)(1)-(4) of this Plan and (iii) in the case of a Group 3 Executive, those Severance Obligations identified in Section 5(b)(iii)(1)-(4) of this Plan.

(cc) “ STIP ” means the Company’s Short Term Incentive Program or other annual cash incentive program or plan.

3. Administration of the Plan .

(a) Authority of the Administrator. This Plan will be administered by the Administrator. Subject to the express provisions of this Plan and applicable law, the Administrator will

have the authority, in its sole and absolute discretion, to: (i) adopt, amend, and rescind administrative and interpretive rules and regulations related to this Plan, (ii) delegate its duties under this Plan to such agents as it may appoint from time to time, and (iii) make all other determinations, perform all other acts and exercise all other powers and authority necessary or advisable for administering this Plan, including the delegation of those ministerial acts and responsibilities as the Administrator deems appropriate. The Administrator shall have complete discretion and authority with respect to this Plan and its application except to the extent that discretion is expressly limited by this Plan. The Administrator may correct any defect, supply any omission, or reconcile any inconsistency in this Plan in any manner and to the extent it deems necessary or desirable to carry this Plan into effect, and the Administrator will be the sole and final judge of that necessity or desirability. The determinations of the Administrator on the matters referred to in this Section 3(a) will be final and conclusive.

(b) Manner of Exercise of Authority . Any action of, or determination by, the Administrator will be final, conclusive and binding on all persons, including the Company, the Company’s Affiliates, the Board, the stockholders of the Company, each Eligible Individual, or other persons claiming rights from or through an Eligible Individual. The express grant of any specific power to the Administrator, and the taking of any action by the Administrator, will not be construed as limiting any power or authority of the Administrator. The Administrator may delegate to officers of the Company, or committees thereof, the authority, subject to such terms as the Administrator will determine, to perform such functions, including administrative functions, as the Administrator may determine. The Administrator may appoint agents to assist it in administering this Plan.

(c) Limitation of Liability . The Administrator will be entitled to, in good faith, rely or act upon any report or other information furnished to the Administrator by any officer or employee of the Company or any of its Affiliates, the Company’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of this Plan. The Administrator and any officer or employee of the Company or any of its Affiliates acting at the direction or on behalf of the Administrator will not be personally liable for any action or determination taken or made in good faith with respect to the Plan and will, to the fullest extent permitted by law, be indemnified and held harmless by the Company with respect to any such action or determination.

4. Eligibility . Each employee of the Company or any of its Affiliates eligible to receive the benefits described in this Plan as designated by the Administrator (collectively the “ Eligible Individuals ” and each an “ Eligible Individual ”); provided, that any individual who is entitled to severance or change in control benefits pursuant to a separate written agreement between the Company (or one of its Affiliates) and the individual shall not be an Eligible Individual.

5. Plan Benefits .

(a) Payment of Accrued Obligations. In the event an Eligible Individual’s Date of Termination occurs for any reason, such Eligible Individual shall be entitled to receive the Accrued

Obligations. Participation in all benefit plans of the Company and its Affiliates will terminate upon an Eligible Individual’s Date of Termination except as otherwise specifically provided in the applicable plan.

(b) Severance Obligations. In the event an Eligible Individual’s employment with the Company and its Affiliates is terminated by death, for Disability, by the Company or one of its Affiliates without Cause or by such Eligible Individual resigning such Eligible Individual’s employment for Good Reason, the Company (or the Affiliate of the Company that is the employer of the Eligible Individual immediately prior to termination) shall provide Severance Obligations set forth below, provided that the conditions of Sections 5(c) and 8 of this Plan have been fulfilled.

(i) Group 1 Executives . The Severance Obligations to a Group 1 Executive shall be as follows:

(1) immediately prior to the Separation from Service, immediate vesting of fifty percent (50%) or, if such Separation from Service is in connection with a Change in Control, one hundred percent (100%), of all equity incentives then held by such Group 1 Executive pursuant to the LTIP, with payment of such equity incentives payable in accordance with the applicable award agreement; provided that any such equity incentives that vest or are earned based on both continued employment and the achievement of performance goals shall continue to vest or be earned upon achievement of such performance goals, notwithstanding the Separation from Service, except to the extent such equity incentives are otherwise measured and paid out as of the Change in Control pursuant to Section 6, below; and

(2) if and to the extent permitted under applicable law and without additional cost or penalty to the Company or the Group 1 Executive, during the portion, if any, of the 18-month period, commencing as of the date such Group 1 Executive is eligible to elect and timely elects to continue coverage for such Group I Executive and such Group 1 Executive’s eligible dependents under the Company’s or an Affiliate’s group health plan pursuant to COBRA or similar state law, the Company (or the Affiliate of the Company that is the Eligible Individual’s employer immediately prior to termination) shall reimburse such Group 1 Executive for the difference between the amount such Group 1 Executive pays to effect and continue such coverage and the employee contribution amount that active senior executive employees of the Company or its applicable Affiliate pay for the same or similar coverage, with any such reimbursement payable for the 60 day period immediately following the Separation from Service being payable on the first business day 60 days following the Separation from Service and any other such reimbursement payable being paid on a monthly basis thereafter.

(ii) Group 2 Executives . The Severance Obligations to a Group 2 Executive shall be as follows:

(1) no later than the first business day 60 days after the Separation from Service, payment of a lump sum cash payment equal to 2 years of such Group 2 Executive’s then current Base Salary as of the Date of Termination, subject to applicable taxes and withholdings;

(2) no later than the first business day 60 days after Separation from Service, payment of a lump sum cash payment equal to 200% of the greater of (A) the annual average of any bonuses received by such Group 2 Executive from the Company pursuant to the STIP in the 2 calendar years immediately before the Date of Termination and (B) such Group 2 Executive’s current “target” bonus amount, subject to applicable taxes and withholdings;

(3) immediately prior to the Separation from Service, immediate vesting of fifty percent (50%) or, if such Date of Termination is in connection with a Change in Control, one hundred percent (100%), of all equity incentives then held by such Group 2 Executive pursuant to the LTIP, with payment of such equity incentives payable in accordance with the applicable award agreement; provided that any such equity incentives that vest or are earned based on both continued employment and the achievement of performance goals shall continue to vest or be earned upon achievement of such performance goals, notwithstanding the Separation from Service, except to the extent such equity incentives are otherwise measured and paid out as of the Change in Control pursuant to Section 6, below; and

(4) if and to the extent permitted under applicable law and without additional cost or penalty to the Company or the Group 2 Executive, during the portion, if any, of the 18-month period, commencing as of the date such Group 2 Executive is eligible to elect and timely elects to continue coverage for such Group 2 Executive and such Group 2 Executive’s eligible dependents under the Company’s or an Affiliate’s group health plan pursuant to COBRA or similar state law, the Company (or the Affiliate of the Company that is the Eligible Individual’s employer immediately prior to termination) shall reimburse such Group 2 Executive on a monthly basis for the difference between the amount such Group 2 Executive pays to effect and continue such coverage and the employee contribution amount that active senior executive employees of the Company or the applicable Affiliate pay for the same or similar coverage, with any such reimbursement payable for the 60 day period immediately following the Separation from Service being payable on the first business day 60 days following the Separation from Service and any other such reimbursement payable being paid on a monthly basis thereafter.

(iii) Group 3 Executives . The Severance Obligations to a Group 3 Executive shall be as follows:

(1) no later than the first business day 60 days after the Separation from Service, payment of a lump sum cash payment equal to 1 year, or, if such Separation from Service is in connection with a Change in Control 2 years, of such Group 3 Executive’s then

current Base Salary as of the Separation from Service, subject to applicable taxes and withholdings;

(2) no later than the first business day 60 days after the Separation from Service, payment of a lump sum cash payment equal to 100%, or, if such Separation from Service is in connection with a Change in Control 200%, of the greater of (A) the annual average of any bonuses received by such Group 3 Executive from the Company pursuant to the STIP in the 2 calendar years immediately before the Date of Termination and (B) such Group 3 Executive’s current “target” bonus amount, subject to applicable taxes and withholdings;

(3) immediately prior to the Separation from Service, immediate vesting of fifty percent (50%) or, if such Separation from Service is in connection with a Change in Control, one hundred percent (100%), of all equity incentives then held by such Group 3 Executive pursuant to the LTIP, with payment of such equity incentives payable in accordance with the applicable award agreement; provided that any such equity incentives that vest or are earned based on both continued employment and the achievement of performance goals shall continue to vest or be earned upon achievement of such performance goals, notwithstanding the Separation from Service, except to the extent such equity incentives are otherwise measured and paid out as of the Change in Control pursuant to Section 6, below; and

(4) if and to the extent permitted under applicable law and without additional cost or penalty to the Company or the Group 3 Executive, during the portion, if any, of the 12-month period, commencing as of the date such Group 3 Executive is eligible to elect and timely elects to continue coverage for such Group 3 Executive and such Group 3 Executive’s eligible dependents under the Company’s or an Affiliate’s group health plan pursuant to COBRA or similar state law, the Company (or the Affiliate of the Company that is the Eligible Individual’s employer immediately prior to termination) shall reimburse such Group 3 Executive on a monthly basis for the difference between the amount such Group 3 Executive pays to effect and continue such coverage and the employee contribution amount that active senior executive employees of the Company or the applicable Affiliate pay for the same or similar coverage, with any such reimbursement payable for the 60 day period immediately following the Separation from Service being payable on the first business day 60 days following the Separation from Service and any other such reimbursement payable being paid on a monthly basis thereafter.

(c) Conditions to Severance Obligations. Notwithstanding Section 5(b) of this Plan, in no event shall an Eligible Individual be entitled to the Severance Obligations unless such Eligible Individual (i) tenders their resignation as a member of the Board and of the board of directors of any Affiliate (in each case, to the extent applicable) effective as of the Date of Termination (the “ Resignation ”), and (ii) executes a Release Agreement in a form and substance approved by the Administrator (the “ Release ”) substantially similar to the Release attached hereto as Exhibit A , with any additional customary terms as the Administrator may deem appropriate in the circumstances, and

such Release is not revoked. The Eligible Individual shall be eligible for the Severance Obligations only if the executed Release is returned to the Company and becomes irrevocable within 60 days after the Separation from Service. Until the Release has become irrevocable, any such Severance Obligations shall not be provided by the Company or any of its Affiliates. If an Eligible Individual fails to return the Resignation so that it would, if accepted, be effective upon the Date of Termination, or fails to return the Release to the Company in sufficient time so that the Release becomes irrevocable within 60 days after the Separation from Service, such Eligible Individual’s rights to Severance Obligations shall be forfeited.

6. Change in Control Benefits . Notwithstanding anything to the contrary that may be set forth in the LTIP or in any grant agreement thereunder, if an Eligible Individual is employed by the Company or one of its Affiliates on the CIC Effective Date, then with respect to any equity incentives that vest or are earned based on both continued employment and the achievement of performance goals, the performance period shall be deemed to have ended on the date of the Change in Control and the Eligible Individual shall receive an immediate payout under such equity incentives based on performance through the date of the Change in Control. In addition, in the event and such Eligible Individual (a) resigns such Eligible Individual’s employment with the Company and its Affiliates for Good Reason or (b) is terminated by the Company and its Affiliates without Cause, in each case, at any time within the eighteen-month period following the CIC Effective Date, then such Eligible Individual shall be entitled to receive the Accrued Obligations and Severance Obligations in accordance with Section 5 hereof.

7. Parachute Payment Limitations . Notwithstanding any contrary provision in this Plan, if an Eligible Individual is a “ disqualified individual ” (as defined in Section 280G of the Code), and the Severance Obligations that would otherwise be paid to such Eligible Individual under this Plan together with any other payments or benefits that such Eligible Individual has a right to receive from the Company (and affiliated entities required to be aggregated in accordance with Q/A-10 and Q/A-46 of Treas. Reg. §1.280G-1) (collectively, the “ Payments ”) would constitute a “ parachute payment ” (as defined in Section 280G of the Code), the Payments shall be either (a) reduced (but not below zero) so that the aggregate present value of such Payments and benefits received by the Eligible Individual from the Company and its Affiliates shall be $1.00 less than three times such Eligible Individual’s “ base amount ” (as defined in Section 280G of the Code) (the “ Safe Harbor Amount ”) and so that no portion of such Payments received by such Eligible Individual shall be subject to the excise tax imposed by Section 4999; or (b) paid in full, whichever produces the better net after-tax result for such Eligible Individual (taking into account any applicable excise tax under Section 4999 and any applicable federal, state and local income and employment taxes). The determination as to whether any such reduction in the amount of the Payments is necessary shall be made by the Company in good faith and such determination shall be conclusive and binding on such Eligible Individual. If reduced Payments are made to the Eligible Individual pursuant to this Section 7 and through error or otherwise those Payments exceed the Safe Harbor Amount, the Eligible Individual shall immediately repay such excess to the Company or its applicable Affiliate upon notification that an overpayment has been made.

The reduction of Payments, if applicable, shall be made by reducing, first, Severance Obligations to be paid in cash hereunder in the order in which such payments would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and second, by reducing any other cash payments that would be payable to the Eligible Individual outside of this Plan which are valued in full for purposes of Code Section 280G in a similar order (last to first), any third, by reducing any equity acceleration hereunder of awards which are valued in full for purposes of Section 280G of the Code in a similar order (last to first), and finally, by reducing any other payments or benefit provided hereunder in a similar order (last to first).

8. Conditions to Receipt of Severance Obligations .

(a) Compliance with Post-Termination Obligations . Notwithstanding anything contained in this Plan to the contrary, the Company and its Affiliates shall have the right to cease providing any part of the Severance Obligations, and the Eligible Individual shall be required to immediately repay the Company and its Affiliates for any Severance Obligations already provided, but all other provisions of this Plan shall remain in full force and effect, if such Eligible Individual has been determined, pursuant to the dispute resolution provisions hereof, not to have fully complied with such Eligible Individual’s Post-Termination Obligations during the Severance Obligation Period or longer, as may be the case.

(b) Separation from Service Required. Notwithstanding anything contained in this Plan to the contrary, the Eligible Individual shall be entitled to Severance Obligations only if such Eligible Individual’s termination of employment constitutes a Separation from Service.

9. Termination .

(a) Notice of Termination. Any termination of an Eligible Individual’s employment with the Company and its Affiliates (other than termination as a result of death) shall be communicated by written Notice of Termination to, (i) in the case of termination by an Eligible Individual, the Company or one of its Affiliates and (ii) in the case of termination by the Company and its Affiliates, the Eligible Individual.

(b) Death . An Eligible Individual’s employment with the Company and its Affiliates shall terminate immediately upon such Eligible Individual’s death.

(c) Disability . An Eligible Individual’s employment with the Company and its Affiliates shall terminate 30 days after Notice of Termination is given by the Company or its Affiliates.

(d) For Cause .

(i) Subject to Section 9(d)(ii), the Company and its Affiliates shall be entitled to terminate an Eligible Individual’s employment with the Company and its Affiliates immediately for any Cause.

(ii) If the Company or one of its Affiliates determines, in its sole discretion, that a cure is possible and appropriate, the Company or the applicable Affiliate will give an Eligible Individual being terminated for Cause written notice of the acts or omissions constituting Cause and no termination of such Eligible Individual’s employment with the Company and its Affiliates for Cause shall occur unless and until such Eligible Individual fails to cure such acts or omissions within 10 days following the receipt of such written notice. If the Company or one of its Affiliates determines, in its sole discretion, that a cure is not possible or appropriate, an Eligible Individual being terminated for Cause shall have no notice or cure rights before such Eligible Individual’s employment with the Company and its Affiliates is terminated for Cause.

(e) Without Cause. The Company and its Affiliates shall be entitled to terminate an Eligible Individual’s employment with the Company for any reason other than death, Disability or Cause, at any time by providing written notice to such Eligible Individual that the Company and its Affiliates is terminating such Eligible Individual’s employment with the Company and its Affiliates without Cause.

(f) With Good Reason .

(i) Subject to Section 9(f)(ii), an Eligible Individual shall be permitted to terminate such Eligible Individual’s employment with the Company and its Affiliates for any Good Reason.

(ii) To exercise an Eligible Individual’s right to terminate such Eligible Individual’s employment for Good Reason, such Eligible Individual must provide written notice to the Company or one of its Affiliates of such Eligible Individual’s belief that Good Reason exists within 90 days of the initial existence of the condition(s) giving rise to such Good Reason, and such notice shall describe the conditions believed to constitute Good Reason. The Company and its Affiliates shall have 30 days to remedy the Good Reason condition(s). If the condition(s) are not remedied during such 30-day period, such Eligible Individual may terminate such Eligible Individual’s employment with the Company and its Affiliates for Good Reason by delivering a Notice of Termination to the Company; provided, however, that such termination must occur no later than 180 days after the date of the initial existence of the condition(s) giving rise to such Good Reason; otherwise, such Eligible Individual is deemed to have accepted the condition(s), or the Company’s and its Affiliates correction of such condition(s), that may have given rise to the existence of such Good Reason.

(g) Without Good Reason . An Eligible Individual shall be entitled to terminate such Eligible Individual’s employment with the Company and its Affiliates at any time by providing 30 days written Notice of Termination to the Company or one of its Affiliates and stating that such termination

is without Good Reason, provided, however, that notwithstanding anything to the contrary contained herein, the Company and its Affiliates shall be under no obligation to continue to employ such Eligible Individual for such 30 day period.

(h) Suspension of Duties . Notwithstanding the foregoing provisions of this Section 9, the Company and its Affiliates may, to the extent doing so would not result in the Eligible Individual’s Separation from Service, suspend an Eligible Individual from performing such Eligible Individual’s duties, responsibilities, and authorities (including, without limitation, such Eligible Individual’s duties, responsibilities and authorities as a member of the Board or the board of directors of any Affiliate) following the delivery by such Eligible Individual of a Notice of Termination providing for such Eligible Individual’s resignation, or following delivery by the Company or one of its Affiliates of a Notice of Termination providing for the termination of such Eligible Individual’s employment for any reason; provided , however, that during the period of suspension (which shall end on or before the Date of Termination), and subject to the legal rules applicable to any Company benefit plans under Section 401(a) of the Code and the rules applicable to nonqualified deferred compensation plans under Section 409A, such Eligible Individual shall continue to be treated as employed by the Company and its Affiliates for other purposes, and such Eligible Individual’s rights to compensation or benefits shall not be reduced by reason of the suspension; and provided, further, that any such suspension shall not affect the determination of whether the resignation was for Good Reason or without Good Reason or whether the termination was for Cause or without Cause. The Company and its Affiliates may suspend an Eligible Individual with pay pending an investigation authorized by the Company or any of its Affiliates or a governmental authority in order to determine whether such Eligible Individual has engaged in acts or omissions constituting Cause, and in such case the paid suspension shall not constitute a termination of such Eligible Individual’s employment with the Company and its Affiliates; provided , however, that such suspension shall not continue past the time that the Eligible Individual would incur a Separation from Service (at such point, the Company shall either terminate the Eligible Individual in accordance with this Plan or have the Eligible Individual return to active employment).

10. General Provisions .

(a) Taxes. The Company and its Affiliates are authorized to withhold from any payments made hereunder amounts of withholding and other taxes due or potentially payable in connection therewith, and to take such other action as the Company and its Affiliates may deem advisable to enable the Company, its Affiliates and Eligible Individuals to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any payments made under this Plan.

(b) Offsets and Substitutions. Pursuant to Reg. § 1.409A-3(j)(4)(xiii), the Company and its Affiliates may set off against, and each Eligible Individual authorizes the Company and its Affiliates to deduct from, any payments due to such Eligible Individual, or to such Eligible Individual’s estate, heirs, legal representatives or successors, any amounts which may be due and owing to the Company or an Affiliate by such Eligible Individual, arising in the ordinary course of business whether

under this Plan or otherwise; provided that no such deduction may exceed $5,000 and the deduction is made at the same time and in the same amount as the amount otherwise would have been due and collected from such Eligible Individual. Such Eligible Individual shall pay to the Company and its Affiliates all other obligations to the Company and its Affiliates. To the extent that any amounts would otherwise be payable (or benefits would otherwise be provided) to an Eligible Individual under another plan of the Company or its Affiliates or an agreement with the Eligible Individual and the Company or its Affiliates, including a change in control plan or agreement, an offer letter or letter agreement, or to the extent that an Eligible Individual moves between Groups, and to the extent that such other payments or benefits or the Severance Obligations provided under this Plan are subject to Section 409A, the Plan shall be administered to ensure that no payment or benefit under the Plan will be (i) accelerated in violation of Section 409A or (ii) further deferred in violation of Section 409A.

(i) Prior to a Change in Control, this Plan may be amended or modified in any respect, and may be terminated, in any such case, by resolution adopted by the Administrator and at least two-thirds (2/3) of the Board; provided, however, that no such amendment, modification or termination that is adopted within one (1) year prior to a Change in Control that would adversely affect the benefits or protections hereunder of any Eligible Individual as of the date such amendment, modification or termination is adopted shall be effective as it relates to such Eligible Individual; provided, further, however, that this Plan may not be amended, modified or terminated, (A) at the request of a third party who has indicated an intention or taken steps to effect a Change in Control and who effectuates a Change in Control, or (B) otherwise in connection with, or in anticipation of, a Change in Control that actually occurs; any such attempted amendment, modification or termination being null and void ab initio. Any action taken to amend, modify or terminate this Plan which is taken subsequent to the execution of an agreement providing for a transaction or transactions which, if consummated, would constitute a Change in Control shall conclusively be presumed to have been taken in connection with a Change in Control. For a period of two (2) years following the occurrence of a Change in Control, this Plan may not be amended or modified in any manner that would in any way adversely affect the benefits or protections provided hereunder to any Eligible Individual under this Plan on the date the Change in Control occurs.

(ii) Notwithstanding the provisions of paragraph (i), the Company may terminate and liquidate the Plan in accordance with the provisions of Section 409A.

(iii) Notwithstanding the foregoing, no amendment, modification or termination of this Plan shall adversely affect any Eligible Individual’s entitlement to payments under this Plan prior to such amendment, modification or termination (other than as required to permit termination of the Plan in accordance with Section 409A), nor shall such amendment, modification or termination relieve the Company of its obligation to pay benefits to Eligible Individuals as otherwise set forth herein, except as otherwise consented to by such Eligible Individual.

(d) Successors . This Plan shall bind and inure to the benefit of and be enforceable by any Eligible Individual and the Company and their respective successors, permitted assigns, heirs and personal representatives and estates, as the case may be. Neither this Plan nor any right or obligation hereunder of the Company, any of its Affiliates or any Eligible Individual may be assigned or delegated without the prior written consent of the other party; provided, however, that the Company may assign this Plan to any of its Affiliates and an Eligible Individual may direct payment of any benefits that will accrue upon death. An Eligible Individual shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon any payments or other benefits provided under this Plan; and no benefits payable under this Plan shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law, except by will or pursuant to the laws of descent and distribution. This Plan shall not confer any rights or remedies upon any person or legal entity other than the Company, its Affiliates and Eligible Individuals and their respective successors and permitted assigns.

(e) Unfunded Obligation . All benefits due an Eligible Individual under this Plan are unfunded and unsecured and are payable out of the general funds of the Company and its Affiliates.

(f) Directed Payments. If any Eligible Individual is determined by the Administrator to be Disabled, the Administrator may cause the payment or payments becoming due to such Eligible Individual to be made to another person for such person’s benefit without responsibility on the part of the Administrator or the Company and its Affiliates to follow the application of such funds.

(g) Limitation on Rights Conferred Under Plan . Neither this Plan nor any action taken hereunder will be construed as (i) giving an Eligible Individual the right to continue in the employ or service of the Company or any Affiliate; (ii) interfering in any way with the right of the Company or any Affiliate to terminate an Eligible Individual’s employment or service at any time; or (iii) giving an Eligible Individual any claim to be treated uniformly with other employees of the Company or any of its Affiliates. The provisions of this document supersede any oral statements made by any employee, officer, or Board member of the Company or any of its Affiliates regarding eligibility, severance payments and benefits.

(h) Governing Law. All questions arising with respect to the provisions of the Plan and payments due hereunder will be determined by application of the laws of the State of Colorado, without giving effect to any conflict of law provisions thereof, except to the extent Colorado law is preempted by federal law.

(i) Dispute Resolution. Any and all disputes, claims or controversies arising out of or relating to this Plan that are not resolved by their mutual agreement (A) shall be brought by an Eligible Individual in such Eligible Individual’s individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding and (B) shall be submitted to final and binding arbitration before Judicial Arbiter Group (“ JAG ”), or its successor. The arbitration process shall be commenced by filing a written demand for arbitration with JAG, with a copy to the Company. The

arbitration will be conducted in accordance with the provisions of JAG’s arbitration rules and procedures in effect at the time of filing of the demand for arbitration. The Company and such Eligible Individual will cooperate with JAG and with one another in selecting a single arbitrator from JAG’s panel of neutrals, and in scheduling the arbitration proceedings, which shall take place in Denver, Colorado. The provisions of this section 10(i) may be enforced by any Court of competent jurisdiction.

(j) Severability . The invalidity or unenforceability of any provision of the Plan will not affect the validity or enforceability of any other provision of the Plan, which will remain in full force and effect, and any prohibition or unenforceability in any jurisdiction will not invalidate that provision, or render it unenforceable, in any other jurisdiction.

(k) Section 409A .

(i) This Plan is intended to comply with Section 409A and shall be construed and operated accordingly. The Company may amend this Plan at any time to the extent necessary to comply with Section 409A. Any Eligible Employee shall perform any act, or refrain from performing any act, as reasonably requested by the Company to comply with any correction procedure promulgated pursuant to Section 409A.

(ii) To the extent required to avoid the imposition of penalties or interest under Section 409A, any payment or benefit to be paid or provided on account of an Eligible Individual’s Separation from Service to an Eligible Individual who is a specified employee (within the meaning of Section 409A(a)(2)(B) of the Code) that would be paid or provided prior to the first day of the seventh month following the Eligible Individual’s Separation from Service shall be paid or provided on the first day of the seventh month following the Eligible Individual’s Separation from Service or, if earlier, the date of the Eligible Individual’s death.

(iii) Each payment to be made under this Plan is a separately identifiable or designated amount for purposes of Section 409A.

(l) PHSA § 2716 . Notwithstanding anything to the contrary in this Plan, in the event that the Company or any of its Affiliates is subject to the sanctions imposed pursuant to § 2716 of the Public Health Service Act by reason of this Plan, the Company may amend this Plan at any time with the goal of giving Employee the economic benefits described herein in a manner that does not result in such sanctions being imposed.

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has adopted this Executive Severance Plan as of the Effective Date.




	JAGGED PEAK ENERGY INC.



	By:	/s/ Joseph N. Jaggers
	Name:	Joseph N. Jaggers
	Title:	Chairman of the Board, Chief Executive Officer & President

[S IGNATURE P AGE TO E XECUTIVE S EVERANCE P LAN ]

EXHIBIT A

FORM OF RELEASE

Employee hereby releases, discharges and forever acquits Jagged Peak Energy Inc. (the “ Company ”) and its subsidiaries and affiliates, and each of the foregoing entities’ respective past present and future affiliates, owners, stockholders, 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 or any of its affiliates and all fiduciaries and administrators of any such plans, in their personal and representative capacities (each a “ Released Party ” and collectively the “ Released Parties ”), from liability for, and hereby waives, any and all claims, damages, or causes of action of any kind related to Employee’s employment or affiliation with any Released 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 Employee signing this Release, 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, 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 Employee may have under any employment contract, incentive compensation plan or equity-based plan with any Released Party or to any ownership interest in any Released Party; (xvii) any and all matters arising out of Employee’s status as a holder, awardee or grantee of any equity of any Released Party; and (xviii) any claim for compensation or benefits of any kind not expressly set forth in this Release (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 RELEASED PARTIES ARISING BEFORE EMPLOYEE SIGNS THIS RELEASE.

a. Employee acknowledges and understands that this Release does not prohibit or prevent Employee 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 Employee 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 Employee cannot waive due to public

B-1

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, Employee waives any right to any monetary recovery or other relief from the Proceeding, and Employee agrees to donate any monies that Employee might be entitled to or receive from such Proceeding to the American Red Cross.

b. It is Employee’s 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. Employee recognizes that Employee may have some claim, demand or cause of action against the Released Parties of which Employee is totally unaware and unsuspecting, that Employee is giving up by execution of this Release. It is Employee intention in executing this Release that it will deprive Employee of each Released Claim and prevent Employee from asserting it against the Released Parties.

c. Notwithstanding the foregoing, nothing in this Release prohibits or restricts Employee 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 Release does not limit Employee’s right to receive an award for information provided to a Government Agency.

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

e. The Released Parties, on behalf of themselves and the other Released Parties, fully release and discharge forever Employee and Employee’s heirs, agents, and representatives from any and all manner of claims, causes of action, complaints, grievances, demands, allegations, promises, and obligations for damages, losses, expenses, fees, salary paid to Employee, bonuses paid to Employee, other compensation paid to Employee, 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 Release; except for (i) fraud, embezzlement, or other intentional misconduct by Employee; (ii) claims arising under this Release (including a misrepresentation or a breach of this Release by Employee); and (iii) any other claim arising after the Effective Date of this Release.

B-2

Exhibit 10.2

«Date»

«Firstname» «Initial» «Lastname»

«Address1»

«Address2»

Re: Employment Terms and Conditions – «Title»

Dear «Firstname»:

You are currently employed by Jagged Peak Energy Management, LLC, a Delaware limited liability company (together with its affiliates, the “ Company ”) pursuant to that certain «Old_Agreement_Name», dated «Old_Agreement_Date» (the “ Prior Agreement ”). In consideration of the benefits described in this letter (this “ Employment Letter Agreement ”) to which you are not otherwise entitled, you hereby agree to waive any and all rights that you have under and with respect to the Prior Agreement and understand and agree that from and after the date of this Employment Letter Agreement, you shall have no further rights under or with respect to the Prior Agreement and it shall be terminated in all respects. You will retain your position as «Title» and your annual salary (the “ Base Salary ”) will remain at the same «Salary» level as in effect immediately prior to the date of this Employment Letter Agreement. In addition to the foregoing and, in summary, your compensation and benefits as of the date of this Employment Letter Agreement will be:


•	Participation in the Company’s 2017 Long Term Incentive Program (“ LTIP ”), subject to the approval and discretion of the Company’s Board of Directors and the other terms and conditions of the LTIP and any award agreement to be entered into thereunder;


•	Participation in the Company’s Short Term Incentive Plan (the “ STIP ”), in a “target” amount of «Target_Bonus» of the Base Salary upon the achievement of Company and personal goals specified each year and subject to the other terms and conditions of the STIP;


•	«Vacation_Hours» hours of annual paid vacation time; five (5) days sick leave annually; and eleven (11) paid holidays per year, all in accordance with the Company’s policies;


•	Continued participation in the Company’s 401(k) Plan, in accordance with such plan; currently the Company provides matching contributions of 6% of W-2 income, which amount may be amended from time to time in accordance with the terms of the 401(k) Plan;


•	Continued participation in the Company’s health insurance plans upon your election subject to the terms and conditions of the plans;


•	Option to participate or to continue to participate in the Company’s flexible benefit plan (Section 125 Plan); and


•	Participation in the Company’s Executive Severance Plan (the “ Severance Plan ”) as a Group «Group_Number» Executive (as such term is defined in the Severance Plan).

The Company may modify compensation and benefits from time to time as it deems necessary in accordance with the terms and conditions of the plans set forth above and the Company’s policies.

The terms and conditions of employment set forth in this Employment Letter Agreement incorporate and are subject to the Confidentiality and Restrictive Covenant Terms and Conditions attached hereto as Exhibit A (the “ Terms ”).

Notwithstanding anything to the contrary, your employment with the Company is AT WILL. You may terminate your employment with the Company at any time and for any reason whatsoever simply by notifying the Company,

subject only to any rights or obligations that may be required by the Severance Plan or the Terms, each as may be amended from time to time. Likewise, the Company may terminate your employment at any time and for any reason whatsoever, subject only to any rights and obligations that may be required by the Severance Plan or the Terms, as each may be amended from time to time.

In consideration for the benefits to be provided to you under this Employment Letter Agreement to which you are not currently entitled, by executing this Employment Letter Agreement, you hereby (a) accept the terms of employment outlined in this Employment Letter, (b) acknowledge and agree that this Employment Letter Agreement constitutes the entire agreement between the parties concerning your employment (except as otherwise may be set forth in the LTIP and any agreements entered into thereunder, the STIP, the Limited Liability Agreement of JPE Management Holdings LLC and any grants of units made pursuant thereto, the Severance Plan, the Terms or any Indemnification Agreement entered into between you and the Company (collectively, the “ Remaining Agreements ”)), and supersedes and terminates all prior and contemporaneous agreements and understandings, both written and oral, between the parties with respect to its subject matters, except for the Remaining Agreements and (c) acknowledge and agree that any accelerated vesting of LTIP awards that may be provided in the Severance Plan shall be deemed an amendment to the terms and conditions of such LTIP awards. You agree that the Company has not made any promise or representation to you concerning this Employment Letter Agreement not expressed in this Employment Letter Agreement, and that, in signing this Employment Letter Agreement, you are not relying on any prior oral or written statement or representation by the Company, but are instead relying solely on your own judgment and the judgment of your legal and tax advisors, if any.

If you have any questions or need additional information, please feel free to contact me.

Sincerely,

By:

Name: Joseph N. Jaggers, III

Title: Chairman, Chief Executive Officer & President

Accepted and agreed:

By:

Name: «Firstname» «Initial» «Lastname»

Date:

Exhibit A

Confidentiality and Restrictive Covenant Terms and Conditions

JAGGED PEAK ENERGY INC.

CONFIDENTIALITY AND RESTRICTIVE COVENANT TERMS AND CONDITIONS

In consideration of the employee’s (as specified in the Employment Letter Agreement (“ Employee ”)) employment or continued employment by Jagged Peak Energy Inc. or any of its subsidiaries (collectively, the “ Company ”), and the compensation now and hereafter paid to Employee, Employee agrees as follows (these “ Terms and Conditions ”):


1.	NONDISCLOSURE.

1.1 Recognition of Company’s Rights; Nondisclosure. At all times during Employee’s employment and thereafter, Employee will hold in strictest confidence and will not disclose, use, lecture upon or publish any of the Company’s Proprietary Information (as defined below), except as such disclosure, use or publication may be required in connection with Employee’s work for the Company, or unless an officer of the Company expressly authorizes such in writing. Employee will obtain the Company’s written approval before publishing or submitting for publication any material (written, verbal, or otherwise) that incorporates any Proprietary Information. Employee hereby assigns to the Company any rights Employee may have or acquire in such Proprietary Information and recognize that all Proprietary Information will be the sole property of the Company and its assigns.

1.2 Proprietary Information. The term “ Proprietary Information ” means any and all confidential and/or proprietary knowledge, data or information of the Company. By way of illustration, but not limitation, “ Proprietary Information ” includes all technical and non-technical information of the Company including (a) trade secrets, including, but not limited to, the whole or any portion or phase of any scientific or technical information, design, process, procedure, improvement, confidential business or financial information, listing or name, addresses or telephone number, or other information relating to any business that is secret and of value; (b) inventions, ideas, materials, concepts, processes, formulas, data, other works of authorship, know-how, improvements, discoveries, developments, designs, techniques, drilling reports, maps, well logs, mud logs, seismic data and geological or geophysical data and analyses (collectively, “ Inventions ”); (c) information regarding research, development, production, areas or zones of interest, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers and the existence of any business discussions, negotiations or agreements between the Company and any third party; and (d) any other non-public information generated by the Company.

1.3 Third Party Information. Employee understands, in addition, that the Company has received and in the future will receive from third parties confidential or proprietary information (“ Third Party Information ”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of Employee’s employment and thereafter, Employee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with Employee’s work for the Company, Third Party Information unless expressly authorized by an officer of the Company in writing.

1.4 No Improper Use of Information of Prior Employers and Others. During Employee’s employment by the Company, Employee will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom Employee has an obligation of confidentiality, and Employee will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom Employee has an obligation of confidentiality unless consented to in writing by that former employer or person. Employee will use in the performance of Employee’s duties only information which is generally known and used by persons with training and experience comparable to Employee’s own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.

1.5 Return of Property . Employee represents and warrants that, upon separation of employment, Employee immediately will return to the Company any and all property, documents, and files (including, without limitation, all electronic files and correspondence, recorded media, papers, computer disks, drives and other data storage devices, copies, photographs, and maps) that contain Proprietary Information, Third Party Information, or that relate

in any way to Company or its business. Employee agrees, to the extent Employee possesses any files, data, or information relating in any way to the Company or its business on any personal computer or device or account, Employee will delete those files, data, or information (and will retain no copies in any form). Employee also will, prior or on to the last date of employment, return any Company tools, equipment, calling cards, credit cards, access cards, keys, and devices, any keys to any filing cabinets, vehicles, vehicle keys, and all other Company property, in any form.

1.6 Disclaimer . An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.


2.	ASSIGNMENT OF INVENTIONS.

2.1 Proprietary Rights. The term “ Proprietary Rights ” means all trade secret, patent, copyright, moral rights and other intellectual property rights throughout the world.

2.2 Previous Inventions. Inventions, if any, patented or unpatented, which Employee made prior to the commencement of Employee’s employment with the Company are excluded from the scope of these Terms and Conditions. To preclude any possible uncertainty, within two (2) business days following Employee’s signing of the Employment Letter Agreement, Employee will provide to the Company a complete written list of all Inventions relevant to the subject matter of Employee’s employment by the Company that Employee has, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of Employee’s employment with the Company, that Employee considers to be Employee’s property or the property of third parties and that Employee wishes to have excluded from the scope of these Terms and Conditions (collectively referred to as “ Previous Inventions ”). If Employee does not timely provide the Company with Employee’s written list of Previous Inventions, Employee represents that there are no Previous Inventions. If, in the course of Employee’s employment with the Company, Employee incorporate a Previous Invention into any work product for the Company, the Company is hereby granted and will have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide, fully paid up license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, modify, use, reproduce, make derivative works of, distribute, publicly perform, publicly display, import and sell such Previous Invention. Notwithstanding the foregoing, Employee agrees that Employee will not incorporate, or permit to be incorporated, Previous Inventions in any Company Inventions without the Company’s prior written consent.

2.3 Assignment of Inventions. Subject to Sections 2.4 and 2.6, Employee hereby assigns and agrees to assign in the future (when any such Inventions or Proprietary Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to the Company all of Employee’s right, title and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by Employee, either alone or jointly with others, during the period of Employee’s employment with the Company. Inventions assigned to the Company, or to a third party as directed by the Company pursuant to this Section 2, are hereinafter referred to as “ Company Inventions .” Employee hereby forever waives and agrees not to assert any and all Proprietary Rights Employee may have in or with respect to a Company Invention.

2.4 Nonassignable Inventions. Employee recognizes that, in the event of a specifically applicable state law, regulation, rule, or public policy (“ Specific Inventions Law ”), these Terms and Conditions Agreement will not be deemed to require assignment of any invention which qualifies fully for protection under a Specific Inventions Law by virtue of the fact that any such invention was, for example, developed entirely on Employee’s own time without using the Company’s equipment, supplies, facilities, or trade secrets and neither related to the Company’s actual or anticipated business, research or development, nor resulted or was derived from work performed by Employee directly or indirectly for the Company. In the absence of a Specific Inventions Law, the preceding sentence will not apply.

2.5 Obligation to Keep Company Informed. During the period of Employee’s employment and for one (1) year after termination of Employee’s employment with the Company, Employee will promptly disclose to the Company fully and in writing all Inventions authored, conceived or reduced to practice by Employee, either alone or jointly with others. In addition, Employee will promptly disclose to the Company all patent applications filed by Employee or on Employee’s behalf or in which Employee is named as an inventor or co-inventor within one (1) year after termination of employment. At the time of each such disclosure, Employee will advise the Company in writing of any Inventions that Employee believes fully qualify for protection under the provisions of a Specific Inventions Law; and Employee will at that time provide to the Company in writing all evidence necessary to substantiate that belief. The Company will keep in confidence and will not use for any purpose or disclose to third parties without Employee’s consent any confidential information disclosed in writing to the Company pursuant to these Terms and Conditions relating to Inventions that qualify fully for protection under a Specific Inventions Law. Employee will preserve the confidentiality of any Invention that does not fully qualify for protection under a Specific Inventions Law.

2.6 Government or Third Party. Employee also agrees to assign all Employee’s right, title and interest in and to any particular Company Invention to a third party, including, without limitation, the United States, as directed by the Company.

2.7 Works for Hire. Employee acknowledges that all original works of authorship which are made by Employee (solely or jointly with others) within the scope of Employee’s employment and which are protectable by copyright are “works made for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101).

2.8 Enforcement of Proprietary Rights. Employee will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to Company Inventions in any and all countries. To that end, Employee will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, Employee will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. Employee’s obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries will continue beyond the termination of Employee’s employment, but the Company will compensate Employee at a reasonable rate after Employee’s termination for the time actually spent by Employee at the Company’s request on such assistance.

2.9 Further Assurances. In the event the Company is unable for any reason, after reasonable effort, to secure Employee’s signature on any document needed in connection with the actions specified in the preceding paragraph, Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Employee’s agent and attorney in fact, which appointment is coupled with an interest, to act for and in Employee’s behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of this Section 2 with the same legal force and effect as if executed by Employee. Employee hereby waives, assigns and quitclaims to the Company any and all claims, of any nature whatsoever, which Employee now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

2.10 Presumption of Ownership. Due to the difficulty of establishing when an Invention is first conceived or developed, whether it results from access to the Company’s actual or anticipated business or research or development, or whether it is a direct or indirect result or derivation of any work Employee performs for the Company, Employee hereby acknowledges and agrees that ownership of all Inventions conceived, developed, suggested or reduced to practice by Employee, alone or jointly with others during Employee’s employment shall be presumed to belong to the Company and Employee shall have the burden of proof to prove otherwise.

3. NON-COMPETE AND NON-SOLICITATION OBLIGATIONS.

3.1 Definitions.

(a) “ Business ” shall mean the acquisition, exploration, development and production of onshore oil, natural gas and associated liquids in the United States of America.

(b) “ Business Opportunities ” shall mean all business ideas, prospects, proposals or other opportunities pertaining to the Business, that are or were developed by Employee during Employee’s employment with the Company or any of the Company’s Affiliates (as defined below) or originated by any third party and brought to Employee’s attention during Employee’s employment with the Company or any of the Company’s Affiliates and in such capacity, together with information relating thereto (including, without limitation, geological and seismic data and interpretations thereof, whether in the form of maps, charts, logs, seismographs, calculations, summaries, memoranda, opinions or other written or charted means).

3.2 Covenant Not to Compete During Term of Employment. Employee acknowledges that, during Employee’s employment with the Company, Employee will have access to and knowledge of Proprietary Information, including, without limitation, trade secret information. During the term of Employee’s employment with the Company and except as provided below or as otherwise permitted by the Company (acting upon the instruction of the board of directors of the Company), to protect the Company’s Proprietary Information, Employee agrees that:

(a) Employee shall not, other than through the Company or any person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company and any predecessor to any such entity (each a “ Company Affiliate ” and collectively, the “ Company’s Affiliates ”), engage or participate in any manner, whether directly or indirectly for Employee’s direct benefit through a family member or as an employee, employer, consultant, agent, principal, partner, more than five percent shareholder, officer, director, licensor, lender, lessor, or in any other individual or representative capacity, in (i) any business or activity that is competitive with the Business, (ii) any business or activity that is engaged in leasing, acquiring, exploring, developing or producing hydrocarbons and related products, or (iii) any enterprise in which a material portion of its business is materially competitive in any way with any business in which the Company is engaged during Employee’s employment with the Company or any of the Company’s Affiliates (including, without limitation, any business if the Company devoted material resources to entering into such business); and

(b) all investments made by Employee (whether in Employee’s own name or for Employee’s direct benefit through an immediate family member or intermediary)( collectively, “ Employee Affiliates ), which relate to the Business or the lease, acquisition, exploration, development or production of hydrocarbons and related products shall be made solely through the Company or any of the Company’s Affiliates; and Employee shall not (directly or indirectly), and shall not permit any Employee Affiliates to: (i) invest or otherwise participate alongside the Company or any of the Company’s Affiliates in any Business Opportunities (as defined above) or (ii) invest or otherwise participate in any business or activity relating to a Business Opportunity, regardless of whether the Company or any of the Company’s Affiliates ultimately participates in such business or activity;

provided , however , that this Section 6.2 shall not apply to (w) the existing personal oil and gas investments owned by Employee, Employee’s family members or any Employee Affiliates as of the date of these Terms and Conditions set forth on Exhibit A hereto (the “ Existing Personal Investments ”), (x) future expenditures made by Employee, Employee’s family members or any Employee Affiliates in the Existing Personal Investments, provided that such future expenditures do not go beyond the limited allowed for Permitted Investments (as defined below), (y) Permitted Investments (as defined below) and (z) any opportunity that is first offered to, and subsequently declined by, the Company (acting through the Company’s board of directors of the Company or its designee), if and to the extent that such opportunities are outside the Geographic Scope( as defined below). For purposes of these Terms and Conditions, “ Permitted Investments ” means passive investments in securities or other ownership interests of businesses made by Employee, Employee’s family members or any Employee Affiliates, provided that the aggregate amount owned by Employee, Employee’s family members and Employee Affiliates does not exceed 5% of the outstanding securities or other ownership interests of any such business.

3.3 Covenant Not to Compete After the Date of Termination. Employee hereby acknowledges and agrees that the purpose of this Section 3.3 is to protect the Company from unfair loss of goodwill and business advantage, to

shield Employee from the pressure to use or disclose Proprietary Information or to trade on the goodwill belonging to the Company, for the protection of the Company’s trade secret and Proprietary Information, and because of the knowledge Employee has acquired or will acquire as an executive or management personnel, or as an officer, or as professional staff to executive and management personnel. Accordingly, during the Post-Termination Non-Compete Term, Employee agrees not to engage or participate in any manner, whether directly or indirectly for Employee’s benefit, through a family member, or as an employee, employer, consultant, agent, principal, partner, shareholder, officer, director, licensor, lender (other than as an employee of a chartered commercial bank with assets of $500 million or greater), 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 twenty-five (25) mile radius of the boundaries of, any mineral property interest of the Company as of the date hereof (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 the Company and any third party) or any other property on which the Company has a right, license, or authority to conduct or direct exploratory activities, such as three dimensional seismic acquisitions or other seismic, geophysical, and geochemical activities as of the date hereof (the “ Geographic Scope ”); provided , however , that this subparagraph shall not be construed to preclude Employee from (w) holding the Existing Personal Investments, (x) making future expenditures made by Employee, Employee’s family members or any Employee Affiliates in the Existing Personal Investments, provided that such future expenditures do not go beyond the limited allowed for Permitted Investments, (y) making Permitted Investments and (z) investing in any opportunity that is first offered to, and subsequently declined by, the Company (acting through the board of directors of the Company or its designee), if and to the extent that such opportunities are outside the Geographic Scope.

3.4 Covenant Not to Solicit. Employee shall not, during Employee’ employment with the Company or the Post-Termination Non-Compete Term (a) directly or indirectly, on behalf of Employee or any third party, solicit, encourage, facilitate, or induce any advertiser, supplier, broker, vendor, agent, sales representative, employee, contractor, consultant, or licensee of the Company or of the Company’s Affiliates to breach any agreement or contract with, or discontinue or curtail his, her or its business relationships with the Company or any of the Company’s Affiliates or (b) directly or indirectly, solicit, recruit or induce as an employee, independent contractor or otherwise, either for Employee or any other third party, any person who is employed by the Company or any of the Company’s Affiliates at the time of such solicitation, recruitment or inducement; provided that general solicitations not specifically directed at any individual shall not be deemed to violate this Section 3.4.

4. NO CONFLICTING OBLIGATION. Employee represents that Employee’s performance of all the terms of these Terms and Conditions and as an employee of the Company does not and will not breach any non-compete agreement or any agreement to keep in confidence information acquired by Employee in confidence or in trust prior to Employee’s employment by the Company. Employee has not entered into, and Employee agrees Employee will not enter into, any agreement either written or oral in conflict with these Terms and Conditions.

5. LEGAL AND EQUITABLE REMEDIES. Because Employee’s services are personal and unique and because Employee may have access to and become acquainted with the Company’s Proprietary Information, the Company has the right to enforce these Terms and Conditions and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of these Terms and Conditions. This paragraph shall not be construed as an election of any remedy, or as a waiver of any right available to Company under these Terms and Conditions or the law, including the right to seek damages from Employee for a breach of any provision of these Terms and Conditions, nor shall this paragraph be construed to limit the rights or remedies available under applicable law or in equity for any violation of any provision of these Terms and Conditions, including, but not limited to, claims for damages. If Employee violates any covenant contained in Section 5, the duration of such covenant shall be automatically extended for the period of time equal to the period of such violation.

6. NOTICES. Any notices required or permitted hereunder will be given to the appropriate party at the address specified below or at such other address as the party may specify in writing. Such notice will be deemed given upon personal delivery to the appropriate address or if sent by certified or registered mail, three (3) days after the date of mailing.

7. NOTIFICATION OF NEW EMPLOYER. In the event that Employee leaves the employ of the Company, Employee hereby consents to the notification of Employee’s new employer of Employee’s rights and obligations under these Terms and Conditions.

8. GENERAL PROVISIONS.

8.1 Governing Law; Consent to Personal Jurisdiction. These Terms and Conditions will be governed by and construed according to the laws of the State of Colorado, without regard for its conflicts of law principles that would require application of the laws of a different state. Employee hereby expressly consents to the personal jurisdiction of the state and federal courts located in Denver, Colorado for any lawsuit filed there against Employee by Company arising from or related to these Terms and Conditions.

8.2 Attorneys’ Fees and Costs. Should the Parties take any action or commence any legal proceeding relating to these Terms and Conditions, if either Party prevails in all or any part of its claims or defenses, such Party shall be entitled to recover all costs and expenses from the other Party, including reasonable attorneys’ fees, incurred in connection with such action or other legal proceeding.

8.3 Waiver of Jury Trial . EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

8.4 Severability. In case any one or more of the provisions contained in these Terms and Conditions is, for any reason, held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect the other provisions of these Terms and Conditions, and these Terms and Conditions will be construed as if such invalid, illegal or unenforceable provision had never been contained herein. Notwithstanding the foregoing, if any one or more of the provisions contained in these Terms and Conditions is held to be excessively broad as to duration, geographical scope, activity or subject, for any reason, it will be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it then appears.

8.5 Successors and Assigns. These Terms and Conditions will be binding upon Employee’s heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns. These Terms and Conditions and shall be freely assignable by Company in its sole discretion, at any time, without the requirement of notice or consent by Employee.

8.6 Survival. The provisions of these Terms and Conditions will survive the termination of Employee’s employment and the assignment of these Terms and Conditions by the Company to any successor in interest or other assignee.

8.7 Employment. Employee acknowledges and agrees that Employee’s relationship with the Company is “AT-WILL”, and that both the Company and Employee may terminate Employee’s employment relationship at any time, with or without cause or advance notice. Employee further agrees and understands that nothing in these Terms and Conditions will confer any right with respect to continuation of employment by the Company, nor will it interfere in any way with Employee’s right or the Company’s right to terminate Employee’s employment at any time, with or without cause or advance notice.

8.8 Waiver. No waiver by the Company of any breach of these Terms and Conditions will be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under these Terms and Conditions will be construed as a waiver of any other right. The Company will not be required to give notice to enforce strict adherence to all terms of these Terms and Conditions.

8.9 Entire Agreement. The obligations pursuant to Sections 1 and 2 of these Terms and Conditions will apply to any time during which Employee was previously employed, or am in the future employed, by the Company as a consultant if no other agreement governs nondisclosure and assignment of inventions during such period. These Terms and Conditions is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions and agreements between us relating to the subject matter hereof. No modification of or amendment to these Terms and Conditions, nor any waiver of any rights under these Terms and

Conditions, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in Employee’s duties, salary or compensation will not affect the validity or scope of these Terms and Conditions.

8.10 Advice of Counsel. EMPLOYEE ACKNOWLEDGES THAT, IN EXECUTING THESE TERMS AND CONDITIONS, EMPLOYEE HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND EMPLOYEE HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THESE TERMS AND CONDITIONS. THESE TERMS AND CONDITIONS MAY NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.

[ END OF DOCUMENT]

Exhibit A

Existing Investments

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:	August 9, 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:	August 9, 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 June 30, 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:	August 9, 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 June 30, 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:	August 9, 2017	/s/ ROBERT W. HOWARD
		Name:	Robert W. Howard
		Title:	Executive Vice President and Chief Financial Officer