cdev-20220630
0001658566December 312022Q2false.159261000016585662022-01-012022-06-3000016585662022-07-31xbrli:shares00016585662022-06-30iso4217:USD00016585662021-12-31iso4217:USDxbrli:shares00016585662022-04-012022-06-3000016585662021-04-012021-06-3000016585662021-01-012021-06-3000016585662020-12-3100016585662021-06-300001658566us-gaap:CommonStockMember2021-12-310001658566us-gaap:AdditionalPaidInCapitalMember2021-12-310001658566us-gaap:RetainedEarningsMember2021-12-310001658566us-gaap:ParentMember2021-12-310001658566us-gaap:CommonStockMember2022-01-012022-03-310001658566us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001658566us-gaap:ParentMember2022-01-012022-03-310001658566us-gaap:RetainedEarningsMember2022-01-012022-03-310001658566us-gaap:CommonStockMember2022-03-310001658566us-gaap:AdditionalPaidInCapitalMember2022-03-310001658566us-gaap:RetainedEarningsMember2022-03-310001658566us-gaap:ParentMember2022-03-310001658566us-gaap:CommonStockMember2022-04-012022-06-300001658566us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001658566us-gaap:ParentMember2022-04-012022-06-300001658566us-gaap:RetainedEarningsMember2022-04-012022-06-300001658566us-gaap:CommonStockMember2022-06-300001658566us-gaap:AdditionalPaidInCapitalMember2022-06-300001658566us-gaap:RetainedEarningsMember2022-06-300001658566us-gaap:ParentMember2022-06-300001658566us-gaap:CommonStockMember2020-12-310001658566us-gaap:AdditionalPaidInCapitalMember2020-12-310001658566us-gaap:RetainedEarningsMember2020-12-310001658566us-gaap:ParentMember2020-12-310001658566us-gaap:CommonStockMember2021-01-012021-03-310001658566us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001658566us-gaap:ParentMember2021-01-012021-03-310001658566us-gaap:RetainedEarningsMember2021-01-012021-03-310001658566us-gaap:CommonStockMember2021-03-310001658566us-gaap:AdditionalPaidInCapitalMember2021-03-310001658566us-gaap:RetainedEarningsMember2021-03-310001658566us-gaap:ParentMember2021-03-310001658566us-gaap:CommonStockMember2021-04-012021-06-300001658566us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001658566us-gaap:ParentMember2021-04-012021-06-300001658566us-gaap:RetainedEarningsMember2021-04-012021-06-300001658566us-gaap:CommonStockMember2021-06-300001658566us-gaap:AdditionalPaidInCapitalMember2021-06-300001658566us-gaap:RetainedEarningsMember2021-06-300001658566us-gaap:ParentMember2021-06-300001658566cdev:DrillingRigMember2022-06-30utr:acre0001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2021-12-310001658566cdev:SeniorNotesDue2026Memberus-gaap:SeniorNotesMember2017-11-30xbrli:pure0001658566cdev:SeniorNotesDue2026Memberus-gaap:SeniorNotesMember2022-06-300001658566cdev:SeniorNotesDue2026Memberus-gaap:SeniorNotesMember2021-12-310001658566cdev:SeniorNotesDue2027Memberus-gaap:SeniorNotesMember2019-03-150001658566cdev:SeniorNotesDue2027Memberus-gaap:SeniorNotesMember2022-06-300001658566cdev:SeniorNotesDue2027Memberus-gaap:SeniorNotesMember2021-12-310001658566us-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Member2021-03-190001658566us-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Member2022-06-300001658566us-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Member2021-12-310001658566us-gaap:SeniorNotesMember2022-06-300001658566us-gaap:SeniorNotesMember2021-12-310001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2022-02-182022-02-180001658566us-gaap:LineOfCreditMemberus-gaap:LetterOfCreditMember2022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2022-01-012022-06-30cdev:redetermination0001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembersrt:MinimumMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembercdev:CreditSpreadAdjustmentSecuredOvernightFinancingRateSOFRMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:FederalFundsEffectiveSwapRateMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembercdev:OneMonthSecuredOvernightFinancingRateSOFRMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembersrt:MinimumMembercdev:AdjustedTermSecuredOvernightFinancingRateSOFRMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMembercdev:AdjustedTermSecuredOvernightFinancingRateSOFRMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2022-06-300001658566us-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Member2021-03-260001658566us-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Member2021-03-262021-03-260001658566us-gaap:ConvertibleNotesPayableMemberus-gaap:DebtInstrumentRedemptionPeriodOneMembercdev:ConvertibleSeniorNotesDue2028Member2022-01-012022-06-300001658566us-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Memberus-gaap:DebtInstrumentRedemptionPeriodTwoMember2022-01-012022-06-300001658566us-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Member2022-01-012022-06-300001658566us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Member2022-06-300001658566us-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Member2021-01-012021-06-300001658566cdev:SeniorNotesDue2027Memberus-gaap:SeniorNotesMember2019-03-152019-03-150001658566cdev:SeniorNotesDue2026Memberus-gaap:SeniorNotesMember2017-11-302017-11-300001658566cdev:SeniorNotesDue2026Memberus-gaap:SeniorNotesMember2020-05-222020-05-220001658566cdev:SeniorNotesDue2027Memberus-gaap:SeniorNotesMember2020-05-222020-05-220001658566us-gaap:SeniorNotesMember2022-01-012022-06-300001658566cdev:SeniorNotesDue2026Memberus-gaap:SeniorNotesMember2019-03-152019-03-150001658566cdev:A2016LongTermIncentivePlanMember2022-03-310001658566cdev:A2016LongTermIncentivePlanMember2022-06-300001658566us-gaap:RestrictedStockMember2022-04-012022-06-300001658566us-gaap:RestrictedStockMember2021-04-012021-06-300001658566us-gaap:RestrictedStockMember2022-01-012022-06-300001658566us-gaap:RestrictedStockMember2021-01-012021-06-300001658566us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001658566us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001658566us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001658566us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001658566us-gaap:PerformanceSharesMember2022-04-012022-06-300001658566us-gaap:PerformanceSharesMember2021-04-012021-06-300001658566us-gaap:PerformanceSharesMember2022-01-012022-06-300001658566us-gaap:PerformanceSharesMember2021-01-012021-06-300001658566us-gaap:EmployeeStockMember2022-04-012022-06-300001658566us-gaap:EmployeeStockMember2021-04-012021-06-300001658566us-gaap:EmployeeStockMember2022-01-012022-06-300001658566us-gaap:EmployeeStockMember2021-01-012021-06-300001658566us-gaap:EquityMember2022-04-012022-06-300001658566us-gaap:EquityMember2021-04-012021-06-300001658566us-gaap:EquityMember2022-01-012022-06-300001658566us-gaap:EquityMember2021-01-012021-06-300001658566cdev:CashsettledRestrictedStockMember2022-04-012022-06-300001658566cdev:CashsettledRestrictedStockMember2021-04-012021-06-300001658566cdev:CashsettledRestrictedStockMember2022-01-012022-06-300001658566cdev:CashsettledRestrictedStockMember2021-01-012021-06-300001658566cdev:CashsettledPerformanceStockMember2022-04-012022-06-300001658566cdev:CashsettledPerformanceStockMember2021-04-012021-06-300001658566cdev:CashsettledPerformanceStockMember2022-01-012022-06-300001658566cdev:CashsettledPerformanceStockMember2021-01-012021-06-300001658566cdev:LiabilityAwardMember2022-04-012022-06-300001658566cdev:LiabilityAwardMember2021-04-012021-06-300001658566cdev:LiabilityAwardMember2022-01-012022-06-300001658566cdev:LiabilityAwardMember2021-01-012021-06-300001658566cdev:A2019EmployeeStockPurchasePlanMember2019-05-010001658566us-gaap:RestrictedStockMember2021-12-310001658566us-gaap:RestrictedStockMember2022-06-300001658566us-gaap:RestrictedStockMembersrt:OfficerMember2022-01-012022-06-300001658566srt:DirectorMemberus-gaap:RestrictedStockMember2022-01-012022-06-300001658566cdev:A2016LongTermIncentivePlanMemberus-gaap:EmployeeStockOptionMember2022-01-012022-06-300001658566us-gaap:EmployeeStockOptionMember2022-06-300001658566us-gaap:PerformanceSharesMember2021-12-310001658566us-gaap:PerformanceSharesMember2022-06-300001658566cdev:CashsettledRestrictedStockMember2020-07-012020-09-300001658566srt:MaximumMembercdev:CashsettledRestrictedStockMember2022-04-012022-06-300001658566srt:MinimumMembercdev:CashsettledRestrictedStockMember2022-04-012022-06-300001658566cdev:ModifiedRestrictedStockMember2022-04-012022-06-300001658566cdev:CashsettledPerformanceStockMember2020-07-012020-09-300001658566cdev:CashsettledPerformanceStockMember2022-06-300001658566cdev:NYMEXWTIMembercdev:CrudeOilSwapPeriodOneMemberDomainus-gaap:NondesignatedMember2022-01-012022-06-30utr:bblutr:bblutr:D0001658566cdev:NYMEXWTIMembercdev:CrudeOilSwapPeriodOneMemberDomainus-gaap:NondesignatedMember2022-06-30iso4217:USDcdev:bbl0001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilSwapPeriodTwoDomain2022-01-012022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilSwapPeriodTwoDomain2022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilSwapPeriodThreeMember2022-01-012022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilSwapPeriodThreeMember2022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilSwapPeriodFourMember2022-01-012022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilSwapPeriodFourMember2022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilSwapPeriodFiveMember2022-01-012022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilSwapPeriodFiveMember2022-06-300001658566cdev:CrudeOilSwapPeriodSixMembercdev:NYMEXWTIMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:CrudeOilSwapPeriodSixMembercdev:NYMEXWTIMemberus-gaap:NondesignatedMember2022-06-300001658566cdev:CrudeOilCollarsPeriodOneMembercdev:NYMEXWTIMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:CrudeOilCollarsPeriodOneMembercdev:NYMEXWTIMemberus-gaap:NondesignatedMember2022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilCollarsPeriodTwoMember2022-01-012022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilCollarsPeriodTwoMember2022-06-300001658566cdev:CrudeOilCollarsPeriodThreeMembercdev:NYMEXWTIMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:CrudeOilCollarsPeriodThreeMembercdev:NYMEXWTIMemberus-gaap:NondesignatedMember2022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilCollarsPeriodFourMember2022-01-012022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilCollarsPeriodFourMember2022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilCollarsPeriodFiveMember2022-01-012022-06-300001658566cdev:NYMEXWTIMemberus-gaap:NondesignatedMembercdev:CrudeOilCollarsPeriodFiveMember2022-06-300001658566cdev:CrudeOilCollarsPeriodSixMembercdev:NYMEXWTIMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:CrudeOilCollarsPeriodSixMembercdev:NYMEXWTIMemberus-gaap:NondesignatedMember2022-06-300001658566cdev:CrudeOilBasisSwapPeriodOneMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:CrudeOilBasisSwapPeriodOneMemberus-gaap:NondesignatedMember2022-06-300001658566us-gaap:NondesignatedMembercdev:CrudeOilBasisSwapPeriodTwoMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:CrudeOilBasisSwapPeriodTwoMember2022-06-300001658566cdev:CrudeOilRollDifferentialSwapPeriodOneMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:CrudeOilRollDifferentialSwapPeriodOneMemberus-gaap:NondesignatedMember2022-06-300001658566us-gaap:NondesignatedMembercdev:CrudeOilRollDifferentialSwapPeriodTwoMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:CrudeOilRollDifferentialSwapPeriodTwoMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasSwapsHenryHubPeriodOneMember2022-01-012022-06-30utr:MMBTU0001658566us-gaap:NondesignatedMembercdev:NaturalGasSwapsHenryHubPeriodOneMember2022-06-30iso4217:USDutr:MMBTU0001658566us-gaap:NondesignatedMembercdev:NaturalGasSwapsHenryHubPeriodTwoMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasSwapsHenryHubPeriodTwoMember2022-06-300001658566cdev:NaturalGasBasisSwapPeriodOneMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:NaturalGasBasisSwapPeriodOneMemberus-gaap:NondesignatedMember2022-06-300001658566cdev:NaturalGasBasisSwapPeriodTwoMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:NaturalGasBasisSwapPeriodTwoMemberus-gaap:NondesignatedMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasBasisSwapPeriodThreeMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasBasisSwapPeriodThreeMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasBasisSwapPeriodFourMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasBasisSwapPeriodFourMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasBasisSwapPeriodFiveMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasBasisSwapPeriodFiveMember2022-06-300001658566cdev:NaturalGasBasisSwapPeriodSixMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:NaturalGasBasisSwapPeriodSixMemberus-gaap:NondesignatedMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodOneMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodOneMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodTwoMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodTwoMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodThreeMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodThreeMember2022-06-300001658566cdev:NaturalGasCollarsPeriodFourMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:NaturalGasCollarsPeriodFourMemberus-gaap:NondesignatedMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodFiveMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodFiveMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodSixMember2022-01-012022-06-300001658566us-gaap:NondesignatedMembercdev:NaturalGasCollarsPeriodSixMember2022-06-300001658566cdev:NaturalGasCollarsPeriodSevenMemberus-gaap:NondesignatedMember2022-01-012022-06-300001658566cdev:NaturalGasCollarsPeriodSevenMemberus-gaap:NondesignatedMember2022-06-300001658566us-gaap:NondesignatedMembercdev:CurrentAssetsMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NoncurrentAssetsMember2022-06-300001658566us-gaap:NondesignatedMembercdev:CurrentLiabilitiesMember2022-06-300001658566us-gaap:NondesignatedMembercdev:NonCurrentLiabilitiesMember2022-06-300001658566us-gaap:NondesignatedMembercdev:CurrentAssetsMember2021-12-310001658566us-gaap:NondesignatedMembercdev:NoncurrentAssetsMember2021-12-310001658566us-gaap:NondesignatedMembercdev:CurrentLiabilitiesMember2021-12-310001658566us-gaap:NondesignatedMembercdev:NonCurrentLiabilitiesMember2021-12-310001658566us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001658566us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001658566us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001658566us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001658566us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001658566us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001658566us-gaap:CarryingReportedAmountFairValueDisclosureMembercdev:SeniorNotesDue2026Memberus-gaap:SeniorNotesMember2022-06-300001658566us-gaap:CarryingReportedAmountFairValueDisclosureMembercdev:SeniorNotesDue2026Memberus-gaap:SeniorNotesMember2021-12-310001658566us-gaap:CarryingReportedAmountFairValueDisclosureMembercdev:SeniorNotesDue2027Memberus-gaap:SeniorNotesMember2022-06-300001658566us-gaap:CarryingReportedAmountFairValueDisclosureMembercdev:SeniorNotesDue2027Memberus-gaap:SeniorNotesMember2021-12-310001658566us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:ConvertibleNotesPayableMembercdev:ConvertibleSeniorNotesDue2028Member2021-12-310001658566us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001658566us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001658566us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001658566us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001658566us-gaap:RestrictedStockMember2022-04-012022-06-300001658566us-gaap:RestrictedStockMember2021-04-012021-06-300001658566us-gaap:RestrictedStockMember2022-01-012022-06-300001658566us-gaap:RestrictedStockMember2021-01-012021-06-300001658566us-gaap:PerformanceSharesMember2022-04-012022-06-300001658566us-gaap:PerformanceSharesMember2021-04-012021-06-300001658566us-gaap:PerformanceSharesMember2022-01-012022-06-300001658566us-gaap:PerformanceSharesMember2021-01-012021-06-300001658566us-gaap:EmployeeStockMember2022-04-012022-06-300001658566us-gaap:EmployeeStockMember2021-04-012021-06-300001658566us-gaap:EmployeeStockMember2022-01-012022-06-300001658566us-gaap:EmployeeStockMember2021-01-012021-06-300001658566us-gaap:ConvertibleNotesPayableMember2022-04-012022-06-300001658566us-gaap:ConvertibleNotesPayableMember2021-01-012021-06-300001658566us-gaap:ConvertibleNotesPayableMember2022-01-012022-06-300001658566us-gaap:WarrantMember2022-04-012022-06-300001658566us-gaap:WarrantMember2021-04-012021-06-300001658566us-gaap:WarrantMember2022-01-012022-06-300001658566us-gaap:WarrantMember2021-01-012021-06-300001658566cdev:LucidEnergyDelawareLLCMembersrt:AffiliatedEntityMember2022-04-012022-06-300001658566cdev:LucidEnergyDelawareLLCMembersrt:AffiliatedEntityMember2021-04-012021-06-300001658566cdev:LucidEnergyDelawareLLCMembersrt:AffiliatedEntityMember2022-01-012022-06-300001658566cdev:LucidEnergyDelawareLLCMembersrt:AffiliatedEntityMember2021-01-012021-06-300001658566cdev:LucidEnergyDelawareLLCMembersrt:AffiliatedEntityMember2022-06-300001658566cdev:LucidEnergyDelawareLLCMembersrt:AffiliatedEntityMember2021-12-310001658566srt:MinimumMember2022-06-300001658566srt:MaximumMember2022-06-300001658566srt:CrudeOilMember2022-04-012022-06-300001658566srt:CrudeOilMember2021-04-012021-06-300001658566srt:CrudeOilMember2022-01-012022-06-300001658566srt:CrudeOilMember2021-01-012021-06-300001658566srt:NaturalGasReservesMember2022-04-012022-06-300001658566srt:NaturalGasReservesMember2021-04-012021-06-300001658566srt:NaturalGasReservesMember2022-01-012022-06-300001658566srt:NaturalGasReservesMember2021-01-012021-06-300001658566srt:NaturalGasLiquidsReservesMember2022-04-012022-06-300001658566srt:NaturalGasLiquidsReservesMember2021-04-012021-06-300001658566srt:NaturalGasLiquidsReservesMember2022-01-012022-06-300001658566srt:NaturalGasLiquidsReservesMember2021-01-012021-06-300001658566srt:MinimumMembercdev:NaturalGasAndNaturalGasLiquidsMember2022-01-012022-06-300001658566srt:MaximumMembercdev:NaturalGasAndNaturalGasLiquidsMember2022-01-012022-06-300001658566us-gaap:LineOfCreditMemberus-gaap:SubsequentEventMember2022-07-150001658566us-gaap:LineOfCreditMember2022-06-30

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, 2022
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 001-37697
CENTENNIAL RESOURCE DEVELOPMENT, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware47-5381253
(State of Incorporation)(I.R.S. Employer Identification No.)
1001 Seventeenth Street, Suite 1800
Denver, Colorado 80202
(Registrant’s telephone number, including area code): (720) 499-1400
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareCDEVThe NASDAQ Stock Market LLC
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, 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 filer Accelerated filer Non-accelerated filer Smaller 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
As of July 31, 2022, there were 285,059,255 shares of Common Stock, par value $0.0001 per share outstanding.



TABLE OF CONTENTS
Page



Table of Contents




GLOSSARY OF UNITS OF MEASUREMENTS AND INDUSTRY TERMS
The following are abbreviations and definitions of certain terms used in this Quarterly Report on Form 10-Q, which are commonly used in the oil and natural gas industry:

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

Bbl/d. One Bbl per day.

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.

Btu. One British thermal unit, which is the quantity of heat required to raise the temperature of a one-pound mass of water by one-degree Fahrenheit.

Completion. The process of preparing an oil and gas wellbore for production through the installation of permanent production equipment, as well as perforation and fracture stimulation to initiate production.
Development well. A well drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive.
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.
Exploratory well. A well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or natural gas in another reservoir.
Extension Well. A well drilled to extend the limits of a known reservoir.
Field. An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

Formation. A layer of rock which has distinct characteristics that differs from nearby rock.

Horizontal drilling. A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval.

ICE Brent. Brent crude oil traded on the Intercontinental Exchange, Inc. (ICE).

LIBOR. London Interbank Offered Rate.

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.

MMBtu. One million British thermal units.

MMcf. One million cubic feet of natural gas.
NEOs. Named executive officers, which term refers to the principal executive officer, the principal financial officer, and the next three most highly paid executive officers of a company as of the end of the most recently completed fiscal year, based on total compensation as determined under Rule 402 of Regulation S-K.
3

Table of Contents




NGL. Natural gas liquids. These are naturally occurring substances found in natural gas, including ethane, butane, isobutane, propane and natural gasoline, that can be collectively removed from produced natural gas, separated into these substances and sold.

NYMEX. The New York Mercantile Exchange.

Operator. The individual or company responsible for the development and/or production of an oil or natural gas well or lease.

Proved developed reserves. Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well.

Proved reserves. The estimated quantities of oil, NGLs and natural gas that geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions.

Proved undeveloped reserves or PUD. Proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for completion. 

Realized price. The cash market price less differentials.

Reserves. Estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to market and all permits and financing required to implement the project.

Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

Royalty interest. An interest in an oil or gas property entitling the owner to shares of the production free of costs of exploration, development and production operations.

SOFR. Secured Overnight Funding Rate.

Spot market price. The cash market price without reduction for expected quality, location, transportation and demand adjustments.

Unproved reserves. Reserves attributable to unproved properties with no proved reserves.

Wellbore. The hole drilled by a drill bit that is equipped for oil and natural gas production once the well has been completed. Also called well or borehole.

Working interest. The interest in an oil and gas property (typically a leasehold interest) that gives the owner the right to drill, produce and conduct operations on the property and to a share of production, subject to all royalties and other burdens and to all costs of exploration, development and operations and all risks in connection therewith.

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

WTI. West Texas Intermediate is a grade of crude oil used as a benchmark in oil pricing.
4

Table of Contents




CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report, 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 Quarterly Report, the words “could,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “goal,” “plan,” “target” 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 this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”) and the risk factors and other cautionary statements contained in our other filings with the United States Securities and Exchange Commission (“SEC”).
Forward-looking statements may include statements about:
volatility of oil, natural gas and NGL prices or a prolonged period of low oil, natural gas or NGL prices and the effects of actions by, or disputes among or between, members of the Organization of Petroleum Exporting Countries (“OPEC”), such as Saudi Arabia, and other oil and natural gas producing countries, such as Russia, with respect to production levels or other matters related to the price of oil;
the effects of excess supply of oil and natural gas resulting from the reduced demand caused by the Coronavirus Disease 2019 (“COVID-19”) pandemic and the actions by certain oil and natural gas producing countries;
political and economic conditions in or affecting other producing regions or countries, including the Middle East, Russia, Eastern Europe, Africa and South America;
our business strategy and future drilling plans; 
our reserves and our ability to replace the reserves we produce through drilling and property acquisitions; 
our ability to identify, complete and effectively integrate acquisitions of properties or businesses, including our pending merger with Colgate Energy Partners III, LLC;
our drilling prospects, inventories, projects and programs; 
our financial strategy, leverage, liquidity and capital required for our development program; 
our realized oil, natural gas and NGL prices; 
the timing and amount of our future production of oil, natural gas and NGLs; 
our hedging strategy and results; 
our competition and government regulations; 
our ability to obtain permits and governmental approvals; 
our pending legal or environmental matters; 
the marketing and transportation of our oil, natural gas and NGLs; 
our leasehold or business acquisitions; 
cost of developing or operating our properties;
our anticipated rate of return;
general economic conditions; 
weather conditions in the areas where we operate;
credit markets; 
uncertainty regarding our future operating results; and 
our plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.
5

Table of Contents




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 and natural gas. 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 in “Item 1A. Risk Factors” in our 2021 Annual Report.
Reserve engineering is a process of estimating underground accumulations of oil and natural gas 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 would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered.
Should one or more of the risks or uncertainties described in our 2021 Annual Report occur, or 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 Quarterly Report 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 statement in this section, to reflect events or circumstances after the date of this Quarterly Report.


6

Table of Contents




PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
CENTENNIAL RESOURCE DEVELOPMENT, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except share and per share amounts)
June 30, 2022December 31, 2021
ASSETS
Current assets
Cash and cash equivalents
$201,092 $9,380 
Accounts receivable, net
141,598 71,295 
Prepaid and other current assets
7,189 5,860 
Total current assets
349,879 86,535 
Property and Equipment
Oil and natural gas properties, successful efforts method
Unproved properties
984,264 1,040,386
Proved properties
4,929,108 4,623,726
Accumulated depreciation, depletion and amortization
(2,140,982)(1,989,489)
Total oil and natural gas properties, net
3,772,390 3,674,623
Other property and equipment, net13,167 11,197
Total property and equipment, net
3,785,557 3,685,820 
Noncurrent assets
Operating lease right-of-use assets
54,934 16,385 
Other noncurrent assets
33,660 15,854
TOTAL ASSETS
$4,224,030 $3,804,594 
LIABILITIES AND EQUITY
Current liabilities
  Accounts payable and accrued expenses
$208,222 $130,256 
Operating lease liabilities21,124 1,413 
Derivative instruments83,541 35,150 
Other current liabilities
3,214 1,080 
Total current liabilities
316,101 167,899
 Noncurrent liabilities
Long-term debt, net
801,849 825,565 
Asset retirement obligations
18,151 17,240 
Deferred income taxes
50,293 2,589 
Operating lease liabilities35,724 16,002 
Other noncurrent liabilities
32,344 24,579 
Total liabilities
1,254,462 1,053,874
Commitments and contingencies (Note 12)
Shareholders’ equity
Common stock, $0.0001 par value, 620,000,000 shares authorized; 297,060,327 shares issued and 284,992,650 shares outstanding at June 30, 2022 and 294,260,623 shares issued and 284,696,972 shares outstanding at December 31, 2021
30 29 
Additional paid-in capital3,024,236 3,013,017 
Retained earnings (accumulated deficit)(54,698)(262,326)
Total Shareholders' equity2,969,568 2,750,720 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$4,224,030 $3,804,594 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7

Table of Contents




CENTENNIAL RESOURCE DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
 Operating revenues
Oil and gas sales$472,654 $232,577 $819,931 $424,968 
Operating expenses
Lease operating expenses28,900 22,976 57,634 48,837 
Severance and ad valorem taxes34,695 15,784 59,746 28,367 
Gathering, processing and transportation expenses25,756 19,494 47,647 40,119 
Depreciation, depletion and amortization82,117 73,429 153,126 137,212 
General and administrative expenses9,947 28,807 40,550 54,063 
Merger and integration expense5,685  5,685  
Impairment and abandonment expense506 9,199 3,133 18,399 
Exploration and other expenses1,954 1,764 4,261 2,859 
Total operating expenses189,560 171,453 371,782 329,856 
Net gain (loss) on sale of long-lived assets(1,406)(8)(1,324)36 
Proceeds from terminated sale of assets 5,983  5,983 
Income (loss) from operations281,688 67,099 446,825 101,131 
Other income (expense)
Interest expense(14,326)(15,182)(27,480)(32,667)
Gain (loss) on extinguishment of debt (22,156) (22,156)
Net gain (loss) on derivative instruments(34,134)(54,959)(163,657)(106,158)
Other income (expense)85 143 203 150 
Total other income (expense)
(48,375)(92,154)(190,934)(160,831)
Income (loss) before income taxes233,313 (25,055)255,891 (59,700)
Income tax (expense) benefit(41,487) (48,263) 
Net income (loss)$191,826 $(25,055)$207,628 $(59,700)
Income (loss) per share of Common Stock:
Basic$0.67 $(0.09)$0.73 $(0.21)
Diluted$0.60 $(0.09)$0.66 $(0.21)
The accompanying notes are an integral part of these unaudited consolidated financial statements.

8

Table of Contents




CENTENNIAL RESOURCE DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
Six Months Ended June 30,
2022

2021
Cash flows from operating activities:
Net income (loss)$207,628 $(59,700)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization
153,126 137,212 
Stock-based compensation expense - equity awards
12,202 9,066 
Stock-based compensation expense - liability awards5,127 25,074 
Impairment and abandonment expense
3,133 18,399 
Deferred tax expense (benefit)
47,663  
Net (gain) loss on sale of long-lived assets1,324 (36)
Non-cash portion of derivative (gain) loss47,131 45,759 
Amortization of debt issuance costs and debt discount4,226 2,886 
(Gain) loss on extinguishment of debt 22,156 
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable(62,751)(33,483)
(Increase) decrease in prepaid and other assets(6,201)(9)
Increase (decrease) in accounts payable and other liabilities42,491 12,301 
Net cash provided by operating activities455,099 179,625 
Cash flows from investing activities:
Acquisition of oil and natural gas properties
(2,592)(638)
Drilling and development capital expenditures
(224,011)(126,665)
Purchases of other property and equipment
(2,863)(471)
Proceeds from sales of oil and natural gas properties
863 698 
Net cash used in investing activities(228,603)(127,076)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility
170,000 320,000 
Repayment of borrowings under revolving credit facility
(195,000)(395,000)
Proceeds from issuance of senior notes 170,000 
Debt issuance costs
(8,533)(6,421)
Premiums paid on capped call transactions (14,688)
Redemption of senior secured notes (127,073)
Proceeds from exercise of stock options8 15 
Restricted stock used for tax withholdings (1,259)(477)
Net cash used in financing activities(34,784)(53,644)
Net increase (decrease) in cash, cash equivalents and restricted cash
191,712 (1,095)
Cash, cash equivalents and restricted cash, beginning of period
9,935 8,339 
Cash, cash equivalents and restricted cash, end of period
$201,647 $7,244 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
9

Table of Contents




CENTENNIAL RESOURCE DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (continued)
(in thousands)
Six Months Ended June 30,
2022

2021
Supplemental cash flow information
Cash paid for interest
$24,276 $30,124 
Cash paid for income taxes600  
Supplemental non-cash activity
Accrued capital expenditures included in accounts payable and accrued expenses
$63,486 $53,096 
Asset retirement obligations incurred, including revisions to estimates
389 66 
Reconciliation of cash, cash equivalents and restricted cash presented on the consolidated statements of cash flows for the periods presented:
Six Months Ended June 30,
20222021
Cash and cash equivalents
$201,092 $4,702 
Restricted cash(1)
555 2,542 
Total cash, cash equivalents and restricted cash
$201,647 $7,244 
(1)    Included in Prepaid and other current assets in the consolidated balance sheet as of June 30, 2022.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

10

Table of Contents




CENTENNIAL RESOURCE DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)
(in thousands)


Common StockAdditional Paid-In CapitalRetained Earnings (Accumulated Deficit)Total Shareholders’ Equity
SharesAmount
Balance at December 31, 2021294,261 $29 $3,013,017 $(262,326)$2,750,720 
Restricted stock issued20 — — — — 
Restricted stock forfeited(52)— — — — 
Restricted stock used for tax withholding(150)— (1,259)— (1,259)
Stock option exercises3 — 1 — 1 
Issuance of Common Stock under Employee Stock Purchase Plan53 — 268 — 268 
Stock-based compensation - equity awards— — 5,545 — 5,545 
Net income (loss)— — — 15,802 15,802 
Balance at March 31, 2022294,135 29 3,017,572 (246,524)2,771,077 
Restricted stock issued2,998 1  — 
Restricted stock forfeited(75)— — — — 
Stock option exercises2 — 7 — 7 
Stock-based compensation - equity awards— — 6,657 — 6,657 
Net income (loss)— — — 191,826 191,826 
Balance at June 30, 2022297,060 30 $3,024,236 $(54,698)$2,969,568 

Balance at December 31, 2020290,646 $29 $3,004,433 $(400,501)$2,603,961 
Restricted stock forfeited(1)— — — — 
Restricted stock used for tax withholding(128)— (477)— (477)
Issuance of Common Stock under Employee Stock Purchase Plan276 — 167 — 167 
Stock-based compensation - equity awards— — 4,585 — 4,585 
Capped call premiums— — (14,688)— (14,688)
Net income (loss)— — — (34,645)(34,645)
Balance at March 31, 2021290,793 29 2,994,020 (435,146)2,558,903 
Restricted stock forfeited(7)— — — — 
Stock option exercises15 — 15 — 15 
Stock-based compensation - equity awards— — 4,481 — 4,481 
Net income (loss)— — — (25,055)(25,055)
Balance at June 30, 2021290,801 29 $2,998,516 $(460,201)$2,538,344 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

11

Table of Contents



CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1—Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
Centennial Resource Development, Inc. is an independent oil and natural gas company focused on the development of crude oil and associated liquids-rich natural gas reserves in the Permian Basin. The Company’s assets are concentrated in the Delaware Basin, a sub-basin of the Permian Basin, and its properties consist of large, contiguous acreage blocks located in West Texas and New Mexico. Unless otherwise specified or the context otherwise requires, all references in these notes to “Centennial” or the “Company” are to Centennial Resource Development, Inc. and its consolidated subsidiary, Centennial Resource Production, LLC (“CRP”).
Principles of Consolidation and Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, certain disclosures normally included in an Annual Report on Form 10-K have been omitted. The consolidated financial statements and related notes included in this Quarterly Report should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2021 (the “2021 Annual Report”). Except as disclosed herein, there have been no material changes to the information disclosed in the notes to the consolidated financial statements included in the Company’s 2021 Annual Report.
In the opinion of management, all normal, recurring adjustments and accruals considered necessary to present fairly, in all material respects, the Company’s interim financial results have been included. Operating results for the periods presented are not necessarily indicative of expected results for the full year. The consolidated financial statements include the accounts of the Company and its subsidiary CRP, and CRP’s wholly-owned subsidiaries.
Use of Estimates
The preparation of the Company’s consolidated financial statements requires the Company’s management to make various assumptions, judgments and estimates to determine the reported amounts of assets, liabilities, revenues and expenses, and 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, and accordingly, actual results could differ from amounts previously established. Additionally, the prices received for oil, natural gas and NGL production can heavily influence the Company’s assumptions, judgments and estimates and continued volatility of oil and gas prices could have a significant impact on the Company’s estimates.
The more significant areas requiring the use of assumptions, judgments and estimates include: (i) oil and natural gas reserves; (ii) cash flow estimates used in impairment tests for long-lived assets; (iii) impairment expense of unproved properties; (iv) depreciation, depletion and amortization; (v) asset retirement obligations; (vi) determining fair value and allocating purchase price in connection with business combinations and asset acquisitions; (vii) accrued revenues and related receivables; (viii) accrued liabilities; (ix) derivative valuations; (x) deferred income taxes; and (xi) determining the fair values of certain stock-based compensation awards.
Leases
The Company has operating leases for drilling rig contracts, office rental agreements, and other wellhead equipment. During the second quarter of 2022, the Company extended two drilling rig contracts each for a two-year period. A lease right-of-use (ROU) asset and related liability have been recorded based on the present value of the future lease payments over the lease term of the drilling rigs. As of June 30, 2022, $19.0 million was recorded to current operating lease liability and $21.6 million was recorded to noncurrent operating lease liability related to these rigs. There have been no other significant changes in operating leases during the six months ended June 30, 2022. Refer to Note 15—Leases footnote in the notes to the consolidated financial statements in Item 8 of the Company’s 2021 Annual Report.
12

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Income Taxes
Income tax expense recognized during interim periods is based on applying an estimated annual effective income tax rate to the Company’s year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various state jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax assets generated. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information becomes known or as the tax environment changes.
Note 2—Business Combination
Pending Merger with Colgate
On May 19, 2022, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) with CRP, Colgate Energy Partners III, LLC (“Colgate”), and Colgate Energy Partners III MidCo, LLC (the “Colgate Unitholder”) which provides for the combination of CRP and Colgate in a merger of equals transaction (the “Merger”), with CRP surviving the Merger (the “Surviving Company”) as a subsidiary of Centennial.
Colgate is an independent oil and gas company focused on the acquisition, development, exploration and production of oil and natural gas properties in the Delaware Basin. Colgate owns approximately 105,000 net leasehold acres and 25,000 net royalty acres in Reeves and Ward counties in Texas and Eddy County in New Mexico.
At the effective time of the Merger, all membership interests in CRP issued and outstanding will be converted into units in the Surviving Company (“Surviving Company Units”) equal to the number of shares of Centennial’s Class A common stock (the “Common Stock”) that are outstanding at such time, and all of the Colgate Unitholder’s membership interest in Colgate will be exchanged for 269,300,000 shares of Class C common stock (with underlying Surviving Company Units) and $525 million in cash. The shares of Class C Common Stock to be issued to the Colgate Unitholders pursuant to the Business Combination Agreement will represent a noncontrolling interest in the Surviving Company.
The transaction has been unanimously approved by the Boards of Directors of both companies. The Company has filed its definitive proxy statement with the SEC and the shareholder meeting is scheduled for August 29, 2022, where the Merger will be voted on by the Company’s shareholders. The Merger is expected to close shortly after the shareholder meeting subject to customary closing conditions, including, among others, receipt of the required approvals from the Company’s shareholders.
Note 3—Accounts Receivable, Accounts Payable and Accrued Expenses
Accounts receivable are comprised of the following:
(in thousands)
June 30, 2022December 31, 2021
Accrued oil and gas sales receivable, net
$114,168 $57,287 
Joint interest billings, net
26,051 12,449 
Other
1,379 1,559 
Accounts receivable, net
$141,598 $71,295 
Accounts payable and accrued expenses are comprised of the following:
(in thousands)
June 30, 2022December 31, 2021
Accounts payable
$31,134 $9,736 
Accrued capital expenditures
49,791 24,377
Revenues payable
60,541 40,438
Accrued employee compensation and benefits
9,038 17,218
Accrued interest
15,423 15,259
Accrued derivative settlements payable
21,168 8,591
Accrued expenses and other
21,127 14,637
Accounts payable and accrued expenses
$208,222 $130,256 
13

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 4—Long-Term Debt
The following table provides information about the Company’s long-term debt as of the dates indicated:
(in thousands)
June 30, 2022December 31, 2021
Credit Facility due 2027
$ $25,000 
Senior Notes
5.375% Senior Notes due 2026
289,448 289,448 
6.875% Senior Notes due 2027
356,351 356,351 
3.25% Convertible Senior Notes due 2028
170,000 170,000 
Unamortized debt issuance costs on Senior Notes
(12,152)(13,279)
Unamortized debt discount
(1,798)(1,955)
Senior Notes, net801,849 800,565 
Total long-term debt, net
$801,849 $825,565 
Credit Agreement
On February 18, 2022, CRP, the Company’s consolidated subsidiary, entered into an amended and restated five-year secured credit facility (the “Credit Agreement”) with a syndicate of banks, which replaced our previous credit facility that was set to mature in May of 2023. The Credit Agreement increased our elected commitments to $750 million, increased our borrowing base to $1.15 billion and extended the maturity of the Credit Agreement to February 2027. As of June 30, 2022, the Company had no borrowings outstanding and $744.2 million in available borrowing capacity, which was net of $5.8 million in letters of credit outstanding, under its new facility.
The amount available to be borrowed under the Credit Agreement is equal to the lesser of (i) the borrowing base, (ii) aggregate elected commitments, which is set at $750 million, or (iii) $1.5 billion. The borrowing base is redetermined semi-annually in the spring and fall by the lenders in their sole discretion. It also allows for two optional borrowing base redeterminations in between the scheduled redeterminations. The borrowing base depends on, among other things, the quantities of CRP’s proved oil and natural gas reserves, estimated cash flows from those reserves, and the Company’s commodity hedge positions. Upon a redetermination of the borrowing base, if actual borrowings outstanding exceed the revised borrowing capacity, CRP could be required to immediately repay a portion of its debt outstanding. Borrowings under the Credit Agreement are guaranteed by certain of CRP’s subsidiaries and the Company.
Borrowings under the Credit Agreement may be base rate loans or Secured Overnight Financing Rate (“SOFR”) loans. Interest is payable quarterly for base rate loans and at the end of the applicable interest period for SOFR loans. SOFR loans bear interest at SOFR plus an applicable margin ranging from 225 to 325 basis points, depending on the percentage of elected commitments utilized, plus an additional 10 basis point credit spread adjustment. Base rate loans bear interest at a rate per annum equal to the greatest of: (i) the agent bank’s prime rate; (ii) the federal funds effective rate plus 50 basis points; or (iii) the adjusted Term SOFR rate for a one-month interest period plus 100 basis points, plus an applicable margin, ranging from 125 to 225 basis points, depending on the percentage of the borrowing base utilized. CRP also pays a commitment fee of 37.5 to 50 basis points on unused elected commitment amounts under its facility.
The Credit Agreement provides for, among other things, the ability to repurchase outstanding shares of the Company’s Common Stock and junior debt, subject to certain leverage and elected commitment availability conditions and subject to the requirement that such repurchases are funded from our free cash flow. The Credit Agreement contains restrictive covenants that limit our ability to, among other things: (i) incur additional indebtedness; (ii) make investments and loans; (iii) enter into mergers; (iv) make restricted payments; (v) repurchase or redeem junior debt; (vi) enter into commodity hedges exceeding a specified percentage of our expected production; (vii) enter into interest rate hedges exceeding a specified percentage of its outstanding indebtedness; (viii) incur liens; (ix) sell assets; and (x) engage in transactions with affiliates.
The Credit Agreement also requires CRP to maintain compliance with the following financial ratios:
(i) a current ratio, which is the ratio of CRP’s consolidated current assets (including an add back of unused commitments under the revolving credit facility and excluding non-cash derivative assets and certain restricted cash) to its consolidated current liabilities (excluding the current portion of long-term debt under the Credit Agreement and non-cash derivative liabilities), of not less than 1.0 to 1.0; and
14

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(ii) a leverage ratio, as defined within the Credit Agreement as the ratio of total funded debt to consolidated EBITDAX for the prior four fiscal quarters, of not greater than 3.5 to 1.0.
CRP was in compliance with the covenants and the applicable financial ratios described above as of June 30, 2022. In July 2022 in connection with the pending Merger, CRP amended its Credit Agreement; refer to Note 14—Subsequent Events for additional information.
Convertible Senior Notes
On March 19, 2021, CRP issued $150.0 million in aggregate principal amount of 3.25% senior unsecured convertible notes due 2028 (the “Convertible Senior Notes”). On March 26, 2021, CRP issued an additional $20.0 million of Convertible Senior Notes pursuant to the exercise of the underwriters’ over-allotment option to purchase additional Convertible Senior Notes. These issuances resulted in aggregate net proceeds to CRP of $163.6 million, after deducting debt issuance costs of $6.4 million. Interest is payable on the Convertible Senior Notes semi-annually in arrears on each April 1 and October 1, commencing on October 1, 2021.
The Convertible Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and each of CRP’s current subsidiaries.
The Convertible Senior Notes will mature on April 1, 2028 unless earlier repurchased, redeemed or converted. Before January 3, 2028, noteholders have the right to convert their Convertible Senior Notes (i) upon the occurrence of certain events, (ii) if the Company’s share price exceeds 130% of the conversion price for any 20 trading days during the last 30 consecutive trading days of a calendar quarter, after June 30, 2021, or (iii) if the trading price per $1,000 principal amount of the notes is less than 98% of the Company’s share price multiplied by the conversion rate, for a 10 consecutive trading day period. In addition, after January 2, 2028, noteholders may convert their Convertible Senior Notes at any time at their election through the second scheduled trading day immediately before the April 1, 2028 maturity date.
CRP can settle conversions by paying or delivering, as applicable, cash, shares of Common Stock, or a combination of cash and shares of Common Stock, at CRP’s election. The initial conversion rate is 159.2610 shares of Common Stock per $1,000 principal amount of Convertible Senior Notes, which represents an initial conversion price of approximately $6.28 per share of Common Stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events (as defined in the indenture) which, in certain circumstances, will increase the conversion rate for a specified period of time. In the context of this issuance, we refer to the notes as convertible in accordance with ASC 470 - Debt. However, per the terms of the Convertible Senior Notes’ indenture, the Convertible Senior Notes were issued by CRP and are exchangeable into shares of Centennial Resource Development, Inc.’s Common Stock.
CRP has the option to redeem, in whole or in part, all of the Convertible Senior Notes at any time on or after April 7, 2025, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption, but only if the last reported sale price per share of Common Stock exceeds 130% of the conversion price (i) for any 20 trading days during the 30 consecutive trading days ending on the day immediately before the date CRP sends the related redemption notice; and (ii) also on the trading day immediately before the date CRP sends such notice.
If certain corporate events occur, including certain business combination transactions involving the Company or CRP or a stock de-listing with respect to the Common Stock, noteholders may require CRP to repurchase their Convertible Senior Notes at a cash repurchase price equal to the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid interest to the repurchase date.
Upon an Event of Default (as defined in the indenture governing the Convertible Senior Notes), the trustee or the holders of at least 25% of the aggregate principal amount of then outstanding Convertible Senior Notes may declare the Convertible Senior Notes immediately due and payable. In addition, a default resulting from certain events of bankruptcy or insolvency with respect to the Company, CRP or any of the subsidiary guarantors will automatically cause all outstanding Convertible Senior Notes to become due and payable.
At issuance, the Company recorded a liability equal to the face value the Convertible Senior Notes, net of unamortized debt issuance costs in the line items Long-term debt, net in the consolidated balance sheets. As of June 30, 2022, the net liability recorded related to the Convertible Senior Notes was $164.6 million.
15

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Capped Called Transactions
In connection with the issuance of the Convertible Senior Notes in March 2021, CRP entered into privately negotiated capped call spread transactions with option counterparties (the “Capped Call Transactions”). The Capped Call Transactions cover the aggregate number of shares of Common Stock that initially underlie the Convertible Senior Notes and are expected to (i) generally reduce potential dilution to the Common Stock upon a conversion of the Convertible Senior Notes, and/or (ii) offset any cash payments CRP is required to make in excess of the principal amount of the Convertible Senior Notes, subject to a cap. The Capped Call Transactions have an initial strike price of $6.28 per share of Common Stock and an initial capped price of $8.4525 per share of Common Stock, each of which are subject to certain customary adjustments upon the occurrence of certain corporate events, as defined in the capped call agreements.
The cost of the Capped Call Transactions was $14.7 million, which was funded from proceeds from the Convertible Senior Note issuance. The cost to purchase the Capped Call Transactions was recorded to additional paid-in capital in the consolidated balances sheets and will not be subject to remeasurement each reporting period.
Senior Unsecured Notes
On March 15, 2019, CRP issued $500.0 million of 6.875% senior notes due 2027 (the “2027 Senior Notes”) in a 144A private placement at a price equal to 99.235% of par that resulted in net proceeds to CRP of $489.0 million, after deducting the original issuance discount of $3.8 million and debt issuance costs of $7.2 million. Interest is payable on the 2027 Senior Notes semi-annually in arrears on each April 1 and October 1, which commenced on October 1, 2019.
On November 30, 2017, CRP issued at par $400.0 million of 5.375% senior notes due 2026 (the “2026 Senior Notes” and collectively with the 2027 Senior Notes, the “Senior Unsecured Notes”) in a 144A private placement that resulted in net proceeds to CRP of $391.0 million, after deducting $9.0 million in debt issuance costs. Interest is payable on the 2026 Senior Notes semi-annually in arrears on each January 15 and July 15, which commenced on July 15, 2018.
In May 2020, $110.6 million aggregate principal amount of the 2026 Senior Notes and $143.7 million aggregate principal amount of the 2027 Senior Notes were validly tendered and exchanged by certain eligible bondholders for consideration consisting of $127.1 million aggregate principal amount of 8.00% second lien senior secured notes, which were fully redeemed at par in connection with the Convertible Senior Notes issuance during the second quarter of 2021. As of June 30, 2022, the remaining aggregate principal amount of 2027 Senior Notes and 2026 Senior Notes outstanding was $356.4 million and $289.4 million, respectively.
The Senior Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and each of CRP’s current subsidiaries that guarantee CRP’s Credit Agreement.
At any time prior to January 15, 2021 (for the 2026 Senior Notes) and April 1, 2022 (for the 2027 Senior Notes), the “Optional Redemption Dates,” CRP may, on any one or more occasions, redeem up to 35% of the aggregate principal amount of either series of Senior Unsecured Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings at a redemption price equal to 105.375% (for the 2026 Senior Notes) and 106.875% (for the 2027 Senior Notes) of the principal amount of the Senior Unsecured Notes of the applicable series redeemed, plus any accrued and unpaid interest to the date of redemption; provided that at least 65% of the aggregate principal amount of each such series of Senior Unsecured Notes remains outstanding immediately after such redemption, and the redemption occurs within 180 days of the closing date of such equity offering.
At any time prior to the Optional Redemption Dates, CRP may, on any one or more occasions, redeem all or a part of the Senior Unsecured Notes at a redemption price equal to 100% of the principal amount of the Senior Unsecured Notes redeemed, plus a “make-whole” premium, and any accrued and unpaid interest as of the date of redemption. On and after the Optional Redemption Dates, CRP may redeem the Senior Unsecured Notes, in whole or in part, at redemption prices expressed as percentages of principal amount plus accrued and unpaid interest to the redemption date.
If CRP experiences certain defined changes of control (and, in some cases, followed by a ratings decline), each holder of the Senior Unsecured Notes may require CRP to repurchase all or a portion of its Senior Unsecured Notes for cash at a price equal to 101% of the aggregate principal amount of such Senior Unsecured Notes, plus any accrued but unpaid interest to the date of repurchase.
The indentures governing the Senior Unsecured Notes contain covenants that, among other things and subject to certain exceptions and qualifications, limit CRP’s ability and the ability of CRP’s restricted subsidiaries to: (i) incur or guarantee additional indebtedness or issue certain types of preferred stock; (ii) pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; (iii) transfer or sell assets; (iv) make investments; (v) create certain liens; (vi) enter
16

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

into agreements that restrict dividends or other payments from their subsidiaries to them; (vii) consolidate, merge or transfer all or substantially all of their assets; (viii) engage in transactions with affiliates; and (ix) create unrestricted subsidiaries. CRP was in compliance with these covenants as of June 30, 2022 and through the filing of this Quarterly Report.
Upon an Event of Default (as defined in the indentures governing the Senior Unsecured Notes), the trustee or the holders of at least 25% of the aggregate principal amount of then outstanding Senior Unsecured Notes may declare the Senior Unsecured Notes immediately due and payable. In addition, a default resulting from certain events of bankruptcy or insolvency with respect to CRP, any restricted subsidiary of CRP that is a significant subsidiary, or any group of restricted subsidiaries that, taken together, would constitute a significant subsidiary, will automatically cause all outstanding Senior Unsecured Notes to become due and payable.
Note 5—Asset Retirement Obligations
The following table summarizes changes in the Company’s asset retirement obligations (“ARO”) associated with its working interests in oil and gas properties for the six months ended June 30, 2022:
(in thousands)
Asset retirement obligations, beginning of period
$17,240 
Liabilities incurred
481 
Liabilities divested and settled
(11)
Accretion expense
533 
Revisions to estimated cash flows
(92)
Asset retirement obligations, end of period
$18,151 
ARO reflect the present value of the estimated future costs associated with the plugging and abandonment of oil and gas wells, removal of equipment and facilities from leased acreage and land restoration in accordance with applicable local, state and federal laws. Inherent in the fair value calculation of ARO are numerous estimates and assumptions, including plug and abandonment settlement amounts, inflation factors, credit adjusted discount rates and timing of settlement. To the extent future revisions to these assumptions impact the value of the existing ARO liabilities, a corresponding offsetting adjustment is made to the oil and gas property balance. Changes in the liability due to the passage of time are recognized as an increase in the carrying amount of the liability with an offsetting charge to accretion expense, which is included within depreciation, depletion and amortization.
Note 6—Stock-Based Compensation
On April 27, 2022, the stockholders of the Company approved the second amended and restated Centennial Resource Development, Inc. 2016 Long Term Incentive Plan (the “LTIP”), which, among other things, increased the number of shares of Common Stock authorized for issuance to employees and directors from 24,750,000 shares to 44,250,000 shares. The LTIP provides for grants of restricted stock, stock options (including incentive stock options and nonqualified stock options), restricted stock units (including performance stock units), stock appreciation rights and other stock or cash-based awards.
Stock-based compensation expense is recognized within both General and administrative expenses and Exploration and other expenses in the consolidated statements of operations. The Company accounts for forfeitures of awards granted under the LTIP as they occur in determining compensation expense.
17

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table summarizes stock-based compensation expense recognized for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2022202120222021
Equity Awards
Restricted stock$4,481 $3,536 $7,920 $7,142 
Stock option awards26 234 57 505 
Performance stock units2,079 646 4,082 1,285 
Other stock-based compensation expense(1)
71 65 143 134 
Total stock-based compensation - equity awards6,657 4,481 12,202 9,066 
Liability Awards
Restricted stock units 4,647  7,955 
Performance stock units(8,593)10,013 5,127 17,119 
Total stock-based compensation - liability awards(8,593)14,660 5,127 25,074 
Total stock-based compensation expense$(1,936)$19,141 $17,329 $34,140 
(1)     Includes expenses related to the Company’s Employee Stock Purchase Plan (the “ESPP”). In May 2019, an aggregate of 2,000,000 shares were authorized by stockholders for issuance under the ESPP, which became effective on July 1, 2019.
Equity Awards
The Company has restricted stock, stock options and performance stock units (“PSUs”) outstanding that were granted under the LTIP as discussed below. Each award has service-based and, in the case of the PSUs, market-based vesting requirements, and are expected to be settled in shares of Common Stock upon vesting. As a result, these awards are classified as equity-based awards in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”).
Restricted Stock
The following table provides information about restricted stock activity during the six months ended June 30, 2022:
Restricted StockWeighted Average Fair Value
Unvested balance as of December 31, 202110,143,687 $2.85 
Granted2,409,749 7.90 
Vested(387,929)5.03 
Forfeited(97,829)5.40 
Unvested balance as of June 30, 202212,067,678 3.76 
The Company grants service-based restricted stock to executive officers and employees, which vest ratably over a three-year service period, and to directors, which vest over a one-year service period. Compensation cost for these service-based restricted stock is based on the closing market price of the Company’s Common Stock on the grant date, and such costs are recognized ratably over the applicable vesting period. The total fair value of restricted stock that vested during the six months ended June 30, 2022 and 2021 was $2.0 million and $2.7 million, respectively. Unrecognized compensation cost related to restricted shares that were unvested as of June 30, 2022 was $32.4 million, which the Company expects to recognize over a weighted average period of 2.5 years.
Stock Options
Stock options that have been granted under the LTIP expire ten years from the grant date and vest ratably over their three-year service period. The exercise price for an option granted under the LTIP is the closing market price of the Company’s Common Stock on the grant date.
Compensation cost for stock options is based on the grant-date fair value of the award, which is then recognized ratably over the vesting period of three years.
18

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table provides information about stock option awards outstanding during the six months ended June 30, 2022:
OptionsWeighted Average Exercise PriceWeighted Average Remaining Term
(in years)
Aggregate Intrinsic Value
(in thousands)
Outstanding as of December 31, 20212,212,798 $15.31 
Granted  
Exercised(4,000)1.92 $24 
Forfeited(2,500)7.58 
Expired(60,832)14.69 
Outstanding as of June 30, 20222,145,466 15.36 4.9$276 
Exercisable as of June 30, 20222,094,791 15.63 4.9$165 
The total fair value of stock options that vested during the six months ended June 30, 2022 and 2021 was $0.2 million and $0.5 million, respectively. The intrinsic value of the stock options exercised was minimal for the six months ended June 30, 2022 and $0.1 million for the six months ended June 30, 2021. As of June 30, 2022, there was less than $0.1 million of unrecognized compensation cost related to unvested stock options, which the Company expects to recognize on a pro-rata basis over a weighted-average period of 0.6 years.
Performance Stock Units
The Company grants performance stock units (“PSU”) to certain executive officers that are subject to market-based vesting criteria as well as a three-year service period. Vesting at the end of the three-year service period is subject to the condition that the Company’s stock price increases by a greater percentage, or decreases by a lesser percentage, than the average percentage increase or decrease, respectively, of the stock prices of a peer group of companies. These market-based conditions must be met in order for the stock awards to vest, and it is therefore possible that no shares could ultimately vest. However, the Company recognizes compensation expense for the PSUs subject to market conditions regardless of whether it becomes probable that these conditions will be met or not, and compensation expense is not reversed if vesting does not actually occur.
During the six months ended June 30, 2022 and the year ended December 31, 2021 there were 0.7 million and 1.1 million shares, respectively, of performance stock units granted that can be settled in either Common Stock or cash upon vesting at the Company’s discretion. The Company currently intends to settle these performance stock units in Common Stock and has sufficient shares available under the LTIP to settle the units in Common Stock at the potential future vesting dates. Accordingly, these units have been treated as equity-based awards and a grant date was established on April 27, 2022, which represents the date the 2022 awards were approved and the date sufficient shares become available under the LTIP to settle 2021 awards in Common Stock. As a result, these PSU awards’ fair value was determined as of the grant date and remeasurement of such value will not be required.
The fair value was estimated using a Monte Carlo valuation model. The Monte Carlo valuation model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility was calculated based on the historical volatility of the Company’s Common Stock, and the risk-free interest rate is based on U.S. Treasury yield curve rates with maturities consistent with the three-year vesting period.
The following table summarizes the key assumptions and related information used to determine the fair value of performance stock units:
2021 Awards2022 Awards
Weighted average fair value per share$12.79$13.81
Number of simulations10,000,00010,000,000
Expected implied stock volatility99.5%96.3%
Dividend yield%%
Risk-free interest rate2.3%2.7%
19

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table provides information about performance stock units outstanding during the six months ended June 30, 2022:
AwardsWeighted Average Fair Value
Unvested balance as of December 31, 20211,580,980 $8.54 
Granted733,330 13.81 
Vested  
Cancelled  
Forfeited  
Unvested balance as of June 30, 20222,314,310 11.83 
As of June 30, 2022, there was $19.1 million of unrecognized compensation cost related to PSUs that were unvested, which the Company expects to recognize on a pro-rata basis over a weighted average period of 2.4 years.
Liability Awards
The Company has performance stock units that were granted under the LTIP, which are settleable in cash and are therefore classified as liability awards in accordance with ASC 718. The Company also had restricted stock units granted under the LTIP that were settleable in cash and that were classified as liability awards, but all such units were settled in their entirety during the third quarter of 2021. Compensation cost for these liability awards is based on the fair value of the units as of the balance sheet date as further discussed below, and such costs are recognized ratably over the service periods of the awards. As the fair value of liability awards is required to be re-measured each period end, stock compensation expense amounts recognized in future periods for these awards will vary. The estimated future cash payments associated with these awards are presented as liabilities within Other long-term liabilities in the consolidated balances sheets.
Restricted Stock Units
The Company granted 5.5 million restricted stock units during the third quarter of 2020 to certain officers (non-NEOs) and employees that were settleable in cash upon vesting. The restricted stock units vested annually in one-third increments over a three-year service period, with the first portion vesting on September 1, 2021. After one year from the grant date, however, the remaining two-thirds of unvested restricted stock units could vest immediately, on an accelerated basis, if they meet certain market-based vesting criteria equal to the maximum return percentage for at least 20 out of any 30 consecutive trading days. Additionally, the restricted stock units included maximum and minimum return amounts equal to 400% and 25%, respectively, of the closing market price of the Company’s Common Stock on the grant date.
During the second quarter of 2021, the Company amended these restricted stock unit agreements to (i) allow the units to be settleable in either cash or Common Stock upon vesting at the Company’s discretion and (ii) remove the maximum and minimum return amounts if the units are settled in Common Stock. The amended terms were effective July 1, 2021, and at that time, the Company intended to settle a portion of these restricted stock units in cash. As a result, the awards continued to be classified as liabilities in accordance with ASC 718.
During the third quarter of 2021, the maximum return event (described above) occurred resulting in an immediate vesting of all the outstanding restricted stock units on September 1, 2021. The Company settled 1.8 million of the restricted stock units in cash resulting in a $6.2 million cash payment, and the remaining units were settled in Common Stock. The portion of the units that were settled in Common Stock were recognized as equity instruments on the vesting date, which resulted in $13.6 million of incremental stock compensation expense being recognized during the year ended December 31, 2021. There are no remaining restricted stock units outstanding as of June 30, 2022.
Performance Stock Units
The Company granted 5.5 million PSUs during third quarter of 2020 to certain executive officers that will be settled in cash and are subject to market-based vesting criteria as well as a three-year service condition. Vesting at the end of the three-year service period is subject to the condition that the Company’s stock price increases by a greater percentage, or decreases by a lessor percentage, than the average percentage increase or decrease, respectively, of the stock price of a peer group of companies. These market-based conditions must be met in order for the PSU awards to vest, and it is therefore possible that no units could ultimately vest and cumulative stock compensation expense recognized for these awards would then be reduced to zero. As of June 30, 2022, there was $15.2 million of unrecognized compensation cost that represents the unvested portion of the fair value of the PSUs at June 30, 2022 and will be recognized over a weighted average period of 1.0 years.
20

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Liability Awards Fair Value
The fair value of the PSUs was estimated using a Monte Carlo valuation model as of the balance sheet date. The Monte Carlo valuation model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility was calculated based on the historical volatility of the Company’s Common Stock as well as the peer companies that are specified in the PSU award agreement. The risk-free rate is based on U.S. Treasury yield curve rates with maturities consistent with the remaining vesting or performance period.
The following table summarizes the key assumptions and related information used to determine the fair value of the liability awards as of June 30, 2022:
Performance stock units
Number of simulations10,000,000
Expected implied stock volatility73.7%
Dividend yield%
Risk-free interest rate2.8%
Note 7—Derivative Instruments
The Company is exposed to certain risks relating to its ongoing business operations and may use derivative instruments to manage its exposure to commodity price risk from time to time.
Commodity Derivative Contracts
Historically, prices received for crude oil and natural gas production have been volatile because of supply and demand factors, worldwide political factors, general economic conditions and seasonal weather patterns. The Company may periodically use derivative instruments, such as swaps, costless collars and basis swaps, to mitigate its exposure to declines in commodity prices and to the corresponding negative impacts such declines can have on its cash flows from operations, returns on capital and other financial results. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future revenues from favorable price changes. The Company does not enter into derivative contracts for speculative or trading purposes.
Commodity Swap and Collar Contracts. The Company may use commodity derivative instruments known as fixed price swaps to realize a known price for a specific volume of production, basis swaps to hedge the difference between the index price and a local or future index price, or costless collars to establish fixed price floors and ceilings. All transactions are settled in cash with one party paying the other for the resulting difference in price multiplied by the contract volume.
The following table summarizes the approximate volumes and average contract prices of derivative contracts the Company had in place as of June 30, 2022:
PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Crude Price
($/Bbl)(1)
Crude oil swaps
July 2022 - September 2022782,000 8,500 $65.46
October 2022 - December 2022690,000 7,500 65.63
January 2023 - March 2023225,000 2,500 73.51
April 2023 - June 2023227,500 2,500 73.25
July 2023 - September 202392,000 1,000 72.98
October 2023 - December 202392,000 1,000 72.98
PeriodVolume (Bbls)Volume
(Bbls/d)
Wtd. Avg. Collar Price Ranges
($/Bbl)(2)
Crude oil collarsJuly 2022 - September 2022460,000 5,000 $78.00-$107.13
October 2022 - December 2022644,000 7,000 80.00-104.17
January 2023 - March 2023810,000 9,000 75.56-91.15
April 2023 - June 2023819,000 9,000 75.56-91.15
July 2023 - September 2023644,000 7,000 76.43-92.70
October 2023 - December 2023644,000 7,000 76.43-92.70
21

Table of Contents
CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)