SECURITIES & EXCHANGE COMMISSION EDGAR...

SECURITIES & EXCHANGE COMMISSION EDGAR FILING

Resolute Energy Corp

Form: 10-Q

Date Filed: 2017-05-03

Corporate Issuer CIK: 1469510

© Copyright 2017, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to the terms of use.

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UNITED STATESSECURITIES 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 March 31, 2017

OR

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

Commission File No. 001-34464

RESOLUTE ENERGY CORPORATION(Exact Name of Registrant as Specified in its Charter)

Delaware 27-0659371

(State or other Jurisdiction ofIncorporation or Organization)

(I.R.S. EmployerIdentification Number)

1700 Lincoln Street, Suite 2800 Denver, CO 80203

(Address of Principal Executive Offices) (Zip Code)

(303) 534-4600(Registrant’s telephone number, including area code)

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 1934during 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 filingrequirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post 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 anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☑ (Do not check if a small reporting company) 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). ☐ No ☑

As of April 28, 2017, 22,449,356 shares of the Registrant’s $0.0001 par value Common Stock were outstanding.

EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995.The use of any statements containing the words “anticipate,” “intend,” “believe,” “estimate,” “project,” “expect,” “plan,” “should” or similar expressions areintended to identify such statements. Forward-looking statements included in this report relate to, among other things, the anticipated closing date and theexpected benefits of the Delaware Basin acquisitions; anticipated capital expenditures in 2017 and the sources of such funding; our financial condition andmanagement of the Company in the current commodity price environment; future financial and operating results; our intention to pursue the disposition of ourAneth Field properties; liquidity and availability of capital including projections of free cash flow; future borrowing base adjustments and the effect thereof; futureproduction, reserve growth and decline rates; our plans and expectations regarding our development activities including drilling, deepening, recompleting, fracingand refracing wells, the number of such potential projects, locations and productive intervals, the rates of return on our acreage and projects; the prospectivity ofour properties and acreage; and the anticipated accounting treatment of various activities. Although we believe that these statements are based upon reasonablecurrent assumptions, no assurance can be given that the future results covered by the forward-looking statements will be achieved. Forward-looking statementscan be subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by the forward-looking statements. All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us,or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation toupdate any forward-looking statement. Factors that could cause actual results to differ materially from our expectations include, among others, those factorsreferenced in the “Risk Factors” section of this report, if any, in our Annual Report on Form 10-K for the year ended December 31, 2016, and such things as:

• our ability to consummate and to realize the expected benefits from the interests acquired in the Delaware Basin acquisitions;

• volatility of oil and gas prices, including extended periods of depressed prices that would adversely affect our revenue, income, cash flow fromoperations and liquidity and the discovery, estimation and development of, and our ability to replace oil and gas reserves;

• a lack of available capital and financing, including the capital needed to pursue our operations and other development plans for our properties, onacceptable terms, including as a result of a reduction in the borrowing base under our revolving credit facility;

• our ability to successfully divest our Aneth Field properties at favorable prices and the effect of the divestiture on our results of operations and cashflows;

• our ability to raise permanent long-term financing for our Delaware Basin Bronco acquisition on terms that are acceptable or favorable to us;

• possible borrowing base reduction under our credit facility as a result of possible disposition of Aneth Field;

• risks related to our level of indebtedness;

• our ability to fulfill our obligations under our revolving credit facility, the senior notes and any additional indebtedness we may incur;

• constraints imposed on our business and operations by our revolving credit facility and senior notes may limit our ability to execute our businessstrategy;

• future write downs of reserves and the carrying value of our oil and gas properties;

• acquisitions and other business opportunities (or lack thereof) that may be presented to and pursued by us, and the risk that any opportunitycurrently being pursued will fail to consummate or encounter material complications;

• our ability to achieve the growth and benefits we expect from our acquisitions;

• risks associated with unanticipated liabilities assumed, or title, environmental or other problems resulting from, our acquisitions;

• our future cash flow, liquidity and financial position;

• the success of our business and financial strategy, derivative strategies and plans;

• the success of the development plan for and production from our oil and gas properties;

• risks associated with rising interest rates;


• risks associated with all of our Aneth Field oil production being purchased by a single cus tomer and connected to such customer with a pipelinethat we do not own or control;

• inaccuracies in reserve estimates;

• the completion, timing and success of drilling on our properties;

• operational problems, or uninsured or underinsured losses affecting our operations or financial results;

• the amount, nature and timing of our capital expenditures, including future development costs;

• our relationship with the Navajo Nation, the local community in the area where we operate Aneth Field, and Navajo Nation Oil and Gas Company,as well as certain purchase rights held by Navajo Nation Oil and Gas Company;

• the impact of any U.S. or global economic recession;

• the timing and amount of future production of oil and gas;

• the ability to sell or otherwise monetize assets, including our Aneth Field assets, at values and on terms that are advantageous to us;

• availability of, or delays related to, drilling, completion and production, personnel, supplies and equipment;

• risks and uncertainties in the application of available horizontal drilling and completion techniques;

• uncertainty surrounding occurrence and timing of identifying drilling locations and necessary capital to drill such locations;

• our ability to fund and develop our estimated proved undeveloped reserves;

• the effect of third party activities on our oil and gas operations, including our dependence on third party owned water sourcing, gathering anddisposal, oil gathering and gas gathering and processing systems;

• our operating costs and other expenses;

• our success in marketing oil and gas;

• the impact and costs related to compliance with, or changes in, laws or regulations governing our oil and gas operations, including changes inNavajo Nation laws, and the potential for increased regulation of drilling and completion techniques, underground injection or fracing operations;

• our relationship with the local communities in the areas where we operate;

• the availability of water and our ability to adequately treat and dispose of water while and after drilling and completing wells;

• regulation of waste water injection intended to address seismic activity;

• the concentration of our producing properties in a limited number of geographic areas;

• potential changes to regulations affecting derivatives instruments;

• environmental liabilities under existing or future laws and regulations;

• the impact of climate change regulations on oil and gas production and demand;

• anticipated CO2 supply, which is currently sourced exclusively from Kinder Morgan CO 2 Company, L.P. under a contract with take or payobligations;

• the effectiveness and results of our CO2 flood program at Aneth Field;

• potential changes in income tax deductions and credits currently available to the oil and gas industry;

• the impact of weather and the occurrence of disasters, such as fires, explosions, floods and other events and natural disasters;

• competition in the oil and gas industry and failure to keep pace with technological development;

• actions, announcements and other developments in OPEC and in other oil and gas producing countries;

• risks relating to our joint interest partners’ and other counterparties’ inability to fulfill their contractual commitments;


• loss of senior management or key technical personnel;

• the impact of long-term incentive programs, including performance-based awards and stock appreciation rights;

• timing of issuance of permits and rights of way, including the effects of any government shut-downs;

• potential power supply limitations in the electrical infrastructure serving our operations;

• timing of installation of gathering infrastructure in areas of new exploration and development;

• potential breakdown of equipment and machinery relating to the Aneth compression facility;

• losses possible from pending or future litigation;

• cybersecurity risks;

• the risk of a transaction that could trigger a change of control under our debt agreements;

• risks related to our common stock, potential declines in stock prices and potential future dilution to stockholders;

• risk factors discussed or referenced in this report; and

• other factors, many of which are beyond our control.

Additionally, the Securities and Exchange Commission (“SEC”) requires oil and gas companies, in filings made with the SEC, to disclose provedreserves, which are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to beeconomically producible from a given date forward, from known reservoirs, under existing economic conditions, operating methods and governmentalregulations. The SEC permits the optional disclosure of “probable” and “possible” reserves. From time to time, we may elect to disclose probable reserves andpossible reserves, excluding their valuation, in our SEC filings, press releases and investor presentations. The SEC defines “probable” reserves as “thoseadditional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are likely as not to be recovered.” TheSEC defines “possible” reserves as “those additional reserves that are less certain to be recovered than probable reserves.” The Company applies thesedefinitions when estimating probable and possible reserves. Statements of reserves are only estimates and may not correspond to the ultimate quantities of oiland gas recovered. Any reserves estimates or potential resources disclosed in our public filings, press releases and investor presentations that are notspecifically designated as being estimates of proved reserves may include estimated reserves not necessarily calculated in accordance with, or contemplated by,the SEC’s reserves reporting guidelines.

SEC rules prohibit us from including resource estimates in our public filings with the SEC. Our potential resource estimates include estimates ofhydrocarbon quantities for (i) new areas for which we do not have sufficient information to date to classify as proved, probable or possible reserves, (ii) otherareas to take into account the level of certainty of recovery of the resources and (iii) uneconomic proved, probable or possible reserves. Potential resourceestimates do not take into account the certainty of resource recovery and are therefore not indicative of the expected future recovery and should not be reliedupon for such purpose. Potential resources might never be recovered and are contingent on exploration success, technical improvements in drilling access,commerciality and other factors. In our press releases and investor presentations, we sometimes include estimates of quantities of oil and gas using certainterms, such as “resource,” “resource potential,” “EUR,” “oil in place,” or other descriptions of volumes of reserves, which terms include quantities of oil and gasthat may not meet the SEC definition of proved, probable and possible reserves. These estimates are by their nature more speculative than estimates of provedreserves and accordingly are subject to substantially greater risk of being recovered by Resolute. The Company believes its potential resource estimates arereasonable, but such estimates have not been reviewed by independent engineers. Furthermore, estimates of potential resources may change significantly asdevelopment provides additional data, and actual quantities that are ultimately recovered may differ substantially from prior estimates.

Production rates, including 24‐hour peak IP rates, 30‐day peak IP rates, 90‐day peak IP rates, 120 ‐day peak IP rates and 150-day peak IP rates, for bothour wells and for those wells that are located near to our properties are limited data points in each well’s productive history. These rates are sometimes actualrates and sometimes extrapolated or normalized rates. As such the rates for a particular well may change as additional data becomes available. Peakproduction rates are not necessarily indicative or predictive of future production rates, EUR or economic rates of return from such wells and should not be reliedupon for such purpose. Equally, the way we calculate and report peak IP rates and the methodologies employed by others may not be consistent, and thus thevalues reported may not be directly and meaningfully comparable. Lateral lengths described are indicative only. Actual completed lateral lengths depend onvarious considerations such as lease‐line offsets. Standard length laterals, sometimes referred to as 5,000 foot laterals, are laterals with completed lengthgenerally between 4,000 feet and 5,500 feet. Mid‐length laterals, sometimes referred to as 7,500 foot laterals, are laterals with completed length generallybetween 6,500 feet and 8,000 feet. Long laterals, sometimes referred to as 10,000 foot laterals, are laterals with completed length generally longer than 8,000feet.


You are urged to consider closely the disclosure in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year endedDecember 31, 2016, in particular the factors described under “Risk Factors.”

TABLE OF CONTENTS PART I - FINANCIAL INFORMATION

Item 1. Financial Statements 1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20

Item 3. Quantitative and Qualitative Disclosures About Market Risk 29

Item 4. Controls and Procedures 31

PART II - OTHER INFORMATION 32

Item 1. Legal Proceedings 32

Item 1 A. Risk Factors 32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 33

Item 3. Defaults Upon Senior Securities 33

Item 4. Mine Safety Disclosures 33

Item 5. Other Information 33

Item 6. Exhibits 34

Signatures 35


RESOLUTE ENERGY CORPORATION

Condensed Consolidated Balance Sheets (UNAUDITED)(in thousands, except share amounts)

March 31, December 31,

2017 2016

Assets Current assets:

Cash and cash equivalents $ 1,041 $ 133,089 Accounts receivable 50,698 55,228 Commodity derivative instruments 3,675 218 Prepaid expenses and other current assets 2,950 3,249

Total current assets 58,364 191,784 Property and equipment, at cost:

Oil and gas properties, full cost method of accounting Unproved 118,081 121,375 Proved 1,925,489 1,889,111

Other property and equipment 9,774 9,754 Accumulated depletion, depreciation and amortization (1,662,721 ) (1,647,120 )

Net property and equipment 390,623 373,120 Other assets:

Restricted cash 23,144 23,137 Other assets 17,426 332

Total assets $ 489,557 $ 588,373

Liabilities and Stockholders’ Deficit Current liabilities:

Accounts payable $ 17,870 $ 8,675 Accrued expenses 45,436 37,507 Accrued revenue payable 19,241 19,801 Accrued interest payable 14,211 5,784 Asset retirement obligations 690 895 Commodity derivative instruments 2,389 8,014 Accrued cash-settled incentive awards 28,143 27,158 Secured term loan facility — 122,139

Total current liabilities 127,980 229,973 Long term liabilities:

Revolving credit facility 16,540 8,821 Senior notes 397,409 397,154 Asset retirement obligations 16,333 19,457 Commodity derivative instruments 2,096 4,104 Other long term liabilities 5,138 4,611

Total liabilities 565,496 664,120 Commitments and contingencies Stockholders’ deficit:

Convertible preferred stock, $0.0001 par value; 1,000,000 shares authorized; issued and outstanding 62,500 shares at March 31, 2017 and December 31, 2016, respectively; $62.5 million liquidation preference —

—

Common stock, $0.0001 par value; 45,000,000 shares authorized; issued and outstanding 22,449,744 and 21,932,842 shares at March 31, 2017 and December 31, 2016, respectively 2

2

Additional paid-in capital 948,112 948,380 Accumulated deficit (1,024,053 ) (1,024,129 )

Total stockholders’ deficit (75,939) (75,747)Total liabilities and stockholders’ deficit $ 489,557 $ 588,373

See notes to condensed consolidated financial statements

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Condensed Consolidated Statements of Operations (UNAUDITED)(in thousands, except per share data)

Three Months Ended March 31,

2017 2016

Revenue: Oil $ 57,659 $ 17,795 Gas 4,957 978 Natural gas liquids 2,610 229

Total revenue 65,226 19,002 Operating expenses:

Lease operating 18,356 13,817 Production and ad valorem taxes 6,603 3,142 Depletion, depreciation, amortization, and asset retirement obligation accretion 16,035

10,361

Impairment of proved oil and gas properties — 58,000 General and administrative 10,415 8,968 Cash-settled incentive awards 5,427 798

Total operating expenses 56,836 95,086 Income (loss) from operations 8,390 (76,084)Other income (expense):

Interest expense, net (17,697) (13,075)Commodity derivative instruments gain 10,840 3,841 Other income (expense) (60) 6

Total other expense (6,917) (9,228)Net income (loss) 1,473 (85,312)

Preferred stock dividends (1,397) — Net income (loss) available to common shareholders $ 76 $ (85,312)

Net income (loss) per common share: Basic $ 0.01 $ (5.65 )Diluted 0.01 (5.65 )

Weighted average common shares outstanding: Basic 21,738 15,036

Diluted 22,791 15,036


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Condensed Consolidated Statements of Stockholders’ Deficit (UNAUDITED)(in thousands)

Additional Total Common Stock Preferred Stock Paid-in Accumulated Stockholders’

Shares Amount Shares Amount Capital Deficit Deficit

Balance as of January 1, 2017 21,933 $ 2 63 $ — $ 948,380 $ (1,024,129 ) $ (75,747)Issuance of stock, restricted stock and share-based compensation 567 — — — 2,881 — 2,881 Redemption of restricted stock for employee income tax and restricted stock forfeitures (87) — — — (3,242) — (3,242)Exercise of employee options to purchase common stock 37 — — — 93 — 93 Preferred stock dividend — — — — — (1,397) (1,397)Net income — — — — — 1,473 1,473 Balance as of March 31, 2017 22,450 $ 2 63 $ — $ 948,112 $ (1,024,053 ) $ (75,939)


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Condensed Consolidated Statements of Cash Flows (UNAUDITED)(in thousands)


2017 2016

Operating activities: Net income (loss) $ 1,473 $ (85,312)Adjustments to reconcile net loss to net cash provided by operating activities:

Depletion, depreciation, amortization and asset retirement obligation accretion 16,035 10,361 Impairment of proved oil and gas properties — 58,000 Amortization of deferred financing costs and long-term debt premium and discount 7,743 1,303 Share-based compensation 2,973 2,324 Commodity derivative instruments gain (10,840) (3,841)Commodity derivative settlement gain (loss) (250) 27,748 Change in operating assets and liabilities:

Accounts receivable 10,497 2,332 Other current assets (6) 126 Accounts payable and accrued expenses 3,222 (5,001)Accrued interest payable 8,427 8,497

Net cash provided by operating activities 39,274 16,537 Investing activities:

Oil and gas exploration and development expenditures (42,298) (23,001)Proceeds from sale of oil and gas properties 14,183 166 Deposit for Bronco acquisition (16,000) — Other long-term assets 4 13 Purchase of other property and equipment (20) (30)Restricted cash (737) (1 )

Net cash used in investing activities (44,868) (22,853)Financing activities:

Proceeds from bank borrowings 73,000 — Repayments of borrowings (64,000) — Repayment of term loan (128,303) — Payment of financing costs (2,605) — Payment of preferred dividend (1,397) — Redemption of restricted stock for employee income taxes (3,242) (60)Proceeds from exercise of employee options to purchase common stock 93 —

Net cash used in financing activities (126,454) (60)Net decrease in cash and cash equivalents (132,048) (6,376)Cash and cash equivalents at beginning of period 133,089 9,297 Cash and cash equivalents at end of period $ 1,041 $ 2,921


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Notes to Condensed Consolidated Financial Statements Note 1 — Organization and Nature of Business

Resolute Energy Corporation (“Resolute” or the “Company”), is an independent oil and gas company engaged in the exploitation, development,exploration for and acquisition of oil and gas properties. Materially all of the Company’s operating assets are comprised of properties in the Delaware Basin inwest Texas (the “Permian Properties” or “Permian Basin Properties”) and Aneth Field located in the Paradox Basin in southeast Utah (the “Aneth FieldProperties” or “Aneth Field”). The Company conducts all of its activities in the United States of America.

Resolute Energy Corporation, the stand-alone parent entity, has insignificant independent assets and no operations. There are no restrictions on theCompany’s ability to obtain cash dividends or other distributions of funds from its subsidiaries, except those imposed by applicable law.

Note 2 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements include Resolute and its subsidiaries, and have been prepared in accordance withaccounting principles generally accepted in the United States (“GAAP”) and Regulation S-X for interim financial reporting. Except as disclosed herein, there hasbeen no material change in our basis of presentation from the information disclosed in the notes to Resolute’s consolidated financial statements for the yearended December 31, 2016. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation ofthe interim financial information have been included. Operating results for the periods presented are not necessarily indicative of the results that may beexpected for the full year. All significant intercompany transactions have been eliminated upon consolidation. Certain prior period amounts have beenreclassified to conform to the current period presentation.

In connection with the preparation of the condensed consolidated financial statements, Resolute evaluated subsequent events that occurred after thebalance sheet date, through the date of filing.

Significant Accounting Policies

The significant accounting policies followed by Resolute are set forth in Resolute’s consolidated financial statements for the year ended December 31,2016. These unaudited condensed consolidated financial statements are to be read in conjunction with the consolidated financial statements appearing inResolute’s Annual Report on Form 10-K and related notes for the year ended December 31, 2016.

Recent Accounting Pronouncements

In May 2014 the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which creates Topic 606 (“ASC 606”). ASC 606 supersedesexisting revenue recognition requirements under GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which weexpect to be entitled in exchange for transferring goods or services to a customer. Additional disclosures will be required as to the nature, timing and uncertaintyof revenue and cash flows from contracts with customers. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09 forone year to annual reports beginning after December 15, 2017. Early adoption is permitted for fiscal years beginning after December 15, 2016.

In May 2016 the FASB issued ASU 2016-12 : Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and PracticalExpedients (“ASU 2016-12”), which updates ASU 2014-09 to clarify core recognition principles including collectability, sales tax presentation, noncashconsideration, contract modifications and completed contracts at transition. This ASU is required to be adopted using either the retrospective transition method,which requires restating previously reported results or the cumulative effect (modified retrospective) transition method, which utilizes a cumulative-effectadjustment to retained earnings in the period of adoption to account for the prior period effects. We have aggregated and reviewed our contracts that are withinthe scope of ASC 606. Based on our evaluation to date, there will not be a material impact on our financial statements. However, we anticipate the new standardwill result in more robust footnote disclosures. We cannot currently determine the extent of the new footnote disclosures as further clarification is needed forcertain practices common to the industry. We will continue to evaluate the impacts that future contracts may have.

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In February 2016 the FASB issued new authoritative guidance related to the accounting of leases. The main provisions require that lessees recognizeboth a lease liability and a right-of-use asset at the commencement date. This authoritative accounting guidance is effective for the annual period beginning afterDecember 15, 2018, and interim periods within annual periods beginning after December 15, 2018. The Company is currently evaluating the provisions of thisguidance and assessing its impact on the Company’s financial statements and disclosures.

Assumptions, Judgments and Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make various assumptions,judgments and estimates to determine the reported amounts of assets, liabilities, revenue and expenses, and in the disclosures of commitments andcontingencies. Changes in these assumptions, judgments and estimates will occur as a result of the passage of time and the occurrence of future events.Accordingly, actual results could differ from amounts previously established.

Significant estimates with regard to the condensed consolidated financial statements include proved oil and gas reserve volumes and the related presentvalue of estimated future net cash flows used in the ceiling test applied to capitalized oil and gas properties; asset retirement obligations; valuation of derivativeassets and liabilities; the estimated fair value and allocation of the purchase price related to business combinations; share-based compensation expense; cash-settled long-term incentive expense; depletion, depreciation and amortization; accrued liabilities; revenue and related receivables and income taxes.

Oil and Gas Properties

Pursuant to full cost accounting rules, Resolute is required to perform a quarterly “ceiling test” calculation to test its oil and gas properties for possibleimpairment. The primary components impacting the calculation are commodity prices, reserve quantities added and produced, overall exploration anddevelopment costs and depletion expense. If the net capitalized cost of the Company’s oil and gas properties subject to amortization (the “carrying value”)exceeds the ceiling limitation, the excess would be charged to expense. The ceiling limitation is equal to the sum of the present value discounted at 10% ofestimated future net cash flows from proved reserves, the cost of properties not being amortized, the lower of cost or estimated fair value of unproven propertiesincluded in the costs being amortized, and all related income tax effects.

No impairment was recorded during the three months ended March 31, 2017. However, the Company recorded a non-cash impairment of the carryingvalue of its oil and gas properties of $58 million as a result of the ceiling test limitation during the three months ended March 31, 2016. If in future periods anegative impact continues on one or more of the components of the calculation, including market prices of oil and gas (based on a trailing twelve-monthunweighted average of the oil and gas prices in effect on the first day of each month), differentials from posted prices, future drilling and capital plans, operatingcosts or expected production, the Company may incur further full cost ceiling impairment related to its oil and gas properties in such periods.

Note 3 — Acquisitions and Divestitures Acquisition of Reeves County Properties in the Delaware Basin

Delaware Basin Bronco Acquisition

On March 3, 2017, Resolute Natural Resources Southwest, LLC (“Buyer” or “Resolute Southwest”), a wholly-owned subsidiary of the Company, enteredinto a Purchase and Sale Agreement (the “Purchase Agreement”) with undisclosed private sellers (“Sellers”) pursuant to which Buyer agreed to acquire certainproducing and undeveloped oil and gas properties in the Delaware Basin in Reeves County, Texas (the “Delaware Basin Bronco Acquisition” – previouslyreferred to as the “Orla” acquisition).

Consideration for the acquisition will be $160 million in cash, subject to customary purchase price adjustments. The closing of the acquisition is expectedto occur on or about May 15, 2017, and is subject to the satisfaction or waiver of certain customary conditions, including the material accuracy of therepresentations and warranties of Buyer and Sellers, and performance of covenants. The Delaware Basin Bronco Acquisition has an effective date of May 1,2017. The Purchase Agreement contains terms and conditions customary to transactions of this type. Subject to the right of Buyer to be indemnified for certainliabilities for a limited period of time and for breaches of representations, warranties and covenants, Buyer will assume substantially all liabilities associated withthe acquired properties. The Purchase Agreement also contains certain customary termination rights for each of Buyer and Sellers.

6


The properties to be acquired include approximately 4,600 net acres in Reeves County, Texas, consisting of 2,187 net acres adjacent to the Company’sexisting operating area in Reeves County and 2,405 net acres in southern Reeves County. In addition, the Company will acquire interests in (i) two operated4,500 foot lateral horizontal Wolfcamp wells that were producing approximately 800 net Boe per day at the time the Purchase Agreement was signed, (ii) sixoperated drilled but uncompleted Wolfcamp wells, four of which have lateral lengths of approximately 4,500 feet and two with approximately 7,500 foot laterals;and (iii) one non-operated 10,000 foot lateral Wolfcamp A well that is currently awaiting completion.

The Company is evaluating the optimal long-term financing for the Delaware Basin Bronco Acquisition. In the interim, however, the Company entered intoa commitment letter on March 3, 2017, for a $100 million unsecured bridge financing facility with BMO Capital Markets (the “Commitment Letter”). TheCommitment Letter provides the Company with the ability to borrow up to $100 million, subject to satisfaction or waiver of customary conditions to closing, forthe consummation of the Delaware Basin Bronco Acquisition (“Bridge Commitment”). In the event that the Bridge Commitment is not drawn in connection withthe Delaware Basin Bronco Acquisition, then the obligations of the parties under the Commitment Letter terminate.

Delaware Basin Firewheel Acquisition

In October 2016 Resolute and Resolute Southwest entered into a Purchase and Sale Agreement with Firewheel Energy, LLC (“Firewheel”) pursuant towhich Resolute Southwest agreed to acquire certain oil and gas interests in the Delaware Basin in Reeves County, Texas (the “Firewheel Properties”), forconsideration to Firewheel consisting of $90 million in cash and 2,114,523 shares of common stock of the Company, par value $0.0001 per share, issued toFirewheel upon the closing of the purchase of the Firewheel Properties (the “Delaware Basin Firewheel Acquisition”). The closing of the Delaware BasinFirewheel Acquisition occurred on October 7, 2016.

The Company acquired the Firewheel Properties for $153.2 million. Revenue and expenses related to the acquired properties are included in theconsolidated statement of operations on the closing date of the transaction. The Delaware Basin Firewheel Acquisition was accounted for using the acquisitionmethod.

The Company completed its assessment of the fair values of the assets acquired and liabilities assumed. Accordingly, the following table presents thepurchase price allocation of the Delaware Basin Firewheel Acquisition at December 31, 2016, based on the fair values of assets acquired and liabilities assumed(in thousands):

2016

Proved oil and gas properties $ 40,900 Unproved oil and gas properties 112,800 Asset retirement obligations assumed (500)

Total purchase price $ 153,200

Divestiture of Southeast New Mexico Properties in the Permian Basin

In February 2017 the Company closed on the sale of its Denton and South Knowles properties in the Northwest Shelf project area in Lea County, NewMexico, for approximately $14.5 million in cash, subject to customary purchase price adjustments. The effective date of this sale was October 1, 2016. Theproceeds of the sale were used to reduce amounts outstanding under the Company’s Revolving Credit Facility (as defined in Note 5) and for other corporatepurposes. As part of the sale, the Company was also no longer liable for asset retirement obligations of $3.6 million at March 31, 2017.

Divestiture of Midstream Assets in the Delaware Basin

In July 2016 Resolute Southwest entered into a definitive Purchase and Sale Agreement (the “Mustang Agreement”) with Caprock Permian ProcessingLLC and Caprock Field Services LLC, as buyers (collectively, “Caprock”) pursuant to which Resolute Southwest and an existing minority interest holder agreed tosell certain gas gathering and produced water handling and disposal systems owned by them in the Mustang project area in Reeves County, Texas, (“Mustang”)for a cash payment of $35 million, plus certain earn-out payments described below.

In July 2016 Resolute Southwest also entered into a definitive Purchase and Sale Agreement (the “Appaloosa Agreement”) with Caprock, pursuant towhich Resolute Southwest agreed to sell certain gas gathering and produced water handling and disposal systems owned by Resolute Southwest in theAppaloosa project area in Reeves County, Texas, (“Appaloosa”) for a cash payment of $15 million, plus certain earn-out payments described below.

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In August 2016 Resolute Southwest closed the transactions contemplated by t he Mustang Agreement and the Appaloosa Agreement. Resolute Southwestreceived aggregate consideration of approximately $36 million (including earn-out payments earned as of the closing), of which approximately $2 million wasplaced in an escrow account for a period of time to secure Resolute’s indemnity obligations under the Mustang Agreement and the Appaloosa Agreement. As thesale did not significantly alter the relationship between capital costs and proved reserves, no gain or loss was recognized.

The net proceeds of the midstream sale were used to repay amounts outstanding under the Company’s Revolving Credit Facility (as defined in Note 5)and for general corporate purposes.

In July 2016, in connection with the Appaloosa Agreement and the Mustang Agreement, Resolute Southwest also entered into a definitive Earn-outAgreement (the “Earn-out Agreement”), pursuant to which Resolute Southwest will be entitled to receive certain earn-out payments based on drilling andcompletion activity in Appaloosa and Mustang through 2020 that will deliver gas and produced water into the system. Earn-out payments for each qualifying wellwill vary depending on the lateral length of the well and the year in which the well is drilled and completed. In March 2017 the Earn-out Agreement was amendedby the parties to provide for an increase in earn-out payments for the wells drilled and completed in 2017. Earn-out payments are contingent on future drilling,and therefore will be recognized when received.

In connection with the closing of the transactions contemplated by the Appaloosa Agreement and the Mustang Agreement, Resolute Southwest enteredinto fifteen year commercial agreements with Caprock for gas gathering services and water handling and disposal services for all current and future gas and waterproduced by Resolute Southwest in Mustang and Appaloosa in exchange for customary fees based on the volume of gas and water produced and delivered.Resolute Southwest has agreed to dedicate and deliver all gas and water produced from its acreage in Mustang and Appaloosa to Caprock for gathering,processing, compression and disposal services for a term of fifteen years.

On April 27, 2017, Resolute Southwest entered into a Crude Oil Connection and Dedication Agreement with Caprock Permian Crude LLC, an affiliate ofCaprock Permian Processing LLC and Caprock Field Services LLC. The agreement provides that Caprock will construct the gathering systems, pipelines andother infrastructure for the gathering of crude oil from our Mustang and Appaloosa operating areas in exchange for customary fees based on the volume of crudeoil produced and delivered. Resolute Southwest has agreed to dedicate and deliver all crude oil produced from its acreage in Mustang and Appaloosa to Caprockfor gathering for a term through July 31, 2031, coterminous with our other commercial agreements with Caprock. For the first five years of the agreement, thecrude oil will be delivered to Midland Station under a joint tariff arrangement between Caprock and Plains Pipeline, L.P. On May 2, 2017, Resolute Southwestalso entered into a Crude Oil Purchase Contract with Plains Marketing, L.P. providing for the sale to Plains of substantially all of the crude oil produced from theMustang and Appaloosa areas for a price equal to an indexed market price less a $1.75 transportation differential that will cover the joint tariff payable to Caprockunder the Crude Oil Connection and Dedication Agreement.

Pro Forma Financial Information

The unaudited pro forma financial information for the three months ended March 31, 2016 reflects Resolute’s results as if the Delaware Basin FirewheelAcquisition and the sale of the Delaware Basin Midstream Assets had occurred on January 1, 2016 (in thousands, except per share amounts):

Three Months Ended

March 31, 2016

Revenue $ 20,404 Loss from operations (76,967)Net loss (86,389) Net loss per share Basic and diluted $ (5.04 )Weighted average common shares outstanding Basic and diluted 17,151

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Note 4 — Earnings per Share

The Company computes basic net income (loss) per share using the weighted average number of shares of common stock outstanding during theperiod. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock and, if dilutive, potential shares ofcommon stock outstanding during the period. Net income (loss) available to common stockholders is computed by deducting both the dividends declared in theperiod on preferred stock and the dividends accumulated for the period on cumulative preferred stock from net income. Potentially dilutive shares consist of theincremental shares and options issuable under the Company’s 2009 Performance Incentive Plan (the “Incentive Plan”) as well as common shares issuable uponthe assumed conversion of the Convertible Preferred Stock (as defined in Note 7). The treasury stock method is used to measure the dilutive impact ofpotentially dilutive shares.

The following table details the potential weighted average dilutive and anti-dilutive securities for the periods presented (in thousands):

Three Months Ended

March 31,

2017 2016

Potential dilutive restricted stock 3,625 410 Anti-dilutive securities 2,116 1,137

The following table sets forth the computation of basic and diluted net income (loss) per share of common stock for the periods presented (in thousands,

except per share amounts):

Three Months Ended

March 31,

2017 2016

Net income (loss) available to common stockholders $ 203 $ (85,312) Basic weighted average common shares outstanding 21,738 15,036 Add: dilutive effect of non-vested restricted stock 172 — Add: dilutive effect of options 881 —

Diluted weighted average common shares outstanding 22,791 15,036

Basic and diluted net income (loss) per common share $ 0.01 $ (5.65 )

Note 5 — Long Term Debt

As of the dates indicated, the Company’s long-term debt consisted of the following (in thousands):

Principal

Unamortizedpremium/(discount)

Unamortizeddeferred financing

costs March 31, 2017

Revolving credit facility $ 19,000 $ — $ (2,460) $ 16,540 8.50% senior notes 400,000 920 (3,511) 397,409

Total long-term debt $ 419,000 $ 920 $ (5,971) $ 413,949

Principal



costs December 31, 2016

Revolving credit facility $ 10,000 $ — $ (1,179) $ 8,821 Secured term loan facility 128,303 (4,882) (1,282) 122,139 8.50% senior notes 400,000 985 (3,831) 397,154

Total long-term debt $ 538,303 $ (3,897) $ (6,292) $ 528,114 Current portion of secured term loan facility 128,303 (4,882) (1,282) 122,139 Long-term debt $ 410,000 $ 985 $ (5,010) $ 405,975

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For the three months ended March 31, 2017 and 2016, the Company incurred interest expense on long-term debt of $17.7 million and $13.1 million,respectively. Approximately $9.7 million in interest expense was incurred in 2017 as a result of the extinguishment of the Secured Term Loan Facility (as definedbelow) on January 3, 2017. The Company capitalized $2.5 million and $0.4 million of interest expense during the three months ended March 31, 2017 and 2016,respectively.

Revolving Credit Facility

On February 17, 2017, the Company entered into the Third Amended and Restated Credit Agreement with a syndicate of banks led by Bank of Montreal,as Administrative Agent, Capital One, National Association, as syndication agent, and Barclays Bank PLC, ING Capital LLC and SunTrust Bank, as co-documentation agents (the “Revolving Credit Facility”). In connection with entering into the Revolving Credit Facility, the Company repaid all amountsoutstanding under the Second Amended and Restated Credit Agreement, dated as of April 15, 2015, by and among Resolute Energy Corporation, as borrower,certain subsidiaries of Resolute Energy Corporation, as Guarantors, Wells Fargo Bank, National Association, as administrative agent, and the lenders partythereto, as amended, and terminated that agreement.

The Revolving Credit Facility specifies a maximum borrowing base as determined by the lenders, which was initially set at $150 million. Thedetermination of the borrowing base takes into consideration the estimated value of Resolute’s oil and gas properties in accordance with the lenders’ customarypractices for oil and gas loans. The borrowing base is redetermined semi-annually, and the amount available for borrowing could be increased or decreased as aresult of such redeterminations. Under certain circumstances, either Resolute or the lenders may request an interim redetermination. The Revolving CreditFacility matures in February 2021, unless there is a maturity of material indebtedness prior to such date.

The Revolving Credit Facility includes covenants that require, among other things, that Resolute maintains a ratio of current assets to current liabilities ofno less than 1.0 to 1.0 and a ratio of funded debt to EBITDA of no more than 4.0 to 1.0. The Revolving Credit Facility prohibits us from entering into derivativearrangements for more than (i) 85% of our anticipated production from proved properties in the next two years and (ii) the greater of 75% of our anticipatedproduction from proved properties or 85% of our production from projected proved developed producing properties after such two year period (not to exceed aterm of 60 months for any such derivative arrangement). The Revolving Credit Facility also includes customary additional terms and covenants that placelimitations on certain types of activities, the payment of dividends, and that require satisfaction of certain financial tests. Resolute was in compliance with theterms and covenants of the Revolving Credit Facility at March 31, 2017.

As of March 31, 2017, outstanding borrowings under the Revolving Credit Facility were $19 million with a weighted average interest rate of 6.0%, under aborrowing base of $150 million. Pursuant to the spring borrowing base redetermination, the borrowing base has been increased to $225 million, effective April17, 2017.

To the extent that the borrowing base, as adjusted from time to time, exceeds the outstanding balance, no repayments of principal are required prior tomaturity. However, should the borrowing base be set at a level below the outstanding balance, Resolute would be required to eliminate that excess within 120days following that determination. The Revolving Credit Facility is guaranteed by all of Resolute’s subsidiaries and is collateralized by substantially all of theassets of the Company’s Aneth Field and Delaware Basin assets held by Resolute Aneth, LLC and Resolute Natural Resources Southwest, LLC, which arewholly-owned subsidiaries of the Company.

Each base rate borrowing under the Revolving Credit Facility accrues interest at either (a) the London Interbank Offered Rate (“LIBOR”), plus a marginthat ranges from 3.0% to 4.0% or (b) the Alternative Base Rate defined as the greater of (i) the Administrative Agent’s Prime Rate (ii) the Federal Funds effectiveRate plus 0.5% or (iii) an adjusted London Interbank Offered Rate plus a margin that ranges from 2.0% to 3.0%. Each such margin is based on the level ofutilization under the borrowing base.

Secured Term Loan Agreement

In December 2014 Resolute and certain of its subsidiaries, as guarantors, entered into a second lien Secured Term Loan Agreement with Bank ofMontreal, as administrative agent, and the lenders party thereto, pursuant to which the Company borrowed $150 million (the “Secured Term Loan Facility”). InMay 2015 Resolute and certain of its subsidiaries, as guarantors, entered into an Amendment to the Secured Term Loan Agreement and Increased FacilityActivation Notice-Incremental Term Loans (the “Amendment”) with Bank of Montreal, as administrative agent, and the lenders party thereto, pursuant to whichthe Company borrowed an additional $50 million of second lien term debt (the “Incremental Term Loans”) under its Secured Term Loan Facility.

In December 2015 the Company retired $70 million of the amount outstanding under the Secured Term Loan Facility following the sale of certainproperties in the Midland Basin in accordance with mandatory prepayment provisions stipulated in the Secured Term Loan Facility.

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On January 3, 2017, the Company repaid approximately $132 million constituting all amounts due under the Term Loan Facility (including prepaymentfees of $3.5 million), with a portion of the proceeds from its previously announced common stock offering that closed on December 23, 2016. In addition $6.2million of deferred financing costs and original issue discount were expensed as part of the extinguishment. The Secured Term Loan Facility was terminated inconnection with the repayment.

Senior Notes

In 2012 the Company consummated two private placements of senior notes with principal totaling $400 million (the “Senior Notes”). The Senior Notes aredue May 1, 2020, and bear an annual interest rate of 8.50% with the interest on the Senior Notes payable semiannually in cash on May 1 and November 1 ofeach year.

The Senior Notes were issued under an Indenture (the “Indenture”) among the Company and the Company’s existing subsidiaries (the “Guarantors”) in aprivate transaction not subject to the registration requirements of the Securities Act of 1933. In March 2013 the Company registered the Senior Notes with theSecurities and Exchange Commission by filing an amendment to the registration statement on Form S-4 enabling holders of the Senior Notes to exchange theprivately placed Senior Notes for publically registered Senior Notes with substantially identical terms. The Indenture contains affirmative and negative covenantsthat, among other things, limit the Company’s and the Guarantors’ ability to make investments, incur additional indebtedness or issue certain types of preferredstock, create liens, sell assets, enter into agreements that restrict dividends or other payments by restricted subsidiaries, consolidate, merge or transfer all orsubstantially all of the assets of the Company, engage in transactions with the Company’s affiliates, pay dividends or make other distributions on capital stock orprepay subordinated indebtedness and create unrestricted subsidiaries. The Indenture also contains customary events of default. Upon occurrence of events ofdefault arising from certain events of bankruptcy or insolvency, the Senior Notes shall become due and payable immediately without any declaration or other actof the trustee or the holders of the Senior Notes. Upon the occurrence of certain other events of default, the trustee or the holders of the Senior Notes maydeclare all outstanding Senior Notes to be due and payable immediately. The Company was in compliance with all financial covenants under its Senior Notes asof March 31, 2017.

The Senior Notes are general unsecured senior obligations of the Company and guaranteed on a senior unsecured basis by the Guarantors. The SeniorNotes rank equally in right of payment with all existing and future senior indebtedness of the Company, will be subordinated in right of payment to all existing andfuture senior secured indebtedness of the Guarantors, will rank senior in right of payment to any future subordinated indebtedness of the Company and will befully and unconditionally guaranteed by the Guarantors on a senior basis.

The Senior Notes are redeemable by the Company on not less than 30 or more than 60 days’ prior notice, at redemption prices set forth in the Indenture.If a change of control occurs, each holder of the Senior Notes will have the right to require that the Company purchase all of such holder’s Senior Notes in anamount equal to 101% of the principal of such Senior Notes, plus accrued and unpaid interest, if any, to the date of the purchase.

As previously disclosed in its Current Report on Form 8-K filed on April 28, 2016, during the month of February 2016 the Company was approached bycertain holders of the Senior Notes to engage in discussions with the Company regarding a potential debt exchange, financing or other transaction involving theSenior Notes. The Company and the noteholders did not reach an agreement on such a transaction and the Company has terminated all discussions withnoteholders regarding any such transaction but may engage in other such discussions in the future.

The fair value of the Senior Notes at March 31, 2017, was estimated to be $404.8 million based upon data from independent market makers (Level 2 fairvalue measurement).

Note 6 — Income Taxes

Income tax benefit (expense) during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income (loss),plus any significant, unusual or infrequently occurring items that are recorded in the interim period. The provision for income taxes for the three months endedMarch 31, 2017 and 2016, differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 35% to income before incometaxes. This difference relates primarily to the valuation allowance established, in addition to state income taxes and estimated permanent differences.

There was no provision for income taxes during the three months ended March 31, 2017 and 2016.

The Company had no reserve for uncertain tax positions as of March 31, 2017. The Company assesses the recoverability of its deferred tax assets eachperiod by considering whether it is more likely than not that all or a portion of the deferred tax assets will be realized. The Company considers all availableevidence (both positive and negative) in determining whether a valuation allowance is

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required. As a result of the Company’s analysis, it was concluded that as of March 31, 2017, a valuation allowance should be established against the Company’snet deferred tax asset. The Company recorded a valuation allowance as of March 31, 2017 and 2016, of $309.7 million and $274.7 million, respectively, on itslong-term deferred tax asset. The Company will continue to monitor facts and circumstances in the reassessment of the likelihood that the deferred tax assetswill be realized.

Note 7 — Stockholders’ Equity and Long-term Employee Incentive Plan

Preferred Stock

The Company is authorized to issue up to 1,000,000 shares of preferred stock, par value $0.0001 with such designations, voting and other rights andpreferences as may be determined from time to time by the Board of Directors. At March 31, 2017 and December 31, 2016, the Company had 62,500 shares ofpreferred stock issued and outstanding.

In October 2016, the Company entered into a Purchase Agreement (the “Preferred Stock Purchase Agreement”) with BMO Capital Markets Corp. (“InitialPurchaser”), pursuant to which the Company agreed to issue and sell to Initial Purchaser 55,000 shares (the “Firm Securities”) of the Company’s 8⅛% Series BCumulative Perpetual Convertible Preferred Stock, par value $0.0001 per share (the “Convertible Preferred Stock”) and, at Initial Purchaser’s option, up to 7,500additional shares of Convertible Preferred Stock (together with the Firm Securities, collectively, the “Securities”). The Initial Purchaser exercised its over-allotment option to purchase the additional 7,500 shares of Convertible Preferred Stock in full, bringing the total shares of Convertible Preferred Stock purchasedby Initial Purchaser to 62,500, for an aggregate net consideration of $60 million, before offering expenses.

Each holder has the right at any time, at its option, to convert, any or all of such holder’s shares of Convertible Preferred Stock at an initial conversionrate of 33.8616 shares of fully paid and nonassessable shares of Common Stock, per share of Convertible Preferred Stock. Additionally, at any time on or afterOctober 15, 2021, the Company shall have the right, at its option, to elect to cause all, and not part, of the outstanding shares of Convertible Preferred Stock tobe automatically converted into that number of shares of Common Stock for each share of Convertible Preferred Stock equal to the conversion rate in effect onthe mandatory conversion date as such terms are defined in the Certificate of Designation.

As of March 31, 2017, the Company had accumulated undeclared preferred dividends of $1.1 million. A preferred dividend of $1.3 million was declaredon April 12, 2017, and paid on April 17, 2017.

Common Stock

The authorized common stock of the Company consists of 45,000,000 shares. The holders of the common shares are entitled to one vote for each shareof common stock. In addition, the holders of the common stock are entitled to receive dividends when, as and if declared by the Board of Directors. At March 31,2017 and December 31, 2016, the Company had 22,449,744 and 21,932,842 shares of common stock issued and outstanding, respectively.

In May 2016, Resolute adopted a stockholder rights plan and in connection with such plan declared a dividend of one preferred share purchase right (a“Right”) for each outstanding share of common stock, par value $0.0001 per share. The Rights trade with, and are inseparable from, the common stock until suchtime as they become exercisable on the distribution date. The Rights are evidenced only by certificates that represent shares of common stock and not byseparate certificates. New Rights will accompany any new shares of common stock issued after May 27, 2016, until the earlier of the distribution date and theredemption or expiration of the rights.

Each Right allows its holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock (a “PreferredShare”) for $4.50, once the Rights become exercisable. Prior to exercise, the Right does not give its holder any dividend, voting or liquidation rights. The Rightswill not be exercisable until 10 days after the public announcement that a person or group has become an “Acquiring Person” by obtaining beneficial ownershipof 20% or more of our outstanding common stock, or, if earlier, 10 business days (or a later date determined by the Board before any person or group becomesan Acquiring Person) after a person or group begins a tender or exchange offer which, if completed, would result in that person or group becoming an AcquiringPerson. The stockholder rights plan has been submitted for approval by the Company’s stockholders at the 2017 annual meeting scheduled to be held on May12, 2017. In the event that the plan is not approved, then it would expire by its terms on May 16, 2017.

In June 2016 Resolute filed a certificate of amendment to its certificate of incorporation to effect the previously-announced reverse stock split of theCompany’s common stock, par value $0.0001 per share, at a ratio of 1-for-5 (the “Reverse Stock Split”). The certificate of amendment also reduced the numberof authorized shares of common stock from 225,000,000 to 45,000,000. The Reverse Stock Split, including the certificate of amendment, was approved bystockholders at the Company’s 2016 annual meeting of stockholders and by the Company’s Board of Directors. As a result, the Company is now in compliancewith the $1.00 per share

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minimum price requirement of the New York Stock Exchange (the “NYSE”). All historical share amounts disclosed have been retroactively adjusted to reflect thisReverse Stock Split.

During the fourth quarter of 2016, the Company issued 4,370,000 shares of common stock in a public offering at $38.00 per share for net proceeds of$160.9 million, after deducting fees and estimated expenses. The net proceeds were used to repay outstanding borrowings under the Secured Term LoanFacility and Revolving Credit Facility.

Long Term Employee Incentive Plan

The Company accounts for share-based compensation in accordance with FASB ASC Topic 718, Stock Compensation.

In July 2009, the Company adopted the 2009 Long Term Performance Incentive Plan (“Incentive Plan”), providing for long-term share-based awardsintended as a means for the Company to attract, motivate, retain and reward directors, officers, employees and other eligible persons through the grant ofawards and incentives for high levels of individual performance and improved financial performance of the Company. The share-based awards are also intendedto further align the interests of award recipients and the Company’s stockholders. The maximum number of shares of common stock that may be issued underthe Incentive Plan is 3,451,548 (which includes the additional 620,000 shares under Amendment No. 2 to the incentive plan approved by the Company’sstockholders in June 2015 and the 1,000,000 shares under Amendment No. 3 in the incentive plan approved by the Company’s stockholders in May 2016). Anamendment to the Incentive Plan to increase the number of shares available for issuance thereunder by 1,450,000 shares has been submitted for approval bythe Company’s stockholders at the 2017 annual meeting scheduled to be held on May 12, 2017.

In February 2016 the Board and its Compensation Committee approved long-term incentive awards to employees and non-employee directors for 2016consisting of a combination of stock options, cash-settled stock appreciation rights and restricted cash grants under the Incentive Plan. The 2016 long-termincentive awards to employees and non-employee directors consisted of grants of (i) options with a ten-year term, vesting in three equal annual installments onMarch 8 of 2017, 2018 and 2019 for employees and in one installment on March 8, 2017 for non-employee directors, (ii) cash-settled stock appreciation rightswith a ten-year term, vesting in three equal annual installments on March 8 of 2017, 2018 and 2019 for employees and in one installment on March 8, 2017 fornon-employee directors, (iii) time-vested restricted cash awards, vesting in three equal annual installments on March 8 of 2017, 2018 and 2019, and (iv)restricted stock vesting on March 8, 2017 to non-employee directors.

For the three months ended March 31, 2017 and 2016, the Company recorded expense related to the Incentive Plan as follows (in thousands): Three Months Ended March 31,

2017 2016

Time-based restricted stock awards $ 1,500 $ 1,777 TSR awards 916 337 Stock option awards 457 189 Total share-based compensation expense 2,873 2,303 Time-based restricted cash awards 279 649 Performance-based restricted cash awards 507 38 Cash-settled stock appreciation awards 4,641 111 Total cash-based compensation expense 5,427 798

Total Incentive Plan compensation expense $ 8,300 $ 3,101

As of March 31, 2017, the Company held unrecognized share-based compensation expense (in thousands) which is expected to be recognized over aweighted-average period as follows:

Weighted

Unrecognized Average Compensation Years Expense Remaining

Time-based restricted stock awards $ 14,608 2.8 TSR awards 9,302 2.9 Stock option awards 1,266 1.7

Total unrecognized compensation expense $ 25,176

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Equity Awards

Equity awards consist of service-based and performance-based restricted stock units and stock options under the Incentive Plan. All historical exercise,base and threshold prices disclosed have been retroactively adjusted to reflect the Reverse Stock Split.

Time-Based Restricted Stock Awards

Shares of time-based restricted stock issued to employees generally vest in three or four equal annual installments at specified dates based on continuedemployment. Shares issued to non-employee directors vest in one year based on continued service. The compensation expense to be recognized for the time-based restricted stock awards was measured based on the Company’s closing stock price on the dates of grant, utilizing estimated forfeiture rates between 0%and 15% which are updated periodically based on actual employee turnover. During the three months ended March 31, 2017, the Company granted 372,720shares of time-based restricted stock to employees and non-employee directors, pursuant to the Incentive Plan.

The following table summarizes the changes in non-vested time-based restricted stock awards for the three months ended March 31, 2017:

Weighted

Average Grant Date Shares Fair Value

Non-vested, beginning of period 151,781 $ 25.07 Granted 372,720 43.92 Vested (111,379) 28.40 Forfeited (1,592) 44.26

Non-vested, end of period 411,530 $ 41.17 TSR Awards

In February 2017 the Board and its Compensation Committee awarded performance-based restricted shares to senior employees and executive officersof the Company under the Incentive Plan. The restricted stock grants vest only upon achievement of thresholds of cumulative total shareholder return (“TSR”) ascompared to a specified peer group (the “Performance-Vested Shares”). A TSR percentile (the “TSR Percentile”) is calculated based on the change in the valueof the Company’s common stock between the grant date and the applicable vesting date, including any dividends paid during the period, as compared to therespective TSRs of a specified group of twelve peer companies. The Performance-Vested Shares vest in three installments to the extent that the applicable TSRPercentile ranking thresholds are met upon the one-, two- and three-year anniversaries of the grant date. Performance-Vested Shares that are eligible to vest ona vesting date, but do not qualify for vesting, become eligible for vesting again on the next vesting date. All Performance-Vested Shares that do not vest as of thefinal vesting date will be forfeited on such date.

The Board and its Compensation Committee also granted rights to earn additional shares of common stock upon achievement of a higher TSR Percentile(“Outperformance Shares”). The Outperformance Shares are earned in increasing increments based on a TSR Percentile attained over a specified threshold.Outperformance Shares may be earned on any vesting date to the extent that the applicable TSR Percentile ranking thresholds are met in three installments onthe one-, two- and three-year anniversaries of the grant date. Outperformance Shares that are earned at a vesting date will be issued to the recipient; however,prior to such issuance, the recipient is not entitled to stockholder rights with respect to Outperformance Shares. Outperformance Shares that are eligible to beearned but remain unearned on a vesting date become eligible to be earned again on the next vesting date. The right to earn any theretofore unearnedOutperformance Shares terminates immediately following the final vesting date. The Performance-Vested Shares and the Outperformance Shares are referred toas the “TSR Awards.”

The compensation expense to be recognized for the TSR Awards was measured based on the estimated fair value at the date of grant using a MonteCarlo simulation model and utilizes estimated forfeiture rates between 0% and 2% which are updated periodically based on actual employee turnover.

The valuation model for TSR Awards used the following assumptions:

Grant Year Average Expected

Volatility Expected Dividend

Yield Risk-Free

Interest Rate

2017 49.07% - 108.21% 0% 0.83% - 1.45%

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The following table summarizes the changes in non-vested TSR Awards for the three months ended March 31, 2017:

Weighted


Non-vested, beginning of period 97,561 $ 66.60 Granted 131,379 77.23 Vested (97,561) 66.60 Forfeited (481) 77.21

Non-vested, end of period 130,898 $ 77.23

There were no TSR awards granted during the three months ended March 31, 2016. In addition to the vested TSR awards above, 63,024

outperformance shares were also earned and vested during the three months ended March 31, 2017, related to the TSR awards granted in 2014.

Stock Option Awards

Options issued to employees to purchase shares of common stock vest in three equal annual installments at specified dates based on continuedemployment with a ten year term. The compensation expense to be recognized for the option awards was measured based on the Company’s estimated fairvalue at the date of grant using a Black-Scholes pricing model as well as estimated forfeiture rates between 0% and 15%, no dividends, expected stock pricevolatility ranging from 63% to 67% and a risk-free rate ranging between 1.75% and 2.27%.

The following table summarizes the option award activity for the three months ended March 31, 2017:

Weighted Weighted Average Aggregate

Average Remaining Intrinsic Value

Shares Exercise Price Contractual Term (in thousands)

Outstanding, beginning of period 1,052,513 $ 4.03 Granted — — Exercised (37,684) 3.36 Forfeited (9,081) 3.48

Outstanding, end of period 1,005,748 $ 4.06 8.6 $ 36,548

Exercisable, end of period 301,712 $ 4.05 8.6 $ 10,967

The weighted average grant date fair value of options granted during the three months ended March 31, 2016, was $1.93. No options were grantedduring the three months ended March 31, 2017. The total intrinsic value for options exercised during the three months ended March 31, 2017, was $1.4 million.No options were exercised during the three months ended March 31, 2016.

Liability Awards

Liability awards consist of awards that are settled in cash instead of shares, as discussed below. The fair value of those instruments at a single point intime is not a forecast of what the estimated fair value of those instruments may be in the future.

Cash-settled Stock Appreciation Rights

A stock appreciation right is the right to receive an amount in cash equal to the excess, if any, of the fair market value of a share of common stock on thedate on which the right is exercised over its base price. The February 2016 grants of cash-settled stock appreciation rights hold base prices of $2.65 per share(as to 486,373 rights) and $2.915 per share (as to 1,216,479 rights). The awards granted to employees vest in three equal annual installments and have a ten-year term. The awards granted to non-employee directors vest in one year based on continued service and also have a ten-year term. The compensationexpense to be recognized for the cash-settled stock appreciation rights was measured utilizing estimated forfeiture rates between 0% and 15% which will beupdated periodically based on actual employee turnover. The fair value of the cash-settled stock appreciation rights as of March 31, 2017, was $63.2 million, ofwhich $22.4 million has been expensed.

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Time-Based Restricted Cash Awards

Awards of time-based restricted cash issued to employees vest in three equal annual increments at specified dates based on continued employment.Time-based restricted cash issued to non-employee directors vests in one year based on continued service. The compensation expense to be recognized for thetime-based restricted cash awards was measured utilizing estimated forfeiture rates between 0% and 20% which will be updated periodically based on actualemployee turnover. The total estimated future liability of the time-based restricted cash awards as of March 31, 2017, was $9.7 million, of which $5.0 million hasbeen expensed.

Performance-Based Restricted Cash Awards

The performance criteria for the performance-based restricted cash awards granted in May 2015 are based on future prices of the Company’s commonstock trading at or above specified thresholds. If and as certain stock price thresholds are met, using a 60 trading day average, various multiples of theperformance-vested cash award will be attained. The first stock price hurdle was at $10.00 at which the award was payable at 1x, and the highest stock pricehurdle was $40.00 at which the award was payable at a multiple of 6x. Interim hurdles and multiples between these end points are set forth in the governingagreements. As of March 31, 2017, all of the stock price hurdles up to $40.00 have been met. A time vesting element will apply to the performance-vested cashawards such that attained multiples will not be paid out earlier than upon satisfaction of a three-year vesting timetable from the date of grant. In order for anaward to be paid, both the performance criteria and the time criteria would need to be satisfied. Once a time vesting date passes, the employee is entitled to bepaid one third, two thirds or 100%, as applicable, of whatever multiples have been achieved provided the employee continues to be employed by the Company.Any multiples achieved following 100% time vesting would be paid within 60 days of such achievement.

The estimated fair value of the performance-based restricted cash awards as of March 31, 2017, was $16.8 million of which $14.5 million has beenexpensed, based upon the three-year vesting. The fair value was estimated using an option pricing model for a cash or nothing call, an estimated forfeiture rateof 5% and an average effective term of less than one year. As the fair value of liability awards is required to be re-measured at each period end, amountsrecognized in future periods will vary. Note 8 — Asset Retirement Obligation

Resolute’s estimated asset retirement obligation liability is based on estimated economic lives, estimates as to the cost to abandon the wells and facilitiesin the future, and federal and state regulatory requirements. The liability is discounted using a credit-adjusted risk-free rate estimated at the time the liability isincurred or revised, that ranges between 7% and 12%. Revisions to the liability could occur due to changes in estimated abandonment costs or well economiclives, or if federal or state regulators enact new requirements regarding the abandonment of wells. Asset retirement obligations are valued utilizing Level 3 fairvalue measurement inputs.

The following table provides a reconciliation of Resolute’s asset retirement obligations for the periods presented (in thousands):


2017 2016

Asset retirement obligations at beginning of period $ 20,352 $ 19,238 Additional liability incurred / acquired 47 8 Accretion expense 433 437 Liabilities settled / sold (3,729) (1 )Revisions to previous estimates (80) — Asset retirement obligations at end of period 17,023 19,682 Less: current asset retirement obligations (690) (1,068)Long-term asset retirement obligations $ 16,333 $ 18,614

Note 9 — Derivative Instruments

Resolute enters into commodity derivative contracts to manage its exposure to oil and gas price volatility. Resolute has not elected to designate derivativeinstruments as hedges under the provisions of FASB ASC Topic 815, Derivatives and Hedging. As a result, these derivative instruments are marked to market atthe end of each reporting period and changes in the fair value are recorded in the accompanying consolidated statements of operations. Gains and losses oncommodity derivative instruments from Resolute’s price risk management activities are recognized in other income (expense). The cash flows from derivativesare reported as cash flows

16


from operating activities unless the derivative contract is deemed to contain a financing element. Derivatives deemed to contain a financing element are reportedas financing activities in the condensed consolidated statement of cash flows.

The Company utilizes fixed price swaps, basis swaps, option contracts and two-and three-way collars. These instruments generally entitle Resolute (thefloating price payer in most cases) to receive settlement from the counterparty (the fixed price payer in most cases) for each calculation period in amounts, ifany, by which the settlement price for the scheduled trading days applicable to each calculation period is less than the fixed strike price or floor price. TheCompany would pay the counterparty if the settlement price for the scheduled trading days applicable to each calculation period exceeds the fixed strike price orceiling price. The amount payable by Resolute, if the floating price is above the fixed or ceiling price is the product of the notional contract quantity and theexcess of the floating price over the fixed or ceiling price per calculation period. The amount payable by the counterparty, if the floating price is below the fixed orfloor price, is the product of the notional contract quantity and the excess of the fixed or floor price over the floating price per calculation period. A three-waycollar consists of a two-way collar contract combined with a put option contract sold by the Company with a strike price below the floor price of the two-waycollar. The Company receives price protection at the purchased put option floor price of the two-way collar if commodity prices are above the sold put optionstrike price. If commodity prices fall below the sold put option strike price, the Company receives the cash market price plus the variance between the two putoption strike prices. This type of instrument captures more value in a rising commodity price environment, but limits the benefits in a downward commodity priceenvironment. Basis swaps, when used in connection with fixed price swaps, to fix the price differential between the NYMEX commodity price and the index priceat which the production is sold.

As of March 31, 2017, the fair value of the Company’s commodity derivatives was a net liability of $0.8 million (Level 2 fair value measurement).

The following table represents Resolute’s commodity swap contracts as of March 31, 2017:

Oil (NYMEX WTI) Gas (NYMEX Henry Hub) NGL (Mont Belvieu)

Remaining Term Bbl per Day

WeightedAverage SwapPrice per Bbl MMBtu per Day

WeightedAverage Swap

Price per MMBtu Bbl per Day

WeightedAverage SwapPrice per Bbl

Apr – Dec 2017 3,022 $ 53.69 1,357 $ 2.770 300 $ 19.53

The following table represents Resolute’s two-way commodity collar contracts as of March 31, 2017:

Oil (NYMEX WTI) Gas (NYMEX Henry Hub)


WeightedAverage FloorPrice per Bbl

WeightedAverage Ceiling

Price per Bbl MMBtu per Day

WeightedAverage Floor

Price per MMBtu

WeightedAverage CeilingPrice per MMBtu

Apr – Dec 2017 2,500 $ 47.54 $ 59.40 7,910 $ 2.504 $ 3.336

The following table represents Resolute’s three-way oil collar contracts as of March 31, 2017:

Oil (NYMEX WTI)

Weighted

Average WeightedAverage

WeightedAverage

Remaining Term

Bbl per Day Short Put

Price per Bbl Floor Price

per Bbl Ceiling Price

per Bbl

Apr – Dec 2017 1,500 $ 40.00 $ 50.00 $ 60.10 The following table represents Resolute’s three-way gas collar contracts as of March 31, 2017:

Gas (NYMEX Henry Hub)

Weighted

Average Short Weighted

Average Floor WeightedAverage

Remaining Term

MMBtu per Day Put Price

per MMBtu Price per MMBtu Ceiling Price per

MMBtu

Apr – Dec 2017 1,998 $ 2.692 $ 3.192 $ 3.746

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The following table represents Resolute’s commodity option contract as of March 31, 2017:

Oil (NYMEX WTI)


Weighted AverageSold Call Price per

Bbl

Jan – Dec 2018 1,100 $ 50.00

Subsequent to March 31, 2017, Resolute entered into additional gas swap contracts as summarized below:


Commodity Swaps

MMBtu per Day Weighted Average Swap

Price per MMBtu

Jun 2017 7,000 3.245 Jul – Sep 2017 9,000 3.340 Sep – Nov 2017 10,000 3.442

The table below summarizes the location and amount of commodity derivative instrument gains and losses reported in the consolidated statements ofoperations (in thousands): Three Months Ended March 31,

2017 2016

Other income (expense): Commodity derivative settlement gain (loss) $ (250) $ 27,748 Mark-to-market gain (loss) 11,090 (23,907)

Commodity derivative instruments gain $ 10,840 $ 3,841

Credit Risk and Contingent Features in Derivative Instruments

Resolute is exposed to credit risk to the extent of nonperformance by the counterparties in the derivative contracts discussed above. All counterpartiesare current or former lenders under Resolute’s Revolving Credit Facility. Accordingly, Resolute is not required to provide any credit support to its counterpartiesother than cross collateralization with the properties securing the Revolving Credit Facility. Resolute’s derivative contracts are documented with industrystandard contracts known as a Schedule to the Master Agreement and International Swaps and Derivative Association, Inc. Master Agreement (“ISDA”). Typicalterms for each ISDA include credit support requirements, cross default provisions, termination events, and set-off provisions. Resolute generally has set-offprovisions with its lenders that, in the event of counterparty default, allow Resolute to set-off amounts owed under the Revolving Credit Facility or other generalobligations against amounts owed for derivative contract liabilities.

Resolute does not offset the fair value amounts of commodity derivative assets and liabilities with the same counterparty for financial reporting purposes.

The following is a listing of Resolute’s commodity derivative assets and liabilities required to be measured at fair value on a recurring basis and where they areclassified within the hierarchy as of March 31, 2017, and December 31, 2016 (in thousands): Level 2

March 31, 2017 December 31, 2016

Assets Derivative instruments, current $ 3,675 $ 218 Derivative instruments, long term — —

Total assets $ 3,675 $ 218

Liabilities Derivative instruments, current $ 2,389 $ 8,014 Derivative instruments, long term 2,096 4,104

Total liabilities $ 4,485 $ 12,118

As of March 31, 2017, the maximum amount of loss in the event of all counterparties defaulting was $0.1 million.

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Note 10 — Commitments and Contingencies

CO2 Take-or-Pay Agreements

Resolute is party to a take-or-pay purchase agreement with Kinder Morgan CO 2 Company L.P., under which Resolute has committed to buy specifiedvolumes of CO2. The purchased CO 2 is for use in Resolute’s enhanced tertiary recovery projects in Aneth Field. Resolute is obligated to purchase a minimumdaily volume of CO2 or pay for any deficiencies at the price in effect when delivery was to have occurred. The ultimate CO 2 volumes planned for use on theenhanced recovery projects exceed the minimum daily volumes provided in these take-or-pay purchase agreements. Although the Company may incurdeficiency payments from time to time, Resolute expects to avoid any payments for deficiencies over the term of the agreement.

Future minimum CO 2 purchase commitments as of March 31, 2017, under this purchase agreement, based on prices and volumes in effect at March 31,2017, are as follows (in thousands):

CO2 Purchase Year Commitments

2017 4,125 2018 5,475

Total $ 9,600

The terms of the CO2 contract, as amended in Amendment No. 3 to the Kinder Morgan Product Sale and Purchase Contract dated July 1, 2007, containsa unit price floor, below which the price cannot fall. As a result, the Company is exposed to the risk of paying higher than the market rate for CO2 in a climate ofdeclining oil and CO2 prices. Based on this floor pricing term, the Company has determined that this contract contains an embedded derivative. However,assuming the prices in effect as of March 31, 2017, the fair value of this embedded derivative would be less than $0.1 million.

Cooperative Agreement with Navajo Nation Oil and Gas Company

Resolute is party to a cooperative agreement with Navajo Nation Oil and Gas Company (“NNOGC”) related to the Aneth Field Properties (the“Cooperative Agreement”). Pursuant to the Cooperative Agreement, as modified on March 9, 2017, NNOGC holds an option to purchase an additional 10% ofResolute’s interest in the Aneth Field Properties. The option is exercisable until July 2017 at the fair market value of such interest.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” contained in our Annual Report on Form 10-K for the year ended December 31, 2016, as well as the accompanying financial statements and therelated notes contained elsewhere in this report. References to “Resolute,” “the Company,” “we,” “ours,” and “us” refer to Resolute Energy Corporation and itssubsidiaries. Overview

We are a publicly traded, independent oil and gas company with assets located primarily in the Delaware Basin in west Texas and Aneth Field located inthe Paradox Basin in southeast Utah. Our development activity is focused on our 20,000 gross (16,400 net) operated acreage position in what we believe to bethe core of the Wolfcamp horizontal play in northern Reeves County, Texas. Our corporate strategy is to drive organic growth in reserves, production and cashflow through development of our Reeves County acreage and opportunistic bolt-on acquisitions in the Delaware Basin while continuing to focus on improvingmargins in our Aneth Field Properties while de-risking certain future growth projects through selectively targeted capital investment.

During 2016 oil sales comprised approximately 90% of revenue, and our December 31, 2016 estimated net proved reserves were approximately 60.3million barrels of oil equivalent (“MMBoe”), of which approximately 62% and 59% were proved developed reserves and proved developed producing reserves(“PDP”), respectively. Approximately 73% of our estimated net proved reserves were oil and approximately 85% were oil and natural gas liquids (“NGL”). TheDecember 31, 2016, pre-tax present value discounted at 10% (“PV-10”) of our net proved reserves and the standardized measure of our estimated net provedreserves were $344 million.

Pursuant to full cost accounting rules, we perform ceiling tests each quarter on our proved oil and gas assets. We recorded a non-cash impairment of thecarrying value of our proved oil and gas properties of $58 million at March 31, 2016, as a result of the ceiling test limitation. No impairment was recorded as ofMarch 31, 2017. If in future periods a negative impact continues on one or more of the components of the calculation, including market prices of oil and gas(based on a trailing twelve-month unweighted average of the oil and gas prices in effect on the first day of each month), differentials from posted prices, futuredrilling and capital plans, operating costs or expected production, the Company may incur further full cost ceiling impairment related to its oil and gas propertiesin such periods.

For 2017 we expect to incur capital expenditures of $210 to $240 million, primarily focused on following our successful 2016 performance in theDelaware Basin with a two rig drilling program spudding 22 gross wells. We expect the 2017 program to accomplish a number of important initiatives for theCompany. We will further delineate our development inventory as we drill wells across our acreage block, conduct multiple spacing tests and complete wells inmultiple landing zones in the Wolfcamp A as well as in the Wolfcamp B. The success of this program will help confirm the more than 365 Wolfcamp A and Bdevelopment locations we believe exist in our Mustang and Appaloosa project areas. We also expect that substantially all of our acreage will be held byproduction by the end of 2017.

We expect to outspend our cash flows from operations during 2017. A deterioration of commodity prices from current levels could negatively affect ourresults of operations, financial condition and future development plans. We may change our 2017 capital investment forecast during the year as a result of,among other things, a decline in commodity prices, drilling results, cost increases, or unfavorable changes in our borrowing capacity. We may also change ourcapital expenditure plan depending upon our ability to consummate the Delaware Basin Bronco Acquisition and additional capital activity associated with thoseassets and/or the potential divestiture of our Aneth Field assets.

On August 1, 2016, we closed the sale of our Reeves County gas gathering and produced water handling and disposal assets. This transaction providedapproximately $36 million of net proceeds to Resolute, with $2 million held in escrow and the remaining proceeds used principally to repay all then outstandingRevolving Credit Facility debt. In connection with such sale, we also entered into long-term gas gathering and processing and water gathering and disposalagreements with the purchaser of such assets. On October 7, 2016, we closed the acquisition of certain Reeves County interests in the Delaware Basin forconsideration consisting of $90 million in cash and 2,114,523 shares of our common stock. The cash paid for this acquisition was funded in part by net proceedsfrom the sale of preferred stock and borrowings on our Revolving Credit Facility. On December 23, 2016, we closed our public stock offering of 4,370,000 sharesof common stock. The net proceeds from the offering, after deducting fees and estimated expenses, were approximately $160.9 million. With a portion of theseproceeds, on January 3, 2017, we repaid approximately $132 million constituting all amounts due under the term loan facility (including prepayment fees). Thesecond lien secured term loan

20


facility (the “Secured Term Loan Facility”) was terminated in connection with the repayment. We will also continue to explore other ways to enhance our liquidity,de-lever our balance sheet and increase drilling activity, including potential asset sales and potential joint ventures. Such strategic initiatives are considered onan ongoing basis and decisions related thereto will be made if the terms are determined to be advantageous to us.

On February 22, 2017, we closed on the sale of our Denton and South Knowles properties in the Northwest Shelf project area in Lea County, NewMexico, for approximately $14.5 million in cash, subject to customary purchase price adjustments. The effective date of this sale was October 1, 2016. Theproceeds of the sale will be used for general corporate purposes. As part of the sale, the Company was also no longer liable for asset retirement obligations of$3.6 million at March 31, 2017.

On March 3, 2017, Resolute Natural Resources Southwest, LLC, a wholly-owned subsidiary of the Company, entered into a Purchase and SaleAgreement with undisclosed private sellers pursuant to which Buyer agreed to acquire certain producing and undeveloped oil and gas properties in theDelaware Basin in Reeves County, Texas (the “Bronco” acquisition; previously referred to as the “Orla” acquisition).

Consideration for the Bronco acquisition will be $160 million in cash, subject to customary purchase price adjustments. The closing of the Broncoacquisition is expected to occur on or about May 15, 2017, and is subject to the satisfaction or waiver of certain customary conditions, including the materialaccuracy of the representations and warranties of Buyer and Sellers, and performance of covenants. The Delaware Basin Bronco Acquisition has an effectivedate of May 1, 2017. The Purchase Agreement contains terms and conditions customary to transactions of this type. Subject to the right of Buyer to beindemnified for certain liabilities for a limited period of time and for breaches of representations, warranties and covenants, Buyer will assume substantially allliabilities associated with the acquired properties. The Purchase Agreement also contains certain customary termination rights for each of Buyer and Sellers.

The properties to be acquired include approximately 4,600 net acres in Reeves County, Texas, consisting of 2,187 net acres adjacent to the Company’sexisting operating area in Reeves County and 2,405 net acres in southern Reeves County. In addition, the Company will acquire interests in (i) two operated4,500 foot lateral horizontal Wolfcamp wells that were producing approximately 800 net Boe per day when the Purchase Agreement was signed, (ii) six operateddrilled but uncompleted Wolfcamp wells, four of which have lateral lengths of approximately 4,500 feet and two with approximately 7,500 foot laterals; and (iii)one non-operated 10,000 foot lateral Wolfcamp A well that is currently awaiting completion.

The closing of the Bronco acquisition will result in a short term rise in our level of indebtedness on an absolute basis and in relation to our cash flows. Theinterim increase in indebtedness does not represent a change in philosophy as to the appropriate level of leverage for the Company. We believe that we are wellpositioned financially to move forward with both the acquisition and our Delaware Basin development program. In the near term, sources of liquidity include ourrecently increased $225 million borrowing base, the potential to access the capital markets, or the ability to draw our existing bridge facility. Longer term, weexpect the sale of Aneth Field to be a significant deleveraging event. We expect to return to our target leverage levels by the fourth quarter of 2017 or earlier. Inthe meantime, we are working with our bank group to secure a precautionary amendment to ensure that we remain in compliance with our covenants under ourRevolving Credit Facility during this interim period of increased indebtedness.

To complete our repositioning as a pure-play Delaware Basin company, Resolute’s board of directors has approved a process to pursue the sale of theCompany’s Aneth Field assets. The potential disposition of Aneth Field, if consummated, would provide meaningful additional capital to Resolute. This capitalcan be deployed either to our Delaware Basin drilling program where we see our highest rates of return or as a component of the optimal long-term financing forthe Delaware Basin Bronco Acquisition. The Company has engaged Petrie Partners, LLC and Barclays Capital Inc. to act as financial advisors in the salesprocess launched in April 2017.


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Our Revolving Credit Facility and Senior Notes include customary terms and covenants that place limitations on certain types of activities and requiresatisfaction of certain financial tests. We were in compliance with all material terms and covenants of the Revolving Credit Facility and Senior Notes at March 31,2017.

Our management uses a variety of financial and operational measurements to analyze our operating performance, including but not limited to, productionlevels, pricing and cost trends, reserve trends, operating and general and administrative expenses, operating cash flow and Adjusted EBITDA. The analysis ofthese measurements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained inour Annual Report on Form 10-K for the year ended December 31, 2016.

Permian Basin Properties

Our Permian Basin Properties, constituting 59% of net proved reserves as of December 31, 2016, are located in the Permian Basin of west Texas. Ourproject area located in the Delaware Basin portion of the Permian Basin, in Reeves County, targets the Wolfcamp formation. We believe that growth potentialexists from more than 365 gross prospective wells targeting upper Wolfcamp A, lower Wolfcamp A and Wolfcamp B formations. Significant additional opportunityexists from reduced spacing as well as additional subzones. For 2017 the Board has approved a two rig drilling program spudding 22 gross wells. This capitalprogram does not contemplate additional potential drilling or completion activities following the anticipated consummation of the Delaware Basin BroncoAcquisition.

During the three months ended March 31, 2017, we completed 4 gross (4.0 net) wells and had 4 gross (3.9 net) wells awaiting completion operations atquarter end. Furthermore, as of March 31, 2017, we were in the process of drilling 1 gross (0.9 net) well. All such wells are located in the Delaware Basin.

In February 2017 we sold our Denton and South Knowles properties in the Northwest Shelf project area in the Permian Basin. See Note 3 of the Notesto Condensed Consolidated Financial Statements for additional information.

In October 2016 we acquired certain Reeves County interests in the Delaware Basin. See Note 3 of the Notes to the Condensed Consolidated FinancialStatements for additional information.

In August 2016 we sold certain midstream asset interests in the Delaware Basin. See Note 3 of the Notes to Condensed Consolidated FinancialStatements for additional information.

Aneth Field Properties

Our Aneth Field Properties constituted 41% of our net proved reserves as of December 31, 2016. Our working interests in Aneth Field, a mature, long-lived oil producing field, are located primarily on the Navajo Reservation in southeast Utah. We own a majority of the working interests in, and are the operatorof, three federal production units which constitute the Aneth Field Properties. These are the Aneth Unit, the McElmo Creek Unit and the Ratherford Unit, in whichwe own working interests of 62.4%, 67.5% and 58.6%, respectively, at March 31, 2017. Factors That Significantly Affect Our Financial Results

Revenue, cash flow from operations and future growth depend on many factors beyond our control, such as oil prices, cost of services and supplies,economic, political and regulatory developments and competition from other sources of energy. Historical oil prices have been volatile and are expected tofluctuate widely in the future. Sustained periods of low prices for oil could materially and adversely affect our financial position, our results of operations, thequantities of oil and gas that we can economically produce, and our ability to obtain capital.

Like all businesses engaged in the exploration for and production of oil and gas, we face the challenge of natural production declines. As initial reservoirpressures are depleted, oil and gas production from a given well decreases. Thus, an oil and gas exploration and production company depletes part of its assetbase with each unit of oil or gas it produces. We attempt to overcome this natural decline by developing existing properties, implementing secondary and tertiaryrecovery techniques and by acquiring more reserves than we produce. Our future growth will depend on our ability to enhance production levels from existingreserves and to continue to add reserves in excess of production through exploration, development and acquisition. We will maintain our focus on costsnecessary to produce our reserves as well as the costs necessary to add reserves through production enhancement, drilling and acquisitions. Our ability to makecapital expenditures to increase production from existing reserves and to acquire more reserves is dependent on availability of capital resources, and can belimited by many factors, including the ability to obtain capital in a cost-effective manner and to obtain permits and regulatory approvals in a timely manner.

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Results of Operations

For the purposes of management’s discussion and analysis of the results of operations, management has analyzed the operational results for the threemonths ended March 31, 2017, in comparison to results for the three months ended March 31, 2016.

The following table presents our sales volumes, revenues and operating expenses, and sets forth our sales prices, costs and expenses on a barrel of oilequivalent (“Boe”) basis for the periods indicated:

Three Months Ended

March 31,

2017 2016

Net Sales: Oil (MBbl) 1,213 668 Gas (MMcf) 1,922 594 NGL (MBbl) 240 53

Total sales (MBoe) 1,773 820 Average daily sales (Boe/d) 19,702 9,016

Average Sales Prices: Oil ($/Bbl) $ 47.52 $ 26.63 Gas ($/Mcf) 2.58 1.64 NGL ($/Bbl) 10.89 4.30

Average sales price ($/Boe, excluding commodity derivative settlements) $ 36.78 $ 23.16

Operating Expenses ($/Boe): Lease operating $ 10.35 $ 16.84 Production and ad valorem taxes 3.72 3.83 General and administrative 5.87 10.93 General and administrative (excluding non-cash compensation expense) 4.28

8.24

Cash-settled incentive awards 3.06 0.97 Depletion, depreciation, amortization and accretion 9.04 12.63

Quarter Ended March 31, 2017, Compared to the Quarter Ended March 31, 2016

Revenue. Revenue from oil and gas activities increased by 243% to $65.2 million during 2017, from $19.0 million during 2016. Of the $46.2 millionincrease in revenue, approximately $24.1 million was attributable to increased commodity pricing ($36.78 per Boe in 2017 versus $23.16 per Boe in 2016) and$22.1 million was attributable to increased production. Sales volumes increased 116% to 1,773 MBoe during 2017 as compared to 820 MBoe during 2016,principally as a result of production from newly drilled wells in the Delaware Basin.

Operating Expenses. Lease operating expenses include direct labor, contract services, field office rent, production and ad valorem taxes, vehicleexpenses, supervision, transportation, minor maintenance, tools and supplies, workover expenses, utilities and other customary charges. Resolute assesseslease operating expenses in part by monitoring the expenses in relation to production volumes and the number of wells operated.

Lease operating expenses increased 33% to $18.4 million during 2017, from $13.8 million during 2016. On a per-unit basis, lease operating expensedecreased 39% to $10.35 per Boe in 2017 compared to $16.84 per Boe in 2016. The significant decrease in per unit operating expense is primarily due to thesignificant increase in production.

Production and ad valorem taxes increased to $6.6 million during 2017, as compared to $3.1 million during 2016, but were less on a per-unit basis ascompared to 2016. Production and ad valorem taxes were 10.1% of total revenue in 2017 versus 16.5% of total revenue in 2016. The lower production and advalorem taxes as a percentage of revenue in 2017 as compared to 2016 is attributable to the increase in the percentage of revenue realized in the State ofTexas which has a lower tax rate than the Aneth Field properties.

General and administrative expenses include the costs of employees and executive officers, related benefits, share-based compensation, office leases,

professional fees, general corporate overhead and other costs not directly associated with field operations. We monitor our general and administrative expensescarefully, attempting to balance the cash effect of incurring general and

23


administrative costs against the related benef its, with a focus on hiring and retaining highly qualified staff who can add value to our asset base.

General and administrative expenses increased to $10.4 million during 2017, as compared to $9.0 million during 2016. The $1.4 million, or 16% increase,primarily resulted from increases in short term incentive compensation which had been reduced during 2015 and 2016 in response to lower commodity prices.On a per-unit basis, general and administrative expenses decreased to $5.87 per Boe in 2017 from the $10.93 per Boe in 2016. Cash-based general andadministrative expense was $7.6 million, or $4.28 per Boe, in 2017 compared to $6.8 million, or $8.24 per Boe, in 2016.

Cash-settled incentive award expense increased to $5.4 million in 2017, as compared to $0.8 million in 2016. This increase was the result of the grant of

time- and performance-based restricted cash awards as well as cash-settled stock appreciation rights under the long-term incentive program and theachievement of multiple performance targets that are based on the Company’s stock price. The time-based awards will vest and be expensed ratably over threeyears. The performance-based awards and stock appreciation rights will vest ratably over three years but their fair value will be re-measured at each period endover their ten-year lives. Actual cash payments during the period were $3.6 million.

Depletion, depreciation, amortization and accretion expenses increased to $16.0 million during 2017, as compared to $10.4 million during 2016.Conversely, on a per-unit basis, depreciation, amortization and accretion expenses decreased to $9.04 per Boe in 2017 from $12.63 per Boe in 2016 dueprimarily to the significant increase in proved reserve quantities.

Pursuant to full cost accounting rules, we perform ceiling tests each quarter on our proved oil and gas assets. The primary components affecting thiscalculation are commodity prices, reserve quantities added and produced, overall exploration and development costs and depletion expense. If the netcapitalized cost of the Company’s oil and gas properties subject to amortization (the “carrying value”) exceeds the ceiling limitation, the excess is charged toexpense. We recorded a $58 million non-cash impairment of the carrying value of our proved oil and gas properties at March 31, 2016, as a result of the ceilingtest limitation. No impairment was recorded at March 31, 2017. If in future periods a negative impact continues on one or more of the components of thecalculation, including market prices of oil and gas (based on a trailing twelve-month unweighted average of the oil and gas prices in effect on the first day of eachmonth), differentials from posted prices, future drilling and capital plans, operating costs or expected production, the Company may incur further full cost ceilingimpairment related to its oil and gas properties in such periods.

Other Income (Expense). All of our oil and gas derivative instruments are accounted for under mark-to-market accounting rules, which provide for thefair value of the contracts to be reflected as either an asset or a liability on the balance sheet. The change in the fair value during an accounting period isreflected in the income statement for that period. During 2017 the gain on oil and gas commodity derivatives was $10.8 million, consisting of $11.1 million ofmark-to-market gains partially offset by $0.3 million of derivative settlement losses. During 2016 the gain on oil and gas commodity derivatives was $3.8 million,consisting of $27.7 million of derivative settlement gains offset by $23.9 million mark-to-market losses.

Interest expense in 2017 increased to $17.7 million from the $13.1 million recorded in 2016. The increase in interest expense was primarily due to thepenalties incurred related to the repayment of the Secured Term Loan offset by increases in amounts capitalized. The components of our interest expense areas follows (in thousands):


2017 2016

8.50% senior notes $ 8,500 $ 8,500 Secured term loan facility 3,631 3,568 Revolving credit facility 314 145 Amortization of deferred financing costs, senior notes premium and secured term loan facility discount 7,743

1,303

Other, net 13 (2 )Capitalized interest (2,504) (439)

Total interest expense $ 17,697 $ 13,075

As a result of the prepayment of the Secured Term Loan Facility on January 3, 2017, we recognized $9.7 million of interest costs (comprised ofamortization of the original issue discount, deferred financing costs and prepayment fees) in the first quarter of 2017.

Income Tax Benefit (Expense). No income tax benefit or expense was recognized during the three months ended March 31, 2017 or 2016 due to the

deferred tax asset valuation allowance previously provided by the Company.

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Liquidity and Capital Resources

Our primary sources of liquidity have been cash generated from operations, amounts available under our Revolving Credit Facility, proceeds from theissuance of debt and equity securities and sales of oil and gas properties. For purposes of Management’s Discussion and Analysis of Liquidity and CapitalResources, we have analyzed our cash flows and capital resources for the three months ended March 31, 2017 and 2016.

Three Months Ended

March 31, 2017 2016

(in thousands)

Cash provided by operating activities $ 39,274 $ 16,537 Cash used in investing activities (44,868) (22,853)Cash provided by (used in) financing activities (126,454) (60)

Net cash provided by operating activities was $39.3 million for the first three months of 2017 as compared to $16.5 million for the 2016 period. The

increase in net cash provided by operating activities in 2017 as compared to 2016 was primarily due to increased revenue resulting from higher productionvolumes.

Net cash used in investing activities was $44.9 million in 2017 compared to $22.9 million in 2016. The primary investing activity in 2017 was cash usedfor capital expenditures of $42.3 million. Capital expenditures in 2017 consisted primarily of $39.8 million in drilling activities and infrastructure projects in thePermian Basin, $1.5 million in facility projects in Aneth Field and $1.0 million in CO2 acquisition for Aneth Field. Capital divestitures in 2017 included $14.2million of net proceeds primarily from the sale of the New Mexico Properties. The primary investing activity in 2016 was cash used for capital expenditures of$23.0 million. Capital expenditures in 2016 consisted primarily of $18.1 million in drilling activities and infrastructure projects in the Permian Basin, $3.3 million incompression and facility projects in Aneth Field and $1.6 million in CO2 acquisition.

Net cash used in financing activities $126.5 million in 2017 compared to $0.1 million used in financing activities in 2016. The primary financing activity in

2017 was the repayment of $128.3 million of principal on the Secured Term Loan, partially offset by $9.0 million in net borrowings under the Revolving CreditFacility.

If cash flow from operating activities does not meet expectations, we may reduce our expected level of capital expenditures and/or fund a portion of ourcapital expenditures using borrowings under our Revolving Credit Facility (if available), issuances of other debt or equity securities or from other sources, suchas asset sales. There can be no assurance that needed capital will be available on acceptable terms or at all. Our ability to raise funds through the incurrence ofadditional indebtedness could be limited by the covenants in our Revolving Credit Facility or Senior Notes. If we are unable to obtain funds when needed or onacceptable terms, we may not be able to satisfy our obligations under our existing indebtedness, finance the capital expenditures necessary to maintainproduction or proved reserves or complete acquisitions that may be favorable to us.


Our Revolving Credit Facility requires us to enter into derivative agreements covering a significant portion of our production, as described below under“Revolving Credit Facility.”

We plan to continue our practice of hedging a significant portion of our production through the use of various commodity derivative transactions. Ourexisting derivative transactions have not been designated as cash flow hedges, and we anticipate that future transactions will receive similar accountingtreatment. Derivative settlements usually occur within five days of the end of the month. As is typical in the oil and gas industry, however, we do not generallyreceive the proceeds from the sale of our oil production until the 20th day of the month following the month of production. As a result, when commodity pricesincrease above the fixed price in the derivative contacts, we will be required to pay the derivative counterparty the difference between the fixed price in the

25


derivative contract and the market price before receiving the proceeds from the sale of the hedged production. If this occurs, we may use working capital orborrowings under the Revolving Credit Facility to fund our operations.


On February 17, 2017, we entered into the Third Amended and Restated Credit Agreement with a syndicate of banks led by Bank of Montreal, asAdministrative Agent, Capital One, National Association, as syndication agent, and Barclays Bank PLC, ING Capital LLC and SunTrust Bank, as co-documentation agents. In connection with entering into the Revolving Credit Facility, we repaid all amounts outstanding under the Second Amended andRestated Credit Agreement, dated as of April 15, 2015, by and among Resolute Energy Corporation, as Borrower, certain subsidiaries of Resolute EnergyCorporation, as Guarantors, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto, as amended, and terminated thatagreement.

The Revolving Credit Facility specifies a maximum borrowing base as determined by the lenders in their sole discretion, which was initially set at $150million. The determination of the borrowing base takes into consideration the estimated value of our oil and gas properties in accordance with the lenders’customary practices for oil and gas loans. The borrowing base is re-determined semi-annually, and the amount available for borrowing could be increased ordecreased as a result of such redeterminations. Under certain circumstances, either the Company or the lenders may request an interim redetermination. TheRevolving Credit Facility matures in February 2021, unless there is a maturity of material indebtedness prior to such date.

The Revolving Credit Facility is guaranteed by all of our subsidiaries and is collateralized by substantially all of the assets of the Company’s Aneth Fieldand Delaware Basin assets held by Resolute Aneth, LLC and Resolute Natural Resources Southwest, LLC, which are wholly-owned subsidiaries of theCompany.

Pursuant to the spring borrowing base redetermination, the borrowing base has been increased to $225 million, effective April 17, 2017.

The Revolving Credit Facility includes covenants that require, among other things, that we maintain a ratio of current assets to current liabilities of no lessthan 1.0 to 1.0 and a ratio of total funded debt to EBITDA of no more than 4.0 to 1.0. The Revolving Credit Facility prohibits us from entering into derivativearrangements for more than (i) 85% of our anticipated production from proved properties in the next two years and (ii) the greater of 75% of our anticipatedproduction from proved properties or 85% of our production from projected proved developed producing properties after such two year period (not to exceed aterm of 60 months for any such derivative arrangement).

To the extent that the borrowing base, as adjusted from time to time, exceeds the outstanding balance, no repayments of principal are required prior tomaturity. However, should the borrowing base be set at a level below the outstanding balance, we would be required to eliminate that excess over the 120 daysfollowing that determination.

Each borrowing under the Revolving Credit Facility accrues interest at either (a) the London Interbank Offered Rate, plus a margin that ranges from 3.0%to 4.0% or (b) the Alternative Base Rate defined as the greater of (i) the Administrative Agent’s Prime Rate (ii) the Federal Funds Effective Rate plus 0.5% or(iii) an adjusted LIBOR plus a margin for the Alternate Base Rate that ranges from 2.0% to 3.0%. Each such margin is based on the level of utilization under theborrowing base.

We were in compliance with all material terms and covenants of the Revolving Credit Facility at March 31, 2017.

Resolute Energy Corporation, the stand-alone parent entity, has insignificant independent assets and no operations. There are no restrictions on ourability to obtain cash dividends or other distributions of funds from our subsidiaries, except those imposed by applicable law.


In December 2014 we entered into a second lien Secured Term Loan Agreement with Bank of Montreal, as administrative agent, and the lenders partythereto, pursuant to which we borrowed $150 million. In May 2015 Resolute and certain of its subsidiaries, as guarantors, entered into an Amendment to theSecured Term Loan Agreement and Increased Facility Activation Notice-Incremental Term Loans with Bank of Montreal, as administrative agent, and the lendersparty thereto, pursuant to which the Company borrowed an additional $50 million of Incremental Term Loans under its Secured Term Loan Facility.

In December 2015 we retired $70 million of the amount outstanding under the Secured Term Loan Facility following the sale of certain properties in theMidland Basin in accordance with mandatory prepayment provisions stipulated in the Secured Term Loan Facility.

26


On January 3, 2017, we paid approximately $132 million constituting all amounts due under the Secured Term Loan Facility (including prepayment fees of$3.5 million), with a portion of the proceeds from the previously announced common stock offering that closed on December 23, 2016. In addition $6.2 million ofdeferred financing costs and original issue discount were expensed as part of the extinguishment. The Secured Term Loan Facility was terminated in connectionwith the repayment.

Senior Notes

In 2012 we consummated two private placements of senior notes with principal totaling $400 million. The Senior Notes are due May 1, 2020, and bear anannual interest rate of 8.50% with the interest on the notes payable semiannually in cash on May and November 1 of each year.

The Senior Notes were issued under an Indenture (the “Indenture”) among the Company and our existing subsidiaries (the “Guarantors”) in a privatetransaction not subject to the registration requirements of the Securities Act of 1933. In March 2013 the Company registered the Senior Notes with theSecurities and Exchange Commission by filing an amendment to the registration statement on Form S-4 enabling holders of the Senior Notes to exchange theprivately placed Senior Notes for publically registered Senior Notes with substantially identical terms. The Indenture contains affirmative and negative covenantsthat, among other things, limit our and the Guarantors’ ability to make investments, incur additional indebtedness or issue certain types of preferred stock, createliens, sell assets, enter into agreements that restrict dividends or other payments by restricted subsidiaries, consolidate, merge or transfer all or substantially allof our assets, engage in transactions with our affiliates, pay dividends or make other distributions on capital stock or prepay subordinated indebtedness andcreate unrestricted subsidiaries. The Indenture also contains customary events of default. Upon occurrence of events of default arising from certain events ofbankruptcy or insolvency, the Senior Notes shall become due and payable immediately without any declaration or other act of the trustee or the holders of theSenior Notes. Upon the occurrence of certain other events of default, the trustee or the holders of the Senior Notes may declare all outstanding Senior Notes tobe due and payable immediately. We were in compliance with all material terms and covenants under our Senior Notes as of March 31, 2017.


The Senior Notes are redeemable by us on not less than 30 or more than 60 days prior notice, at redemption prices set forth in the Indenture. If a changeof control occurs, each holder of the Senior Notes will have the right to require that we purchase all of such holder’s Senior Notes in an amount equal to 101% ofthe principal of such Senior Notes, plus accrued and unpaid interest, if any, to the date of the purchase. In light of the significantly lower interest rateenvironment currently compared to when the Senior Notes were first issued, the Company is evaluating a potential refinance of the Senior Notes.

Preferred Stock



As of March 31, 2017, the Company had accumulated undeclared preferred dividends of $1.1 million. A preferred dividend of $1.3 million was declaredon April 12, 2017 and paid on April 17, 2017.

Commitment Letter

27


The Company is evaluating the optimal long-term financing for the Delaware Basin Bronco Acquisition. In the interim, however, the Company entered intoa commitment letter on March 3, 2017, for a $100 million unsecured bridge financing facility with BMO Capital Markets (the “Commitment Letter”). TheCommitment Letter provides the Company with the ability to borrow up to $100 million, subject to satisfaction or waiver of customary conditions to closing, forthe consummation of the Delaware Basin Bronco Acquisition. In the event that the Bridge Commitment is not drawn in connection with the Delaware BasinBronco Acquisition, then the obligations of the parties under the Commitment Letter terminate.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financing arrangements other than operating leases and have not guaranteed any debt or commitments of otherentities or are party to any options on non-financial assets.

28


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Price Risk and Derivative Arrangements

Our major market risk exposure is in the pricing applicable to oil and gas production. Realized pricing on our unhedged volumes of production is primarilydriven by the spot market prices applicable to oil production and the prevailing price for gas. Oil and gas prices have been volatile and unpredictable for severalyears, and we expect this volatility to continue in the future. The prices we receive for unhedged production depend on many factors outside of our control.

We employ derivative instruments such as swaps, puts, calls, collars and other such agreements. The purpose of these instruments is to manage ourexposure to commodity price risk in order to provide a measure of stability to our cash flows in an environment of volatile oil and gas prices.

Under the terms of our Revolving Credit Agreement, as amended and restated February 17, 2017, the form of derivative instruments to be entered into isat our discretion, but they are not to exceed (i) 85% of our anticipated production from proved properties in the next two years and (ii) the greater of 75% of ouranticipated production from proved properties or 85% of our anticipated production from proved developed producing properties after such two year period,utilizing economic parameters specified in our credit agreement, including escalated prices and costs.

By removing the price volatility from a significant portion of our oil and gas production, we have mitigated, but not eliminated, the potential effects ofvolatile prices on cash flow from operations for the periods hedged. While mitigating negative effects of falling commodity prices, certain of these derivativecontracts also limit the benefits we would receive from increases in commodity prices. It is our policy to enter into derivative contracts only with counterpartiesthat are major, creditworthy financial institutions deemed by management as competent and competitive market makers. As of March 31, 2017, the fair value ofour commodity derivatives was a net liability of $0.8 million.

The following table represents our oil swap contracts as of March 31, 2017:

Oil (NYMEX WTI)

Remaining Term

Bbl per Day

Weighted AverageSwap Price

per Bbl

Fair Value ofAsset (Liability)(in thousands)

Apr – Dec 2017 3,022 $ 53.69 $ 1,656

The following table represents our gas swap contracts as of March 31, 2017: Gas (NYMEX Henry Hub)

Remaining Term

MMBtuper Day

WeightedAverage Swap Price

per MMBtu


Apr – Dec 2017 1,357 $ 2.770 $ (162)

The following table represents our NGL swap contracts as of March 31, 2017:

NGL (Mont Belvieu)

Remaining Term

Bbl per Day Weighted AverageSwap Price per Bbl

Fair Value of

Asset (Liability)(in thousands)

Apr – Dec 2017 300 $ 19.53 $ (230)

The following table represents our two-way oil collar contracts as of March 31, 2017:

Oil (NYMEX WTI)

Remaining Term

Bbl per Day

Weighted AverageFloor Price

per Bbl

Weighted AverageCeiling Price

per Bbl


Apr – Dec 2017 2,500 $ 47.54 $ 59.40 $ 720

29


The following table represents our two-way gas collar contracts as of March 31, 2017:


Remaining Term

MMBtu per Day

Weighted AverageFloor Priceper MMBtu

Weighted AverageCeiling Priceper MMBtu


Apr – Dec 2017 7,910 $ 2.504 $ 3.336 $ (633)

The following table represents our three-way oil collar contracts as of March 31, 2017:

Oil (NYMEX WTI)

Remaining Term

Bbl per Day

Weighted AverageShort Put Price

per Bbl


per Bbl


per Bbl


Apr – Dec 2017 1,500 40.00 $ 50.00 $ 60.10 $ 535

The following table represents our three-way gas collar contracts as of March 31, 2017:


Remaining Term

MMBtu per Day

Weighted AverageShort Put Price per

MMBtu




Apr – Dec 2017 1,998 $ 2.692 $ 3.192 $ 3.746 $ 21

The following table represents our commodity option contract as of March 31, 2017:

Oil (NYMEX WTI)


Weighted AverageSold Call Price

per Bbl


Jan – Dec 2018 1,100 $ 50.00 $ (2,717)



Commodity Swaps

MMBtu per Day Weighted Average Swap Price

per MMBtu


Interest Rate Risk

At March 31, 2017, we had $19 million of outstanding debt under the Revolving Credit Facility. Interest is calculated under the terms of the agreementbased principally on a LIBOR spread. A 10% increase in LIBOR would result in an increase of less than $0.1 million in annual interest expense. We do notcurrently have any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness.


We are exposed to credit risk to the extent of nonperformance by the counterparties in the derivative contracts discussed above. All counterparties arecurrent or former lenders under our Revolving Credit Facility. For these contracts, we are not required to provide any credit support to our counterparties otherthan cross collateralization with the properties securing the Revolving Credit Facility. Our derivative contracts are documented with industry standard contractsknown as a Schedule to the Master Agreement and International Swaps and Derivative Association, Inc. Master Agreement. Typical terms for the ISDAs includecredit support requirements, cross default provisions, termination events, and set-off provisions. We have set-off provisions with our Revolving Credit Facilitylenders that, in the event of counterparty default, allow us to set-off amounts owed under the Revolving Credit Facility or other general obligations againstamounts owed for derivative contract liabilities.

30


ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of Richard F. Betz, our Chief Executive Officer, and Theodore Gazulis, our Chief Financial Officer, evaluated theeffectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2017. Based on the evaluation, those officers haveconcluded that:

• our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submitunder the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rulesand forms; and

• our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submitunder the Securities Exchange Act of 1934 was accumulated and communicated to our management, including our Chief Executive Officer andChief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has not been any change in the Company’s internal control over financial reporting that occurred during the quarterly period ended March 31,2017 that has materially affected, or is reasonably likely to affect, the Company’s internal control over financial reporting.

31


PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS

Resolute is not a party to any material pending legal or governmental proceedings, other than ordinary routine litigation incidental to our business. Whilethe ultimate outcome and impact of any proceeding cannot be predicted with certainty, our management believes that the resolution of any of our pendingproceedings will not have a material adverse effect on our financial condition or results of operations.

ITEM 1A. RISK FACTORS

Information about material risks related to our business, financial condition and results of operations for the quarter ended March 31, 2017 does notmaterially differ from those set out in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2016. The additional risk factor setforth below is related to the Bronco Acquisition and potential Aneth disposition.

We plan to reposition Resolute to a pure-play Delaware Basin company by disposing of our Aneth Field Properties, we may be unable to successfullydivest our Aneth Field Properties at favorable prices and the divesture could materially adversely affect our business, financial position, results ofoperations or cash flows.

We have announced that have begun pursing a process focused on the disposition of our Aneth Field Properties in order to reposition us as a pure-playDelaware Basin company. The disposition of Aneth Field Properties, if consummated, would provide meaningful additional capital to the Company. This capitalcould be deployed either to our Delaware Basin drilling program where we see our highest rates of return or as a component of the optimal long-term financingfor the Delaware Basin Bronco Acquisition.

Aneth Field is currently a substantial part of our operations, and sales of oil and gas from Aneth Field represent a substantial part of our total cash flow. AtDecember 31, 2016, Aneth Field held approximately 41% of our net proved reserves and averaged production of 6,161 Boe per day in 2016, of whichapproximately 95% was oil. During 2016, Aneth Field had sales of 2,132 MBbl of oil and 739 MMcf gas with average realized prices of $36.37 per Bbl of oil and$1.31 per Mcf of gas with average production costs of $20.24 per Boe of lease operating expenses and $4.31 per Boe of production and ad valorem taxes.Additionally at December 31, 2016, Aneth Field consisted of 43,218 developed gross acres or 67.1% of our total developed gross acreage and 27,157 developednet acres or 60.5% of our total developed net acreage.

A sale of our Aneth Field Properties may be affected by market conditions outside of our control, such as:

• market demand;

• price of oil and gas;

• availability of financing or other sources of funding available to potential purchasers;

• general economic and political outlook of the United States;

• identification of potential purchasers and negotiation of sales agreements;

• willingness of the purchasers to assume certain agreements and liabilities associated with the assets offered for sale; and

• approval of the transaction from the Navajo Nation.

Our ability to divest of Aneth Field Properties, the timing of such divestment, and the price we may ultimately receive may be affected by the foregoing orother factors. Additionally, there can be no assurances that our subsequent investments in the Delaware Basin from the proceeds and the redeployment ofresources made available by the sale of our Aneth Field Properties will meet our internal production and profitability projections for a pure-play Delaware Basinstrategy or even meet current production and profitability projections were we not to divest the Aneth Field Properties. We currently depend in part on the cashflow generated by our Aneth Field Properties for the payment of our indebtedness, and if we do not meet our internal projections and experience lower cash flowdue to sale of our Aneth Field Properties, it may materially adversely affect our ability make payments on our outstanding indebtedness. Consequently, the saleof our Aneth Field Properties could materially adversely affect our business, financial position, results of operations or cash flows.

32


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

In connection with the vesting of Company restricted common stock under the 2009 Performance Incentive Plan (“Incentive Plan”), we retain shares ofcommon stock at the election of the recipients of such awards in satisfaction of withholding tax obligations. These shares are retired by the Company.

2017 Total Number of Shares

Purchased(1)(2) Average Price Paid

Per Share

March 1 – 31 84,835 $ 38.22

1) All shares purchased in 2017 were to offset tax withholding obligations that occur upon the vesting and delivery of outstanding common shares under the terms of the Incentive Plan.2) As of March 31, 2017, the maximum number of shares that may yet be purchased would not exceed the employees’ portion of taxes withheld on unvested shares (542,428 shares), outstanding stock

options (1,005,748 options), shares yet to be granted under the Incentive Plan (467,124 shares) and potential Outperformance Shares (130,898 shares).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

33


ITEM 6. EXHIBITS

ExhibitNumber Description

2.1

Purchase and Sale Agreement entered into March 3, 2017 by and between CP Exploration II, LLC and Petrocap CPX, LLC as sellers andResolute Natural Resources Southwest, LLC as buyer effective May 1, 2017 (filed herewith). Schedules and exhibits have been omitted pursuantto Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and ExchangeCommission upon request.

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith) 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith) 32.1

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnishedherewith)

101

The following materials are filed herewith: (i) XBRL Instance Document, (ii) XBRL Taxonomy Extension Schema Document, (iii) XBRL TaxonomyExtension Calculation Linkbase Document, (iv) XBRL Taxonomy Extension Labels Linkbase Document, (v) XBRL Taxonomy ExtensionPresentation Linkbase Document, and (vi) XBRL Taxonomy Extension Definition Linkbase Document.

34


SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned thereunto dulyauthorized. Signature Capacity Date

/s/ Richard F. Betz Richard F. Betz Chief Executive Officer and Director

(Principal Executive Officer) May 3, 2017

/s/ Theodore Gazulis Theodore Gazulis Executive Vice President and

Chief Financial Officer(Principal Financial Officer)

May 3, 2017

35 TYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd">

\

UNITED STATESSECURITIES 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 March 31, 2017

OR

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

Commission File No. 001-34464

RESOLUTE ENERGY CORPORATION(Exact Name of Registrant as Specified in its Charter)

Delaware 27-0659371

(State or other Jurisdiction ofIncorporation or Organization)

(I.R.S. EmployerIdentification Number)

1700 Lincoln Street, Suite 2800 Denver, CO 80203

(Address of Principal Executive Offices) (Zip Code)

(303) 534-4600(Registrant’s telephone number, including area code)

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 1934during 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 filingrequirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post 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 anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☑ (Do not check if a small reporting company) 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). ☐ No ☑


As of April 28, 2017, 22,449,356 shares of the Registrant’s $0.0001 par value Common Stock were outstanding.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995.The use of any statements containing the words “anticipate,” “intend,” “believe,” “estimate,” “project,” “expect,” “plan,” “should” or similar expressions areintended to identify such statements. Forward-looking statements included in this report relate to, among other things, the anticipated closing date and theexpected benefits of the Delaware Basin acquisitions; anticipated capital expenditures in 2017 and the sources of such funding; our financial condition andmanagement of the Company in the current commodity price environment; future financial and operating results; our intention to pursue the disposition of ourAneth Field properties; liquidity and availability of capital including projections of free cash flow; future borrowing base adjustments and the effect thereof; futureproduction, reserve growth and decline rates; our plans and expectations regarding our development activities including drilling, deepening, recompleting, fracingand refracing wells, the number of such potential projects, locations and productive intervals, the rates of return on our acreage and projects; the prospectivity ofour properties and acreage; and the anticipated accounting treatment of various activities. Although we believe that these statements are based upon reasonablecurrent assumptions, no assurance can be given that the future results covered by the forward-looking statements will be achieved. Forward-looking statementscan be subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by the forward-looking statements. All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us,or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation toupdate any forward-looking statement. Factors that could cause actual results to differ materially from our expectations include, among others, those factorsreferenced in the “Risk Factors” section of this report, if any, in our Annual Report on Form 10-K for the year ended December 31, 2016, and such things as:

• our ability to consummate and to realize the expected benefits from the interests acquired in the Delaware Basin acquisitions;

• volatility of oil and gas prices, including extended periods of depressed prices that would adversely affect our revenue, income, cash flow fromoperations and liquidity and the discovery, estimation and development of, and our ability to replace oil and gas reserves;

• a lack of available capital and financing, including the capital needed to pursue our operations and other development plans for our properties, onacceptable terms, including as a result of a reduction in the borrowing base under our revolving credit facility;

• our ability to successfully divest our Aneth Field properties at favorable prices and the effect of the divestiture on our results of operations and cashflows;

• our ability to raise permanent long-term financing for our Delaware Basin Bronco acquisition on terms that are acceptable or favorable to us;

• possible borrowing base reduction under our credit facility as a result of possible disposition of Aneth Field;

• risks related to our level of indebtedness;

• our ability to fulfill our obligations under our revolving credit facility, the senior notes and any additional indebtedness we may incur;

• constraints imposed on our business and operations by our revolving credit facility and senior notes may limit our ability to execute our businessstrategy;

• future write downs of reserves and the carrying value of our oil and gas properties;

• acquisitions and other business opportunities (or lack thereof) that may be presented to and pursued by us, and the risk that any opportunitycurrently being pursued will fail to consummate or encounter material complications;

• our ability to achieve the growth and benefits we expect from our acquisitions;

• risks associated with unanticipated liabilities assumed, or title, environmental or other problems resulting from, our acquisitions;

• our future cash flow, liquidity and financial position;

• the success of our business and financial strategy, derivative strategies and plans;

• the success of the development plan for and production from our oil and gas properties;

• risks associated with rising interest rates;


• risks associated with all of our Aneth Field oil production being purchased by a single cus tomer and connected to such customer with a pipelinethat we do not own or control;

• inaccuracies in reserve estimates;

• the completion, timing and success of drilling on our properties;

• operational problems, or uninsured or underinsured losses affecting our operations or financial results;

• the amount, nature and timing of our capital expenditures, including future development costs;

• our relationship with the Navajo Nation, the local community in the area where we operate Aneth Field, and Navajo Nation Oil and Gas Company,as well as certain purchase rights held by Navajo Nation Oil and Gas Company;

• the impact of any U.S. or global economic recession;

• the timing and amount of future production of oil and gas;

• the ability to sell or otherwise monetize assets, including our Aneth Field assets, at values and on terms that are advantageous to us;

• availability of, or delays related to, drilling, completion and production, personnel, supplies and equipment;

• risks and uncertainties in the application of available horizontal drilling and completion techniques;

• uncertainty surrounding occurrence and timing of identifying drilling locations and necessary capital to drill such locations;

• our ability to fund and develop our estimated proved undeveloped reserves;

• the effect of third party activities on our oil and gas operations, including our dependence on third party owned water sourcing, gathering anddisposal, oil gathering and gas gathering and processing systems;

• our operating costs and other expenses;

• our success in marketing oil and gas;

• the impact and costs related to compliance with, or changes in, laws or regulations governing our oil and gas operations, including changes inNavajo Nation laws, and the potential for increased regulation of drilling and completion techniques, underground injection or fracing operations;

• our relationship with the local communities in the areas where we operate;

• the availability of water and our ability to adequately treat and dispose of water while and after drilling and completing wells;

• regulation of waste water injection intended to address seismic activity;

• the concentration of our producing properties in a limited number of geographic areas;

• potential changes to regulations affecting derivatives instruments;

• environmental liabilities under existing or future laws and regulations;

• the impact of climate change regulations on oil and gas production and demand;

• anticipated CO2 supply, which is currently sourced exclusively from Kinder Morgan CO 2 Company, L.P. under a contract with take or payobligations;

• the effectiveness and results of our CO2 flood program at Aneth Field;

• potential changes in income tax deductions and credits currently available to the oil and gas industry;

• the impact of weather and the occurrence of disasters, such as fires, explosions, floods and other events and natural disasters;

• competition in the oil and gas industry and failure to keep pace with technological development;

• actions, announcements and other developments in OPEC and in other oil and gas producing countries;

• risks relating to our joint interest partners’ and other counterparties’ inability to fulfill their contractual commitments;


• loss of senior management or key technical personnel;

• the impact of long-term incentive programs, including performance-based awards and stock appreciation rights;

• timing of issuance of permits and rights of way, including the effects of any government shut-downs;

• potential power supply limitations in the electrical infrastructure serving our operations;

• timing of installation of gathering infrastructure in areas of new exploration and development;

• potential breakdown of equipment and machinery relating to the Aneth compression facility;

• losses possible from pending or future litigation;

• cybersecurity risks;

• the risk of a transaction that could trigger a change of control under our debt agreements;

• risks related to our common stock, potential declines in stock prices and potential future dilution to stockholders;

• risk factors discussed or referenced in this report; and

• other factors, many of which are beyond our control.

Additionally, the Securities and Exchange Commission (“SEC”) requires oil and gas companies, in filings made with the SEC, to disclose provedreserves, which are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to beeconomically producible from a given date forward, from known reservoirs, under existing economic conditions, operating methods and governmentalregulations. The SEC permits the optional disclosure of “probable” and “possible” reserves. From time to time, we may elect to disclose probable reserves andpossible reserves, excluding their valuation, in our SEC filings, press releases and investor presentations. The SEC defines “probable” reserves as “thoseadditional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are likely as not to be recovered.” TheSEC defines “possible” reserves as “those additional reserves that are less certain to be recovered than probable reserves.” The Company applies thesedefinitions when estimating probable and possible reserves. Statements of reserves are only estimates and may not correspond to the ultimate quantities of oiland gas recovered. Any reserves estimates or potential resources disclosed in our public filings, press releases and investor presentations that are notspecifically designated as being estimates of proved reserves may include estimated reserves not necessarily calculated in accordance with, or contemplated by,the SEC’s reserves reporting guidelines.

SEC rules prohibit us from including resource estimates in our public filings with the SEC. Our potential resource estimates include estimates ofhydrocarbon quantities for (i) new areas for which we do not have sufficient information to date to classify as proved, probable or possible reserves, (ii) otherareas to take into account the level of certainty of recovery of the resources and (iii) uneconomic proved, probable or possible reserves. Potential resourceestimates do not take into account the certainty of resource recovery and are therefore not indicative of the expected future recovery and should not be reliedupon for such purpose. Potential resources might never be recovered and are contingent on exploration success, technical improvements in drilling access,commerciality and other factors. In our press releases and investor presentations, we sometimes include estimates of quantities of oil and gas using certainterms, such as “resource,” “resource potential,” “EUR,” “oil in place,” or other descriptions of volumes of reserves, which terms include quantities of oil and gasthat may not meet the SEC definition of proved, probable and possible reserves. These estimates are by their nature more speculative than estimates of provedreserves and accordingly are subject to substantially greater risk of being recovered by Resolute. The Company believes its potential resource estimates arereasonable, but such estimates have not been reviewed by independent engineers. Furthermore, estimates of potential resources may change significantly asdevelopment provides additional data, and actual quantities that are ultimately recovered may differ substantially from prior estimates.

Production rates, including 24‐hour peak IP rates, 30‐day peak IP rates, 90‐day peak IP rates, 120 ‐day peak IP rates and 150-day peak IP rates, for bothour wells and for those wells that are located near to our properties are limited data points in each well’s productive history. These rates are sometimes actualrates and sometimes extrapolated or normalized rates. As such the rates for a particular well may change as additional data becomes available. Peakproduction rates are not necessarily indicative or predictive of future production rates, EUR or economic rates of return from such wells and should not be reliedupon for such purpose. Equally, the way we calculate and report peak IP rates and the methodologies employed by others may not be consistent, and thus thevalues reported may not be directly and meaningfully comparable. Lateral lengths described are indicative only. Actual completed lateral lengths depend onvarious considerations such as lease‐line offsets. Standard length laterals, sometimes referred to as 5,000 foot laterals, are laterals with completed lengthgenerally between 4,000 feet and 5,500 feet. Mid‐length laterals, sometimes referred to as 7,500 foot laterals, are laterals with completed length generallybetween 6,500 feet and 8,000 feet. Long laterals, sometimes referred to as 10,000 foot laterals, are laterals with completed length generally longer than 8,000feet.


You are urged to consider closely the disclosure in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year endedDecember 31, 2016, in particular the factors described under “Risk Factors.”

TABLE OF CONTENTS PART I - FINANCIAL INFORMATION

Item 1. Financial Statements 1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20

Item 3. Quantitative and Qualitative Disclosures About Market Risk 29

Item 4. Controls and Procedures 31

PART II - OTHER INFORMATION 32

Item 1. Legal Proceedings 32

Item 1 A. Risk Factors 32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 33

Item 3. Defaults Upon Senior Securities 33

Item 4. Mine Safety Disclosures 33

Item 5. Other Information 33

Item 6. Exhibits 34

Signatures 35



Condensed Consolidated Balance Sheets (UNAUDITED)(in thousands, except share amounts)

March 31, December 31,

2017 2016

Assets Current assets:

Cash and cash equivalents $ 1,041 $ 133,089 Accounts receivable 50,698 55,228 Commodity derivative instruments 3,675 218 Prepaid expenses and other current assets 2,950 3,249

Total current assets 58,364 191,784 Property and equipment, at cost:

Oil and gas properties, full cost method of accounting Unproved 118,081 121,375 Proved 1,925,489 1,889,111

Other property and equipment 9,774 9,754 Accumulated depletion, depreciation and amortization (1,662,721 ) (1,647,120 )

Net property and equipment 390,623 373,120 Other assets:

Restricted cash 23,144 23,137 Other assets 17,426 332

Total assets $ 489,557 $ 588,373

Liabilities and Stockholders’ Deficit Current liabilities:

Accounts payable $ 17,870 $ 8,675 Accrued expenses 45,436 37,507 Accrued revenue payable 19,241 19,801 Accrued interest payable 14,211 5,784 Asset retirement obligations 690 895 Commodity derivative instruments 2,389 8,014 Accrued cash-settled incentive awards 28,143 27,158 Secured term loan facility — 122,139

Total current liabilities 127,980 229,973 Long term liabilities:

Revolving credit facility 16,540 8,821 Senior notes 397,409 397,154 Asset retirement obligations 16,333 19,457 Commodity derivative instruments 2,096 4,104 Other long term liabilities 5,138 4,611

Total liabilities 565,496 664,120 Commitments and contingencies Stockholders’ deficit:

Convertible preferred stock, $0.0001 par value; 1,000,000 shares authorized; issued and outstanding 62,500 shares at March 31, 2017 and December 31, 2016, respectively; $62.5 million liquidation preference —

—

Common stock, $0.0001 par value; 45,000,000 shares authorized; issued and outstanding 22,449,744 and 21,932,842 shares at March 31, 2017 and December 31, 2016, respectively 2

2

Additional paid-in capital 948,112 948,380 Accumulated deficit (1,024,053 ) (1,024,129 )

Total stockholders’ deficit (75,939) (75,747)Total liabilities and stockholders’ deficit $ 489,557 $ 588,373


1



Condensed Consolidated Statements of Operations (UNAUDITED)(in thousands, except per share data)


2017 2016

Revenue: Oil $ 57,659 $ 17,795 Gas 4,957 978 Natural gas liquids 2,610 229

Total revenue 65,226 19,002 Operating expenses:

Lease operating 18,356 13,817 Production and ad valorem taxes 6,603 3,142 Depletion, depreciation, amortization, and asset retirement obligation accretion 16,035

10,361

Impairment of proved oil and gas properties — 58,000 General and administrative 10,415 8,968 Cash-settled incentive awards 5,427 798

Total operating expenses 56,836 95,086 Income (loss) from operations 8,390 (76,084)Other income (expense):

Interest expense, net (17,697) (13,075)Commodity derivative instruments gain 10,840 3,841 Other income (expense) (60) 6

Total other expense (6,917) (9,228)Net income (loss) 1,473 (85,312)

Preferred stock dividends (1,397) — Net income (loss) available to common shareholders $ 76 $ (85,312)

Net income (loss) per common share: Basic $ 0.01 $ (5.65 )Diluted 0.01 (5.65 )

Weighted average common shares outstanding: Basic 21,738 15,036

Diluted 22,791 15,036


2



Condensed Consolidated Statements of Stockholders’ Deficit (UNAUDITED)(in thousands)

Additional Total Common Stock Preferred Stock Paid-in Accumulated Stockholders’

Shares Amount Shares Amount Capital Deficit Deficit

Balance as of January 1, 2017 21,933 $ 2 63 $ — $ 948,380 $ (1,024,129 ) $ (75,747)Issuance of stock, restricted stock and share-based compensation 567 — — — 2,881 — 2,881 Redemption of restricted stock for employee income tax and restricted stock forfeitures (87) — — — (3,242) — (3,242)Exercise of employee options to purchase common stock 37 — — — 93 — 93 Preferred stock dividend — — — — — (1,397) (1,397)Net income — — — — — 1,473 1,473 Balance as of March 31, 2017 22,450 $ 2 63 $ — $ 948,112 $ (1,024,053 ) $ (75,939)


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Condensed Consolidated Statements of Cash Flows (UNAUDITED)(in thousands)


2017 2016

Operating activities: Net income (loss) $ 1,473 $ (85,312)Adjustments to reconcile net loss to net cash provided by operating activities:

Depletion, depreciation, amortization and asset retirement obligation accretion 16,035 10,361 Impairment of proved oil and gas properties — 58,000 Amortization of deferred financing costs and long-term debt premium and discount 7,743 1,303 Share-based compensation 2,973 2,324 Commodity derivative instruments gain (10,840) (3,841)Commodity derivative settlement gain (loss) (250) 27,748 Change in operating assets and liabilities:

Accounts receivable 10,497 2,332 Other current assets (6) 126 Accounts payable and accrued expenses 3,222 (5,001)Accrued interest payable 8,427 8,497

Net cash provided by operating activities 39,274 16,537 Investing activities:

Oil and gas exploration and development expenditures (42,298) (23,001)Proceeds from sale of oil and gas properties 14,183 166 Deposit for Bronco acquisition (16,000) — Other long-term assets 4 13 Purchase of other property and equipment (20) (30)Restricted cash (737) (1 )

Net cash used in investing activities (44,868) (22,853)Financing activities:

Proceeds from bank borrowings 73,000 — Repayments of borrowings (64,000) — Repayment of term loan (128,303) — Payment of financing costs (2,605) — Payment of preferred dividend (1,397) — Redemption of restricted stock for employee income taxes (3,242) (60)Proceeds from exercise of employee options to purchase common stock 93 —

Net cash used in financing activities (126,454) (60)Net decrease in cash and cash equivalents (132,048) (6,376)Cash and cash equivalents at beginning of period 133,089 9,297 Cash and cash equivalents at end of period $ 1,041 $ 2,921


4



Notes to Condensed Consolidated Financial Statements Note 1 — Organization and Nature of Business

Resolute Energy Corporation (“Resolute” or the “Company”), is an independent oil and gas company engaged in the exploitation, development,exploration for and acquisition of oil and gas properties. Materially all of the Company’s operating assets are comprised of properties in the Delaware Basin inwest Texas (the “Permian Properties” or “Permian Basin Properties”) and Aneth Field located in the Paradox Basin in southeast Utah (the “Aneth FieldProperties” or “Aneth Field”). The Company conducts all of its activities in the United States of America.

Resolute Energy Corporation, the stand-alone parent entity, has insignificant independent assets and no operations. There are no restrictions on theCompany’s ability to obtain cash dividends or other distributions of funds from its subsidiaries, except those imposed by applicable law.

Note 2 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements include Resolute and its subsidiaries, and have been prepared in accordance withaccounting principles generally accepted in the United States (“GAAP”) and Regulation S-X for interim financial reporting. Except as disclosed herein, there hasbeen no material change in our basis of presentation from the information disclosed in the notes to Resolute’s consolidated financial statements for the yearended December 31, 2016. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation ofthe interim financial information have been included. Operating results for the periods presented are not necessarily indicative of the results that may beexpected for the full year. All significant intercompany transactions have been eliminated upon consolidation. Certain prior period amounts have beenreclassified to conform to the current period presentation.

In connection with the preparation of the condensed consolidated financial statements, Resolute evaluated subsequent events that occurred after thebalance sheet date, through the date of filing.

Significant Accounting Policies

The significant accounting policies followed by Resolute are set forth in Resolute’s consolidated financial statements for the year ended December 31,2016. These unaudited condensed consolidated financial statements are to be read in conjunction with the consolidated financial statements appearing inResolute’s Annual Report on Form 10-K and related notes for the year ended December 31, 2016.

Recent Accounting Pronouncements

In May 2014 the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which creates Topic 606 (“ASC 606”). ASC 606 supersedesexisting revenue recognition requirements under GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which weexpect to be entitled in exchange for transferring goods or services to a customer. Additional disclosures will be required as to the nature, timing and uncertaintyof revenue and cash flows from contracts with customers. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09 forone year to annual reports beginning after December 15, 2017. Early adoption is permitted for fiscal years beginning after December 15, 2016.

In May 2016 the FASB issued ASU 2016-12 : Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and PracticalExpedients (“ASU 2016-12”), which updates ASU 2014-09 to clarify core recognition principles including collectability, sales tax presentation, noncashconsideration, contract modifications and completed contracts at transition. This ASU is required to be adopted using either the retrospective transition method,which requires restating previously reported results or the cumulative effect (modified retrospective) transition method, which utilizes a cumulative-effectadjustment to retained earnings in the period of adoption to account for the prior period effects. We have aggregated and reviewed our contracts that are withinthe scope of ASC 606. Based on our evaluation to date, there will not be a material impact on our financial statements. However, we anticipate the new standardwill result in more robust footnote disclosures. We cannot currently determine the extent of the new footnote disclosures as further clarification is needed forcertain practices common to the industry. We will continue to evaluate the impacts that future contracts may have.

5


In February 2016 the FASB issued new authoritative guidance related to the accounting of leases. The main provisions require that lessees recognizeboth a lease liability and a right-of-use asset at the commencement date. This authoritative accounting guidance is effective for the annual period beginning afterDecember 15, 2018, and interim periods within annual periods beginning after December 15, 2018. The Company is currently evaluating the provisions of thisguidance and assessing its impact on the Company’s financial statements and disclosures.

Assumptions, Judgments and Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make various assumptions,judgments and estimates to determine the reported amounts of assets, liabilities, revenue and expenses, and in the disclosures of commitments andcontingencies. Changes in these assumptions, judgments and estimates will occur as a result of the passage of time and the occurrence of future events.Accordingly, actual results could differ from amounts previously established.

Significant estimates with regard to the condensed consolidated financial statements include proved oil and gas reserve volumes and the related presentvalue of estimated future net cash flows used in the ceiling test applied to capitalized oil and gas properties; asset retirement obligations; valuation of derivativeassets and liabilities; the estimated fair value and allocation of the purchase price related to business combinations; share-based compensation expense; cash-settled long-term incentive expense; depletion, depreciation and amortization; accrued liabilities; revenue and related receivables and income taxes.

Oil and Gas Properties

Pursuant to full cost accounting rules, Resolute is required to perform a quarterly “ceiling test” calculation to test its oil and gas properties for possibleimpairment. The primary components impacting the calculation are commodity prices, reserve quantities added and produced, overall exploration anddevelopment costs and depletion expense. If the net capitalized cost of the Company’s oil and gas properties subject to amortization (the “carrying value”)exceeds the ceiling limitation, the excess would be charged to expense. The ceiling limitation is equal to the sum of the present value discounted at 10% ofestimated future net cash flows from proved reserves, the cost of properties not being amortized, the lower of cost or estimated fair value of unproven propertiesincluded in the costs being amortized, and all related income tax effects.

No impairment was recorded during the three months ended March 31, 2017. However, the Company recorded a non-cash impairment of the carryingvalue of its oil and gas properties of $58 million as a result of the ceiling test limitation during the three months ended March 31, 2016. If in future periods anegative impact continues on one or more of the components of the calculation, including market prices of oil and gas (based on a trailing twelve-monthunweighted average of the oil and gas prices in effect on the first day of each month), differentials from posted prices, future drilling and capital plans, operatingcosts or expected production, the Company may incur further full cost ceiling impairment related to its oil and gas properties in such periods.

Note 3 — Acquisitions and Divestitures Acquisition of Reeves County Properties in the Delaware Basin

Delaware Basin Bronco Acquisition

On March 3, 2017, Resolute Natural Resources Southwest, LLC (“Buyer” or “Resolute Southwest”), a wholly-owned subsidiary of the Company, enteredinto a Purchase and Sale Agreement (the “Purchase Agreement”) with undisclosed private sellers (“Sellers”) pursuant to which Buyer agreed to acquire certainproducing and undeveloped oil and gas properties in the Delaware Basin in Reeves County, Texas (the “Delaware Basin Bronco Acquisition” – previouslyreferred to as the “Orla” acquisition).

Consideration for the acquisition will be $160 million in cash, subject to customary purchase price adjustments. The closing of the acquisition is expectedto occur on or about May 15, 2017, and is subject to the satisfaction or waiver of certain customary conditions, including the material accuracy of therepresentations and warranties of Buyer and Sellers, and performance of covenants. The Delaware Basin Bronco Acquisition has an effective date of May 1,2017. The Purchase Agreement contains terms and conditions customary to transactions of this type. Subject to the right of Buyer to be indemnified for certainliabilities for a limited period of time and for breaches of representations, warranties and covenants, Buyer will assume substantially all liabilities associated withthe acquired properties. The Purchase Agreement also contains certain customary termination rights for each of Buyer and Sellers.

6


The properties to be acquired include approximately 4,600 net acres in Reeves County, Texas, consisting of 2,187 net acres adjacent to the Company’sexisting operating area in Reeves County and 2,405 net acres in southern Reeves County. In addition, the Company will acquire interests in (i) two operated4,500 foot lateral horizontal Wolfcamp wells that were producing approximately 800 net Boe per day at the time the Purchase Agreement was signed, (ii) sixoperated drilled but uncompleted Wolfcamp wells, four of which have lateral lengths of approximately 4,500 feet and two with approximately 7,500 foot laterals;and (iii) one non-operated 10,000 foot lateral Wolfcamp A well that is currently awaiting completion.

The Company is evaluating the optimal long-term financing for the Delaware Basin Bronco Acquisition. In the interim, however, the Company entered intoa commitment letter on March 3, 2017, for a $100 million unsecured bridge financing facility with BMO Capital Markets (the “Commitment Letter”). TheCommitment Letter provides the Company with the ability to borrow up to $100 million, subject to satisfaction or waiver of customary conditions to closing, forthe consummation of the Delaware Basin Bronco Acquisition (“Bridge Commitment”). In the event that the Bridge Commitment is not drawn in connection withthe Delaware Basin Bronco Acquisition, then the obligations of the parties under the Commitment Letter terminate.

Delaware Basin Firewheel Acquisition

In October 2016 Resolute and Resolute Southwest entered into a Purchase and Sale Agreement with Firewheel Energy, LLC (“Firewheel”) pursuant towhich Resolute Southwest agreed to acquire certain oil and gas interests in the Delaware Basin in Reeves County, Texas (the “Firewheel Properties”), forconsideration to Firewheel consisting of $90 million in cash and 2,114,523 shares of common stock of the Company, par value $0.0001 per share, issued toFirewheel upon the closing of the purchase of the Firewheel Properties (the “Delaware Basin Firewheel Acquisition”). The closing of the Delaware BasinFirewheel Acquisition occurred on October 7, 2016.

The Company acquired the Firewheel Properties for $153.2 million. Revenue and expenses related to the acquired properties are included in theconsolidated statement of operations on the closing date of the transaction. The Delaware Basin Firewheel Acquisition was accounted for using the acquisitionmethod.

The Company completed its assessment of the fair values of the assets acquired and liabilities assumed. Accordingly, the following table presents thepurchase price allocation of the Delaware Basin Firewheel Acquisition at December 31, 2016, based on the fair values of assets acquired and liabilities assumed(in thousands):

2016

Proved oil and gas properties $ 40,900 Unproved oil and gas properties 112,800 Asset retirement obligations assumed (500)

Total purchase price $ 153,200

Divestiture of Southeast New Mexico Properties in the Permian Basin

In February 2017 the Company closed on the sale of its Denton and South Knowles properties in the Northwest Shelf project area in Lea County, NewMexico, for approximately $14.5 million in cash, subject to customary purchase price adjustments. The effective date of this sale was October 1, 2016. Theproceeds of the sale were used to reduce amounts outstanding under the Company’s Revolving Credit Facility (as defined in Note 5) and for other corporatepurposes. As part of the sale, the Company was also no longer liable for asset retirement obligations of $3.6 million at March 31, 2017.

Divestiture of Midstream Assets in the Delaware Basin

In July 2016 Resolute Southwest entered into a definitive Purchase and Sale Agreement (the “Mustang Agreement”) with Caprock Permian ProcessingLLC and Caprock Field Services LLC, as buyers (collectively, “Caprock”) pursuant to which Resolute Southwest and an existing minority interest holder agreed tosell certain gas gathering and produced water handling and disposal systems owned by them in the Mustang project area in Reeves County, Texas, (“Mustang”)for a cash payment of $35 million, plus certain earn-out payments described below.

In July 2016 Resolute Southwest also entered into a definitive Purchase and Sale Agreement (the “Appaloosa Agreement”) with Caprock, pursuant towhich Resolute Southwest agreed to sell certain gas gathering and produced water handling and disposal systems owned by Resolute Southwest in theAppaloosa project area in Reeves County, Texas, (“Appaloosa”) for a cash payment of $15 million, plus certain earn-out payments described below.

7


In August 2016 Resolute Southwest closed the transactions contemplated by t he Mustang Agreement and the Appaloosa Agreement. Resolute Southwestreceived aggregate consideration of approximately $36 million (including earn-out payments earned as of the closing), of which approximately $2 million wasplaced in an escrow account for a period of time to secure Resolute’s indemnity obligations under the Mustang Agreement and the Appaloosa Agreement. As thesale did not significantly alter the relationship between capital costs and proved reserves, no gain or loss was recognized.

The net proceeds of the midstream sale were used to repay amounts outstanding under the Company’s Revolving Credit Facility (as defined in Note 5)and for general corporate purposes.

In July 2016, in connection with the Appaloosa Agreement and the Mustang Agreement, Resolute Southwest also entered into a definitive Earn-outAgreement (the “Earn-out Agreement”), pursuant to which Resolute Southwest will be entitled to receive certain earn-out payments based on drilling andcompletion activity in Appaloosa and Mustang through 2020 that will deliver gas and produced water into the system. Earn-out payments for each qualifying wellwill vary depending on the lateral length of the well and the year in which the well is drilled and completed. In March 2017 the Earn-out Agreement was amendedby the parties to provide for an increase in earn-out payments for the wells drilled and completed in 2017. Earn-out payments are contingent on future drilling,and therefore will be recognized when received.

In connection with the closing of the transactions contemplated by the Appaloosa Agreement and the Mustang Agreement, Resolute Southwest enteredinto fifteen year commercial agreements with Caprock for gas gathering services and water handling and disposal services for all current and future gas and waterproduced by Resolute Southwest in Mustang and Appaloosa in exchange for customary fees based on the volume of gas and water produced and delivered.Resolute Southwest has agreed to dedicate and deliver all gas and water produced from its acreage in Mustang and Appaloosa to Caprock for gathering,processing, compression and disposal services for a term of fifteen years.


Pro Forma Financial Information

The unaudited pro forma financial information for the three months ended March 31, 2016 reflects Resolute’s results as if the Delaware Basin FirewheelAcquisition and the sale of the Delaware Basin Midstream Assets had occurred on January 1, 2016 (in thousands, except per share amounts):

Three Months Ended

March 31, 2016

Revenue $ 20,404 Loss from operations (76,967)Net loss (86,389) Net loss per share Basic and diluted $ (5.04 )Weighted average common shares outstanding Basic and diluted 17,151

8


Note 4 — Earnings per Share

The Company computes basic net income (loss) per share using the weighted average number of shares of common stock outstanding during theperiod. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock and, if dilutive, potential shares ofcommon stock outstanding during the period. Net income (loss) available to common stockholders is computed by deducting both the dividends declared in theperiod on preferred stock and the dividends accumulated for the period on cumulative preferred stock from net income. Potentially dilutive shares consist of theincremental shares and options issuable under the Company’s 2009 Performance Incentive Plan (the “Incentive Plan”) as well as common shares issuable uponthe assumed conversion of the Convertible Preferred Stock (as defined in Note 7). The treasury stock method is used to measure the dilutive impact ofpotentially dilutive shares.

The following table details the potential weighted average dilutive and anti-dilutive securities for the periods presented (in thousands):

Three Months Ended

March 31,

2017 2016

Potential dilutive restricted stock 3,625 410 Anti-dilutive securities 2,116 1,137

The following table sets forth the computation of basic and diluted net income (loss) per share of common stock for the periods presented (in thousands,

except per share amounts):

Three Months Ended

March 31,

2017 2016

Net income (loss) available to common stockholders $ 203 $ (85,312) Basic weighted average common shares outstanding 21,738 15,036 Add: dilutive effect of non-vested restricted stock 172 — Add: dilutive effect of options 881 —

Diluted weighted average common shares outstanding 22,791 15,036

Basic and diluted net income (loss) per common share $ 0.01 $ (5.65 )

Note 5 — Long Term Debt

As of the dates indicated, the Company’s long-term debt consisted of the following (in thousands):

Principal



costs March 31, 2017

Revolving credit facility $ 19,000 $ — $ (2,460) $ 16,540 8.50% senior notes 400,000 920 (3,511) 397,409

Total long-term debt $ 419,000 $ 920 $ (5,971) $ 413,949

Principal



costs December 31, 2016

Revolving credit facility $ 10,000 $ — $ (1,179) $ 8,821 Secured term loan facility 128,303 (4,882) (1,282) 122,139 8.50% senior notes 400,000 985 (3,831) 397,154

Total long-term debt $ 538,303 $ (3,897) $ (6,292) $ 528,114 Current portion of secured term loan facility 128,303 (4,882) (1,282) 122,139 Long-term debt $ 410,000 $ 985 $ (5,010) $ 405,975

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For the three months ended March 31, 2017 and 2016, the Company incurred interest expense on long-term debt of $17.7 million and $13.1 million,respectively. Approximately $9.7 million in interest expense was incurred in 2017 as a result of the extinguishment of the Secured Term Loan Facility (as definedbelow) on January 3, 2017. The Company capitalized $2.5 million and $0.4 million of interest expense during the three months ended March 31, 2017 and 2016,respectively.


On February 17, 2017, the Company entered into the Third Amended and Restated Credit Agreement with a syndicate of banks led by Bank of Montreal,as Administrative Agent, Capital One, National Association, as syndication agent, and Barclays Bank PLC, ING Capital LLC and SunTrust Bank, as co-documentation agents (the “Revolving Credit Facility”). In connection with entering into the Revolving Credit Facility, the Company repaid all amountsoutstanding under the Second Amended and Restated Credit Agreement, dated as of April 15, 2015, by and among Resolute Energy Corporation, as borrower,certain subsidiaries of Resolute Energy Corporation, as Guarantors, Wells Fargo Bank, National Association, as administrative agent, and the lenders partythereto, as amended, and terminated that agreement.

The Revolving Credit Facility specifies a maximum borrowing base as determined by the lenders, which was initially set at $150 million. Thedetermination of the borrowing base takes into consideration the estimated value of Resolute’s oil and gas properties in accordance with the lenders’ customarypractices for oil and gas loans. The borrowing base is redetermined semi-annually, and the amount available for borrowing could be increased or decreased as aresult of such redeterminations. Under certain circumstances, either Resolute or the lenders may request an interim redetermination. The Revolving CreditFacility matures in February 2021, unless there is a maturity of material indebtedness prior to such date.

The Revolving Credit Facility includes covenants that require, among other things, that Resolute maintains a ratio of current assets to current liabilities ofno less than 1.0 to 1.0 and a ratio of funded debt to EBITDA of no more than 4.0 to 1.0. The Revolving Credit Facility prohibits us from entering into derivativearrangements for more than (i) 85% of our anticipated production from proved properties in the next two years and (ii) the greater of 75% of our anticipatedproduction from proved properties or 85% of our production from projected proved developed producing properties after such two year period (not to exceed aterm of 60 months for any such derivative arrangement). The Revolving Credit Facility also includes customary additional terms and covenants that placelimitations on certain types of activities, the payment of dividends, and that require satisfaction of certain financial tests. Resolute was in compliance with theterms and covenants of the Revolving Credit Facility at March 31, 2017.

As of March 31, 2017, outstanding borrowings under the Revolving Credit Facility were $19 million with a weighted average interest rate of 6.0%, under aborrowing base of $150 million. Pursuant to the spring borrowing base redetermination, the borrowing base has been increased to $225 million, effective April17, 2017.

To the extent that the borrowing base, as adjusted from time to time, exceeds the outstanding balance, no repayments of principal are required prior tomaturity. However, should the borrowing base be set at a level below the outstanding balance, Resolute would be required to eliminate that excess within 120days following that determination. The Revolving Credit Facility is guaranteed by all of Resolute’s subsidiaries and is collateralized by substantially all of theassets of the Company’s Aneth Field and Delaware Basin assets held by Resolute Aneth, LLC and Resolute Natural Resources Southwest, LLC, which arewholly-owned subsidiaries of the Company.

Each base rate borrowing under the Revolving Credit Facility accrues interest at either (a) the London Interbank Offered Rate (“LIBOR”), plus a marginthat ranges from 3.0% to 4.0% or (b) the Alternative Base Rate defined as the greater of (i) the Administrative Agent’s Prime Rate (ii) the Federal Funds effectiveRate plus 0.5% or (iii) an adjusted London Interbank Offered Rate plus a margin that ranges from 2.0% to 3.0%. Each such margin is based on the level ofutilization under the borrowing base.


In December 2014 Resolute and certain of its subsidiaries, as guarantors, entered into a second lien Secured Term Loan Agreement with Bank ofMontreal, as administrative agent, and the lenders party thereto, pursuant to which the Company borrowed $150 million (the “Secured Term Loan Facility”). InMay 2015 Resolute and certain of its subsidiaries, as guarantors, entered into an Amendment to the Secured Term Loan Agreement and Increased FacilityActivation Notice-Incremental Term Loans (the “Amendment”) with Bank of Montreal, as administrative agent, and the lenders party thereto, pursuant to whichthe Company borrowed an additional $50 million of second lien term debt (the “Incremental Term Loans”) under its Secured Term Loan Facility.

In December 2015 the Company retired $70 million of the amount outstanding under the Secured Term Loan Facility following the sale of certainproperties in the Midland Basin in accordance with mandatory prepayment provisions stipulated in the Secured Term Loan Facility.

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On January 3, 2017, the Company repaid approximately $132 million constituting all amounts due under the Term Loan Facility (including prepaymentfees of $3.5 million), with a portion of the proceeds from its previously announced common stock offering that closed on December 23, 2016. In addition $6.2million of deferred financing costs and original issue discount were expensed as part of the extinguishment. The Secured Term Loan Facility was terminated inconnection with the repayment.

Senior Notes

In 2012 the Company consummated two private placements of senior notes with principal totaling $400 million (the “Senior Notes”). The Senior Notes aredue May 1, 2020, and bear an annual interest rate of 8.50% with the interest on the Senior Notes payable semiannually in cash on May 1 and November 1 ofeach year.

The Senior Notes were issued under an Indenture (the “Indenture”) among the Company and the Company’s existing subsidiaries (the “Guarantors”) in aprivate transaction not subject to the registration requirements of the Securities Act of 1933. In March 2013 the Company registered the Senior Notes with theSecurities and Exchange Commission by filing an amendment to the registration statement on Form S-4 enabling holders of the Senior Notes to exchange theprivately placed Senior Notes for publically registered Senior Notes with substantially identical terms. The Indenture contains affirmative and negative covenantsthat, among other things, limit the Company’s and the Guarantors’ ability to make investments, incur additional indebtedness or issue certain types of preferredstock, create liens, sell assets, enter into agreements that restrict dividends or other payments by restricted subsidiaries, consolidate, merge or transfer all orsubstantially all of the assets of the Company, engage in transactions with the Company’s affiliates, pay dividends or make other distributions on capital stock orprepay subordinated indebtedness and create unrestricted subsidiaries. The Indenture also contains customary events of default. Upon occurrence of events ofdefault arising from certain events of bankruptcy or insolvency, the Senior Notes shall become due and payable immediately without any declaration or other actof the trustee or the holders of the Senior Notes. Upon the occurrence of certain other events of default, the trustee or the holders of the Senior Notes maydeclare all outstanding Senior Notes to be due and payable immediately. The Company was in compliance with all financial covenants under its Senior Notes asof March 31, 2017.


The Senior Notes are redeemable by the Company on not less than 30 or more than 60 days’ prior notice, at redemption prices set forth in the Indenture.If a change of control occurs, each holder of the Senior Notes will have the right to require that the Company purchase all of such holder’s Senior Notes in anamount equal to 101% of the principal of such Senior Notes, plus accrued and unpaid interest, if any, to the date of the purchase.

As previously disclosed in its Current Report on Form 8-K filed on April 28, 2016, during the month of February 2016 the Company was approached bycertain holders of the Senior Notes to engage in discussions with the Company regarding a potential debt exchange, financing or other transaction involving theSenior Notes. The Company and the noteholders did not reach an agreement on such a transaction and the Company has terminated all discussions withnoteholders regarding any such transaction but may engage in other such discussions in the future.

The fair value of the Senior Notes at March 31, 2017, was estimated to be $404.8 million based upon data from independent market makers (Level 2 fairvalue measurement).

Note 6 — Income Taxes

Income tax benefit (expense) during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income (loss),plus any significant, unusual or infrequently occurring items that are recorded in the interim period. The provision for income taxes for the three months endedMarch 31, 2017 and 2016, differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 35% to income before incometaxes. This difference relates primarily to the valuation allowance established, in addition to state income taxes and estimated permanent differences.

There was no provision for income taxes during the three months ended March 31, 2017 and 2016.

The Company had no reserve for uncertain tax positions as of March 31, 2017. The Company assesses the recoverability of its deferred tax assets eachperiod by considering whether it is more likely than not that all or a portion of the deferred tax assets will be realized. The Company considers all availableevidence (both positive and negative) in determining whether a valuation allowance is

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required. As a result of the Company’s analysis, it was concluded that as of March 31, 2017, a valuation allowance should be established against the Company’snet deferred tax asset. The Company recorded a valuation allowance as of March 31, 2017 and 2016, of $309.7 million and $274.7 million, respectively, on itslong-term deferred tax asset. The Company will continue to monitor facts and circumstances in the reassessment of the likelihood that the deferred tax assetswill be realized.

Note 7 — Stockholders’ Equity and Long-term Employee Incentive Plan

Preferred Stock

The Company is authorized to issue up to 1,000,000 shares of preferred stock, par value $0.0001 with such designations, voting and other rights andpreferences as may be determined from time to time by the Board of Directors. At March 31, 2017 and December 31, 2016, the Company had 62,500 shares ofpreferred stock issued and outstanding.



As of March 31, 2017, the Company had accumulated undeclared preferred dividends of $1.1 million. A preferred dividend of $1.3 million was declaredon April 12, 2017, and paid on April 17, 2017.

Common Stock

The authorized common stock of the Company consists of 45,000,000 shares. The holders of the common shares are entitled to one vote for each shareof common stock. In addition, the holders of the common stock are entitled to receive dividends when, as and if declared by the Board of Directors. At March 31,2017 and December 31, 2016, the Company had 22,449,744 and 21,932,842 shares of common stock issued and outstanding, respectively.

In May 2016, Resolute adopted a stockholder rights plan and in connection with such plan declared a dividend of one preferred share purchase right (a“Right”) for each outstanding share of common stock, par value $0.0001 per share. The Rights trade with, and are inseparable from, the common stock until suchtime as they become exercisable on the distribution date. The Rights are evidenced only by certificates that represent shares of common stock and not byseparate certificates. New Rights will accompany any new shares of common stock issued after May 27, 2016, until the earlier of the distribution date and theredemption or expiration of the rights.

Each Right allows its holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock (a “PreferredShare”) for $4.50, once the Rights become exercisable. Prior to exercise, the Right does not give its holder any dividend, voting or liquidation rights. The Rightswill not be exercisable until 10 days after the public announcement that a person or group has become an “Acquiring Person” by obtaining beneficial ownershipof 20% or more of our outstanding common stock, or, if earlier, 10 business days (or a later date determined by the Board before any person or group becomesan Acquiring Person) after a person or group begins a tender or exchange offer which, if completed, would result in that person or group becoming an AcquiringPerson. The stockholder rights plan has been submitted for approval by the Company’s stockholders at the 2017 annual meeting scheduled to be held on May12, 2017. In the event that the plan is not approved, then it would expire by its terms on May 16, 2017.

In June 2016 Resolute filed a certificate of amendment to its certificate of incorporation to effect the previously-announced reverse stock split of theCompany’s common stock, par value $0.0001 per share, at a ratio of 1-for-5 (the “Reverse Stock Split”). The certificate of amendment also reduced the numberof authorized shares of common stock from 225,000,000 to 45,000,000. The Reverse Stock Split, including the certificate of amendment, was approved bystockholders at the Company’s 2016 annual meeting of stockholders and by the Company’s Board of Directors. As a result, the Company is now in compliancewith the $1.00 per share

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minimum price requirement of the New York Stock Exchange (the “NYSE”). All historical share amounts disclosed have been retroactively adjusted to reflect thisReverse Stock Split.

During the fourth quarter of 2016, the Company issued 4,370,000 shares of common stock in a public offering at $38.00 per share for net proceeds of$160.9 million, after deducting fees and estimated expenses. The net proceeds were used to repay outstanding borrowings under the Secured Term LoanFacility and Revolving Credit Facility.

Long Term Employee Incentive Plan

The Company accounts for share-based compensation in accordance with FASB ASC Topic 718, Stock Compensation.

In July 2009, the Company adopted the 2009 Long Term Performance Incentive Plan (“Incentive Plan”), providing for long-term share-based awardsintended as a means for the Company to attract, motivate, retain and reward directors, officers, employees and other eligible persons through the grant ofawards and incentives for high levels of individual performance and improved financial performance of the Company. The share-based awards are also intendedto further align the interests of award recipients and the Company’s stockholders. The maximum number of shares of common stock that may be issued underthe Incentive Plan is 3,451,548 (which includes the additional 620,000 shares under Amendment No. 2 to the incentive plan approved by the Company’sstockholders in June 2015 and the 1,000,000 shares under Amendment No. 3 in the incentive plan approved by the Company’s stockholders in May 2016). Anamendment to the Incentive Plan to increase the number of shares available for issuance thereunder by 1,450,000 shares has been submitted for approval bythe Company’s stockholders at the 2017 annual meeting scheduled to be held on May 12, 2017.

In February 2016 the Board and its Compensation Committee approved long-term incentive awards to employees and non-employee directors for 2016consisting of a combination of stock options, cash-settled stock appreciation rights and restricted cash grants under the Incentive Plan. The 2016 long-termincentive awards to employees and non-employee directors consisted of grants of (i) options with a ten-year term, vesting in three equal annual installments onMarch 8 of 2017, 2018 and 2019 for employees and in one installment on March 8, 2017 for non-employee directors, (ii) cash-settled stock appreciation rightswith a ten-year term, vesting in three equal annual installments on March 8 of 2017, 2018 and 2019 for employees and in one installment on March 8, 2017 fornon-employee directors, (iii) time-vested restricted cash awards, vesting in three equal annual installments on March 8 of 2017, 2018 and 2019, and (iv)restricted stock vesting on March 8, 2017 to non-employee directors.

For the three months ended March 31, 2017 and 2016, the Company recorded expense related to the Incentive Plan as follows (in thousands): Three Months Ended March 31,

2017 2016

Time-based restricted stock awards $ 1,500 $ 1,777 TSR awards 916 337 Stock option awards 457 189 Total share-based compensation expense 2,873 2,303 Time-based restricted cash awards 279 649 Performance-based restricted cash awards 507 38 Cash-settled stock appreciation awards 4,641 111 Total cash-based compensation expense 5,427 798

Total Incentive Plan compensation expense $ 8,300 $ 3,101

As of March 31, 2017, the Company held unrecognized share-based compensation expense (in thousands) which is expected to be recognized over aweighted-average period as follows:

Weighted

Unrecognized Average Compensation Years Expense Remaining

Time-based restricted stock awards $ 14,608 2.8 TSR awards 9,302 2.9 Stock option awards 1,266 1.7

Total unrecognized compensation expense $ 25,176

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Equity Awards

Equity awards consist of service-based and performance-based restricted stock units and stock options under the Incentive Plan. All historical exercise,base and threshold prices disclosed have been retroactively adjusted to reflect the Reverse Stock Split.

Time-Based Restricted Stock Awards

Shares of time-based restricted stock issued to employees generally vest in three or four equal annual installments at specified dates based on continuedemployment. Shares issued to non-employee directors vest in one year based on continued service. The compensation expense to be recognized for the time-based restricted stock awards was measured based on the Company’s closing stock price on the dates of grant, utilizing estimated forfeiture rates between 0%and 15% which are updated periodically based on actual employee turnover. During the three months ended March 31, 2017, the Company granted 372,720shares of time-based restricted stock to employees and non-employee directors, pursuant to the Incentive Plan.

The following table summarizes the changes in non-vested time-based restricted stock awards for the three months ended March 31, 2017:

Weighted


Non-vested, beginning of period 151,781 $ 25.07 Granted 372,720 43.92 Vested (111,379) 28.40 Forfeited (1,592) 44.26

Non-vested, end of period 411,530 $ 41.17 TSR Awards

In February 2017 the Board and its Compensation Committee awarded performance-based restricted shares to senior employees and executive officersof the Company under the Incentive Plan. The restricted stock grants vest only upon achievement of thresholds of cumulative total shareholder return (“TSR”) ascompared to a specified peer group (the “Performance-Vested Shares”). A TSR percentile (the “TSR Percentile”) is calculated based on the change in the valueof the Company’s common stock between the grant date and the applicable vesting date, including any dividends paid during the period, as compared to therespective TSRs of a specified group of twelve peer companies. The Performance-Vested Shares vest in three installments to the extent that the applicable TSRPercentile ranking thresholds are met upon the one-, two- and three-year anniversaries of the grant date. Performance-Vested Shares that are eligible to vest ona vesting date, but do not qualify for vesting, become eligible for vesting again on the next vesting date. All Performance-Vested Shares that do not vest as of thefinal vesting date will be forfeited on such date.

The Board and its Compensation Committee also granted rights to earn additional shares of common stock upon achievement of a higher TSR Percentile(“Outperformance Shares”). The Outperformance Shares are earned in increasing increments based on a TSR Percentile attained over a specified threshold.Outperformance Shares may be earned on any vesting date to the extent that the applicable TSR Percentile ranking thresholds are met in three installments onthe one-, two- and three-year anniversaries of the grant date. Outperformance Shares that are earned at a vesting date will be issued to the recipient; however,prior to such issuance, the recipient is not entitled to stockholder rights with respect to Outperformance Shares. Outperformance Shares that are eligible to beearned but remain unearned on a vesting date become eligible to be earned again on the next vesting date. The right to earn any theretofore unearnedOutperformance Shares terminates immediately following the final vesting date. The Performance-Vested Shares and the Outperformance Shares are referred toas the “TSR Awards.”

The compensation expense to be recognized for the TSR Awards was measured based on the estimated fair value at the date of grant using a MonteCarlo simulation model and utilizes estimated forfeiture rates between 0% and 2% which are updated periodically based on actual employee turnover.

The valuation model for TSR Awards used the following assumptions:

Grant Year Average Expected

Volatility Expected Dividend

Yield Risk-Free

Interest Rate

2017 49.07% - 108.21% 0% 0.83% - 1.45%

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The following table summarizes the changes in non-vested TSR Awards for the three months ended March 31, 2017:

Weighted


Non-vested, beginning of period 97,561 $ 66.60 Granted 131,379 77.23 Vested (97,561) 66.60 Forfeited (481) 77.21

Non-vested, end of period 130,898 $ 77.23

There were no TSR awards granted during the three months ended March 31, 2016. In addition to the vested TSR awards above, 63,024

outperformance shares were also earned and vested during the three months ended March 31, 2017, related to the TSR awards granted in 2014.

Stock Option Awards

Options issued to employees to purchase shares of common stock vest in three equal annual installments at specified dates based on continuedemployment with a ten year term. The compensation expense to be recognized for the option awards was measured based on the Company’s estimated fairvalue at the date of grant using a Black-Scholes pricing model as well as estimated forfeiture rates between 0% and 15%, no dividends, expected stock pricevolatility ranging from 63% to 67% and a risk-free rate ranging between 1.75% and 2.27%.

The following table summarizes the option award activity for the three months ended March 31, 2017:

Weighted Weighted Average Aggregate

Average Remaining Intrinsic Value

Shares Exercise Price Contractual Term (in thousands)

Outstanding, beginning of period 1,052,513 $ 4.03 Granted — — Exercised (37,684) 3.36 Forfeited (9,081) 3.48

Outstanding, end of period 1,005,748 $ 4.06 8.6 $ 36,548

Exercisable, end of period 301,712 $ 4.05 8.6 $ 10,967

The weighted average grant date fair value of options granted during the three months ended March 31, 2016, was $1.93. No options were grantedduring the three months ended March 31, 2017. The total intrinsic value for options exercised during the three months ended March 31, 2017, was $1.4 million.No options were exercised during the three months ended March 31, 2016.

Liability Awards

Liability awards consist of awards that are settled in cash instead of shares, as discussed below. The fair value of those instruments at a single point intime is not a forecast of what the estimated fair value of those instruments may be in the future.

Cash-settled Stock Appreciation Rights

A stock appreciation right is the right to receive an amount in cash equal to the excess, if any, of the fair market value of a share of common stock on thedate on which the right is exercised over its base price. The February 2016 grants of cash-settled stock appreciation rights hold base prices of $2.65 per share(as to 486,373 rights) and $2.915 per share (as to 1,216,479 rights). The awards granted to employees vest in three equal annual installments and have a ten-year term. The awards granted to non-employee directors vest in one year based on continued service and also have a ten-year term. The compensationexpense to be recognized for the cash-settled stock appreciation rights was measured utilizing estimated forfeiture rates between 0% and 15% which will beupdated periodically based on actual employee turnover. The fair value of the cash-settled stock appreciation rights as of March 31, 2017, was $63.2 million, ofwhich $22.4 million has been expensed.

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Time-Based Restricted Cash Awards

Awards of time-based restricted cash issued to employees vest in three equal annual increments at specified dates based on continued employment.Time-based restricted cash issued to non-employee directors vests in one year based on continued service. The compensation expense to be recognized for thetime-based restricted cash awards was measured utilizing estimated forfeiture rates between 0% and 20% which will be updated periodically based on actualemployee turnover. The total estimated future liability of the time-based restricted cash awards as of March 31, 2017, was $9.7 million, of which $5.0 million hasbeen expensed.

Performance-Based Restricted Cash Awards

The performance criteria for the performance-based restricted cash awards granted in May 2015 are based on future prices of the Company’s commonstock trading at or above specified thresholds. If and as certain stock price thresholds are met, using a 60 trading day average, various multiples of theperformance-vested cash award will be attained. The first stock price hurdle was at $10.00 at which the award was payable at 1x, and the highest stock pricehurdle was $40.00 at which the award was payable at a multiple of 6x. Interim hurdles and multiples between these end points are set forth in the governingagreements. As of March 31, 2017, all of the stock price hurdles up to $40.00 have been met. A time vesting element will apply to the performance-vested cashawards such that attained multiples will not be paid out earlier than upon satisfaction of a three-year vesting timetable from the date of grant. In order for anaward to be paid, both the performance criteria and the time criteria would need to be satisfied. Once a time vesting date passes, the employee is entitled to bepaid one third, two thirds or 100%, as applicable, of whatever multiples have been achieved provided the employee continues to be employed by the Company.Any multiples achieved following 100% time vesting would be paid within 60 days of such achievement.

The estimated fair value of the performance-based restricted cash awards as of March 31, 2017, was $16.8 million of which $14.5 million has beenexpensed, based upon the three-year vesting. The fair value was estimated using an option pricing model for a cash or nothing call, an estimated forfeiture rateof 5% and an average effective term of less than one year. As the fair value of liability awards is required to be re-measured at each period end, amountsrecognized in future periods will vary. Note 8 — Asset Retirement Obligation

Resolute’s estimated asset retirement obligation liability is based on estimated economic lives, estimates as to the cost to abandon the wells and facilitiesin the future, and federal and state regulatory requirements. The liability is discounted using a credit-adjusted risk-free rate estimated at the time the liability isincurred or revised, that ranges between 7% and 12%. Revisions to the liability could occur due to changes in estimated abandonment costs or well economiclives, or if federal or state regulators enact new requirements regarding the abandonment of wells. Asset retirement obligations are valued utilizing Level 3 fairvalue measurement inputs.

The following table provides a reconciliation of Resolute’s asset retirement obligations for the periods presented (in thousands):


2017 2016

Asset retirement obligations at beginning of period $ 20,352 $ 19,238 Additional liability incurred / acquired 47 8 Accretion expense 433 437 Liabilities settled / sold (3,729) (1 )Revisions to previous estimates (80) — Asset retirement obligations at end of period 17,023 19,682 Less: current asset retirement obligations (690) (1,068)Long-term asset retirement obligations $ 16,333 $ 18,614

Note 9 — Derivative Instruments

Resolute enters into commodity derivative contracts to manage its exposure to oil and gas price volatility. Resolute has not elected to designate derivativeinstruments as hedges under the provisions of FASB ASC Topic 815, Derivatives and Hedging. As a result, these derivative instruments are marked to market atthe end of each reporting period and changes in the fair value are recorded in the accompanying consolidated statements of operations. Gains and losses oncommodity derivative instruments from Resolute’s price risk management activities are recognized in other income (expense). The cash flows from derivativesare reported as cash flows

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from operating activities unless the derivative contract is deemed to contain a financing element. Derivatives deemed to contain a financing element are reportedas financing activities in the condensed consolidated statement of cash flows.

The Company utilizes fixed price swaps, basis swaps, option contracts and two-and three-way collars. These instruments generally entitle Resolute (thefloating price payer in most cases) to receive settlement from the counterparty (the fixed price payer in most cases) for each calculation period in amounts, ifany, by which the settlement price for the scheduled trading days applicable to each calculation period is less than the fixed strike price or floor price. TheCompany would pay the counterparty if the settlement price for the scheduled trading days applicable to each calculation period exceeds the fixed strike price orceiling price. The amount payable by Resolute, if the floating price is above the fixed or ceiling price is the product of the notional contract quantity and theexcess of the floating price over the fixed or ceiling price per calculation period. The amount payable by the counterparty, if the floating price is below the fixed orfloor price, is the product of the notional contract quantity and the excess of the fixed or floor price over the floating price per calculation period. A three-waycollar consists of a two-way collar contract combined with a put option contract sold by the Company with a strike price below the floor price of the two-waycollar. The Company receives price protection at the purchased put option floor price of the two-way collar if commodity prices are above the sold put optionstrike price. If commodity prices fall below the sold put option strike price, the Company receives the cash market price plus the variance between the two putoption strike prices. This type of instrument captures more value in a rising commodity price environment, but limits the benefits in a downward commodity priceenvironment. Basis swaps, when used in connection with fixed price swaps, to fix the price differential between the NYMEX commodity price and the index priceat which the production is sold.

As of March 31, 2017, the fair value of the Company’s commodity derivatives was a net liability of $0.8 million (Level 2 fair value measurement).

The following table represents Resolute’s commodity swap contracts as of March 31, 2017:

Oil (NYMEX WTI) Gas (NYMEX Henry Hub) NGL (Mont Belvieu)


WeightedAverage SwapPrice per Bbl MMBtu per Day

WeightedAverage Swap

Price per MMBtu Bbl per Day

WeightedAverage SwapPrice per Bbl

Apr – Dec 2017 3,022 $ 53.69 1,357 $ 2.770 300 $ 19.53

The following table represents Resolute’s two-way commodity collar contracts as of March 31, 2017:

Oil (NYMEX WTI) Gas (NYMEX Henry Hub)


WeightedAverage FloorPrice per Bbl

WeightedAverage Ceiling

Price per Bbl MMBtu per Day

WeightedAverage Floor

Price per MMBtu

WeightedAverage CeilingPrice per MMBtu

Apr – Dec 2017 2,500 $ 47.54 $ 59.40 7,910 $ 2.504 $ 3.336

The following table represents Resolute’s three-way oil collar contracts as of March 31, 2017:

Oil (NYMEX WTI)

Weighted

Average WeightedAverage

WeightedAverage

Remaining Term

Bbl per Day Short Put

Price per Bbl Floor Price

per Bbl Ceiling Price

per Bbl

Apr – Dec 2017 1,500 $ 40.00 $ 50.00 $ 60.10 The following table represents Resolute’s three-way gas collar contracts as of March 31, 2017:


Weighted

Average Short Weighted

Average Floor WeightedAverage

Remaining Term

MMBtu per Day Put Price

per MMBtu Price per MMBtu Ceiling Price per

MMBtu

Apr – Dec 2017 1,998 $ 2.692 $ 3.192 $ 3.746

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The following table represents Resolute’s commodity option contract as of March 31, 2017:

Oil (NYMEX WTI)


Weighted AverageSold Call Price per

Bbl

Jan – Dec 2018 1,100 $ 50.00



Commodity Swaps

MMBtu per Day Weighted Average Swap

Price per MMBtu


The table below summarizes the location and amount of commodity derivative instrument gains and losses reported in the consolidated statements ofoperations (in thousands): Three Months Ended March 31,

2017 2016

Other income (expense): Commodity derivative settlement gain (loss) $ (250) $ 27,748 Mark-to-market gain (loss) 11,090 (23,907)

Commodity derivative instruments gain $ 10,840 $ 3,841


Resolute is exposed to credit risk to the extent of nonperformance by the counterparties in the derivative contracts discussed above. All counterpartiesare current or former lenders under Resolute’s Revolving Credit Facility. Accordingly, Resolute is not required to provide any credit support to its counterpartiesother than cross collateralization with the properties securing the Revolving Credit Facility. Resolute’s derivative contracts are documented with industrystandard contracts known as a Schedule to the Master Agreement and International Swaps and Derivative Association, Inc. Master Agreement (“ISDA”). Typicalterms for each ISDA include credit support requirements, cross default provisions, termination events, and set-off provisions. Resolute generally has set-offprovisions with its lenders that, in the event of counterparty default, allow Resolute to set-off amounts owed under the Revolving Credit Facility or other generalobligations against amounts owed for derivative contract liabilities.

Resolute does not offset the fair value amounts of commodity derivative assets and liabilities with the same counterparty for financial reporting purposes.

The following is a listing of Resolute’s commodity derivative assets and liabilities required to be measured at fair value on a recurring basis and where they areclassified within the hierarchy as of March 31, 2017, and December 31, 2016 (in thousands): Level 2

March 31, 2017 December 31, 2016

Assets Derivative instruments, current $ 3,675 $ 218 Derivative instruments, long term — —

Total assets $ 3,675 $ 218

Liabilities Derivative instruments, current $ 2,389 $ 8,014 Derivative instruments, long term 2,096 4,104

Total liabilities $ 4,485 $ 12,118

As of March 31, 2017, the maximum amount of loss in the event of all counterparties defaulting was $0.1 million.

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Note 10 — Commitments and Contingencies

CO2 Take-or-Pay Agreements

Resolute is party to a take-or-pay purchase agreement with Kinder Morgan CO 2 Company L.P., under which Resolute has committed to buy specifiedvolumes of CO2. The purchased CO 2 is for use in Resolute’s enhanced tertiary recovery projects in Aneth Field. Resolute is obligated to purchase a minimumdaily volume of CO2 or pay for any deficiencies at the price in effect when delivery was to have occurred. The ultimate CO 2 volumes planned for use on theenhanced recovery projects exceed the minimum daily volumes provided in these take-or-pay purchase agreements. Although the Company may incurdeficiency payments from time to time, Resolute expects to avoid any payments for deficiencies over the term of the agreement.

Future minimum CO 2 purchase commitments as of March 31, 2017, under this purchase agreement, based on prices and volumes in effect at March 31,2017, are as follows (in thousands):

CO2 Purchase Year Commitments

2017 4,125 2018 5,475

Total $ 9,600

The terms of the CO2 contract, as amended in Amendment No. 3 to the Kinder Morgan Product Sale and Purchase Contract dated July 1, 2007, containsa unit price floor, below which the price cannot fall. As a result, the Company is exposed to the risk of paying higher than the market rate for CO2 in a climate ofdeclining oil and CO2 prices. Based on this floor pricing term, the Company has determined that this contract contains an embedded derivative. However,assuming the prices in effect as of March 31, 2017, the fair value of this embedded derivative would be less than $0.1 million.

Cooperative Agreement with Navajo Nation Oil and Gas Company

Resolute is party to a cooperative agreement with Navajo Nation Oil and Gas Company (“NNOGC”) related to the Aneth Field Properties (the“Cooperative Agreement”). Pursuant to the Cooperative Agreement, as modified on March 9, 2017, NNOGC holds an option to purchase an additional 10% ofResolute’s interest in the Aneth Field Properties. The option is exercisable until July 2017 at the fair market value of such interest.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” contained in our Annual Report on Form 10-K for the year ended December 31, 2016, as well as the accompanying financial statements and therelated notes contained elsewhere in this report. References to “Resolute,” “the Company,” “we,” “ours,” and “us” refer to Resolute Energy Corporation and itssubsidiaries. Overview

We are a publicly traded, independent oil and gas company with assets located primarily in the Delaware Basin in west Texas and Aneth Field located inthe Paradox Basin in southeast Utah. Our development activity is focused on our 20,000 gross (16,400 net) operated acreage position in what we believe to bethe core of the Wolfcamp horizontal play in northern Reeves County, Texas. Our corporate strategy is to drive organic growth in reserves, production and cashflow through development of our Reeves County acreage and opportunistic bolt-on acquisitions in the Delaware Basin while continuing to focus on improvingmargins in our Aneth Field Properties while de-risking certain future growth projects through selectively targeted capital investment.

During 2016 oil sales comprised approximately 90% of revenue, and our December 31, 2016 estimated net proved reserves were approximately 60.3million barrels of oil equivalent (“MMBoe”), of which approximately 62% and 59% were proved developed reserves and proved developed producing reserves(“PDP”), respectively. Approximately 73% of our estimated net proved reserves were oil and approximately 85% were oil and natural gas liquids (“NGL”). TheDecember 31, 2016, pre-tax present value discounted at 10% (“PV-10”) of our net proved reserves and the standardized measure of our estimated net provedreserves were $344 million.

Pursuant to full cost accounting rules, we perform ceiling tests each quarter on our proved oil and gas assets. We recorded a non-cash impairment of thecarrying value of our proved oil and gas properties of $58 million at March 31, 2016, as a result of the ceiling test limitation. No impairment was recorded as ofMarch 31, 2017. If in future periods a negative impact continues on one or more of the components of the calculation, including market prices of oil and gas(based on a trailing twelve-month unweighted average of the oil and gas prices in effect on the first day of each month), differentials from posted prices, futuredrilling and capital plans, operating costs or expected production, the Company may incur further full cost ceiling impairment related to its oil and gas propertiesin such periods.

For 2017 we expect to incur capital expenditures of $210 to $240 million, primarily focused on following our successful 2016 performance in theDelaware Basin with a two rig drilling program spudding 22 gross wells. We expect the 2017 program to accomplish a number of important initiatives for theCompany. We will further delineate our development inventory as we drill wells across our acreage block, conduct multiple spacing tests and complete wells inmultiple landing zones in the Wolfcamp A as well as in the Wolfcamp B. The success of this program will help confirm the more than 365 Wolfcamp A and Bdevelopment locations we believe exist in our Mustang and Appaloosa project areas. We also expect that substantially all of our acreage will be held byproduction by the end of 2017.

We expect to outspend our cash flows from operations during 2017. A deterioration of commodity prices from current levels could negatively affect ourresults of operations, financial condition and future development plans. We may change our 2017 capital investment forecast during the year as a result of,among other things, a decline in commodity prices, drilling results, cost increases, or unfavorable changes in our borrowing capacity. We may also change ourcapital expenditure plan depending upon our ability to consummate the Delaware Basin Bronco Acquisition and additional capital activity associated with thoseassets and/or the potential divestiture of our Aneth Field assets.

On August 1, 2016, we closed the sale of our Reeves County gas gathering and produced water handling and disposal assets. This transaction providedapproximately $36 million of net proceeds to Resolute, with $2 million held in escrow and the remaining proceeds used principally to repay all then outstandingRevolving Credit Facility debt. In connection with such sale, we also entered into long-term gas gathering and processing and water gathering and disposalagreements with the purchaser of such assets. On October 7, 2016, we closed the acquisition of certain Reeves County interests in the Delaware Basin forconsideration consisting of $90 million in cash and 2,114,523 shares of our common stock. The cash paid for this acquisition was funded in part by net proceedsfrom the sale of preferred stock and borrowings on our Revolving Credit Facility. On December 23, 2016, we closed our public stock offering of 4,370,000 sharesof common stock. The net proceeds from the offering, after deducting fees and estimated expenses, were approximately $160.9 million. With a portion of theseproceeds, on January 3, 2017, we repaid approximately $132 million constituting all amounts due under the term loan facility (including prepayment fees). Thesecond lien secured term loan

20


facility (the “Secured Term Loan Facility”) was terminated in connection with the repayment. We will also continue to explore other ways to enhance our liquidity,de-lever our balance sheet and increase drilling activity, including potential asset sales and potential joint ventures. Such strategic initiatives are considered onan ongoing basis and decisions related thereto will be made if the terms are determined to be advantageous to us.

On February 22, 2017, we closed on the sale of our Denton and South Knowles properties in the Northwest Shelf project area in Lea County, NewMexico, for approximately $14.5 million in cash, subject to customary purchase price adjustments. The effective date of this sale was October 1, 2016. Theproceeds of the sale will be used for general corporate purposes. As part of the sale, the Company was also no longer liable for asset retirement obligations of$3.6 million at March 31, 2017.

On March 3, 2017, Resolute Natural Resources Southwest, LLC, a wholly-owned subsidiary of the Company, entered into a Purchase and SaleAgreement with undisclosed private sellers pursuant to which Buyer agreed to acquire certain producing and undeveloped oil and gas properties in theDelaware Basin in Reeves County, Texas (the “Bronco” acquisition; previously referred to as the “Orla” acquisition).

Consideration for the Bronco acquisition will be $160 million in cash, subject to customary purchase price adjustments. The closing of the Broncoacquisition is expected to occur on or about May 15, 2017, and is subject to the satisfaction or waiver of certain customary conditions, including the materialaccuracy of the representations and warranties of Buyer and Sellers, and performance of covenants. The Delaware Basin Bronco Acquisition has an effectivedate of May 1, 2017. The Purchase Agreement contains terms and conditions customary to transactions of this type. Subject to the right of Buyer to beindemnified for certain liabilities for a limited period of time and for breaches of representations, warranties and covenants, Buyer will assume substantially allliabilities associated with the acquired properties. The Purchase Agreement also contains certain customary termination rights for each of Buyer and Sellers.

The properties to be acquired include approximately 4,600 net acres in Reeves County, Texas, consisting of 2,187 net acres adjacent to the Company’sexisting operating area in Reeves County and 2,405 net acres in southern Reeves County. In addition, the Company will acquire interests in (i) two operated4,500 foot lateral horizontal Wolfcamp wells that were producing approximately 800 net Boe per day when the Purchase Agreement was signed, (ii) six operateddrilled but uncompleted Wolfcamp wells, four of which have lateral lengths of approximately 4,500 feet and two with approximately 7,500 foot laterals; and (iii)one non-operated 10,000 foot lateral Wolfcamp A well that is currently awaiting completion.


To complete our repositioning as a pure-play Delaware Basin company, Resolute’s board of directors has approved a process to pursue the sale of theCompany’s Aneth Field assets. The potential disposition of Aneth Field, if consummated, would provide meaningful additional capital to Resolute. This capitalcan be deployed either to our Delaware Basin drilling program where we see our highest rates of return or as a component of the optimal long-term financing forthe Delaware Basin Bronco Acquisition. The Company has engaged Petrie Partners, LLC and Barclays Capital Inc. to act as financial advisors in the salesprocess launched in April 2017.


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Our Revolving Credit Facility and Senior Notes include customary terms and covenants that place limitations on certain types of activities and requiresatisfaction of certain financial tests. We were in compliance with all material terms and covenants of the Revolving Credit Facility and Senior Notes at March 31,2017.

Our management uses a variety of financial and operational measurements to analyze our operating performance, including but not limited to, productionlevels, pricing and cost trends, reserve trends, operating and general and administrative expenses, operating cash flow and Adjusted EBITDA. The analysis ofthese measurements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained inour Annual Report on Form 10-K for the year ended December 31, 2016.

Permian Basin Properties

Our Permian Basin Properties, constituting 59% of net proved reserves as of December 31, 2016, are located in the Permian Basin of west Texas. Ourproject area located in the Delaware Basin portion of the Permian Basin, in Reeves County, targets the Wolfcamp formation. We believe that growth potentialexists from more than 365 gross prospective wells targeting upper Wolfcamp A, lower Wolfcamp A and Wolfcamp B formations. Significant additional opportunityexists from reduced spacing as well as additional subzones. For 2017 the Board has approved a two rig drilling program spudding 22 gross wells. This capitalprogram does not contemplate additional potential drilling or completion activities following the anticipated consummation of the Delaware Basin BroncoAcquisition.

During the three months ended March 31, 2017, we completed 4 gross (4.0 net) wells and had 4 gross (3.9 net) wells awaiting completion operations atquarter end. Furthermore, as of March 31, 2017, we were in the process of drilling 1 gross (0.9 net) well. All such wells are located in the Delaware Basin.

In February 2017 we sold our Denton and South Knowles properties in the Northwest Shelf project area in the Permian Basin. See Note 3 of the Notesto Condensed Consolidated Financial Statements for additional information.

In October 2016 we acquired certain Reeves County interests in the Delaware Basin. See Note 3 of the Notes to the Condensed Consolidated FinancialStatements for additional information.

In August 2016 we sold certain midstream asset interests in the Delaware Basin. See Note 3 of the Notes to Condensed Consolidated FinancialStatements for additional information.

Aneth Field Properties

Our Aneth Field Properties constituted 41% of our net proved reserves as of December 31, 2016. Our working interests in Aneth Field, a mature, long-lived oil producing field, are located primarily on the Navajo Reservation in southeast Utah. We own a majority of the working interests in, and are the operatorof, three federal production units which constitute the Aneth Field Properties. These are the Aneth Unit, the McElmo Creek Unit and the Ratherford Unit, in whichwe own working interests of 62.4%, 67.5% and 58.6%, respectively, at March 31, 2017. Factors That Significantly Affect Our Financial Results

Revenue, cash flow from operations and future growth depend on many factors beyond our control, such as oil prices, cost of services and supplies,economic, political and regulatory developments and competition from other sources of energy. Historical oil prices have been volatile and are expected tofluctuate widely in the future. Sustained periods of low prices for oil could materially and adversely affect our financial position, our results of operations, thequantities of oil and gas that we can economically produce, and our ability to obtain capital.

Like all businesses engaged in the exploration for and production of oil and gas, we face the challenge of natural production declines. As initial reservoirpressures are depleted, oil and gas production from a given well decreases. Thus, an oil and gas exploration and production company depletes part of its assetbase with each unit of oil or gas it produces. We attempt to overcome this natural decline by developing existing properties, implementing secondary and tertiaryrecovery techniques and by acquiring more reserves than we produce. Our future growth will depend on our ability to enhance production levels from existingreserves and to continue to add reserves in excess of production through exploration, development and acquisition. We will maintain our focus on costsnecessary to produce our reserves as well as the costs necessary to add reserves through production enhancement, drilling and acquisitions. Our ability to makecapital expenditures to increase production from existing reserves and to acquire more reserves is dependent on availability of capital resources, and can belimited by many factors, including the ability to obtain capital in a cost-effective manner and to obtain permits and regulatory approvals in a timely manner.

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Results of Operations

For the purposes of management’s discussion and analysis of the results of operations, management has analyzed the operational results for the threemonths ended March 31, 2017, in comparison to results for the three months ended March 31, 2016.

The following table presents our sales volumes, revenues and operating expenses, and sets forth our sales prices, costs and expenses on a barrel of oilequivalent (“Boe”) basis for the periods indicated:

Three Months Ended

March 31,

2017 2016

Net Sales: Oil (MBbl) 1,213 668 Gas (MMcf) 1,922 594 NGL (MBbl) 240 53

Total sales (MBoe) 1,773 820 Average daily sales (Boe/d) 19,702 9,016

Average Sales Prices: Oil ($/Bbl) $ 47.52 $ 26.63 Gas ($/Mcf) 2.58 1.64 NGL ($/Bbl) 10.89 4.30

Average sales price ($/Boe, excluding commodity derivative settlements) $ 36.78 $ 23.16

Operating Expenses ($/Boe): Lease operating $ 10.35 $ 16.84 Production and ad valorem taxes 3.72 3.83 General and administrative 5.87 10.93 General and administrative (excluding non-cash compensation expense) 4.28

8.24

Cash-settled incentive awards 3.06 0.97 Depletion, depreciation, amortization and accretion 9.04 12.63

Quarter Ended March 31, 2017, Compared to the Quarter Ended March 31, 2016

Revenue. Revenue from oil and gas activities increased by 243% to $65.2 million during 2017, from $19.0 million during 2016. Of the $46.2 millionincrease in revenue, approximately $24.1 million was attributable to increased commodity pricing ($36.78 per Boe in 2017 versus $23.16 per Boe in 2016) and$22.1 million was attributable to increased production. Sales volumes increased 116% to 1,773 MBoe during 2017 as compared to 820 MBoe during 2016,principally as a result of production from newly drilled wells in the Delaware Basin.

Operating Expenses. Lease operating expenses include direct labor, contract services, field office rent, production and ad valorem taxes, vehicleexpenses, supervision, transportation, minor maintenance, tools and supplies, workover expenses, utilities and other customary charges. Resolute assesseslease operating expenses in part by monitoring the expenses in relation to production volumes and the number of wells operated.

Lease operating expenses increased 33% to $18.4 million during 2017, from $13.8 million during 2016. On a per-unit basis, lease operating expensedecreased 39% to $10.35 per Boe in 2017 compared to $16.84 per Boe in 2016. The significant decrease in per unit operating expense is primarily due to thesignificant increase in production.

Production and ad valorem taxes increased to $6.6 million during 2017, as compared to $3.1 million during 2016, but were less on a per-unit basis ascompared to 2016. Production and ad valorem taxes were 10.1% of total revenue in 2017 versus 16.5% of total revenue in 2016. The lower production and advalorem taxes as a percentage of revenue in 2017 as compared to 2016 is attributable to the increase in the percentage of revenue realized in the State ofTexas which has a lower tax rate than the Aneth Field properties.

General and administrative expenses include the costs of employees and executive officers, related benefits, share-based compensation, office leases,

professional fees, general corporate overhead and other costs not directly associated with field operations. We monitor our general and administrative expensescarefully, attempting to balance the cash effect of incurring general and

23


administrative costs against the related benef its, with a focus on hiring and retaining highly qualified staff who can add value to our asset base.

General and administrative expenses increased to $10.4 million during 2017, as compared to $9.0 million during 2016. The $1.4 million, or 16% increase,primarily resulted from increases in short term incentive compensation which had been reduced during 2015 and 2016 in response to lower commodity prices.On a per-unit basis, general and administrative expenses decreased to $5.87 per Boe in 2017 from the $10.93 per Boe in 2016. Cash-based general andadministrative expense was $7.6 million, or $4.28 per Boe, in 2017 compared to $6.8 million, or $8.24 per Boe, in 2016.

Cash-settled incentive award expense increased to $5.4 million in 2017, as compared to $0.8 million in 2016. This increase was the result of the grant of

time- and performance-based restricted cash awards as well as cash-settled stock appreciation rights under the long-term incentive program and theachievement of multiple performance targets that are based on the Company’s stock price. The time-based awards will vest and be expensed ratably over threeyears. The performance-based awards and stock appreciation rights will vest ratably over three years but their fair value will be re-measured at each period endover their ten-year lives. Actual cash payments during the period were $3.6 million.

Depletion, depreciation, amortization and accretion expenses increased to $16.0 million during 2017, as compared to $10.4 million during 2016.Conversely, on a per-unit basis, depreciation, amortization and accretion expenses decreased to $9.04 per Boe in 2017 from $12.63 per Boe in 2016 dueprimarily to the significant increase in proved reserve quantities.

Pursuant to full cost accounting rules, we perform ceiling tests each quarter on our proved oil and gas assets. The primary components affecting thiscalculation are commodity prices, reserve quantities added and produced, overall exploration and development costs and depletion expense. If the netcapitalized cost of the Company’s oil and gas properties subject to amortization (the “carrying value”) exceeds the ceiling limitation, the excess is charged toexpense. We recorded a $58 million non-cash impairment of the carrying value of our proved oil and gas properties at March 31, 2016, as a result of the ceilingtest limitation. No impairment was recorded at March 31, 2017. If in future periods a negative impact continues on one or more of the components of thecalculation, including market prices of oil and gas (based on a trailing twelve-month unweighted average of the oil and gas prices in effect on the first day of eachmonth), differentials from posted prices, future drilling and capital plans, operating costs or expected production, the Company may incur further full cost ceilingimpairment related to its oil and gas properties in such periods.

Other Income (Expense). All of our oil and gas derivative instruments are accounted for under mark-to-market accounting rules, which provide for thefair value of the contracts to be reflected as either an asset or a liability on the balance sheet. The change in the fair value during an accounting period isreflected in the income statement for that period. During 2017 the gain on oil and gas commodity derivatives was $10.8 million, consisting of $11.1 million ofmark-to-market gains partially offset by $0.3 million of derivative settlement losses. During 2016 the gain on oil and gas commodity derivatives was $3.8 million,consisting of $27.7 million of derivative settlement gains offset by $23.9 million mark-to-market losses.

Interest expense in 2017 increased to $17.7 million from the $13.1 million recorded in 2016. The increase in interest expense was primarily due to thepenalties incurred related to the repayment of the Secured Term Loan offset by increases in amounts capitalized. The components of our interest expense areas follows (in thousands):


2017 2016

8.50% senior notes $ 8,500 $ 8,500 Secured term loan facility 3,631 3,568 Revolving credit facility 314 145 Amortization of deferred financing costs, senior notes premium and secured term loan facility discount 7,743

1,303

Other, net 13 (2 )Capitalized interest (2,504) (439)

Total interest expense $ 17,697 $ 13,075

As a result of the prepayment of the Secured Term Loan Facility on January 3, 2017, we recognized $9.7 million of interest costs (comprised ofamortization of the original issue discount, deferred financing costs and prepayment fees) in the first quarter of 2017.

Income Tax Benefit (Expense). No income tax benefit or expense was recognized during the three months ended March 31, 2017 or 2016 due to the

deferred tax asset valuation allowance previously provided by the Company.

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Liquidity and Capital Resources

Our primary sources of liquidity have been cash generated from operations, amounts available under our Revolving Credit Facility, proceeds from theissuance of debt and equity securities and sales of oil and gas properties. For purposes of Management’s Discussion and Analysis of Liquidity and CapitalResources, we have analyzed our cash flows and capital resources for the three months ended March 31, 2017 and 2016.

Three Months Ended

March 31, 2017 2016

(in thousands)

Cash provided by operating activities $ 39,274 $ 16,537 Cash used in investing activities (44,868) (22,853)Cash provided by (used in) financing activities (126,454) (60)

Net cash provided by operating activities was $39.3 million for the first three months of 2017 as compared to $16.5 million for the 2016 period. The

increase in net cash provided by operating activities in 2017 as compared to 2016 was primarily due to increased revenue resulting from higher productionvolumes.

Net cash used in investing activities was $44.9 million in 2017 compared to $22.9 million in 2016. The primary investing activity in 2017 was cash usedfor capital expenditures of $42.3 million. Capital expenditures in 2017 consisted primarily of $39.8 million in drilling activities and infrastructure projects in thePermian Basin, $1.5 million in facility projects in Aneth Field and $1.0 million in CO2 acquisition for Aneth Field. Capital divestitures in 2017 included $14.2million of net proceeds primarily from the sale of the New Mexico Properties. The primary investing activity in 2016 was cash used for capital expenditures of$23.0 million. Capital expenditures in 2016 consisted primarily of $18.1 million in drilling activities and infrastructure projects in the Permian Basin, $3.3 million incompression and facility projects in Aneth Field and $1.6 million in CO2 acquisition.

Net cash used in financing activities $126.5 million in 2017 compared to $0.1 million used in financing activities in 2016. The primary financing activity in

2017 was the repayment of $128.3 million of principal on the Secured Term Loan, partially offset by $9.0 million in net borrowings under the Revolving CreditFacility.

If cash flow from operating activities does not meet expectations, we may reduce our expected level of capital expenditures and/or fund a portion of ourcapital expenditures using borrowings under our Revolving Credit Facility (if available), issuances of other debt or equity securities or from other sources, suchas asset sales. There can be no assurance that needed capital will be available on acceptable terms or at all. Our ability to raise funds through the incurrence ofadditional indebtedness could be limited by the covenants in our Revolving Credit Facility or Senior Notes. If we are unable to obtain funds when needed or onacceptable terms, we may not be able to satisfy our obligations under our existing indebtedness, finance the capital expenditures necessary to maintainproduction or proved reserves or complete acquisitions that may be favorable to us.


Our Revolving Credit Facility requires us to enter into derivative agreements covering a significant portion of our production, as described below under“Revolving Credit Facility.”

We plan to continue our practice of hedging a significant portion of our production through the use of various commodity derivative transactions. Ourexisting derivative transactions have not been designated as cash flow hedges, and we anticipate that future transactions will receive similar accountingtreatment. Derivative settlements usually occur within five days of the end of the month. As is typical in the oil and gas industry, however, we do not generallyreceive the proceeds from the sale of our oil production until the 20th day of the month following the month of production. As a result, when commodity pricesincrease above the fixed price in the derivative contacts, we will be required to pay the derivative counterparty the difference between the fixed price in the

25


derivative contract and the market price before receiving the proceeds from the sale of the hedged production. If this occurs, we may use working capital orborrowings under the Revolving Credit Facility to fund our operations.


On February 17, 2017, we entered into the Third Amended and Restated Credit Agreement with a syndicate of banks led by Bank of Montreal, asAdministrative Agent, Capital One, National Association, as syndication agent, and Barclays Bank PLC, ING Capital LLC and SunTrust Bank, as co-documentation agents. In connection with entering into the Revolving Credit Facility, we repaid all amounts outstanding under the Second Amended andRestated Credit Agreement, dated as of April 15, 2015, by and among Resolute Energy Corporation, as Borrower, certain subsidiaries of Resolute EnergyCorporation, as Guarantors, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto, as amended, and terminated thatagreement.

The Revolving Credit Facility specifies a maximum borrowing base as determined by the lenders in their sole discretion, which was initially set at $150million. The determination of the borrowing base takes into consideration the estimated value of our oil and gas properties in accordance with the lenders’customary practices for oil and gas loans. The borrowing base is re-determined semi-annually, and the amount available for borrowing could be increased ordecreased as a result of such redeterminations. Under certain circumstances, either the Company or the lenders may request an interim redetermination. TheRevolving Credit Facility matures in February 2021, unless there is a maturity of material indebtedness prior to such date.

The Revolving Credit Facility is guaranteed by all of our subsidiaries and is collateralized by substantially all of the assets of the Company’s Aneth Fieldand Delaware Basin assets held by Resolute Aneth, LLC and Resolute Natural Resources Southwest, LLC, which are wholly-owned subsidiaries of theCompany.

Pursuant to the spring borrowing base redetermination, the borrowing base has been increased to $225 million, effective April 17, 2017.

The Revolving Credit Facility includes covenants that require, among other things, that we maintain a ratio of current assets to current liabilities of no lessthan 1.0 to 1.0 and a ratio of total funded debt to EBITDA of no more than 4.0 to 1.0. The Revolving Credit Facility prohibits us from entering into derivativearrangements for more than (i) 85% of our anticipated production from proved properties in the next two years and (ii) the greater of 75% of our anticipatedproduction from proved properties or 85% of our production from projected proved developed producing properties after such two year period (not to exceed aterm of 60 months for any such derivative arrangement).

To the extent that the borrowing base, as adjusted from time to time, exceeds the outstanding balance, no repayments of principal are required prior tomaturity. However, should the borrowing base be set at a level below the outstanding balance, we would be required to eliminate that excess over the 120 daysfollowing that determination.

Each borrowing under the Revolving Credit Facility accrues interest at either (a) the London Interbank Offered Rate, plus a margin that ranges from 3.0%to 4.0% or (b) the Alternative Base Rate defined as the greater of (i) the Administrative Agent’s Prime Rate (ii) the Federal Funds Effective Rate plus 0.5% or(iii) an adjusted LIBOR plus a margin for the Alternate Base Rate that ranges from 2.0% to 3.0%. Each such margin is based on the level of utilization under theborrowing base.

We were in compliance with all material terms and covenants of the Revolving Credit Facility at March 31, 2017.

Resolute Energy Corporation, the stand-alone parent entity, has insignificant independent assets and no operations. There are no restrictions on ourability to obtain cash dividends or other distributions of funds from our subsidiaries, except those imposed by applicable law.


In December 2014 we entered into a second lien Secured Term Loan Agreement with Bank of Montreal, as administrative agent, and the lenders partythereto, pursuant to which we borrowed $150 million. In May 2015 Resolute and certain of its subsidiaries, as guarantors, entered into an Amendment to theSecured Term Loan Agreement and Increased Facility Activation Notice-Incremental Term Loans with Bank of Montreal, as administrative agent, and the lendersparty thereto, pursuant to which the Company borrowed an additional $50 million of Incremental Term Loans under its Secured Term Loan Facility.

In December 2015 we retired $70 million of the amount outstanding under the Secured Term Loan Facility following the sale of certain properties in theMidland Basin in accordance with mandatory prepayment provisions stipulated in the Secured Term Loan Facility.

26


On January 3, 2017, we paid approximately $132 million constituting all amounts due under the Secured Term Loan Facility (including prepayment fees of$3.5 million), with a portion of the proceeds from the previously announced common stock offering that closed on December 23, 2016. In addition $6.2 million ofdeferred financing costs and original issue discount were expensed as part of the extinguishment. The Secured Term Loan Facility was terminated in connectionwith the repayment.

Senior Notes

In 2012 we consummated two private placements of senior notes with principal totaling $400 million. The Senior Notes are due May 1, 2020, and bear anannual interest rate of 8.50% with the interest on the notes payable semiannually in cash on May and November 1 of each year.

The Senior Notes were issued under an Indenture (the “Indenture”) among the Company and our existing subsidiaries (the “Guarantors”) in a privatetransaction not subject to the registration requirements of the Securities Act of 1933. In March 2013 the Company registered the Senior Notes with theSecurities and Exchange Commission by filing an amendment to the registration statement on Form S-4 enabling holders of the Senior Notes to exchange theprivately placed Senior Notes for publically registered Senior Notes with substantially identical terms. The Indenture contains affirmative and negative covenantsthat, among other things, limit our and the Guarantors’ ability to make investments, incur additional indebtedness or issue certain types of preferred stock, createliens, sell assets, enter into agreements that restrict dividends or other payments by restricted subsidiaries, consolidate, merge or transfer all or substantially allof our assets, engage in transactions with our affiliates, pay dividends or make other distributions on capital stock or prepay subordinated indebtedness andcreate unrestricted subsidiaries. The Indenture also contains customary events of default. Upon occurrence of events of default arising from certain events ofbankruptcy or insolvency, the Senior Notes shall become due and payable immediately without any declaration or other act of the trustee or the holders of theSenior Notes. Upon the occurrence of certain other events of default, the trustee or the holders of the Senior Notes may declare all outstanding Senior Notes tobe due and payable immediately. We were in compliance with all material terms and covenants under our Senior Notes as of March 31, 2017.


The Senior Notes are redeemable by us on not less than 30 or more than 60 days prior notice, at redemption prices set forth in the Indenture. If a changeof control occurs, each holder of the Senior Notes will have the right to require that we purchase all of such holder’s Senior Notes in an amount equal to 101% ofthe principal of such Senior Notes, plus accrued and unpaid interest, if any, to the date of the purchase. In light of the significantly lower interest rateenvironment currently compared to when the Senior Notes were first issued, the Company is evaluating a potential refinance of the Senior Notes.

Preferred Stock



As of March 31, 2017, the Company had accumulated undeclared preferred dividends of $1.1 million. A preferred dividend of $1.3 million was declaredon April 12, 2017 and paid on April 17, 2017.

Commitment Letter

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The Company is evaluating the optimal long-term financing for the Delaware Basin Bronco Acquisition. In the interim, however, the Company entered intoa commitment letter on March 3, 2017, for a $100 million unsecured bridge financing facility with BMO Capital Markets (the “Commitment Letter”). TheCommitment Letter provides the Company with the ability to borrow up to $100 million, subject to satisfaction or waiver of customary conditions to closing, forthe consummation of the Delaware Basin Bronco Acquisition. In the event that the Bridge Commitment is not drawn in connection with the Delaware BasinBronco Acquisition, then the obligations of the parties under the Commitment Letter terminate.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financing arrangements other than operating leases and have not guaranteed any debt or commitments of otherentities or are party to any options on non-financial assets.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Price Risk and Derivative Arrangements

Our major market risk exposure is in the pricing applicable to oil and gas production. Realized pricing on our unhedged volumes of production is primarilydriven by the spot market prices applicable to oil production and the prevailing price for gas. Oil and gas prices have been volatile and unpredictable for severalyears, and we expect this volatility to continue in the future. The prices we receive for unhedged production depend on many factors outside of our control.

We employ derivative instruments such as swaps, puts, calls, collars and other such agreements. The purpose of these instruments is to manage ourexposure to commodity price risk in order to provide a measure of stability to our cash flows in an environment of volatile oil and gas prices.

Under the terms of our Revolving Credit Agreement, as amended and restated February 17, 2017, the form of derivative instruments to be entered into isat our discretion, but they are not to exceed (i) 85% of our anticipated production from proved properties in the next two years and (ii) the greater of 75% of ouranticipated production from proved properties or 85% of our anticipated production from proved developed producing properties after such two year period,utilizing economic parameters specified in our credit agreement, including escalated prices and costs.

By removing the price volatility from a significant portion of our oil and gas production, we have mitigated, but not eliminated, the potential effects ofvolatile prices on cash flow from operations for the periods hedged. While mitigating negative effects of falling commodity prices, certain of these derivativecontracts also limit the benefits we would receive from increases in commodity prices. It is our policy to enter into derivative contracts only with counterpartiesthat are major, creditworthy financial institutions deemed by management as competent and competitive market makers. As of March 31, 2017, the fair value ofour commodity derivatives was a net liability of $0.8 million.

The following table represents our oil swap contracts as of March 31, 2017:

Oil (NYMEX WTI)

Remaining Term

Bbl per Day

Weighted AverageSwap Price

per Bbl


Apr – Dec 2017 3,022 $ 53.69 $ 1,656

The following table represents our gas swap contracts as of March 31, 2017: Gas (NYMEX Henry Hub)

Remaining Term

MMBtuper Day

WeightedAverage Swap Price

per MMBtu


Apr – Dec 2017 1,357 $ 2.770 $ (162)

The following table represents our NGL swap contracts as of March 31, 2017:

NGL (Mont Belvieu)

Remaining Term

Bbl per Day Weighted AverageSwap Price per Bbl

Fair Value of

Asset (Liability)(in thousands)

Apr – Dec 2017 300 $ 19.53 $ (230)

The following table represents our two-way oil collar contracts as of March 31, 2017:

Oil (NYMEX WTI)

Remaining Term

Bbl per Day


per Bbl


per Bbl


Apr – Dec 2017 2,500 $ 47.54 $ 59.40 $ 720

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The following table represents our two-way gas collar contracts as of March 31, 2017:


Remaining Term

MMBtu per Day




Apr – Dec 2017 7,910 $ 2.504 $ 3.336 $ (633)

The following table represents our three-way oil collar contracts as of March 31, 2017:

Oil (NYMEX WTI)

Remaining Term

Bbl per Day

Weighted AverageShort Put Price

per Bbl


per Bbl


per Bbl


Apr – Dec 2017 1,500 40.00 $ 50.00 $ 60.10 $ 535

The following table represents our three-way gas collar contracts as of March 31, 2017:


Remaining Term

MMBtu per Day

Weighted AverageShort Put Price per

MMBtu




Apr – Dec 2017 1,998 $ 2.692 $ 3.192 $ 3.746 $ 21

The following table represents our commodity option contract as of March 31, 2017:

Oil (NYMEX WTI)


Weighted AverageSold Call Price

per Bbl


Jan – Dec 2018 1,100 $ 50.00 $ (2,717)



Commodity Swaps

MMBtu per Day Weighted Average Swap Price

per MMBtu


Interest Rate Risk

At March 31, 2017, we had $19 million of outstanding debt under the Revolving Credit Facility. Interest is calculated under the terms of the agreementbased principally on a LIBOR spread. A 10% increase in LIBOR would result in an increase of less than $0.1 million in annual interest expense. We do notcurrently have any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness.


We are exposed to credit risk to the extent of nonperformance by the counterparties in the derivative contracts discussed above. All counterparties arecurrent or former lenders under our Revolving Credit Facility. For these contracts, we are not required to provide any credit support to our counterparties otherthan cross collateralization with the properties securing the Revolving Credit Facility. Our derivative contracts are documented with industry standard contractsknown as a Schedule to the Master Agreement and International Swaps and Derivative Association, Inc. Master Agreement. Typical terms for the ISDAs includecredit support requirements, cross default provisions, termination events, and set-off provisions. We have set-off provisions with our Revolving Credit Facilitylenders that, in the event of counterparty default, allow us to set-off amounts owed under the Revolving Credit Facility or other general obligations againstamounts owed for derivative contract liabilities.

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ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of Richard F. Betz, our Chief Executive Officer, and Theodore Gazulis, our Chief Financial Officer, evaluated theeffectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2017. Based on the evaluation, those officers haveconcluded that:

• our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submitunder the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rulesand forms; and

• our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submitunder the Securities Exchange Act of 1934 was accumulated and communicated to our management, including our Chief Executive Officer andChief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has not been any change in the Company’s internal control over financial reporting that occurred during the quarterly period ended March 31,2017 that has materially affected, or is reasonably likely to affect, the Company’s internal control over financial reporting.

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PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS

Resolute is not a party to any material pending legal or governmental proceedings, other than ordinary routine litigation incidental to our business. Whilethe ultimate outcome and impact of any proceeding cannot be predicted with certainty, our management believes that the resolution of any of our pendingproceedings will not have a material adverse effect on our financial condition or results of operations.

ITEM 1A. RISK FACTORS

Information about material risks related to our business, financial condition and results of operations for the quarter ended March 31, 2017 does notmaterially differ from those set out in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2016. The additional risk factor setforth below is related to the Bronco Acquisition and potential Aneth disposition.

We plan to reposition Resolute to a pure-play Delaware Basin company by disposing of our Aneth Field Properties, we may be unable to successfullydivest our Aneth Field Properties at favorable prices and the divesture could materially adversely affect our business, financial position, results ofoperations or cash flows.

We have announced that have begun pursing a process focused on the disposition of our Aneth Field Properties in order to reposition us as a pure-playDelaware Basin company. The disposition of Aneth Field Properties, if consummated, would provide meaningful additional capital to the Company. This capitalcould be deployed either to our Delaware Basin drilling program where we see our highest rates of return or as a component of the optimal long-term financingfor the Delaware Basin Bronco Acquisition.

Aneth Field is currently a substantial part of our operations, and sales of oil and gas from Aneth Field represent a substantial part of our total cash flow. AtDecember 31, 2016, Aneth Field held approximately 41% of our net proved reserves and averaged production of 6,161 Boe per day in 2016, of whichapproximately 95% was oil. During 2016, Aneth Field had sales of 2,132 MBbl of oil and 739 MMcf gas with average realized prices of $36.37 per Bbl of oil and$1.31 per Mcf of gas with average production costs of $20.24 per Boe of lease operating expenses and $4.31 per Boe of production and ad valorem taxes.Additionally at December 31, 2016, Aneth Field consisted of 43,218 developed gross acres or 67.1% of our total developed gross acreage and 27,157 developednet acres or 60.5% of our total developed net acreage.

A sale of our Aneth Field Properties may be affected by market conditions outside of our control, such as:

• market demand;

• price of oil and gas;

• availability of financing or other sources of funding available to potential purchasers;

• general economic and political outlook of the United States;

• identification of potential purchasers and negotiation of sales agreements;

• willingness of the purchasers to assume certain agreements and liabilities associated with the assets offered for sale; and

• approval of the transaction from the Navajo Nation.

Our ability to divest of Aneth Field Properties, the timing of such divestment, and the price we may ultimately receive may be affected by the foregoing orother factors. Additionally, there can be no assurances that our subsequent investments in the Delaware Basin from the proceeds and the redeployment ofresources made available by the sale of our Aneth Field Properties will meet our internal production and profitability projections for a pure-play Delaware Basinstrategy or even meet current production and profitability projections were we not to divest the Aneth Field Properties. We currently depend in part on the cashflow generated by our Aneth Field Properties for the payment of our indebtedness, and if we do not meet our internal projections and experience lower cash flowdue to sale of our Aneth Field Properties, it may materially adversely affect our ability make payments on our outstanding indebtedness. Consequently, the saleof our Aneth Field Properties could materially adversely affect our business, financial position, results of operations or cash flows.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

In connection with the vesting of Company restricted common stock under the 2009 Performance Incentive Plan (“Incentive Plan”), we retain shares ofcommon stock at the election of the recipients of such awards in satisfaction of withholding tax obligations. These shares are retired by the Company.

2017 Total Number of Shares

Purchased(1)(2) Average Price Paid

Per Share

March 1 – 31 84,835 $ 38.22

1) All shares purchased in 2017 were to offset tax withholding obligations that occur upon the vesting and delivery of outstanding common shares under the terms of the Incentive Plan.2) As of March 31, 2017, the maximum number of shares that may yet be purchased would not exceed the employees’ portion of taxes withheld on unvested shares (542,428 shares), outstanding stock

options (1,005,748 options), shares yet to be granted under the Incentive Plan (467,124 shares) and potential Outperformance Shares (130,898 shares).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

ExhibitNumber Description

2.1

Purchase and Sale Agreement entered into March 3, 2017 by and between CP Exploration II, LLC and Petrocap CPX, LLC as sellers andResolute Natural Resources Southwest, LLC as buyer effective May 1, 2017 (filed herewith). Schedules and exhibits have been omitted pursuantto Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and ExchangeCommission upon request.

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith) 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith) 32.1

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnishedherewith)

101

The following materials are filed herewith: (i) XBRL Instance Document, (ii) XBRL Taxonomy Extension Schema Document, (iii) XBRL TaxonomyExtension Calculation Linkbase Document, (iv) XBRL Taxonomy Extension Labels Linkbase Document, (v) XBRL Taxonomy ExtensionPresentation Linkbase Document, and (vi) XBRL Taxonomy Extension Definition Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned thereunto dulyauthorized. Signature Capacity Date

/s/ Richard F. Betz Richard F. Betz Chief Executive Officer and Director

(Principal Executive Officer) May 3, 2017

/s/ Theodore Gazulis Theodore Gazulis Executive Vice President and

Chief Financial Officer(Principal Financial Officer)

May 3, 2017

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Exhibit 2.1

Execution Version

PURCHASE AND SALE AGREEMENT

BY AND AMONG

CP EXPLORATION II, LLC

and

PETROCAP CPX, LLC

as Seller,

and

RESOLUTE NATURAL RESOURCES SOUTHWEST, LLC

as Buyer

EXECUTED ON March 3, 2017



THIS PURCHASE AND SALE AGREEMENT (as the same may be amended, restated, supplemented or otherwisemodified from time to time in accordance herewith, this “Agreement”) is entered into this 3rd day of March, 2017 (the “ExecutionDate”), between CP Exploration II, LLC, a Delaware limited liability company (“CPX”), and PetroCap CPX, LLC, a Texas limitedliability company (“PetroCap” and together with CPX, collectively, “Seller” and each, individually, a “Seller Party”), and ResoluteNatural Resources Southwest, LLC, a Delaware limited liability company (“Buyer”). Buyer and Seller may be referred to collectivelyas the “Parties” or individually as a “Party.”

W I T N E S S E T H:

ARTICLE IDEFINITIONS AND REFERENCES

Section 1.1 Defined Terms. When used in this Agreement, the following terms shall have the respective meaningsassigned to them in this Section 1.1 or in the section, subsections or other subdivisions referred to below:

“AAA” has the meaning assigned to such term in Section 16.1(a).

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, through one or moreintermediaries, controls, or is controlled by, or is under common control with, another Person. The term “control” and its derivativeswith respect to any Person mean the possession, directly or indirectly, of the power to direct or cause the direction of the managementand policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Allocated Amount” means the portion of the Base Purchase Price allocated to each Property by Buyer as set forth onExhibit D.

“Allocation Schedule” has the meaning assigned to such term in Section 3.3.

“Applicable Contracts” means all Contracts to which Seller or its Affiliates is a party or is bound relating to any of theProperties and (in each case) that will be binding on Buyer after the Closing, including, without limitation: joint operating agreements;communitization agreements; net profits agreements; production payment agreements; area of mutual interest agreements; jointventure agreements; confidentiality agreements; farmin and farmout agreements; bottom hole agreements; crude oil, condensate, andnatural gas purchase and sale, gathering, transportation, and marketing agreements; hydrocarbon storage agreements; acreagecontribution agreements; operating agreements; balancing agreements; pooling declarations or agreements; unitization agreements;processing agreements; saltwater disposal agreements; facilities or equipment leases; and other similar contracts and agreements,but exclusive of any master service agreements and Contracts relating to the Excluded Properties.

“Applicable Environmental Laws” mean all applicable Laws by which the Properties are bound and which are pertainingor relating to (a) pollution or pollution control, (b) the

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protection of public health, wildlife, natural resources or the environment, and (c) the management, presence, transport, storage,disposal or release of waste materials and/or Hazardous Substances, including the Clean Air Act, as amended, the ComprehensiveEnvironmental Response, Compensation and Liability Act, as amended, the Federal Water Pollution Control Act, as amended, theResources Conservation and Recovery Act, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances ControlAct, as amended, the Superfund Amendment and Reauthorization Act of 1986, as amended, the Hazardous Materials TransportationAct, as amended and comparable state and local laws.

“Applicable Permits” means all Permits to which Seller or its Affiliates (including CPX Operating), is a party relating to anyof the Properties that are fully assignable to Buyer at Closing without payment of fees or other penalties (unless Buyer pays such feesand/or penalties), but exclusive of any Permits relating to the Excluded Properties.

“Arbitration Notice” has the meaning assigned to such term in Section 16.1(a).

“Arbitration Panel” has the meaning assigned to such term in Section 16.1(b).

“Asserted Defects” mean Asserted Title Defects and Asserted Environmental Defects, collectively.

“Asserted Environmental Defects” has the meaning assigned to such term in Section 7.1.

“Asserted Title Defects” has the meaning assigned to such term in Section 7.1.

“Asset Taxes” means ad valorem, property, excise, severance, production, sales, use, or similar Taxes (excluding, for theavoidance of doubt, any Income Taxes and Transfer Taxes) based upon or measured by the ownership or operation of the Propertiesor the production of Hydrocarbons therefrom or the receipt of proceeds therefrom.

“Base Purchase Price” has the meaning assigned to such term in Section 3.1.

“Business Day” means any day other than a Saturday, a Sunday or other day on which commercial banks in Dallas, Texasare authorized or required by Law to close.

“Buyer” has the meaning assigned to such term in the preamble.

“Buyer’s Indemnified Claim” and “Buyer’s Indemnified Claims” have the meanings assigned to such terms in Section12.2.

“Buyer Indemnified Parties” means Buyer and its partners, members and Affiliates and all their directors, officers,employees, attorneys, contractors and agents.

“Closing” and “Closing Date” have the meanings assigned to such terms in Section 9.1.

“Code” means the Internal Revenue Code of 1986, as amended.

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“Condition of the Properties” has the meaning assigned to such term in Section 12.1(c).

“Confidential Information” has the meaning assigned to such term in Section 2.1(i).

“Consents” has the meaning assigned to such term in Section 4.1(j).

“Contract” means any written or oral contract or agreement, but excluding, however, any Lease, easement, right-of-way,permit or other instrument creating or evidencing an interest in the Oil and Gas Properties or any real or immovable property related toor used in connection with the operations of any Properties.

“Conveyance” has the meaning assigned to such term in Section 9.2(a).

“CPX” has the meaning assigned to such term in the preamble.

“CPX Operating” means CPX II Operating, LLC, a Delaware limited liability company.

“Cure Period” has the meaning assigned to such term in Section 7.4(a).

“Debt Financing Commitment” means the executed commitment letter, dated as of the date hereof, by and among Buyerand lenders party thereto, including all exhibits, schedules, annexes and amendments thereto.

“Debt Financing Sources” means the financing sources party to the Debt Financing Commitment and any of theirrespective former, current or future general or limited partners, direct or indirect shareholders or equityholders, managers, members,directors, officers, employees, Affiliates, representatives or agents or any former, current or future general or limited partner, direct orindirect shareholder or equityholder, manager, member, director, officer, employee, Affiliate, representative or agent of any of theforegoing.

“Defect” has the meaning assigned to such term in Section 7.2.

“Defect Amount” has the meaning assigned to such term in Section 7.5.

“Defect Arbitrator” has the meaning assigned to such term in Section 7.8.

“Defect Deadline” has the meaning assigned to such term in Section 7.1.

“Defect Notice” has the meaning assigned to such term in Section 7.1.

“Deposit” has the meaning assigned to such term in Section 3.2.

“Dispute Notice” has the meaning assigned to such term in Section 11.3.

“Easements” has the meaning assigned to such term in Section 2.1(h).

“Effective Date” has the meaning assigned to such term in Section 9.2(a).

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“Environmental Defect Amount” has the meaning assigned to such term in Section 7.7(b).

“Environmental Defect Deductible” has the meaning assigned to such term in Section 7.7(b).

“Environmental Defects” has the meaning assigned to such term in Section 7.2(f).

“Escrow Account” has the meaning assigned to such term in Section 3.2.

“Escrow Agent” has the meaning assigned to such term in Section 3.2.

“Escrow Agreement” has the meaning assigned to such term in Section 3.2.

“Excluded Liens” has the meaning assigned to such term in Section 7.2(b).

“Excluded Properties” has the meaning assigned to such term in Section 2.2.

“Execution Date” has the meaning assigned to such term in the preamble.

“Farmout Agreement” means that certain Amended and Restated Farmout and Joint Development Agreement datedeffective as of August 1, 2015, by and among ConocoPhillips Company, a Delaware corporation, CPX and PetroCap, as amended.

“Fee Properties” has the meaning assigned to such term in Section 2.1(g).

“Final Settlement Statement” has the meaning assigned to such term in Section 11.3.

“Fraud” means, with respect to Seller, a false statement of a material fact: (a) made by an individual identified in thedefinition of “Seller’s Knowledge,” (b) with the actual and present knowledge on the part of such individual that the statement isuntrue, (c) with actual and deliberate intent on the part of such individual to deceive the person (victim) that is claiming fraud, (d)where the person (victim) justifiably relied on such false statement, and (e) where the person (victim) suffered actual injury as a directresult of such false statement.

“Fundamental Representations” means the representations and warranties of Seller set forth in Section 4.1(a)(Organization and Qualification), Section 4.1(b) (Due Authorization), Section 4.1(c) (Approvals), Section 4.1(d) (Valid, Binding andEnforceable) , Section 4.1(i) (Payment of Expenses) , Section 4.1(m) (No Bankruptcy; Insolvency) and Section 4.1(y) (BrokerageFees and Commissions).

“Governmental Authority” or “Governmental Authorities” mean any federal, state or local government or any court ofcompetent jurisdiction, or any regulatory or administrative agency, commission, department, board with jurisdiction or Taxing Authorityover any of the Properties.

“Hard Consent” has the meaning assigned to such term in Section 6.5(b).

4


“Hazardous Substances” means (i) any petrochemical or petroleum products, oil or coal ash, radioactive materials, radongas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipmentthat contain dielectric fluid which may contain levels of polychlorinated biphenyls, (ii) any chemicals, materials, or substances definedas or included in the definition of “hazardous substances,” “hazardous wastes,” “restricted hazardous materials,” “extremely hazardoussubstances,” “toxic substances,” “contaminants” or “pollutants” or words of similar meaning and regulatory effect or (iii) any otherchemical, material or substance, exposure to which is prohibited, limited or regulated by any Applicable Environmental Law.

“Hydrocarbons” shall mean oil and gas and other hydrocarbons produced or processed in association therewith.

“Income Taxes” means any income, franchise and similar Taxes.

“Indemnitee” has the meaning assigned to such term in Section 12.3.

“Law” or “Laws” mean any applicable statute, law (including common law), rule, regulation, ordinance, order, injunction,decree or judgment by any Governmental Authority.

“Leases” has the meaning assigned to such term in Section 2.1(a).

“Like-Kind Exchange” has the meaning assigned to such term in Section 17.17.

“Material Contracts” has the meaning assigned to such term in Section 4.1(f).

“Net Mineral Acres” means, solely with respect to each Lease, the product of (a) the gross acres included in such Lease,(b) the lessor’s percentage ownership of the oil, gas and other minerals beneath such Lease, and (c) Seller’s undivided percentageownership of such Lease. By way of example, if Seller owns a one hundred percent (100%) interest in a Lease that covers 100 grossacres, and the lessor of such lease owns an undivided twenty percent (20%) of the lands covered by such lease, then the calculationdescribed herein would yield a result of twenty (20) Net Mineral Acres.

“Net Revenue Interest” shall mean, with respect to any Well, the interest in and to all Hydrocarbons produced, saved andsold from or allocated to such Well after giving effect to all Royalties, carried interests, reversionary interests and other burdens upon,measured by or payable out of production therefrom.

“Oil and Gas Property” and “Oil and Gas Properties” have the meanings assigned to such terms in Section 2.1.

“Person” means any individual, firm, corporation, company, partnership (general and limited), limited liability company, jointventure, association, trust, estate, unincorporated organization, Governmental Authority or any other entity.

“Permit” means any credit, permit, license, approval, waiver, or similar qualification or authorization issued or given by anyGovernmental Authority.

5


“Permitted Encumbrances” has the meaning assigned to such term in Section 7.3.

“PetroCap” has the meaning assigned to such term in the preamble.

“Preferential Rights” has the meaning assigned to such term in Section 4.1(j).

“Privileged Information” has the meaning assigned to such term in Section 2.1(i).

“Properties” has the meaning assigned to such term in Section 2.1.

“Property Expenses” means all operating and capital costs and expenses (including, without limitation, rentals, Royalties,drilling costs, capital expenditures, lease operating expenses, expenses incurred under applicable operating agreements andoverhead costs charged to the Properties under applicable operating agreements, as allowable under applicable accountingprocedures) incurred in connection with the ownership or operation of the Properties, and excluding, for the avoidance of doubt, anyAsset Taxes, Income Taxes and Transfer Taxes.

“Purchase Price” has the meaning assigned to such term in Section 3.1.

“Records” has the meaning assigned to such term in Section 2.1(i).

“Remediate” means the implementation and completion of any remedial, removal, response, construction, closure, disposalor other corrective actions required under Applicable Environmental Laws to correct or remove material violations of ApplicableEnvironmental Laws in the most cost effective manner reasonably available, consistent with requirements of Applicable EnvironmentalLaws, taking into account that nonpermanent remedies (such as, by way of example, but not by limitation or similarity, mechanisms tocontain or stabilize hazardous substances or materials, including monitoring site conditions, natural attenuation, risk-based correctiveaction, dikes, encapsulation, leachate collection system, etc.) that may be the most cost effective manner reasonably available.

“Retained Obligations” means all costs, obligations and liabilities related to (a) the mispayment or non-payment ofRoyalties payable out of Seller’s share of production of Hydrocarbons from the Oil and Gas Properties during the Seller OwnershipPeriod, but prior to the Effective Date, but only to the extent that Buyer has provided Sellers with a timely notice in accordance withSection 12.3 prior to the date that is twelve (12) months following the Closing, (b) any contamination or condition that is a result ofany off-site disposal by either Seller of any Hazardous Substances produced from any of the Properties on, in or below any propertiesnot included in the Properties that occurs prior to the Closing, for which, and to the extent, that remediation of such contamination orcondition is required by any Applicable Environmental Law; in each case, only to the extent that Buyer has provided Seller with atimely Claim Notice in accordance with Section 12.3 prior to the date that is twelve (12) months following the Closing, (c) any liabilityof Seller, or otherwise imposed on the Properties in respect of any Tax, including without limitation, any liability of Seller for the Taxesof any other Person under Treasury Regulation 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee orsuccessor, by contract or otherwise, but excluding any Taxes that are specifically allocated to the Buyer pursuant to Article XV, (d)any expenses for which Seller is responsible pursuant to Article XI, but only to the extent that Buyer has provided Seller with a timelyclaim

6


notice in accordance with Section 12.3 prior to the date that is twelve (12) months following the Closing, (e) obligations with respectto the period prior to Closing and payable to any Affiliate of a Seller, (f) the Excluded Properties, (g) Seller’s or its Affiliates’employment relationship with the employees of Seller or its Affiliates, or Seller’s or its Affiliates’ responsibilities under the EmployeeRetirement Income Security Act of 1974, as amended, applicable to such employees; and (h) the payment or improper payment ordistribution by Seller of suspense revenues prior to the Effective Time, but only to the extent that Buyer has provided Sellers with atimely notice in accordance with Section 12.3 prior to the date that is twelve (12) months following the Closing.

“Routine Governmental Approvals” has the meaning assigned to such term in Section 4.1(c).

“Royalties” means all royalties, overriding royalties, reversionary interests, net profit interests, production payments, carriedinterests, non-participating royalty interests, reversionary interests and other royalty burdens and other interests payable out ofproduction of Hydrocarbons from or allocated to the Leases, Wells or the proceeds thereof to Third Parties, but excluding AssetTaxes.

“Seller” has the meaning assigned to such term in the preamble.

“Seller Party” has the meaning assigned to such term in the preamble.

“Seller Indemnified Parties” means each Seller Party and its partners, members, and all their Affiliates, and all theirrespective directors, officers, employees, attorneys, contractors and agents.

“Seller Ownership Period” has the meaning assigned to such term in Section 4.1(p).

“Seller Party Documents” means (a) any agreements, arrangements, instruments, contracts or documents between CPXand PetroCap (or their respective Affiliates) that will be terminated prior to Closing, and (b) any reports, data, information ordocumentation prepared by Cobb & Associates, together with any communications related thereto and analysis thereof.

“Seller’s Indemnified Claim” and “Seller’s Indemnified Claims” have the meanings assigned to such terms in Section12.1.

“Seller’s Knowledge” and any similar phrase mean, (a) with respect to PetroCap, the actual knowledge of Lane Britain and(b) with respect to CPX, the actual knowledge of Tom Powell, Daniel Griffith, Randall J. Holt, Justin Bynum and Bridget Powell, both(a) and (b), after such inquiry or investigation as would reasonably be undertaken by an employee in such position in connection withthe performance of his or her duties with respect to the Properties; provided, however, that the scope of such inquiry or investigationshall in no event go beyond (x) a review of the books and records related to the Properties in the applicable Seller Party’s (or itsAffiliate’s) possession, and (y) inquiry of the applicable Seller Party’s (or its Affiliate’s) employees responsible for the matter inquestion.

“Seller’s Warranties” has the meaning assigned to such term in Section 4.2.

7


“Side Letter Agreement” means the letter agreement dated the date hereof by and among the Buyer and the Sellers.

“Straddle Period” means any Tax period beginning before and ending on or after the date on which the Effective Dateoccurs.

“Survival Period” has the meaning assigned to such term in Section 17.1.

“Tax Return” means any Tax return, declaration, report, claim for refund, or information return, including any schedulethereto and any amendment thereof.

“Taxes” means any taxes, assessments, unclaimed property or escheat obligations and other governmental chargesimposed by any Governmental Authority, including income, profits, gross receipts, employment, stamp, occupation, premium,alternative or add-on minimum, ad valorem, real property, personal property, transfer, real property transfer, value added, sales, use,customs, duties, capital stock, franchise, excise, withholding, social security (or similar), unemployment, disability, payroll, windfallprofit, severance, production, estimated or other tax, including any interest, penalty or addition thereto, whether disputed or not.

“Taxing Authority” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposessuch Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision, including any governmental orquasi-governmental entity or agency that imposes, or is charged with collecting, social security or similar charges or premiums.

“Third Party” means any Person or entity, governmental or otherwise, other than Sellers, Buyer, and their respectiveAffiliates and includes other working interest owners, royalty owners, lease operators, landowners, service contractors andGovernmental Authorities.

“Title Benefit” has the meaning assigned to such term in Section 7.6.

“Title Benefit Amount” has the meaning assigned to such term in Section 7.6.

“Title Benefit Notice” has the meaning assigned to such term in Section 7.6.

“Title Defect Amount” has the meaning assigned to such term in Section 7.7(a).

“Title Defect Deductible” has the meaning assigned to such term in Section 7.7(a).

“Title Defects” has the meaning assigned to such term in Section 7.2(e).

“Transfer Taxes” means any and all sales, use, transfer, stamp, documentary, registration or similar Taxes incurred orimposed with respect to the transactions described in this Agreement.

“Wells” has the meaning assigned to such term in Section 2.1(d).

8


“Working Interest” shall mean, with respect to any Well, the interest in and to such Well that is burdened with theobligation to bear and pay costs and expenses of maintenance, development and operations on or in connection with such Well, butwithout regard to the effect of any Royalties and other similar burdens upon, measured by or payable out of production therefrom.

ARTICLE IIPROPERTY TO BE SOLD AND PURCHASED

Section 2.1 Properties. Seller shall sell and Buyer shall purchase, on the terms and provisions herein contained, thefollowing described properties, rights and interests:

(a) All rights, titles and interests of Seller and its Affiliates in and to the oil, gas and/or mineral leases which aredescribed on Exhibit A hereto and any ratifications or amendments to such leases (the “Leases”);

(b) Without limitation of the foregoing, all other right, title and interest (of whatever kind or character, whether legal orequitable, and whether vested or contingent) of Seller and its Affiliates in and to the oil, gas and other minerals in and under or thatmay be produced from the lands and depths described on Exhibit A hereto or described in any of the Leases and all right, title andinterest that may be earned pursuant to the Farmout Agreement (as hereinafter defined) (including, without limitation, interests in oil,gas and/or mineral leases, overriding royalties, production payments, net profits interests, fee mineral interests, fee royalty interestsand other interests insofar as they cover such lands), even though Seller’s or its Affiliate’s interest therein may be incorrectlydescribed in, or omitted from, such Exhibit A;

(c) All rights, titles and interests of Seller or its Affiliates in and to, or otherwise derived from, all presently existing andvalid oil, gas and/or mineral unitization, pooling, and/or communitization agreements, declarations and/or orders (including, withoutlimitation, all units formed under orders, rules, regulations, or other official acts of any federal, state or other authority havingjurisdiction, and voluntary unitization agreements, designations and/or declarations) to the extent that they relate to any of theproperties described in subsections (a) and (b) above;

(d) All rights, titles and interests of Seller or its Affiliates in and to the oil, condensate, natural gas, injection, salt waterdisposal or water wells, whether producing, non-producing, shut-in or temporarily abandoned (but not permanently abandoned),located on the Oil and Gas Properties (as hereinafter defined), including, without limitation, those listed on Exhibit B hereto (the“Wells”);

(e) All rights, titles and interests of Seller or its Affiliates in and to the Applicable Contracts, including, withoutlimitation, the Farmout Agreement and the Contracts listed on Exhibit A-3;

(f) All rights, titles and interests of Seller or its Affiliates in and to all materials, supplies, machinery, equipment,improvements (including, without limitation, frac ponds) and other personal property and fixtures (including, but not by way oflimitation, all pumping units, flowlines, tanks, buildings, injection facilities, saltwater disposal facilities, compression

9


facilities, gathering systems, and other equipment) located on the Oil and Gas Properties and used in connection with the exploration,development, operation or maintenance thereof;

(g) All rights, titles and interests of Seller or its Affiliates in and to the fee surface ownership of the propertiesdescribed on Exhibit A-2 hereto (collectively, the “Fee Properties”);

(h) All rights, titles and interests of Seller or its Affiliates (including CPX Operating), in and to all easements,servitudes, rights of way and surface leases appurtenant to or used in connection with the properties described in subsections (a), (b),(c), (d), (f) and (g) above, including those described on Exhibit A-1 hereto (“Easements”) and all Applicable Permits, including thosedescribed on Exhibit A-1 hereto; and

(i) All rights, titles and interests of Seller in and to all files, records, and data relating to the items described inparagraphs (a) through (h), above, including, without limitation, the following, if and to the extent that such files exist: all books,records, reports, manuals, files, title documents (including correspondence and curative), records of production and maintenance,revenue, sales, expenses, warranties, lease files, land files, well files, division order files, abstracts, title opinions, assignments,reports, property records, contract files, operations files, copies of tax and accounting records (but excluding Federal and state incometax returns and records) and files, maps, core data, hydrocarbon analysis, well logs, mud logs, and field studies, together with otherfiles, contracts, and other records and data and maps including any interpretations, analyses and reports related thereto (collectively,the “Records”), but excluding from the foregoing (and the term “Records” shall be deemed to exclude) (i) records that are subject tolegal privilege (such as the attorney-client privilege or work product doctrine) (the “Privileged Information”), (ii) records that aresubject to Third Party contractual restrictions on disclosure or transfer for which consent or waiver has not been obtained, or to theextent such disclosure or transfer is subjected to payment of a fee or other consideration, for which Buyer has not agreed in writing topay the fee or other consideration, as applicable (“Confidential Information”), provided Seller shall make a reasonable good faitheffort to obtain permission to provide the Confidential Information (but shall in no event be obligated to incur any costs or expenses toobtain such permission), and (iii) the Seller Party Documents. The properties, rights and interests specified in the foregoing subsections (a), (b), (c), and (d), except for the Excluded Properties asdefined below, are herein sometimes collectively called the “Oil and Gas Properties,” and individually an “Oil and Gas Property,”and the properties, rights and interests specified in the foregoing subsections (a), (b), (c), (d), (e), (f), (g), (h) and (i), except for theExcluded Properties, are herein sometimes collectively called the “Properties” and individually a “Property.”

Section 2.2 Excluded Properties. The Properties do not include, and there is hereby expressly excepted andexcluded therefrom and reserved to Seller:

(a) Except to the extent related to any Assumed Obligations, all rights and choses in action (but, for the avoidance ofdoubt, no liabilities or obligations arising from or related to the Properties, all of which are addressed in Article XI and Article XII) infavor of Seller, arising, occurring or existing prior to the Effective Date in connection with the Properties or the

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operation of or production from the Oil and Gas Properties prior to the Effective Date (including, but not limited to, any and all contractrights, claims, receivables, revenues, recoupment rights, recovery rights, accounting adjustments, mispayments, erroneous paymentsor other claims of any nature (i) in favor of Seller and (ii) relating and accruing to any time period prior to the Effective Date, providedthat rights to insurance claims and proceeds are handled under paragraph (d) below);

(b) Any accounts payable accruing before the Effective Date;

(c) All limited liability company, financial, tax and legal (other than title) records of Seller;

(d) Subject to Section 13.1, all rights and interests of Seller (i) under any policy or agreement of insurance orindemnity, (ii) under any bond, or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts,omissions or events or damage to or destruction of property;

(e) All Hydrocarbon production from or attributable to the Properties with respect to all periods prior to the EffectiveDate, as described in Section 11.1, and all proceeds attributable thereto;

(f) Properties excluded from the purchase and sale contemplated by this Agreement under Section 7.4;

(g) Copies (but not the originals) of all Records;

(h) Except to the extent constituting suspended royalties, all deposits, cash, checks, funds and accounts receivable orreceived attributable to Seller’s interests in the Properties with respect to any period of time prior to the Effective Date;

(i) All computer or communications software or intellectual property (including tapes, data and programdocumentation and all tangible manifestations and technical information relating thereto) owned, licensed or used by Seller;

(j) Any logo, service mark, copyright, trade name or trademark of or associated with Seller or any Affiliate of Seller orany business of Seller or of any Affiliate of Seller;

(k) Any documents withheld or not transferred pursuant to Section 10.1 as the result of a legal privilege or third-partyagreement restriction and any communications, documents or memoranda in any way related to the marketing of, or the salesprocess for, the Properties;

(l) All claims of Seller or any of its Affiliates for refunds of, rights to receive funds from any Governmental Authority, orloss carry forwards or credits with respect to (i) Asset Taxes attributable to any period (or portion thereof) prior to the Effective Date,(ii) Income Taxes, or (iii) any Taxes attributable to the Excluded Properties;

(m) Any seismic records and surveys, gravity maps, electric logs, geological or other geophysical data and recordsthat cannot be transferred without the consent of or payment to any

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third party unless such consent is obtained or, in the case of a consent requiring a payment, Buyer elects to make such payment orobtain such consent; and

(n) All right, title and interest of Seller in and to the assets described on Exhibit C.

These excluded properties, rights and interests specified in the foregoing subsections (a) through (n), inclusive, of this Section 2.2are collectively referred to as the “Excluded Properties.” Buyer shall not be responsible for, and Seller expressly retains, all liabilitiesrelated to the Excluded Properties, whether such liabilities arise before or after the Effective Date. It is understood that certain of theExcluded Properties may not be embraced by the term Properties. The fact that certain properties, rights and interests have beenexpressly excluded is not intended to suggest that had they not been excluded they would have constituted Properties and shall notbe used to interpret the meaning of any word or phrase used in describing the Properties.

ARTICLE IIIPURCHASE PRICE

Section 3.1 Purchase Price. The purchase price for the Properties shall be One Hundred Sixty Million Dollars($160,000,000) (such amount, unadjusted by any adjustments provided for in this Agreement or agreed to by the parties, being hereincalled the “Base Purchase Price”). Such Base Purchase Price may be adjusted as provided in Section 6.5, Article VII, and ArticleXI hereof (the Base Purchase Price, as so adjusted, and as the same may otherwise be adjusted by mutual agreement of the parties,being herein called the “Purchase Price”). The Purchase Price shall be paid in cash at the Closing as hereinafter provided.

Section 3.2 Deposit. Contemporaneously with the execution of this Agreement, Buyer, Seller and Wells Fargo BankN.A. (the “Escrow Agent”) have entered into an escrow agreement (the “Escrow Agreement”), and Buyer has deposited into theescrow account contemplated by the Escrow Agreement (the “Escrow Account”) an amount equal to ten percent (10%) of the BasePurchase Price (such amount being herein called the “Deposit”). The Deposit shall bear interest at the rate established by theEscrow Agent. In the event the transaction contemplated hereby is consummated in accordance with the terms hereof, the Deposit,plus the earned interest, shall be applied to the Purchase Price to be paid by Buyer at the Closing. In the event this Agreement isterminated by Buyer or Seller in accordance with Section 8.3, the Deposit shall be paid to Buyer or Seller as provided therein. If theDeposit is paid to Buyer, or if Buyer receives credit for same against the Purchase Price paid at Closing, such payment, or credit, shallbe in the amount of the Deposit plus the amount of such earned interest. For federal income tax purposes, the interest earned on theDeposit shall be reported by Buyer or Seller in the manner set forth in the Escrow Agreement. THE PARTIES HEREBYACKNOWLEDGE THAT THE EXTENT OF DAMAGES TO SELLER OCCASIONED BY THE FAILURE OF THIS TRANSACTIONTO BE CONSUMMATED WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN AND THAT THE AMOUNT OFTHE DEPOSIT IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER THE CIRCUMSTANCES AND DOESNOT CONSTITUTE A PENALTY.

Section 3.3 Allocation of Purchase Price. Buyer and Seller agree that the Base Purchase Price shall be allocatedamong the Properties as set forth in Exhibit D (the “Allocation

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Schedule”). The Allocated Amounts as set forth on Exhibit D shall be used in calculating adjustments to the Base Purchase Price asprovided herein.

Section 3.4 Allocation for Tax Matters. Seller and Buyer agree that they shall allocate the Purchase Price among theProperties for Tax purposes in a manner consistent with the allocation set forth on the Allocation Schedule and in accordance withSection 1060 of the Code and the Treasury Regulations promulgated thereunder. By Closing, Seller and Buyer shall each completetwo (2) copies of IRS Form 8594 allocating the Purchase Price among the asset classes as provided in the AllocationSchedule. Seller and Buyer agree to file all information reports and Tax Returns (including IRS Form 8594 and any amended TaxReturns or claims for refund) in a manner consistent with the Allocation Schedule and neither Seller nor Buyer shall take, or permit anyof their respective Affiliates to take, any position inconsistent with the Allocation Schedule on any Tax Return, in an audit or otherwise,unless required to do so by applicable Law or a “determination”, within the meaning of Section 1313(a)(1) of the Code. The AllocationSchedule may be revised (solely for Tax purposes, and not for the purposes of Article VII), from time to time, by the mutual writtenconsent of Seller and Buyer, so as to reflect any matters that need updating (including Purchase Price adjustments, if any).Notwithstanding the forgoing, if Seller and Buyer are unable to resolve any dispute with respect to proposed revisions to the PurchasePrice allocations within 14 days, each of Buyer and Seller shall be free to file its own separate Form 8594.

ARTICLE IVREPRESENTATIONS OF SELLER

Section 4.1 Representations of Seller. Each Seller Party severally (and not jointly) represents to Buyer that as of thedate hereof and the Closing Date:

(a) Organization and Qualification. Such Seller Party is duly organized and legally existing and in good standingunder the Laws of the state in which it was formed and is qualified to do business and in good standing in the state of Texas.

(b) Due Authorization. Such Seller Party has full power to enter into and perform its obligations under this Agreementand the other agreements and documents to be entered into hereunder and has taken all necessary action to authorize entering intothis Agreement and such other agreements and performance of its obligations hereunder and thereunder.

(c) Approvals. Neither the execution and delivery of this Agreement or the other agreements and documentscontemplated hereunder, nor the consummation of the transactions contemplated hereby or thereby, nor the compliance with theterms hereof or thereof, will result in any default under any agreement or instrument to which such Seller Party is a party or by whichthe Properties are bound, or violate any order, writ, injunction, decree, statute, rule or regulation applicable to such Seller Party or tothe Properties, except for (i) requirements (if any) that there be obtained consents to assignment (or waivers of preferential rights topurchase) from Third Parties, and (ii) approvals required to be obtained from Governmental Authorities which are customarily obtainedpost-closing (“Routine Governmental Approvals”).

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(d) Valid, Binding and Enforceable. This Agreement constitutes (and the Conveyance provided for herein to bedelivered at Closing will, when executed and delivered, constitute) the legal, valid and binding obligation of such Seller Party,enforceable in accordance with its terms, except as limited by bankruptcy or other Laws applicable generally to creditor’s rights andas limited by general equitable principles.

(e) Litigation. Except as set forth on Exhibit 4.1(e), there are no pending suits, actions, or administrative proceedingsin which such Seller Party (or its Affiliate) is a party and has been served (or, to Seller’s Knowledge, pending written demands orclaims) and which could be reasonably expected to adversely affect the Properties after the Effective Date (including, withoutlimitation, any actions challenging or pertaining to such Seller Party’s (or its Affiliate’s) title to any of the Properties or claiming aviolation of Applicable Environmental Laws), or to enjoin or prohibit the execution and delivery of this Agreement or the consummationof the transactions contemplated hereby.

(f) Material Contracts. Exhibit 4.1(f) sets forth as of the Execution Date all Applicable Contracts of the type describedbelow (collectively, the “Material Contracts”):

(i) any Applicable Contract that can reasonably be expected to result in aggregate payments by Seller or itsAffiliates of more than $50,000 during the remainder of the current or any subsequent fiscal year (based solely on the termsthereof and current volumes, without regard to any expected increase in volumes or revenues);

(ii) any Applicable Contract that can reasonably be expected to result in aggregate revenues to Seller or itsAffiliates of more than $50,000 during the remainder of the current or any subsequent fiscal year (based solely on the termsthereof and current volumes, without regard to any expected increase in volumes or revenues);

(iii) any Hydrocarbon or water purchase and sale, transportation, gathering, treating, processing, injection,disposal or similar Applicable Contract that (i) contains a dedication of production or acreage, or (ii) is not terminable withoutpenalty on 30 days’ or less notice;

(iv) any indenture, mortgage, loan, credit or sale-leaseback or similar Applicable Contract that canreasonably be expected to result in payments by Seller or its Affiliates during the current or any subsequent fiscal year;

(v) any Applicable Contract that constitutes a lease under which Seller or its Affiliates is the lessor or thelessee of real or personal property which lease (A) cannot be terminated by Seller or its Affiliates without penalty upon 90days’ or less notice and (B) involves an annual base rental of more than $50,000;

(vi) any Applicable Contract with any Affiliate of Seller which will be binding on Buyer after the Closing Dateand will not be terminable by Buyer within 30 days’ or less notice after the Closing;

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(vii) a n y farmout agreement, area of mutual interest agreement, exploration agreement, participationagreement, joint operating agreement or similar Applicable Contract where the primary obligations thereunder have not fullybeen performed; and

(viii) any Applicable Contract for the sale of gas containing a take-or-pay, advance payment, prepayment orsimilar provision or requiring gas to be gathered, delivered, processed or transported without then or thereafter receiving fullpayment therefor.

Except as set forth in Exhibit 4.1(f) and except for matters which are not reasonably expected to give rise to claims in excess of$50,000, there exists no default under any Material Contract by such Seller Party or its Affiliates or, to Seller’s Knowledge, by anyother Person that is a party to such Material Contract.

(g) Farmout Agreement. Seller is not in material breach of the Farmout Agreement and, to Seller’s Knowledge, noother party to the Farmout Agreement is in breach thereof. Seller has not received any written notice alleging default or terminationby Seller and, to Seller’s Knowledge, the Farmout Agreement is in full force and effect in accordance with its terms. Seller has madeavailable to Buyer a true, correct and complete copy of the Farmout Agreement and all amendments thereto. The first Initial EarningWell (as defined in the Farmout Agreement) (i) was drilled, tested, completed, Equipped (as defined in the Farmout Agreement) andwas producing in accordance with the terms of the Farmout Agreement on or before July 30, 2016, (ii) is currently producing in payingquantities, and (iii) has a lateral length of not less than 3,600 feet. The remaining five Initial Earning Wells have been drilled toContract Depth (as defined in the Farmout Agreement) in accordance with the Farmout Agreement and each has a lateral length ofnot less than 3,600 feet. Further, Exhibit 4.1(g) sets forth a full and complete list of elections made by Conoco as of the ExecutionDate with respect to their participation in any Wells drilled or completed under the Farmout Agreement.

(h) Commitments, Abandonments or Proposals. Except as set forth in Exhibit 4.1(h), to Seller’s Knowledge: (a) suchSeller Party has incurred no expenses, and has made no commitments to make expenditures in excess of $50,000 net to such SellerParty’s interest in the Properties in connection with the ownership or operation of the Properties after the Effective Date, other thancustomary expenses incurred (i) in the normal operation of existing Wells or (ii) in the performance of continuous developmentobligations under any of the Leases; and (b) no proposals or authorities for expenditures are currently outstanding (whether made bysuch Seller Party or by any other party) to drill additional wells, deepen, plug back, or rework existing Wells, or to conduct operationsother than normal operation of existing Wells, or to permanently abandon any Wells.

(i) Payment of Expenses. To Seller’s Knowledge, all expenses (including all bills for labor, materials and suppliesused or furnished for use in connection with the Properties, and all Asset Taxes) relating to the ownership or operation of theProperties, and for which such Seller Party has received a bill, invoice or other written request for payment have been, and are being,paid (timely, and before the same become delinquent) by such Seller Party, except such expenses and Asset Taxes as are disputedin good faith by such Seller Party and for which an adequate

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accounting reserve has been established by such Seller Party, such disputes being set forth on Exhibit 4.1(i).

(j) Consents and Preferential Rights. To Seller’s Knowledge (i) Exhibit 4.1(j) contains a complete and accurate list ofall requirements that consent (“Consents”) be obtained by such Seller Party for the assignment of the Properties to Buyer; provided,however, that the term “Consents”, as used in this Agreement, shall be deemed to exclude any such requirements in oil and gasleases which have not been assigned to Seller under the Farmout Agreement prior to the Execution Date and, (ii) there are no rightsof first refusal, preferential purchase rights, rights of first negotiation, options, tag right or similar rights, obligations or requirements(“Preferential Rights”) that affect the Oil and Gas Properties.

(k) Well Status. Except as set forth on Exhibit 4.1(k), to Seller’s Knowledge (a) there are no Wells that: (i) suchSeller Party is currently obligated by Law or contract to plug and abandon; or (ii) such Seller Party will be obligated by Law or contractto plug or abandon with the lapse of time or notice or both because the Well is not currently capable of producing in commercialquantities; and (b) such Seller Party has not abandoned any Wells since the Effective Date. Exhibit 4.1(k) contains a list of the statusof any “payout” balance, as of the date set forth on Exhibit 4.1(k), for the Wells subject to a reversion or other adjustment at somelevel of cost recovery or payout (or passage of time or other event other than termination of a Lease by its terms).

(l) Imbalances. Such Seller Party and its predecessors in title to the Oil and Gas Properties have not: (i) takenvolumes of gas from the Wells in excess of those volumes which the ownership of the Properties would entitle such Seller Party toreceive, and (ii) taken volumes of gas from the Wells in amounts less than those volumes which the ownership of the Properties wouldentitle such Seller Party to receive.

(m) No Bankruptcy; Insolvency. There are no bankruptcy, insolvency, reorganization or arrangement proceedingspending, being contemplated by, or to Seller’s Knowledge, threatened against such Seller Party. Seller is not insolvent, and will notbe rendered insolvent by any of the transactions contemplated by this Agreement. As used in this Section 4.1(m), “insolvent” meansthat the sum of Seller’s debts and other probable liabilities exceeds the present fair saleable value of Seller’s assets.

(n) Liens. Except as set forth on Exhibit 4.1(n), there are no liens by, through or under such Seller Party or itsAffiliate affecting Seller’s or its Affiliate’s right, title and interest in the Properties except: (i) liens for Taxes not yet due and payable orthe validity of which is being contested in good faith through appropriate proceedings, (ii) mechanic’s or materialmen’s liens (or othersimilar liens) or liens under an operating agreement or similar agreement, to the extent the same relate to expenses incurred whichare not yet delinquent.

(o) Taxes. Such Seller Party and its Affiliates have filed all Tax Returns and reports required to be filed by such SellerParty or its Affiliate in connection with its ownership and operation of the Oil and Gas Properties, and all such Tax Returns were true,correct and complete in all material respects. Neither Seller Party nor its Affiliate has received notice from a Governmental Authorityregarding the delinquency, mispayment, late payment or non-payment

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of any Asset Taxes. With respect to all Asset Taxes relating to the Properties; (i) there are not currently in effect any extension orwaiver of any statute of limitations of any jurisdiction regarding the assessment or collection of any Asset Tax; (ii) there are noproceedings pending against the Properties or such Seller Party or its Affiliate by any taxing authority for which such Seller Party hasreceived written notice; and (iii) there are no Tax liens on any of the Properties except for liens for Taxes not yet due. None of theProperties is subject to any tax partnership as defined in Section 761 of the Code.

(p) Royalties. During the Seller Ownership Period, all Royalties and other burdens payable to Third Parties out ofSeller’s share of production of Hydrocarbons from the Oil and Gas Properties have either (i) been properly and timely paid, or (ii) heldin suspense by Seller in accordance with applicable Law. “Seller Ownership Period” means, with respect to each Asset, the periodbeginning on the effective date of Seller’s acquisition of the Asset and ending at the Closing.

(q) Compliance with Laws; Permits.

(i) Except as disclosed on Exhibit 4.1(q), Seller’s and its Affiliates’ ownership of the Properties, Seller’s andits Affiliates’ operation of the Oil and Gas Properties operated by Seller, and to Seller’s Knowledge, the operation of theProperties that are operated by a Third Party, are currently in compliance in all material respects with the provisions andrequirements of all Laws (excluding Environmental Laws, which are addressed in Section 4.1(r), and Taxes, which areaddressed in Section 4.1(o)) of all Governmental Authorities having jurisdiction with respect to the Properties, or theownership, operation, development, maintenance, or use of any thereof.

(ii) To Seller’s Knowledge, Sellers and their respective Affiliates have all material Permits required to ownand operate the Properties. To Seller’s Knowledge, there are no facts or circumstances that could be reasonably expectedto result in any termination, suspension or revocation of any such material Permit.

(r) Environmental Matters.

(i) With respect to the Properties, neither Seller nor its Affiliates have entered into, or is subject to, anyagreements, consents, orders, decrees, judgments, license or permit conditions, or other directives of any GovernmentalAuthority in existence as of the Execution Date based on any Applicable Environmental Laws that relate to the future use ofany of the Properties and that require any remediation or other change in the present conditions of any of the Properties.

(ii) Except as set forth in Exhibit 4.1(r), Seller has not received written notice from any Person of anyrelease, disposal, event, condition, circumstance, activity, practice or incident concerning any land, facility, asset or propertyincluded in the Properties that: (A) interferes with or prevents compliance by Seller or the Properties with any ApplicableEnvironmental Law or the terms of any permits, licenses, orders, approvals, variances, waivers, franchises, rights or otherauthorizations issued pursuant

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thereto; or (B) gives rise to or results in any common law or other liability of Seller to any Person.

(iii) To Seller’s Knowledge, all material reports (including any tests and analyses) or studies specificallyaddressing environmental matters, in each case, (i) prepared by a Third Party, (ii) related to Seller’s ownership or operationof the Properties, and (iii) in Seller’s or its Affiliates’ possession, have been made available to Buyer.

(s) Drilling Obligations. Except as set forth on Exhibit 4.1(s), or to the extent of those obligations previously fulfilledby Seller or any of its predecessors, none of the Leases or any Applicable Contracts that are included in the Properties containexpress provisions obligating Seller to drill any wells on the Properties (other than provisions requiring optional drilling as a conditionof maintaining or earning all or a portion of a Lease).

(t) Bonds. Exhibit 4.1(t) lists all bonds, letters of credit and other similar credit support instruments maintained bySeller or any Affiliate of Seller with respect to the Properties.

(u) Rights on Production. Except as set forth in Exhibit 4.1(u) and with respect to imbalances, neither Seller nor anyAffiliate of Seller has granted (or entered into any agreement to grant), and to Seller’s Knowledge, no other Third Person has granted,any call upon, right to purchase, option to purchase or similar rights with respect to any portion of the Hydrocarbons produced fromthe Properties from and after the Effective Date that is not terminable upon thirty (30) days (or less) notice.

(v) Suspense. Except as set forth in Exhibit 4.1(v), neither Seller nor its Affiliates hold (in escrow or otherwise) anyThird Party funds in suspense with respect to production of Hydrocarbons from any of the Properties. All funds described in Exhibit4.1(v) are being held in suspense in compliance in all material respects with applicable Law and Applicable Contracts.

(w) Personal Property and Equipment. Except for any equipment that is leased, Seller is the owner of the equipmentincluded in the Properties not constituting Leases or Wells, free and clear of all liens and encumbrances other than those to bereleased at Closing and Permitted Encumbrances.

(x) Leases. Neither Seller nor its Affiliates have received any written notice of default or breach under any of theLeases which default or breach has not been cured or remedied. All Wells included in the Properties that have been drilled andcompleted by Seller or its Affiliates (or to Seller’s Knowledge, by any Third Party operator) have been drilled and completed within thelimits permitted by all applicable Leases and pooling or unit agreements or orders and in compliance with all applicable Permits andfield rules of the Texas Railroad Commission; provided however, that this Section 4.1(x) shall not include any matter whichconstitutes a Defect, all of which such matters shall be addressed exclusively in accordance with Article VII.

(y) Brokerage Fees and Commissions. Neither Seller nor any Affiliate of Seller has incurred any obligation or enteredinto any agreement for any investment banking, brokerage or finder’s fee or commission in respect of the transactions contemplatedby this Agreement for which Buyer shall incur any liability.

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Section 4.2 Disclaimers. THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED INSECTION 4.1 ABOVE AND THE SPECIAL WARRANTY OF TITLE IN THE CONVEYANCE TO BE DELIVERED AT CLOSING(COLLECTIVELY, THE “SELLER’S WARRANTIES”) ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONSAND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. SELLER EXPRESSLY DISCLAIMS ANY AND ALLSUCH OTHER REPRESENTATIONS AND WARRANTIES. WITHOUT LIMITATION OF THE FOREGOING AND EXCEPT FORSELLER’S WARRANTIES, THE PROPERTIES SHALL BE CONVEYED PURSUANT HERETO WITHOUT (a) ANY WARRANTY ORREPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, RELATING TO (i) TITLE TO THEPROPERTIES, OR THE CONDITION, QUANTITY, QUALITY OF THE PROPERTIES, (ii) THE ACCURACY OR COMPLETENESSOF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTERFURNISHED OR MADE AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT, (iii) PRICING ASSUMPTIONS, ORQUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES OR THE ABILITY ORPOTENTIAL OF THE PROPERTIES TO PRODUCE HYDROCARBONS, (iv) THE ENVIRONMENTAL CONDITION OF THEPROPERTIES, BOTH SURFACE AND SUBSURFACE, (v) THE STATUS OF THE PROPERTIES WITH RESPECT TOCOMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS, OR (vi) ANY OTHER MATTERS CONTAINED IN ANY MATERIALSFURNISHED OR MADE AVAILABLE TO BUYER BY SELLER OR BY SELLER’S AGENTS OR REPRESENTATIVES, OR (b) ANYOTHER EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER. BUYER SHALLHAVE (i) INSPECTED, OR (ii) WAIVED, (AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT,T H E PROPERTIES FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTALCONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATEDTO THE PRESENCE OR RELEASE OF HAZARDOUS MATERIAL, INCLUDING HAZARDOUS SUBSTANCES, SOLID WASTES,ASBESTOS AND OTHER MAN MADE FIBERS, OR NATURALLY OCCURRING RADIOACTIVE MATERIALS. EXCEPT FOR THESELLER’S WARRANTIES, SELLER FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORYOR IMPLIED, OF RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATIONOR RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETOT H A T BUYER SHALL BE DEEMED TO BE OBTAINING THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, THEEQUIPMENT COMPRISING PART OF THE PROPERTIES, IN THEIR PRESENT STATUS, AND CONDITION, “AS IS” AND“WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE),AND THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE. SELLERAND BUYER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OFCERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4.2 ARE “CONSPICUOUS” DISCLAIMERSFOR THE PURPOSE OF ANY APPLICABLE LAW.

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Section 4.3 Disclosures. The matters set forth on the exhibits and schedules referred to in Section 4.1 are notnecessarily matters that Seller is required to disclose or matters that would constitute a breach of any representation or warranty hadsuch matters not been disclosed.

ARTICLE VREPRESENTATIONS OF BUYER

Section 5.1 Representations of Buyer. Buyer represents to Seller that as of the date hereof and the Closing Date:

(a) Organization and Qualification. Buyer is duly organized and legally existing and in good standing under the Lawsof the state in which it was formed and is qualified to do business and in good standing in each state in which the Oil and GasProperties are located where the Laws of such state will require Buyer to so qualify with respect to the interest in the Oil and GasProperties to be conveyed hereunder. Buyer is also qualified to own and operate oil and gas properties with all applicableGovernmental Authorities having jurisdiction over the Properties, to the extent such qualification is necessary or appropriate or will benecessary or appropriate upon consummation of the transactions contemplated hereby (including, without limitation, Buyer has met allbonding requirements of such agencies).

(b) Due Authorization. Buyer has full power to enter into and perform its obligations under this Agreement and hastaken all proper action to authorize entering into this Agreement and performance of its obligations hereunder.

(c) Approvals. Neither the execution and delivery of this Agreement, nor the consummation of the transactionscontemplated hereby, nor the compliance with the terms hereof, will result in any default under any agreement or instrument to whichBuyer is a party, conflict with or result in a breach of any provisions of the organizational or other governing documents of Buyer, orviolate any order, writ, injunction, decree, statute, rule or regulation applicable to Buyer, except for requirements (if any) that there beobtained consents to assignment (or waivers of preferential rights to purchase) from third parties, and Routine GovernmentalApprovals, and except in each case, for such conflicts, breaches or violations as would not, individually or in the aggregate,reasonably be expected to adversely impact Buyer’s ability to consummate the transactions contemplated by this Agreement.

(d) Valid, Binding and Enforceable. This Agreement constitutes (and the Conveyance provided for herein to bedelivered at Closing will, when executed and delivered, constitute) the legal, valid and binding obligation of Buyer, enforceable inaccordance with its terms, except as limited by bankruptcy or other Laws applicable generally to creditor’s rights and as limited bygeneral equitable principles.

(e) No Litigation. There are no pending suits, actions, or other proceedings in which Buyer is a party (or, to Buyer’sknowledge, which have been threatened to be instituted against Buyer) which affect the execution and delivery of this Agreement orthe consummation of the transactions contemplated hereby.

(f) No Distribution. Buyer is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of1933, as amended, and is acquiring the Properties for its

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own account and not with the intent to make a distribution in violation of the Securities Act of 1933 as amended (and the rules andregulations pertaining thereto) or in violation of any applicable state blue sky Laws or other applicable securities Laws, rules orregulations.

(g) Knowledge and Experience. Buyer has, and had prior to negotiations regarding the Properties, such knowledgeand experience in the ownership and operation of oil and gas properties and financial and business matters as to be able to evaluatethe merits and risks of an investment in the Properties. Buyer is able to bear the risks of an investment in the Properties andunderstands risks of, and other considerations relating to, a purchase of the Properties.

(h) Opportunity to Verify Information. As of the Closing, Buyer has been afforded the opportunity to ask questions ofthe Seller (or a person or persons acting on its behalf) concerning the Properties, and Buyer has been furnished with materialsrelating to the Properties requested by Buyer under this Agreement. Buyer has made its own independent investigation of theProperties to the extent necessary to evaluate the Properties.

(i) Merits and Risks of an Investment in the Properties. Buyer understands and acknowledges that: (i) an investmentin the Properties involves certain risks; (ii) neither the United States Securities and Exchange Commission nor any federal, state orforeign agency has passed upon the Properties or made any finding or determination as to the fairness of an investment in theProperties or the accuracy or adequacy of the disclosures made to Buyer; and (iii) except as set forth in Section 8.3 of this Agreement,Buyer is not entitled to cancel, terminate or revoke this Agreement.

(j) Financing. Buyer has, or will have as the same become due hereunder, all funds necessary to (i) pay thePurchase Price and all other amounts payable hereunder, (ii) pay any fees and expenses payable by Buyer in connection with thetransaction contemplated hereby, and (iii) satisfy any of its other payment obligations hereunder.

(k) Bankruptcy. There are no bankruptcy, reorganization or arrangement proceedings pending against, beingcontemplated by, or, to the knowledge of Buyer, threatened against Buyer, its assets or sources of capital.

(l) Brokerage Fees and Commissions. Neither Buyer nor any Affiliate of Buyer has incurred any obligation or enteredinto any agreement for any investment banking, brokerage or finder’s fee or commission in respect of the transactions contemplatedby this Agreement for which Sellers shall incur any liability.

ARTICLE VICOVENANTS OF SELLER PENDING CLOSING

Section 6.1 Access to Records. Seller will give Buyer, or Buyer’s authorized representatives, at CPX’s office and at allreasonable times during normal business hours before the Closing Date, access to Seller’s records pertaining to the ownership and/oroperation of the Properties (including, without limitation, title files, and division order files), for the purpose of conducting due diligencereviews contemplated by Section 7.1 below. Upon request, Seller will provide Buyer with electronic copies of such records to theextent electronic copies are readily available and in Seller’s possession or control. Buyer may make copies of such records, at its

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expense, but shall, if Seller so requests, return all copies so made if the Closing does not occur and destroy all notes or work productrelating thereto except those notes and work product that Buyer is required to maintain pursuant to applicable Laws. Notwithstandingthe foregoing, Seller shall not be obligated to provide Buyer with access to any Privileged Information, (b) the Seller Party Documents,or (c) Confidential Information, except title opinions; provided, however, Seller shall make a reasonable good faith effort to obtainpermission to provide the Confidential Information but shall in no event be obligated to incur any costs or expenses to obtain suchpermission; provided, further, however, that that in no event shall Seller have any obligations with respect to Privileged Information orthe Seller Party Documents. Seller shall furnish, if requested by Buyer in writing, a description of the Confidential Information notfurnished to Buyer to the extent Seller reasonably believes that it may do so without waiving any such legal privilege or violating suchrestrictions on disclosure or transfer. BUYER ACKNOWLEDGES AND AGREES THAT ALL MATERIALS, DOCUMENTS, ANDOTHER INFORMATION MADE AVAILABLE TO BUYER AT ANY TIME IN CONNECTION WITH THE TRANSACTIONCONTEMPLATED HEREBY, WHETHER MADE AVAILABLE PURSUANT TO THIS SECTION OR OTHERWISE, ARE MADEAVAILABLE TO IT AS AN ACCOMMODATION, AND, EXCEPT FOR SELLERS’ REPRESENTATIONS AND WARRANTIESEXPRESSLY SET FORTH IN THIS AGREEMENT, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, WHETHEREXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS,AND OTHER INFORMATION. EXCEPT FOR SELLERS’ REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH INTHIS AGREEMENT, BUYER EXPRESSLY AGREES THAT ANY RELIANCE UPON OR CONCLUSIONS DRAWN THEREFROMSHALL BE AT BUYER’S RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANYLIABILITY OF OR AGAINST SELLER AND BUYER HEREBY WAIVES AND RELEASES ANY CLAIMS ARISING UNDER THISAGREEMENT, COMMON LAW OR ANY STATUTE ARISING OUT OF ANY MATERIALS, DOCUMENTS OR INFORMATIONPROVIDED TO BUYER.

Section 6.2 Physical Inspection. With respect to Properties operated by a Seller Party, Seller shall give Buyer, orBuyer’s authorized representatives, at all reasonable times before the Closing Date and upon adequate notice to Seller, physicalaccess to the Properties for the purpose of inspecting same. With respect to Properties not operated by a Seller Party, Seller shallmake a good faith effort to obtain consent from each operator of such Properties for Buyer to access such Properties at all reasonabletimes before the Closing Date and upon adequate notice provided to Seller; provided, however, that Seller shall not be required tomake any payment or incur any expense in obtaining such consent. Buyer agrees to comply fully with the rules, regulations andinstructions issued by Seller (or any third-party operator) regarding the actions of Buyer while upon, entering or leaving the Propertiesand Seller, or a representative of Seller, may accompany Buyer at any time Buyer is accessing the Properties. Except as otherwiseexpressly permitted herein, Buyer’s inspection shall be limited to a Phase I Environmental Site Assessment in accordance with theAmerican Society for Testing and Materials (A.S.T.M.) Standard Practice Environmental Site Assessments: Phase I EnvironmentalSite Assessment Process (each, a “Site Assessment”). In the event Buyer’s Site Assessment leads Buyer or its designee toreasonably conclude that an ASTM Phase II Environmental Assessment is warranted

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as to certain of the Properties, Buyer may request Seller’s consent to conduct such Phase II Environmental Assessment, whichconsent Seller may withhold in its sole and absolute discretion; provided, however, that if Seller withholds such consent, Buyer mayelect to claim an Environmental Defect for such Properties and may, upon its own discretion, exclude such affected Propertiespursuant to Section 7.4(c) below. Any Phase II Environmental Assessment costs shall be borne by Buyer, and Buyer shall be solelyresponsible for costs arising therefrom to the extent related to surface restoration required under any Lease, Easement or ApplicableContract. Buyer shall furnish to Seller, free of cost, a copy of any written report prepared by or for Buyer related to any SiteAssessment or Phase II Environmental Assessment of the Properties as soon as reasonably possible after it is prepared. Allenvironmental reports prepared by or for Buyer shall be maintained in strict confidence and for use solely in connection with itsevaluation of the Properties. Except for the obligations to provide reports to Seller as set forth in this Section 6.2, if Closing does notoccur, such reports shall not be disclosed to any other party.

Section 6.3 Exculpation and Indemnification. If Buyer exercises rights of access under this Article or otherwise, orconducts examinations or inspections under this Article or otherwise, then (a) such access, examination and inspection of theProperties shall be at Buyer’s sole risk, cost and expense and Buyer waives and releases all claims against the Seller IndemnifiedParties arising in any way therefrom or in any way connected therewith and (b) Buyer shall indemnify, defend and hold harmless theSeller Indemnified Parties from any and all claims, actions, causes of action, liabilities, damages, losses, costs or expenses(including, without limitation, court costs and attorneys’ fees), or liens or encumbrances for labor or materials, arising out of or in anyway connected with Buyer’s examinations or inspections. THE FOREGOING RELEASE AND INDEMNIFICATION SHALL APPLYWHETHER OR NOT SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OREXPENSES ARISE OUT OF OR RESULT FROM, SOLELY OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT ORCOMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY A MEMBER OF THESELLER INDEMNIFIED PARTIES, EXCEPTING ONLY IN THE CASE OF THIS SECTION 6.3 (i) LIABILITIES ACTUALLYRESULTING ON THE ACCOUNT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A MEMBER OF THE SELLERINDEMNIFIED PARTIES AND (ii) LIABILITIES THAT WERE EXISTING PRIOR TO SUCH INSPECTIONS. During all periods thatBuyer, and/or any representative of Buyer are on the Properties, Buyer shall maintain, at its sole expense and with insurersreasonably satisfactory to Seller, policies of insurance of the types and in the amounts reasonably requested by Seller. Upon requestby Seller, Buyer shall provide evidence of such insurance to Seller prior to entering upon the Properties.

Section 6.4 Interim Operations.

(a) Except (x) for the operations covered by the AFEs described in Exhibit 4.1(h), the operations set forth in the SideLetter Agreement, or such operations required pursuant to any Applicable Contract, applicable Law or Lease, (y) as required in theevent of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or asexpressly consented to in writing by Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shall,from and after the Execution Date until Closing:

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(i) as to Properties operated by CPX or its Affiliates, continue the operation of the Properties in the ordinarycourse of business, or, as to Properties where CPX or an Affiliate of CPX is not the operator, continue its actions as a non-operator in the ordinary course of business;

(ii) subject to interruptions resulting from force majeure, mechanical breakdown and planned maintenance,in each case, operate the Properties in compliance with all applicable Laws and the terms of all Leases and ApplicableContracts;

(iii) maintain, or cause to be maintained, the books of account and Records relating to the Properties in theusual, regular and ordinary manner and in accordance with the usual accounting practices of Seller; and

(iv) to the extent Seller has Knowledge thereof, use commercially reasonable efforts to timely inform Buyerof all matters it considers in good faith to be material developments affecting any of the Properties.

(b) Except (x) for the operations covered by the AFEs described in Exhibit 4.1(h), the operations set forth in the SideLetter Agreement, or such operations required pursuant to any Applicable Contract, applicable Law or Lease, (y) as required in theevent of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or asexpressly consented to in writing by Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shallnot, from and after the Execution Date until Closing:

(i) sell or otherwise dispose of any portion of the Properties except for sales or other dispositions of (1)Hydrocarbons in the ordinary course of business after production, or (2) equipment and other personal property or fixturesin the ordinary course of business where the same has become obsolete, is otherwise no longer necessary for theoperation of the Properties, or is replaced by an item or items of at least equal suitability;

(ii) affirmatively terminate any Material Contract or materially amend or change the terms of any MaterialContract;

(iii) enter into an agreement that, if in existence on the Execution Date would be a Material Contract;

(iv) affirmatively release, terminate or materially amend any Lease, Easement, permit or license;

(v) incur any indebtedness or take or fail to take any action that would cause a lien or encumbrance to ariseor exist on the Properties or otherwise allow a lien (other than Permitted Encumbrances) to attach to or encumber theProperties or any portion thereof;

(vi) grant or create any Preferential Right, transfer restriction or similar right, obligation, or requirement withrespect to the Properties; and

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(vii) except for the commitments set forth in Exhibit 4.1(h), all of which are deemed to be approved,approve or propose any operations on the Properties anticipated to cost the owner of the Properties more than $50,000 peroperation or activity net to Seller’s or any of its Affiliate’s interest.

(c) Buyer acknowledges that Seller is currently, and from the date hereof will continue to, conduct certain operationsrequired in order to perpetuate the Leases and extend its rights under the Farmout Agreement and, notwithstanding anything in thisSection 6.3, but subject to Section 6.3(d) to the contrary, all activities and actions of Seller taken in connection therewith are deemedauthorized by Buyer, without further consultation, and regardless of whether such activities and actions are in the ordinary course ofbusiness.

(d) With the exception of the operations and activities set forth on Exhibit 4.1(h) and the operations and activities setforth in the Side Letter Agreement, which shall be deemed authorized by Buyer without further consultation, should Seller receive (ordesire to make) any proposals to drill additional wells on the Oil and Gas Properties, or to conduct other operations which requireconsent of non-operators under an applicable operating agreement, Seller will notify Buyer of, and consult with Buyer concerning, suchproposals, provided that in the event Seller and Buyer cannot come to an agreement on any such proposal, any decisions withrespect to such proposal shall be made by Seller in its sole discretion. From and after the Effective Date, any proposed activities otherthan those set forth on Exhibit 4.1(h) or in the Side Letter Agreement shall be subject to Buyer’s prior written consent. The Partieshereby recognize that the current ownership and operation of the Properties may include Seller electing not to participate (i.e., non-consent status) in wells drilled pursuant to an operating agreement, joint exploration agreement or spacing order relating to theProperties and that Seller may continue to make consistent elections for such Properties, provided, however, Seller will provide Buyerwith notice of such election. For the avoidance of doubt, subject to the Side Letter Agreement and notwithstanding anything in thisAgreement to the contrary, in no event shall Seller be required to drill or complete any wells prior to Closing. The Buyer shall bepermitted to undertake the activities on the Oil and Gas Properties in accordance with and subject to the terms of the Side LetterAgreement.

(e) Without expanding any obligations which Seller may have to Buyer, it is expressly agreed that Seller shall neverhave any liability to Buyer with respect to its operation of a Property greater than that which it might have as the operator to a non-operator under the applicable operating agreement (or, in the absence of such an agreement, under the AAPL 610 (1989 Revision)form Operating Agreement), IT BEING RECOGNIZED THAT, UNDER SUCH AGREEMENTS AND SUCH FORM, SELLER IS NOTRESPONSIBLE FOR ITS OWN NEGLIGENCE, AND HAS NO RESPONSIBILITY OTHER THAN FOR GROSS NEGLIGENCE ORWILLFUL MISCONDUCT.

(f) Promptly following the execution of this Agreement, Buyer shall use its commercially reasonable efforts to securethe fracing and completion services of Cudd Energy Services with respect to the following four uncompleted wells located in ReevesCounty, Texas: Durham Smith Fuente #212HU (API # 389-35440) to be scheduled on or about June 1, 2017; Durham Smith Fuente#214HU (API # 389-35464) to be scheduled on or about June 25, 2017; Durham Smith Fuente #207HL (API # 389-35563) to bescheduled on or about July 10, 2017;

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and Durham Smith Fuente #209HL (API # 389-35431) to be scheduled on or about August 14, 2017. The scheduled dates set forthabove are estimates only and are subject to the availability of Cudd Energy Services. In the event (i) the Closing has not occurredprior to five Business Days before any scheduled service, or (ii) this Agreement is terminated pursuant to Section 8.3, Buyer shall useits commercially reasonable efforts to assign and transfer its rights with respect to such scheduled services to Seller. Further, in theevent of such transfer, Buyer agrees to pay to Seller the amount of any costs associated with such scheduled services above Seller’scurrent negotiated rate with C&J Energy Services, provided that in the event of a transfer pursuant to clause (i) above, no suchpayment shall be required unless this Agreement is terminated prior to Closing.

Section 6.5 Consents.

(a) As soon as reasonably practical following the Execution Date, but in any event within ten (10) Business Days ofthe Execution Date, Seller shall send to each holder of a Consent, as set forth on Exhibit 4.1(j), a notice (which form of notice shall bein accordance with the requirements, if any, relating to such Consent obligation and shall be provided to Buyer for review no morethan five (5) Business Days after the Execution Date and, until the expiration of the ten (10) Business Day period set forth herein,Seller shall consult with Buyer regarding such form of notice), of the transaction contemplated hereby requesting the requiredconsent.

(b) If Seller fails to obtain a Consent, as set forth on Exhibit 4.1(j), prior to Closing and the failure to obtain suchConsent would cause (i) the assignment of the Properties affected thereby to Buyer to be void or (ii) the termination of suchProperties under the express terms thereof (each, a “Hard Consent”), then, in each such case, the affected Properties shall beexcluded from the Properties to be acquired by Buyer at Closing hereunder and the Base Purchase Price shall be reduced by theAllocated Amount of the Properties so excluded. In the event that a Hard Consent (with respect to any applicable Properties excludedpursuant to this Section 6.5(b)) that was not obtained prior to Closing is obtained within 180 days following Closing, then, Buyer shallpurchase, within 10 days after such Hard Consent is obtained, such Properties so excluded from Seller under the terms of thisAgreement for the amount (if any) by which the Base Purchase Price was reduced at Closing due to the exclusion of such Properties(as such amount is appropriately adjusted in accordance with this Agreement with respect to such Properties), and Seller shall assignto Buyer such Properties pursuant to an instrument in form substantially similar to the Conveyance.

(c) If Seller fails to obtain a Consent, as set forth on Exhibit 4.1(j), prior to Closing and the failure to obtain suchconsent would not cause (i) the assignment of the Properties affected thereby to Buyer to be void or (ii) the termination of suchProperties under the express terms thereof, then (x) the Properties subject to such un-obtained Consent shall be acquired by Buyer atClosing as part of the Properties, (y) Buyer shall have no claim against, and hereby releases and indemnifies the Seller IndemnifiedParties from any liability for, the failure to obtain such Consent, and (z) Buyer shall be solely responsible from and after Closing forany and all liabilities arising from the failure to obtain such Consent.

(d) Prior to Closing, Seller shall deliver to Buyer appropriate evidence reflecting that all Hard Consents have beenobtained (unless the affected Property is being excluded pursuant to

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Section 6.5(b)) and any other evidence relating to additional Consents obtained by Seller prior to Closing.

Section 6.6 Insurance. Seller shall maintain its current insurance policies in effect in accordance with industry practiceuntil Closing.

Section 6.7 Knowledge of Breach. Seller shall not have any liability to Buyer for a breach of a representation orwarranty contained in this Agreement to the extent that Buyer had actual knowledge of such breach on or prior to the Closing Dateand failed to disclose the existence of such breach to Seller prior to the Closing Date. For the purpose of this Agreement, the“knowledge” of Buyer shall be limited to the actual knowledge of Rick Betz, Theodore Gazulis, Michael Stefanoudakis, Bob D. Brady,Jr. or Bill Alleman.

Section 6.8 Bonds. Prior to Closing, Buyer shall take such actions as may be necessary or appropriate so that all suretybonds, guaranties, and cash collateral listed on Exhibit 4.1(t) will be released and replaced immediately after Closing with comparablesurety bonds, guaranties, and cash collateral from Buyer or an Affiliate of Buyer. In the event any surety bonds, guaranties and/orcash collateral are not immediately released and replaced at Closing, Buyer shall promptly reimburse Seller for any losses or costsincurred by Seller in connection with such delay in the release and replacement of such surety bonds, guaranties, or cash collateralafter Closing.

Section 6.9 Financing Assistance. Prior to the Closing Date, Seller shall use commercially reasonable efforts toprovide, and shall use its commercially reasonable efforts to cause its Affiliates and its and its Affiliates’ representatives to provide,Buyer such cooperation as may be reasonably requested by Buyer with respect to any financing that Buyer seeks to obtain inconnection with the consummation of the transactions contemplated hereby; provided, however, that in no event shall suchcooperation (a) require Seller to provide access to or disclose any information or documentation except as expressly provided inSection 6.1, (b) require Seller to incur any costs or expenses, or (c) adversely interfere with the operations of Sellers, their respectiveAffiliates or the ownership or operation of the Properties. Buyer will pay or, if paid, reimburse the applicable Seller, within ten (10)Business Days after demand therefor, for any reasonable out-of-pocket costs incurred by such Seller in complying with the provisionsof this Section 6.9. Notwithstanding the foregoing, (x) nothing herein shall expand Seller’s representations, warranties, covenants oragreements set forth in this Agreement or give Buyer, its Affiliates or any Third Party any rights to which it is not otherwise expresslyentitled hereunder, and (y) no breach of this Section 6.9 by Seller shall give rise to a failure of the condition set forth in Section 8.1(b)or otherwise entitle Buyer to refuse to proceed with Closing or terminate this Agreement.

ARTICLE VIIDUE DILIGENCE REVIEW

Section 7.1 Defect Notice. Should, as a result of Buyer’s examinations and investigations, or otherwise, Buyerdiscover a Defect (as below defined), Buyer shall provide to Seller notice of such Defect (“Defect Notice”) no later than 5 p.m.Mountain Time on April 5, 2017 (the “Defect Deadline”). To be effective, each Defect Notice shall be in writing and shall

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include (i) a description of the alleged Defect and the Property, or portion thereof, affected by such Defect (ii) the Allocated Amount ofthe affected Property, (iii) supporting documentation reasonably necessary to fully describe the basis for the Defect or, if thesupporting documentation is contained in Seller’s files, sufficient information to enable Seller to expeditiously locate such supportingdocumentation, and (iv) the amount by which Buyer reasonably believes the Allocated Amount of the affected Property is reduced bysuch Defect and the computations upon which Buyer’s belief is based. To give Seller an opportunity to commence reviewing andcuring Defects, Buyer agrees to use reasonable efforts to give Seller, on or before the end of each calendar week prior to the DefectDeadline, written notice of all alleged Defects (as well as any claims that would be claims under the special warranty set forth in theConveyance) discovered by Buyer during the preceding calendar week, which notice(s) may be preliminary in nature andsupplemented in all respects prior to the Defect Deadline. Notwithstanding anything in this Agreement to the contrary, if after theDefect Deadline and prior to Closing either Buyer or Seller becomes “aware” (as used in this Section 7.1, “aware” means, withrespect to Seller, to Seller’s Knowledge, and, with respect to Buyer, to the “knowledge” of Buyer (as described in Section 6.7)) of anynew condition affecting the Properties that was not in existence prior to the Defect Deadline and which may result in an EnvironmentalDefect (as defined below), such Party shall, within three (3) Business Days, inform the other Party of such condition and Buyer shallbe entitled to perform additional diligence subject to the conditions set forth in Article VI. In the event Buyer’s diligence results in adetermination that such condition constitutes an Environmental Defect, Buyer shall provide to Seller no later than 5 p.m. on the datethat is five (5) Business Days prior to the Scheduled Closing Date a Defect Notice relating to such alleged Environmental Defect. TheParties shall resolve such Environmental Defect in accordance with the provisions of this Article VII. For purposes of this Article VII,any Defects asserted by Buyer in a Defect Notice relating to Seller’s title in and to the Properties are herein called “Asserted TitleDefects” and any Defects asserted by Buyer in a Defect Notice relating to the environmental condition of the Properties are hereincalled “Asserted Environmental Defects”. Except as provided above with respect to an Environmental Defect that arises after theDefect Date, any Defect with respect to which Buyer fails to deliver a Defect Notice by the Defect Deadline will be deemed waived forall purposes, including if applicable, as a condition to close or indemnification claim. With respect to an Environmental Defect thatarises after the Defect Date, any such Environmental Defect with respect to which Buyer fails to deliver a Defect Notice at least five (5)Business Days prior to the Scheduled Closing Date will be deemed waived for all purposes, including if applicable, as a condition toclose or indemnification claim. EXCEPT FOR (i) THE CONDITION TO CLOSE SET FORTH IN SECTION 8.1(C), (ii) THEREPRESENTATIONS AND WARRANTIES OF SELLER IN SECTION 4.1(r), AND (iii) THE SPECIAL WARRANTY OF TITLE INTHE CONVEYANCE TO BE EXECUTED AND DELIVERED AT CLOSING, BUYER’S SOLE AND EXCLUSIVE RIGHTS ANDREMEDIES WITH RESPECT TO ANY MATTER THAT CONSTITUTES A DEFECT SHALL BE THOSE SET FORTH IN THISARTICLE VII, AND BUYER SHALL NOT BE ENTITLED TO REFUSE TO CLOSE OR TO INDEMNIFICATION OR ANY OTHERRIGHT OR REMEDY WITH RESPECT TO ANY DEFECT. ACCESS TO SELLER’S RECORDS AND THE PROPERTIES INCONNECTION WITH BUYER’S DUE DILIGENCE SHALL BE SUBJECT AND PURSUANT TO SECTION 6.1, SECTION 6.2 ANDSECTION 6.3.

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Section 7.2 Nature of Defects. The term “Defect” as used in this Agreement shall mean the following:

(a) Owned NRI or WI Variances. With respect to any Well listed as an “Earned Well” on Exhibit D hereto, Seller’sownership is such that it (i) entitles Seller at any time during the productive life of such Well to receive a Net Revenue Interest lessthan the Net Revenue Interest set forth on Exhibit D in connection with such Well under the column headed “Net Revenue Interest” or(ii) causes Seller at any time during the productive life of such Well to be obligated to bear a Working Interest greater than theWorking Interest set forth on Exhibit D in connection with such Well under the column headed “Working Interest” (without at least aproportionate increase in the Net Revenue Interest which Seller is entitled to receive from such Well).

(b) Liens. Seller’s interest in an Oil and Gas Property or Fee Property is subject to a lien other than (i) a lien for taxeswhich are not yet delinquent, or (ii) a mechanic’s or materialmen’s lien (or other similar lien), or a lien under an operating agreementor similar agreement, to the extent the same relates to expenses incurred which are not yet delinquent, or (iii) liens which will bereleased at or before Closing (the liens described in (i), (ii) and (iii) of this Section 7.2(b) are herein called “Excluded Liens”).

(c) Owned Net Mineral Acre Variances. With respect to any Lease listed as an “Earned Lease” on Exhibit D hereto,Seller’s ownership is such that the number of Net Mineral Acres owned by Seller in such Lease is less than the number of Net MineralAcres for such Lease as set forth on Exhibit D under the column headed “Net Mineral Acres”.

(d) Farmout Net Mineral Acre Variances. With respect to any Lease listed as an “Unearned Lease” on Exhibit D,notwithstanding the fact that Seller has not yet earned an ownership interest in such Lease, Seller’s rights under the FarmoutAgreement are such that the number of Net Mineral Acres which Seller has the right to earn pursuant to the Farmout Agreement isless than the number of Net Mineral Acres set forth on Exhibit D under the column headed “Farmout Net Mineral Acres”.

(e) Farmout NRI or WI Variances. With respect to any Well listed as an “Drilled but Uncompleted Well” on Exhibit Dhereto, notwithstanding the fact that Seller has not yet earned an ownership interest in such Well, Seller’s rights under the FarmoutAgreement are such that Seller has the right to earn pursuant to the Farmout Agreement an interest which (i) entitles Seller at anytime during the productive life of such Well to receive a Net Revenue Interest less than the Net Revenue Interest set forth on ExhibitD in connection with such Well under the column headed “Farmout Net Revenue Interest” or (ii) causes Seller at any time during theproductive life of such Well to be obligated to bear a Working Interest greater than the Working Interest set forth on Exhibit D inconnection with such Well under the column headed “Farmout Working Interest” (without at least a proportionate increase in the NetRevenue Interest which Seller is entitled to receive from such Well) (the Defects described in subsections (a), (b), (c) (d) and (e) of thisSection 7.2 are herein called “Title Defects”).

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(f) Environmental Matters. Except as disclosed on Exhibit 7.2(f), an Oil and Gas Property or Fee Property is inviolation of Applicable Environmental Laws (the Defects described in this Section 7.2(f) are herein called “Environmental Defects”).

Section 7.3 Permitted Matters and Encumbrances. Notwithstanding any other provision in this Agreement to thecontrary, the following matters shall not constitute a Defect (collectively, the “Permitted Encumbrances”):

(a) defects or irregularities arising out of lack of proof of representative authority on behalf of a corporation,partnership, limited liability company, or trust unless Buyer provides affirmative evidence that such action was not authorized andresults in another person’s superior claim of title to the relevant Property;

(b) defects or irregularities arising out of a lack of recorded powers of attorney from corporations or other entities toexecute and deliver documents on their behalf and immaterial variations of corporate or entity names (such as scrivener’s ortypographical errors which would normally be waived by a reasonably prudent purchaser of oil and gas assets) unless Buyer providesaffirmative evidence that such variations result in a superior third party claim of title to the relevant Property;

(c) defects or irregularities in acknowledgments;

(d) defects or irregularities that have been cured or remedied by applicable statutes of limitation or statutes forprescription;

(e) defects or irregularities in the chain of title consisting of the failure to recite marital status in documents oromissions of heirship proceedings, unless Buyer provides affirmative evidence that such defects, irregularities or omissions result in asuperior third party claim of title to the relevant Property;

(f) defects or irregularities resulting from or related to probate proceedings or the lack thereof which defects orirregularities have been outstanding for ten (10) years or more, unless Buyer provides affirmative evidence that such defects,irregularities or omissions result in a superior third party claim of title to the relevant Property;

(g) defects or irregularities arising out of prior oil and gas leases which, on their face, expired more than ten (10)years prior to the Closing, and which have not been released of record;

(h) conventional rights of reassignment normally actuated by an intent to abandon or release a lease and requiringnotice to the holders of such rights;

(i) outstanding deed of trust and mortgage liens burdening the interest of any lessor under any of the oil and gasleases included in the Properties, unless there is evidence that the mortgagee or lien holder has asserted a default under any suchdeed of trust or mortgage and has exercised, or intends to exercise, foreclosure proceedings;

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(j) all Royalties if the net cumulative effect of such burdens (i) does not operate to reduce the Net Revenue Interest forsuch Property to an amount less than the “Net Revenue Interest” set forth on Exhibit D for such Property (ii) does not obligate Sellerto bear a Working Interest for such Property in any amount greater than the “Working Interest” set forth on Exhibit D for such Property(without at least a proportionate increase in the Net Revenue Interest which Seller is entitled to receive from such Property); and

(k) (i) the matters set forth on Exhibit 7.3, and (ii) any other terms, conditions, restrictions, exceptions, reservationsand limitations contained in the Leases, Material Contracts and Easements listed on an Exhibit hereto, in the case of clause (ii), thatindividually or in the aggregate do not (A) materially interfere with the ownership, operation or use of any of the Properties, (B) operateto reduce the Net Revenue Interest for any Property to an amount less than the “Net Revenue Interest” set forth on Exhibit D for suchProperty, or (C) obligate Seller to bear a Working Interest for such property in any amount greater than the “Working Interest” set forthon Exhibit D for such property (without at least a proportionate increase in the Net Revenue Interest which Seller is entitled to receivefrom such Property).

Section 7.4 Seller’s Response to Asserted Defects. In the event that Buyer notifies Seller of Asserted Defects:

(a) Cure. Seller may (but shall have no obligation to) attempt to cure at its sole cost and expense, up to the date thatis three (3) Business Days prior to Closing (“Cure Period”), any Asserted Defects.

(b) Remedies for Uncured Asserted Title Defects. Subject to Seller’s continuing right to dispute the existence oramount of an Asserted Title Defect and subject to the rights of the Parties pursuant to Section 8.1(c) and Section 8.2(c), in the eventthat any Asserted Title Defect is not waived in writing by Buyer or cured on or before Closing, then, subject to the limitations set forthin Section 7.7 below, the Base Purchase Price shall be reduced by the Defect Amount determined pursuant to Section 7.5; provided,however, that in the event the Defect Amount is equal to ninety-five percent (95%) or more of the Allocated Amount of the affectedProperty, Seller may elect to exclude such Property from the transaction contemplated herein and it shall be considered an ExcludedProperty and the Base Purchase Price shall be reduced by the Allocated Amount of such Property.

(c) Remedies for Uncured Asserted Environmental Defects. Subject to Seller’s continuing right to dispute theexistence or amount of an Asserted Environmental Defect and subject to the rights of the Parties pursuant to Section 8.1(c) andSection 8.2(c), in the event that any Asserted Environmental Defect is not waived in writing by Buyer or cured on or before Closing,then, subject to the limitations set forth in Section 7.7 below, the Base Purchase Price shall be reduced by the Defect Amountdetermined pursuant to Section 7.5; provided, however, that in the event (i) the Defect Amount is greater than or equal to theAllocated Amount of the affected Property or (ii) Seller withholds consent for a Phase II Environmental Assessment requested byBuyer pursuant to Section 6.2, then Seller or Buyer may elect to exclude such Property from the transaction contemplated herein andit shall be considered an Excluded Property and the Base Purchase Price shall be reduced by the Allocated Amount of suchProperty.

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Section 7.5 Adjustment For Uncured Asserted Defects. The amount by which the Allocated Amount of an affectedProperty is reduced as a result of the existence of an Asserted Title Defect or an Asserted Environmental Defect shall be the “DefectAmount” and shall be determined in accordance with the following terms and conditions:

(a) if Buyer and Seller agree on the Defect Amount, then that amount shall be the Defect Amount;

(b) If the Asserted Defect is a Defect described in clause (i) of Section 7.2(a) or clause (i) of Section 7.2(e) and thereis a proportionate decrease in Seller’s Working Interest in such Well, as set forth on Exhibit D, the Defect Amount shall be an amountdetermined by multiplying the Allocated Amount for such Well by a fraction (i) the numerator of which is an amount equal to the “NetRevenue Interest” or “Farmout Net Revenue Interest”, as applicable, shown on Exhibit D for such Well, less the actual Net RevenueInterest to which Seller is entitled and (ii) the denominator of which is the “Net Revenue Interest” or “Farmout Net Revenue Interest”,as applicable, shown for such Well on Exhibit D.

(c) If the Asserted Defect is a Defect described in Section 7.2(b), then the Defect Amount shall be the lesser of (i) theamount necessary to be paid to remove the Asserted Defect from the affected Property or (ii) the Allocated Amount of such Property.

(d) If the Asserted Defect is a Defect described in Section 7.2(c) or Section 7.2(d), the Defect Amount shall be anamount determined by multiplying the Allocated Amount for such Lease by a fraction (i) the numerator of which is an amount equal tothe “Net Mineral Acres” or “Farmout Net Mineral Acres”, as applicable, shown on Exhibit D for such Lease, less the Net MineralAcres actually owned by Seller (or, with respect to the “Farmout Net Mineral Acres”, less the actual Net Mineral Acres Seller isentitled to earn under the Farmout Agreement) and (ii) the denominator of which is the “Net Mineral Acres” or “Farmout Net MineralAcres”, as applicable, shown for such Lease on Exhibit D.

(e) If the Asserted Defect is a Defect described in Section 7.2(f), the Defect Amount shall be the lesser of (i) the coststo Remediate such Defect consistent with the requirements of Applicable Environmental Laws or (ii) the Allocated Amount of suchProperty as adjusted pursuant to the provisions of this Agreement including, without limitation, the other subsections of this Section7.5.

(f) If the Asserted Defect is not of the type described in the other subsections of this Section 7.5, the Defect Amountshall be determined by taking into account (i) the portion of the Property affected by such Asserted Defect, (ii) the legal effect of suchAsserted Defect, (iii) the economic effect of such Asserted Defect over the life of the Property, (iv) the values placed upon suchAsserted Defect by Buyer and Seller and (v) such other reasonable factors as are necessary to make a proper evaluation.

Section 7.6 Title Benefits. If prior to the Defect Deadline, Seller should determine that (a) the ownership of theProperties by Seller entitles Seller to a Net Revenue Interest in a Well listed on Exhibit D greater than the Net Revenue Interest forsuch Well under the column headed “Net Revenue Interest” on Exhibit D, or (b) Seller owns a number of Net Mineral Acres

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in a Lease that is greater than is shown under the column headed “Net Mineral Acres” on Exhibit D for such Lease (a “Title Benefit”),then Seller may provide Buyer with a “Title Benefit Notice”, which shall include (i) a description of the Title Benefit and the Propertiesaffected by the Title Benefit, (ii) supporting documents reasonably necessary for Buyer to verify the existence of such Title Benefit and(iii) the amount by which Seller reasonably believes the Allocated Amount of such Properties is increased by the Title Benefit and thecomputations upon which Seller’s belief is based. Seller shall be deemed to have waived any Title Benefits that Seller fails to providea Title Benefit Notice therefore on or before the Defect Deadline. Subject to Buyer’s continuing right to dispute the existence oramount of a Title Benefit, as Seller’s sole and exclusive remedy for any Title Benefits, the amount (the “Title Benefit Amount”) equalto the increase in the Allocated Value for such Asset caused by such Title Benefits, shall be applied as to offset the aggregate TitleDefect Amount attributable to Asserted Title Defects, if any.

Section 7.7 Limitations on Adjustments.

(a) Title Defects. If the Base Purchase Price reduction with respect to a particular Asserted Title Defect which wouldresult from the above provided for procedure does not exceed Twenty Five Thousand Dollars ($25,000), no adjustment shall be madefor such Asserted Title Defect. If the Base Purchase Price reduction which would result from the above provided for procedure, asapplied to all Asserted Title Defects for which an adjustment is to be made does not exceed one and a half percent (1.5%) of the BasePurchase Price (the “Title Defect Deductible”), then no adjustment of the Base Purchase Price shall occur and none of theProperties which would be excluded by such procedure shall be excluded. If the Base Purchase Price reduction which would resultfrom the above provided for procedure as applied to all Asserted Title Defects for which an adjustment is to be made exceeds the TitleDefect Deductible, the Base Purchase Price shall be adjusted by the amount by which such reduction exceeds the Title DefectDeductible (the “Title Defect Amount”).

(b) Environmental Defects. If the Base Purchase Price reduction with respect to a particular Asserted EnvironmentalDefect which would result from the above provided for procedure does not exceed Twenty Five Thousand Dollars ($25,000), noadjustment shall be made for such Asserted Environmental Defect. If the Base Purchase Price reduction which would result from theabove provided for procedure, as applied to all Asserted Environmental Defects for which an adjustment is to be made does notexceed one and a half percent (1.5%) of the Base Purchase Price (the “Environmental Defect Deductible”), then no adjustment ofthe Base Purchase Price shall occur, and none of the Properties which would be excluded by such procedure shall be excluded. Ifthe Base Purchase Price reduction which would result from the above provided for procedure as applied to all Asserted EnvironmentalDefects for which an adjustment is to be made exceeds the Environmental Defect Deductible, the Base Purchase Price shall beadjusted by the amount by which such reduction exceeds the Environmental Defect Deductible (the “Environmental DefectAmount”).

(c) Other Limitations. In no event shall an adjustment for any Asserted Defect exceed the Allocated Amount of theProperty to which such Asserted Defect relates. All Asserted Defect values and related adjustments to the Base Purchase Price shallbe made without duplication.

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Section 7.8 Title Dispute Resolution. Seller and Buyer shall attempt to agree on all Asserted Defects, DefectAmounts, Title Benefits and Title Benefit Amounts prior to Closing. If Seller and Buyer are unable to agree by Closing, the DefectAmounts and Title Benefit Amounts in dispute shall be exclusively and finally resolved pursuant to this Section 7.8. There shall be asingle arbitrator, who shall be a title or environmental attorney, as applicable, with at least 10 years’ experience in oil and gas title orenvironmental matters, as applicable, involving properties in the regional area in which the Properties are located, as selected bymutual agreement of Buyer and Seller within 15 days after the end of the Cure Period (the “Defect Arbitrator”). In the event theParties are unable to mutually agree upon the Arbitrator within such time period, then application shall be made to the AAA to appointthe Defect Arbitrator. The arbitration proceeding shall be held in Houston, Texas. The Arbitrator’s determination shall be made within20 days after submission of the matters in dispute and shall be final and binding upon both Parties, without right of appeal. In makingits determination, the Arbitrator shall be bound by the rules set forth in this Article VII and, subject to the foregoing, may considersuch other matters as in the opinion of the Arbitrator are necessary to make a proper determination. The Arbitrator, however, may notaward the Buyer a greater Defect Amount than the Defect Amount claimed by Buyer in its applicable Defect Notice, or award theSeller a greater Title Benefit Amount than the Title Benefit Amount claimed by Seller in its applicable Title Benefit Notice. TheArbitrator shall act as an expert for the limited purpose of determining the specific disputed Defect, Title Benefit, Defect Amountsand/or Title Benefit Amounts submitted by either Party and may not award damages, interest or penalties to either Party with respectto any matter. Seller and Buyer shall each bear its own legal fees and other costs of presenting its case. Each of Seller and Buyershall bear one-half of the costs and expenses of the Title Arbitrator. To the extent that the award of the Title Arbitrator with respect toany Defect Amount or Title Benefit Amount is not taken into account as an adjustment to the Base Purchase Price at Closing, thenwithin 10 days after the Arbitrator delivers written notice to Buyer and Seller of his award with respect to a Defect Amount or a TitleBenefit Amount, then such adjustment shall be made pursuant to Section 11.3. Nothing herein shall operate to cause Closing to bedelayed on account of any arbitration hereunder and to the extent any adjustments are not agreed upon by the Parties as of Closing,the Base Purchase Price shall be reduced at Closing pursuant to this Article VII (using the Defect Amounts asserted in good faith byBuyer and the Title Benefit Amounts asserted in good faith by Seller).

ARTICLE VIIICONDITIONS PRECEDENT TO CLOSING OBLIGATIONS

Section 8.1 Conditions Precedent to the Obligations of Buyer. The obligations of Buyer to consummate thetransactions contemplated by this Agreement are subject to each of the following conditions being met:

(a) Representations True and Correct. Each and every representation of Seller under this Agreement shall be trueand accurate in all material respects (except for those representations and warranties qualified by materiality, which shall be true in allrespects) as of the date when made and shall be true and accurate in all material respects (except for those representations andwarranties qualified by materiality, which shall be true in all respects) at and as of such time of Closing as if it had been made again atand as of the Closing.

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(b) Compliance with Covenants and Agreements. Seller shall have performed and complied in all material respectswith (or compliance therewith shall have been waived by Buyer) each and every covenant and agreement required by this Agreementto be performed or complied with by Seller prior to or at the Closing.

(c) Price Adjustment Limitations. The aggregate adjustment (if any) of the Purchase Price which results from theprocedures set forth in Section 6.5, Article VII and Section 13.1 does not exceed fifteen percent (15%) percent of the Base PurchasePrice.

(d) Litigation. No suit, action or other proceedings (other than any suit, action or other proceeding brought by a Partyor an Affiliate of a Party) shall, on the date of Closing, be pending or threatened before any court or Governmental Authority seekingto restrain, prohibit, or obtain material damages or other material relief in connection with the consummation of the transactionscontemplated by this Agreement.

(e) Farmout Agreement. The consent required from ConocoPhillips Company under the Farmout Agreement shallhave been obtained.

Section 8.2 Conditions Precedent to the Obligations of Seller. The obligations of Seller to consummate thetransactions contemplated by this Agreement are subject to the each of the following conditions being met:

(a) Representations True and Correct. Each and every representation of Buyer under this Agreement shall be trueand accurate in all material respects (except for those representations and warranties qualified by materiality, which shall be true in allrespects) as of the date when made and shall be true and accurate in all material respects (except for those representations andwarranties qualified by materiality, which shall be true in all respects) at and as of such time of Closing as if it had been made again atand as of the Closing.

(b) Compliance With Covenants and Agreements. Buyer shall have performed and complied in all material respectswith (or compliance therewith shall have been waived by Seller) each and every covenant and agreement required by this Agreementto be performed or complied with by Buyer prior to or at the Closing.

(c) Price Adjustment Limitations. The aggregate adjustment (if any) to the Base Purchase Price which results fromthe procedures set forth in Section 6.5, Article VII and Section 13.1 does not exceed fifteen percent (15%) percent of the BasePurchase Price.



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Section 8.3 Termination.

(a) This Agreement may be terminated prior to Closing as follows:

(i) by mutual written consent of Seller and Buyer;

(ii) by Sellers, if the Closing does not occur on or before 5:00 pm in CST on June 15, 2017 (the “OutsideDate”);

(iii) by Buyer, if the Closing does not occur on or before the Outside Date;

(iv) by Sellers, at or after the Scheduled Closing Date, if the conditions set forth in Section 8.1 have beensatisfied, but the conditions set forth in Section 8.2 are not satisfied or are not capable of satisfaction at such time and arenot waived by Sellers;

(v) by Buyer, at or after the Scheduled Closing Date, if the conditions set forth in Section 8.2 have beensatisfied, but the conditions set forth in Section 8.1 are not satisfied or are not capable of satisfaction at such time and arenot waived by Buyer;

(vi) by either Party if, at or after the Scheduled Closing Date, the conditions set forth in Section 8.1(c),Section 8.1(d), Section 8.1(e), Section 8.2(c), Section 8.2(d) or Section 8.2(e) have not been satisfied or waived by Selleror Buyer, as applicable, and are not capable of satisfaction on or prior to the Outside Date.

Any termination pursuant to Section 8.3(a)(i) through 8.3(a)(vi) shall be effective upon the non-terminating Party’s receipt of theterminating Party’s written notice of termination. Any termination of this Agreement by Sellers shall require notice from both PetroCapand CPX and this Agreement may not be terminated upon notice from only one Seller.

(b) If (i) this Agreement is terminated by Sellers pursuant to Section 8.3(a)(ii) or Section 8.3(a)(iv) or by Buyerpursuant to Section 8.3(a)(iii) and (ii) at the time the written notice of termination is provided to the non-terminating Party (A) Buyer isin breach of this Agreement where such breach or breaches in the aggregate result (or would result if the Closing were thenscheduled to occur) in a failure of a condition set forth in Section 8.2(a) or Section 8.2(b), (B) Seller is not in breach of thisAgreement where such breach or breaches in the aggregate result (or would result if Closing were then scheduled to occur) in afailure of a conditions set forth in Section 8.1(a) or Section 8.1(b), and (C) all conditions to Closing set forth in Sections 8.1(c)through (e) are satisfied (or would be satisfied, solely but for any breaches of this Agreement by Buyer), then the Parties shall instructthe Escrow Agent to pay to Seller, as its sole and exclusive remedy, the Deposit as liquidated damages and not as a penalty. TheParties agree that the damages set forth in this Section 8.3(b) will be deemed liquidated damages and that the amount of liquidateddamages is reasonable considering all of the circumstances existing as of the date of this Agreement and constitute the Parties’ goodfaith estimate of the actual damages reasonably expected to result from Buyer’s breaches of this Agreement.

(c) If (i) Buyer is entitled to terminate this Agreement pursuant to Section 8.3(a)(iii) or Section 8.3(a)(v), or Sellerselect to terminate this Agreement pursuant to Section 8.3(a)(ii),

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(ii) either Seller is in breach of this Agreement where such breach or breaches in the aggregate results (or would result if the Closingwere then scheduled to occur) in a failure of a condition set forth in Section 8.1(a) or Section 8.1(b), (iii) Buyer is not in breach of thisAgreement where such breach or breaches in the aggregate result (or would result if Closing were then scheduled to occur) in afailure of a condition set forth in Section 8.2(a) or Section 8.2(b), and (iv) all conditions to Closing set forth in Section 8.2(c) through(e) are satisfied (or would be satisfied, solely but for any breaches of this Agreement by Seller), then Buyer shall be entitled to anyand all remedies available at Law (subject to the limitations in Section 17.5) or equity against such Seller, including any rights tospecific performance of this Agreement, in accordance with this Section 8.3(c). In the circumstances described in this Section8.3(c), the Parties acknowledge and agree that Buyer shall be entitled to specific performance in the broadest sense necessary toeffect the consummation of the transactions contemplated by this Agreement. The Parties specifically agree that the Arbitration Panelshall have the power to award specific performance if requested by the Buyer and that the Parties shall take all necessary steps togive effect to an award of specific performance in the event specific performance is so awarded. The Buyer shall not be required toestablish that it lacks an adequate remedy at law as a condition to obtaining an order for specific performance. In the event that (A)the Buyer does not seek an order to compel specific performance, or an order of specific performance is not awarded, and (B) theconditions set forth in clause (i), (ii), (iii) and (iv) of this Section 8.3(c) are met, then, in addition to the return of its Deposit andpayment of the Reimbursed Cost Amount, Buyer shall be entitled to recover damages which shall be limited to an amount equal to thelesser of (x) the actual out of pocket costs paid by Buyer to Third Parties in connection with this Agreement, and (y) three milliondollars ($3,000,000); provided, however, that any action to recover such damages shall be brought within thirty (30) days following thelater of (1) termination of this Agreement and (2) the withdrawal or termination of any action brought by Buyer to compel specificperformance, and any failure by Buyer to bring such an action during such time period shall be deemed a waiver of Buyer’s rightswith respect to such damages. Notwithstanding the foregoing, in the circumstances described in this Section 8.3(c), if Buyer elects tobring an action to compel specific performance, Buyer shall bring such action no later than thirty (30) days following termination of thisAgreement, and if Buyer fails to bring such an action within such period, Buyer shall be deemed to have waived its right to compelspecific performance of this Agreement (but shall not be deemed to have waived its right to recover damages).

(d) If this Agreement is terminated pursuant to this Section 8.3, this Agreement shall become void and of no furtherforce or effect, except for the provisions of Section 6.3 (Exculpation and Indemnification), Section 8.3 (Termination), Section 12.4 (NoCommissions Owed), Article XVI (Dispute Resolution) , Section 17.5 (Parties Bear Own Expenses/No Special Damages) , Section17.8 (Choice of Law), Section 17.21 (Confidentiality), and such parts of Article I (Definitions and References) as are necessary to giveeffect to the foregoing, all of which shall continue in full force and effect in accordance with their terms. If Buyer or Seller terminatesthis Agreement pursuant to Section 8.3 (other than in the circumstances described in Sections 8.3(b) or (c)), neither Buyer nor Sellershall have any liability to the other Party for termination of this Agreement, but, in such event, the Parties shall immediately (but in noevent later than two (2) days after termination) instruct the Escrow Agent to return the Deposit to Buyer.

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(e) If this Agreement is terminated for any reason pursuant to this Section 8.3, Seller shall reimburse Buyer for costsincurred by Buyer in accordance with the terms and provisions of the Side Letter Agreement (the “Reimbursed Cost Amount”). TheReimbursed Cost Amount shall be paid by Seller in accordance with the terms and provisions of the Side Letter Agreement. TheReimbursed Cost Amount shall not constitute damages and shall not count toward the limitation on damages set forth in Section8.3(c).

ARTICLE IXCLOSING

Section 9.1 Closing. The closing (herein called the “Closing”) of the transaction contemplated hereby shall take placein the offices of Thompson & Knight LLP at One Arts Plaza, 1722 Routh Street, Suite 1500, Dallas, Texas 75201, or at such otherplace mutually agreed by the Parties, on May 15, 2017 (the “Scheduled Closing Date”), at 10:00 a.m. Central Standard Time, or ifthe conditions referred to in Sections 8.1 and 8.2 have not been satisfied or waived in writing by the Scheduled Closing Date, thenSeller (in the case of a failure of a condition set forth in Section 8.2) or Buyer (in the case of a failure of a condition set forth inSection 8.1) shall provide written notice to the other Party describing, in reasonable detail, such failure. In such event, the ClosingDate shall be extended until three (3) Business Days after such conditions have been satisfied or waived, subject to the Parties rightto terminate under Section 8.3. The date on which the Closing occurs is referred to as the “Closing Date”.

Section 9.2 Seller’s Closing Obligations. At the Closing,

(a) Delivery of Conveyance. Upon receipt of payment of the amount provided in Section 9.3(a), Seller shall execute,acknowledge and deliver to Buyer, and shall cause CPX Operating to execute, acknowledge and deliver to Buyer, a conveyance ofthe Properties, including those Properties owned by CPX Operating as further set forth on Exhibit 9.2(a) (the “Conveyance”), in theform attached hereto as Schedule I (and with Exhibit A, Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit B and Exhibit C hereto, withsuch modifications as may be mutually agreed to by Buyer and Seller, being attached thereto), effective as of 7:00 a.m. local timewhere the Properties are located on May 1, 2017 (herein called the “Effective Date”).

(b) Federal and State Conveyance Forms. Seller shall execute (and, where required, acknowledge) and deliver toBuyer forms of conveyance or assignment as required by the applicable Governmental Authorities for transfers of any interests instate, federal or Indian leases included in the Oil and Gas Properties.

(c) Letters in Lieu. Seller shall, if requested by Buyer, execute and deliver to Buyer letters in lieu of transfer orders (orsimilar documentation), in form acceptable to both parties.

(d) Turn Over Possession. Seller shall turn over possession of the Properties to the extent Seller can do so.

(e) IRS Form 8594. Seller shall provide a copy of IRS Form 8594 completed in accordance with Section 3.4.

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(f) Release of Liens. Seller shall deliver original, executed and acknowledged releases, in recordable form, of allmortgage liens, security interests and financings statements granted by Seller or its Affiliates that encumber the Properties, includingthe liens described on Exhibit 4.1(n).

(g) Change of Operator Forms. Seller shall deliver appropriate evidence reflecting change of operator as required byapplicable Governmental Authorities.

(h) Non-Foreign Status Affidavit. If requested, Seller shall deliver a non-foreign status affidavit in the form (except forany de minimis changes thereto) of Schedule II attached hereto, as required by Section 1445 of the Code, executed by Seller.

(i) Closing Certificate. Each Seller shall deliver to Buyer a Closing Certificate dated as of the Closing Date, executedby an executive officer of Seller, certifying that all of the conditions set forth in Section 8.1 have been satisfied.

Section 9.3 Buyer’s Closing Obligations. At the Closing,

(a) Payment to Seller. Buyer shall deliver to the Seller, by wire transfer of immediately available funds to an accountdesignated by Seller in a bank located in the United States, an amount equal to the Purchase Price, less the Deposit.

(b) Succession by Buyer. Buyer shall (A) furnish to Seller such evidence (including, without limitation, evidence ofsatisfaction of all applicable bonding and surety requirements) as Seller may require that Buyer is qualified with the applicableauthorities to succeed Seller as the owner and, where applicable, operator of the Properties, (B) with respect to properties operated bySeller where Buyer is to succeed as operator, execute and deliver to Seller appropriate evidence reflecting change of operator asrequired by applicable Governmental Authorities, and (C) execute and deliver to Seller such forms as Seller may reasonably requestfor filing with the applicable authorities to reflect Buyer’s assumption of plugging and abandonment liabilities with respect to the Wellsor on units in which the Properties participate.

(c) IRS Form 8594. Buyer shall provide a copy of IRS Form 8594 completed in accordance with Section 3.4.

(d) Closing Certificate. Buyer shall deliver to Seller a Closing Certificate dated as of the Closing Date, executed by anexecutive officer of Buyer, certifying that all of the conditions set forth in Section 8.2 have been satisfied.

ARTICLE XPOST CLOSING ACTIONS

Section 10.1 Transfer of Files. Seller will use its best efforts to deliver to Buyer, at Buyer’s expense, and within ten(10) days after Closing, all files, records, and data relating to the Properties, including, without limitation, the following, if and to theextent that such files exist: all books, records, reports, manuals, files, title documents (including correspondence and curative),records of production and maintenance, revenue, sales, expenses, warranties, lease files, land files, well files, division order files,abstracts, title opinions, assignments, reports,

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property records, contract files, operations files, copies of tax and accounting records (but excluding Federal and state income taxreturns and records) and files, maps, core data, hydrocarbon analysis, well logs, mud logs, and field studies, together with other files,contracts, and other records and data and maps including any interpretations, analyses and reports related thereto, but excludingfrom the foregoing (a) Privileged Information, (b) Confidential Information, (c) the Seller Party Documents, or (d) to the extent suchdisclosure or transfer is subjected to payment of a fee or other consideration, for which Buyer has not agreed in writing to pay the feeor other consideration, as applicable. As to those files and records containing Confidential Information, Seller shall make acommercially reasonable good faith effort to obtain permission to provide such files or records to Buyer without waiving any legalprivilege breaching any agreement within five (5) days after the Closing, provided Seller is only obligated to cause those responsiblefor the files to expend a reasonable amount of time in an effort to obtain such permission and Seller shall not be obligated to incur anycosts or expenses to obtain such permission other than the salaries of such employees; provided, however, that in no event shallSeller have any obligations with respect to Privileged Information or the Seller Party Documents. Seller may, at its election, make andretain copies of any or all such files. Buyer shall preserve all files so delivered by Seller for a period of five (5) years following Closingand will allow Seller access (including, without limitation, the right to make copies at Seller’s expense) to such files at all reasonabletimes.

Section 10.2 Operational Transition. THERE IS NO ASSURANCE GIVEN BY SELLER THAT BUYER SHALLSUCCEED SELLER AS OPERATOR OF ANY PROPERTY WHERE OTHER PARTIES OWN INTERESTS IN THE WELLSLOCATED THEREON AND BUYER ACCEPTS THE RISK THEREOF.

Section 10.3 Notifications by Buyer. Immediately after the Closing, Buyer shall notify all applicable operators, non-operators, oil and gas purchasers, and Governmental Authorities that it has purchased the Properties.

Section 10.4 Farmout Agreement. Without limiting the generality of the other terms and provisions of this Agreement,(a) the Conveyance is being executed and delivered expressly subject to the terms and provisions of the Farmout Agreement, and (b)Buyer expressly agrees to be bound by the terms of the Farmout Agreement and any applicable Operating Agreement (as defined inthe Farmout Agreement). Further, between the Execution Date and the Closing Date, Buyer shall comply with the provisions set forthin Article 37 of the Farmout Agreement; provided, however, that nothing contained in this Section 10.4 shall be construed to requireBuyer to obtain approval of the Seller or the counterparty to the Farmout Agreement to disclose information with respect to thisAgreement or the transaction represented herein (including the names of the parties to this Agreement) to the extent, and then only tothe extent, required by applicable Law or necessary to comply with disclosure requirements of the SEC, New York Stock Exchange, orany other regulated stock exchange; provided, further, however, that Buyer shall consult with Seller regarding (and shall allow Sellerto review and provide comments to) any such required disclosure prior to disclosure to any Third Party and shall use commerciallyreasonably efforts to obtain any consent or approval necessary from any Third Parties in connection therewith.

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Section 10.5 Financial Statements. Each Seller shall reasonably cooperate with Buyer and make available, duringnormal business hours, to Buyer and its representatives prior to and for a period of fifteen (15) months following the Closing Date anyand all existing information and documents relating to revenues and expenses attributable to the Properties and in the possession ofsuch Seller that Buyer may reasonably require to comply with Buyer’s tax and financial reporting requirements and audits, includingany filings with any Governmental Authority and filings that may be required by the Securities and Exchange Commission under theSecurities Act of 1933 and/or the Securities Exchange Act of 1934. Without limiting the generality of the foregoing, each Seller willuse its commercially reasonable efforts after execution of this Agreement and following the Closing Date to cooperate with theindependent auditors chosen by Buyer (“Buyer’s Auditor”) in connection with their audit or review of any revenue and expenserecords attributable to the Properties that Buyer or any of its affiliates requires to comply with their tax, financial and other reportingrequirements. Each Seller’s cooperation will include (i) reasonable access during normal business hours to such Seller’s employeesand representatives designated by such Seller who were responsible for preparing or maintaining the revenue and expense recordsand work papers and other supporting documents used in the preparation of such financial statements as may be required by Buyer’sAuditor to perform an audit or conduct a review in accordance with generally accepted auditing standards or to otherwise verify suchfinancial statements; and (ii) delivery of one or more customary representation letters from such Seller to Buyer’s Auditor that arereasonably requested by Buyer to allow such auditors to complete an audit (or review of any financial statements), and to allowBuyer’s Auditor to issue an opinion with respect to its audit or review. Buyer will pay or, if paid, reimburse the applicable Seller, withinten (10) Business Days after demand therefor, for any reasonable out-of-pocket costs incurred by such Seller in complying with theprovisions of this Section 10.5. Notwithstanding the foregoing, nothing herein shall expand Seller’s representations, warranties,covenants or agreements set forth in this Agreement or give Buyer, its Affiliates or any Third Party any rights to which it is nototherwise expressly entitled hereunder.

ARTICLE XIACCOUNTING ADJUSTMENTS

Section 11.1 Adjustments for Revenues and Expenses. Appropriate adjustments to the Base Purchase Price andthe Purchase Price, as applicable, shall be made between Buyer and Seller so that:

(a) except as expressly provided otherwise in this Agreement, Buyer shall be entitled to its rights of ownership(including the right to production, proceeds of production and other proceeds), and shall be responsible for and bear (by payment,through the adjustments provided for herein or otherwise) all Property Expenses, in each case, attributable to the Properties for theperiod of time from and after the Effective Date. Additionally, Buyer shall pay to Seller $50,000 per month as overhead for Seller’soperation of the Properties (prorated for any period less than one month) for each month or part thereof between the Effective Dateand Closing; and

(b) except as provided in subsection (c) below, Section 11.4 below, Article XII, Article XV, and Exhibit 4.1(h), Sellershall remain entitled to all of the rights of ownership (including the right to all production, proceeds of production and other proceeds)and shall

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remain responsible for and bear (by payment, through the adjustments provided for herein or otherwise) all Property Expenses, ineach case, attributable to the Properties for the period of time prior to the Effective Date; and

(c) It is agreed that, in making such adjustments:

(i) oil which was produced from the Oil and Gas Properties and which was, on the Effective Date, stored intanks located on the Oil and Gas Properties (or located elsewhere but used by Seller to store oil produced from, orattributable to, the Oil and Gas Properties prior to delivery to oil purchasers) and above pipeline connections shall bedeemed to have been produced before the Effective Date and valued at the actual contract price or the price Seller wouldotherwise receive as of the Effective Date,

(ii) the provisions of Section 17.3 shall be effective as of the Effective Date,

(iii) casualty losses shall be handled in accordance with Section 13.1,

(iv) delay rentals shall be attributable to the date paid and not prorated over the period of such delay, and

(v) the Parties shall bear responsibility for Income Taxes and Asset Taxes as set forth in Article XV.

(d) The Base Purchase Price shall be reduced by an amount equal to all funds attributable to the Properties beingheld in suspense by Seller on the Closing Date.

(e) The Base Purchase Price shall be increased by one million dollars ($1,000,000) to account for the cost of certainactivities as provided in Section VII of the Side Letter Agreement.

(f) In the event Buyer elects to exclude the Orla Frac Pond #1 pursuant to the terms of the Side Letter Agreement, theBase Purchase Price shall be reduced by four hundred and fifty thousand dollars ($450,000).

Section 11.2 Initial Adjustment at Closing. At least five (5) days before the Closing Date, Seller shall provide to Buyera statement showing its computations of the amount of the adjustments provided for (a) i n Section 11.1 above using the bestinformation available to Seller at the time, which (i) for known amounts, shall be based on amounts which prior to such time haveactually been paid or received by Seller and (ii) for unknown amounts, shall be based on Seller’s reasonable good faith estimates,and (b) in Section 11.5, if any. Buyer and Seller shall use their commercially reasonable efforts to agree upon such adjustments priorto Closing, provided that if agreement is not reached, Seller’s computation shall be used at Closing, subject to further adjustmentunder Section 11.3 below.

Section 11.3 Adjustment Post Closing. On or before ninety (90) days after the Closing, Seller shall deliver to Buyer afinal settlement statement (the “Final Settlement Statement”) prepared by Seller based on actual income and expenses during theperiod between the Effective Date and Closing and which takes into account all final adjustments made to the Purchase Price. Assoon as practicable, and in any event within 30 days after receipt of the Final Settlement

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Statement, Buyer shall deliver to Seller a written report containing any proposed changes to the Final Settlement Statement and anexplanation of any such changes and the reasons therefor (the “Dispute Notice”). Any changes not so specified in the DisputeNotice shall be deemed waived and Seller’s determinations with respect to all such elements of the Final Settlement Statement thatare not addressed specifically in the Dispute Notice shall prevail. If Buyer fails to timely deliver a Dispute Notice to Seller containingchanges Buyer proposes to be made to the Final Settlement Statement, the Final Settlement Statement as delivered by Seller will bedeemed to be correct and mutually agreed upon by the Parties, and will be final and binding on the Parties and not subject to furtheraudit or arbitration. If Seller and Buyer are unable to resolve the matters addressed in the Dispute Notice (if any), each of Buyer andSeller shall within 14 Business Days after the delivery of such Dispute Notice, summarize its position with regard to such dispute in awritten document of 20 pages or less and submit such summaries to the Accounting Arbitrator, together with the Dispute Notice, theFinal Settlement Statement and any other documentation such Party may desire to submit. Within 20 Business Days after receivingthe Parties’ respective submissions, the Accounting Arbitrator shall render a decision choosing either Seller’s position or Buyer’sposition (or another position which shall be no less favorable to Seller than Buyer’s position and no less favorable to Buyer thanSeller’s position) with respect to each matter addressed in any Dispute Notice, based on the materials submitted to the AccountingArbitrator as described above. Any decision rendered by the Accounting Arbitrator pursuant hereto shall be final, conclusive andbinding on Seller and Buyer and will be enforceable against the Parties in any court of competent jurisdiction. The costs of theAccounting Arbitrator shall be borne pro rata between the Parties with each Party being responsible for the Accounting Arbitrator’scosts to the extent the Accounting Arbitrator has not selected such Party’s position on an aggregate dollar basis with respect to allamounts submitted for resolution by the Accounting Arbitrator. If the adjustments set forth in the Final Settlement Statement aremutually agreed upon by Seller and Buyer, the Final Settlement Statement and the adjusted Purchase Price shall be final and bindingon the Parties, subject to the provisions of Section 11.4. Any difference in the Purchase Price as paid at Closing and the PurchasePrice as adjusted pursuant to the Final Settlement Statement shall be paid by the owing Party to the owed Party within 10 days afterfinal determination of such owed amounts in accordance herewith. All amounts paid pursuant to this Section 11.3 shall be deliveredin United States currency by wire transfer of immediately available funds to the account specified in writing by the relevant Party.

Section 11.4 Additional Expenses. After the Parties’ agreement upon the Final Settlement Statement, ( i) if eitherParty receives monies belonging to the other Party, including proceeds of production, then such amount shall, within 30 days after theend of the calendar month in which such amounts were received, be paid over to the proper Party, (ii) if either Party pays monieswhich are the obligation of the other Party under Section 11.1 above, then such other Party shall, within 30 days after the end of thecalendar month in which the applicable invoice and proof of payment of such invoice were received, reimburse the Party which paidsuch expenses, (iii) if a Party receives an invoice of an expense or obligation (other than an invoice of an expense or obligation withrespect to Asset Taxes or Income Taxes) which is owed by the other Party, such Party receiving the invoice shall promptly forwardsuch invoice to the Party obligated to pay the same, and (iv) if an invoice or other evidence of an obligation (other than an obligationwith respect to Asset Taxes or Income Taxes) is received by a Party, which is partially an obligation of both Seller and Buyer, then theParties shall consult with each other, and each shall promptly pay its portion of such obligation to the obligee thereof.

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Section 11.5 Imbalance Adjustments. If there exists any overproduction or underproduction with respect to the Wellsas of the Effective Date and either Buyer or Seller gives the other Party written notice of such fact prior to the Defect Deadline, adetermination shall be made pursuant to Section 11.2 prior to Closing of (a) the actual amount of overproduction and (b) the actualamount of underproduction. If there is an actual amount of overproduction, then the Purchase Price shall be decreased by an amountequal to the actual contract price or the price Seller would otherwise receive as of the Effective Date for each Mcf of the excess. Inaddition, if there is an actual amount of underproduction, the Purchase Price shall be increased by an amount equal to the actualcontract price or the price Seller would otherwise receive as of the Effective Date for each Mcf of the excess.

Section 11.6 Suspended Funds. Seller shall retain all funds (including interest owed thereof, if any) relating to theProperties that are held in suspense by Seller as of the Closing Date as further set forth on Exhibit 4.1(v). Buyer acknowledges thatthe Base Purchase Price will be reduced at Closing to account for such suspended funds and, from and after the Closing, Buyer shallbe responsible for the proper distribution of all such suspended proceeds. Buyer agrees to indemnify, defend and hold harmlessSeller from and against any and all claims, liabilities and losses related to such suspended proceeds except to the extent Sellerunlawfully suspended such proceeds.

ARTICLE XIIASSUMPTION AND INDEMNIFICATION

Section 12.1 Assumption and Indemnification By Buyer. From and after the Closing, Buyer shall assume timely payand perform, all duties, obligations and liabilities relating to the ownership and/or operation of the Properties regardless of whether thesame accrued or otherwise arose before or after the Closing (including, without limitation, those arising under the ApplicableContracts), other than the Retained Obligations (collectively, the “Assumed Obligations”). Provided that the Closing occurs, Buyershall indemnify and hold the Seller Indemnified Parties harmless from and against any and all claims, actions, causes of action,liabilities, damages, costs or expenses (including, without limitation, court costs and consultants’ and attorneys’ fees) of any kind orcharacter (individually a “Seller’s Indemnified Claim” and collectively “Seller’s Indemnified Claims”) arising out of:

(a) any misrepresentation or breach of any warranty, covenant or agreement of Buyer contained in this Agreement;

(b) the Assumed Obligations, provided that, with respect to Seller’s Indemnified Claims that occurred or arose beforethe Closing, Buyer is not obligated to indemnify Seller under this subparagraph (b) for any Buyer’s Indemnified Claim to the extent thatSeller is obligated to indemnify Buyer for such Buyer’s Indemnified Claim pursuant to this Agreement;

(c) except for the Retained Obligations, the condition (“Condition of the Properties”) of the Properties on the date ofClosing (including, without limitation, within such matters all obligations to properly plug and abandon, or replug and re-abandon,wells, to restore the surface of the Properties and to comply with, or to bring the Properties into compliance with, ApplicableEnvironmental Laws, rules, regulations and orders, including conducting any

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remediation activities which may be required on or otherwise in connection with activities on the Properties), regardless of whethersuch condition or the events giving rise to such condition arose or occurred before or after the Closing; provided that, with respect toSeller’s Indemnified Claims that occurred or arose before the Closing, Buyer is not obligated to indemnify Seller under thissubparagraph (c ) for any Buyer’s Indemnified Claim to the extent that Seller is obligated to indemnify Buyer for such Buyer’sIndemnified Claim pursuant to this Agreement; or

(d) any Defect, except for any right of Buyer under Article VII to an adjustment to the Base Purchase Price for suchDefect or to exclude a Property for such Defect and to receive a reduction in the Base Purchase Price to account for the exclusion ofsuch Property.

THE FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY WHETHER OR NOT SUCH DUTIES,OBLIGATIONS OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES,COSTS OR EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE,CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSSNEGLIGENCE OR WILLFUL MISCONDUCT) OF ANY INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.

Section 12.2 Indemnification By Seller. Sellers shall retain all costs, obligations and liabilities related to the RetainedObligations. From and after Closing, each Seller Party severally (and not jointly) shall indemnify and hold the Buyer IndemnifiedParties harmless from and against any and all claims, actions, causes of action, liabilities, damages, costs or expenses (includingwithout limitation court costs and consultants and attorneys' fees) (individually a “Buyer’s Indemnified Claim” and collectively“Buyer’s Indemnified Claims”) arising out of:

(a) the employment relationship between Seller and any of Seller’s present or former employees or the termination ofany such employment relationship;

(b) any personal injury (including death) or property damage related to Seller’s ownership or operation of the Oil andGas Properties prior to Closing;

(c) the liens described on Exhibit 4.1(n);

(d) any misrepresentation or breach of any warranty, covenant or agreement of Seller contained in this Agreement; or

(e) the Retained Obligations.

provided, however, no Seller Party shall be obligated to indemnify Buyer under this Section 12.2(d) for a misrepresentation or breachof any representation or warranty contained in this Agreement (i) any individual Buyer’s Indemnified Claim unless the amount of suchBuyer’s Indemnified Claim exceeds $25,000, and (ii) any Buyer’s Indemnified Claims exceeding $25,000 except to the extent, if any,that the aggregate of all of Buyer’s Indemnified Claims exceeds two percent (2%) of the Base Purchase Price; provided, further,however, that the foregoing limitations shall not apply to Buyer’s Indemnified Claims (A) under Section 12.2(d)

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for any misrepresentation or breach of any Fundamental Representations or breach of any covenant or agreement in this Agreement,or (B) under Section 12.2(a), (b), (c) or (e).

Section 12.3 Notice of Claim. If indemnification pursuant to Section 12.1 or Section 12.2 is sought, the party seekingindemnification (the “Indemnitee”) shall give written notice to the indemnifying party of an event giving rise to the obligation toindemnify, describing in reasonable detail the factual basis for such claim, and for a period of thirty (30) days shall allow theindemnifying party to assume and conduct the defense of the claim or action with counsel reasonably satisfactory to the Indemnitee,and cooperate with the indemnifying party in the defense thereof; provided, however, that the omission to give such notice to theindemnifying party shall not relieve the indemnifying party from any liability which it may have to the Indemnitee, except to the extentthat the indemnifying party is prejudiced by the failure to give such notice. In the case of a claim for indemnification based upon aThird Party claim, the indemnifying party, on or before the 30th day after its receipt of the claim notice under this Section 12.3, shallnotify the Indemnitee whether it admits or denies its liability to defend the Indemnitee against the claim at the sole cost and expense ofthe indemnifying party. Any failure by the indemnifying party to admit or deny its liability to defend the indemnitee shall be deemed tobe a denial by the indemnifying party as to its liability or obligation to defend the Indemnitee. The Indemnitee is authorized, prior toand before the expiration of this 30-day period, to file any motion, answer or other pleading that it shall deem necessary or appropriateto protect its interests or those of the indemnifying party and that is not prejudicial to the indemnifying party. If the indemnifying partydoes not admit its liability to defend the Indemnitee or admits its liability to defend the Indemnitee but fails diligently to prosecute orsettle the claim, then the Indemnitee shall have the right to defend against the claim at the sole cost and expense of the indemnifyingparty, with counsel of the Indemnitee’s choosing, subject to the right of the indemnifying party to admit its liability to defend theIndemnitee and assume the defense of the claim at any time prior to its settlement or final determination. If the indemnifying party hasnot yet admitted its liability to defend the Indemnitee for a Claim, the Indemnitee shall notify the indemnifying party of any proposedsettlement and the indemnifying party shall have the option, on or before the tenth (10th) day following receipt of that notice (i) toadmit in writing its liability to defend the Indemnitee for the claim, and (ii) if its liability to defend the Indemnitee is so admitted, toreject, in its reasonable judgment, the proposed settlement. If the Indemnitee settles any Third Party claim over the objection of theindemnifying party after the indemnifying party has timely admitted its obligation for indemnification in writing and assumed thedefense of the Third Party claim, the Indemnitee shall be deemed to have waived any right to indemnity with respect to the ThirdParty claim. The Indemnitee shall have the right to employ separate counsel to represent the Indemnitee if the Indemnitee is advisedby counsel that an actual conflict of interest makes it advisable for the Indemnitee to be represented by separate counsel and thereasonable expenses and fees of such separate counsel shall be paid by the indemnifying party.

Section 12.4 No Commissions Owed. Seller agrees to indemnify and hold the Buyer Indemnified Parties harmlessfrom and against any and all claims, actions, causes of action, liabilities, damages, losses, costs or expenses (including, withoutlimitation, court costs and attorneys' fees) of any kind or character arising out of or resulting from any agreement, arrangement orunderstanding alleged to have been made by, or on behalf of, Seller with any broker or finder in connection with this Agreement or thetransaction contemplated hereby. Buyer agrees to indemnify and hold the Seller Indemnified Parties harmless from and against any

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and all claims, actions, causes of action, liabilities, damages, losses, costs or expenses (including, without limitation, court costs andattorneys' fees) of any kind or character arising out of or resulting from any agreement, arrangement or understanding alleged to havebeen made by, or on behalf of, Buyer with any broker or finder in connection with this Agreement or the transaction contemplatedhereby.

Section 12.5 Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreementshall be treated by the Parties as an adjustment to the Purchase Price for U.S. federal and applicable state income Tax purposes,unless otherwise required by Law.

Section 12.6 Materiality. Notwithstanding anything herein or in any agreement delivered hereunder to the contrary,for the purpose of calculating the amount of damages in connection with any Buyer’s Indemnified Claim (but not for the purpose ofdetermining whether a breach has occurred or the Buyer is entitled to indemnity hereunder) no effect shall be given to any qualifiersas to materiality, Material Adverse Effect or material adverse effect set forth in any representation or warranty or any certifications andaffirmations of representations or warranties in any certificate delivered at Closing.

Section 12.7 Indemnity Escrow. (a) On the Closing Date, Escrow Agent shall retain the Deposit in the Escrow Account (such amount, the “Indemnity

Escrow Amount”) for the purpose of securing the satisfaction and discharge of indemnity claims of Buyer against Seller under thisAgreement. The Indemnity Escrow Amount shall be governed by the provisions of this Section 12.7 and the Escrow Agreement. Thejoint, written authorization of representatives of Buyer and Sellers pursuant to the Escrow Agreement shall be required for thedisbursement of any portion of the Indemnity Escrow Amount. The Indemnity Escrow Amount shall not limit Buyer’s right to recoverany amount otherwise due from Sellers hereunder but is intended only to provide a secure source of funding for such recovery.

(b) With respect to each claim for indemnification asserted in writing by Buyer against Seller pursuant to Article XII

during the Survival Period, upon final resolution or determination of such an indemnity or warranty claim by the Parties or inaccordance with this Article XII, resolving the claim in favor of Buyer, Buyer and Sellers shall jointly instruct the Escrow Agent todisburse to Buyer the amount set forth in such joint written instruction, which will be that portion of the Indemnity Escrow Amountbeing held in the Escrow Account as would satisfy such finally resolved or determined indemnity or warranty claim.

(c) On the nine-month anniversary of the Closing Date, Buyer and Sellers shall jointly instruct the Escrow Agent to

release to Sellers an amount equal to fifty percent (50%) of the total of any amounts then-remaining in the Escrow Account less theaggregate amount of all outstanding claims for indemnification or warranty asserted in good faith by Buyer, which Buyer has providedto Sellers in writing in accordance with Article XII that have not been previously satisfied (which monies shall remain part of theEscrow Account until final resolution of such outstanding indemnity and/or warranty claims). For the avoidance of doubt, an amountequal to

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50% of the Deposit plus all interest earned thereon plus the aggregate amount of all such outstanding claims shall remain part of theEscrow Account for the remaining Survival Period.

(d) Buyer and Sellers shall jointly instruct the Escrow Agent to release to Sellers any amounts then remaining in the

Escrow Account on the first Business Day after the expiration of the Survival Period, except for the aggregate amount of alloutstanding claims for indemnification or warranty which Buyer has provided in writing and in good faith to Sellers in accordance withArticle XII that have not been previously satisfied (which monies shall remain part of the Indemnity Escrow Account until finalresolution of such outstanding indemnity and/or warranty claims).

ARTICLE XIIICASUALTY LOSSES

Section 13.1 Casualty Loss. In the event of damage by fire or other casualty to, or condemnation of, all or anyportion the Properties prior to the Closing, this Agreement shall remain in full force and effect, and in such event:

(a) Oil and Gas Properties. As to each such Property so affected which is an Oil and Gas Property, then (unlessSeller is able to and elects to repair such damage, which Seller shall have no obligation to do, in which case all rights to insuranceproceeds, and claims against third parties, related thereto shall belong to Seller), the Purchase Price will not be adjusted, and Sellershall, at Seller’s election, either collect (and when collected pay over to Buyer) any insurance claims related to such damage, orassign to Buyer such insurance claims, and, in either event, Buyer shall take title to the Property affected by such loss withoutreduction of the Purchase Price.

(b) Other Properties. As to each such Property which is other than an Oil and Gas Property and which is notcondemned, Seller shall, at Seller’s election, either (i) repair such damage or replace such Property, (ii) collect (and when collectedpay over to Buyer) any insurance claims related to such damage, or (iii) assign to Buyer any insurance claims related to suchdamage. Whether Seller elects either (i), (ii) or (iii) under this Section 13.1(b), Buyer shall take title to the Property (or thereplacement property to the extent Seller elects to replace such Property under (i)) affected by such loss without reduction of thePurchase Price.

Seller shall maintain its existing insurance coverage, and in the event of a loss other than condemnation or other governmental takingwhich is not covered by insurance, Seller shall have no obligation to Buyer with respect thereto; provided that, if Buyer so requests,and if Seller has not repaired the damage or replaced the Property and if Buyer has not elected option (i) in Section 13.1(a) above,Seller will assign any rights it may have against third parties with respect to such damaged Property. Seller shall notify Buyer withintwo (2) Business Days following the occurrence of any event that gives rise to a casualty loss pursuant to this Article XIII.

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ARTICLE XIVNOTICES

Section 14.1 Notices. All notices and other communications required under this Agreement shall (unless otherwisespecifically provided herein) be in writing and be delivered personally, by recognized commercial courier or delivery service whichprovides a receipt, by facsimile or electronic mail (with receipt acknowledged), or by registered or certified mail (postage prepaid), atthe following addresses: If to Buyer: If to Seller:Resolute Natural Resources Southwest, LLC 1700 Lincoln Street, Suite 2800 PetroCap CPX, LLCDenver, CO 80203 Attention: Lane BritainAttention: General Counsel 2602 McKinney Avenue, Suite 400Email: [email protected] Dallas, Texas 75204Fax: 303-623-3628 Email: [email protected] Telephone: (214) 871-7697 PetroCap CPX, LLC Attention: David Hopson 2602 McKinney Avenue, Suite 400 Dallas, Texas 75204 Email: [email protected] Telephone: (214) 871-7697 CP Exploration II, LLC Attention: Tom Powell 420 Oil Center Drive Lafayette, Louisiana 70503 Email: [email protected] Telephone: (337) 984-4589 With copies (which shall not constitute notice) to: Thompson & Knight LLP 98 San Jacinto Boulevard, Suite 1900 Austin, Texas 78701 Attn: Arthur Wright Fax: (512) 469-6180 Email: [email protected] Thompson & Knight LLP One Arts Plaza 1722 Routh Street, Suite 1500 Dallas, Texas 75201

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Attn: Cole Bredthauer Fax: (214) 880-3106 Email: [email protected] Chaffe McCall, L.L.P. 1100 Poydras Street, Suite 2300 New Orleans, Louisiana 70163-2300 Attn: V.M. Wheeler III, Esq. Fax: (504) 544-6046 E-Mail: [email protected]

or such other post office address within the continental limits of the United States as a Party may designate for itself by giving noticeto the other Party, in the manner provided in this Section, at least ten (10) days prior to the effective date of such change ofaddress. All notices given by personal delivery or mail shall be effective on the date of actual receipt at the appropriate address asprovided above. Notices given by facsimile or electronic mail, if receipt is confirmed by the transmitting device, shall be effective uponactual receipt of received during recipient’s normal business hours or at the beginning of the next business day after receipt if receivedafter recipient’s normal business hours.

ARTICLE XVTAX MATTERS

Section 15.1 Asset Taxes.

(a) Seller shall be allocated and bear all Asset Taxes for any period or portion thereof ending prior to the EffectiveDate, and Buyer shall be allocated and bear all Asset Taxes for any period or portion thereof that begins at or after the Effective Date.Each Party shall be responsible for its own Income Taxes.

(b) For purposes of this Section 15.1, (i) Asset Taxes that are attributable to the severance or production ofHydrocarbons shall be allocated to the period in which the severance or production giving rise to such Asset Taxes occurred, (ii)Asset Taxes that are based upon or related to income or receipts or imposed on a transactional basis (other than such Asset Taxesdescribed in clause (i)), shall be allocated to the period in which the transaction giving rise to such Asset Taxes occurred, and (iii)Asset Taxes that are ad valorem, property or other Asset Taxes imposed on a periodic basis pertaining to a Straddle Period shall beallocated between the portion of such Straddle Period ending immediately prior to the date on which the Effective Date occurs and theportion of such Straddle Period beginning on the date on which the Effective Date occurs by prorating each such Asset Tax based onthe number of days in the applicable Straddle Period that occur before the date on which the Effective Date occurs, on the one hand,and the number of days in such Straddle Period that occur on or after the date on which the Effective Date occurs, on the otherhand. For purposes of clause (iii) of the preceding sentence, the period for such Asset Taxes shall begin on the date on whichownership of the applicable Properties gives rise to liability for the particular Asset Tax and shall end on the day before the next suchdate.

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(c) To the extent the actual amount of an Asset Tax is not determinable at the Closing or at the time of thedetermination of the Final Settlement Statement pursuant to Section 11.3, as applicable, (i) the Parties shall utilize the most recentinformation available in estimating the amount of such Asset Tax for purposes of such adjustment, and (ii) upon the laterdetermination of the actual amount of such Asset Tax, timely payments will be made from one Party to the other to the extentnecessary to cause each Party to bear the amount of such Asset Tax that is allocable to such Party under Section 15.1(b). Buyershall be responsible for the preparation and timely filing of any Tax Returns and the payment to the applicable Taxing Authority of allAsset Taxes that become due and payable on or after the Closing Date, and Buyer shall indemnify and hold Seller harmless for anyfailure to file such Tax Returns and to make such payments; except Seller shall be responsible for the payment of all ad valorem, realproperty and personal property taxes for the Straddle Period on Properties operated by Seller, provided that Buyer shall reimburseSeller for any such Taxes that are allocated to Buyer pursuant to Section 15.1(b).

Section 15.2 Transfer Fees and Taxes. All required documentary, filing and recording fees and expenses inconnection with the filing and recording of the assignments, conveyances or other instruments required to convey title to theProperties to Buyer shall be borne by Buyer. Any and all Transfer Taxes shall be borne by Buyer, provided that Seller shall pay orcause to be paid to the applicable Governmental Authorities any Transfer Taxes that it is required by Law to collect and remit. Buyershall indemnify and hold Seller harmless from and against such Transfer Taxes within thirty (30) days of Seller's written demandtherefor. If Seller (not Buyer) is required by applicable Law to appeal or protest the assessment of Transfer Taxes, the appeal orprotest of such proposed assessment shall be treated as an item for which Seller is entitled to indemnification and if Buyer provides awritten request and instructs Seller to do so, Seller shall prosecute the protest or appeal; in such event Buyer shall pay all out-of-pocket expenses of Seller (including attorneys’ fees) incurred by Seller in connection with such appeal or protest. Seller and Buyershall reasonably cooperate in good faith to minimize, to the extent permissible under applicable Law, the amount of any such TransferTaxes.

Section 15.3 Tax Returns. The Parties shall use their commercially reasonable efforts to cooperate fully, as and tothe extent reasonably requested by the other Party, in connection with the filing of Tax Returns and any audit, litigation, or otherproceeding with respect to Taxes relating to the Properties. Such cooperation shall include the retention and (upon another Party’srequest) the provision of records and information that are relevant to any such Tax Return or audit, litigation or other proceeding andmaking employees available on a mutually convenient basis to provide additional information and explanation of any materialprovided under this Agreement. The Parties agree to retain all books and records with respect to Tax matters pertinent to theProperties relating to any Tax period beginning before the Closing Date until the expiration of the statute of limitations of the respectiveTax periods and to abide by all record retention agreements entered into with any Governmental Authority.

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ARTICLE XVIDISPUTE RESOLUTION

Section 16.1 Arbitration.

(a) Except as expressly provided otherwise in this Agreement, all disputes between the Parties arising under thisAgreement shall be solely and exclusively resolved by final and binding arbitration. The arbitration shall be administered by theAmerican Arbitration Association (“AAA”) in accordance with, and in the following order of priority: (a) the terms of these arbitrationprovisions; (b) the Commercial Arbitration Rules of the AAA; (c) the Federal Arbitration Act (Title 9 of the United States Code); and (d)the Texas General Arbitration Act (Tex. Civ. Prac. & Rem. Code § 171.001). The validity and enforceability of these arbitrationprovisions shall be determined in accordance with the same order of priority. In the event of any inconsistency between thesearbitration provisions and such rules and Acts these arbitration provisions shall control. Judgment upon any award renderedhereunder shall be entered in any court having jurisdiction thereof, and the parties consent to the jurisdiction of any state or federalcourt in Texas. Commencement of and demand for arbitration shall be made by written notice (“Arbitration Notice”) by the initiatingParty (claimant) to the other Party (respondent) which contains a statement of the nature of the dispute, the amount involved and therelief or remedy sought.

(b) Each Party shall select one impartial arbitrator, who is experienced and knowledgeable in the areas involved inthe dispute, within ten (10) working days of their receipt of Notice that arbitration has been demanded and commenced, and each willnotify the other Party of the name of its selected arbitrator within that same time period. If Seller o r Buyer refuses to name anarbitrator, application will be made to the AAA. The two arbitrators thus selected will confer within ten (10) business days of their finalselection and agree upon a third arbitrator (collectively, the “Arbitration Panel”). If the two arbitrators are unable to agree on a thirdarbitrator within sixty (60) working days of their first contact, the nomination of the third arbitrator will follow the same procedure as thenomination of a Party arbitrator for a Party refusing to make a selection. AAA Rules regarding the selection, qualification, andchallenge of arbitrator shall only apply to the second or third arbitrators if those arbitrators are selected by the AAA. No member of theArbitration Panel may be involved in the controversy, be or have been an officer, director, representative, employee or agent of or foreither Party. The third arbitrator shall act as chairman of the Arbitration Panel.

(c) The costs and fees of the arbitrators selected by Seller and Buyer shall be borne by the Party selecting sucharbitrator, unless otherwise awarded by the Arbitration Panel. The costs and fees attributable to the third arbitrator shall be sharedequally by Seller and Buyer, unless otherwise awarded by the Arbitration Panel.

(d) The Arbitration Panel may engage engineers, accountants or other consultants that the Arbitration Panel deemsnecessary to render a decision in the arbitration proceeding. All fees of any such consultants shall be borne equally by Seller andBuyer, unless otherwise awarded by the Arbitration Panel.

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(e) The arbitrators will establish a schedule that will result in a final arbitration award to be rendered in written formnot later than 180 days following the appointment of the third arbitrator. The place of the arbitration shall be Houston, Texas.

(f) Seller and Buyer agree that pre-arbitration hearing discovery is necessary. Within twenty (20) business days afterthe appointment of the third arbitrator, the Parties agree to exchange lists of the witnesses and exhibits each then plans to call anduse in the arbitration hearing. Within twenty (20) business days after the exchange of witness and exhibit lists, the Parties mayrequest additional discovery, if any is necessary, from the other Party. Seller and Buyer agree to respond to any such additionalrequest for documents from the other Party within thirty (30) days after receiving such request, and each agrees to attempt in goodfaith to schedule the depositions of witnesses requested by the other side by agreement. If the Parties are unable to agree on anyaspect of discovery requested, such discovery issue shall be presented to and resolved by the Arbitration Panel.

(g) Any dispute or difference arising under or out of, in relation to or in any way connected with this Agreement orany other document or agreement contemplated or related to this Agreement (whether contractual, tortious, equitable, statutory orotherwise including, without limitation, the negotiation, execution, existence, amendment, validity, enforceability, performance, non-performance, breach, termination, interpretation or construction thereof), and all questions as to whether or how specific disputes areto be resolved pursuant to this Article shall be resolved in accordance with the procedures of this Article. Without limiting thegenerality of the foregoing, such disputes include disputes over the existence, validity, interpretation or scope of the agreement underwhich arbitration is sought, and who are proper parties to the arbitration. In any arbitration under this Article, the arbitration panel shallhave the power to rule on its own jurisdiction, including any objection to the initial or continuing existence, validity or the effectivenessof the arbitration agreement. For the purposes of challenges to the jurisdiction of the arbitration panel, the arbitration clause shall beconsidered as separable from any contract of which it forms a part.

(h) A written decision by two (2) of the arbitrators will be final and binding on Seller and Buyer. An arbitration awardwill be in writing and signed by the arbitrators. An arbitration award entered herein can be confirmed by either Seller or Buyer in theUnited States District Court for the Northern District of Texas or any state district court for the State of Texas, and a judgment may beentered on the arbitration award by the same court.

(i) Punitive damages may not be awarded by the Arbitration Panel. The Parties specifically agree that the ArbitrationPanel shall have the power to award specific performance to the extent expressly permitted under this Agreement if requested by theBuyer and that the Parties shall take all necessary steps to give effect to an award of specific performance in the event specificperformance is so awarded. The Arbitration Panel shall not have the power to award damages to Seller against the Buyer other thana release of the Deposit and as provided in the following sentence. The Arbitration Panel shall have the power to award recovery tothe prevailing Party of all or part of its costs, expenses and attorneys’ fees incurred in conjunction with such arbitration proceeding. The Parties wish to avoid multiple arbitration cases in which similar evidence is presented. Therefore, either party may move toconsolidate any arbitration proceeding under this Article with another arbitration or arbitrations under this Article.

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(j) Notwithstanding anything in this Agreement to the contrary, Seller a n d Buyer, their Affiliates, employees,contractors, attorneys, and auditors shall keep the substance of these final and binding arbitration proceedings confidential to theextent the same is permissible, consistent with the responsibilities of the attorneys under the pertinent codes of professionalresponsibility or obligations which may reasonably require disclosure to financial institutions, limited partners, investors, consultantsfor evaluation purposes or as may be ordered by the federal or state government or a court of competent jurisdiction. Under nocircumstances shall any documents memorializing the substance of any aspect of these proceedings be disclosed or released to thenewspaper or other media absent the mutual agreement of Parties. Seller and Buyer will use all reasonable efforts to obtain protectiveorders before disclosing any terms of these proceedings to any federal or state government or a court of competent jurisdiction.

(k) Notwithstanding anything in this Article XVI to the contrary, each of the Parties hereto agree that it will not bring orsupport any action (whether at law, in equity, in contract, in tort or otherwise) against the Debt Financing Sources in any way relatingto this Agreement or any of the transactions contemplated by this Agreement, including any dispute arising out of or relating in anyway to any proposed or actual debt financing in connection with the transactions contemplated by this Agreement in any forum otherthan the Supreme Court of the State of New York, County of New York, or, if under applicable law exclusive jurisdiction is vested in theFederal courts, the United States District Court for the Southern District of New York (and appellate courts thereof). The provisions ofthis Section 16.1(k) shall be enforceable by each Debt Financing Source, its Affiliates and their respective successors and permittedassigns.

ARTICLE XVIIMISCELLANEOUS MATTERS

Section 17.1 Survival of Provisions. The representations and warranties of Buyer contained in this Agreement, or inany certificate delivered at Closing shall survive the Closing and the delivery of the Conveyance. The representations and warrantieso f Seller contained in this Agreement, or in any certificate delivered at Closing shall survive the Closing and delivery of theConveyance for period of twelve (12) months from the from the Closing (the “Survival Period”), except for the FundamentalRepresentations, which shall survive the Closing until the expiration of the applicable statute of limitations. All covenants of Seller orBuyer contained in this Agreement, or in any certificate delivered at the Closing shall survive the Closing and the delivery of theConveyance, except for (a) any covenant which by its terms terminates as of a specific date, or is only made for a specified period, (b)the covenants set forth in Section 12.2, (and any other covenants of Seller to indemnify Buyer) which, with respect to Sellers’obligation to indemnify for misrepresentations or breaches of representations and warranties in this Agreement, shall only survive forthe Survival Period (other than with respect to the Fundamental Representations). Notice of any claim for indemnification by Buyerarising during the Survival Period must be given to the other Party within 90 days after such claim arises as a condition precedent tothe right to enforce such claim for indemnification. Buyer may bring a suit to enforce any claim for indemnification under thisAgreement, to the extent arising during the Survival Period, for a period of two (2) years after the cause of action arose with respect toany matter for which Buyer shall have given Seller written notice during the Survival Period. Nothing in this Agreement shall limit thetime period during which Buyer may make a claim against Seller for breach of the special warranty of title in the Conveyance.

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Section 17.2 Further Assurances. After the Closing, Seller shall execute and deliver, and shall otherwise cause to beexecuted and delivered, from time to time, such further instruments, notices, division orders, transfer orders and other documents, anddo such other and further acts and things, as may be reasonably necessary to more fully and effectively grant, convey and assign theProperties to Buyer.

Section 17.3 Gas Imbalances, Make-Up Obligations. Without limitation on any other provision of this Agreement, it isexpressly understood and agreed that, upon the occurrence of Closing, but effective as of the Effective Date, Buyer shall succeed toand assume the position of Seller with respect to all gas imbalances and make-up obligations related to the Properties (regardless ofwhether such imbalances or make-up obligations arise at the wellhead, pipeline, gathering system or other level, and regardless ofwhether the same arise under contract or otherwise). As a result of such succession, Buyer shall (i) be entitled to receive any and allbenefits which Seller would have been entitled to receive by virtue of such position (including, without limitation, rights to produce andreceive volumes of production in excess of volumes which it would otherwise be entitled to produce and receive by virtue ofownership of the Properties and rights to receive cash balancing payments), and (ii) be obligated to suffer any detriments which Sellerwould have been obligated to suffer by virtue of such position (including, without limitation, the obligation to deliver to othersproduction volumes which would have otherwise been attributable to its ownership of the Properties, to deliver production topurchasers hereof without receiving full payment therefor, or to make cash balancing payments or to repay take or pay payments) and(iii) shall be responsible for any and all royalty obligations with respect to such imbalances (including, without limitation, any of thesame arising out of royalties having been paid on an “entitlement” basis rather than a “receipts” basis).

Section 17.4 Waiver of Consumer Rights. Buyer hereby waives its rights under the Texas Deceptive Trade Practices- Consumer Protection Act, Section 17.41 et seq., Business and Commerce Code, a Law that gives consumers special rights andprotections, and any similar Law in any other state to the extent such Act or similar Law would otherwise apply. After consultation withan attorney of Buyer’s own selection, Buyer voluntarily consents to this waiver. To evidence Buyer’s ability to grant such waiver, Buyerrepresents to Seller that it (a) is in the business of seeking or acquiring, by purchase or lease, goods or services for commercial orbusiness use, (b) has knowledge and experience in financial and business matters that enable it to evaluate the merits and risks of thetransactions contemplated hereby, (c) is not in a significantly disparate bargaining position, and (d ) has consulted with, and isrepresented by, an attorney of Buyer’s own selection in connection with this transaction, and such attorney was not directly orindirectly identified, suggested, or selected by Seller or an agent of Seller.

Section 17.5 Parties Bear Own Expenses/No Special Damages. Each Party shall bear and pay all expenses(including, without limitation, legal fees) incurred by it in connection with the transaction contemplated by thisAgreement. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY NEITHER P A R T Y SHALL HAVE ANYOBLIGATIONS WITH RESPECT TO THIS AGREEMENT, OR OTHERWISE IN CONNECTION HEREWITH, FOR ANY SPECIAL,CONSEQUENTIAL OR PUNITIVE DAMAGES, PROVIDED THAT ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGESRECOVERED BY A THIRD PARTY (EXCEPT AN AFFILIATE OF THE INDEMNIFIED PARTY) SHALL BE RECOVERABLE BY APARTY TO THE EXTENT

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THAT SUCH PARTY IS ENTITLED TO INDEMNIFICATION FOR THE MATTER FOR SUCH DAMAGES ARE RECOVERED.

Section 17.6 Entire Agreement. This Agreement, together with the Side Letter Agreement, contains the entireunderstanding of the parties hereto with respect to subject matter hereof and supersedes all prior agreements, understandings,negotiations, and discussions among the parties with respect to such subject matter; provided that any Confidentiality Agreementexecuted by Buyer and Seller, or any representative of Seller, in connection with the transaction contemplated hereby is notsuperseded or modified by this Agreement.

Section 17.7 Amendments, Waivers. This Agreement may be amended, modified, supplemented, restated ordischarged (and provisions hereof may be waived) only by an instrument in writing signed by the Party against whom enforcement ofthe amendment, modification, supplement, restatement or discharge (or waiver) is sought. The Parties may not amend, modify orsupersede the terms of this Section 17.7 and Sections 16.1(k), 17.8, 17.14 and 17.22 without the prior written consent of the DebtFinancing Sources.

Section 17.8 Choice of Law. Without regard to principles of conflicts of Law, this Agreement shall be construed andenforced in accordance with and governed by the Laws of the state of Texas applicable to contracts made and to be performedentirely within such state and the Laws of the United States of America; provided that, notwithstanding the foregoing, any suchdisputes involving the Debt Financing Sources will be governed by and construed in accordance with the applicable Laws of the Stateof New York. EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT ITMAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATINGTO THIS AGREEMENT (INCLUDING ANY PROCEEDING INVOLVING THE DEBT FINANCING SOURCES UNDER THE DEBTFINANCING COMMITMENT).

Section 17.9 Time of Essence. Time is of the essence in this Agreement.

Section 17.10 No Assignment. Neither Party shall have the right to assign this Agreement, including anyindemnification rights hereunder, without the prior written consent of the other Party first having been obtained.

Section 17.11 Successors and Assigns. Subject to the limitation on assignment contained in Section 17.10 above,the Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns.

Section 17.12 No Press Releases. Prior to making any press release or public announcement with respect to thisAgreement or the transaction represented herein, the Party desiring to make such press release or public announcement shall consultin good faith with the other Party and seek comments from such other Party with respect to the press release or public announcement(which comments shall be considered in good faith by the proposing Party); provided, however, no Party may specifically identify theother Party in any press release or public announcement without the express, written prior approval of such other Party; provided,further, that nothing contained in this Section 17.12 shall be construed to require either Party to

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obtain approval of the other Party to disclose information with respect to this Agreement or the transaction represented herein(including the names of the parties to this Agreement) to the extent, and then only to the extent, required by applicable Law ornecessary to comply with disclosure requirements of the SEC, New York Stock Exchange, or any other regulated stock exchange.

Section 17.13 Counterpart Execution, Fax Execution. This instrument may be executed in a number of identicalcounterparts, each of which for all purposes is to be deemed an original, and all of which constitute collectively, one instrument. It isnot necessary that each Party hereto execute the same counterpart so long as identical counterparts are executed by each such Partyhereto. This instrument may be validly executed and delivered by facsimile or other electronic transmission.

Section 17.14 Exclusive Remedy. Except for the Buyer’s rights with respect to the Special Warranty of title containedin the Conveyance or in the case of Fraud, the sole and exclusive remedy of Buyer with respect to the Properties shall be pursuant tothe express provisions of this Agreement. Without limitation of the foregoing, if the Closing occurs, and except for Buyer’s rights withrespect to the Special Warranty of title contained in the Conveyance or in the case of Fraud, the sole and exclusive remedy of Buyer,for any and all (a) claims relating to any representations, warranties, covenants and agreements that is contained in this Agreement orin any certificate delivered at Closing, (b) other claims pursuant to or in connection with this Agreement, and (c) other claims relating tothe Properties and the purchase and sale thereof, shall be any right to indemnification from such claims that is expressly provided inthis Agreement, and if no such right of indemnification is expressly provided, then such claims are hereby waived to the fullest extentpermitted by Law. If the Closing occurs, and except in the case of Fraud, Buyer shall also be deemed to have waived, to the fullestextent permitted under applicable Law, any right to contribution against Seller (including, without limitation, any contribution claimarising under any Applicable Environmental Law) and any and all other rights, claims and causes of action it may have against Sellerarising under or based on any Law. Without limiting the obligations of the Debt Financing Sources under the Debt FinancingCommitment, Seller acknowledges and agrees that no Debt Financing Source shall have any liability or obligation to the Seller or anyof its subsidiaries in connection with this Agreement and any of the other transaction documents if such Debt Financing Sourcebreaches or fails to perform or otherwise does not perform (whether willfully, intentionally, unintentionally or otherwise) any of itsobligations under the Debt Financing Commitment.

Section 17.15 Limitation on Seller’s Indemnity Obligations. In no event shall the Seller be obligated under thisAgreement to indemnify Buyer for a Buyer Indemnified Claim under Section 12.2(d) for a misrepresentation or breach of anyrepresentation in this Agreement for an aggregate amount in excess of fifteen percent (15%) of the Base Purchase Price; provided,however, that such limitation shall not apply to Buyer Indemnified Claims (A) under Section 12.2(d) for any misrepresentation orbreach of any Fundamental Representations or any breach of any covenant or agreement in this Agreement, or (B) under Section12.2(a), (b), (c) or (e).

Section 17.16 Imputed Knowledge and Waiver. Anything to the contrary notwithstanding, if Buyer or an affiliate ofBuyer (a) owns any interest in any Property and Seller or an affiliate of Seller is not the operator of such Property or (b) acts as anoperator with respect

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to any Property (regardless of whether or not it also owns an interest in such Property), Buyer shall be deemed to have knowledge ofany Environmental Defect or breach of any representation or warranty by Seller with respect to such Property, and shall not be entitled(and hereby waives any right) (i) to give a notice of an Asserted Environmental Defect with respect to such Property, (ii) to refuse toclose because of the existence of any such Asserted Environmental Defect or breach or (iii) to indemnity or any other remedy withrespect to any such Asserted Environmental Defect or breach.

Section 17.17 Like Kind Exchange. Seller may elect to structure this transaction as a like-kind exchange pursuant toSection 1031 of the Code, and the Treasury Regulations promulgated thereunder, with respect to any or all of the Properties (a “Like-Kind Exchange”) at any time prior to the date of Closing. In order to effect a Like-Kind Exchange, Buyer shall cooperate and do allacts as may be reasonably required or requested by Seller with regard to effecting the Like-Kind Exchange, including, but not limitedto, permitting Seller to assign its rights under this Agreement to a qualified intermediary of Seller’s choice in accordance with TreasuryRegulation § 1.1031(k)-1(g)(4) or executing additional escrow instructions, documents, agreements or instruments to effect anexchange; provided, however, (i) Buyer shall incur no expense in connection with such Like-Kind Exchange, (ii) Buyer shall not berequired to take title to any property other than the Properties in connection with the Like-Kind Exchange, (iii) Buyer’s possession ofthe Properties will not be delayed by reason of any such Like-Kind Exchange, and (iv) any such Like-Kind Exchange shall not releaseany Party from, or modify, any of the Parties’ respective liabilities and obligations (including indemnity obligations to each other) underthis Agreement. In the event Seller elects to engage in a Like-Kind Exchange, Seller agrees to indemnify, defend and hold Buyerharmless from and against any and all claims, demands, causes of action, liabilities, costs and expenses, including reasonableattorneys’ fees and costs of litigation, that Buyer may suffer or incur by reason of such cooperation or Like-Kind Exchange.

Section 17.18 References, Titles and Construction.

(a) All references in this Agreement to articles, sections, subsections and other subdivisions refer to correspondingarticles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise.

(b) Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute partof such subdivisions and shall be disregarded in construing the language contained in such subdivisions.

(c) The words “this Agreement”, “this instrument”, “herein”, “hereof”, “hereby”, “hereunder” and words of similar importrefer to this Agreement as a whole and not to any particular subdivision unless expressly so limited.

(d) Words in the singular form shall be construed to include the plural and vice versa, unless the context otherwiserequires. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender.

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(e) Examples shall not be construed to limit, expressly or by implication, the matter they illustrate.

Section 17.19 Severability. The provisions of this Agreement will be deemed severable and the invalidity orunenforceability of any provision will not affect the validity or enforceability of any other provision.

Section 17.20 Removal of Name. As promptly as reasonably possible, but in any case within thirty (30) days after theClosing Date, Buyer shall remove the names of Seller and any variants thereof from the Oil and Gas Properties.

Section 17.21 Confidentiality. Prior t o Closing, Buyer and Seller shall hold in strict confidence all aspects of thetransactions contemplated by this Agreement and Buyer shall hold all proprietary information and data concerning the Properties andobtained in connection with the transactions contemplated by this Agreement (other than information and data that becomes generallyavailable to the public other than through disclosure by a Party or its partners, officers, managers, investors, employees orrepresentatives), and without the prior written consent of all other parties neither Buyer nor Seller shall disclose any such informationto anyone other than to its agents, partners, officers, managers, employees and representatives; provided, however, the foregoingshall not restrict disclosures by Buyer or Seller in order to comply with applicable securities or other applicable laws or to comply withexisting loan or other agreements binding upon such Party. From and after the Closing (or if Closing does not occur, for a period oftwo (2) years following the date of this Agreement), Buyer shall keep all information and data not relating to the Properties that Buyermay have obtained during its due diligence in strict confidence and shall not disclose such information to any Person except to theirattorneys, and to the extent such disclosure is required by applicable law (including legal process, such as subpoenas) or regulationsor the applicable rules of any stock exchange. The obligations set forth in this Section 17.21 shall not apply to any information that(a) is already known to or in the possession of the receiving Party or its representatives as of the date of disclosure, (b) is already inpossession of the public o r becomes available to the public other than through the act o r omission of the receiving Party or itsrepresentatives, or (c) is acquired independently from a third party that represents, after reasonable inquiry, that is has the right todisseminate such information at the time it is acquired by the receiving Party or its representatives. Notwithstanding anything in thisAgreement to the contrary, the obligations set forth in this Section 17.21 shall survive for a period of two (2) years from and afterClosing.

Section 17.22 Agreement for Parties’ Benefit Only; No Recourse to Lenders. This Agreement is not intended to conferupon any Person not a Party hereto any rights or remedies hereunder except as expressly provided in Article XII and no person otherthan the Parties hereto is entitled to rely on any representation, covenant, or agreement contained herein; provided however that theDebt Financing Sources shall be deemed to be third party beneficiaries of and shall be entitled to rely upon Sections 16.1(k), 17.7,17.8, 17.14 and this Section 17.22, and each Debt Financing Source may enforce such provisions. None of the Sellers, nor any oftheir respective Affiliates shall have any rights or claims against any Debt Financing Source whether at law or equity, in contract, intort or otherwise.

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Section 17.23 Seller’s Obligations Several and not Joint. Anything to the contrary notwithstanding, the obligations andliability of each Seller Party, arising under and in connection with this Agreement shall be several and not joint. All representations,warranties, and covenants of a Seller Party or Seller under this Agreement relating to the Properties, are made by each Seller Party,severally with respect only to the interest owned by each, in the Properties, if any. The representations, warranties, and covenantsrelating to the organization of Seller Party or Seller, are made individually by each Seller Party only as to its business organization.

[Remainder of page intentionally left blank; signature page follows.]

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IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the date set forth above.

CPX: CP EXPLORATION II, LLC By: /s/ Thomas L. Powell, IV Name: Thomas L. Powell, IV Title: Chief Executive Officer


PETROCAP: PETROCAP CPX, LLC By: PetroCap Partners II, L.P. Its: Managing Member By: PetroCap Partners II GP, LLC Its: General Partner By: /s/ William L. Britain Name: William L. Britain Title: Managing Member


BUYER: RESOLUTE NATURAL RESOURCES SOUTHWEST, LLC By: /s/ Theodore Gazulis Name: Theodore Gazulis Title: Executive Vice President and Chief Financial Officer


SCHEDULE I

FORM OF CONVEYANCE

CP Exploration II, LLC, a Delaware limited liability company (“CPX”), CPX II Operating, LLC, a Delaware limited liability company(“CPX Operating”), and PetroCap CPX, LLC, a Texas limited liability company (“PetroCap”, and together with CPX and CPXOperating, “Grantor”), for Ten Dollars and other good and valuable consideration (the receipt and sufficiency of which are herebyacknowledged), does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER, and DELIVER unto ResoluteNatural Resources Southwest, LLC, a Delaware limited liability company (herein called “Grantee”), whose address is 1700 LincolnStreet, Suite 2800, Denver, Colorado 80203, the following described properties, rights and interests:

(a) All rights, titles and interests of Grantor in and to the oil, gas and/or mineral leases which are described onExhibit A hereto and any ratifications or amendments to such leases (the “Leases”);

(b) Without limitation of the foregoing, all other right, title and interest (of whatever kind or character, whether legal orequitable, and whether vested or contingent) of Grantor in and to the oil, gas and other minerals in and under or that may be producedfrom the lands and depths described on Exhibit A hereto or described in any of the Leases and all right, title and interest that may beearned pursuant to the Farmout Agreement (as defined in the Purchase Agreement) (including, without limitation, interests in oil, gasand/or mineral leases, overriding royalties, production payments, net profits interests, fee mineral interests, fee royalty interests andother interests insofar as they cover such lands), even though Grantor’s interest therein may be incorrectly described in, or omittedfrom, such Exhibit A;

(c) All rights, titles and interests of Grantor in and to, or otherwise derived from, all presently existing and valid oil, gasand/or mineral unitization, pooling, and/or communitization agreements, declarations and/or orders (including, without limitation, allunits formed under orders, rules, regulations, or other official acts of any federal, state or other authority having jurisdiction, andvoluntary unitization agreements, designations and/or declarations) to the extent that they relate to any of the properties described insubsections (a) and (b) above;

(d) All rights, titles and interests of Grantor in and to the oil, condensate, natural gas, injection, salt water disposal orwater wells, whether producing, non-producing, shut-in or temporarily abandoned (but not permanently abandoned), located on the Oiland Gas Properties (as hereinafter defined), including, without limitation, those listed on Exhibit B hereto (the “Wells”);

(e) All rights, titles and interests of Grantor in and to all presently existing and valid contracts and agreements to whichSeller is a party or is bound relating to any of the Properties, including, without limitation: joint operating agreements; communitizationagreements; net profits agreements; production payment agreements; area of mutual interest agreements; joint venture agreements;confidentiality agreements; farmin and farmout agreements (specifically including the Farmout Agreement); bottom hole agreements;crude oil, condensate, and natural


gas purchase and sale, gathering, transportation, and marketing agreements; hydrocarbon storage agreements; acreage contributionagreements; operating agreements; balancing agreements; pooling declarations or agreements; unitization agreements; processingagreements; saltwater disposal agreements; facilities or equipment leases; and other similar contracts and agreements, includingthose contracts and agreements described on Exhibit A-3, but exclusive of any master service agreements, Leases, easements,rights-of-way, permits or other instruments creating or evidencing an interest in the Properties or any real or immovable propertyrelated to or used in connection with the operations of any Properties and contracts relating to the Excluded Properties;

(f) All rights, titles and interests of Grantor in and to all materials, supplies, machinery, equipment, improvements(including, without limitation, frac ponds) and other personal property and fixtures (including, but not by way of limitation, all pumpingunits, flowlines, tanks, buildings, injection facilities, saltwater disposal facilities, compression facilities, gathering systems, and otherequipment) located on the Oil and Gas Properties and used in connection with the exploration, development, operation ormaintenance thereof;

(g) All rights, titles and interests of Grantor in and to the fee surface ownership of the properties described on ExhibitA-2 hereto (collectively, the “Fee Properties”);

(h) All rights, titles and interests of Grantor in and to all easements, servitudes, rights of way and surface leases(collectively, the “Easements”) and all credits, permits, licenses, approvals, waivers, or similar qualification or authorization issued orgiven by any Governmental Authority that are fully assignable to Grantee without payment of fees or other penalties (unless Granteeagrees in writing to pay such fees and/or penalties), but exclusive of any such qualifications or authorizations relating to the ExcludedProperties (collectively, the “Permits”), in each case, that are appurtenant to or used in connection with the properties described insubsections (a), (b), (c), (d), (f) and (g) above, including those Easements and Permits described on Exhibit A-1 hereto; and

(i) All rights, titles and interests of Grantor in and to all files, records, and data relating to the items described inparagraphs (a) through (h), above, including, without limitation, the following, if and to the extent that such files exist: all books,records, reports, manuals, files, title documents (including correspondence and curative), records of production and maintenance,revenue, sales, expenses, warranties, lease files, land files, well files, division order files, abstracts, title opinions, assignments,reports, property records, contract files, operations files, copies of tax and accounting records (but excluding Federal and state incometax returns and records) and files, maps, core data, hydrocarbon analysis, well logs, mud logs, and field studies, together with otherfiles, contracts, and other records and data and maps including any interpretations, analyses and reports related thereto (collectively,the “Records”), but excluding from the foregoing (and the term “Records” shall be deemed to exclude) (i) records that are subject tolegal privilege (such as the attorney-client privilege or work product doctrine) (the “Privileged Information”) (ii) records that aresubject to Third Party contractual restrictions on disclosure or transfer for which consent or waiver has not been obtained, or to theextent such disclosure or transfer is subjected to payment of a fee or other consideration, for which Grantee has not agreed in writingto pay the fee or other consideration, as applicable (“Confidential Information”), and (iii) the Seller Party Documents (as defined inthe Purchase Agreement).


The properties, rights and interests specified in the foregoing subsections (a), (b), (c) and (d), except for the Excluded

Properties as defined below, are herein sometimes collectively called the “Oil and Gas Properties,” and individually an “Oil and GasProperty,” and the properties, rights and interests specified in the foregoing subsections (a), (b), (c), (d), (e), (f), (g), (h) and (i) exceptfor the Excluded Properties, are herein sometimes collectively called the “Properties” and individually a “Property.”

The Properties do not include, and there is hereby expressly excepted and reserved therefrom and reserved to Grantor thefollowing:

i. Except to the extent related to any Assumed Obligations under the purchase Agreement, all rights andchoses in action in favor of Grantor, arising, occurring or existing prior to the Effective Date in connection with theProperties or the operation of or production from the Oil and Gas Properties prior to the Effective Date (including, but notlimited to, any and all contract rights, claims, receivables, revenues, recoupment rights, recovery rights, accountingadjustments, mispayments, erroneous payments or other claims of any nature (i) in favor of Grantor and (ii) relating andaccruing to any time period prior to the Effective Date, provided that rights to insurance claims and proceeds are handledunder paragraph (iv) below);

ii. Any accounts payable accruing before the Effective Date;

iii. All limited liability company, financial, tax and legal (other than title) records of Grantor;

iv. Subject to Section 13.1 of the Purchase Agreement (as defined below), all rights and interests of Grantor(i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance or condemnationproceeds or awards arising, in each case, from acts, omissions or events or damage to or destruction of property;

v. All Hydrocarbon production from or attributable to the Properties with respect to all periods prior to theEffective Date, as described in Section 11.1 of the Purchase Agreement, and all proceeds attributable thereto;

vi. Copies (but not the originals) of all Records;

vii. Except to the extent constituting suspended royalties, all deposits, cash, checks, funds and accountsreceivable or received attributable to Grantor’s interests in the Properties with respect to any period of time prior to theEffective Date;

viii. All computer or communications software or intellectual property (including tapes, data and programdocumentation and all tangible manifestations and technical information relating thereto) owned, licensed or used byGrantor;

ix. Any logo, service mark, copyright, trade name or trademark of or associated with Grantor or any Affiliateof Grantor or any business of Grantor or of any Affiliate of Grantor;


x. Any documents withheld or not transferred pursuant to Section 10.1 of the Purchase Agreement as the

result of a legal privilege or third-party agreement restriction and any communications, documents or memoranda in anyway related to the marketing of, or the sales process for, the Properties;

xi. All claims of Grantor or any of its Affiliates for refunds of, rights to receive funds from any GovernmentalAuthority, or loss carry forwards or credits with respect to (i) Asset Taxes attributable to any period (or portion thereof) priorto the Effective Date, (ii) Income Taxes, or (iii) any Taxes attributable to the Excluded Properties;

xii. Any seismic records and surveys, gravity maps, electric logs, geological or other geophysical data andrecords that cannot be transferred without the consent of or payment to any third party unless such consent is obtained or,in the case of a consent requiring payment, Grantee elects to make such payment or obtain such consent; and

xiii. All right, title and interest of Grantor in and to the assets described on Exhibit C. The excluded properties, rights and interests specified in the foregoing subsections (i) through (xiii), inclusive, are collectively referredto as the “Excluded Properties.” Grantee shall not be responsible for, and Grantor expressly retains, all liabilities related to theExcluded Properties, whether such liabilities arise before or after the Effective Date. It is understood that certain of the ExcludedProperties may not be embraced by the term Properties. The fact that certain properties, rights and interests have been expresslyexcluded is not intended to suggest that had they not been excluded they would have constituted Properties and shall not be used tointerpret the meaning of any word or phrase used in describing the Properties.

TO HAVE AND TO HOLD the Properties unto Grantee, its successors and assigns, forever.

GRANTOR AGREES TO WARRANT AND FOREVER DEFEND TITLE TO THE PROPERTIES UNTO GRANTEE AGAINST THECLAIMS AND DEMANDS OF ALL PERSONS CLAIMING, OR TO CLAIM THE SAME, OR ANY PART THEREOF, BY, THROUGHOR UNDER GRANTOR, BUT NOT OTHERWISE, SUBJECT TO THE PERMITTED ENCUMBRANCES (AS SUCH TERM ISDEFINED IN THE PURCHASE AGREEMENT). EXCEPT FOR THE SPECIAL WARRANTY OF TITLE SET FORTH ABOVE ANDEXCEPT FOR GRANTOR’S REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THE PURCHASEAGREEMENT, THIS CONVEYANCE IS MADE WITHOUT ANY WARRANTIES OR REPRESENTATIONS, EXPRESS, IMPLIED,STATUTORY OR OTHERWISE AND GRANTOR EXPRESSLY DISCLAIMS ANY AND ALL OTHER REPRESENTATIONS ANDWARRANTIES. WITHOUT LIMITATION OF THE FOREGOING, EXCEPT FOR THE SPECIAL WARRANTY OF TITLE SET FORTHABOVE AND EXCEPT FOR GRANTOR’S REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THEPURCHASE AGREEMENT, THE PROPERTIES ARE CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY ORREPRESENTATION WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, RELATING TO TITLE TO


THE PROPERTIES OR RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE,CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT OR ITSFITNESS FOR ANY PURPOSE. WITHOUT LIMITATION OF THE FOREGOING, WITH THE EXCEPTION OF ANY INTERESTEARNED PURSUANT TO THE FARMOUT AGREEMENT, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THEDOCTRINE OF AFTER ACQUIRED TITLE SHALL NOT APPLY TO THIS CONVEYANCE AND THAT THE GRANTOR SHALLNOT BE ESTOPPED FROM ASSERTING ANY AFTER ACQUIRED RIGHT, TITLE OR INTEREST.

GRANTEE HAS INSPECTED, OR WAIVED ITS RIGHT TO INSPECT, THE PROPERTIES FOR ALL PURPOSES AND SATISFIEDITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING BUTNOT LIMITED TO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUSSUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN MADE FIBERS, OR NATURALLY OCCURRING RADIOACTIVEMATERIALS. EXCEPT FOR GRANTOR’S REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THEPURCHASE AGREEMENT GRANTEE IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE PROPERTIES, ANDGRANTEE ACCEPTS ALL OF THE SAME, INCLUDING, WITHOUT LIMITATION, THE EQUIPMENT COMPRISING PART OF THEPROPERTIES, IN THEIR “AS IS”,” WHERE IS” CONDITION.

GRANTEE ACKNOWLEDGES AND AGREES THAT ALL MATERIALS, DOCUMENTS, AND OTHER INFORMATION MADEAVAILABLE TO GRANTEE AT ANY TIME IN CONNECTION WITH THE TRANSACTION CONTEMPLATED HEREBY, WEREMADE AVAILABLE TO GRANTEE AS AN ACCOMMODATION, AND, EXCEPT FOR GRANTOR’S REPRESENTATIONS ANDWARRANTIES EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, WITHOUT REPRESENTATION OR WARRANTYOF ANY KIND, WHETHER EXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCHMATERIALS, DOCUMENTS, AND OTHER INFORMATION. EXCEPT FOR GRANTOR’S REPRESENTATIONS ANDWARRANTIES EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, GRANTEE EXPRESSLY AGREES THAT ANYRELIANCE UPON OR CONCLUSIONS DRAWN THEREFROM SHALL BE AT GRANTEE’S RISK TO THE MAXIMUM EXTENTPERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY LIABILITY OF OR AGAINST GRANTOR AND GRANTEE HEREBYWAIVES AND RELEASES ANY CLAIMS ARISING UNDER THIS AGREEMENT, COMMON LAW OR ANY STATUTE ARISINGOUT OF ANY MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO GRANTEE.

Notwithstanding anything herein to the contrary, Grantee shall not be entitled to assert any claim under the special warrantyof title contained herein for any Asserted Defect (as defined in the Purchase Agreement).

This Conveyance is made subject to that certain Purchase and Sale Agreement among CPX, PetroCap and Grantee dated March 3,2017 (the “Purchase Agreement”) and in the event of a


conflict between the terms hereof and the terms of the Purchase Agreement, the terms of the Purchase Agreement shall govern;provided, however, that third parties may rely only on this Conveyance to vest title to the Properties in Grantee. All terms used but notdefined herein shall have the meanings assigned to them in the Purchase Agreement. The Purchase Agreement contains certainrepresentations, warranties and agreements between the parties, some of which may survive the delivery of this Conveyance, asprovided for therein.

Grantor agrees to execute and deliver to Grantee, from time to time, such other and additional instruments, notices, division orders,transfer orders and other documents, and to do all such other and further acts and things as may be necessary to more fully andeffectively grant, convey and assign to Grantee the Properties.

This Conveyance is being executed in several counterparts all of which are identical except that, to facilitate recordation, certaincounterparts hereof may contain only that portion of the Exhibits which contain specific descriptions of properties located in therecording jurisdiction in which the particular counterpart is to be recorded, with other portions of the Exhibits being included in suchcounterparts by reference only. All of such counterparts together shall constitute one and the same instrument.



IN WITNESS WHEREOF this Conveyance has been executed by Grantor and Grantee on the date of its acknowledgment but shallbe effective as of May 1, 2017 (the “Effective Date”).

GRANTOR: CP EXPLORATION II, LLC By: Name: Title:

CPX II OPERATION, LLC By: Name: Title:

PETROCAP CPX, LLC By: Name: Title:

GRANTEE: RESOLUTE NATURAL RESOURCES SOUTHWEST, LLC By: Name: Title:

[Insert proper acknowledgments.]


SCHEDULE II

FORM OF FIRPTA AFFIDAVIT

Section 1445 of the Internal Revenue Code (the “Code”) provides that a transferee of a United States real property interestmust withhold tax if the transferor is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregardedentity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not thedisregarded entity. To inform the transferee that withholding of tax is not required upon the disposition of a United States real propertyinterest by PetroCap CPX, LLC, a Texas limited liability company (“Seller”), the undersigned hereby certifies the following on behalf ofSeller:

1. Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined inthe Internal Revenue Code and Income Tax Regulations); and

2. Seller is not a disregarded entity as defined in §1.1445-2(b)(2)(iii) of the Code; and

3. Seller’s U.S. employer taxpayer identification number is [__________]; and

4. Seller’s office address is [___________________].

Seller understands that this certification may be disclosed to the Internal Revenue Service by transferee and that any falsestatement contained herein could be punished by fine, imprisonment, or both.

Under the penalties of perjury, I declare that I have examined this certification and to the best of my knowledge and belief itis true, correct, and complete, and I further declare that I have authority to sign this document on behalf of Seller. Dated: [ ] PetroCap CPX, LLC , a Texas limited liability company By: Name: Title:


Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICERPURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard F. Betz, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Resolute Energy Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.

/s/ Richard F. BetzRichard F. BetzChief Executive OfficerMay 3, 2017


Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICERPURSUANT TO


I, Theodore Gazulis, certify that:












/s/ Theodore GazulisTheodore GazulisChief Financial OfficerMay 3, 2017


Exhibit 32.1

CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resolute Energy Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2017, as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.

/s/ Richard F. BetzRichard F. BetzChief Executive OfficerMay 3, 2017 /s/ Theodore GazulisTheodore GazulisChief Financial OfficerMay 3, 2017


Exhibit 2.1

Execution Version


BY AND AMONG

CP EXPLORATION II, LLC

and

PETROCAP CPX, LLC

as Seller,

and

RESOLUTE NATURAL RESOURCES SOUTHWEST, LLC

as Buyer

EXECUTED ON March 3, 2017



THIS PURCHASE AND SALE AGREEMENT (as the same may be amended, restated, supplemented or otherwisemodified from time to time in accordance herewith, this “Agreement”) is entered into this 3rd day of March, 2017 (the “ExecutionDate”), between CP Exploration II, LLC, a Delaware limited liability company (“CPX”), and PetroCap CPX, LLC, a Texas limitedliability company (“PetroCap” and together with CPX, collectively, “Seller” and each, individually, a “Seller Party”), and ResoluteNatural Resources Southwest, LLC, a Delaware limited liability company (“Buyer”). Buyer and Seller may be referred to collectivelyas the “Parties” or individually as a “Party.”

W I T N E S S E T H:

ARTICLE IDEFINITIONS AND REFERENCES

Section 1.1 Defined Terms. When used in this Agreement, the following terms shall have the respective meaningsassigned to them in this Section 1.1 or in the section, subsections or other subdivisions referred to below:

“AAA” has the meaning assigned to such term in Section 16.1(a).

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, through one or moreintermediaries, controls, or is controlled by, or is under common control with, another Person. The term “control” and its derivativeswith respect to any Person mean the possession, directly or indirectly, of the power to direct or cause the direction of the managementand policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Allocated Amount” means the portion of the Base Purchase Price allocated to each Property by Buyer as set forth onExhibit D.

“Allocation Schedule” has the meaning assigned to such term in Section 3.3.

“Applicable Contracts” means all Contracts to which Seller or its Affiliates is a party or is bound relating to any of theProperties and (in each case) that will be binding on Buyer after the Closing, including, without limitation: joint operating agreements;communitization agreements; net profits agreements; production payment agreements; area of mutual interest agreements; jointventure agreements; confidentiality agreements; farmin and farmout agreements; bottom hole agreements; crude oil, condensate, andnatural gas purchase and sale, gathering, transportation, and marketing agreements; hydrocarbon storage agreements; acreagecontribution agreements; operating agreements; balancing agreements; pooling declarations or agreements; unitization agreements;processing agreements; saltwater disposal agreements; facilities or equipment leases; and other similar contracts and agreements,but exclusive of any master service agreements and Contracts relating to the Excluded Properties.

“Applicable Environmental Laws” mean all applicable Laws by which the Properties are bound and which are pertainingor relating to (a) pollution or pollution control, (b) the

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protection of public health, wildlife, natural resources or the environment, and (c) the management, presence, transport, storage,disposal or release of waste materials and/or Hazardous Substances, including the Clean Air Act, as amended, the ComprehensiveEnvironmental Response, Compensation and Liability Act, as amended, the Federal Water Pollution Control Act, as amended, theResources Conservation and Recovery Act, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances ControlAct, as amended, the Superfund Amendment and Reauthorization Act of 1986, as amended, the Hazardous Materials TransportationAct, as amended and comparable state and local laws.

“Applicable Permits” means all Permits to which Seller or its Affiliates (including CPX Operating), is a party relating to anyof the Properties that are fully assignable to Buyer at Closing without payment of fees or other penalties (unless Buyer pays such feesand/or penalties), but exclusive of any Permits relating to the Excluded Properties.

“Arbitration Notice” has the meaning assigned to such term in Section 16.1(a).

“Arbitration Panel” has the meaning assigned to such term in Section 16.1(b).

“Asserted Defects” mean Asserted Title Defects and Asserted Environmental Defects, collectively.

“Asserted Environmental Defects” has the meaning assigned to such term in Section 7.1.

“Asserted Title Defects” has the meaning assigned to such term in Section 7.1.

“Asset Taxes” means ad valorem, property, excise, severance, production, sales, use, or similar Taxes (excluding, for theavoidance of doubt, any Income Taxes and Transfer Taxes) based upon or measured by the ownership or operation of the Propertiesor the production of Hydrocarbons therefrom or the receipt of proceeds therefrom.

“Base Purchase Price” has the meaning assigned to such term in Section 3.1.

“Business Day” means any day other than a Saturday, a Sunday or other day on which commercial banks in Dallas, Texasare authorized or required by Law to close.

“Buyer” has the meaning assigned to such term in the preamble.

“Buyer’s Indemnified Claim” and “Buyer’s Indemnified Claims” have the meanings assigned to such terms in Section12.2.

“Buyer Indemnified Parties” means Buyer and its partners, members and Affiliates and all their directors, officers,employees, attorneys, contractors and agents.

“Closing” and “Closing Date” have the meanings assigned to such terms in Section 9.1.

“Code” means the Internal Revenue Code of 1986, as amended.

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“Condition of the Properties” has the meaning assigned to such term in Section 12.1(c).

“Confidential Information” has the meaning assigned to such term in Section 2.1(i).

“Consents” has the meaning assigned to such term in Section 4.1(j).

“Contract” means any written or oral contract or agreement, but excluding, however, any Lease, easement, right-of-way,permit or other instrument creating or evidencing an interest in the Oil and Gas Properties or any real or immovable property related toor used in connection with the operations of any Properties.

“Conveyance” has the meaning assigned to such term in Section 9.2(a).

“CPX” has the meaning assigned to such term in the preamble.

“CPX Operating” means CPX II Operating, LLC, a Delaware limited liability company.

“Cure Period” has the meaning assigned to such term in Section 7.4(a).

“Debt Financing Commitment” means the executed commitment letter, dated as of the date hereof, by and among Buyerand lenders party thereto, including all exhibits, schedules, annexes and amendments thereto.

“Debt Financing Sources” means the financing sources party to the Debt Financing Commitment and any of theirrespective former, current or future general or limited partners, direct or indirect shareholders or equityholders, managers, members,directors, officers, employees, Affiliates, representatives or agents or any former, current or future general or limited partner, direct orindirect shareholder or equityholder, manager, member, director, officer, employee, Affiliate, representative or agent of any of theforegoing.

“Defect” has the meaning assigned to such term in Section 7.2.

“Defect Amount” has the meaning assigned to such term in Section 7.5.

“Defect Arbitrator” has the meaning assigned to such term in Section 7.8.

“Defect Deadline” has the meaning assigned to such term in Section 7.1.

“Defect Notice” has the meaning assigned to such term in Section 7.1.

“Deposit” has the meaning assigned to such term in Section 3.2.

“Dispute Notice” has the meaning assigned to such term in Section 11.3.

“Easements” has the meaning assigned to such term in Section 2.1(h).

“Effective Date” has the meaning assigned to such term in Section 9.2(a).

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“Environmental Defect Amount” has the meaning assigned to such term in Section 7.7(b).

“Environmental Defect Deductible” has the meaning assigned to such term in Section 7.7(b).

“Environmental Defects” has the meaning assigned to such term in Section 7.2(f).

“Escrow Account” has the meaning assigned to such term in Section 3.2.

“Escrow Agent” has the meaning assigned to such term in Section 3.2.

“Escrow Agreement” has the meaning assigned to such term in Section 3.2.

“Excluded Liens” has the meaning assigned to such term in Section 7.2(b).

“Excluded Properties” has the meaning assigned to such term in Section 2.2.

“Execution Date” has the meaning assigned to such term in the preamble.

“Farmout Agreement” means that certain Amended and Restated Farmout and Joint Development Agreement datedeffective as of August 1, 2015, by and among ConocoPhillips Company, a Delaware corporation, CPX and PetroCap, as amended.

“Fee Properties” has the meaning assigned to such term in Section 2.1(g).

“Final Settlement Statement” has the meaning assigned to such term in Section 11.3.

“Fraud” means, with respect to Seller, a false statement of a material fact: (a) made by an individual identified in thedefinition of “Seller’s Knowledge,” (b) with the actual and present knowledge on the part of such individual that the statement isuntrue, (c) with actual and deliberate intent on the part of such individual to deceive the person (victim) that is claiming fraud, (d)where the person (victim) justifiably relied on such false statement, and (e) where the person (victim) suffered actual injury as a directresult of such false statement.

“Fundamental Representations” means the representations and warranties of Seller set forth in Section 4.1(a)(Organization and Qualification), Section 4.1(b) (Due Authorization), Section 4.1(c) (Approvals), Section 4.1(d) (Valid, Binding andEnforceable) , Section 4.1(i) (Payment of Expenses) , Section 4.1(m) (No Bankruptcy; Insolvency) and Section 4.1(y) (BrokerageFees and Commissions).

“Governmental Authority” or “Governmental Authorities” mean any federal, state or local government or any court ofcompetent jurisdiction, or any regulatory or administrative agency, commission, department, board with jurisdiction or Taxing Authorityover any of the Properties.

“Hard Consent” has the meaning assigned to such term in Section 6.5(b).

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“Hazardous Substances” means (i) any petrochemical or petroleum products, oil or coal ash, radioactive materials, radongas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipmentthat contain dielectric fluid which may contain levels of polychlorinated biphenyls, (ii) any chemicals, materials, or substances definedas or included in the definition of “hazardous substances,” “hazardous wastes,” “restricted hazardous materials,” “extremely hazardoussubstances,” “toxic substances,” “contaminants” or “pollutants” or words of similar meaning and regulatory effect or (iii) any otherchemical, material or substance, exposure to which is prohibited, limited or regulated by any Applicable Environmental Law.

“Hydrocarbons” shall mean oil and gas and other hydrocarbons produced or processed in association therewith.

“Income Taxes” means any income, franchise and similar Taxes.

“Indemnitee” has the meaning assigned to such term in Section 12.3.

“Law” or “Laws” mean any applicable statute, law (including common law), rule, regulation, ordinance, order, injunction,decree or judgment by any Governmental Authority.

“Leases” has the meaning assigned to such term in Section 2.1(a).

“Like-Kind Exchange” has the meaning assigned to such term in Section 17.17.

“Material Contracts” has the meaning assigned to such term in Section 4.1(f).

“Net Mineral Acres” means, solely with respect to each Lease, the product of (a) the gross acres included in such Lease,(b) the lessor’s percentage ownership of the oil, gas and other minerals beneath such Lease, and (c) Seller’s undivided percentageownership of such Lease. By way of example, if Seller owns a one hundred percent (100%) interest in a Lease that covers 100 grossacres, and the lessor of such lease owns an undivided twenty percent (20%) of the lands covered by such lease, then the calculationdescribed herein would yield a result of twenty (20) Net Mineral Acres.

“Net Revenue Interest” shall mean, with respect to any Well, the interest in and to all Hydrocarbons produced, saved andsold from or allocated to such Well after giving effect to all Royalties, carried interests, reversionary interests and other burdens upon,measured by or payable out of production therefrom.

“Oil and Gas Property” and “Oil and Gas Properties” have the meanings assigned to such terms in Section 2.1.

“Person” means any individual, firm, corporation, company, partnership (general and limited), limited liability company, jointventure, association, trust, estate, unincorporated organization, Governmental Authority or any other entity.

“Permit” means any credit, permit, license, approval, waiver, or similar qualification or authorization issued or given by anyGovernmental Authority.

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“Permitted Encumbrances” has the meaning assigned to such term in Section 7.3.

“PetroCap” has the meaning assigned to such term in the preamble.

“Preferential Rights” has the meaning assigned to such term in Section 4.1(j).

“Privileged Information” has the meaning assigned to such term in Section 2.1(i).

“Properties” has the meaning assigned to such term in Section 2.1.

“Property Expenses” means all operating and capital costs and expenses (including, without limitation, rentals, Royalties,drilling costs, capital expenditures, lease operating expenses, expenses incurred under applicable operating agreements andoverhead costs charged to the Properties under applicable operating agreements, as allowable under applicable accountingprocedures) incurred in connection with the ownership or operation of the Properties, and excluding, for the avoidance of doubt, anyAsset Taxes, Income Taxes and Transfer Taxes.

“Purchase Price” has the meaning assigned to such term in Section 3.1.

“Records” has the meaning assigned to such term in Section 2.1(i).

“Remediate” means the implementation and completion of any remedial, removal, response, construction, closure, disposalor other corrective actions required under Applicable Environmental Laws to correct or remove material violations of ApplicableEnvironmental Laws in the most cost effective manner reasonably available, consistent with requirements of Applicable EnvironmentalLaws, taking into account that nonpermanent remedies (such as, by way of example, but not by limitation or similarity, mechanisms tocontain or stabilize hazardous substances or materials, including monitoring site conditions, natural attenuation, risk-based correctiveaction, dikes, encapsulation, leachate collection system, etc.) that may be the most cost effective manner reasonably available.

“Retained Obligations” means all costs, obligations and liabilities related to (a) the mispayment or non-payment ofRoyalties payable out of Seller’s share of production of Hydrocarbons from the Oil and Gas Properties during the Seller OwnershipPeriod, but prior to the Effective Date, but only to the extent that Buyer has provided Sellers with a timely notice in accordance withSection 12.3 prior to the date that is twelve (12) months following the Closing, (b) any contamination or condition that is a result ofany off-site disposal by either Seller of any Hazardous Substances produced from any of the Properties on, in or below any propertiesnot included in the Properties that occurs prior to the Closing, for which, and to the extent, that remediation of such contamination orcondition is required by any Applicable Environmental Law; in each case, only to the extent that Buyer has provided Seller with atimely Claim Notice in accordance with Section 12.3 prior to the date that is twelve (12) months following the Closing, (c) any liabilityof Seller, or otherwise imposed on the Properties in respect of any Tax, including without limitation, any liability of Seller for the Taxesof any other Person under Treasury Regulation 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee orsuccessor, by contract or otherwise, but excluding any Taxes that are specifically allocated to the Buyer pursuant to Article XV, (d)any expenses for which Seller is responsible pursuant to Article XI, but only to the extent that Buyer has provided Seller with a timelyclaim

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notice in accordance with Section 12.3 prior to the date that is twelve (12) months following the Closing, (e) obligations with respectto the period prior to Closing and payable to any Affiliate of a Seller, (f) the Excluded Properties, (g) Seller’s or its Affiliates’employment relationship with the employees of Seller or its Affiliates, or Seller’s or its Affiliates’ responsibilities under the EmployeeRetirement Income Security Act of 1974, as amended, applicable to such employees; and (h) the payment or improper payment ordistribution by Seller of suspense revenues prior to the Effective Time, but only to the extent that Buyer has provided Sellers with atimely notice in accordance with Section 12.3 prior to the date that is twelve (12) months following the Closing.

“Routine Governmental Approvals” has the meaning assigned to such term in Section 4.1(c).

“Royalties” means all royalties, overriding royalties, reversionary interests, net profit interests, production payments, carriedinterests, non-participating royalty interests, reversionary interests and other royalty burdens and other interests payable out ofproduction of Hydrocarbons from or allocated to the Leases, Wells or the proceeds thereof to Third Parties, but excluding AssetTaxes.

“Seller” has the meaning assigned to such term in the preamble.

“Seller Party” has the meaning assigned to such term in the preamble.

“Seller Indemnified Parties” means each Seller Party and its partners, members, and all their Affiliates, and all theirrespective directors, officers, employees, attorneys, contractors and agents.

“Seller Ownership Period” has the meaning assigned to such term in Section 4.1(p).

“Seller Party Documents” means (a) any agreements, arrangements, instruments, contracts or documents between CPXand PetroCap (or their respective Affiliates) that will be terminated prior to Closing, and (b) any reports, data, information ordocumentation prepared by Cobb & Associates, together with any communications related thereto and analysis thereof.

“Seller’s Indemnified Claim” and “Seller’s Indemnified Claims” have the meanings assigned to such terms in Section12.1.

“Seller’s Knowledge” and any similar phrase mean, (a) with respect to PetroCap, the actual knowledge of Lane Britain and(b) with respect to CPX, the actual knowledge of Tom Powell, Daniel Griffith, Randall J. Holt, Justin Bynum and Bridget Powell, both(a) and (b), after such inquiry or investigation as would reasonably be undertaken by an employee in such position in connection withthe performance of his or her duties with respect to the Properties; provided, however, that the scope of such inquiry or investigationshall in no event go beyond (x) a review of the books and records related to the Properties in the applicable Seller Party’s (or itsAffiliate’s) possession, and (y) inquiry of the applicable Seller Party’s (or its Affiliate’s) employees responsible for the matter inquestion.

“Seller’s Warranties” has the meaning assigned to such term in Section 4.2.

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“Side Letter Agreement” means the letter agreement dated the date hereof by and among the Buyer and the Sellers.

“Straddle Period” means any Tax period beginning before and ending on or after the date on which the Effective Dateoccurs.

“Survival Period” has the meaning assigned to such term in Section 17.1.

“Tax Return” means any Tax return, declaration, report, claim for refund, or information return, including any schedulethereto and any amendment thereof.

“Taxes” means any taxes, assessments, unclaimed property or escheat obligations and other governmental chargesimposed by any Governmental Authority, including income, profits, gross receipts, employment, stamp, occupation, premium,alternative or add-on minimum, ad valorem, real property, personal property, transfer, real property transfer, value added, sales, use,customs, duties, capital stock, franchise, excise, withholding, social security (or similar), unemployment, disability, payroll, windfallprofit, severance, production, estimated or other tax, including any interest, penalty or addition thereto, whether disputed or not.

“Taxing Authority” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposessuch Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision, including any governmental orquasi-governmental entity or agency that imposes, or is charged with collecting, social security or similar charges or premiums.

“Third Party” means any Person or entity, governmental or otherwise, other than Sellers, Buyer, and their respectiveAffiliates and includes other working interest owners, royalty owners, lease operators, landowners, service contractors andGovernmental Authorities.

“Title Benefit” has the meaning assigned to such term in Section 7.6.

“Title Benefit Amount” has the meaning assigned to such term in Section 7.6.

“Title Benefit Notice” has the meaning assigned to such term in Section 7.6.

“Title Defect Amount” has the meaning assigned to such term in Section 7.7(a).

“Title Defect Deductible” has the meaning assigned to such term in Section 7.7(a).

“Title Defects” has the meaning assigned to such term in Section 7.2(e).

“Transfer Taxes” means any and all sales, use, transfer, stamp, documentary, registration or similar Taxes incurred orimposed with respect to the transactions described in this Agreement.

“Wells” has the meaning assigned to such term in Section 2.1(d).

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“Working Interest” shall mean, with respect to any Well, the interest in and to such Well that is burdened with theobligation to bear and pay costs and expenses of maintenance, development and operations on or in connection with such Well, butwithout regard to the effect of any Royalties and other similar burdens upon, measured by or payable out of production therefrom.

ARTICLE IIPROPERTY TO BE SOLD AND PURCHASED

Section 2.1 Properties. Seller shall sell and Buyer shall purchase, on the terms and provisions herein contained, thefollowing described properties, rights and interests:

(a) All rights, titles and interests of Seller and its Affiliates in and to the oil, gas and/or mineral leases which aredescribed on Exhibit A hereto and any ratifications or amendments to such leases (the “Leases”);

(b) Without limitation of the foregoing, all other right, title and interest (of whatever kind or character, whether legal orequitable, and whether vested or contingent) of Seller and its Affiliates in and to the oil, gas and other minerals in and under or thatmay be produced from the lands and depths described on Exhibit A hereto or described in any of the Leases and all right, title andinterest that may be earned pursuant to the Farmout Agreement (as hereinafter defined) (including, without limitation, interests in oil,gas and/or mineral leases, overriding royalties, production payments, net profits interests, fee mineral interests, fee royalty interestsand other interests insofar as they cover such lands), even though Seller’s or its Affiliate’s interest therein may be incorrectlydescribed in, or omitted from, such Exhibit A;

(c) All rights, titles and interests of Seller or its Affiliates in and to, or otherwise derived from, all presently existing andvalid oil, gas and/or mineral unitization, pooling, and/or communitization agreements, declarations and/or orders (including, withoutlimitation, all units formed under orders, rules, regulations, or other official acts of any federal, state or other authority havingjurisdiction, and voluntary unitization agreements, designations and/or declarations) to the extent that they relate to any of theproperties described in subsections (a) and (b) above;

(d) All rights, titles and interests of Seller or its Affiliates in and to the oil, condensate, natural gas, injection, salt waterdisposal or water wells, whether producing, non-producing, shut-in or temporarily abandoned (but not permanently abandoned),located on the Oil and Gas Properties (as hereinafter defined), including, without limitation, those listed on Exhibit B hereto (the“Wells”);

(e) All rights, titles and interests of Seller or its Affiliates in and to the Applicable Contracts, including, withoutlimitation, the Farmout Agreement and the Contracts listed on Exhibit A-3;

(f) All rights, titles and interests of Seller or its Affiliates in and to all materials, supplies, machinery, equipment,improvements (including, without limitation, frac ponds) and other personal property and fixtures (including, but not by way oflimitation, all pumping units, flowlines, tanks, buildings, injection facilities, saltwater disposal facilities, compression

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facilities, gathering systems, and other equipment) located on the Oil and Gas Properties and used in connection with the exploration,development, operation or maintenance thereof;

(g) All rights, titles and interests of Seller or its Affiliates in and to the fee surface ownership of the propertiesdescribed on Exhibit A-2 hereto (collectively, the “Fee Properties”);

(h) All rights, titles and interests of Seller or its Affiliates (including CPX Operating), in and to all easements,servitudes, rights of way and surface leases appurtenant to or used in connection with the properties described in subsections (a), (b),(c), (d), (f) and (g) above, including those described on Exhibit A-1 hereto (“Easements”) and all Applicable Permits, including thosedescribed on Exhibit A-1 hereto; and

(i) All rights, titles and interests of Seller in and to all files, records, and data relating to the items described inparagraphs (a) through (h), above, including, without limitation, the following, if and to the extent that such files exist: all books,records, reports, manuals, files, title documents (including correspondence and curative), records of production and maintenance,revenue, sales, expenses, warranties, lease files, land files, well files, division order files, abstracts, title opinions, assignments,reports, property records, contract files, operations files, copies of tax and accounting records (but excluding Federal and state incometax returns and records) and files, maps, core data, hydrocarbon analysis, well logs, mud logs, and field studies, together with otherfiles, contracts, and other records and data and maps including any interpretations, analyses and reports related thereto (collectively,the “Records”), but excluding from the foregoing (and the term “Records” shall be deemed to exclude) (i) records that are subject tolegal privilege (such as the attorney-client privilege or work product doctrine) (the “Privileged Information”), (ii) records that aresubject to Third Party contractual restrictions on disclosure or transfer for which consent or waiver has not been obtained, or to theextent such disclosure or transfer is subjected to payment of a fee or other consideration, for which Buyer has not agreed in writing topay the fee or other consideration, as applicable (“Confidential Information”), provided Seller shall make a reasonable good faitheffort to obtain permission to provide the Confidential Information (but shall in no event be obligated to incur any costs or expenses toobtain such permission), and (iii) the Seller Party Documents. The properties, rights and interests specified in the foregoing subsections (a), (b), (c), and (d), except for the Excluded Properties asdefined below, are herein sometimes collectively called the “Oil and Gas Properties,” and individually an “Oil and Gas Property,”and the properties, rights and interests specified in the foregoing subsections (a), (b), (c), (d), (e), (f), (g), (h) and (i), except for theExcluded Properties, are herein sometimes collectively called the “Properties” and individually a “Property.”

Section 2.2 Excluded Properties. The Properties do not include, and there is hereby expressly excepted andexcluded therefrom and reserved to Seller:

(a) Except to the extent related to any Assumed Obligations, all rights and choses in action (but, for the avoidance ofdoubt, no liabilities or obligations arising from or related to the Properties, all of which are addressed in Article XI and Article XII) infavor of Seller, arising, occurring or existing prior to the Effective Date in connection with the Properties or the

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operation of or production from the Oil and Gas Properties prior to the Effective Date (including, but not limited to, any and all contractrights, claims, receivables, revenues, recoupment rights, recovery rights, accounting adjustments, mispayments, erroneous paymentsor other claims of any nature (i) in favor of Seller and (ii) relating and accruing to any time period prior to the Effective Date, providedthat rights to insurance claims and proceeds are handled under paragraph (d) below);

(b) Any accounts payable accruing before the Effective Date;

(c) All limited liability company, financial, tax and legal (other than title) records of Seller;

(d) Subject to Section 13.1, all rights and interests of Seller (i) under any policy or agreement of insurance orindemnity, (ii) under any bond, or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts,omissions or events or damage to or destruction of property;

(e) All Hydrocarbon production from or attributable to the Properties with respect to all periods prior to the EffectiveDate, as described in Section 11.1, and all proceeds attributable thereto;

(f) Properties excluded from the purchase and sale contemplated by this Agreement under Section 7.4;

(g) Copies (but not the originals) of all Records;

(h) Except to the extent constituting suspended royalties, all deposits, cash, checks, funds and accounts receivable orreceived attributable to Seller’s interests in the Properties with respect to any period of time prior to the Effective Date;

(i) All computer or communications software or intellectual property (including tapes, data and programdocumentation and all tangible manifestations and technical information relating thereto) owned, licensed or used by Seller;

(j) Any logo, service mark, copyright, trade name or trademark of or associated with Seller or any Affiliate of Seller orany business of Seller or of any Affiliate of Seller;

(k) Any documents withheld or not transferred pursuant to Section 10.1 as the result of a legal privilege or third-partyagreement restriction and any communications, documents or memoranda in any way related to the marketing of, or the salesprocess for, the Properties;

(l) All claims of Seller or any of its Affiliates for refunds of, rights to receive funds from any Governmental Authority, orloss carry forwards or credits with respect to (i) Asset Taxes attributable to any period (or portion thereof) prior to the Effective Date,(ii) Income Taxes, or (iii) any Taxes attributable to the Excluded Properties;

(m) Any seismic records and surveys, gravity maps, electric logs, geological or other geophysical data and recordsthat cannot be transferred without the consent of or payment to any

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third party unless such consent is obtained or, in the case of a consent requiring a payment, Buyer elects to make such payment orobtain such consent; and

(n) All right, title and interest of Seller in and to the assets described on Exhibit C.

These excluded properties, rights and interests specified in the foregoing subsections (a) through (n), inclusive, of this Section 2.2are collectively referred to as the “Excluded Properties.” Buyer shall not be responsible for, and Seller expressly retains, all liabilitiesrelated to the Excluded Properties, whether such liabilities arise before or after the Effective Date. It is understood that certain of theExcluded Properties may not be embraced by the term Properties. The fact that certain properties, rights and interests have beenexpressly excluded is not intended to suggest that had they not been excluded they would have constituted Properties and shall notbe used to interpret the meaning of any word or phrase used in describing the Properties.

ARTICLE IIIPURCHASE PRICE

Section 3.1 Purchase Price. The purchase price for the Properties shall be One Hundred Sixty Million Dollars($160,000,000) (such amount, unadjusted by any adjustments provided for in this Agreement or agreed to by the parties, being hereincalled the “Base Purchase Price”). Such Base Purchase Price may be adjusted as provided in Section 6.5, Article VII, and ArticleXI hereof (the Base Purchase Price, as so adjusted, and as the same may otherwise be adjusted by mutual agreement of the parties,being herein called the “Purchase Price”). The Purchase Price shall be paid in cash at the Closing as hereinafter provided.

Section 3.2 Deposit. Contemporaneously with the execution of this Agreement, Buyer, Seller and Wells Fargo BankN.A. (the “Escrow Agent”) have entered into an escrow agreement (the “Escrow Agreement”), and Buyer has deposited into theescrow account contemplated by the Escrow Agreement (the “Escrow Account”) an amount equal to ten percent (10%) of the BasePurchase Price (such amount being herein called the “Deposit”). The Deposit shall bear interest at the rate established by theEscrow Agent. In the event the transaction contemplated hereby is consummated in accordance with the terms hereof, the Deposit,plus the earned interest, shall be applied to the Purchase Price to be paid by Buyer at the Closing. In the event this Agreement isterminated by Buyer or Seller in accordance with Section 8.3, the Deposit shall be paid to Buyer or Seller as provided therein. If theDeposit is paid to Buyer, or if Buyer receives credit for same against the Purchase Price paid at Closing, such payment, or credit, shallbe in the amount of the Deposit plus the amount of such earned interest. For federal income tax purposes, the interest earned on theDeposit shall be reported by Buyer or Seller in the manner set forth in the Escrow Agreement. THE PARTIES HEREBYACKNOWLEDGE THAT THE EXTENT OF DAMAGES TO SELLER OCCASIONED BY THE FAILURE OF THIS TRANSACTIONTO BE CONSUMMATED WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN AND THAT THE AMOUNT OFTHE DEPOSIT IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER THE CIRCUMSTANCES AND DOESNOT CONSTITUTE A PENALTY.

Section 3.3 Allocation of Purchase Price. Buyer and Seller agree that the Base Purchase Price shall be allocatedamong the Properties as set forth in Exhibit D (the “Allocation

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Schedule”). The Allocated Amounts as set forth on Exhibit D shall be used in calculating adjustments to the Base Purchase Price asprovided herein.

Section 3.4 Allocation for Tax Matters. Seller and Buyer agree that they shall allocate the Purchase Price among theProperties for Tax purposes in a manner consistent with the allocation set forth on the Allocation Schedule and in accordance withSection 1060 of the Code and the Treasury Regulations promulgated thereunder. By Closing, Seller and Buyer shall each completetwo (2) copies of IRS Form 8594 allocating the Purchase Price among the asset classes as provided in the AllocationSchedule. Seller and Buyer agree to file all information reports and Tax Returns (including IRS Form 8594 and any amended TaxReturns or claims for refund) in a manner consistent with the Allocation Schedule and neither Seller nor Buyer shall take, or permit anyof their respective Affiliates to take, any position inconsistent with the Allocation Schedule on any Tax Return, in an audit or otherwise,unless required to do so by applicable Law or a “determination”, within the meaning of Section 1313(a)(1) of the Code. The AllocationSchedule may be revised (solely for Tax purposes, and not for the purposes of Article VII), from time to time, by the mutual writtenconsent of Seller and Buyer, so as to reflect any matters that need updating (including Purchase Price adjustments, if any).Notwithstanding the forgoing, if Seller and Buyer are unable to resolve any dispute with respect to proposed revisions to the PurchasePrice allocations within 14 days, each of Buyer and Seller shall be free to file its own separate Form 8594.

ARTICLE IVREPRESENTATIONS OF SELLER

Section 4.1 Representations of Seller. Each Seller Party severally (and not jointly) represents to Buyer that as of thedate hereof and the Closing Date:

(a) Organization and Qualification. Such Seller Party is duly organized and legally existing and in good standingunder the Laws of the state in which it was formed and is qualified to do business and in good standing in the state of Texas.

(b) Due Authorization. Such Seller Party has full power to enter into and perform its obligations under this Agreementand the other agreements and documents to be entered into hereunder and has taken all necessary action to authorize entering intothis Agreement and such other agreements and performance of its obligations hereunder and thereunder.

(c) Approvals. Neither the execution and delivery of this Agreement or the other agreements and documentscontemplated hereunder, nor the consummation of the transactions contemplated hereby or thereby, nor the compliance with theterms hereof or thereof, will result in any default under any agreement or instrument to which such Seller Party is a party or by whichthe Properties are bound, or violate any order, writ, injunction, decree, statute, rule or regulation applicable to such Seller Party or tothe Properties, except for (i) requirements (if any) that there be obtained consents to assignment (or waivers of preferential rights topurchase) from Third Parties, and (ii) approvals required to be obtained from Governmental Authorities which are customarily obtainedpost-closing (“Routine Governmental Approvals”).

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(d) Valid, Binding and Enforceable. This Agreement constitutes (and the Conveyance provided for herein to bedelivered at Closing will, when executed and delivered, constitute) the legal, valid and binding obligation of such Seller Party,enforceable in accordance with its terms, except as limited by bankruptcy or other Laws applicable generally to creditor’s rights andas limited by general equitable principles.

(e) Litigation. Except as set forth on Exhibit 4.1(e), there are no pending suits, actions, or administrative proceedingsin which such Seller Party (or its Affiliate) is a party and has been served (or, to Seller’s Knowledge, pending written demands orclaims) and which could be reasonably expected to adversely affect the Properties after the Effective Date (including, withoutlimitation, any actions challenging or pertaining to such Seller Party’s (or its Affiliate’s) title to any of the Properties or claiming aviolation of Applicable Environmental Laws), or to enjoin or prohibit the execution and delivery of this Agreement or the consummationof the transactions contemplated hereby.

(f) Material Contracts. Exhibit 4.1(f) sets forth as of the Execution Date all Applicable Contracts of the type describedbelow (collectively, the “Material Contracts”):

(i) any Applicable Contract that can reasonably be expected to result in aggregate payments by Seller or itsAffiliates of more than $50,000 during the remainder of the current or any subsequent fiscal year (based solely on the termsthereof and current volumes, without regard to any expected increase in volumes or revenues);

(ii) any Applicable Contract that can reasonably be expected to result in aggregate revenues to Seller or itsAffiliates of more than $50,000 during the remainder of the current or any subsequent fiscal year (based solely on the termsthereof and current volumes, without regard to any expected increase in volumes or revenues);

(iii) any Hydrocarbon or water purchase and sale, transportation, gathering, treating, processing, injection,disposal or similar Applicable Contract that (i) contains a dedication of production or acreage, or (ii) is not terminable withoutpenalty on 30 days’ or less notice;

(iv) any indenture, mortgage, loan, credit or sale-leaseback or similar Applicable Contract that canreasonably be expected to result in payments by Seller or its Affiliates during the current or any subsequent fiscal year;

(v) any Applicable Contract that constitutes a lease under which Seller or its Affiliates is the lessor or thelessee of real or personal property which lease (A) cannot be terminated by Seller or its Affiliates without penalty upon 90days’ or less notice and (B) involves an annual base rental of more than $50,000;

(vi) any Applicable Contract with any Affiliate of Seller which will be binding on Buyer after the Closing Dateand will not be terminable by Buyer within 30 days’ or less notice after the Closing;

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(vii) a n y farmout agreement, area of mutual interest agreement, exploration agreement, participationagreement, joint operating agreement or similar Applicable Contract where the primary obligations thereunder have not fullybeen performed; and

(viii) any Applicable Contract for the sale of gas containing a take-or-pay, advance payment, prepayment orsimilar provision or requiring gas to be gathered, delivered, processed or transported without then or thereafter receiving fullpayment therefor.

Except as set forth in Exhibit 4.1(f) and except for matters which are not reasonably expected to give rise to claims in excess of$50,000, there exists no default under any Material Contract by such Seller Party or its Affiliates or, to Seller’s Knowledge, by anyother Person that is a party to such Material Contract.

(g) Farmout Agreement. Seller is not in material breach of the Farmout Agreement and, to Seller’s Knowledge, noother party to the Farmout Agreement is in breach thereof. Seller has not received any written notice alleging default or terminationby Seller and, to Seller’s Knowledge, the Farmout Agreement is in full force and effect in accordance with its terms. Seller has madeavailable to Buyer a true, correct and complete copy of the Farmout Agreement and all amendments thereto. The first Initial EarningWell (as defined in the Farmout Agreement) (i) was drilled, tested, completed, Equipped (as defined in the Farmout Agreement) andwas producing in accordance with the terms of the Farmout Agreement on or before July 30, 2016, (ii) is currently producing in payingquantities, and (iii) has a lateral length of not less than 3,600 feet. The remaining five Initial Earning Wells have been drilled toContract Depth (as defined in the Farmout Agreement) in accordance with the Farmout Agreement and each has a lateral length ofnot less than 3,600 feet. Further, Exhibit 4.1(g) sets forth a full and complete list of elections made by Conoco as of the ExecutionDate with respect to their participation in any Wells drilled or completed under the Farmout Agreement.

(h) Commitments, Abandonments or Proposals. Except as set forth in Exhibit 4.1(h), to Seller’s Knowledge: (a) suchSeller Party has incurred no expenses, and has made no commitments to make expenditures in excess of $50,000 net to such SellerParty’s interest in the Properties in connection with the ownership or operation of the Properties after the Effective Date, other thancustomary expenses incurred (i) in the normal operation of existing Wells or (ii) in the performance of continuous developmentobligations under any of the Leases; and (b) no proposals or authorities for expenditures are currently outstanding (whether made bysuch Seller Party or by any other party) to drill additional wells, deepen, plug back, or rework existing Wells, or to conduct operationsother than normal operation of existing Wells, or to permanently abandon any Wells.

(i) Payment of Expenses. To Seller’s Knowledge, all expenses (including all bills for labor, materials and suppliesused or furnished for use in connection with the Properties, and all Asset Taxes) relating to the ownership or operation of theProperties, and for which such Seller Party has received a bill, invoice or other written request for payment have been, and are being,paid (timely, and before the same become delinquent) by such Seller Party, except such expenses and Asset Taxes as are disputedin good faith by such Seller Party and for which an adequate

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accounting reserve has been established by such Seller Party, such disputes being set forth on Exhibit 4.1(i).

(j) Consents and Preferential Rights. To Seller’s Knowledge (i) Exhibit 4.1(j) contains a complete and accurate list ofall requirements that consent (“Consents”) be obtained by such Seller Party for the assignment of the Properties to Buyer; provided,however, that the term “Consents”, as used in this Agreement, shall be deemed to exclude any such requirements in oil and gasleases which have not been assigned to Seller under the Farmout Agreement prior to the Execution Date and, (ii) there are no rightsof first refusal, preferential purchase rights, rights of first negotiation, options, tag right or similar rights, obligations or requirements(“Preferential Rights”) that affect the Oil and Gas Properties.

(k) Well Status. Except as set forth on Exhibit 4.1(k), to Seller’s Knowledge (a) there are no Wells that: (i) suchSeller Party is currently obligated by Law or contract to plug and abandon; or (ii) such Seller Party will be obligated by Law or contractto plug or abandon with the lapse of time or notice or both because the Well is not currently capable of producing in commercialquantities; and (b) such Seller Party has not abandoned any Wells since the Effective Date. Exhibit 4.1(k) contains a list of the statusof any “payout” balance, as of the date set forth on Exhibit 4.1(k), for the Wells subject to a reversion or other adjustment at somelevel of cost recovery or payout (or passage of time or other event other than termination of a Lease by its terms).

(l) Imbalances. Such Seller Party and its predecessors in title to the Oil and Gas Properties have not: (i) takenvolumes of gas from the Wells in excess of those volumes which the ownership of the Properties would entitle such Seller Party toreceive, and (ii) taken volumes of gas from the Wells in amounts less than those volumes which the ownership of the Properties wouldentitle such Seller Party to receive.

(m) No Bankruptcy; Insolvency. There are no bankruptcy, insolvency, reorganization or arrangement proceedingspending, being contemplated by, or to Seller’s Knowledge, threatened against such Seller Party. Seller is not insolvent, and will notbe rendered insolvent by any of the transactions contemplated by this Agreement. As used in this Section 4.1(m), “insolvent” meansthat the sum of Seller’s debts and other probable liabilities exceeds the present fair saleable value of Seller’s assets.

(n) Liens. Except as set forth on Exhibit 4.1(n), there are no liens by, through or under such Seller Party or itsAffiliate affecting Seller’s or its Affiliate’s right, title and interest in the Properties except: (i) liens for Taxes not yet due and payable orthe validity of which is being contested in good faith through appropriate proceedings, (ii) mechanic’s or materialmen’s liens (or othersimilar liens) or liens under an operating agreement or similar agreement, to the extent the same relate to expenses incurred whichare not yet delinquent.

(o) Taxes. Such Seller Party and its Affiliates have filed all Tax Returns and reports required to be filed by such SellerParty or its Affiliate in connection with its ownership and operation of the Oil and Gas Properties, and all such Tax Returns were true,correct and complete in all material respects. Neither Seller Party nor its Affiliate has received notice from a Governmental Authorityregarding the delinquency, mispayment, late payment or non-payment

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of any Asset Taxes. With respect to all Asset Taxes relating to the Properties; (i) there are not currently in effect any extension orwaiver of any statute of limitations of any jurisdiction regarding the assessment or collection of any Asset Tax; (ii) there are noproceedings pending against the Properties or such Seller Party or its Affiliate by any taxing authority for which such Seller Party hasreceived written notice; and (iii) there are no Tax liens on any of the Properties except for liens for Taxes not yet due. None of theProperties is subject to any tax partnership as defined in Section 761 of the Code.

(p) Royalties. During the Seller Ownership Period, all Royalties and other burdens payable to Third Parties out ofSeller’s share of production of Hydrocarbons from the Oil and Gas Properties have either (i) been properly and timely paid, or (ii) heldin suspense by Seller in accordance with applicable Law. “Seller Ownership Period” means, with respect to each Asset, the periodbeginning on the effective date of Seller’s acquisition of the Asset and ending at the Closing.

(q) Compliance with Laws; Permits.

(i) Except as disclosed on Exhibit 4.1(q), Seller’s and its Affiliates’ ownership of the Properties, Seller’s andits Affiliates’ operation of the Oil and Gas Properties operated by Seller, and to Seller’s Knowledge, the operation of theProperties that are operated by a Third Party, are currently in compliance in all material respects with the provisions andrequirements of all Laws (excluding Environmental Laws, which are addressed in Section 4.1(r), and Taxes, which areaddressed in Section 4.1(o)) of all Governmental Authorities having jurisdiction with respect to the Properties, or theownership, operation, development, maintenance, or use of any thereof.

(ii) To Seller’s Knowledge, Sellers and their respective Affiliates have all material Permits required to ownand operate the Properties. To Seller’s Knowledge, there are no facts or circumstances that could be reasonably expectedto result in any termination, suspension or revocation of any such material Permit.

(r) Environmental Matters.

(i) With respect to the Properties, neither Seller nor its Affiliates have entered into, or is subject to, anyagreements, consents, orders, decrees, judgments, license or permit conditions, or other directives of any GovernmentalAuthority in existence as of the Execution Date based on any Applicable Environmental Laws that relate to the future use ofany of the Properties and that require any remediation or other change in the present conditions of any of the Properties.

(ii) Except as set forth in Exhibit 4.1(r), Seller has not received written notice from any Person of anyrelease, disposal, event, condition, circumstance, activity, practice or incident concerning any land, facility, asset or propertyincluded in the Properties that: (A) interferes with or prevents compliance by Seller or the Properties with any ApplicableEnvironmental Law or the terms of any permits, licenses, orders, approvals, variances, waivers, franchises, rights or otherauthorizations issued pursuant

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thereto; or (B) gives rise to or results in any common law or other liability of Seller to any Person.

(iii) To Seller’s Knowledge, all material reports (including any tests and analyses) or studies specificallyaddressing environmental matters, in each case, (i) prepared by a Third Party, (ii) related to Seller’s ownership or operationof the Properties, and (iii) in Seller’s or its Affiliates’ possession, have been made available to Buyer.

(s) Drilling Obligations. Except as set forth on Exhibit 4.1(s), or to the extent of those obligations previously fulfilledby Seller or any of its predecessors, none of the Leases or any Applicable Contracts that are included in the Properties containexpress provisions obligating Seller to drill any wells on the Properties (other than provisions requiring optional drilling as a conditionof maintaining or earning all or a portion of a Lease).

(t) Bonds. Exhibit 4.1(t) lists all bonds, letters of credit and other similar credit support instruments maintained bySeller or any Affiliate of Seller with respect to the Properties.

(u) Rights on Production. Except as set forth in Exhibit 4.1(u) and with respect to imbalances, neither Seller nor anyAffiliate of Seller has granted (or entered into any agreement to grant), and to Seller’s Knowledge, no other Third Person has granted,any call upon, right to purchase, option to purchase or similar rights with respect to any portion of the Hydrocarbons produced fromthe Properties from and after the Effective Date that is not terminable upon thirty (30) days (or less) notice.

(v) Suspense. Except as set forth in Exhibit 4.1(v), neither Seller nor its Affiliates hold (in escrow or otherwise) anyThird Party funds in suspense with respect to production of Hydrocarbons from any of the Properties. All funds described in Exhibit4.1(v) are being held in suspense in compliance in all material respects with applicable Law and Applicable Contracts.

(w) Personal Property and Equipment. Except for any equipment that is leased, Seller is the owner of the equipmentincluded in the Properties not constituting Leases or Wells, free and clear of all liens and encumbrances other than those to bereleased at Closing and Permitted Encumbrances.

(x) Leases. Neither Seller nor its Affiliates have received any written notice of default or breach under any of theLeases which default or breach has not been cured or remedied. All Wells included in the Properties that have been drilled andcompleted by Seller or its Affiliates (or to Seller’s Knowledge, by any Third Party operator) have been drilled and completed within thelimits permitted by all applicable Leases and pooling or unit agreements or orders and in compliance with all applicable Permits andfield rules of the Texas Railroad Commission; provided however, that this Section 4.1(x) shall not include any matter whichconstitutes a Defect, all of which such matters shall be addressed exclusively in accordance with Article VII.

(y) Brokerage Fees and Commissions. Neither Seller nor any Affiliate of Seller has incurred any obligation or enteredinto any agreement for any investment banking, brokerage or finder’s fee or commission in respect of the transactions contemplatedby this Agreement for which Buyer shall incur any liability.

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Section 4.2 Disclaimers. THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED INSECTION 4.1 ABOVE AND THE SPECIAL WARRANTY OF TITLE IN THE CONVEYANCE TO BE DELIVERED AT CLOSING(COLLECTIVELY, THE “SELLER’S WARRANTIES”) ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONSAND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. SELLER EXPRESSLY DISCLAIMS ANY AND ALLSUCH OTHER REPRESENTATIONS AND WARRANTIES. WITHOUT LIMITATION OF THE FOREGOING AND EXCEPT FORSELLER’S WARRANTIES, THE PROPERTIES SHALL BE CONVEYED PURSUANT HERETO WITHOUT (a) ANY WARRANTY ORREPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, RELATING TO (i) TITLE TO THEPROPERTIES, OR THE CONDITION, QUANTITY, QUALITY OF THE PROPERTIES, (ii) THE ACCURACY OR COMPLETENESSOF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTERFURNISHED OR MADE AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT, (iii) PRICING ASSUMPTIONS, ORQUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES OR THE ABILITY ORPOTENTIAL OF THE PROPERTIES TO PRODUCE HYDROCARBONS, (iv) THE ENVIRONMENTAL CONDITION OF THEPROPERTIES, BOTH SURFACE AND SUBSURFACE, (v) THE STATUS OF THE PROPERTIES WITH RESPECT TOCOMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS, OR (vi) ANY OTHER MATTERS CONTAINED IN ANY MATERIALSFURNISHED OR MADE AVAILABLE TO BUYER BY SELLER OR BY SELLER’S AGENTS OR REPRESENTATIVES, OR (b) ANYOTHER EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER. BUYER SHALLHAVE (i) INSPECTED, OR (ii) WAIVED, (AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT,T H E PROPERTIES FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTALCONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATEDTO THE PRESENCE OR RELEASE OF HAZARDOUS MATERIAL, INCLUDING HAZARDOUS SUBSTANCES, SOLID WASTES,ASBESTOS AND OTHER MAN MADE FIBERS, OR NATURALLY OCCURRING RADIOACTIVE MATERIALS. EXCEPT FOR THESELLER’S WARRANTIES, SELLER FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORYOR IMPLIED, OF RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATIONOR RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETOT H A T BUYER SHALL BE DEEMED TO BE OBTAINING THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, THEEQUIPMENT COMPRISING PART OF THE PROPERTIES, IN THEIR PRESENT STATUS, AND CONDITION, “AS IS” AND“WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE),AND THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE. SELLERAND BUYER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OFCERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4.2 ARE “CONSPICUOUS” DISCLAIMERSFOR THE PURPOSE OF ANY APPLICABLE LAW.

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Section 4.3 Disclosures. The matters set forth on the exhibits and schedules referred to in Section 4.1 are notnecessarily matters that Seller is required to disclose or matters that would constitute a breach of any representation or warranty hadsuch matters not been disclosed.

ARTICLE VREPRESENTATIONS OF BUYER

Section 5.1 Representations of Buyer. Buyer represents to Seller that as of the date hereof and the Closing Date:

(a) Organization and Qualification. Buyer is duly organized and legally existing and in good standing under the Lawsof the state in which it was formed and is qualified to do business and in good standing in each state in which the Oil and GasProperties are located where the Laws of such state will require Buyer to so qualify with respect to the interest in the Oil and GasProperties to be conveyed hereunder. Buyer is also qualified to own and operate oil and gas properties with all applicableGovernmental Authorities having jurisdiction over the Properties, to the extent such qualification is necessary or appropriate or will benecessary or appropriate upon consummation of the transactions contemplated hereby (including, without limitation, Buyer has met allbonding requirements of such agencies).

(b) Due Authorization. Buyer has full power to enter into and perform its obligations under this Agreement and hastaken all proper action to authorize entering into this Agreement and performance of its obligations hereunder.

(c) Approvals. Neither the execution and delivery of this Agreement, nor the consummation of the transactionscontemplated hereby, nor the compliance with the terms hereof, will result in any default under any agreement or instrument to whichBuyer is a party, conflict with or result in a breach of any provisions of the organizational or other governing documents of Buyer, orviolate any order, writ, injunction, decree, statute, rule or regulation applicable to Buyer, except for requirements (if any) that there beobtained consents to assignment (or waivers of preferential rights to purchase) from third parties, and Routine GovernmentalApprovals, and except in each case, for such conflicts, breaches or violations as would not, individually or in the aggregate,reasonably be expected to adversely impact Buyer’s ability to consummate the transactions contemplated by this Agreement.

(d) Valid, Binding and Enforceable. This Agreement constitutes (and the Conveyance provided for herein to bedelivered at Closing will, when executed and delivered, constitute) the legal, valid and binding obligation of Buyer, enforceable inaccordance with its terms, except as limited by bankruptcy or other Laws applicable generally to creditor’s rights and as limited bygeneral equitable principles.

(e) No Litigation. There are no pending suits, actions, or other proceedings in which Buyer is a party (or, to Buyer’sknowledge, which have been threatened to be instituted against Buyer) which affect the execution and delivery of this Agreement orthe consummation of the transactions contemplated hereby.

(f) No Distribution. Buyer is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of1933, as amended, and is acquiring the Properties for its

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own account and not with the intent to make a distribution in violation of the Securities Act of 1933 as amended (and the rules andregulations pertaining thereto) or in violation of any applicable state blue sky Laws or other applicable securities Laws, rules orregulations.

(g) Knowledge and Experience. Buyer has, and had prior to negotiations regarding the Properties, such knowledgeand experience in the ownership and operation of oil and gas properties and financial and business matters as to be able to evaluatethe merits and risks of an investment in the Properties. Buyer is able to bear the risks of an investment in the Properties andunderstands risks of, and other considerations relating to, a purchase of the Properties.

(h) Opportunity to Verify Information. As of the Closing, Buyer has been afforded the opportunity to ask questions ofthe Seller (or a person or persons acting on its behalf) concerning the Properties, and Buyer has been furnished with materialsrelating to the Properties requested by Buyer under this Agreement. Buyer has made its own independent investigation of theProperties to the extent necessary to evaluate the Properties.

(i) Merits and Risks of an Investment in the Properties. Buyer understands and acknowledges that: (i) an investmentin the Properties involves certain risks; (ii) neither the United States Securities and Exchange Commission nor any federal, state orforeign agency has passed upon the Properties or made any finding or determination as to the fairness of an investment in theProperties or the accuracy or adequacy of the disclosures made to Buyer; and (iii) except as set forth in Section 8.3 of this Agreement,Buyer is not entitled to cancel, terminate or revoke this Agreement.

(j) Financing. Buyer has, or will have as the same become due hereunder, all funds necessary to (i) pay thePurchase Price and all other amounts payable hereunder, (ii) pay any fees and expenses payable by Buyer in connection with thetransaction contemplated hereby, and (iii) satisfy any of its other payment obligations hereunder.

(k) Bankruptcy. There are no bankruptcy, reorganization or arrangement proceedings pending against, beingcontemplated by, or, to the knowledge of Buyer, threatened against Buyer, its assets or sources of capital.

(l) Brokerage Fees and Commissions. Neither Buyer nor any Affiliate of Buyer has incurred any obligation or enteredinto any agreement for any investment banking, brokerage or finder’s fee or commission in respect of the transactions contemplatedby this Agreement for which Sellers shall incur any liability.

ARTICLE VICOVENANTS OF SELLER PENDING CLOSING

Section 6.1 Access to Records. Seller will give Buyer, or Buyer’s authorized representatives, at CPX’s office and at allreasonable times during normal business hours before the Closing Date, access to Seller’s records pertaining to the ownership and/oroperation of the Properties (including, without limitation, title files, and division order files), for the purpose of conducting due diligencereviews contemplated by Section 7.1 below. Upon request, Seller will provide Buyer with electronic copies of such records to theextent electronic copies are readily available and in Seller’s possession or control. Buyer may make copies of such records, at its

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expense, but shall, if Seller so requests, return all copies so made if the Closing does not occur and destroy all notes or work productrelating thereto except those notes and work product that Buyer is required to maintain pursuant to applicable Laws. Notwithstandingthe foregoing, Seller shall not be obligated to provide Buyer with access to any Privileged Information, (b) the Seller Party Documents,or (c) Confidential Information, except title opinions; provided, however, Seller shall make a reasonable good faith effort to obtainpermission to provide the Confidential Information but shall in no event be obligated to incur any costs or expenses to obtain suchpermission; provided, further, however, that that in no event shall Seller have any obligations with respect to Privileged Information orthe Seller Party Documents. Seller shall furnish, if requested by Buyer in writing, a description of the Confidential Information notfurnished to Buyer to the extent Seller reasonably believes that it may do so without waiving any such legal privilege or violating suchrestrictions on disclosure or transfer. BUYER ACKNOWLEDGES AND AGREES THAT ALL MATERIALS, DOCUMENTS, ANDOTHER INFORMATION MADE AVAILABLE TO BUYER AT ANY TIME IN CONNECTION WITH THE TRANSACTIONCONTEMPLATED HEREBY, WHETHER MADE AVAILABLE PURSUANT TO THIS SECTION OR OTHERWISE, ARE MADEAVAILABLE TO IT AS AN ACCOMMODATION, AND, EXCEPT FOR SELLERS’ REPRESENTATIONS AND WARRANTIESEXPRESSLY SET FORTH IN THIS AGREEMENT, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, WHETHEREXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS,AND OTHER INFORMATION. EXCEPT FOR SELLERS’ REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH INTHIS AGREEMENT, BUYER EXPRESSLY AGREES THAT ANY RELIANCE UPON OR CONCLUSIONS DRAWN THEREFROMSHALL BE AT BUYER’S RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANYLIABILITY OF OR AGAINST SELLER AND BUYER HEREBY WAIVES AND RELEASES ANY CLAIMS ARISING UNDER THISAGREEMENT, COMMON LAW OR ANY STATUTE ARISING OUT OF ANY MATERIALS, DOCUMENTS OR INFORMATIONPROVIDED TO BUYER.

Section 6.2 Physical Inspection. With respect to Properties operated by a Seller Party, Seller shall give Buyer, orBuyer’s authorized representatives, at all reasonable times before the Closing Date and upon adequate notice to Seller, physicalaccess to the Properties for the purpose of inspecting same. With respect to Properties not operated by a Seller Party, Seller shallmake a good faith effort to obtain consent from each operator of such Properties for Buyer to access such Properties at all reasonabletimes before the Closing Date and upon adequate notice provided to Seller; provided, however, that Seller shall not be required tomake any payment or incur any expense in obtaining such consent. Buyer agrees to comply fully with the rules, regulations andinstructions issued by Seller (or any third-party operator) regarding the actions of Buyer while upon, entering or leaving the Propertiesand Seller, or a representative of Seller, may accompany Buyer at any time Buyer is accessing the Properties. Except as otherwiseexpressly permitted herein, Buyer’s inspection shall be limited to a Phase I Environmental Site Assessment in accordance with theAmerican Society for Testing and Materials (A.S.T.M.) Standard Practice Environmental Site Assessments: Phase I EnvironmentalSite Assessment Process (each, a “Site Assessment”). In the event Buyer’s Site Assessment leads Buyer or its designee toreasonably conclude that an ASTM Phase II Environmental Assessment is warranted

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as to certain of the Properties, Buyer may request Seller’s consent to conduct such Phase II Environmental Assessment, whichconsent Seller may withhold in its sole and absolute discretion; provided, however, that if Seller withholds such consent, Buyer mayelect to claim an Environmental Defect for such Properties and may, upon its own discretion, exclude such affected Propertiespursuant to Section 7.4(c) below. Any Phase II Environmental Assessment costs shall be borne by Buyer, and Buyer shall be solelyresponsible for costs arising therefrom to the extent related to surface restoration required under any Lease, Easement or ApplicableContract. Buyer shall furnish to Seller, free of cost, a copy of any written report prepared by or for Buyer related to any SiteAssessment or Phase II Environmental Assessment of the Properties as soon as reasonably possible after it is prepared. Allenvironmental reports prepared by or for Buyer shall be maintained in strict confidence and for use solely in connection with itsevaluation of the Properties. Except for the obligations to provide reports to Seller as set forth in this Section 6.2, if Closing does notoccur, such reports shall not be disclosed to any other party.

Section 6.3 Exculpation and Indemnification. If Buyer exercises rights of access under this Article or otherwise, orconducts examinations or inspections under this Article or otherwise, then (a) such access, examination and inspection of theProperties shall be at Buyer’s sole risk, cost and expense and Buyer waives and releases all claims against the Seller IndemnifiedParties arising in any way therefrom or in any way connected therewith and (b) Buyer shall indemnify, defend and hold harmless theSeller Indemnified Parties from any and all claims, actions, causes of action, liabilities, damages, losses, costs or expenses(including, without limitation, court costs and attorneys’ fees), or liens or encumbrances for labor or materials, arising out of or in anyway connected with Buyer’s examinations or inspections. THE FOREGOING RELEASE AND INDEMNIFICATION SHALL APPLYWHETHER OR NOT SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OREXPENSES ARISE OUT OF OR RESULT FROM, SOLELY OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT ORCOMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY A MEMBER OF THESELLER INDEMNIFIED PARTIES, EXCEPTING ONLY IN THE CASE OF THIS SECTION 6.3 (i) LIABILITIES ACTUALLYRESULTING ON THE ACCOUNT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A MEMBER OF THE SELLERINDEMNIFIED PARTIES AND (ii) LIABILITIES THAT WERE EXISTING PRIOR TO SUCH INSPECTIONS. During all periods thatBuyer, and/or any representative of Buyer are on the Properties, Buyer shall maintain, at its sole expense and with insurersreasonably satisfactory to Seller, policies of insurance of the types and in the amounts reasonably requested by Seller. Upon requestby Seller, Buyer shall provide evidence of such insurance to Seller prior to entering upon the Properties.

Section 6.4 Interim Operations.

(a) Except (x) for the operations covered by the AFEs described in Exhibit 4.1(h), the operations set forth in the SideLetter Agreement, or such operations required pursuant to any Applicable Contract, applicable Law or Lease, (y) as required in theevent of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or asexpressly consented to in writing by Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shall,from and after the Execution Date until Closing:

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(i) as to Properties operated by CPX or its Affiliates, continue the operation of the Properties in the ordinarycourse of business, or, as to Properties where CPX or an Affiliate of CPX is not the operator, continue its actions as a non-operator in the ordinary course of business;

(ii) subject to interruptions resulting from force majeure, mechanical breakdown and planned maintenance,in each case, operate the Properties in compliance with all applicable Laws and the terms of all Leases and ApplicableContracts;

(iii) maintain, or cause to be maintained, the books of account and Records relating to the Properties in theusual, regular and ordinary manner and in accordance with the usual accounting practices of Seller; and

(iv) to the extent Seller has Knowledge thereof, use commercially reasonable efforts to timely inform Buyerof all matters it considers in good faith to be material developments affecting any of the Properties.

(b) Except (x) for the operations covered by the AFEs described in Exhibit 4.1(h), the operations set forth in the SideLetter Agreement, or such operations required pursuant to any Applicable Contract, applicable Law or Lease, (y) as required in theevent of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or asexpressly consented to in writing by Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shallnot, from and after the Execution Date until Closing:

(i) sell or otherwise dispose of any portion of the Properties except for sales or other dispositions of (1)Hydrocarbons in the ordinary course of business after production, or (2) equipment and other personal property or fixturesin the ordinary course of business where the same has become obsolete, is otherwise no longer necessary for theoperation of the Properties, or is replaced by an item or items of at least equal suitability;

(ii) affirmatively terminate any Material Contract or materially amend or change the terms of any MaterialContract;

(iii) enter into an agreement that, if in existence on the Execution Date would be a Material Contract;

(iv) affirmatively release, terminate or materially amend any Lease, Easement, permit or license;

(v) incur any indebtedness or take or fail to take any action that would cause a lien or encumbrance to ariseor exist on the Properties or otherwise allow a lien (other than Permitted Encumbrances) to attach to or encumber theProperties or any portion thereof;

(vi) grant or create any Preferential Right, transfer restriction or similar right, obligation, or requirement withrespect to the Properties; and

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(vii) except for the commitments set forth in Exhibit 4.1(h), all of which are deemed to be approved,approve or propose any operations on the Properties anticipated to cost the owner of the Properties more than $50,000 peroperation or activity net to Seller’s or any of its Affiliate’s interest.

(c) Buyer acknowledges that Seller is currently, and from the date hereof will continue to, conduct certain operationsrequired in order to perpetuate the Leases and extend its rights under the Farmout Agreement and, notwithstanding anything in thisSection 6.3, but subject to Section 6.3(d) to the contrary, all activities and actions of Seller taken in connection therewith are deemedauthorized by Buyer, without further consultation, and regardless of whether such activities and actions are in the ordinary course ofbusiness.

(d) With the exception of the operations and activities set forth on Exhibit 4.1(h) and the operations and activities setforth in the Side Letter Agreement, which shall be deemed authorized by Buyer without further consultation, should Seller receive (ordesire to make) any proposals to drill additional wells on the Oil and Gas Properties, or to conduct other operations which requireconsent of non-operators under an applicable operating agreement, Seller will notify Buyer of, and consult with Buyer concerning, suchproposals, provided that in the event Seller and Buyer cannot come to an agreement on any such proposal, any decisions withrespect to such proposal shall be made by Seller in its sole discretion. From and after the Effective Date, any proposed activities otherthan those set forth on Exhibit 4.1(h) or in the Side Letter Agreement shall be subject to Buyer’s prior written consent. The Partieshereby recognize that the current ownership and operation of the Properties may include Seller electing not to participate (i.e., non-consent status) in wells drilled pursuant to an operating agreement, joint exploration agreement or spacing order relating to theProperties and that Seller may continue to make consistent elections for such Properties, provided, however, Seller will provide Buyerwith notice of such election. For the avoidance of doubt, subject to the Side Letter Agreement and notwithstanding anything in thisAgreement to the contrary, in no event shall Seller be required to drill or complete any wells prior to Closing. The Buyer shall bepermitted to undertake the activities on the Oil and Gas Properties in accordance with and subject to the terms of the Side LetterAgreement.

(e) Without expanding any obligations which Seller may have to Buyer, it is expressly agreed that Seller shall neverhave any liability to Buyer with respect to its operation of a Property greater than that which it might have as the operator to a non-operator under the applicable operating agreement (or, in the absence of such an agreement, under the AAPL 610 (1989 Revision)form Operating Agreement), IT BEING RECOGNIZED THAT, UNDER SUCH AGREEMENTS AND SUCH FORM, SELLER IS NOTRESPONSIBLE FOR ITS OWN NEGLIGENCE, AND HAS NO RESPONSIBILITY OTHER THAN FOR GROSS NEGLIGENCE ORWILLFUL MISCONDUCT.

(f) Promptly following the execution of this Agreement, Buyer shall use its commercially reasonable efforts to securethe fracing and completion services of Cudd Energy Services with respect to the following four uncompleted wells located in ReevesCounty, Texas: Durham Smith Fuente #212HU (API # 389-35440) to be scheduled on or about June 1, 2017; Durham Smith Fuente#214HU (API # 389-35464) to be scheduled on or about June 25, 2017; Durham Smith Fuente #207HL (API # 389-35563) to bescheduled on or about July 10, 2017;

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and Durham Smith Fuente #209HL (API # 389-35431) to be scheduled on or about August 14, 2017. The scheduled dates set forthabove are estimates only and are subject to the availability of Cudd Energy Services. In the event (i) the Closing has not occurredprior to five Business Days before any scheduled service, or (ii) this Agreement is terminated pursuant to Section 8.3, Buyer shall useits commercially reasonable efforts to assign and transfer its rights with respect to such scheduled services to Seller. Further, in theevent of such transfer, Buyer agrees to pay to Seller the amount of any costs associated with such scheduled services above Seller’scurrent negotiated rate with C&J Energy Services, provided that in the event of a transfer pursuant to clause (i) above, no suchpayment shall be required unless this Agreement is terminated prior to Closing.

Section 6.5 Consents.

(a) As soon as reasonably practical following the Execution Date, but in any event within ten (10) Business Days ofthe Execution Date, Seller shall send to each holder of a Consent, as set forth on Exhibit 4.1(j), a notice (which form of notice shall bein accordance with the requirements, if any, relating to such Consent obligation and shall be provided to Buyer for review no morethan five (5) Business Days after the Execution Date and, until the expiration of the ten (10) Business Day period set forth herein,Seller shall consult with Buyer regarding such form of notice), of the transaction contemplated hereby requesting the requiredconsent.

(b) If Seller fails to obtain a Consent, as set forth on Exhibit 4.1(j), prior to Closing and the failure to obtain suchConsent would cause (i) the assignment of the Properties affected thereby to Buyer to be void or (ii) the termination of suchProperties under the express terms thereof (each, a “Hard Consent”), then, in each such case, the affected Properties shall beexcluded from the Properties to be acquired by Buyer at Closing hereunder and the Base Purchase Price shall be reduced by theAllocated Amount of the Properties so excluded. In the event that a Hard Consent (with respect to any applicable Properties excludedpursuant to this Section 6.5(b)) that was not obtained prior to Closing is obtained within 180 days following Closing, then, Buyer shallpurchase, within 10 days after such Hard Consent is obtained, such Properties so excluded from Seller under the terms of thisAgreement for the amount (if any) by which the Base Purchase Price was reduced at Closing due to the exclusion of such Properties(as such amount is appropriately adjusted in accordance with this Agreement with respect to such Properties), and Seller shall assignto Buyer such Properties pursuant to an instrument in form substantially similar to the Conveyance.

(c) If Seller fails to obtain a Consent, as set forth on Exhibit 4.1(j), prior to Closing and the failure to obtain suchconsent would not cause (i) the assignment of the Properties affected thereby to Buyer to be void or (ii) the termination of suchProperties under the express terms thereof, then (x) the Properties subject to such un-obtained Consent shall be acquired by Buyer atClosing as part of the Properties, (y) Buyer shall have no claim against, and hereby releases and indemnifies the Seller IndemnifiedParties from any liability for, the failure to obtain such Consent, and (z) Buyer shall be solely responsible from and after Closing forany and all liabilities arising from the failure to obtain such Consent.

(d) Prior to Closing, Seller shall deliver to Buyer appropriate evidence reflecting that all Hard Consents have beenobtained (unless the affected Property is being excluded pursuant to

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Section 6.5(b)) and any other evidence relating to additional Consents obtained by Seller prior to Closing.

Section 6.6 Insurance. Seller shall maintain its current insurance policies in effect in accordance with industry practiceuntil Closing.

Section 6.7 Knowledge of Breach. Seller shall not have any liability to Buyer for a breach of a representation orwarranty contained in this Agreement to the extent that Buyer had actual knowledge of such breach on or prior to the Closing Dateand failed to disclose the existence of such breach to Seller prior to the Closing Date. For the purpose of this Agreement, the“knowledge” of Buyer shall be limited to the actual knowledge of Rick Betz, Theodore Gazulis, Michael Stefanoudakis, Bob D. Brady,Jr. or Bill Alleman.

Section 6.8 Bonds. Prior to Closing, Buyer shall take such actions as may be necessary or appropriate so that all suretybonds, guaranties, and cash collateral listed on Exhibit 4.1(t) will be released and replaced immediately after Closing with comparablesurety bonds, guaranties, and cash collateral from Buyer or an Affiliate of Buyer. In the event any surety bonds, guaranties and/orcash collateral are not immediately released and replaced at Closing, Buyer shall promptly reimburse Seller for any losses or costsincurred by Seller in connection with such delay in the release and replacement of such surety bonds, guaranties, or cash collateralafter Closing.

Section 6.9 Financing Assistance. Prior to the Closing Date, Seller shall use commercially reasonable efforts toprovide, and shall use its commercially reasonable efforts to cause its Affiliates and its and its Affiliates’ representatives to provide,Buyer such cooperation as may be reasonably requested by Buyer with respect to any financing that Buyer seeks to obtain inconnection with the consummation of the transactions contemplated hereby; provided, however, that in no event shall suchcooperation (a) require Seller to provide access to or disclose any information or documentation except as expressly provided inSection 6.1, (b) require Seller to incur any costs or expenses, or (c) adversely interfere with the operations of Sellers, their respectiveAffiliates or the ownership or operation of the Properties. Buyer will pay or, if paid, reimburse the applicable Seller, within ten (10)Business Days after demand therefor, for any reasonable out-of-pocket costs incurred by such Seller in complying with the provisionsof this Section 6.9. Notwithstanding the foregoing, (x) nothing herein shall expand Seller’s representations, warranties, covenants oragreements set forth in this Agreement or give Buyer, its Affiliates or any Third Party any rights to which it is not otherwise expresslyentitled hereunder, and (y) no breach of this Section 6.9 by Seller shall give rise to a failure of the condition set forth in Section 8.1(b)or otherwise entitle Buyer to refuse to proceed with Closing or terminate this Agreement.

ARTICLE VIIDUE DILIGENCE REVIEW

Section 7.1 Defect Notice. Should, as a result of Buyer’s examinations and investigations, or otherwise, Buyerdiscover a Defect (as below defined), Buyer shall provide to Seller notice of such Defect (“Defect Notice”) no later than 5 p.m.Mountain Time on April 5, 2017 (the “Defect Deadline”). To be effective, each Defect Notice shall be in writing and shall

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include (i) a description of the alleged Defect and the Property, or portion thereof, affected by such Defect (ii) the Allocated Amount ofthe affected Property, (iii) supporting documentation reasonably necessary to fully describe the basis for the Defect or, if thesupporting documentation is contained in Seller’s files, sufficient information to enable Seller to expeditiously locate such supportingdocumentation, and (iv) the amount by which Buyer reasonably believes the Allocated Amount of the affected Property is reduced bysuch Defect and the computations upon which Buyer’s belief is based. To give Seller an opportunity to commence reviewing andcuring Defects, Buyer agrees to use reasonable efforts to give Seller, on or before the end of each calendar week prior to the DefectDeadline, written notice of all alleged Defects (as well as any claims that would be claims under the special warranty set forth in theConveyance) discovered by Buyer during the preceding calendar week, which notice(s) may be preliminary in nature andsupplemented in all respects prior to the Defect Deadline. Notwithstanding anything in this Agreement to the contrary, if after theDefect Deadline and prior to Closing either Buyer or Seller becomes “aware” (as used in this Section 7.1, “aware” means, withrespect to Seller, to Seller’s Knowledge, and, with respect to Buyer, to the “knowledge” of Buyer (as described in Section 6.7)) of anynew condition affecting the Properties that was not in existence prior to the Defect Deadline and which may result in an EnvironmentalDefect (as defined below), such Party shall, within three (3) Business Days, inform the other Party of such condition and Buyer shallbe entitled to perform additional diligence subject to the conditions set forth in Article VI. In the event Buyer’s diligence results in adetermination that such condition constitutes an Environmental Defect, Buyer shall provide to Seller no later than 5 p.m. on the datethat is five (5) Business Days prior to the Scheduled Closing Date a Defect Notice relating to such alleged Environmental Defect. TheParties shall resolve such Environmental Defect in accordance with the provisions of this Article VII. For purposes of this Article VII,any Defects asserted by Buyer in a Defect Notice relating to Seller’s title in and to the Properties are herein called “Asserted TitleDefects” and any Defects asserted by Buyer in a Defect Notice relating to the environmental condition of the Properties are hereincalled “Asserted Environmental Defects”. Except as provided above with respect to an Environmental Defect that arises after theDefect Date, any Defect with respect to which Buyer fails to deliver a Defect Notice by the Defect Deadline will be deemed waived forall purposes, including if applicable, as a condition to close or indemnification claim. With respect to an Environmental Defect thatarises after the Defect Date, any such Environmental Defect with respect to which Buyer fails to deliver a Defect Notice at least five (5)Business Days prior to the Scheduled Closing Date will be deemed waived for all purposes, including if applicable, as a condition toclose or indemnification claim. EXCEPT FOR (i) THE CONDITION TO CLOSE SET FORTH IN SECTION 8.1(C), (ii) THEREPRESENTATIONS AND WARRANTIES OF SELLER IN SECTION 4.1(r), AND (iii) THE SPECIAL WARRANTY OF TITLE INTHE CONVEYANCE TO BE EXECUTED AND DELIVERED AT CLOSING, BUYER’S SOLE AND EXCLUSIVE RIGHTS ANDREMEDIES WITH RESPECT TO ANY MATTER THAT CONSTITUTES A DEFECT SHALL BE THOSE SET FORTH IN THISARTICLE VII, AND BUYER SHALL NOT BE ENTITLED TO REFUSE TO CLOSE OR TO INDEMNIFICATION OR ANY OTHERRIGHT OR REMEDY WITH RESPECT TO ANY DEFECT. ACCESS TO SELLER’S RECORDS AND THE PROPERTIES INCONNECTION WITH BUYER’S DUE DILIGENCE SHALL BE SUBJECT AND PURSUANT TO SECTION 6.1, SECTION 6.2 ANDSECTION 6.3.

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Section 7.2 Nature of Defects. The term “Defect” as used in this Agreement shall mean the following:

(a) Owned NRI or WI Variances. With respect to any Well listed as an “Earned Well” on Exhibit D hereto, Seller’sownership is such that it (i) entitles Seller at any time during the productive life of such Well to receive a Net Revenue Interest lessthan the Net Revenue Interest set forth on Exhibit D in connection with such Well under the column headed “Net Revenue Interest” or(ii) causes Seller at any time during the productive life of such Well to be obligated to bear a Working Interest greater than theWorking Interest set forth on Exhibit D in connection with such Well under the column headed “Working Interest” (without at least aproportionate increase in the Net Revenue Interest which Seller is entitled to receive from such Well).

(b) Liens. Seller’s interest in an Oil and Gas Property or Fee Property is subject to a lien other than (i) a lien for taxeswhich are not yet delinquent, or (ii) a mechanic’s or materialmen’s lien (or other similar lien), or a lien under an operating agreementor similar agreement, to the extent the same relates to expenses incurred which are not yet delinquent, or (iii) liens which will bereleased at or before Closing (the liens described in (i), (ii) and (iii) of this Section 7.2(b) are herein called “Excluded Liens”).

(c) Owned Net Mineral Acre Variances. With respect to any Lease listed as an “Earned Lease” on Exhibit D hereto,Seller’s ownership is such that the number of Net Mineral Acres owned by Seller in such Lease is less than the number of Net MineralAcres for such Lease as set forth on Exhibit D under the column headed “Net Mineral Acres”.

(d) Farmout Net Mineral Acre Variances. With respect to any Lease listed as an “Unearned Lease” on Exhibit D,notwithstanding the fact that Seller has not yet earned an ownership interest in such Lease, Seller’s rights under the FarmoutAgreement are such that the number of Net Mineral Acres which Seller has the right to earn pursuant to the Farmout Agreement isless than the number of Net Mineral Acres set forth on Exhibit D under the column headed “Farmout Net Mineral Acres”.

(e) Farmout NRI or WI Variances. With respect to any Well listed as an “Drilled but Uncompleted Well” on Exhibit Dhereto, notwithstanding the fact that Seller has not yet earned an ownership interest in such Well, Seller’s rights under the FarmoutAgreement are such that Seller has the right to earn pursuant to the Farmout Agreement an interest which (i) entitles Seller at anytime during the productive life of such Well to receive a Net Revenue Interest less than the Net Revenue Interest set forth on ExhibitD in connection with such Well under the column headed “Farmout Net Revenue Interest” or (ii) causes Seller at any time during theproductive life of such Well to be obligated to bear a Working Interest greater than the Working Interest set forth on Exhibit D inconnection with such Well under the column headed “Farmout Working Interest” (without at least a proportionate increase in the NetRevenue Interest which Seller is entitled to receive from such Well) (the Defects described in subsections (a), (b), (c) (d) and (e) of thisSection 7.2 are herein called “Title Defects”).

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(f) Environmental Matters. Except as disclosed on Exhibit 7.2(f), an Oil and Gas Property or Fee Property is inviolation of Applicable Environmental Laws (the Defects described in this Section 7.2(f) are herein called “Environmental Defects”).

Section 7.3 Permitted Matters and Encumbrances. Notwithstanding any other provision in this Agreement to thecontrary, the following matters shall not constitute a Defect (collectively, the “Permitted Encumbrances”):

(a) defects or irregularities arising out of lack of proof of representative authority on behalf of a corporation,partnership, limited liability company, or trust unless Buyer provides affirmative evidence that such action was not authorized andresults in another person’s superior claim of title to the relevant Property;

(b) defects or irregularities arising out of a lack of recorded powers of attorney from corporations or other entities toexecute and deliver documents on their behalf and immaterial variations of corporate or entity names (such as scrivener’s ortypographical errors which would normally be waived by a reasonably prudent purchaser of oil and gas assets) unless Buyer providesaffirmative evidence that such variations result in a superior third party claim of title to the relevant Property;

(c) defects or irregularities in acknowledgments;

(d) defects or irregularities that have been cured or remedied by applicable statutes of limitation or statutes forprescription;

(e) defects or irregularities in the chain of title consisting of the failure to recite marital status in documents oromissions of heirship proceedings, unless Buyer provides affirmative evidence that such defects, irregularities or omissions result in asuperior third party claim of title to the relevant Property;

(f) defects or irregularities resulting from or related to probate proceedings or the lack thereof which defects orirregularities have been outstanding for ten (10) years or more, unless Buyer provides affirmative evidence that such defects,irregularities or omissions result in a superior third party claim of title to the relevant Property;

(g) defects or irregularities arising out of prior oil and gas leases which, on their face, expired more than ten (10)years prior to the Closing, and which have not been released of record;

(h) conventional rights of reassignment normally actuated by an intent to abandon or release a lease and requiringnotice to the holders of such rights;

(i) outstanding deed of trust and mortgage liens burdening the interest of any lessor under any of the oil and gasleases included in the Properties, unless there is evidence that the mortgagee or lien holder has asserted a default under any suchdeed of trust or mortgage and has exercised, or intends to exercise, foreclosure proceedings;

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(j) all Royalties if the net cumulative effect of such burdens (i) does not operate to reduce the Net Revenue Interest forsuch Property to an amount less than the “Net Revenue Interest” set forth on Exhibit D for such Property (ii) does not obligate Sellerto bear a Working Interest for such Property in any amount greater than the “Working Interest” set forth on Exhibit D for such Property(without at least a proportionate increase in the Net Revenue Interest which Seller is entitled to receive from such Property); and

(k) (i) the matters set forth on Exhibit 7.3, and (ii) any other terms, conditions, restrictions, exceptions, reservationsand limitations contained in the Leases, Material Contracts and Easements listed on an Exhibit hereto, in the case of clause (ii), thatindividually or in the aggregate do not (A) materially interfere with the ownership, operation or use of any of the Properties, (B) operateto reduce the Net Revenue Interest for any Property to an amount less than the “Net Revenue Interest” set forth on Exhibit D for suchProperty, or (C) obligate Seller to bear a Working Interest for such property in any amount greater than the “Working Interest” set forthon Exhibit D for such property (without at least a proportionate increase in the Net Revenue Interest which Seller is entitled to receivefrom such Property).

Section 7.4 Seller’s Response to Asserted Defects. In the event that Buyer notifies Seller of Asserted Defects:

(a) Cure. Seller may (but shall have no obligation to) attempt to cure at its sole cost and expense, up to the date thatis three (3) Business Days prior to Closing (“Cure Period”), any Asserted Defects.

(b) Remedies for Uncured Asserted Title Defects. Subject to Seller’s continuing right to dispute the existence oramount of an Asserted Title Defect and subject to the rights of the Parties pursuant to Section 8.1(c) and Section 8.2(c), in the eventthat any Asserted Title Defect is not waived in writing by Buyer or cured on or before Closing, then, subject to the limitations set forthin Section 7.7 below, the Base Purchase Price shall be reduced by the Defect Amount determined pursuant to Section 7.5; provided,however, that in the event the Defect Amount is equal to ninety-five percent (95%) or more of the Allocated Amount of the affectedProperty, Seller may elect to exclude such Property from the transaction contemplated herein and it shall be considered an ExcludedProperty and the Base Purchase Price shall be reduced by the Allocated Amount of such Property.

(c) Remedies for Uncured Asserted Environmental Defects. Subject to Seller’s continuing right to dispute theexistence or amount of an Asserted Environmental Defect and subject to the rights of the Parties pursuant to Section 8.1(c) andSection 8.2(c), in the event that any Asserted Environmental Defect is not waived in writing by Buyer or cured on or before Closing,then, subject to the limitations set forth in Section 7.7 below, the Base Purchase Price shall be reduced by the Defect Amountdetermined pursuant to Section 7.5; provided, however, that in the event (i) the Defect Amount is greater than or equal to theAllocated Amount of the affected Property or (ii) Seller withholds consent for a Phase II Environmental Assessment requested byBuyer pursuant to Section 6.2, then Seller or Buyer may elect to exclude such Property from the transaction contemplated herein andit shall be considered an Excluded Property and the Base Purchase Price shall be reduced by the Allocated Amount of suchProperty.

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Section 7.5 Adjustment For Uncured Asserted Defects. The amount by which the Allocated Amount of an affectedProperty is reduced as a result of the existence of an Asserted Title Defect or an Asserted Environmental Defect shall be the “DefectAmount” and shall be determined in accordance with the following terms and conditions:

(a) if Buyer and Seller agree on the Defect Amount, then that amount shall be the Defect Amount;

(b) If the Asserted Defect is a Defect described in clause (i) of Section 7.2(a) or clause (i) of Section 7.2(e) and thereis a proportionate decrease in Seller’s Working Interest in such Well, as set forth on Exhibit D, the Defect Amount shall be an amountdetermined by multiplying the Allocated Amount for such Well by a fraction (i) the numerator of which is an amount equal to the “NetRevenue Interest” or “Farmout Net Revenue Interest”, as applicable, shown on Exhibit D for such Well, less the actual Net RevenueInterest to which Seller is entitled and (ii) the denominator of which is the “Net Revenue Interest” or “Farmout Net Revenue Interest”,as applicable, shown for such Well on Exhibit D.

(c) If the Asserted Defect is a Defect described in Section 7.2(b), then the Defect Amount shall be the lesser of (i) theamount necessary to be paid to remove the Asserted Defect from the affected Property or (ii) the Allocated Amount of such Property.

(d) If the Asserted Defect is a Defect described in Section 7.2(c) or Section 7.2(d), the Defect Amount shall be anamount determined by multiplying the Allocated Amount for such Lease by a fraction (i) the numerator of which is an amount equal tothe “Net Mineral Acres” or “Farmout Net Mineral Acres”, as applicable, shown on Exhibit D for such Lease, less the Net MineralAcres actually owned by Seller (or, with respect to the “Farmout Net Mineral Acres”, less the actual Net Mineral Acres Seller isentitled to earn under the Farmout Agreement) and (ii) the denominator of which is the “Net Mineral Acres” or “Farmout Net MineralAcres”, as applicable, shown for such Lease on Exhibit D.

(e) If the Asserted Defect is a Defect described in Section 7.2(f), the Defect Amount shall be the lesser of (i) the coststo Remediate such Defect consistent with the requirements of Applicable Environmental Laws or (ii) the Allocated Amount of suchProperty as adjusted pursuant to the provisions of this Agreement including, without limitation, the other subsections of this Section7.5.

(f) If the Asserted Defect is not of the type described in the other subsections of this Section 7.5, the Defect Amountshall be determined by taking into account (i) the portion of the Property affected by such Asserted Defect, (ii) the legal effect of suchAsserted Defect, (iii) the economic effect of such Asserted Defect over the life of the Property, (iv) the values placed upon suchAsserted Defect by Buyer and Seller and (v) such other reasonable factors as are necessary to make a proper evaluation.

Section 7.6 Title Benefits. If prior to the Defect Deadline, Seller should determine that (a) the ownership of theProperties by Seller entitles Seller to a Net Revenue Interest in a Well listed on Exhibit D greater than the Net Revenue Interest forsuch Well under the column headed “Net Revenue Interest” on Exhibit D, or (b) Seller owns a number of Net Mineral Acres

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in a Lease that is greater than is shown under the column headed “Net Mineral Acres” on Exhibit D for such Lease (a “Title Benefit”),then Seller may provide Buyer with a “Title Benefit Notice”, which shall include (i) a description of the Title Benefit and the Propertiesaffected by the Title Benefit, (ii) supporting documents reasonably necessary for Buyer to verify the existence of such Title Benefit and(iii) the amount by which Seller reasonably believes the Allocated Amount of such Properties is increased by the Title Benefit and thecomputations upon which Seller’s belief is based. Seller shall be deemed to have waived any Title Benefits that Seller fails to providea Title Benefit Notice therefore on or before the Defect Deadline. Subject to Buyer’s continuing right to dispute the existence oramount of a Title Benefit, as Seller’s sole and exclusive remedy for any Title Benefits, the amount (the “Title Benefit Amount”) equalto the increase in the Allocated Value for such Asset caused by such Title Benefits, shall be applied as to offset the aggregate TitleDefect Amount attributable to Asserted Title Defects, if any.

Section 7.7 Limitations on Adjustments.

(a) Title Defects. If the Base Purchase Price reduction with respect to a particular Asserted Title Defect which wouldresult from the above provided for procedure does not exceed Twenty Five Thousand Dollars ($25,000), no adjustment shall be madefor such Asserted Title Defect. If the Base Purchase Price reduction which would result from the above provided for procedure, asapplied to all Asserted Title Defects for which an adjustment is to be made does not exceed one and a half percent (1.5%) of the BasePurchase Price (the “Title Defect Deductible”), then no adjustment of the Base Purchase Price shall occur and none of theProperties which would be excluded by such procedure shall be excluded. If the Base Purchase Price reduction which would resultfrom the above provided for procedure as applied to all Asserted Title Defects for which an adjustment is to be made exceeds the TitleDefect Deductible, the Base Purchase Price shall be adjusted by the amount by which such reduction exceeds the Title DefectDeductible (the “Title Defect Amount”).

(b) Environmental Defects. If the Base Purchase Price reduction with respect to a particular Asserted EnvironmentalDefect which would result from the above provided for procedure does not exceed Twenty Five Thousand Dollars ($25,000), noadjustment shall be made for such Asserted Environmental Defect. If the Base Purchase Price reduction which would result from theabove provided for procedure, as applied to all Asserted Environmental Defects for which an adjustment is to be made does notexceed one and a half percent (1.5%) of the Base Purchase Price (the “Environmental Defect Deductible”), then no adjustment ofthe Base Purchase Price shall occur, and none of the Properties which would be excluded by such procedure shall be excluded. Ifthe Base Purchase Price reduction which would result from the above provided for procedure as applied to all Asserted EnvironmentalDefects for which an adjustment is to be made exceeds the Environmental Defect Deductible, the Base Purchase Price shall beadjusted by the amount by which such reduction exceeds the Environmental Defect Deductible (the “Environmental DefectAmount”).

(c) Other Limitations. In no event shall an adjustment for any Asserted Defect exceed the Allocated Amount of theProperty to which such Asserted Defect relates. All Asserted Defect values and related adjustments to the Base Purchase Price shallbe made without duplication.

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Section 7.8 Title Dispute Resolution. Seller and Buyer shall attempt to agree on all Asserted Defects, DefectAmounts, Title Benefits and Title Benefit Amounts prior to Closing. If Seller and Buyer are unable to agree by Closing, the DefectAmounts and Title Benefit Amounts in dispute shall be exclusively and finally resolved pursuant to this Section 7.8. There shall be asingle arbitrator, who shall be a title or environmental attorney, as applicable, with at least 10 years’ experience in oil and gas title orenvironmental matters, as applicable, involving properties in the regional area in which the Properties are located, as selected bymutual agreement of Buyer and Seller within 15 days after the end of the Cure Period (the “Defect Arbitrator”). In the event theParties are unable to mutually agree upon the Arbitrator within such time period, then application shall be made to the AAA to appointthe Defect Arbitrator. The arbitration proceeding shall be held in Houston, Texas. The Arbitrator’s determination shall be made within20 days after submission of the matters in dispute and shall be final and binding upon both Parties, without right of appeal. In makingits determination, the Arbitrator shall be bound by the rules set forth in this Article VII and, subject to the foregoing, may considersuch other matters as in the opinion of the Arbitrator are necessary to make a proper determination. The Arbitrator, however, may notaward the Buyer a greater Defect Amount than the Defect Amount claimed by Buyer in its applicable Defect Notice, or award theSeller a greater Title Benefit Amount than the Title Benefit Amount claimed by Seller in its applicable Title Benefit Notice. TheArbitrator shall act as an expert for the limited purpose of determining the specific disputed Defect, Title Benefit, Defect Amountsand/or Title Benefit Amounts submitted by either Party and may not award damages, interest or penalties to either Party with respectto any matter. Seller and Buyer shall each bear its own legal fees and other costs of presenting its case. Each of Seller and Buyershall bear one-half of the costs and expenses of the Title Arbitrator. To the extent that the award of the Title Arbitrator with respect toany Defect Amount or Title Benefit Amount is not taken into account as an adjustment to the Base Purchase Price at Closing, thenwithin 10 days after the Arbitrator delivers written notice to Buyer and Seller of his award with respect to a Defect Amount or a TitleBenefit Amount, then such adjustment shall be made pursuant to Section 11.3. Nothing herein shall operate to cause Closing to bedelayed on account of any arbitration hereunder and to the extent any adjustments are not agreed upon by the Parties as of Closing,the Base Purchase Price shall be reduced at Closing pursuant to this Article VII (using the Defect Amounts asserted in good faith byBuyer and the Title Benefit Amounts asserted in good faith by Seller).

ARTICLE VIIICONDITIONS PRECEDENT TO CLOSING OBLIGATIONS

Section 8.1 Conditions Precedent to the Obligations of Buyer. The obligations of Buyer to consummate thetransactions contemplated by this Agreement are subject to each of the following conditions being met:

(a) Representations True and Correct. Each and every representation of Seller under this Agreement shall be trueand accurate in all material respects (except for those representations and warranties qualified by materiality, which shall be true in allrespects) as of the date when made and shall be true and accurate in all material respects (except for those representations andwarranties qualified by materiality, which shall be true in all respects) at and as of such time of Closing as if it had been made again atand as of the Closing.

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(b) Compliance with Covenants and Agreements. Seller shall have performed and complied in all material respectswith (or compliance therewith shall have been waived by Buyer) each and every covenant and agreement required by this Agreementto be performed or complied with by Seller prior to or at the Closing.

(c) Price Adjustment Limitations. The aggregate adjustment (if any) of the Purchase Price which results from theprocedures set forth in Section 6.5, Article VII and Section 13.1 does not exceed fifteen percent (15%) percent of the Base PurchasePrice.



Section 8.2 Conditions Precedent to the Obligations of Seller. The obligations of Seller to consummate thetransactions contemplated by this Agreement are subject to the each of the following conditions being met:

(a) Representations True and Correct. Each and every representation of Buyer under this Agreement shall be trueand accurate in all material respects (except for those representations and warranties qualified by materiality, which shall be true in allrespects) as of the date when made and shall be true and accurate in all material respects (except for those representations andwarranties qualified by materiality, which shall be true in all respects) at and as of such time of Closing as if it had been made again atand as of the Closing.

(b) Compliance With Covenants and Agreements. Buyer shall have performed and complied in all material respectswith (or compliance therewith shall have been waived by Seller) each and every covenant and agreement required by this Agreementto be performed or complied with by Buyer prior to or at the Closing.

(c) Price Adjustment Limitations. The aggregate adjustment (if any) to the Base Purchase Price which results fromthe procedures set forth in Section 6.5, Article VII and Section 13.1 does not exceed fifteen percent (15%) percent of the BasePurchase Price.



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Section 8.3 Termination.

(a) This Agreement may be terminated prior to Closing as follows:

(i) by mutual written consent of Seller and Buyer;

(ii) by Sellers, if the Closing does not occur on or before 5:00 pm in CST on June 15, 2017 (the “OutsideDate”);

(iii) by Buyer, if the Closing does not occur on or before the Outside Date;

(iv) by Sellers, at or after the Scheduled Closing Date, if the conditions set forth in Section 8.1 have beensatisfied, but the conditions set forth in Section 8.2 are not satisfied or are not capable of satisfaction at such time and arenot waived by Sellers;

(v) by Buyer, at or after the Scheduled Closing Date, if the conditions set forth in Section 8.2 have beensatisfied, but the conditions set forth in Section 8.1 are not satisfied or are not capable of satisfaction at such time and arenot waived by Buyer;

(vi) by either Party if, at or after the Scheduled Closing Date, the conditions set forth in Section 8.1(c),Section 8.1(d), Section 8.1(e), Section 8.2(c), Section 8.2(d) or Section 8.2(e) have not been satisfied or waived by Selleror Buyer, as applicable, and are not capable of satisfaction on or prior to the Outside Date.

Any termination pursuant to Section 8.3(a)(i) through 8.3(a)(vi) shall be effective upon the non-terminating Party’s receipt of theterminating Party’s written notice of termination. Any termination of this Agreement by Sellers shall require notice from both PetroCapand CPX and this Agreement may not be terminated upon notice from only one Seller.

(b) If (i) this Agreement is terminated by Sellers pursuant to Section 8.3(a)(ii) or Section 8.3(a)(iv) or by Buyerpursuant to Section 8.3(a)(iii) and (ii) at the time the written notice of termination is provided to the non-terminating Party (A) Buyer isin breach of this Agreement where such breach or breaches in the aggregate result (or would result if the Closing were thenscheduled to occur) in a failure of a condition set forth in Section 8.2(a) or Section 8.2(b), (B) Seller is not in breach of thisAgreement where such breach or breaches in the aggregate result (or would result if Closing were then scheduled to occur) in afailure of a conditions set forth in Section 8.1(a) or Section 8.1(b), and (C) all conditions to Closing set forth in Sections 8.1(c)through (e) are satisfied (or would be satisfied, solely but for any breaches of this Agreement by Buyer), then the Parties shall instructthe Escrow Agent to pay to Seller, as its sole and exclusive remedy, the Deposit as liquidated damages and not as a penalty. TheParties agree that the damages set forth in this Section 8.3(b) will be deemed liquidated damages and that the amount of liquidateddamages is reasonable considering all of the circumstances existing as of the date of this Agreement and constitute the Parties’ goodfaith estimate of the actual damages reasonably expected to result from Buyer’s breaches of this Agreement.

(c) If (i) Buyer is entitled to terminate this Agreement pursuant to Section 8.3(a)(iii) or Section 8.3(a)(v), or Sellerselect to terminate this Agreement pursuant to Section 8.3(a)(ii),

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(ii) either Seller is in breach of this Agreement where such breach or breaches in the aggregate results (or would result if the Closingwere then scheduled to occur) in a failure of a condition set forth in Section 8.1(a) or Section 8.1(b), (iii) Buyer is not in breach of thisAgreement where such breach or breaches in the aggregate result (or would result if Closing were then scheduled to occur) in afailure of a condition set forth in Section 8.2(a) or Section 8.2(b), and (iv) all conditions to Closing set forth in Section 8.2(c) through(e) are satisfied (or would be satisfied, solely but for any breaches of this Agreement by Seller), then Buyer shall be entitled to anyand all remedies available at Law (subject to the limitations in Section 17.5) or equity against such Seller, including any rights tospecific performance of this Agreement, in accordance with this Section 8.3(c). In the circumstances described in this Section8.3(c), the Parties acknowledge and agree that Buyer shall be entitled to specific performance in the broadest sense necessary toeffect the consummation of the transactions contemplated by this Agreement. The Parties specifically agree that the Arbitration Panelshall have the power to award specific performance if requested by the Buyer and that the Parties shall take all necessary steps togive effect to an award of specific performance in the event specific performance is so awarded. The Buyer shall not be required toestablish that it lacks an adequate remedy at law as a condition to obtaining an order for specific performance. In the event that (A)the Buyer does not seek an order to compel specific performance, or an order of specific performance is not awarded, and (B) theconditions set forth in clause (i), (ii), (iii) and (iv) of this Section 8.3(c) are met, then, in addition to the return of its Deposit andpayment of the Reimbursed Cost Amount, Buyer shall be entitled to recover damages which shall be limited to an amount equal to thelesser of (x) the actual out of pocket costs paid by Buyer to Third Parties in connection with this Agreement, and (y) three milliondollars ($3,000,000); provided, however, that any action to recover such damages shall be brought within thirty (30) days following thelater of (1) termination of this Agreement and (2) the withdrawal or termination of any action brought by Buyer to compel specificperformance, and any failure by Buyer to bring such an action during such time period shall be deemed a waiver of Buyer’s rightswith respect to such damages. Notwithstanding the foregoing, in the circumstances described in this Section 8.3(c), if Buyer elects tobring an action to compel specific performance, Buyer shall bring such action no later than thirty (30) days following termination of thisAgreement, and if Buyer fails to bring such an action within such period, Buyer shall be deemed to have waived its right to compelspecific performance of this Agreement (but shall not be deemed to have waived its right to recover damages).

(d) If this Agreement is terminated pursuant to this Section 8.3, this Agreement shall become void and of no furtherforce or effect, except for the provisions of Section 6.3 (Exculpation and Indemnification), Section 8.3 (Termination), Section 12.4 (NoCommissions Owed), Article XVI (Dispute Resolution) , Section 17.5 (Parties Bear Own Expenses/No Special Damages) , Section17.8 (Choice of Law), Section 17.21 (Confidentiality), and such parts of Article I (Definitions and References) as are necessary to giveeffect to the foregoing, all of which shall continue in full force and effect in accordance with their terms. If Buyer or Seller terminatesthis Agreement pursuant to Section 8.3 (other than in the circumstances described in Sections 8.3(b) or (c)), neither Buyer nor Sellershall have any liability to the other Party for termination of this Agreement, but, in such event, the Parties shall immediately (but in noevent later than two (2) days after termination) instruct the Escrow Agent to return the Deposit to Buyer.

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(e) If this Agreement is terminated for any reason pursuant to this Section 8.3, Seller shall reimburse Buyer for costsincurred by Buyer in accordance with the terms and provisions of the Side Letter Agreement (the “Reimbursed Cost Amount”). TheReimbursed Cost Amount shall be paid by Seller in accordance with the terms and provisions of the Side Letter Agreement. TheReimbursed Cost Amount shall not constitute damages and shall not count toward the limitation on damages set forth in Section8.3(c).

ARTICLE IXCLOSING

Section 9.1 Closing. The closing (herein called the “Closing”) of the transaction contemplated hereby shall take placein the offices of Thompson & Knight LLP at One Arts Plaza, 1722 Routh Street, Suite 1500, Dallas, Texas 75201, or at such otherplace mutually agreed by the Parties, on May 15, 2017 (the “Scheduled Closing Date”), at 10:00 a.m. Central Standard Time, or ifthe conditions referred to in Sections 8.1 and 8.2 have not been satisfied or waived in writing by the Scheduled Closing Date, thenSeller (in the case of a failure of a condition set forth in Section 8.2) or Buyer (in the case of a failure of a condition set forth inSection 8.1) shall provide written notice to the other Party describing, in reasonable detail, such failure. In such event, the ClosingDate shall be extended until three (3) Business Days after such conditions have been satisfied or waived, subject to the Parties rightto terminate under Section 8.3. The date on which the Closing occurs is referred to as the “Closing Date”.

Section 9.2 Seller’s Closing Obligations. At the Closing,

(a) Delivery of Conveyance. Upon receipt of payment of the amount provided in Section 9.3(a), Seller shall execute,acknowledge and deliver to Buyer, and shall cause CPX Operating to execute, acknowledge and deliver to Buyer, a conveyance ofthe Properties, including those Properties owned by CPX Operating as further set forth on Exhibit 9.2(a) (the “Conveyance”), in theform attached hereto as Schedule I (and with Exhibit A, Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit B and Exhibit C hereto, withsuch modifications as may be mutually agreed to by Buyer and Seller, being attached thereto), effective as of 7:00 a.m. local timewhere the Properties are located on May 1, 2017 (herein called the “Effective Date”).

(b) Federal and State Conveyance Forms. Seller shall execute (and, where required, acknowledge) and deliver toBuyer forms of conveyance or assignment as required by the applicable Governmental Authorities for transfers of any interests instate, federal or Indian leases included in the Oil and Gas Properties.

(c) Letters in Lieu. Seller shall, if requested by Buyer, execute and deliver to Buyer letters in lieu of transfer orders (orsimilar documentation), in form acceptable to both parties.

(d) Turn Over Possession. Seller shall turn over possession of the Properties to the extent Seller can do so.

(e) IRS Form 8594. Seller shall provide a copy of IRS Form 8594 completed in accordance with Section 3.4.

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(f) Release of Liens. Seller shall deliver original, executed and acknowledged releases, in recordable form, of allmortgage liens, security interests and financings statements granted by Seller or its Affiliates that encumber the Properties, includingthe liens described on Exhibit 4.1(n).

(g) Change of Operator Forms. Seller shall deliver appropriate evidence reflecting change of operator as required byapplicable Governmental Authorities.

(h) Non-Foreign Status Affidavit. If requested, Seller shall deliver a non-foreign status affidavit in the form (except forany de minimis changes thereto) of Schedule II attached hereto, as required by Section 1445 of the Code, executed by Seller.

(i) Closing Certificate. Each Seller shall deliver to Buyer a Closing Certificate dated as of the Closing Date, executedby an executive officer of Seller, certifying that all of the conditions set forth in Section 8.1 have been satisfied.

Section 9.3 Buyer’s Closing Obligations. At the Closing,

(a) Payment to Seller. Buyer shall deliver to the Seller, by wire transfer of immediately available funds to an accountdesignated by Seller in a bank located in the United States, an amount equal to the Purchase Price, less the Deposit.

(b) Succession by Buyer. Buyer shall (A) furnish to Seller such evidence (including, without limitation, evidence ofsatisfaction of all applicable bonding and surety requirements) as Seller may require that Buyer is qualified with the applicableauthorities to succeed Seller as the owner and, where applicable, operator of the Properties, (B) with respect to properties operated bySeller where Buyer is to succeed as operator, execute and deliver to Seller appropriate evidence reflecting change of operator asrequired by applicable Governmental Authorities, and (C) execute and deliver to Seller such forms as Seller may reasonably requestfor filing with the applicable authorities to reflect Buyer’s assumption of plugging and abandonment liabilities with respect to the Wellsor on units in which the Properties participate.

(c) IRS Form 8594. Buyer shall provide a copy of IRS Form 8594 completed in accordance with Section 3.4.

(d) Closing Certificate. Buyer shall deliver to Seller a Closing Certificate dated as of the Closing Date, executed by anexecutive officer of Buyer, certifying that all of the conditions set forth in Section 8.2 have been satisfied.

ARTICLE XPOST CLOSING ACTIONS

Section 10.1 Transfer of Files. Seller will use its best efforts to deliver to Buyer, at Buyer’s expense, and within ten(10) days after Closing, all files, records, and data relating to the Properties, including, without limitation, the following, if and to theextent that such files exist: all books, records, reports, manuals, files, title documents (including correspondence and curative),records of production and maintenance, revenue, sales, expenses, warranties, lease files, land files, well files, division order files,abstracts, title opinions, assignments, reports,

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property records, contract files, operations files, copies of tax and accounting records (but excluding Federal and state income taxreturns and records) and files, maps, core data, hydrocarbon analysis, well logs, mud logs, and field studies, together with other files,contracts, and other records and data and maps including any interpretations, analyses and reports related thereto, but excludingfrom the foregoing (a) Privileged Information, (b) Confidential Information, (c) the Seller Party Documents, or (d) to the extent suchdisclosure or transfer is subjected to payment of a fee or other consideration, for which Buyer has not agreed in writing to pay the feeor other consideration, as applicable. As to those files and records containing Confidential Information, Seller shall make acommercially reasonable good faith effort to obtain permission to provide such files or records to Buyer without waiving any legalprivilege breaching any agreement within five (5) days after the Closing, provided Seller is only obligated to cause those responsiblefor the files to expend a reasonable amount of time in an effort to obtain such permission and Seller shall not be obligated to incur anycosts or expenses to obtain such permission other than the salaries of such employees; provided, however, that in no event shallSeller have any obligations with respect to Privileged Information or the Seller Party Documents. Seller may, at its election, make andretain copies of any or all such files. Buyer shall preserve all files so delivered by Seller for a period of five (5) years following Closingand will allow Seller access (including, without limitation, the right to make copies at Seller’s expense) to such files at all reasonabletimes.

Section 10.2 Operational Transition. THERE IS NO ASSURANCE GIVEN BY SELLER THAT BUYER SHALLSUCCEED SELLER AS OPERATOR OF ANY PROPERTY WHERE OTHER PARTIES OWN INTERESTS IN THE WELLSLOCATED THEREON AND BUYER ACCEPTS THE RISK THEREOF.

Section 10.3 Notifications by Buyer. Immediately after the Closing, Buyer shall notify all applicable operators, non-operators, oil and gas purchasers, and Governmental Authorities that it has purchased the Properties.

Section 10.4 Farmout Agreement. Without limiting the generality of the other terms and provisions of this Agreement,(a) the Conveyance is being executed and delivered expressly subject to the terms and provisions of the Farmout Agreement, and (b)Buyer expressly agrees to be bound by the terms of the Farmout Agreement and any applicable Operating Agreement (as defined inthe Farmout Agreement). Further, between the Execution Date and the Closing Date, Buyer shall comply with the provisions set forthin Article 37 of the Farmout Agreement; provided, however, that nothing contained in this Section 10.4 shall be construed to requireBuyer to obtain approval of the Seller or the counterparty to the Farmout Agreement to disclose information with respect to thisAgreement or the transaction represented herein (including the names of the parties to this Agreement) to the extent, and then only tothe extent, required by applicable Law or necessary to comply with disclosure requirements of the SEC, New York Stock Exchange, orany other regulated stock exchange; provided, further, however, that Buyer shall consult with Seller regarding (and shall allow Sellerto review and provide comments to) any such required disclosure prior to disclosure to any Third Party and shall use commerciallyreasonably efforts to obtain any consent or approval necessary from any Third Parties in connection therewith.

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Section 10.5 Financial Statements. Each Seller shall reasonably cooperate with Buyer and make available, duringnormal business hours, to Buyer and its representatives prior to and for a period of fifteen (15) months following the Closing Date anyand all existing information and documents relating to revenues and expenses attributable to the Properties and in the possession ofsuch Seller that Buyer may reasonably require to comply with Buyer’s tax and financial reporting requirements and audits, includingany filings with any Governmental Authority and filings that may be required by the Securities and Exchange Commission under theSecurities Act of 1933 and/or the Securities Exchange Act of 1934. Without limiting the generality of the foregoing, each Seller willuse its commercially reasonable efforts after execution of this Agreement and following the Closing Date to cooperate with theindependent auditors chosen by Buyer (“Buyer’s Auditor”) in connection with their audit or review of any revenue and expenserecords attributable to the Properties that Buyer or any of its affiliates requires to comply with their tax, financial and other reportingrequirements. Each Seller’s cooperation will include (i) reasonable access during normal business hours to such Seller’s employeesand representatives designated by such Seller who were responsible for preparing or maintaining the revenue and expense recordsand work papers and other supporting documents used in the preparation of such financial statements as may be required by Buyer’sAuditor to perform an audit or conduct a review in accordance with generally accepted auditing standards or to otherwise verify suchfinancial statements; and (ii) delivery of one or more customary representation letters from such Seller to Buyer’s Auditor that arereasonably requested by Buyer to allow such auditors to complete an audit (or review of any financial statements), and to allowBuyer’s Auditor to issue an opinion with respect to its audit or review. Buyer will pay or, if paid, reimburse the applicable Seller, withinten (10) Business Days after demand therefor, for any reasonable out-of-pocket costs incurred by such Seller in complying with theprovisions of this Section 10.5. Notwithstanding the foregoing, nothing herein shall expand Seller’s representations, warranties,covenants or agreements set forth in this Agreement or give Buyer, its Affiliates or any Third Party any rights to which it is nototherwise expressly entitled hereunder.

ARTICLE XIACCOUNTING ADJUSTMENTS

Section 11.1 Adjustments for Revenues and Expenses. Appropriate adjustments to the Base Purchase Price andthe Purchase Price, as applicable, shall be made between Buyer and Seller so that:

(a) except as expressly provided otherwise in this Agreement, Buyer shall be entitled to its rights of ownership(including the right to production, proceeds of production and other proceeds), and shall be responsible for and bear (by payment,through the adjustments provided for herein or otherwise) all Property Expenses, in each case, attributable to the Properties for theperiod of time from and after the Effective Date. Additionally, Buyer shall pay to Seller $50,000 per month as overhead for Seller’soperation of the Properties (prorated for any period less than one month) for each month or part thereof between the Effective Dateand Closing; and

(b) except as provided in subsection (c) below, Section 11.4 below, Article XII, Article XV, and Exhibit 4.1(h), Sellershall remain entitled to all of the rights of ownership (including the right to all production, proceeds of production and other proceeds)and shall

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remain responsible for and bear (by payment, through the adjustments provided for herein or otherwise) all Property Expenses, ineach case, attributable to the Properties for the period of time prior to the Effective Date; and

(c) It is agreed that, in making such adjustments:

(i) oil which was produced from the Oil and Gas Properties and which was, on the Effective Date, stored intanks located on the Oil and Gas Properties (or located elsewhere but used by Seller to store oil produced from, orattributable to, the Oil and Gas Properties prior to delivery to oil purchasers) and above pipeline connections shall bedeemed to have been produced before the Effective Date and valued at the actual contract price or the price Seller wouldotherwise receive as of the Effective Date,

(ii) the provisions of Section 17.3 shall be effective as of the Effective Date,

(iii) casualty losses shall be handled in accordance with Section 13.1,

(iv) delay rentals shall be attributable to the date paid and not prorated over the period of such delay, and

(v) the Parties shall bear responsibility for Income Taxes and Asset Taxes as set forth in Article XV.

(d) The Base Purchase Price shall be reduced by an amount equal to all funds attributable to the Properties beingheld in suspense by Seller on the Closing Date.

(e) The Base Purchase Price shall be increased by one million dollars ($1,000,000) to account for the cost of certainactivities as provided in Section VII of the Side Letter Agreement.

(f) In the event Buyer elects to exclude the Orla Frac Pond #1 pursuant to the terms of the Side Letter Agreement, theBase Purchase Price shall be reduced by four hundred and fifty thousand dollars ($450,000).

Section 11.2 Initial Adjustment at Closing. At least five (5) days before the Closing Date, Seller shall provide to Buyera statement showing its computations of the amount of the adjustments provided for (a) i n Section 11.1 above using the bestinformation available to Seller at the time, which (i) for known amounts, shall be based on amounts which prior to such time haveactually been paid or received by Seller and (ii) for unknown amounts, shall be based on Seller’s reasonable good faith estimates,and (b) in Section 11.5, if any. Buyer and Seller shall use their commercially reasonable efforts to agree upon such adjustments priorto Closing, provided that if agreement is not reached, Seller’s computation shall be used at Closing, subject to further adjustmentunder Section 11.3 below.

Section 11.3 Adjustment Post Closing. On or before ninety (90) days after the Closing, Seller shall deliver to Buyer afinal settlement statement (the “Final Settlement Statement”) prepared by Seller based on actual income and expenses during theperiod between the Effective Date and Closing and which takes into account all final adjustments made to the Purchase Price. Assoon as practicable, and in any event within 30 days after receipt of the Final Settlement

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Statement, Buyer shall deliver to Seller a written report containing any proposed changes to the Final Settlement Statement and anexplanation of any such changes and the reasons therefor (the “Dispute Notice”). Any changes not so specified in the DisputeNotice shall be deemed waived and Seller’s determinations with respect to all such elements of the Final Settlement Statement thatare not addressed specifically in the Dispute Notice shall prevail. If Buyer fails to timely deliver a Dispute Notice to Seller containingchanges Buyer proposes to be made to the Final Settlement Statement, the Final Settlement Statement as delivered by Seller will bedeemed to be correct and mutually agreed upon by the Parties, and will be final and binding on the Parties and not subject to furtheraudit or arbitration. If Seller and Buyer are unable to resolve the matters addressed in the Dispute Notice (if any), each of Buyer andSeller shall within 14 Business Days after the delivery of such Dispute Notice, summarize its position with regard to such dispute in awritten document of 20 pages or less and submit such summaries to the Accounting Arbitrator, together with the Dispute Notice, theFinal Settlement Statement and any other documentation such Party may desire to submit. Within 20 Business Days after receivingthe Parties’ respective submissions, the Accounting Arbitrator shall render a decision choosing either Seller’s position or Buyer’sposition (or another position which shall be no less favorable to Seller than Buyer’s position and no less favorable to Buyer thanSeller’s position) with respect to each matter addressed in any Dispute Notice, based on the materials submitted to the AccountingArbitrator as described above. Any decision rendered by the Accounting Arbitrator pursuant hereto shall be final, conclusive andbinding on Seller and Buyer and will be enforceable against the Parties in any court of competent jurisdiction. The costs of theAccounting Arbitrator shall be borne pro rata between the Parties with each Party being responsible for the Accounting Arbitrator’scosts to the extent the Accounting Arbitrator has not selected such Party’s position on an aggregate dollar basis with respect to allamounts submitted for resolution by the Accounting Arbitrator. If the adjustments set forth in the Final Settlement Statement aremutually agreed upon by Seller and Buyer, the Final Settlement Statement and the adjusted Purchase Price shall be final and bindingon the Parties, subject to the provisions of Section 11.4. Any difference in the Purchase Price as paid at Closing and the PurchasePrice as adjusted pursuant to the Final Settlement Statement shall be paid by the owing Party to the owed Party within 10 days afterfinal determination of such owed amounts in accordance herewith. All amounts paid pursuant to this Section 11.3 shall be deliveredin United States currency by wire transfer of immediately available funds to the account specified in writing by the relevant Party.

Section 11.4 Additional Expenses. After the Parties’ agreement upon the Final Settlement Statement, ( i) if eitherParty receives monies belonging to the other Party, including proceeds of production, then such amount shall, within 30 days after theend of the calendar month in which such amounts were received, be paid over to the proper Party, (ii) if either Party pays monieswhich are the obligation of the other Party under Section 11.1 above, then such other Party shall, within 30 days after the end of thecalendar month in which the applicable invoice and proof of payment of such invoice were received, reimburse the Party which paidsuch expenses, (iii) if a Party receives an invoice of an expense or obligation (other than an invoice of an expense or obligation withrespect to Asset Taxes or Income Taxes) which is owed by the other Party, such Party receiving the invoice shall promptly forwardsuch invoice to the Party obligated to pay the same, and (iv) if an invoice or other evidence of an obligation (other than an obligationwith respect to Asset Taxes or Income Taxes) is received by a Party, which is partially an obligation of both Seller and Buyer, then theParties shall consult with each other, and each shall promptly pay its portion of such obligation to the obligee thereof.

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Section 11.5 Imbalance Adjustments. If there exists any overproduction or underproduction with respect to the Wellsas of the Effective Date and either Buyer or Seller gives the other Party written notice of such fact prior to the Defect Deadline, adetermination shall be made pursuant to Section 11.2 prior to Closing of (a) the actual amount of overproduction and (b) the actualamount of underproduction. If there is an actual amount of overproduction, then the Purchase Price shall be decreased by an amountequal to the actual contract price or the price Seller would otherwise receive as of the Effective Date for each Mcf of the excess. Inaddition, if there is an actual amount of underproduction, the Purchase Price shall be increased by an amount equal to the actualcontract price or the price Seller would otherwise receive as of the Effective Date for each Mcf of the excess.

Section 11.6 Suspended Funds. Seller shall retain all funds (including interest owed thereof, if any) relating to theProperties that are held in suspense by Seller as of the Closing Date as further set forth on Exhibit 4.1(v). Buyer acknowledges thatthe Base Purchase Price will be reduced at Closing to account for such suspended funds and, from and after the Closing, Buyer shallbe responsible for the proper distribution of all such suspended proceeds. Buyer agrees to indemnify, defend and hold harmlessSeller from and against any and all claims, liabilities and losses related to such suspended proceeds except to the extent Sellerunlawfully suspended such proceeds.

ARTICLE XIIASSUMPTION AND INDEMNIFICATION

Section 12.1 Assumption and Indemnification By Buyer. From and after the Closing, Buyer shall assume timely payand perform, all duties, obligations and liabilities relating to the ownership and/or operation of the Properties regardless of whether thesame accrued or otherwise arose before or after the Closing (including, without limitation, those arising under the ApplicableContracts), other than the Retained Obligations (collectively, the “Assumed Obligations”). Provided that the Closing occurs, Buyershall indemnify and hold the Seller Indemnified Parties harmless from and against any and all claims, actions, causes of action,liabilities, damages, costs or expenses (including, without limitation, court costs and consultants’ and attorneys’ fees) of any kind orcharacter (individually a “Seller’s Indemnified Claim” and collectively “Seller’s Indemnified Claims”) arising out of:

(a) any misrepresentation or breach of any warranty, covenant or agreement of Buyer contained in this Agreement;

(b) the Assumed Obligations, provided that, with respect to Seller’s Indemnified Claims that occurred or arose beforethe Closing, Buyer is not obligated to indemnify Seller under this subparagraph (b) for any Buyer’s Indemnified Claim to the extent thatSeller is obligated to indemnify Buyer for such Buyer’s Indemnified Claim pursuant to this Agreement;

(c) except for the Retained Obligations, the condition (“Condition of the Properties”) of the Properties on the date ofClosing (including, without limitation, within such matters all obligations to properly plug and abandon, or replug and re-abandon,wells, to restore the surface of the Properties and to comply with, or to bring the Properties into compliance with, ApplicableEnvironmental Laws, rules, regulations and orders, including conducting any

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remediation activities which may be required on or otherwise in connection with activities on the Properties), regardless of whethersuch condition or the events giving rise to such condition arose or occurred before or after the Closing; provided that, with respect toSeller’s Indemnified Claims that occurred or arose before the Closing, Buyer is not obligated to indemnify Seller under thissubparagraph (c ) for any Buyer’s Indemnified Claim to the extent that Seller is obligated to indemnify Buyer for such Buyer’sIndemnified Claim pursuant to this Agreement; or

(d) any Defect, except for any right of Buyer under Article VII to an adjustment to the Base Purchase Price for suchDefect or to exclude a Property for such Defect and to receive a reduction in the Base Purchase Price to account for the exclusion ofsuch Property.

THE FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY WHETHER OR NOT SUCH DUTIES,OBLIGATIONS OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES,COSTS OR EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE,CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSSNEGLIGENCE OR WILLFUL MISCONDUCT) OF ANY INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.

Section 12.2 Indemnification By Seller. Sellers shall retain all costs, obligations and liabilities related to the RetainedObligations. From and after Closing, each Seller Party severally (and not jointly) shall indemnify and hold the Buyer IndemnifiedParties harmless from and against any and all claims, actions, causes of action, liabilities, damages, costs or expenses (includingwithout limitation court costs and consultants and attorneys' fees) (individually a “Buyer’s Indemnified Claim” and collectively“Buyer’s Indemnified Claims”) arising out of:

(a) the employment relationship between Seller and any of Seller’s present or former employees or the termination ofany such employment relationship;

(b) any personal injury (including death) or property damage related to Seller’s ownership or operation of the Oil andGas Properties prior to Closing;

(c) the liens described on Exhibit 4.1(n);

(d) any misrepresentation or breach of any warranty, covenant or agreement of Seller contained in this Agreement; or

(e) the Retained Obligations.

provided, however, no Seller Party shall be obligated to indemnify Buyer under this Section 12.2(d) for a misrepresentation or breachof any representation or warranty contained in this Agreement (i) any individual Buyer’s Indemnified Claim unless the amount of suchBuyer’s Indemnified Claim exceeds $25,000, and (ii) any Buyer’s Indemnified Claims exceeding $25,000 except to the extent, if any,that the aggregate of all of Buyer’s Indemnified Claims exceeds two percent (2%) of the Base Purchase Price; provided, further,however, that the foregoing limitations shall not apply to Buyer’s Indemnified Claims (A) under Section 12.2(d)

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for any misrepresentation or breach of any Fundamental Representations or breach of any covenant or agreement in this Agreement,or (B) under Section 12.2(a), (b), (c) or (e).

Section 12.3 Notice of Claim. If indemnification pursuant to Section 12.1 or Section 12.2 is sought, the party seekingindemnification (the “Indemnitee”) shall give written notice to the indemnifying party of an event giving rise to the obligation toindemnify, describing in reasonable detail the factual basis for such claim, and for a period of thirty (30) days shall allow theindemnifying party to assume and conduct the defense of the claim or action with counsel reasonably satisfactory to the Indemnitee,and cooperate with the indemnifying party in the defense thereof; provided, however, that the omission to give such notice to theindemnifying party shall not relieve the indemnifying party from any liability which it may have to the Indemnitee, except to the extentthat the indemnifying party is prejudiced by the failure to give such notice. In the case of a claim for indemnification based upon aThird Party claim, the indemnifying party, on or before the 30th day after its receipt of the claim notice under this Section 12.3, shallnotify the Indemnitee whether it admits or denies its liability to defend the Indemnitee against the claim at the sole cost and expense ofthe indemnifying party. Any failure by the indemnifying party to admit or deny its liability to defend the indemnitee shall be deemed tobe a denial by the indemnifying party as to its liability or obligation to defend the Indemnitee. The Indemnitee is authorized, prior toand before the expiration of this 30-day period, to file any motion, answer or other pleading that it shall deem necessary or appropriateto protect its interests or those of the indemnifying party and that is not prejudicial to the indemnifying party. If the indemnifying partydoes not admit its liability to defend the Indemnitee or admits its liability to defend the Indemnitee but fails diligently to prosecute orsettle the claim, then the Indemnitee shall have the right to defend against the claim at the sole cost and expense of the indemnifyingparty, with counsel of the Indemnitee’s choosing, subject to the right of the indemnifying party to admit its liability to defend theIndemnitee and assume the defense of the claim at any time prior to its settlement or final determination. If the indemnifying party hasnot yet admitted its liability to defend the Indemnitee for a Claim, the Indemnitee shall notify the indemnifying party of any proposedsettlement and the indemnifying party shall have the option, on or before the tenth (10th) day following receipt of that notice (i) toadmit in writing its liability to defend the Indemnitee for the claim, and (ii) if its liability to defend the Indemnitee is so admitted, toreject, in its reasonable judgment, the proposed settlement. If the Indemnitee settles any Third Party claim over the objection of theindemnifying party after the indemnifying party has timely admitted its obligation for indemnification in writing and assumed thedefense of the Third Party claim, the Indemnitee shall be deemed to have waived any right to indemnity with respect to the ThirdParty claim. The Indemnitee shall have the right to employ separate counsel to represent the Indemnitee if the Indemnitee is advisedby counsel that an actual conflict of interest makes it advisable for the Indemnitee to be represented by separate counsel and thereasonable expenses and fees of such separate counsel shall be paid by the indemnifying party.

Section 12.4 No Commissions Owed. Seller agrees to indemnify and hold the Buyer Indemnified Parties harmlessfrom and against any and all claims, actions, causes of action, liabilities, damages, losses, costs or expenses (including, withoutlimitation, court costs and attorneys' fees) of any kind or character arising out of or resulting from any agreement, arrangement orunderstanding alleged to have been made by, or on behalf of, Seller with any broker or finder in connection with this Agreement or thetransaction contemplated hereby. Buyer agrees to indemnify and hold the Seller Indemnified Parties harmless from and against any

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and all claims, actions, causes of action, liabilities, damages, losses, costs or expenses (including, without limitation, court costs andattorneys' fees) of any kind or character arising out of or resulting from any agreement, arrangement or understanding alleged to havebeen made by, or on behalf of, Buyer with any broker or finder in connection with this Agreement or the transaction contemplatedhereby.

Section 12.5 Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreementshall be treated by the Parties as an adjustment to the Purchase Price for U.S. federal and applicable state income Tax purposes,unless otherwise required by Law.

Section 12.6 Materiality. Notwithstanding anything herein or in any agreement delivered hereunder to the contrary,for the purpose of calculating the amount of damages in connection with any Buyer’s Indemnified Claim (but not for the purpose ofdetermining whether a breach has occurred or the Buyer is entitled to indemnity hereunder) no effect shall be given to any qualifiersas to materiality, Material Adverse Effect or material adverse effect set forth in any representation or warranty or any certifications andaffirmations of representations or warranties in any certificate delivered at Closing.

Section 12.7 Indemnity Escrow. (a) On the Closing Date, Escrow Agent shall retain the Deposit in the Escrow Account (such amount, the “Indemnity

Escrow Amount”) for the purpose of securing the satisfaction and discharge of indemnity claims of Buyer against Seller under thisAgreement. The Indemnity Escrow Amount shall be governed by the provisions of this Section 12.7 and the Escrow Agreement. Thejoint, written authorization of representatives of Buyer and Sellers pursuant to the Escrow Agreement shall be required for thedisbursement of any portion of the Indemnity Escrow Amount. The Indemnity Escrow Amount shall not limit Buyer’s right to recoverany amount otherwise due from Sellers hereunder but is intended only to provide a secure source of funding for such recovery.

(b) With respect to each claim for indemnification asserted in writing by Buyer against Seller pursuant to Article XII

during the Survival Period, upon final resolution or determination of such an indemnity or warranty claim by the Parties or inaccordance with this Article XII, resolving the claim in favor of Buyer, Buyer and Sellers shall jointly instruct the Escrow Agent todisburse to Buyer the amount set forth in such joint written instruction, which will be that portion of the Indemnity Escrow Amountbeing held in the Escrow Account as would satisfy such finally resolved or determined indemnity or warranty claim.

(c) On the nine-month anniversary of the Closing Date, Buyer and Sellers shall jointly instruct the Escrow Agent to

release to Sellers an amount equal to fifty percent (50%) of the total of any amounts then-remaining in the Escrow Account less theaggregate amount of all outstanding claims for indemnification or warranty asserted in good faith by Buyer, which Buyer has providedto Sellers in writing in accordance with Article XII that have not been previously satisfied (which monies shall remain part of theEscrow Account until final resolution of such outstanding indemnity and/or warranty claims). For the avoidance of doubt, an amountequal to

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50% of the Deposit plus all interest earned thereon plus the aggregate amount of all such outstanding claims shall remain part of theEscrow Account for the remaining Survival Period.

(d) Buyer and Sellers shall jointly instruct the Escrow Agent to release to Sellers any amounts then remaining in the

Escrow Account on the first Business Day after the expiration of the Survival Period, except for the aggregate amount of alloutstanding claims for indemnification or warranty which Buyer has provided in writing and in good faith to Sellers in accordance withArticle XII that have not been previously satisfied (which monies shall remain part of the Indemnity Escrow Account until finalresolution of such outstanding indemnity and/or warranty claims).

ARTICLE XIIICASUALTY LOSSES

Section 13.1 Casualty Loss. In the event of damage by fire or other casualty to, or condemnation of, all or anyportion the Properties prior to the Closing, this Agreement shall remain in full force and effect, and in such event:

(a) Oil and Gas Properties. As to each such Property so affected which is an Oil and Gas Property, then (unlessSeller is able to and elects to repair such damage, which Seller shall have no obligation to do, in which case all rights to insuranceproceeds, and claims against third parties, related thereto shall belong to Seller), the Purchase Price will not be adjusted, and Sellershall, at Seller’s election, either collect (and when collected pay over to Buyer) any insurance claims related to such damage, orassign to Buyer such insurance claims, and, in either event, Buyer shall take title to the Property affected by such loss withoutreduction of the Purchase Price.

(b) Other Properties. As to each such Property which is other than an Oil and Gas Property and which is notcondemned, Seller shall, at Seller’s election, either (i) repair such damage or replace such Property, (ii) collect (and when collectedpay over to Buyer) any insurance claims related to such damage, or (iii) assign to Buyer any insurance claims related to suchdamage. Whether Seller elects either (i), (ii) or (iii) under this Section 13.1(b), Buyer shall take title to the Property (or thereplacement property to the extent Seller elects to replace such Property under (i)) affected by such loss without reduction of thePurchase Price.

Seller shall maintain its existing insurance coverage, and in the event of a loss other than condemnation or other governmental takingwhich is not covered by insurance, Seller shall have no obligation to Buyer with respect thereto; provided that, if Buyer so requests,and if Seller has not repaired the damage or replaced the Property and if Buyer has not elected option (i) in Section 13.1(a) above,Seller will assign any rights it may have against third parties with respect to such damaged Property. Seller shall notify Buyer withintwo (2) Business Days following the occurrence of any event that gives rise to a casualty loss pursuant to this Article XIII.

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ARTICLE XIVNOTICES

Section 14.1 Notices. All notices and other communications required under this Agreement shall (unless otherwisespecifically provided herein) be in writing and be delivered personally, by recognized commercial courier or delivery service whichprovides a receipt, by facsimile or electronic mail (with receipt acknowledged), or by registered or certified mail (postage prepaid), atthe following addresses: If to Buyer: If to Seller:Resolute Natural Resources Southwest, LLC 1700 Lincoln Street, Suite 2800 PetroCap CPX, LLCDenver, CO 80203 Attention: Lane BritainAttention: General Counsel 2602 McKinney Avenue, Suite 400Email: [email protected] Dallas, Texas 75204Fax: 303-623-3628 Email: [email protected] Telephone: (214) 871-7697 PetroCap CPX, LLC Attention: David Hopson 2602 McKinney Avenue, Suite 400 Dallas, Texas 75204 Email: [email protected] Telephone: (214) 871-7697 CP Exploration II, LLC Attention: Tom Powell 420 Oil Center Drive Lafayette, Louisiana 70503 Email: [email protected] Telephone: (337) 984-4589 With copies (which shall not constitute notice) to: Thompson & Knight LLP 98 San Jacinto Boulevard, Suite 1900 Austin, Texas 78701 Attn: Arthur Wright Fax: (512) 469-6180 Email: [email protected] Thompson & Knight LLP One Arts Plaza 1722 Routh Street, Suite 1500 Dallas, Texas 75201

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Attn: Cole Bredthauer Fax: (214) 880-3106 Email: [email protected] Chaffe McCall, L.L.P. 1100 Poydras Street, Suite 2300 New Orleans, Louisiana 70163-2300 Attn: V.M. Wheeler III, Esq. Fax: (504) 544-6046 E-Mail: [email protected]

or such other post office address within the continental limits of the United States as a Party may designate for itself by giving noticeto the other Party, in the manner provided in this Section, at least ten (10) days prior to the effective date of such change ofaddress. All notices given by personal delivery or mail shall be effective on the date of actual receipt at the appropriate address asprovided above. Notices given by facsimile or electronic mail, if receipt is confirmed by the transmitting device, shall be effective uponactual receipt of received during recipient’s normal business hours or at the beginning of the next business day after receipt if receivedafter recipient’s normal business hours.

ARTICLE XVTAX MATTERS

Section 15.1 Asset Taxes.

(a) Seller shall be allocated and bear all Asset Taxes for any period or portion thereof ending prior to the EffectiveDate, and Buyer shall be allocated and bear all Asset Taxes for any period or portion thereof that begins at or after the Effective Date.Each Party shall be responsible for its own Income Taxes.

(b) For purposes of this Section 15.1, (i) Asset Taxes that are attributable to the severance or production ofHydrocarbons shall be allocated to the period in which the severance or production giving rise to such Asset Taxes occurred, (ii)Asset Taxes that are based upon or related to income or receipts or imposed on a transactional basis (other than such Asset Taxesdescribed in clause (i)), shall be allocated to the period in which the transaction giving rise to such Asset Taxes occurred, and (iii)Asset Taxes that are ad valorem, property or other Asset Taxes imposed on a periodic basis pertaining to a Straddle Period shall beallocated between the portion of such Straddle Period ending immediately prior to the date on which the Effective Date occurs and theportion of such Straddle Period beginning on the date on which the Effective Date occurs by prorating each such Asset Tax based onthe number of days in the applicable Straddle Period that occur before the date on which the Effective Date occurs, on the one hand,and the number of days in such Straddle Period that occur on or after the date on which the Effective Date occurs, on the otherhand. For purposes of clause (iii) of the preceding sentence, the period for such Asset Taxes shall begin on the date on whichownership of the applicable Properties gives rise to liability for the particular Asset Tax and shall end on the day before the next suchdate.

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(c) To the extent the actual amount of an Asset Tax is not determinable at the Closing or at the time of thedetermination of the Final Settlement Statement pursuant to Section 11.3, as applicable, (i) the Parties shall utilize the most recentinformation available in estimating the amount of such Asset Tax for purposes of such adjustment, and (ii) upon the laterdetermination of the actual amount of such Asset Tax, timely payments will be made from one Party to the other to the extentnecessary to cause each Party to bear the amount of such Asset Tax that is allocable to such Party under Section 15.1(b). Buyershall be responsible for the preparation and timely filing of any Tax Returns and the payment to the applicable Taxing Authority of allAsset Taxes that become due and payable on or after the Closing Date, and Buyer shall indemnify and hold Seller harmless for anyfailure to file such Tax Returns and to make such payments; except Seller shall be responsible for the payment of all ad valorem, realproperty and personal property taxes for the Straddle Period on Properties operated by Seller, provided that Buyer shall reimburseSeller for any such Taxes that are allocated to Buyer pursuant to Section 15.1(b).

Section 15.2 Transfer Fees and Taxes. All required documentary, filing and recording fees and expenses inconnection with the filing and recording of the assignments, conveyances or other instruments required to convey title to theProperties to Buyer shall be borne by Buyer. Any and all Transfer Taxes shall be borne by Buyer, provided that Seller shall pay orcause to be paid to the applicable Governmental Authorities any Transfer Taxes that it is required by Law to collect and remit. Buyershall indemnify and hold Seller harmless from and against such Transfer Taxes within thirty (30) days of Seller's written demandtherefor. If Seller (not Buyer) is required by applicable Law to appeal or protest the assessment of Transfer Taxes, the appeal orprotest of such proposed assessment shall be treated as an item for which Seller is entitled to indemnification and if Buyer provides awritten request and instructs Seller to do so, Seller shall prosecute the protest or appeal; in such event Buyer shall pay all out-of-pocket expenses of Seller (including attorneys’ fees) incurred by Seller in connection with such appeal or protest. Seller and Buyershall reasonably cooperate in good faith to minimize, to the extent permissible under applicable Law, the amount of any such TransferTaxes.

Section 15.3 Tax Returns. The Parties shall use their commercially reasonable efforts to cooperate fully, as and tothe extent reasonably requested by the other Party, in connection with the filing of Tax Returns and any audit, litigation, or otherproceeding with respect to Taxes relating to the Properties. Such cooperation shall include the retention and (upon another Party’srequest) the provision of records and information that are relevant to any such Tax Return or audit, litigation or other proceeding andmaking employees available on a mutually convenient basis to provide additional information and explanation of any materialprovided under this Agreement. The Parties agree to retain all books and records with respect to Tax matters pertinent to theProperties relating to any Tax period beginning before the Closing Date until the expiration of the statute of limitations of the respectiveTax periods and to abide by all record retention agreements entered into with any Governmental Authority.

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ARTICLE XVIDISPUTE RESOLUTION

Section 16.1 Arbitration.

(a) Except as expressly provided otherwise in this Agreement, all disputes between the Parties arising under thisAgreement shall be solely and exclusively resolved by final and binding arbitration. The arbitration shall be administered by theAmerican Arbitration Association (“AAA”) in accordance with, and in the following order of priority: (a) the terms of these arbitrationprovisions; (b) the Commercial Arbitration Rules of the AAA; (c) the Federal Arbitration Act (Title 9 of the United States Code); and (d)the Texas General Arbitration Act (Tex. Civ. Prac. & Rem. Code § 171.001). The validity and enforceability of these arbitrationprovisions shall be determined in accordance with the same order of priority. In the event of any inconsistency between thesearbitration provisions and such rules and Acts these arbitration provisions shall control. Judgment upon any award renderedhereunder shall be entered in any court having jurisdiction thereof, and the parties consent to the jurisdiction of any state or federalcourt in Texas. Commencement of and demand for arbitration shall be made by written notice (“Arbitration Notice”) by the initiatingParty (claimant) to the other Party (respondent) which contains a statement of the nature of the dispute, the amount involved and therelief or remedy sought.

(b) Each Party shall select one impartial arbitrator, who is experienced and knowledgeable in the areas involved inthe dispute, within ten (10) working days of their receipt of Notice that arbitration has been demanded and commenced, and each willnotify the other Party of the name of its selected arbitrator within that same time period. If Seller o r Buyer refuses to name anarbitrator, application will be made to the AAA. The two arbitrators thus selected will confer within ten (10) business days of their finalselection and agree upon a third arbitrator (collectively, the “Arbitration Panel”). If the two arbitrators are unable to agree on a thirdarbitrator within sixty (60) working days of their first contact, the nomination of the third arbitrator will follow the same procedure as thenomination of a Party arbitrator for a Party refusing to make a selection. AAA Rules regarding the selection, qualification, andchallenge of arbitrator shall only apply to the second or third arbitrators if those arbitrators are selected by the AAA. No member of theArbitration Panel may be involved in the controversy, be or have been an officer, director, representative, employee or agent of or foreither Party. The third arbitrator shall act as chairman of the Arbitration Panel.

(c) The costs and fees of the arbitrators selected by Seller and Buyer shall be borne by the Party selecting sucharbitrator, unless otherwise awarded by the Arbitration Panel. The costs and fees attributable to the third arbitrator shall be sharedequally by Seller and Buyer, unless otherwise awarded by the Arbitration Panel.

(d) The Arbitration Panel may engage engineers, accountants or other consultants that the Arbitration Panel deemsnecessary to render a decision in the arbitration proceeding. All fees of any such consultants shall be borne equally by Seller andBuyer, unless otherwise awarded by the Arbitration Panel.

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(e) The arbitrators will establish a schedule that will result in a final arbitration award to be rendered in written formnot later than 180 days following the appointment of the third arbitrator. The place of the arbitration shall be Houston, Texas.

(f) Seller and Buyer agree that pre-arbitration hearing discovery is necessary. Within twenty (20) business days afterthe appointment of the third arbitrator, the Parties agree to exchange lists of the witnesses and exhibits each then plans to call anduse in the arbitration hearing. Within twenty (20) business days after the exchange of witness and exhibit lists, the Parties mayrequest additional discovery, if any is necessary, from the other Party. Seller and Buyer agree to respond to any such additionalrequest for documents from the other Party within thirty (30) days after receiving such request, and each agrees to attempt in goodfaith to schedule the depositions of witnesses requested by the other side by agreement. If the Parties are unable to agree on anyaspect of discovery requested, such discovery issue shall be presented to and resolved by the Arbitration Panel.

(g) Any dispute or difference arising under or out of, in relation to or in any way connected with this Agreement orany other document or agreement contemplated or related to this Agreement (whether contractual, tortious, equitable, statutory orotherwise including, without limitation, the negotiation, execution, existence, amendment, validity, enforceability, performance, non-performance, breach, termination, interpretation or construction thereof), and all questions as to whether or how specific disputes areto be resolved pursuant to this Article shall be resolved in accordance with the procedures of this Article. Without limiting thegenerality of the foregoing, such disputes include disputes over the existence, validity, interpretation or scope of the agreement underwhich arbitration is sought, and who are proper parties to the arbitration. In any arbitration under this Article, the arbitration panel shallhave the power to rule on its own jurisdiction, including any objection to the initial or continuing existence, validity or the effectivenessof the arbitration agreement. For the purposes of challenges to the jurisdiction of the arbitration panel, the arbitration clause shall beconsidered as separable from any contract of which it forms a part.

(h) A written decision by two (2) of the arbitrators will be final and binding on Seller and Buyer. An arbitration awardwill be in writing and signed by the arbitrators. An arbitration award entered herein can be confirmed by either Seller or Buyer in theUnited States District Court for the Northern District of Texas or any state district court for the State of Texas, and a judgment may beentered on the arbitration award by the same court.

(i) Punitive damages may not be awarded by the Arbitration Panel. The Parties specifically agree that the ArbitrationPanel shall have the power to award specific performance to the extent expressly permitted under this Agreement if requested by theBuyer and that the Parties shall take all necessary steps to give effect to an award of specific performance in the event specificperformance is so awarded. The Arbitration Panel shall not have the power to award damages to Seller against the Buyer other thana release of the Deposit and as provided in the following sentence. The Arbitration Panel shall have the power to award recovery tothe prevailing Party of all or part of its costs, expenses and attorneys’ fees incurred in conjunction with such arbitration proceeding. The Parties wish to avoid multiple arbitration cases in which similar evidence is presented. Therefore, either party may move toconsolidate any arbitration proceeding under this Article with another arbitration or arbitrations under this Article.

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(j) Notwithstanding anything in this Agreement to the contrary, Seller a n d Buyer, their Affiliates, employees,contractors, attorneys, and auditors shall keep the substance of these final and binding arbitration proceedings confidential to theextent the same is permissible, consistent with the responsibilities of the attorneys under the pertinent codes of professionalresponsibility or obligations which may reasonably require disclosure to financial institutions, limited partners, investors, consultantsfor evaluation purposes or as may be ordered by the federal or state government or a court of competent jurisdiction. Under nocircumstances shall any documents memorializing the substance of any aspect of these proceedings be disclosed or released to thenewspaper or other media absent the mutual agreement of Parties. Seller and Buyer will use all reasonable efforts to obtain protectiveorders before disclosing any terms of these proceedings to any federal or state government or a court of competent jurisdiction.

(k) Notwithstanding anything in this Article XVI to the contrary, each of the Parties hereto agree that it will not bring orsupport any action (whether at law, in equity, in contract, in tort or otherwise) against the Debt Financing Sources in any way relatingto this Agreement or any of the transactions contemplated by this Agreement, including any dispute arising out of or relating in anyway to any proposed or actual debt financing in connection with the transactions contemplated by this Agreement in any forum otherthan the Supreme Court of the State of New York, County of New York, or, if under applicable law exclusive jurisdiction is vested in theFederal courts, the United States District Court for the Southern District of New York (and appellate courts thereof). The provisions ofthis Section 16.1(k) shall be enforceable by each Debt Financing Source, its Affiliates and their respective successors and permittedassigns.

ARTICLE XVIIMISCELLANEOUS MATTERS

Section 17.1 Survival of Provisions. The representations and warranties of Buyer contained in this Agreement, or inany certificate delivered at Closing shall survive the Closing and the delivery of the Conveyance. The representations and warrantieso f Seller contained in this Agreement, or in any certificate delivered at Closing shall survive the Closing and delivery of theConveyance for period of twelve (12) months from the from the Closing (the “Survival Period”), except for the FundamentalRepresentations, which shall survive the Closing until the expiration of the applicable statute of limitations. All covenants of Seller orBuyer contained in this Agreement, or in any certificate delivered at the Closing shall survive the Closing and the delivery of theConveyance, except for (a) any covenant which by its terms terminates as of a specific date, or is only made for a specified period, (b)the covenants set forth in Section 12.2, (and any other covenants of Seller to indemnify Buyer) which, with respect to Sellers’obligation to indemnify for misrepresentations or breaches of representations and warranties in this Agreement, shall only survive forthe Survival Period (other than with respect to the Fundamental Representations). Notice of any claim for indemnification by Buyerarising during the Survival Period must be given to the other Party within 90 days after such claim arises as a condition precedent tothe right to enforce such claim for indemnification. Buyer may bring a suit to enforce any claim for indemnification under thisAgreement, to the extent arising during the Survival Period, for a period of two (2) years after the cause of action arose with respect toany matter for which Buyer shall have given Seller written notice during the Survival Period. Nothing in this Agreement shall limit thetime period during which Buyer may make a claim against Seller for breach of the special warranty of title in the Conveyance.

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Section 17.2 Further Assurances. After the Closing, Seller shall execute and deliver, and shall otherwise cause to beexecuted and delivered, from time to time, such further instruments, notices, division orders, transfer orders and other documents, anddo such other and further acts and things, as may be reasonably necessary to more fully and effectively grant, convey and assign theProperties to Buyer.

Section 17.3 Gas Imbalances, Make-Up Obligations. Without limitation on any other provision of this Agreement, it isexpressly understood and agreed that, upon the occurrence of Closing, but effective as of the Effective Date, Buyer shall succeed toand assume the position of Seller with respect to all gas imbalances and make-up obligations related to the Properties (regardless ofwhether such imbalances or make-up obligations arise at the wellhead, pipeline, gathering system or other level, and regardless ofwhether the same arise under contract or otherwise). As a result of such succession, Buyer shall (i) be entitled to receive any and allbenefits which Seller would have been entitled to receive by virtue of such position (including, without limitation, rights to produce andreceive volumes of production in excess of volumes which it would otherwise be entitled to produce and receive by virtue ofownership of the Properties and rights to receive cash balancing payments), and (ii) be obligated to suffer any detriments which Sellerwould have been obligated to suffer by virtue of such position (including, without limitation, the obligation to deliver to othersproduction volumes which would have otherwise been attributable to its ownership of the Properties, to deliver production topurchasers hereof without receiving full payment therefor, or to make cash balancing payments or to repay take or pay payments) and(iii) shall be responsible for any and all royalty obligations with respect to such imbalances (including, without limitation, any of thesame arising out of royalties having been paid on an “entitlement” basis rather than a “receipts” basis).

Section 17.4 Waiver of Consumer Rights. Buyer hereby waives its rights under the Texas Deceptive Trade Practices- Consumer Protection Act, Section 17.41 et seq., Business and Commerce Code, a Law that gives consumers special rights andprotections, and any similar Law in any other state to the extent such Act or similar Law would otherwise apply. After consultation withan attorney of Buyer’s own selection, Buyer voluntarily consents to this waiver. To evidence Buyer’s ability to grant such waiver, Buyerrepresents to Seller that it (a) is in the business of seeking or acquiring, by purchase or lease, goods or services for commercial orbusiness use, (b) has knowledge and experience in financial and business matters that enable it to evaluate the merits and risks of thetransactions contemplated hereby, (c) is not in a significantly disparate bargaining position, and (d ) has consulted with, and isrepresented by, an attorney of Buyer’s own selection in connection with this transaction, and such attorney was not directly orindirectly identified, suggested, or selected by Seller or an agent of Seller.

Section 17.5 Parties Bear Own Expenses/No Special Damages. Each Party shall bear and pay all expenses(including, without limitation, legal fees) incurred by it in connection with the transaction contemplated by thisAgreement. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY NEITHER P A R T Y SHALL HAVE ANYOBLIGATIONS WITH RESPECT TO THIS AGREEMENT, OR OTHERWISE IN CONNECTION HEREWITH, FOR ANY SPECIAL,CONSEQUENTIAL OR PUNITIVE DAMAGES, PROVIDED THAT ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGESRECOVERED BY A THIRD PARTY (EXCEPT AN AFFILIATE OF THE INDEMNIFIED PARTY) SHALL BE RECOVERABLE BY APARTY TO THE EXTENT

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THAT SUCH PARTY IS ENTITLED TO INDEMNIFICATION FOR THE MATTER FOR SUCH DAMAGES ARE RECOVERED.

Section 17.6 Entire Agreement. This Agreement, together with the Side Letter Agreement, contains the entireunderstanding of the parties hereto with respect to subject matter hereof and supersedes all prior agreements, understandings,negotiations, and discussions among the parties with respect to such subject matter; provided that any Confidentiality Agreementexecuted by Buyer and Seller, or any representative of Seller, in connection with the transaction contemplated hereby is notsuperseded or modified by this Agreement.

Section 17.7 Amendments, Waivers. This Agreement may be amended, modified, supplemented, restated ordischarged (and provisions hereof may be waived) only by an instrument in writing signed by the Party against whom enforcement ofthe amendment, modification, supplement, restatement or discharge (or waiver) is sought. The Parties may not amend, modify orsupersede the terms of this Section 17.7 and Sections 16.1(k), 17.8, 17.14 and 17.22 without the prior written consent of the DebtFinancing Sources.

Section 17.8 Choice of Law. Without regard to principles of conflicts of Law, this Agreement shall be construed andenforced in accordance with and governed by the Laws of the state of Texas applicable to contracts made and to be performedentirely within such state and the Laws of the United States of America; provided that, notwithstanding the foregoing, any suchdisputes involving the Debt Financing Sources will be governed by and construed in accordance with the applicable Laws of the Stateof New York. EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT ITMAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATINGTO THIS AGREEMENT (INCLUDING ANY PROCEEDING INVOLVING THE DEBT FINANCING SOURCES UNDER THE DEBTFINANCING COMMITMENT).

Section 17.9 Time of Essence. Time is of the essence in this Agreement.

Section 17.10 No Assignment. Neither Party shall have the right to assign this Agreement, including anyindemnification rights hereunder, without the prior written consent of the other Party first having been obtained.

Section 17.11 Successors and Assigns. Subject to the limitation on assignment contained in Section 17.10 above,the Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns.

Section 17.12 No Press Releases. Prior to making any press release or public announcement with respect to thisAgreement or the transaction represented herein, the Party desiring to make such press release or public announcement shall consultin good faith with the other Party and seek comments from such other Party with respect to the press release or public announcement(which comments shall be considered in good faith by the proposing Party); provided, however, no Party may specifically identify theother Party in any press release or public announcement without the express, written prior approval of such other Party; provided,further, that nothing contained in this Section 17.12 shall be construed to require either Party to

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obtain approval of the other Party to disclose information with respect to this Agreement or the transaction represented herein(including the names of the parties to this Agreement) to the extent, and then only to the extent, required by applicable Law ornecessary to comply with disclosure requirements of the SEC, New York Stock Exchange, or any other regulated stock exchange.

Section 17.13 Counterpart Execution, Fax Execution. This instrument may be executed in a number of identicalcounterparts, each of which for all purposes is to be deemed an original, and all of which constitute collectively, one instrument. It isnot necessary that each Party hereto execute the same counterpart so long as identical counterparts are executed by each such Partyhereto. This instrument may be validly executed and delivered by facsimile or other electronic transmission.

Section 17.14 Exclusive Remedy. Except for the Buyer’s rights with respect to the Special Warranty of title containedin the Conveyance or in the case of Fraud, the sole and exclusive remedy of Buyer with respect to the Properties shall be pursuant tothe express provisions of this Agreement. Without limitation of the foregoing, if the Closing occurs, and except for Buyer’s rights withrespect to the Special Warranty of title contained in the Conveyance or in the case of Fraud, the sole and exclusive remedy of Buyer,for any and all (a) claims relating to any representations, warranties, covenants and agreements that is contained in this Agreement orin any certificate delivered at Closing, (b) other claims pursuant to or in connection with this Agreement, and (c) other claims relating tothe Properties and the purchase and sale thereof, shall be any right to indemnification from such claims that is expressly provided inthis Agreement, and if no such right of indemnification is expressly provided, then such claims are hereby waived to the fullest extentpermitted by Law. If the Closing occurs, and except in the case of Fraud, Buyer shall also be deemed to have waived, to the fullestextent permitted under applicable Law, any right to contribution against Seller (including, without limitation, any contribution claimarising under any Applicable Environmental Law) and any and all other rights, claims and causes of action it may have against Sellerarising under or based on any Law. Without limiting the obligations of the Debt Financing Sources under the Debt FinancingCommitment, Seller acknowledges and agrees that no Debt Financing Source shall have any liability or obligation to the Seller or anyof its subsidiaries in connection with this Agreement and any of the other transaction documents if such Debt Financing Sourcebreaches or fails to perform or otherwise does not perform (whether willfully, intentionally, unintentionally or otherwise) any of itsobligations under the Debt Financing Commitment.

Section 17.15 Limitation on Seller’s Indemnity Obligations. In no event shall the Seller be obligated under thisAgreement to indemnify Buyer for a Buyer Indemnified Claim under Section 12.2(d) for a misrepresentation or breach of anyrepresentation in this Agreement for an aggregate amount in excess of fifteen percent (15%) of the Base Purchase Price; provided,however, that such limitation shall not apply to Buyer Indemnified Claims (A) under Section 12.2(d) for any misrepresentation orbreach of any Fundamental Representations or any breach of any covenant or agreement in this Agreement, or (B) under Section12.2(a), (b), (c) or (e).

Section 17.16 Imputed Knowledge and Waiver. Anything to the contrary notwithstanding, if Buyer or an affiliate ofBuyer (a) owns any interest in any Property and Seller or an affiliate of Seller is not the operator of such Property or (b) acts as anoperator with respect

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to any Property (regardless of whether or not it also owns an interest in such Property), Buyer shall be deemed to have knowledge ofany Environmental Defect or breach of any representation or warranty by Seller with respect to such Property, and shall not be entitled(and hereby waives any right) (i) to give a notice of an Asserted Environmental Defect with respect to such Property, (ii) to refuse toclose because of the existence of any such Asserted Environmental Defect or breach or (iii) to indemnity or any other remedy withrespect to any such Asserted Environmental Defect or breach.

Section 17.17 Like Kind Exchange. Seller may elect to structure this transaction as a like-kind exchange pursuant toSection 1031 of the Code, and the Treasury Regulations promulgated thereunder, with respect to any or all of the Properties (a “Like-Kind Exchange”) at any time prior to the date of Closing. In order to effect a Like-Kind Exchange, Buyer shall cooperate and do allacts as may be reasonably required or requested by Seller with regard to effecting the Like-Kind Exchange, including, but not limitedto, permitting Seller to assign its rights under this Agreement to a qualified intermediary of Seller’s choice in accordance with TreasuryRegulation § 1.1031(k)-1(g)(4) or executing additional escrow instructions, documents, agreements or instruments to effect anexchange; provided, however, (i) Buyer shall incur no expense in connection with such Like-Kind Exchange, (ii) Buyer shall not berequired to take title to any property other than the Properties in connection with the Like-Kind Exchange, (iii) Buyer’s possession ofthe Properties will not be delayed by reason of any such Like-Kind Exchange, and (iv) any such Like-Kind Exchange shall not releaseany Party from, or modify, any of the Parties’ respective liabilities and obligations (including indemnity obligations to each other) underthis Agreement. In the event Seller elects to engage in a Like-Kind Exchange, Seller agrees to indemnify, defend and hold Buyerharmless from and against any and all claims, demands, causes of action, liabilities, costs and expenses, including reasonableattorneys’ fees and costs of litigation, that Buyer may suffer or incur by reason of such cooperation or Like-Kind Exchange.

Section 17.18 References, Titles and Construction.

(a) All references in this Agreement to articles, sections, subsections and other subdivisions refer to correspondingarticles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise.

(b) Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute partof such subdivisions and shall be disregarded in construing the language contained in such subdivisions.

(c) The words “this Agreement”, “this instrument”, “herein”, “hereof”, “hereby”, “hereunder” and words of similar importrefer to this Agreement as a whole and not to any particular subdivision unless expressly so limited.

(d) Words in the singular form shall be construed to include the plural and vice versa, unless the context otherwiserequires. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender.

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(e) Examples shall not be construed to limit, expressly or by implication, the matter they illustrate.

Section 17.19 Severability. The provisions of this Agreement will be deemed severable and the invalidity orunenforceability of any provision will not affect the validity or enforceability of any other provision.

Section 17.20 Removal of Name. As promptly as reasonably possible, but in any case within thirty (30) days after theClosing Date, Buyer shall remove the names of Seller and any variants thereof from the Oil and Gas Properties.

Section 17.21 Confidentiality. Prior t o Closing, Buyer and Seller shall hold in strict confidence all aspects of thetransactions contemplated by this Agreement and Buyer shall hold all proprietary information and data concerning the Properties andobtained in connection with the transactions contemplated by this Agreement (other than information and data that becomes generallyavailable to the public other than through disclosure by a Party or its partners, officers, managers, investors, employees orrepresentatives), and without the prior written consent of all other parties neither Buyer nor Seller shall disclose any such informationto anyone other than to its agents, partners, officers, managers, employees and representatives; provided, however, the foregoingshall not restrict disclosures by Buyer or Seller in order to comply with applicable securities or other applicable laws or to comply withexisting loan or other agreements binding upon such Party. From and after the Closing (or if Closing does not occur, for a period oftwo (2) years following the date of this Agreement), Buyer shall keep all information and data not relating to the Properties that Buyermay have obtained during its due diligence in strict confidence and shall not disclose such information to any Person except to theirattorneys, and to the extent such disclosure is required by applicable law (including legal process, such as subpoenas) or regulationsor the applicable rules of any stock exchange. The obligations set forth in this Section 17.21 shall not apply to any information that(a) is already known to or in the possession of the receiving Party or its representatives as of the date of disclosure, (b) is already inpossession of the public o r becomes available to the public other than through the act o r omission of the receiving Party or itsrepresentatives, or (c) is acquired independently from a third party that represents, after reasonable inquiry, that is has the right todisseminate such information at the time it is acquired by the receiving Party or its representatives. Notwithstanding anything in thisAgreement to the contrary, the obligations set forth in this Section 17.21 shall survive for a period of two (2) years from and afterClosing.

Section 17.22 Agreement for Parties’ Benefit Only; No Recourse to Lenders. This Agreement is not intended to conferupon any Person not a Party hereto any rights or remedies hereunder except as expressly provided in Article XII and no person otherthan the Parties hereto is entitled to rely on any representation, covenant, or agreement contained herein; provided however that theDebt Financing Sources shall be deemed to be third party beneficiaries of and shall be entitled to rely upon Sections 16.1(k), 17.7,17.8, 17.14 and this Section 17.22, and each Debt Financing Source may enforce such provisions. None of the Sellers, nor any oftheir respective Affiliates shall have any rights or claims against any Debt Financing Source whether at law or equity, in contract, intort or otherwise.

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Section 17.23 Seller’s Obligations Several and not Joint. Anything to the contrary notwithstanding, the obligations andliability of each Seller Party, arising under and in connection with this Agreement shall be several and not joint. All representations,warranties, and covenants of a Seller Party or Seller under this Agreement relating to the Properties, are made by each Seller Party,severally with respect only to the interest owned by each, in the Properties, if any. The representations, warranties, and covenantsrelating to the organization of Seller Party or Seller, are made individually by each Seller Party only as to its business organization.


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IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the date set forth above.

CPX: CP EXPLORATION II, LLC By: /s/ Thomas L. Powell, IV Name: Thomas L. Powell, IV Title: Chief Executive Officer


PETROCAP: PETROCAP CPX, LLC By: PetroCap Partners II, L.P. Its: Managing Member By: PetroCap Partners II GP, LLC Its: General Partner By: /s/ William L. Britain Name: William L. Britain Title: Managing Member


BUYER: RESOLUTE NATURAL RESOURCES SOUTHWEST, LLC By: /s/ Theodore Gazulis Name: Theodore Gazulis Title: Executive Vice President and Chief Financial Officer


SCHEDULE I

FORM OF CONVEYANCE

CP Exploration II, LLC, a Delaware limited liability company (“CPX”), CPX II Operating, LLC, a Delaware limited liability company(“CPX Operating”), and PetroCap CPX, LLC, a Texas limited liability company (“PetroCap”, and together with CPX and CPXOperating, “Grantor”), for Ten Dollars and other good and valuable consideration (the receipt and sufficiency of which are herebyacknowledged), does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER, and DELIVER unto ResoluteNatural Resources Southwest, LLC, a Delaware limited liability company (herein called “Grantee”), whose address is 1700 LincolnStreet, Suite 2800, Denver, Colorado 80203, the following described properties, rights and interests:

(a) All rights, titles and interests of Grantor in and to the oil, gas and/or mineral leases which are described onExhibit A hereto and any ratifications or amendments to such leases (the “Leases”);

(b) Without limitation of the foregoing, all other right, title and interest (of whatever kind or character, whether legal orequitable, and whether vested or contingent) of Grantor in and to the oil, gas and other minerals in and under or that may be producedfrom the lands and depths described on Exhibit A hereto or described in any of the Leases and all right, title and interest that may beearned pursuant to the Farmout Agreement (as defined in the Purchase Agreement) (including, without limitation, interests in oil, gasand/or mineral leases, overriding royalties, production payments, net profits interests, fee mineral interests, fee royalty interests andother interests insofar as they cover such lands), even though Grantor’s interest therein may be incorrectly described in, or omittedfrom, such Exhibit A;

(c) All rights, titles and interests of Grantor in and to, or otherwise derived from, all presently existing and valid oil, gasand/or mineral unitization, pooling, and/or communitization agreements, declarations and/or orders (including, without limitation, allunits formed under orders, rules, regulations, or other official acts of any federal, state or other authority having jurisdiction, andvoluntary unitization agreements, designations and/or declarations) to the extent that they relate to any of the properties described insubsections (a) and (b) above;

(d) All rights, titles and interests of Grantor in and to the oil, condensate, natural gas, injection, salt water disposal orwater wells, whether producing, non-producing, shut-in or temporarily abandoned (but not permanently abandoned), located on the Oiland Gas Properties (as hereinafter defined), including, without limitation, those listed on Exhibit B hereto (the “Wells”);

(e) All rights, titles and interests of Grantor in and to all presently existing and valid contracts and agreements to whichSeller is a party or is bound relating to any of the Properties, including, without limitation: joint operating agreements; communitizationagreements; net profits agreements; production payment agreements; area of mutual interest agreements; joint venture agreements;confidentiality agreements; farmin and farmout agreements (specifically including the Farmout Agreement); bottom hole agreements;crude oil, condensate, and natural


gas purchase and sale, gathering, transportation, and marketing agreements; hydrocarbon storage agreements; acreage contributionagreements; operating agreements; balancing agreements; pooling declarations or agreements; unitization agreements; processingagreements; saltwater disposal agreements; facilities or equipment leases; and other similar contracts and agreements, includingthose contracts and agreements described on Exhibit A-3, but exclusive of any master service agreements, Leases, easements,rights-of-way, permits or other instruments creating or evidencing an interest in the Properties or any real or immovable propertyrelated to or used in connection with the operations of any Properties and contracts relating to the Excluded Properties;

(f) All rights, titles and interests of Grantor in and to all materials, supplies, machinery, equipment, improvements(including, without limitation, frac ponds) and other personal property and fixtures (including, but not by way of limitation, all pumpingunits, flowlines, tanks, buildings, injection facilities, saltwater disposal facilities, compression facilities, gathering systems, and otherequipment) located on the Oil and Gas Properties and used in connection with the exploration, development, operation ormaintenance thereof;

(g) All rights, titles and interests of Grantor in and to the fee surface ownership of the properties described on ExhibitA-2 hereto (collectively, the “Fee Properties”);

(h) All rights, titles and interests of Grantor in and to all easements, servitudes, rights of way and surface leases(collectively, the “Easements”) and all credits, permits, licenses, approvals, waivers, or similar qualification or authorization issued orgiven by any Governmental Authority that are fully assignable to Grantee without payment of fees or other penalties (unless Granteeagrees in writing to pay such fees and/or penalties), but exclusive of any such qualifications or authorizations relating to the ExcludedProperties (collectively, the “Permits”), in each case, that are appurtenant to or used in connection with the properties described insubsections (a), (b), (c), (d), (f) and (g) above, including those Easements and Permits described on Exhibit A-1 hereto; and

(i) All rights, titles and interests of Grantor in and to all files, records, and data relating to the items described inparagraphs (a) through (h), above, including, without limitation, the following, if and to the extent that such files exist: all books,records, reports, manuals, files, title documents (including correspondence and curative), records of production and maintenance,revenue, sales, expenses, warranties, lease files, land files, well files, division order files, abstracts, title opinions, assignments,reports, property records, contract files, operations files, copies of tax and accounting records (but excluding Federal and state incometax returns and records) and files, maps, core data, hydrocarbon analysis, well logs, mud logs, and field studies, together with otherfiles, contracts, and other records and data and maps including any interpretations, analyses and reports related thereto (collectively,the “Records”), but excluding from the foregoing (and the term “Records” shall be deemed to exclude) (i) records that are subject tolegal privilege (such as the attorney-client privilege or work product doctrine) (the “Privileged Information”) (ii) records that aresubject to Third Party contractual restrictions on disclosure or transfer for which consent or waiver has not been obtained, or to theextent such disclosure or transfer is subjected to payment of a fee or other consideration, for which Grantee has not agreed in writingto pay the fee or other consideration, as applicable (“Confidential Information”), and (iii) the Seller Party Documents (as defined inthe Purchase Agreement).


The properties, rights and interests specified in the foregoing subsections (a), (b), (c) and (d), except for the Excluded

Properties as defined below, are herein sometimes collectively called the “Oil and Gas Properties,” and individually an “Oil and GasProperty,” and the properties, rights and interests specified in the foregoing subsections (a), (b), (c), (d), (e), (f), (g), (h) and (i) exceptfor the Excluded Properties, are herein sometimes collectively called the “Properties” and individually a “Property.”

The Properties do not include, and there is hereby expressly excepted and reserved therefrom and reserved to Grantor thefollowing:

i. Except to the extent related to any Assumed Obligations under the purchase Agreement, all rights andchoses in action in favor of Grantor, arising, occurring or existing prior to the Effective Date in connection with theProperties or the operation of or production from the Oil and Gas Properties prior to the Effective Date (including, but notlimited to, any and all contract rights, claims, receivables, revenues, recoupment rights, recovery rights, accountingadjustments, mispayments, erroneous payments or other claims of any nature (i) in favor of Grantor and (ii) relating andaccruing to any time period prior to the Effective Date, provided that rights to insurance claims and proceeds are handledunder paragraph (iv) below);

ii. Any accounts payable accruing before the Effective Date;

iii. All limited liability company, financial, tax and legal (other than title) records of Grantor;

iv. Subject to Section 13.1 of the Purchase Agreement (as defined below), all rights and interests of Grantor(i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance or condemnationproceeds or awards arising, in each case, from acts, omissions or events or damage to or destruction of property;

v. All Hydrocarbon production from or attributable to the Properties with respect to all periods prior to theEffective Date, as described in Section 11.1 of the Purchase Agreement, and all proceeds attributable thereto;

vi. Copies (but not the originals) of all Records;

vii. Except to the extent constituting suspended royalties, all deposits, cash, checks, funds and accountsreceivable or received attributable to Grantor’s interests in the Properties with respect to any period of time prior to theEffective Date;

viii. All computer or communications software or intellectual property (including tapes, data and programdocumentation and all tangible manifestations and technical information relating thereto) owned, licensed or used byGrantor;

ix. Any logo, service mark, copyright, trade name or trademark of or associated with Grantor or any Affiliateof Grantor or any business of Grantor or of any Affiliate of Grantor;


x. Any documents withheld or not transferred pursuant to Section 10.1 of the Purchase Agreement as the

result of a legal privilege or third-party agreement restriction and any communications, documents or memoranda in anyway related to the marketing of, or the sales process for, the Properties;

xi. All claims of Grantor or any of its Affiliates for refunds of, rights to receive funds from any GovernmentalAuthority, or loss carry forwards or credits with respect to (i) Asset Taxes attributable to any period (or portion thereof) priorto the Effective Date, (ii) Income Taxes, or (iii) any Taxes attributable to the Excluded Properties;

xii. Any seismic records and surveys, gravity maps, electric logs, geological or other geophysical data andrecords that cannot be transferred without the consent of or payment to any third party unless such consent is obtained or,in the case of a consent requiring payment, Grantee elects to make such payment or obtain such consent; and

xiii. All right, title and interest of Grantor in and to the assets described on Exhibit C. The excluded properties, rights and interests specified in the foregoing subsections (i) through (xiii), inclusive, are collectively referredto as the “Excluded Properties.” Grantee shall not be responsible for, and Grantor expressly retains, all liabilities related to theExcluded Properties, whether such liabilities arise before or after the Effective Date. It is understood that certain of the ExcludedProperties may not be embraced by the term Properties. The fact that certain properties, rights and interests have been expresslyexcluded is not intended to suggest that had they not been excluded they would have constituted Properties and shall not be used tointerpret the meaning of any word or phrase used in describing the Properties.

TO HAVE AND TO HOLD the Properties unto Grantee, its successors and assigns, forever.

GRANTOR AGREES TO WARRANT AND FOREVER DEFEND TITLE TO THE PROPERTIES UNTO GRANTEE AGAINST THECLAIMS AND DEMANDS OF ALL PERSONS CLAIMING, OR TO CLAIM THE SAME, OR ANY PART THEREOF, BY, THROUGHOR UNDER GRANTOR, BUT NOT OTHERWISE, SUBJECT TO THE PERMITTED ENCUMBRANCES (AS SUCH TERM ISDEFINED IN THE PURCHASE AGREEMENT). EXCEPT FOR THE SPECIAL WARRANTY OF TITLE SET FORTH ABOVE ANDEXCEPT FOR GRANTOR’S REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THE PURCHASEAGREEMENT, THIS CONVEYANCE IS MADE WITHOUT ANY WARRANTIES OR REPRESENTATIONS, EXPRESS, IMPLIED,STATUTORY OR OTHERWISE AND GRANTOR EXPRESSLY DISCLAIMS ANY AND ALL OTHER REPRESENTATIONS ANDWARRANTIES. WITHOUT LIMITATION OF THE FOREGOING, EXCEPT FOR THE SPECIAL WARRANTY OF TITLE SET FORTHABOVE AND EXCEPT FOR GRANTOR’S REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THEPURCHASE AGREEMENT, THE PROPERTIES ARE CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY ORREPRESENTATION WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, RELATING TO TITLE TO


THE PROPERTIES OR RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE,CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT OR ITSFITNESS FOR ANY PURPOSE. WITHOUT LIMITATION OF THE FOREGOING, WITH THE EXCEPTION OF ANY INTERESTEARNED PURSUANT TO THE FARMOUT AGREEMENT, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THEDOCTRINE OF AFTER ACQUIRED TITLE SHALL NOT APPLY TO THIS CONVEYANCE AND THAT THE GRANTOR SHALLNOT BE ESTOPPED FROM ASSERTING ANY AFTER ACQUIRED RIGHT, TITLE OR INTEREST.

GRANTEE HAS INSPECTED, OR WAIVED ITS RIGHT TO INSPECT, THE PROPERTIES FOR ALL PURPOSES AND SATISFIEDITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING BUTNOT LIMITED TO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUSSUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN MADE FIBERS, OR NATURALLY OCCURRING RADIOACTIVEMATERIALS. EXCEPT FOR GRANTOR’S REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THEPURCHASE AGREEMENT GRANTEE IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE PROPERTIES, ANDGRANTEE ACCEPTS ALL OF THE SAME, INCLUDING, WITHOUT LIMITATION, THE EQUIPMENT COMPRISING PART OF THEPROPERTIES, IN THEIR “AS IS”,” WHERE IS” CONDITION.

GRANTEE ACKNOWLEDGES AND AGREES THAT ALL MATERIALS, DOCUMENTS, AND OTHER INFORMATION MADEAVAILABLE TO GRANTEE AT ANY TIME IN CONNECTION WITH THE TRANSACTION CONTEMPLATED HEREBY, WEREMADE AVAILABLE TO GRANTEE AS AN ACCOMMODATION, AND, EXCEPT FOR GRANTOR’S REPRESENTATIONS ANDWARRANTIES EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, WITHOUT REPRESENTATION OR WARRANTYOF ANY KIND, WHETHER EXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCHMATERIALS, DOCUMENTS, AND OTHER INFORMATION. EXCEPT FOR GRANTOR’S REPRESENTATIONS ANDWARRANTIES EXPRESSLY SET FORTH IN THE PURCHASE AGREEMENT, GRANTEE EXPRESSLY AGREES THAT ANYRELIANCE UPON OR CONCLUSIONS DRAWN THEREFROM SHALL BE AT GRANTEE’S RISK TO THE MAXIMUM EXTENTPERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY LIABILITY OF OR AGAINST GRANTOR AND GRANTEE HEREBYWAIVES AND RELEASES ANY CLAIMS ARISING UNDER THIS AGREEMENT, COMMON LAW OR ANY STATUTE ARISINGOUT OF ANY MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO GRANTEE.

Notwithstanding anything herein to the contrary, Grantee shall not be entitled to assert any claim under the special warrantyof title contained herein for any Asserted Defect (as defined in the Purchase Agreement).

This Conveyance is made subject to that certain Purchase and Sale Agreement among CPX, PetroCap and Grantee dated March 3,2017 (the “Purchase Agreement”) and in the event of a


conflict between the terms hereof and the terms of the Purchase Agreement, the terms of the Purchase Agreement shall govern;provided, however, that third parties may rely only on this Conveyance to vest title to the Properties in Grantee. All terms used but notdefined herein shall have the meanings assigned to them in the Purchase Agreement. The Purchase Agreement contains certainrepresentations, warranties and agreements between the parties, some of which may survive the delivery of this Conveyance, asprovided for therein.

Grantor agrees to execute and deliver to Grantee, from time to time, such other and additional instruments, notices, division orders,transfer orders and other documents, and to do all such other and further acts and things as may be necessary to more fully andeffectively grant, convey and assign to Grantee the Properties.

This Conveyance is being executed in several counterparts all of which are identical except that, to facilitate recordation, certaincounterparts hereof may contain only that portion of the Exhibits which contain specific descriptions of properties located in therecording jurisdiction in which the particular counterpart is to be recorded, with other portions of the Exhibits being included in suchcounterparts by reference only. All of such counterparts together shall constitute one and the same instrument.



IN WITNESS WHEREOF this Conveyance has been executed by Grantor and Grantee on the date of its acknowledgment but shallbe effective as of May 1, 2017 (the “Effective Date”).

GRANTOR: CP EXPLORATION II, LLC By: Name: Title:

CPX II OPERATION, LLC By: Name: Title:

PETROCAP CPX, LLC By: Name: Title:

GRANTEE: RESOLUTE NATURAL RESOURCES SOUTHWEST, LLC By: Name: Title:

[Insert proper acknowledgments.]


SCHEDULE II

FORM OF FIRPTA AFFIDAVIT

Section 1445 of the Internal Revenue Code (the “Code”) provides that a transferee of a United States real property interestmust withhold tax if the transferor is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregardedentity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not thedisregarded entity. To inform the transferee that withholding of tax is not required upon the disposition of a United States real propertyinterest by PetroCap CPX, LLC, a Texas limited liability company (“Seller”), the undersigned hereby certifies the following on behalf ofSeller:

1. Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined inthe Internal Revenue Code and Income Tax Regulations); and

2. Seller is not a disregarded entity as defined in §1.1445-2(b)(2)(iii) of the Code; and

3. Seller’s U.S. employer taxpayer identification number is [__________]; and

4. Seller’s office address is [___________________].

Seller understands that this certification may be disclosed to the Internal Revenue Service by transferee and that any falsestatement contained herein could be punished by fine, imprisonment, or both.

Under the penalties of perjury, I declare that I have examined this certification and to the best of my knowledge and belief itis true, correct, and complete, and I further declare that I have authority to sign this document on behalf of Seller. Dated: [ ] PetroCap CPX, LLC , a Texas limited liability company By: Name: Title:


Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICERPURSUANT TO


I, Richard F. Betz, certify that:












/s/ Richard F. BetzRichard F. BetzChief Executive OfficerMay 3, 2017


Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICERPURSUANT TO


I, Theodore Gazulis, certify that:












/s/ Theodore GazulisTheodore GazulisChief Financial OfficerMay 3, 2017


Exhibit 32.1

CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resolute Energy Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2017, as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.

/s/ Richard F. BetzRichard F. BetzChief Executive OfficerMay 3, 2017 /s/ Theodore GazulisTheodore GazulisChief Financial OfficerMay 3, 2017


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