Earthstone and Oak Valley form strategic combination

Earthstone Energy Inc. and Oak Valley Resources LLC

Earthstone Energy Inc. (NYSE MKT: ESTE) and privately held Oak Valley Resources LLC have entered into a definitive exchange agreement under which Earthstone will acquire all of the subsidiaries of Oak Valley, inclusive of producing assets, undeveloped acreage, and $138 million of cash, in exchange for 9.1 million shares of Earthstone’s common stock.

The specified amount of cash represents existing cash on hand plus $107 million of capital commitments available to Oak Valley from its members in accordance with the terms of its limited liability company agreement. Upon completion of the transaction, there will be 10.9 million shares of Earthstone common stock outstanding with current Earthstone stockholders owning 16% of the combined company and Oak Valley owning the remaining 84%.

At the closing of the transaction, which is subject to the approval of Earthstone stockholders, Oak Valley’s management team, including President and CEO Frank A. Lodzinski, will assume the same roles in the combined company. Lodzinski will also be a director of the combined company. Ray Singleton, the company’s current president and CEO, will continue to serve in a senior executive position and as a director. All of the other board positions of the combined company will be filled by Oak Valley.

Additionally, the combined company will relocate its headquarters to Houston, Texas, while maintaining an office in Denver, Colorado, to focus on growth opportunities located in the Bakken shale play and in the Rockies. Headquartered in Houston, Texas, Oak Valley focuses on developing and producing oil and natural gas, with properties primarily located in the Eagle Ford trend of South Texas.

Earthstone is currently producing approximately 600 Boepd and had proved reserves of 3.2 MMBoe (82% liquids and 60% proved developed) as estimated by Earthstone effective December 31, 2013.


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