Document
false--12-31Q2201900016585660.00010.0001620000000620000000265859273120031832662549711200318326432332812003183264431567120031830.0250.0150.0150.0050.02250.01250.01250.00250.0100.00500.053750.068750.00500.00375P5Y0.0430.00010.0001100000010000001111P1YP3Y0 0001658566 2019-01-01 2019-06-30 0001658566 us-gaap:CommonClassCMember 2019-07-29 0001658566 us-gaap:CommonClassAMember 2019-07-29 0001658566 us-gaap:ConvertibleCommonStockMember 2018-12-31 0001658566 2018-12-31 0001658566 2019-06-30 0001658566 us-gaap:CommonClassAMember 2019-06-30 0001658566 us-gaap:CommonClassAMember 2018-12-31 0001658566 us-gaap:ConvertibleCommonStockMember 2019-06-30 0001658566 us-gaap:SeriesAPreferredStockMember 2019-06-30 0001658566 us-gaap:SeriesAPreferredStockMember 2018-12-31 0001658566 2018-04-01 2018-06-30 0001658566 2019-04-01 2019-06-30 0001658566 2018-01-01 2018-06-30 0001658566 2018-06-30 0001658566 2017-12-31 0001658566 us-gaap:SeriesAPreferredStockMember us-gaap:PreferredStockMember 2018-06-30 0001658566 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001658566 us-gaap:ConvertibleCommonStockMember us-gaap:CommonStockMember 2017-12-31 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2018-04-01 2018-06-30 0001658566 us-gaap:RetainedEarningsMember 2018-01-01 2018-03-31 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2018-03-31 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2018-06-30 0001658566 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-03-31 0001658566 us-gaap:ConvertibleCommonStockMember us-gaap:CommonStockMember 2018-01-01 2018-03-31 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2017-12-31 0001658566 2018-01-01 2018-03-31 0001658566 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0001658566 us-gaap:ParentMember 2018-01-01 2018-03-31 0001658566 us-gaap:ParentMember 2018-06-30 0001658566 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0001658566 us-gaap:ParentMember 2018-04-01 2018-06-30 0001658566 2018-03-31 0001658566 us-gaap:NoncontrollingInterestMember 2018-04-01 2018-06-30 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2018-01-01 2018-03-31 0001658566 us-gaap:ParentMember 2018-03-31 0001658566 us-gaap:RetainedEarningsMember 2018-03-31 0001658566 us-gaap:ParentMember 2017-12-31 0001658566 us-gaap:RetainedEarningsMember 2017-12-31 0001658566 us-gaap:NoncontrollingInterestMember 2018-01-01 2018-03-31 0001658566 us-gaap:SeriesAPreferredStockMember us-gaap:PreferredStockMember 2017-12-31 0001658566 us-gaap:RetainedEarningsMember 2018-06-30 0001658566 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001658566 us-gaap:ConvertibleCommonStockMember us-gaap:CommonStockMember 2018-06-30 0001658566 us-gaap:NoncontrollingInterestMember 2018-06-30 0001658566 us-gaap:ConvertibleCommonStockMember us-gaap:CommonStockMember 2018-03-31 0001658566 us-gaap:SeriesAPreferredStockMember us-gaap:PreferredStockMember 2018-03-31 0001658566 us-gaap:NoncontrollingInterestMember 2017-12-31 0001658566 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0001658566 us-gaap:NoncontrollingInterestMember 2018-03-31 0001658566 us-gaap:ConvertibleCommonStockMember us-gaap:CommonStockMember 2018-12-31 0001658566 2019-01-01 2019-03-31 0001658566 us-gaap:ParentMember 2019-01-01 2019-03-31 0001658566 us-gaap:ParentMember 2019-04-01 2019-06-30 0001658566 us-gaap:SeriesAPreferredStockMember us-gaap:PreferredStockMember 2019-06-30 0001658566 us-gaap:ParentMember 2019-06-30 0001658566 us-gaap:RetainedEarningsMember 2018-12-31 0001658566 us-gaap:NoncontrollingInterestMember 2019-04-01 2019-06-30 0001658566 us-gaap:SeriesAPreferredStockMember us-gaap:PreferredStockMember 2019-03-31 0001658566 us-gaap:NoncontrollingInterestMember 2019-03-31 0001658566 us-gaap:ConvertibleCommonStockMember us-gaap:CommonStockMember 2019-03-31 0001658566 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2019-03-31 0001658566 us-gaap:RetainedEarningsMember 2019-03-31 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2019-06-30 0001658566 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001658566 us-gaap:NoncontrollingInterestMember 2019-06-30 0001658566 2019-03-31 0001658566 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001658566 us-gaap:SeriesAPreferredStockMember us-gaap:PreferredStockMember 2018-12-31 0001658566 us-gaap:RetainedEarningsMember 2019-06-30 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2018-12-31 0001658566 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001658566 us-gaap:ConvertibleCommonStockMember us-gaap:CommonStockMember 2019-06-30 0001658566 us-gaap:NoncontrollingInterestMember 2019-01-01 2019-03-31 0001658566 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001658566 us-gaap:ParentMember 2019-03-31 0001658566 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2019-01-01 2019-03-31 0001658566 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001658566 us-gaap:ParentMember 2018-12-31 0001658566 us-gaap:NoncontrollingInterestMember 2018-12-31 0001658566 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001658566 cdev:CentennialContributorsMember cdev:CentennialResourceProductionLLCMember 2019-06-30 0001658566 cdev:CentennialContributorsMember cdev:CentennialResourceProductionLLCMember 2018-12-31 0001658566 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2018-12-31 0001658566 us-gaap:SeniorNotesMember 2018-12-31 0001658566 cdev:SeniorNotesDue2027Member us-gaap:SeniorNotesMember 2019-06-30 0001658566 us-gaap:SeniorNotesMember 2019-06-30 0001658566 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-06-30 0001658566 cdev:SeniorNotesDue2026Member us-gaap:SeniorNotesMember 2018-12-31 0001658566 cdev:SeniorNotesDue2026Member us-gaap:SeniorNotesMember 2019-06-30 0001658566 cdev:SeniorNotesDue2027Member us-gaap:SeniorNotesMember 2018-12-31 0001658566 cdev:SeniorNotesDue2027Member us-gaap:SeniorNotesMember 2019-03-15 0001658566 cdev:SeniorNotesDue2026Member us-gaap:SeniorNotesMember 2017-11-30 2017-11-30 0001658566 us-gaap:SeniorNotesMember 2019-01-01 2019-06-30 0001658566 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-01-01 2019-06-30 0001658566 cdev:SeniorNotesDue2027Member us-gaap:SeniorNotesMember 2019-03-15 2019-03-15 0001658566 us-gaap:LetterOfCreditMember us-gaap:LineOfCreditMember 2019-06-30 0001658566 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-01-01 2019-06-30 0001658566 cdev:SeniorNotesDue2026Member us-gaap:SeniorNotesMember 2017-11-30 0001658566 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-04-26 2019-04-26 0001658566 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-01-01 2019-06-30 0001658566 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember cdev:AdjustedForStatutoryReserveRequirementsLondonInterbankOfferedRateLIBORMember 2019-04-26 2019-06-30 0001658566 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember cdev:OneMonthLondonInterbankOfferedRateLIBORMember 2019-04-26 2019-06-30 0001658566 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember us-gaap:FederalFundsEffectiveSwapRateMember 2019-04-26 2019-06-30 0001658566 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember cdev:AdjustedForStatutoryReserveRequirementsLondonInterbankOfferedRateLIBORMember 2019-04-26 2019-06-30 0001658566 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-04-26 2019-06-30 0001658566 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-04-26 2019-06-30 0001658566 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember cdev:AdjustedForStatutoryReserveRequirementsLondonInterbankOfferedRateLIBORMember 2019-04-25 2019-04-25 0001658566 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember cdev:AdjustedForStatutoryReserveRequirementsLondonInterbankOfferedRateLIBORMember 2019-04-25 2019-04-25 0001658566 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-04-26 2019-06-30 0001658566 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-04-25 2019-04-25 0001658566 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-04-25 2019-04-25 0001658566 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2019-04-26 2019-06-30 0001658566 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember 2018-05-04 2018-05-04 0001658566 us-gaap:RestrictedStockMember 2019-01-01 2019-06-30 0001658566 us-gaap:RestrictedStockMember 2019-06-30 0001658566 us-gaap:RestrictedStockMember 2018-12-31 0001658566 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-06-30 0001658566 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-06-30 0001658566 us-gaap:EmployeeStockOptionMember cdev:A2016LongTermIncentivePlanMember 2019-01-01 2019-06-30 0001658566 us-gaap:PerformanceSharesMember 2019-01-01 2019-06-30 0001658566 us-gaap:EmployeeStockOptionMember 2019-06-30 0001658566 us-gaap:RestrictedStockMember 2018-01-01 2018-06-30 0001658566 cdev:A2016LongTermIncentivePlanMember 2016-10-07 0001658566 cdev:A2016LongTermIncentivePlanMember 2019-06-30 0001658566 us-gaap:PerformanceSharesMember 2019-06-30 0001658566 us-gaap:RestrictedStockMember 2019-04-01 2019-06-30 0001658566 us-gaap:PerformanceSharesMember 2018-01-01 2018-06-30 0001658566 us-gaap:PerformanceSharesMember 2019-04-01 2019-06-30 0001658566 us-gaap:PerformanceSharesMember 2018-04-01 2018-06-30 0001658566 us-gaap:EmployeeStockOptionMember 2019-04-01 2019-06-30 0001658566 us-gaap:EmployeeStockOptionMember 2018-04-01 2018-06-30 0001658566 us-gaap:RestrictedStockMember 2018-04-01 2018-06-30 0001658566 us-gaap:RestrictedStockMember us-gaap:OfficerMember 2019-01-01 2019-06-30 0001658566 us-gaap:RestrictedStockMember us-gaap:DirectorMember 2019-01-01 2019-06-30 0001658566 cdev:NaturalGasBasisSwapPeriodOneMember us-gaap:NondesignatedMember 2019-06-30 0001658566 cdev:NaturalGasSwapsWestTexasWAHANextYearMember us-gaap:NondesignatedMember 2019-06-30 0001658566 cdev:NaturalGasBasisSwapPeriodOneMember us-gaap:NondesignatedMember 2019-01-01 2019-06-30 0001658566 cdev:NaturalGasSwapsHenryHubNextYearMember us-gaap:NondesignatedMember 2019-06-30 0001658566 cdev:NaturalGasSwapsWestTexasWAHANextYearMember us-gaap:NondesignatedMember 2019-01-01 2019-06-30 0001658566 cdev:NaturalGasSwapsHenryHubNextYearMember us-gaap:NondesignatedMember 2019-01-01 2019-06-30 0001658566 cdev:CrudeOilBasisSwapPeriodTwoMember us-gaap:NondesignatedMember 2019-01-01 2019-06-30 0001658566 cdev:CrudeOilBasisSwapPeriodOneMember us-gaap:NondesignatedMember 2019-01-01 2019-06-30 0001658566 cdev:CrudeOilBasisSwapPeriodOneMember us-gaap:NondesignatedMember 2019-06-30 0001658566 cdev:CrudeOilBasisSwapPeriodTwoMember us-gaap:NondesignatedMember 2019-06-30 0001658566 cdev:CurrentLiabilitiesMember us-gaap:NondesignatedMember 2018-12-31 0001658566 cdev:CurrentLiabilitiesMember us-gaap:NondesignatedMember 2019-06-30 0001658566 cdev:CurrentAssetsMember us-gaap:NondesignatedMember 2018-12-31 0001658566 cdev:CurrentAssetsMember us-gaap:NondesignatedMember 2019-06-30 0001658566 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001658566 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001658566 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001658566 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001658566 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001658566 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001658566 us-gaap:RevolvingCreditFacilityMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:LineOfCreditMember 2018-12-31 0001658566 cdev:SeniorNotesDue2027Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:SeniorNotesMember 2018-12-31 0001658566 cdev:SeniorNotesDue2026Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:SeniorNotesMember 2019-06-30 0001658566 us-gaap:RevolvingCreditFacilityMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:LineOfCreditMember 2019-06-30 0001658566 cdev:SeniorNotesDue2027Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:SeniorNotesMember 2019-06-30 0001658566 cdev:SeniorNotesDue2026Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:SeniorNotesMember 2018-12-31 0001658566 us-gaap:WarrantMember 2019-01-01 2019-06-30 0001658566 us-gaap:WarrantMember 2018-04-01 2018-06-30 0001658566 us-gaap:PerformanceSharesMember 2019-04-01 2019-06-30 0001658566 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-06-30 0001658566 us-gaap:WarrantMember 2018-01-01 2018-06-30 0001658566 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-06-30 0001658566 us-gaap:CommonClassCMember 2018-04-01 2018-06-30 0001658566 us-gaap:EmployeeStockOptionMember 2019-04-01 2019-06-30 0001658566 us-gaap:RestrictedStockMember 2018-04-01 2018-06-30 0001658566 us-gaap:RestrictedStockMember 2019-01-01 2019-06-30 0001658566 us-gaap:RestrictedStockMember 2019-04-01 2019-06-30 0001658566 us-gaap:WarrantMember 2019-04-01 2019-06-30 0001658566 us-gaap:RestrictedStockMember 2018-01-01 2018-06-30 0001658566 us-gaap:EmployeeStockOptionMember 2018-04-01 2018-06-30 0001658566 us-gaap:CommonClassCMember 2019-01-01 2019-06-30 0001658566 us-gaap:PerformanceSharesMember 2018-01-01 2018-06-30 0001658566 us-gaap:CommonClassCMember 2018-01-01 2018-06-30 0001658566 us-gaap:PerformanceSharesMember 2018-04-01 2018-06-30 0001658566 us-gaap:CommonClassCMember 2019-04-01 2019-06-30 0001658566 us-gaap:PerformanceSharesMember 2019-01-01 2019-06-30 0001658566 cdev:LucidEnergyDelawareLLCMember srt:AffiliatedEntityMember 2018-04-01 2018-06-30 0001658566 cdev:LucidEnergyDelawareLLCMember srt:AffiliatedEntityMember 2018-12-31 0001658566 cdev:LucidEnergyDelawareLLCMember srt:AffiliatedEntityMember 2019-04-01 2019-06-30 0001658566 cdev:LucidEnergyDelawareLLCMember srt:AffiliatedEntityMember 2018-01-01 2018-06-30 0001658566 cdev:LucidEnergyDelawareLLCMember srt:AffiliatedEntityMember 2019-01-01 2019-06-30 0001658566 cdev:LucidEnergyDelawareLLCMember srt:AffiliatedEntityMember 2019-06-30 0001658566 srt:NaturalGasLiquidsReservesMember 2019-04-01 2019-06-30 0001658566 srt:NaturalGasReservesMember 2019-04-01 2019-06-30 0001658566 srt:NaturalGasReservesMember 2019-01-01 2019-06-30 0001658566 srt:NaturalGasReservesMember 2018-04-01 2018-06-30 0001658566 us-gaap:CrudeOilMember 2019-01-01 2019-06-30 0001658566 srt:NaturalGasLiquidsReservesMember 2019-01-01 2019-06-30 0001658566 us-gaap:CrudeOilMember 2018-01-01 2018-06-30 0001658566 srt:NaturalGasLiquidsReservesMember 2018-04-01 2018-06-30 0001658566 srt:NaturalGasReservesMember 2018-01-01 2018-06-30 0001658566 us-gaap:CrudeOilMember 2019-04-01 2019-06-30 0001658566 srt:NaturalGasLiquidsReservesMember 2018-01-01 2018-06-30 0001658566 us-gaap:CrudeOilMember 2018-04-01 2018-06-30 0001658566 cdev:NaturalGasAndNaturalGasLiquidsMember srt:MinimumMember 2019-01-01 2019-06-30 0001658566 cdev:NaturalGasAndNaturalGasLiquidsMember srt:MaximumMember 2019-01-01 2019-06-30 0001658566 srt:MinimumMember 2019-01-01 2019-06-30 0001658566 srt:MaximumMember 2019-01-01 2019-06-30 0001658566 srt:MaximumMember 2019-06-30 0001658566 cdev:OfficeLeasesMember 2018-12-31 0001658566 cdev:OperatingLeaseDrillingRigsMember 2018-12-31 xbrli:pure iso4217:USD utreg:MMBTU cdev:redetermination utreg:bbl iso4217:USD cdev:bbl utreg:MMBTU xbrli:shares utreg:bbl utreg:D iso4217:USD xbrli:shares iso4217:USD


 
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, 2019
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)
Delaware
 
47-5381253
(State of Incorporation)
 
(I.R.S. Employer Identification Number)
 
 
 
 
 
 
1001 Seventeenth Street,
Suite 1800,
Denver,
Colorado
 
80202
(Address of Principal Executive Offices)
 
(Zip Code)
(720) 499-1400
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share
 
CDEV
 
The 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 29, 2019, there were 264,436,351 shares of Class A Common Stock, par value $0.0001 per share and 12,003,183 shares of Class C Common Stock, par value $0.0001 per share, outstanding.
 



TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

GLOSSARY OF OIL AND NATURAL GAS 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 optimize production.

Development project. The means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single reservoir or field, an incremental development in a producing field or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a development project.
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.
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.

Flush production. First yield from a flowing oil well during its most productive period after it is first completed and put on line.

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.

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.


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 or recompletion. 

Realized price. The cash market price less differentials.

Recompletion. The completion for production of an existing wellbore in another formation from that which the well has been previously completed.

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.

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

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

GLOSSARY OF CERTAIN OTHER TERMS
The following are definitions of certain other terms that are used in this Quarterly Report on Form 10-Q:
Business Combination. The acquisition of approximately 89% of the outstanding membership interests in CRP from the Centennial Contributors, which closed on October 11, 2016, and the other transactions contemplated by the Contribution Agreement.
Celero. Celero Energy Company, LP, a Delaware limited partnership.
Centennial Contributors. CRD, NGP Follow-On and Celero, collectively.
The Company, we, our or us. (i) Centennial Resource Development, Inc. and its consolidated subsidiaries including CRP, following the closing of the Business Combination and (ii) Silver Run Acquisition Corporation prior to the closing of the Business Combination.
Class A Common Stock. Our Class A Common Stock, par value $0.0001 per share.
Class C Common Stock. Our Class C Common Stock, par value $0.0001 per share, which was issued to the Centennial Contributors in connection with the Business Combination.
Contribution Agreement. The Contribution Agreement, dated as of July 6, 2016, among the Centennial Contributors, CRP and NewCo, as amended by Amendment No. 1 thereto, dated as of July 29, 2016, and the Joinder Agreement, dated as of October 7, 2016, by the Company.
CRD. Centennial Resource Development, LLC, a Delaware limited liability company, which was dissolved on June 15, 2018.
CRP. Centennial Resource Production, LLC, a Delaware limited liability company.
CRP Common Units. The units representing common membership interests in CRP.
NewCo. New Centennial, LLC, a Delaware limited liability company controlled by affiliates of Riverstone.
NGP Follow-On. NGP Centennial Follow-On LLC, a Delaware limited liability company.
Riverstone. Riverstone Investment Group LLC and its affiliates, including Silver Run Sponsor, LLC, a Delaware limited liability company, collectively.


5

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 our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 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:
our business strategy and future drilling plans; 
our reserves and our ability to replace the reserves we produce through drilling and property acquisitions; 
our drilling prospects, inventories, projects and programs; 
our financial strategy, 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 our properties;
our anticipated rate of return;
general economic conditions; 
credit markets; 
uncertainty regarding our future operating results; and 
our plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.
You should not place undue reliance on these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including but not limited to those risks described under “Item 1A. Risk Factors” in our 2018 Annual Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
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.
Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we can give no assurance that these plans, intentions or expectations will be

6

Table of Contents

achieved or occur, and actual results could differ materially and adversely from those anticipated or implied by the 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.
All forward-looking statements, expressed or implied, are made only as of the date of this Quarterly Report. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report.



7

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, 2019
 
December 31, 2018
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
28,444

 
$
18,157

Accounts receivable, net
121,546

 
100,623

Derivative instruments
174

 
1,632

Prepaid and other current assets
9,848

 
9,777

Total current assets
160,012

 
130,189

Property and Equipment
 
 
 
Oil and natural gas properties, successful efforts method
 
 
 
Unproved properties
1,574,668

 
1,680,065

Proved properties
3,435,804

 
2,895,280

Accumulated depreciation, depletion and amortization
(698,526
)
 
(496,900)

Total oil and natural gas properties, net
4,311,946

 
4,078,445

Other property and equipment, net
11,580

 
8,837

Total property and equipment, net
4,323,526

 
4,087,282

Noncurrent assets
 
 
 
Operating lease right-of-use assets
23,161

 

Other noncurrent assets
28,628

 
42,550

TOTAL ASSETS
$
4,535,327

 
$
4,260,021

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued expenses
$
267,437

 
$
240,575

Derivative instruments
14,347

 
6,051

Operating lease liabilities
18,875

 

Other current liabilities
924

 
1,090

Total current liabilities
301,583

 
247,716

Noncurrent liabilities
 
 
 
Long-term debt, net
881,353

 
691,630

Asset retirement obligations
14,113

 
13,895

Deferred income taxes
65,832

 
62,167

Operating lease liabilities
5,203

 

Other long-term liabilities

 
744

Total liabilities
1,268,084

 
1,016,152

Commitments and contingencies (Note 10)


 


Shareholders’ equity
 
 
 
Preferred stock, $0.0001 par value, 1,000,000 shares authorized:
 
 
 
Series A: 1 share issued and outstanding

 

Common stock, $0.0001 par value, 620,000,000 shares authorized:
 
 
 
Class A: 266,254,971 shares issued and 264,431,567 shares outstanding at June 30, 2019 and 265,859,273 shares issued and 264,323,328 shares outstanding at December 31, 2018
27

 
27

Class C (Convertible): 12,003,183 shares issued and outstanding at June 30, 2019 and December 31, 2018
1

 
1

Additional paid-in capital
2,846,520

 
2,833,611

Retained earnings
276,303

 
266,538

Total shareholders’ equity
3,122,851

 
3,100,177

Noncontrolling interest
144,392

 
143,692

Total equity
3,267,243

 
3,243,869

TOTAL LIABILITIES AND EQUITY
$
4,535,327

 
$
4,260,021


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

8

Table of Contents

CENTENNIAL RESOURCE DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)

For the Three Months Ended June 30,
 
For the Six Months Ended June 30,

2019

2018

2019

2018
Operating revenues











Oil and gas sales
$
244,239


$
217,763


$
458,808


$
433,661

Operating expenses











Lease operating expenses
34,885


19,182


64,747


35,458

Severance and ad valorem taxes
17,186


14,208


33,306


28,381

Gathering, processing and transportation expenses
16,243


15,296


31,267


29,124

Depreciation, depletion and amortization
112,114


74,946


208,672


140,956

Impairment and abandonment expense
4,418


1,784


35,682


1,784

Exploration expense
3,861


1,867


6,377


5,314

General and administrative expenses
18,435


13,809


36,553


28,106

Total operating expenses
207,142


141,092


416,604


269,123

Net gain (loss) on sale of long-lived assets
9


(141
)

7


(126
)
Income from operations
37,106


76,530


42,211


164,412













Other income (expense)











Interest expense
(14,437
)

(5,791
)

(24,597
)

(11,604
)
Net gain (loss) on derivative instruments
2,128


16,697


(3,743
)

24,540

Other income (expense)
133


(14
)

259


(17
)
Total other income (expense)
(12,176
)

10,892


(28,081
)

12,919













Income before income taxes
24,930


87,422


14,130


177,331

Income tax expense
(5,928
)

(19,940
)

(3,665
)

(39,077
)
Net income
19,002


67,482


10,465


138,254

Less: Net income attributable to noncontrolling interest
1,125


3,941


700


8,623

Net income attributable to Class A Common Stock
$
17,877


$
63,541


$
9,765


$
129,631













Income per share of Class A Common Stock:











Basic
$
0.07


$
0.24


$
0.04


$
0.49

Diluted
$
0.07


$
0.24


$
0.04


$
0.49

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)
(in thousands)
 
For the Six Months Ended June 30,
 
2019

2018
Cash flows from operating activities:
 
 
 
Net income
$
10,465

 
$
138,254

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
208,672

 
140,956

Stock-based compensation expense
13,241

 
8,988

Impairment and abandonment expense
35,682

 
1,784

Exploratory dry hole costs

 
395

Deferred tax expense
3,665

 
39,077

Net (gain) loss on sale of long-lived assets
(7
)
 
126

Non-cash portion of derivative (gain) loss
9,754

 
(19,016
)
Amortization of debt issuance costs and discount
1,287

 
806

Changes in operating assets and liabilities:
 
 
 
(Increase) decrease in accounts receivable
(22,751
)
 
(16,687
)
(Increase) decrease in prepaid and other assets
(154
)
 
294

Increase (decrease) in accounts payable and other liabilities
20,340

 
28,925

Net cash provided by operating activities
280,194

 
323,902

Cash flows from investing activities:
 
 
 
Acquisition of oil and natural gas properties
(42,264
)
 
(107,193
)
Drilling and development capital expenditures
(437,912
)
 
(469,004
)
Purchases of other property and equipment
(4,263
)
 
(3,264
)
Proceeds from sales of oil and natural gas properties
25,919

 
146,090

Net cash used in investing activities
(458,520
)
 
(433,371
)
Cash flows from financing activities:
 
 
 
Proceeds from borrowings under revolving credit facility
155,000

 
115,000

Repayment of borrowings under revolving credit facility
(455,000
)
 
(85,000
)
Proceeds from issuance of 2027 Senior Notes
496,175

 

Debt issuance costs
(7,200
)
 
(4,044
)
Proceeds from stock options exercised

 
575

Restricted stock used for tax withholdings
(332
)
 
(257
)
Net cash provided by financing activities
188,643

 
26,274

Net increase (decrease) in cash, cash equivalents and restricted cash
10,317

 
(83,195
)
Cash, cash equivalents and restricted cash, beginning of period
21,422

 
125,915

Cash, cash equivalents and restricted cash, end of period
$
31,739

 
$
42,720

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

10

Table of Contents

CENTENNIAL RESOURCE DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Continued)
(in thousands)

Supplemental cash flow information and non-cash activity:
 
For the Six Months Ended June 30,
 
2019

2018
Supplemental cash flow information
 
 
 
Cash paid for interest
$
15,799

 
$
1,157

Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
Operating cash flows from operating leases
11,487

 

Investing cash flows from operating leases
9,906

 

Supplemental non-cash activity
 
 
 
Accrued capital expenditures included in accounts payable and accrued expenses
$
128,807

 
$
97,711

Asset retirement obligations incurred, including revisions to estimates
714

 
659

Right-of-use assets obtained in exchange for operating lease liabilities
35,267

 

Reconciliation of cash, cash equivalents and restricted cash presented on the Consolidated Statements of Cash Flows for the periods presented:
 
For the Six Months Ended June 30,
 
2019
 
2018
Cash and cash equivalents
$
28,444

 
$
42,720

Restricted cash(1)
3,295

 

Total cash, cash equivalents and restricted cash
$
31,739

 
$
42,720

 
(1) 
Included in Prepaid and other current assets line item on the Consolidated Balance Sheets


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


11

Table of Contents

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


 
Common Stock
 
Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
Class A
 
Class C
 
Series A
 
Additional Paid-In Capital
 
Retained Earnings
 
Total Shareholder's Equity
 
Non-controlling Interest
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance at December 31, 2018
265,859

 
$
27

 
12,003

 
$
1

 

 
$

 
$
2,833,611

 
$
266,538

 
$
3,100,177

 
$
143,692

 
$
3,243,869

Restricted stock issued
436

 

 

 

 

 

 

 

 

 

 

Restricted stock used for tax withholding
(24
)
 

 

 

 

 

 
(291
)
 

 
(291
)
 

 
(291
)
Stock-based compensation

 

 

 

 

 

 
6,483

 

 
6,483

 

 
6,483

Net income (loss)

 

 

 

 

 

 

 
(8,112
)
 
(8,112
)
 
(425
)
 
(8,537
)
Balance at March 31, 2019
266,271

 
$
27

 
12,003

 
$
1

 

 
$

 
$
2,839,803

 
$
258,426

 
$
3,098,257

 
$
143,267

 
$
3,241,524

Restricted stock issued
4

 

 

 

 

 

 

 

 

 

 

Restricted stock forfeited
(16
)
 

 

 

 

 

 

 

 

 

 

Restricted stock used for tax withholding
(4
)
 

 

 

 

 

 
(41
)
 

 
(41
)
 

 
(41
)
Stock-based compensation

 

 

 

 

 

 
6,758

 

 
6,758

 

 
6,758

Net income (loss)

 

 

 

 

 

 

 
17,877

 
17,877

 
1,125

 
19,002

Balance at June 30, 2019
266,255

 
$
27

 
12,003

 
$
1

 

 
$

 
$
2,846,520

 
$
276,303

 
$
3,122,851

 
$
144,392

 
$
3,267,243



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
















12

Table of Contents


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


 
Common Stock
 
Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
Class A
 
Class C
 
Series A
 
Additional Paid-In Capital
 
Retained Earnings
 
Total Shareholder's Equity
 
Non-controlling Interest
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance at December 31, 2017
261,338

 
$
26

 
15,661

 
$
2

 

 
$

 
$
2,767,558

 
$
66,639

 
$
2,834,225

 
$
169,747

 
$
3,003,972

Restricted stock issued
199

 

 

 

 

 

 

 

 

 

 

Restricted stock forfeited
(26
)
 

 

 

 

 

 

 

 

 

 

Restricted stock used for tax withholding
(10
)
 

 

 

 

 

 
(192
)
 

 
(192
)
 

 
(192
)
Option exercises
10

 

 

 

 

 

 
164

 

 
164

 

 
164

Stock-based compensation

 

 

 

 

 

 
4,333

 

 
4,333

 

 
4,333

Conversion of common shares from Class C to Class A, net of tax
3,347

 
1

 
(3,347
)
 
(1
)
 

 

 
42,188

 

 
42,188

 
(35,519
)
 
6,669

Net income (loss)

 

 

 

 

 

 

 
66,090

 
66,090

 
4,682

 
70,772

Balance at March 31, 2018
264,858

 
$
27

 
12,314

 
$
1

 

 
$

 
$
2,814,051

 
$
132,729

 
$
2,946,808

 
$
138,910

 
$
3,085,718

Restricted stock issued
23

 

 

 

 

 

 

 

 

 

 

Restricted stock forfeited
(17
)
 

 

 

 

 

 

 

 

 

 

Restricted stock used for tax withholding
(4
)
 

 

 

 

 

 
(65
)
 

 
(65
)
 

 
(65
)
Option exercises
28

 

 

 

 

 

 
411

 

 
411

 

 
411

Stock-based compensation

 

 

 

 

 

 
4,655

 

 
4,655

 

 
4,655

Net income (loss)

 

 

 

 

 

 

 
63,541

 
63,541

 
3,941

 
67,482

Balance at June 30, 2018
264,888

 
$
27

 
12,314

 
$
1

 

 
$

 
$
2,819,052

 
$
196,270

 
$
3,015,350

 
$
142,851

 
$
3,158,201



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


13

Table of Contents

CENTENNIAL RESOURCE DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1—Basis of Presentation
Description of Business
Centennial Resource Development, Inc. is an independent oil and natural gas company focused on the development of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin. All of the Company’s assets are concentrated exclusively in the Delaware Basin, a sub-basin of the Permian Basin, and its properties consist of large, contiguous acreage blocks primarily in Reeves County in West Texas and Lea County in 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, 2018 (the “2018 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 2018 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 majority owned subsidiary CRP, and CRP’s wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Noncontrolling interest represents third-party ownership in CRP, and is presented as a component of equity. As of June 30, 2019 and December 31, 2018, the noncontrolling interest ownership of CRP was 4.3%.
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.
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 of long-lived assets; (iii) depreciation, depletion and amortization; (iv) asset retirement obligations; (v) determining fair value and allocating purchase price in connection with business combinations and asset acquisitions; (vi) accrued revenues and related receivables; (vii) accrued liabilities; (viii) valuation of derivatives; and (ix) deferred income taxes.
Income Taxes
Income tax expense 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, more historical trend data becomes available, additional information becomes known or as the tax environment changes.


14

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


Recently Issued Accounting Standards
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which updates the disclosure requirements for fair value measurements in Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC Topic 820”). Certain disclosure requirements under ASC Topic 820 were removed, modified or added in order to improve the effectiveness of the fair value note included in the financial statements. This update will be effective for financial statements issued for fiscal years beginning after December 31, 2019, including interim periods within those fiscal years. An entity is permitted to early adopt any removed or modified disclosures and delay adoption of the additional disclosures until the effective date. The Company is currently assessing the impact of this update on the Company's consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, which created ASC Topic 842, Leases (“ASC Topic 842”), superseding current lease requirements under ASC Topic 840, Leases. Subsequently in 2018, the FASB issued various ASUs which provide a practical expedient for the evaluation of existing land easement agreements, optionality in the adoption transition method, and additional implementation guidance. ASC Topic 842 and its related amendments apply to any entity that enters into a lease, with some specified scope exemptions. Under ASC Topic 842, a lessee should recognize in its consolidated balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset, representing its right to use the underlying asset for the lease term. While there were no major changes to lessor accounting, changes were made to align key aspects with revenue recognition guidance. ASC Topic 842 was effective for public entities for fiscal years, beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.
The standard permits retrospective application using either of the following methodologies: (i) application of the new standard at the earliest presented period or (ii) application of the new standard at the adoption date with a cumulative-effect adjustment recognized to retained earnings. The Company has adopted this guidance as of January 1, 2019, the effective date, and elected to recognize a cumulative-effect adjustment at the time of adoption. The Company has elected the following practical expedients that allows an entity to carry forward historical accounting treatment relating to (i) lease identification and classification for existing leases upon adoption and (ii) existing land easements. The adoption of ASC 842 resulted in the recognition of Operating lease right-of-use assets and Operating lease liabilities in the Company’s Consolidated Balance Sheets for existing operating leases including drilling rig contracts, office rental agreements, and other wellhead equipment. This adoption did not have a significant impact on the Company’s Consolidated Statements of Operations or Consolidated Statements of Cash Flows. Refer to Note 12—Leases for additional information.
Note 2—Accounts Receivable, Accounts Payable and Accrued Expenses
Accounts receivable are comprised of the following:
(in thousands)
June 30, 2019

December 31, 2018
Accrued oil and gas sales receivable, net
$
68,737


$
66,997

Joint interest billings, net
52,686


31,658

Other
123


1,968

Accounts receivable, net
$
121,546


$
100,623


Accounts payable and accrued expenses are comprised of the following:
(in thousands)
June 30, 2019

December 31, 2018
Accounts payable
$
54,656


$
55,984

Accrued capital expenditures
90,917


75,791

Revenues payable
80,671


63,399

Accrued interest
20,813


11,129

Accrued employee compensation and benefits
6,840


9,757

Accrued expenses and other
13,540


24,515

Accounts payable and accrued expenses
$
267,437


$
240,575



15

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


Note 3—Long-Term Debt
The following table provides information about the Company’s long-term debt as of the dates indicated:
(in thousands)
June 30, 2019
 
December 31, 2018
Credit Facility due 2023
$

 
$
300,000

 
 
 
 
5.375% Senior Notes due 2026
400,000

 
400,000

6.875% Senior Notes due 2027
500,000

 

Unamortized debt discount
(3,735
)
 

Unamortized debt issuance costs on Senior Notes
(14,912
)
 
(8,370
)
Senior Notes, net
881,353

 
391,630

 
 
 
 
Total long-term debt, net
$
881,353

 
$
691,630


Credit Agreement
On May 4, 2018, CRP, the Company’s consolidated subsidiary, entered into an amended and restated credit agreement with a syndicate of banks that as of June 30, 2019, had a borrowing base of $1.2 billion and elected commitments of $800.0 million. The credit agreement provides for a five-year secured revolving credit facility, maturing on May 4, 2023. As of June 30, 2019, the Company had no borrowings outstanding and $799.2 million in available borrowing capacity, which was net of $0.8 million in letters of credit outstanding.
The amount available to be borrowed under the Company’s credit agreement is equal to the lesser of (i) the borrowing base, (ii) aggregate elected commitments, 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 on January 1 and July 1. The borrowing base depends on, among other things, the quantities of CRP’s proved oil and natural gas reserves, estimated cash flows from these reserves, and the Company’s commodity hedge positions. Upon a redetermination of the borrowing base, if actual borrowings exceed the revised borrowing capacity, CRP could be required to immediately repay a portion of its debt outstanding under the credit agreement. Borrowings under CRP’s revolving credit facility are guaranteed by certain of its subsidiaries.
Borrowings under CRP’s revolving credit facility may be base rate loans or LIBOR loans. Interest is payable quarterly for base rate loans and at the end of the applicable interest period for LIBOR loans. LIBOR loans bear interest at LIBOR (adjusted for statutory reserve requirements) plus an applicable margin, which ranged from 125 to 225 basis points as of June 30, 2019, depending on the percentage of the borrowing base utilized. 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; and (iii) the adjusted LIBOR rate for a one-month interest period plus 100 basis points, plus an applicable margin, which ranged from 25 to 125 basis points as of June 30, 2019, depending on the percentage of the borrowing base utilized. CRP also pays a commitment fee on unused amounts under its facility of a range of 37.5 to 50 basis points. The applicable margins for the LIBOR loans and base rate loans referenced above reflect interest rate reductions that became effective on April 26, 2019 and are applicable as long as CRP’s total leverage ratio (as described below) is less than or equal to 3.0 to 1.0. If CRP’s total leverage ratio exceeds 3.0 to 1.0 in the future, the original applicable margins under the credit agreement would revert to the range from 150 to 250 basis points for LIBOR loans and 50 to 150 basis points for base rate loans, in each case depending on the percentage of the borrowing base utilized.
CRP’s credit agreement contains restrictive covenants that limit its ability to, among other things: (i) incur additional indebtedness; (ii) make investments and loans; (iii) enter into mergers; (iv) make or declare dividends; (v) enter into commodity hedges exceeding a specified percentage of the Company’s expected production; (vi) enter into interest rate hedges exceeding a specified percentage of its outstanding indebtedness; (vii) incur liens; (viii) sell assets; and (ix) engage in transactions with affiliates.
CRP’s credit agreement also requires it to maintain compliance with the following financial ratios: (i) a current ratio, which is the ratio of CRP’s consolidated current assets (including unused commitments under its 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 (ii) a leverage ratio, which is the ratio of Total Funded Debt (as defined in CRP’s credit agreement) to consolidated EBITDAX (as defined in CRP’s credit agreement) for the rolling four fiscal quarter period ending on such day, of not greater than 4.0 to 1.0. CRP was in compliance with the covenants and the financial ratios described above as of June 30, 2019 and through the filing of this

16

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


Quarterly Report.
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, commencing 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 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.
The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by each of CRP’s current subsidiaries that guarantee CRP’s revolving credit facility. The Senior Notes are not guaranteed by the Company, nor is the Company subject to the terms of the indentures governing the Senior Notes.
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 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 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 such series of Senior Notes issued under the indenture governing such series 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 Optional Redemption Dates, CRP may, on any one or more occasions, redeem all or a part of the Senior Notes at a redemption price equal to 100% of the principal amount of the Senior 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 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 Notes may require CRP to repurchase all or a portion of its Senior Notes for cash at a price equal to 101% of the aggregate principal amount of such Senior Notes, plus any accrued but unpaid interest to the date of repurchase.
The indentures governing the Senior Notes contains 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 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, 2019 and through the filing of this Quarterly Report.
Upon an Event of Default (as defined in the indentures governing the Senior Notes), the trustee or the holders of at least 25% of the aggregate principal amount of then outstanding Senior Notes may declare the Senior 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 Notes to become due and payable.

17

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


Note 4—Asset Retirement Obligations
The following table summarizes the changes in the Company’s asset retirement obligations (“ARO”) associated with our working interests in oil and gas properties for the six months ended June 30, 2019:
(in thousands)
 
Asset retirement obligations as of January 1, 2019
$
13,895

Liabilities acquired
80

Liabilities incurred
714

Liabilities divested and settled
(1,014
)
Accretion expense
438

Asset retirement obligations as of June 30, 2019
$
14,113


ARO reflect the present value of the estimated future costs associated with the plugging and abandonment of oil and natural 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 assumptions and judgments including the ultimate 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 liability, 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 and as accretion expense.
Note 5—Stock-Based Compensation
Long Term Incentive Plan
On October 7, 2016, the stockholders of the Company approved the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan (the “LTIP”). An aggregate of 16,500,000 shares of Class A Common Stock were authorized for issuance under the LTIP, and as of June 30, 2019, the Company had 8,907,729 shares of Class A Common Stock available for future grants. The LTIP provides for grants of stock options (including incentive stock options and nonqualified stock options), stock appreciation rights, restricted stock, dividend equivalents, restricted stock units and other stock or cash-based awards.
Stock-based compensation expense is recognized within both General and administrative expenses and Exploration expense in the Consolidated Statements of Operations. The expense amounts in the table below may not be representative of future expense amounts to be recognized as the value of future awards may vary from historical award amounts. The Company accounts for forfeitures of awards granted under the LTIP as they occur in determining compensation expense.
The following table summarizes stock-based compensation expense recognized for the periods presented:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(in thousands)
2019
 
2018
 
2019
 
2018
Restricted stock awards
$
3,408

 
$
1,989

 
$
6,590

 
$
3,764

Stock option awards
2,625

 
2,310

 
5,209

 
4,516

Performance stock units
725

 
356

 
1,442

 
708

Total stock-based compensation expense
$
6,758

 
$
4,655

 
$
13,241

 
$
8,988


Restricted Stock
The following table provides information about restricted stock activity during the six months ended June 30, 2019:
 
Awards
 
Weighted Average Grant Date Fair Value
Unvested balance as of December 31, 2018
1,535,945

 
$
17.88

Granted
440,143

 
12.48

Vested
(137,031
)
 
18.57

Forfeited
(15,652
)
 
16.97

Unvested balance as of June 30, 2019
1,823,405

 
16.53


The Company grants service-based restricted stock awards 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 the service-based

18

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


restricted stock awards is based on the market price of the Company’s Class A common stock on the grant date, and such costs are recognized ratably over the applicable vesting period. The weighted average grant-date fair value for restricted stock awards granted was $12.48 and $18.87 per share for the six months ended June 30, 2019 and 2018, respectively. The total fair value of restricted stock awards that vested during the six months ended June 30, 2019 and 2018 was $1.5 million and $1.4 million, respectively. Unrecognized compensation cost related to restricted shares that were unvested as of June 30, 2019 was $20.8 million, which the Company expects to recognize over a weighted average period of 1.9 years.
Stock Options
Stock options that have been granted under the LTIP expire ten years from the grant date and vest ratably over a three-year service period. The exercise price for an option granted under the LTIP is the closing price of the Company’s Class A Common Stock as reported on the NASDAQ on the date of grant.
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. The Company estimates the fair value using the Black-Scholes option-pricing model. Expected volatilities are based on the weighted average asset volatility of the Company and identified set of comparable companies. Expected term is based on the simplified method and is estimated as the mid-point between the weighted average vesting term and the time to expiration as of the grant date. The Company uses U.S. Treasury bond rates in effect at the grant date for its risk-free interest rates.
The following table summarizes the assumptions and related information used to determine the grant-date fair value of stock options awarded during the six months ended June 30, 2019 and 2018:

For the Six Months Ended June 30,

2019

2018
Weighted average grant-date fair value per share
$
4.77


$
7.82

Expected term (in years)
6


6

Expected stock volatility
46
%

41
%
Dividend yield
%

%
Risk-free interest rate
2.4
%

2.5
%

The following table provides information about stock option awards outstanding during the six months ended June 30, 2019:
 
Options
 
Weighted Average Exercise Price
 
Weighted Average Remaining Term
(in years)
 
Aggregate Intrinsic Value
(in thousands)
Outstanding as of December 31, 2018
4,559,334

 
$
16.55

 
 
 
 
Granted
244,000

 
10.23

 
 
 
 
Exercised

 

 
 
 

Forfeited
(33,835
)
 
15.79

 
 
 
 
Expired
(3,666
)
 
18.23

 
 
 
 
Outstanding as of June 30, 2019
4,765,833

 
16.23

 
7.8
 
$

Exercisable as of June 30, 2019
2,625,457

 
16.13

 
7.5
 
$


The total fair value of stock options that vested during the six months ended June 30, 2019 and 2018 was $4.1 million and $