•

Earthstone’s acquisitions of Bold and Lynden Corp. are accounted for using the acquisition method of accounting for business combinations;

•

Liabilities are recognized for transaction related costs;

•

Depreciation, depletion and amortization and accretion expense are adjusted due to the fair value adjustments to oil and gas properties and asset retirement obligations in connection with the Bold Transaction and the Lynden Acquisition;

•

Estimated tax impacts of the pro forma adjustments; and

•

the unaudited historical consolidated statement of operations of Earthstone for the nine months ended September 30, 2017; and

•

the unaudited historical consolidated statement of operations of Bold for the period January 1, 2017 through May 8, 2017.

•

the audited historical consolidated statement of operations of Earthstone for the year ended December 31, 2016;

•

the unaudited historical condensed consolidated interim statement of income (loss) and comprehensive income (loss) of Lynden Corp. for the three months ended March 31, 2016; and

•

the audited historical consolidated statement of operations of Bold for the year ended December 31, 2016.

ASSETS

Earthstone Historical

Pro Forma Adjustments

Notes

Earthstone Pro Forma Combined as Adjusted

Current assets:

Cash

$

11,047

$

1,685

(b)

$

12,732

Accounts receivable:

Oil, natural gas, and natural gas liquids revenues

15,093

—

15,093

Joint interest billings and other, net of allowance

4,371

—

4,371

Derivative asset

147

—

147

Prepaid expenses and other current assets

1,299

—

1,299

Total current assets

31,957

1,685

33,642

Oil and gas properties, successful efforts method:

Proved properties

599,222

(32,237

)

(a)

566,985

Unproved properties

291,364

—

291,364

Land

5,534

—

5,534

Total oil and gas properties

896,120

(32,237

)

863,883

Accumulated depreciation, depletion and amortization

(122,842

)

8,405

(a)

(114,437

)

Net oil and gas properties

773,278

(23,832

)

749,446

Other noncurrent assets:

Goodwill

17,620

—

17,620

Office and other equipment, net of accumulated depreciation

1,039

—

1,039

Other noncurrent assets

1,078

—

1,078

TOTAL ASSETS

$

824,972

$

(22,147

)

$

802,825

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

19,343

$

540

(c)

19,883

Revenues and royalties payable

9,156

—

9,156

Accrued expenses

16,516

—

16,516

Derivative liability

1,986

—

1,986

Advances

5,048

—

5,048

Current portion of long-term debt

1,704

—

1,704

Total current liabilities

53,753

540

54,293

Noncurrent liabilities:

Long-term debt

71,400

(25,000

)

(b)

46,400

Asset retirement obligation

3,204

(210

)

(d)

2,994

Derivative liability

422

—

422

Deferred tax liability

16,513

—

16,513

Other noncurrent liabilities

143

—

143

Total noncurrent liabilities

91,682

(25,210

)

66,472

Equity:

Preferred stock, $0.001 par value, 20,000,000 shares authorized; none issued or outstanding

—

—

—

Class A common stock, $0.001 par value, 200,000,000 shares authorized; 22,988,759 shares issued and outstanding

23

—

23

Class B common stock, $0.001 par value, 50,000,000 shares authorized; 36,070,828 shares issued and outstanding

36

—

36

Additional paid-in capital

463,009

463,009

Accumulated deficit

(227,146

)

981

(e)

(226,165

)

Total Earthstone Energy, Inc. equity

235,922

981

236,903

Noncontrolling interest

443,615

1,542

(e)

445,157

Total equity

679,537

2,523

682,060

TOTAL LIABILITIES AND EQUITY

$

824,972

$

(22,147

)

$

802,825

For the Nine Months Ended September 30, 2017

Earthstone  Historical

Bold Historical

Bold Pro Forma Adjustments

Notes

Earthstone Pro Forma Results adjusted for Bold Acquisition

Pro Forma Adjustments - Bakken Asset Disposition

Notes

Earthstone

Pro Forma

Combined

REVENUES

Oil

$

59,815

$

23,183

$

—

$

82,998

$

(6,992

)

(j)

$

76,006

Natural gas and Natural gas liquids

12,587

3,607

—

16,194

(1,037

)

(j)

15,157

Total revenues

72,402

26,790

—

99,192

(8,029

)

91,163

OPERATING COSTS AND EXPENSES

Lease operating expense

14,989

1,920

—

16,909

(3,027

)

(j)

13,882

Severance taxes

3,705

1,335

—

5,040

(694

)

(j)

4,346

Impairment expense

66,740

800

—

67,540

—

67,540

Depreciation, depletion and amortization

28,258

7,271

(1,918

)

(p)

33,611

(2,812

)

(k)

30,799

General and administrative expense

14,838

2,383

—

17,221

(752

)

(l)

16,469

Stock-based compensation

4,645

—

—

4,645

—

4,645

Transaction costs

4,676

—

(4,567

)

(f)

109

—

109

Accretion of asset retirement obligation

378

—

—

378

(100

)

(m)

278

Exploration expense

1

—

—

1

(1

)

(j)

—

Total operating costs and expenses

138,230

13,709

(6,485

)

145,454

(7,386

)

138,068

Gain (loss) on sale of oil and gas properties

3,848

—

—

3,848

(865

)

2,983

(Loss) income from operations

(61,980

)

13,081

6,485

(42,414

)

(1,508

)

(43,922

)

OTHER INCOME (EXPENSE)

Interest (expense) income, net

(1,873

)

(712

)

—

(2,585

)

702

(n)

(1,883

)

Write-off of deferred financing costs

(526

)

—

—

(526

)

—

(526

)

Gain on derivative contracts, net

4,137

—

—

4,137

—

4,137

Other expense, net

(34

)

—

—

(34

)

—

(34

)

Total other income (expense)

1,704

(712

)

—

992

702

1,694

(Loss) income before income taxes

(60,276

)

12,369

6,485

(41,422

)

(806

)

(42,228

)

Income tax benefit (expense)

10,046

—

(7,529

)

(g)

2,517

—

(o)

2,517

Net (loss) income

(50,230

)

12,369

(1,044

)

(38,905

)

(806

)

(39,711

)

Less: Net (loss) income attributable to noncontrolling interests

(35,392

)

—

11,570

(h)

(23,822

)

(494

)

(24,316

)

Net (loss) income attributable to Earthstone Energy, Inc.

$

(14,838

)

$

12,369

$

(12,614

)

$

(15,083

)

$

(312

)

$

(15,395

)

Net (loss) income per common share attributable to Earthstone Energy, Inc.:

Basic and diluted

$

(0.66

)

$

(0.66

)

$

(0.68

)

Weighted average common shares outstanding:

Basic and diluted

22,638,977

150,000

(i)

22,788,977

22,788,977

For the Year Ended December 31, 2016

Earthstone  Historical

Lynden Corp. Historical

Lynden Corp. Pro Forma Adjustments

Notes

Bold Historical

Bold Purchase Pro Forma Adjustments

Notes

Earthstone Pro Forma Results adjusted for Lynden and Bold Acquisitions

Pro Forma Adjustments - Bakken Asset Disposition

Notes

Earthstone Pro Forma Combined

REVENUES

Oil

$

34,358

$

3,007

$

—

$

15,792

$

—

$

53,157

$

(6,480

)

(j)

$

46,677

Natural gas and Natural gas liquids

7,911

953

—

3,695

—

12,559

(840

)

(j)

11,719

Total revenues

42,269

3,960

—

19,487

—

65,716

(7,320

)

58,396

OPERATING COSTS AND EXPENSES

Lease operating expense

13,415

2,532

—

2,680

—

18,627

(2,611

)

(j)

16,016

Severance taxes

2,198

202

—

1,004

—

3,404

(581

)

(j)

2,823

Rig idle and contract termination expense

5,059

—

—

—

—

5,059

—

5,059

Re-engineering and workovers

1,652

—

—

—

—

1,652

(597

)

(j)

1,055

Impairment expense

24,283

(24

)

—

11,380

—

35,639

(17,647

)

(v)

17,992

Depreciation, depletion and amortization

25,937

3,457

(826

)

(w)

9,496

(4,184

)

(p)

33,880

(3,538

)

(k)

30,342

General and administrative expense

9,414

697

—

6,023

—

16,134

(1,082

)

(l)

15,052

Stock-based compensation

3,301

—

—

—

—

3,301

—

3,301

Transaction costs

2,483

1,515

(2,445

)

(q)

625

(2,178

)

(f)

—

—

—

Accretion of asset retirement obligation

551

11

1

(r)

39

—

602

(162

)

(m)

440

Exploration expense

5

—

—

—

—

5

—

5

Total operating costs and expenses

88,298

8,390

(3,270

)

31,247

(6,362

)

118,303

(26,218

)

92,085

Gain on sale of oil and gas properties

8

—

—

—

—

8

—

8

(Loss) income from operations

(46,021

)

(4,430

)

3,270

(11,760

)

6,362

(52,579

)

18,898

(33,681

)

OTHER INCOME (EXPENSE)

Interest (expense) income, net

(1,282

)

(335

)

(4

)

(s)

(661

)

—

(2,282

)

610

(n)

(1,672

)

(Loss) gain on derivative contracts, net

(6,638

)

120

—

—

—

(6,518

)

—

(6,518

)

Other expense, net

(72

)

—

—

—

—

(72

)

—

(72

)

Total other income (expense)

(7,992

)

(215

)

(4

)

(661

)

—

(8,872

)

610

(8,262

)

(Loss) income before income taxes

(54,013

)

(4,645

)

3,266

(12,421

)

6,362

(61,451

)

19,508

(41,943

)

Income tax (expense) benefit

(528

)

673

(923

)

(t)

—

—

(778

)

—

(o)

(778

)

Net (loss) income

(54,541

)

(3,972

)

2,343

(12,421

)

6,362

(62,229

)

19,508

(42,721

)

Less: Net (loss) income attributable to noncontrolling interest

—

—

—

—

(37,894

)

(h)

(37,894

)

12,030

(25,864

)

Net (loss) income attributable to Earthstone Energy, Inc.

$

(54,541

)

$

(3,972

)

$

2,343

$

(12,421

)

$

44,256

$

(24,335

)

$

7,478

$

(16,857

)

Net loss per common share attributable to Earthstone Energy, Inc.:

Basic and diluted

$

(2.92

)

$

(1.09

)

$

(0.75

)

Weighted average common shares outstanding:

Basic and diluted

18,651,582

3,622,238

(u)

150,000

(i)

22,423,820

22,423,820

(a)

Reflects the reduction of property, equipment and accumulated depreciation, depletion and amortization related to the divested properties in the Bakken Sale.

(b)

Reflects the use of the net proceeds of approximately $26.7 million from the Bakken Sale to repay $25.0 million outstanding under the Credit Facility and the remaining $1.7 million retained in cash for current operating funds.

(c)

Reflects the 2% fee of $0.5 million payable to the agent facilitating the Bakken Sale.

(d)

Eliminates the asset retirement obligations of the divested properties in the Bakken Sale.

(e)

Reflects the gain on the Bakken Sale of which 39% relates to Earthstone Energy, Inc. and 61% relates to the Noncontrolling interest.

(f)

Adjustments to reflect the elimination of non-recurring transaction costs for the year ended December 31, 2016 that were directly related to the Bold Transaction and are not expected to have a continuing impact.

(g)

To adjust the $7.5 million benefit resulting from a change in assessment of the realization of its net deferred tax assets due to the deferred tax liability that was recorded with respect to its investment in EEH as part of the Bold Transaction.

(h)

The noncontrolling interest for the nine months ended September 30, 2017 and for the year ended December 31, 2016 was 61.1% and 61.7%, respectively.

(i)

Adjustment to reflect 150,000 shares of Class A Common Stock issued to certain employees of Bold pursuant to the Contribution Agreement.

(j)

Eliminates the revenues and direct operating expenses of the divested properties in the Bakken Sale.

(k)

Reflects the reduction in depreciation, depletion and amortization resulting from excluding the divested properties in the Bakken Sale.

(l)

Eliminates the general and administrative costs associated with the office and personnel whose sole purpose was to support the operations of the Bakken assets.

(m)

Eliminates the accretion expense related to the asset retirement obligations of the divested properties in the Bakken Sale.

(n)

Reduces interest expense resulting from applying the net proceeds as repayment of amounts outstanding under the Credit Facility.

(o)

Income tax benefit associated with the Bakken assets has a full valuation allowance recorded against it.

(p)

Adjustments to reflect the decreased depreciation, depletion, and amortization expense that would have been recorded with respect to the Bold properties, had the closing of the Bold Transaction occurred on January 1, 2016 and the Bold properties had been adjusted to estimated fair value.

(q)

Adjustments to reflect the elimination of approximately $2.4 million for the five months ended May 18, 2016 in non-recurring transaction costs that were directly related to the Lynden Acquisition.

(r)

Adjustments to reflect additional accretion expense that would have been recorded with respect to Lynden Corp. properties, had the Lynden Acquisition occurred on January 1, 2016.

(s)

Adjustments to reflect the difference in interest expense that would have been recorded with respect to Lynden Corp.’s debt, had the Lynden Acquisition occurred on January 1, 2016.

(t)

Adjustment to reflect the estimated incremental income tax benefit (expense) associated with the Lynden Corp. pro forma adjustments assuming all of the combined company’s earnings had been subject to federal income tax using an effective tax rate of approximately 34.5%. This rate is inclusive of federal and state income taxes.

(u)

Adjustment to reflect issuance of shares of Common Stock related to the Lynden Acquisition assuming it occurred on January 1, 2016.

(v)

Reflects the reduction in impairment expense resulting from excluding the divested properties in the Bakken Sale.

(w)

Adjustments to reflect the decreased depreciation, depletion, and amortization expense that would have been recorded with respect to the Lynden Corp. properties, had the closing of the Lynden Acquisition occurred on January 1, 2016 and the Lynden Corp. properties been adjusted to estimated fair value.

Earthstone Historical as of December 31, 2016