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peak-energy.com

About Peak Energy

Peak Energy involves crude oil and natural gas exploration, development, and production through horizontal and vertical operations. It is based in Oklahoma City, Oklahoma.

Peak Energy Headquarter Location

PO Box 12880

Oklahoma City, Oklahoma, 73157,

United States

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[Amend]Current report pursuant to Section 13 or 15(d) – Form 8-K/A

Feb 24, 2022

Pioneer Natural Resources Company We haveaudited the accompanying statement of revenues and direct operating expenses of oil and gas assets in the Delaware Basin (the “Delaware Properties”) for the year ended December 31, 2020, and the related notes to the statement. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the statement in conformity with U.S. generally accepted accounting principles; thisincludes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is toexpress an opinion on this statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the statement is free of material misstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofsignificant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the statement referred to above presents fairly, in all material respects, the revenues and direct operating expenses of the DelawareProperties for the year ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Basis of Presentation The accompanying statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described inNote 1. The presentation is not intended to be a complete financial statement presentation of the properties described above. OIL AND GAS ASSETS IN THE DELAWARE BASIN NOTE 1. Basis of Presentation Theaccompanying statements of Revenues and Direct Operating Expenses (the “Statements”) represent the direct undivided interest in the revenue and direct operating expenses associated with certain oil and gas assets in the Delaware Basin (the“Delaware Properties”) held by Pioneer Natural Resources Company (referred to herein collectively with its subsidiaries as the “Company”). On January 12, 2021, the Company acquired the Delaware Properties from ParsleyEnergy, Inc., a Delaware corporation that previously traded on the NYSE under the symbol “PE” (“Parsley”). The Statements vary from a complete income statement in accordance with accounting principals generally accepted in theUnited States of America (“US GAAP”) as they do not include certain revenues recognized and expenses incurred in connection with the ownership and operation of the Delaware Properties, including but not limited to general andadministrative expenses, effects of derivative transactions, interest income or expense, depreciation, depletion and amortization, provision for income taxes and other income and expense items not directly associated with revenues from natural gas,natural gas liquids (“NGLs”) and crude oil. Furthermore, no balance sheet has been presented for the Delaware Properties because the Delaware Properties were not accounted for as a separate subsidiary or division of the Company andcomplete financial statements thereof are not available, nor has information about the Delaware Properties’ operating, investing, and financing cash flows been provided for similar reasons. Accordingly, the Statements are presented in lieu offull financial statements. The Statements are not indicative of the results of operations for the Delaware Properties on a go forward basis. In December 2021, the Company completed the sale of the Delaware Properties to Continental Resources, Inc. The Statements of Revenues and Direct Operating Expenses for the three and nine months ended September 30, 2021 areunaudited and have been prepared on the same basis as the Statement of Revenues and Direct Operating Expenses for the year ended December 31, 2020 and, in the opinion of management of the Company, reflect all adjustments necessary to fairlystate the Delaware Properties’ excess of revenues over direct operating expenses for the three and nine months ended September 30, 2021. NOTE 2. Summary of Significant Accounting Policies Use of Estimates. Preparation of the Statements in conformity with US GAAP requires management of the Company to makeestimates and assumptions that affect the reported amounts of revenues and direct operating expenses during the reporting periods. Actual results could differ from the estimates and assumptions utilized. Revenue Recognition. Revenue is recognized when control of the promised goods is transferred to customers at an amount thatreflects the consideration expected in exchange for those goods. Oil sales. Sales under oil contracts are generally consideredperformed when oil production is sold at the wellhead and an agreed-upon index price is received, net of any price differentials. Recognition of sales revenue occurs when (i) control/custody transfers to the purchaser at the wellhead and(ii) the net price is fixed and determinable. NGL and gas sales. Recognition of NGL and gas revenue occurs when the productsare delivered (custody transfer) to the ultimate third-party purchaser at a contractually agreed-upon delivery point at a specified index price. Direct Operating Expenses. Direct operating expenses are recognized when incurred and consist of direct expenses related to theoperation of the Delaware Properties. The direct operating expenses include lease operating expense, production taxes and ad valorem taxes. Lease operating expenses include lifting costs, gathering and processing costs, well repair expenses, wellworkover costs, and other field related expenses. Lease operating expenses also include expenses directly associated with support personnel, support services, equipment, and facilities directly related to oil and gas production activities. Credit Risk and Major Purchasers. Oil, NGLs and gas are sold to various purchasers who must be prequalified under theCompany’s credit risk policies and procedures. The Company monitors exposure to counterparties primarily by reviewing credit ratings, financial criteria and payment history. Two purchasers account for approximately 85 percent of total oil,NGLs and gas revenues of the Delaware Properties for the year ended December 31, 2020 and three and nine months ended September 30, 2021. While the loss of either of these major purchasers could have a material adverse effect on theability of the Company to produce and sell the oil, NGLs and gas production of the Delaware Properties, the Company believes this risk is mitigated by the size and reputation of these purchasers. DIRECT OPERATING EXPENSES OF OIL AND GAS ASSETS IN THE DELAWARE BASIN Reserve Quantity Information Theestimates of the Company’s proved reserves as of December 31, 2020 were based on evaluations prepared by the Company’s engineers with respect to the Company’s Delaware Properties. Proved reserves were estimated in accordance withguidelines established by the U.S. Securities and Exchange Commission (the “SEC”) and the FASB, which require that reserve estimates be prepared under existing economic and operating conditions based upon an average of the first-day-of-the-month commodity price during the12-month period ending on the balance sheet date with no provision for price and cost escalations except by contractual arrangements. Proved reserve quantity estimates are subject to numerous uncertainties inherent in the estimation of quantities of proved reserves and in theprojection of future rates of production and the timing of development expenditures. The accuracy of such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of subsequentdrilling, testing and production may cause either upward or downward revision of previous estimates. Further, the volumes considered to be commercially recoverable fluctuate with changes in commodity prices and operating costs. The Companyemphasizes that proved reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of currently producing oil and gas properties. Accordingly, these estimates are expected to change as additionalinformation becomes available in the future. The following NYMEX prices used for oil and gas reserve preparation, based upon SECguidelines, were as follows:     Negative revisions of 27,362 MBOE during the year ended December 31, 2020 were due primarily to theremoval of certain wells and proved undeveloped locations due to economics. Standardized Measure of Discounted Future Net Cash Flows The standardized measure of discounted future net cash flows is computed by applying commodity prices used in determining proved reserves (withconsideration of price changes only to the extent provided by contractual arrangements) to the estimated future production of proved reserves less estimated future expenditures (based on year end estimated costs) to be incurred in developing andproducing the proved reserves, discounted using a rate of ten percent per year to reflect the   DIRECT OPERATING EXPENSES OF OIL AND GAS ASSETS IN THE DELAWARE BASIN   estimated timing of the future cash flows. Future income taxes are calculated by comparing undiscounted future cash flows to the tax basis of oil and gas properties plus available carryforwardsand credits and applying the current tax rates to the difference. The discounted future cash flow estimates do not include the effects of the Company’s commodity derivative contracts. Discounted future cash flow estimates like those shown below are not intended to represent estimates of the fair value of oil and gasproperties. Estimates of fair value should also consider probable and possible reserves, anticipated future commodity prices, interest rates, changes in development and production costs and risks associated with future production. Because of theseand other considerations, any estimate of fair value is necessarily subjective and imprecise. The standardized measure of discountedfuture cash flows as well as a rollforward in total for each respective year are as follows:   Unaudited Pro Forma Condensed Combined Financial Information On December 21, 2021, Continental Resources, Inc. (“Continental” or the “Company”) closed the previously announced purchase and saleagreement dated November 1, 2021 (the “Purchase Agreement”) with certain subsidiaries of Pioneer Natural Resources Company (“Pioneer” or the “Seller”), in which the Company purchased: (a) 100% of the issued andoutstanding limited liability company interests of Jagged Peak Energy LLC, which in turn owns 100% of the issued and outstanding limited liability company interests of Parsley SoDe Water LLC; and (b) certain oil and gas assets and properties inthe Permian Basin of Texas (collectively, the “Pioneer Acquisition”). The purchase price paid to the Seller was approximately$3.06 billion in cash, representing a $3.25 billion purchase price less customary closing adjustments made pursuant to the Purchase Agreement. The Company funded the purchase price through a combination of cash on hand, borrowings on itscredit facility totaling $500 million, and the issuance of senior notes totaling $1.6 billion. The increase in credit facility borrowings and proceeds received from the issuance of senior notes are collectively referred to as the“related financing”. The Unaudited Pro Forma Condensed Combined Statements of Operations for the nine months ended September 30, 2021 andthe year ended December 31, 2020 presented below have been prepared based on Continental’s historical Consolidated Statements of Operations for such periods and the historical Statements of Revenues and Direct Operating Expenses ofproperties acquired in the Pioneer Acquisition, and were prepared as if the Pioneer Acquisition and related financing had occurred on January 1, 2020. Certain historical amounts of Pioneer have been reclassified to conform to Continental’sfinancial statement presentation. The Unaudited Pro Forma Condensed Combined Balance Sheet at September 30, 2021 presented below was prepared based on Continental’s historical Consolidated Balance Sheet at September 30, 2021 and wasprepared as if the Pioneer Acquisition and related financing had occurred on September 30, 2021. The unaudited pro forma condensed combinedfinancial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the Company would have been had the Pioneer Acquisitionand related financing occurred on the dates noted above, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. Future results may vary significantly from the results reflected because ofvarious factors. In Continental’s opinion, all adjustments that are necessary to present fairly the unaudited pro forma condensed combined financial information have been made. The unaudited pro forma condensed combined financial information does not reflect the benefits of potential cost savings or the costs that may be necessary toachieve such savings, opportunities to increase revenue generation or other factors that may result from the Pioneer Acquisition and, accordingly, does not attempt to predict or suggest future results. The unaudited pro forma condensed combined financial information should be read in conjunction with:   Notes to Unaudited Pro Forma Condensed Combined Financial Information Note 1. Basis of Presentation The accompanying pro formacondensed combined financial information was prepared based on the historical consolidated financial statements of Continental and the historical statements of revenues and direct operating expenses of the properties acquired in the PioneerAcquisition. The Pioneer Acquisition was accounted for using the acquisition method under ASC Topic 805, Business Combinations, which requires all assets acquired and liabilities assumed to be recorded at fair value at the acquisition date.The Unaudited Pro Forma Condensed Combined Statements of Operations for the nine months ended September 30, 2021 and the year ended December 31, 2020 were prepared assuming the Pioneer Acquisition and related financing occurred onJanuary 1, 2020. The Unaudited Pro Forma Condensed Combined Balance Sheet at September 30, 2021 was prepared as if the Pioneer Acquisition and related financing had occurred on September 30, 2021. The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actualconsolidated results of operations or the consolidated financial position of the Company would have been had the Pioneer Acquisition and related financing occurred on the dates noted above, nor are they necessarily indicative of future consolidatedresults of operations or consolidated financial position. In Continental’s opinion, all adjustments that are necessary to present fairly the unaudited pro forma condensed combined financial information have been made. The unaudited pro formacondensed combined financial information has been compiled in a manner consistent with the accounting policies adopted by the Company. Actual results may differ materially from the assumptions and estimates contained herein. Note 2. Pro Forma Adjustments The pro forma adjustmentsare based on currently available information and certain estimates and assumptions that Continental believes provide a reasonable basis for presenting the significant effects of the Pioneer Acquisition and related financing. General descriptions ofthe pro forma adjustments are provided below. Unaudited Pro Forma Condensed Combined Balance Sheet The following adjustments have been made to the accompanying Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2021 to reflect theallocation of the fair value of the assets acquired and liabilities assumed for the Pioneer Acquisition and the related financing: (a) Represents adecrease in cash of $3.06 billion for the final purchase price of the Pioneer Acquisition, partially offset by $1.59 billion of net proceeds from the issuance of senior notes and $500 million of credit facility borrowings incurred tofund a portion of the acquisition. (b) Represents the allocation of the fair value of the assets acquired and liabilities assumed as follows:   Notes to Unaudited Pro Forma Condensed Combined Financial Information   Provisional fair value measurements have been made by the Company for acquired assets and liabilities, andadjustments to those measurements may be made in subsequent periods (up to one year from the acquisition date) as additional information necessary to complete the fair value analysis is obtained. The fair values of proved and unproved propertiesacquired were measured using discounted cash flow valuation techniques based on inputs that are not observable in the market and, as such, are considered Level 3 fair value measurements. Significant unobservable inputs included future commodityprices adjusted for differentials, projections of estimated quantities of recoverable reserves, forecasted production based on decline curve analysis, estimated timing and amount of future operating and development costs, and a weighted average costof capital. For income tax purposes, the Pioneer Acquisition will be treated as an asset purchase such that the tax basis in the assets and liabilitieswill generally reflect the allocated fair value at closing. Therefore, the Company does not anticipate a material tax consequence for deferred income taxes related to the Pioneer Acquisition. (c) Represents $500 million of credit facility borrowings incurred and $1.6 billion of new senior notes issued to fund a portion of the PioneerAcquisition, net of $11.6 million in initial purchasers’ fees and $0.6 million in original issue discount. (d) Represents legal andadvisory fees incurred in conjunction with the Pioneer Acquisition during the fourth quarter of 2021. These costs are reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet as an increase to accrued liabilities and other with acorresponding impact to retained earnings. Unaudited Pro Forma Condensed Combined Statements of Operations The Unaudited Pro Forma Condensed Combined Statements of Operations for the nine months ended September 30, 2021 and the year ended December 31, 2020reflect the following adjustments: (a) Represents historical revenues and direct operating expenses of the crude oil and natural gas properties acquiredin the Pioneer Acquisition. (b) Represents the reclassification of transportation expenses from Production Expenses to Transportation Expenses to conformhistorical Pioneer direct operating expenses to Continental’s presentation method. (c) Represents incremental depreciation, depletion, andamortization expense resulting from the change in basis of property and equipment acquired and increased accretion expense from new asset retirement obligations recognized as a result of the Pioneer Acquisition. The DD&A adjustment wascalculated primarily using the unit-of-production method under the successful efforts method of accounting using estimated proved reserves and production volumesattributable to the acquired assets. (d) Represents the following adjustments to interest expense resulting from interest and related amortization ofinitial debt discount and issuance costs. Notes to Unaudited Pro Forma Condensed Combined Financial Information   The interest expense for the credit facility reflects a rate of 1.61% as ofyear-end 2021. Actual interest expense may be higher or lower depending on fluctuations in interest rates and other market conditions. A one-eighth percent increase ordecrease in the interest rate would result in a change in interest expense of approximately $0.5 million for the nine months ended September 30, 2021 and approximately $0.6 million for the year ended December 31, 2020. (e) Represents the application of Continental’s statutory tax rate of 24.5% to the pre-tax amount of PioneerAcquisition and pro-forma adjustments. (f) Represents legal and advisory fees incurred in conjunction with thePioneer Acquisition. Such fees were incurred in the fourth quarter of 2021 and have been reflected in the pro-forma adjustments as if they had been incurred on January 1, 2020. Note 3. Supplemental Crude Oil and Natural Gas Information Estimated Quantities of Proved Crude Oil and Natural Gas Reserves The following tables present information regarding net proved crude oil and natural gas reserves attributable to Continental’s interests in provedproperties as of December 31, 2020. In addition, the following tables also set forth information as of December 31, 2020 about the estimated net proved crude oil and natural gas reserves attributable to the Pioneer Acquisition, and the proforma combined net proved crude oil and natural gas reserves as if the Pioneer Acquisition had occurred on January 1, 2020. The proved reserve estimates attributable to the Pioneer Acquisition at December 31, 2020 presented in the tablebelow were prepared based upon information provided by the Seller. The following pro forma combined proved reserve information is not necessarily indicative of the results that might have occurred had the Pioneer Acquisition taken place onJanuary 1, 2020, nor is it intended to be a projection of future results. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Periodic revisions orremovals of estimated reserves and future cash flows may be necessary as a result of a number of factors, including reservoir performance, new drilling, crude oil and natural gas prices, changes in costs, technological advances, new geological orgeophysical data, changes in business strategies, or other economic factors. Accordingly, proved reserve estimates may differ significantly from the quantities of crude oil and natural gas ultimately recovered.

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  • Where is Peak Energy's headquarters?

    Peak Energy's headquarters is located at PO Box 12880, Oklahoma City.

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