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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

Commission file number 001-37907
https://cdn.kscope.io/58a7850ff657c0abd4c647f4a4c19df3-xog-20200630_g1.jpg
EXTRACTION OIL & GAS, INC.
(Exact name of registrant as specified in its charter)

Delaware46-1473923
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
370 17th Street
Suite 5300
Denver,Colorado80202
(Address of principal executive offices)
(720) 557-8300
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      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.
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

The total number of shares of common stock, par value $0.01 per share, outstanding as of August 7, 2020 was 138,343,932.



Table of Contents
EXTRACTION OIL & GAS, INC.
TABLE OF CONTENTS

Page
PART I—FINANCIAL INFORMATION

1

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
EXTRACTION OIL & GAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Debtor-In-Possession)
(Unaudited)
June 30,
2020
December 31,
2019
ASSETS
Current Assets:
Cash and cash equivalents$62,553  $32,382  
Accounts receivable, net
Trade48,599  32,009  
Oil, natural gas and NGL sales48,275  105,103  
Inventory, prepaid expenses and other34,732  36,702  
Commodity derivative asset55,667  17,554  
Total Current Assets249,826  223,750  
Property and Equipment (successful efforts method), at cost:
Proved oil and gas properties4,707,989  4,530,934  
Unproved oil and gas properties356,741  524,214  
Wells in progress137,944  149,733  
Less: accumulated depletion, depreciation, amortization and impairment charges(3,135,748) (2,985,983) 
Net oil and gas properties2,066,926  2,218,898  
Gathering systems and facilities, net of accumulated depreciation  315,777  
Other property and equipment, net of accumulated depreciation71,912  72,542  
Net Property and Equipment2,138,838  2,607,217  
Non-Current Assets:
Commodity derivative asset  13,229  
Other non-current assets15,692  82,761  
Total Non-Current Assets15,692  95,990  
Total Assets$2,404,356  $2,926,957  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities$43,329  $190,864  
Revenue payable5,030  108,493  
Production taxes payable  115,489  
Commodity derivative liability  1,998  
Accrued interest payable4,145  20,625  
Asset retirement obligations  27,058  
DIP Credit Facility—Note 637,500    
Credit Facility—Note 6481,935    
Total Current Liabilities571,939  464,527  
Non-Current Liabilities:
Credit Facility  470,000  
Senior Notes, net of unamortized debt issuance costs  1,085,777  
Production taxes payable1,681  98,740  
Commodity derivative liability  108  
Other non-current liabilities  54,579  
Asset retirement obligations  68,850  
Total Non-Current Liabilities1,681  1,778,054  
Liabilities Subject to Compromise1,697,341    
Total Liabilities2,270,961  2,242,581  
Commitments and Contingencies—Note 14
Series A Convertible Preferred Stock, $0.01 par value; 50,000,000 shares authorized, 185,280 issued and outstanding
187,975  175,639  
Stockholders' Equity (Deficit):
Common stock, $0.01 par value; 900,000,000 share authorized; 138,343,432 and 137,657,922 issued and outstanding, respectively
1,336  1,336  
Treasury stock, at cost, 38,859,078 shares
(170,138) (170,138) 
Additional paid-in capital2,140,327  2,156,383  
Accumulated deficit(2,026,105) (1,743,208) 
Total Extraction Oil & Gas, Inc. Stockholders' Equity (Deficit)(54,580) 244,373  
Noncontrolling interest  264,364  
Total Stockholders' Equity (Deficit)(54,580) 508,737  
Total Liabilities and Stockholders' Equity (Deficit)$2,404,356  $2,926,957  
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2

Table of Contents
EXTRACTION OIL & GAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Debtor-In-Possession)
(Unaudited)

For the Three Months Ended June 30,For the Six Months Ended June 30,
2020201920202019
Revenues:
Oil sales$36,290  $185,125  $160,509  $350,549  
Natural gas sales16,019  21,692  38,321  57,584  
NGL sales10,820  15,240  28,013  35,841  
Gathering and compression    1,473    
Total Revenues63,129  222,057  228,316  443,974  
Operating Expenses:
Lease operating expense22,984  23,608  53,374  45,465  
Midstream operating expenses    3,935    
Transportation and gathering26,306  11,854  49,092  22,219  
Production taxes4,679  18,580  18,133  36,709  
Exploration and abandonment expenses62,661  13,287  175,141  19,481  
Depletion, depreciation, amortization and accretion82,620  118,368  158,670  237,138  
Impairment of long lived assets960  2,985  1,736  11,233  
Gain on sale of property and equipment  (97)   (319) 
General and administrative expense25,148  30,740  35,744  58,392  
Other operating expenses13,209    65,784    
Total Operating Expenses238,567  219,325  561,609  430,318  
Operating Income (Loss)(175,438) 2,732  (333,293) 13,656  
Other Income (Expense):
Commodity derivative gain (loss)(69,301) 73,519  193,714  (48,572) 
Loss on deconsolidation of Elevation Midstream, LLC    (73,139)   
Reorganization items, net(26,919)   (26,919)   
Interest expense(1)(20,314) (18,558) (41,672) (31,566) 
Other income38  851  612  1,994  
Total Other Income (Expense)(116,496) 55,812  52,596  (78,144) 
Income (Loss) Before Income Taxes(291,934) 58,544  (280,697) (64,488) 
Income tax (expense) benefit   (15,100) (2,200) 13,900  
Net Income (Loss)$(291,934) $43,444  $(282,897) $(50,588) 
Net income attributable to noncontrolling interest  4,097  6,160  8,072  
Net Income (Loss) Attributable to Extraction Oil & Gas, Inc.(291,934) 39,347  (289,057) (58,660) 
Adjustments to reflect Series A Preferred Stock dividends and accretion of discount(5,818) (4,359) (12,336) (8,676) 
Net Income (Loss) Available to Common Shareholders, Basic and Diluted(297,752) 34,988  $(301,393) $(67,336) 
Income (Loss) Per Common Share (Note 13)
Basic and diluted$(2.16) $0.22  $(2.18) $(0.41) 
Weighted Average Common Shares Outstanding
Basic and diluted138,163  159,410  137,945  165,025  
(1)Absent the automatic stay described in Note 6—Long-Term Debt, interest expense for the three and six months ended June 30, 2020 would have been $23.2 million and $44.5 million, respectively.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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EXTRACTION OIL & GAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Debtor-In-Possession)
(In thousands)
(Unaudited)
For the Six Months Ended June 30,
20202019
Cash flows from operating activities:
Net loss$(282,897) $(50,588) 
Reconciliation of net loss to net cash provided by operating activities:
Depletion, depreciation, amortization and accretion158,670  237,138  
Abandonment and impairment of unproved properties169,559  14,993  
Impairment of long lived assets1,736  11,233  
Gain on sale of property and equipment  (319) 
Gain on repurchase of 2026 Senior Notes  (10,486) 
Amortization of debt issuance costs3,190  2,826  
Non-cash lease expense8,986  5,058  
Non-cash reorganization items, net13,270    
Contract asset12,317    
Commodity derivatives (gain) loss(193,714) 48,572  
Settlements on commodity derivatives65,447  (21,918) 
Premiums paid on commodity derivatives  (2,852) 
Earnings in unconsolidated subsidiaries(480) (576) 
Loss on deconsolidation of Elevation Midstream, LLC73,139    
Distributions from unconsolidated subsidiaries  1,990  
Deferred income tax expense (benefit)2,200  (13,900) 
Stock-based compensation2,560  27,945  
Changes in current assets and liabilities:
Accounts receivable—trade(16,998) 4,163  
Accounts receivable—oil, natural gas and NGL sales56,828  5,201  
Inventory, prepaid expenses and other(12,289) 600  
Accounts payable and accrued liabilities64,981  (2,973) 
Revenue payable(18,924) (23,553) 
Production taxes payable(23,019) (3,461) 
Accrued interest payable15,565  (2,602) 
Asset retirement expenditures(16,173) (8,047) 
Net cash provided by operating activities83,954  218,444  
Cash flows from investing activities:
Oil and gas property additions(193,334) (314,975) 
Sale of property and equipment11,147  19,982  
Gathering systems and facilities additions, net of cost reimbursements4,193  (115,337) 
Other property and equipment additions(3,386) (25,161) 
Investment in unconsolidated subsidiaries(10,033) (14,962) 
Distributions from unconsolidated subsidiary, return of capital  1,209  
Net cash used in investing activities(191,413) (449,244) 
Cash flows from financing activities:
Borrowings under Credit Facility200,500  245,000  
Repayments under Credit Facility(70,000) (50,000) 
Borrowings under DIP Credit Facility15,000    
Repurchase of 2026 Senior Notes  (39,325) 
Repurchase of common stock  (116,496) 
Payment of employee payroll withholding taxes(120) (582) 
Dividends on Series A Preferred Stock  (5,443) 
Debt issuance costs and other financing fees(22) (1,433) 
Net cash provided by financing activities145,358  31,721  
Effect of deconsolidation of Elevation Midstream, LLC(7,728)   
Increase (decrease) in cash and cash equivalents30,171  (199,079) 
Cash, cash equivalents at beginning of period32,382  234,986  
Cash, cash equivalents at end of the period$62,553  $35,907  
Supplemental cash flow information:
Property and equipment included in accounts payable and accrued liabilities$64,751  $223,527  
Cash paid for interest$26,955  $45,648  
Cash paid for reorganization items, net$3,787  $  
Accretion of beneficial conversion feature of Series A Preferred Stock$3,587  $3,233  
Preferred Units commitment fees and dividends paid-in-kind$6,160  $8,073  
Series A Preferred Stock dividends paid-in-kind$8,749  $  
Derivative unwinds reducing the Credit Facility$96,065  $  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4

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EXTRACTION OIL & GAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY AND NONCONTROLLING INTEREST
(Debtor-In-Possession)
(In thousands)
(Unaudited)
Common StockTreasury StockAdditional Paid in CapitalAccumulated DeficitExtraction Oil & Gas, Inc. Stockholders' Equity (Deficit)Noncontrolling InterestTotal Stockholders' Equity (Deficit)
SharesAmountSharesAmountAmount
Balance at January 1, 2020176,517  $1,336  38,859  $(170,138) $2,156,383  $(1,743,208) $244,373  $264,364  $508,737  
Preferred Units commitment fees & dividends paid-in-kind—  —  —  —  (6,160) —  (6,160) 6,160  —  
Series A Preferred Stock dividends—  —  —  —  (4,748) —  (4,748) —  (4,748) 
Accretion of beneficial conversion feature on Series A Preferred Stock—  —  —  —  (1,770) —  (1,770) —  (1,770) 
Restricted stock issued, net of tax withholdings and other234  —  —  —  (35) —  (35) —  (35) 
Net income—  —  —  —  —  9,037  9,037  —  9,037  
Effects of deconsolidation of Elevation Midstream, LLC—  —  —  —  —  —  —  (270,524) (270,524) 
Balance at March 31, 2020176,751  $1,336  38,859  $(170,138) $2,143,670  $(1,734,171) $240,697  $  $240,697  
Stock-based compensation—  —  —  —  2,560  —  2,560  —  2,560  
Series A Preferred Stock dividends—  —  —  —  (4,001) —  (4,001) —  (4,001) 
Accretion of beneficial conversion feature on Series A Preferred Stock—  —  —  —  (1,817) —  (1,817) —  (1,817) 
Restricted stock issued, net of tax withholdings and other452  —  —  —  (85) —  (85) —  (85) 
Net loss—  —  —  —  —  (291,934) (291,934) —  (291,934) 
Balance at June 30, 2020177,203  $1,336  38,859  $(170,138) $2,140,327  $(2,026,105) $(54,580) $  $(54,580) 

5

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Common StockTreasury StockAdditional Paid in CapitalAccumulated DeficitExtraction Oil & Gas, Inc. Stockholders' Equity (Deficit)Noncontrolling InterestTotal Stockholders' Equity (Deficit)
SharesAmountSharesAmountAmount
Balance at January 1, 2019176,210  $1,678  4,543  $(32,737) $2,153,661  $(375,788) $1,746,814  $147,872  $1,894,686  
Preferred Units issuance costs—  —  —  —  —  —  —  (10) (10) 
Preferred Units commitment fees & dividends paid-in-kind—  —  —  —  (3,975) —  (3,975) 3,975    
Stock-based compensation  —  —  —  13,008  —  13,008  —  13,008  
Series A Preferred Stock dividends—  —  —  —  (2,721) —  (2,721) —  (2,721) 
Accretion of beneficial conversion feature on Series A Preferred Stock—  —  —  —  (1,596) —  (1,596) —  (1,596) 
Repurchase of common stock—  (77) 7,824  (32,135) —  —  (32,212) —  (32,212) 
Restricted stock issued, net of tax withholdings270  —  —  —  (454) —  (454) —  (454) 
Net loss—  —  —  —    (94,032) (94,032) —  (94,032) 
Balance at March 31, 2019176,480  $