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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

Filed by the Registrant  ☒                             Filed by a party other than the Registrant  ☐

Check the appropriate box:

EARTHSTONE ENERGY, INC.

(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):

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PROPOSED TRANSACTION — YOUR VOTE IS VERY IMPORTANT

April 7, 2017

Earthstone Energy, Inc., a Delaware corporation (“Earthstone”), Earthstone Energy Holdings, LLC, a newly formed Delaware limited liability company and wholly owned subsidiary of Earthstone (“EEH”), Lynden USA Inc., a Utah corporation and wholly owned subsidiary of Earthstone (“Lynden”), Lynden USA Operating, LLC, a Texas limited liability company and wholly owned subsidiary of Lynden (“Lynden Sub”), Bold Energy Holdings, LLC, a Texas limited liability company (“Bold Holdings”), and Bold Energy III LLC, a Texas limited liability company (“Bold”), entered into a contribution agreement dated as of November 7, 2016 and as amended on March 21, 2017 (the “Contribution Agreement”). The purpose of the Contribution Agreement is to provide for, among other things described below, the business combination between EEH and Bold, which owns significant developed and undeveloped oil and natural gas properties in the Midland Basin of Texas (the “Transaction”). Bold Holdings and Bold are each affiliates of investment entities controlled by EnCap Investments L.P., a Delaware limited partnership (“EnCap”). EnCap through its investment entities indirectly owns 23.6% of Earthstone but may be deemed to own beneficially 41.1% of Earthstone.

The Transaction has been structured in a manner commonly known as an “Up-C.” Under this structure and the Contribution Agreement, (i) Earthstone will recapitalize its common stock into two classes – Class A common stock, $0.001 par value per share (the “Class A Common Stock”), and Class B common stock, $0.001 par value per share (the “Class B Common Stock”), and all of Earthstone’s existing outstanding common stock, $0.001 par value per share (the “Common Stock”), will be recapitalized on a one-for-one basis for Class A Common Stock (the “Recapitalization”); (ii) Earthstone will transfer all of its membership interests in Earthstone Operating, LLC, Sabine River Energy, LLC, EF Non-Op, LLC and Earthstone Legacy Properties, LLC (formerly Earthstone GP, LLC) and $36,071 in cash from the sale of Class B Common Stock to Bold (collectively, the “Earthstone Assets”) to a newly formed limited liability company, EEH, in exchange for 16,423,849 membership units of EEH (the “EEH Units”); (iii) Lynden will transfer all of its membership interests in Lynden Sub to EEH in exchange for 5,865,328 EEH Units; (iv) Bold Holdings will transfer all of its membership interests in Bold to EEH in exchange for 36,070,828 EEH Units and purchase 36,070,828 shares of Class B Common Stock to be issued by Earthstone for $36,071; and (v) Earthstone will grant an aggregate of 150,000 fully vested shares of Class A Common Stock under Earthstone’s 2014 Long-Term Incentive Plan, as amended (the “Plan”), to certain members of Bold. Each EEH Unit held by Bold Holdings, together with one share of Class B Common Stock to be issued to Bold Holdings, will be convertible into Class A Common Stock on a one-for-one basis.

Upon the completion of the Transaction, it is expected that Bold Holdings will own approximately 61.0% of the outstanding shares of Class A Common Stock, on a fully diluted, as converted, basis, as of April 6, 2017. The EEH Units and the shares of Class B Common Stock to be issued to Bold Holdings will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), but will be issued by EEH and Earthstone in reliance on the exemption provided under Section 4(a)(2) of the Securities Act.

The Common Stock is listed on the NYSE MKT, LLC (the “NYSE MKT”) under the symbol “ESTE.” The closing sale price for the Common Stock on November 7, 2016, the last trading day before the public announcement of the Transaction, was $8.98. The closing sale price of the Common Stock on April 6, 2017, the latest practicable date before the date of this proxy statement, was $14.51.

We are holding a special meeting on May 9, 2017 to obtain the vote of our stockholders on the proposals necessary to complete the Transaction.

A special committee (the “Special Committee”) composed of Jay F. Joliat (chair) and Zachary G. Urban, each independent and disinterested members of our board of directors, evaluated the transaction between Earthstone and Bold. To assist with the process, the Special Committee engaged Richards, Layton & Finger, P.A. (“RLF”), as its legal counsel and Stephens Inc. (“Stephens”) as its financial advisor.

After careful consideration, the board of directors has unanimously approved the Contribution Agreement and the transactions contemplated thereby, including the Transaction. The board of directors unanimously recommends that the stockholders vote “FOR” the approval and adoption of the Contribution Agreement and the transactions contemplated thereby, which includes the business combination with Bold, “FOR” the approval and adoption of the exchange of assets proposal, “FOR” the approval

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and adoption of the amendment to our amended and restated certificate of incorporation proposal, “FOR” the approval of the reclassification and conversion of our Common Stock into Class A Common Stock proposal, “FOR” the approval, for purposes of the applicable listing rules of the NYSE MKT, of the issuance of the Class A Common Stock upon exchange of the EEH Units and shares of Class B Common Stock issued pursuant to the Contribution Agreement proposal, “FOR” the approval and adoption of the amendment to the Plan proposal, and “FOR” the adjournment proposal at the special meeting.

The approval and adoption of the Contribution Agreement, which includes the business combination with Bold, and the exchange of assets each require the affirmative vote of (i) a majority of the issued and outstanding shares of our Common Stock and (ii) a majority of the shares of our Common Stock represented in person or by proxy at the special meeting and voting on the proposal that are not held by Oak Valley Resources, LLC, a Delaware limited liability company (“Oak Valley”), or our executive officers. The approval and adoption of the amendment to our amended and restated certificate of incorporation and the reclassification and conversion of our Common Stock to Class A Common Stock, each require the affirmative vote of a majority of the issued and outstanding shares of our Common Stock. The approval, for purposes of the applicable listing rules of the NYSE MKT, of the issuance of Class A Common Stock in connection with the future exchange of EEH Units and shares of Class B Common Stock issued pursuant to the Contribution Agreement, and the approval and adoption of the amendment to the Plan, each require the affirmative vote of a majority of the issued and outstanding shares of our Common Stock represented in person or by proxy at the special meeting and voting on the proposal, provided that such shares voting affirmatively must also constitute a majority of the required quorum for the special meeting. Approval of the adjournment proposal requires that the votes cast in favor of such proposal exceed the votes cast against such proposal. Your vote is very important, regardless of the number of shares of Common Stock you own. Whether or not you expect to attend the special meeting in person, please vote your shares as promptly as possible so that your shares may be represented and voted at the special meeting.

This proxy statement is an important document containing answers to frequently asked questions and a summary description of the Contribution Agreement and the Transaction, followed by more detailed information about Earthstone, EEH, Bold Holdings, Bold, the Transaction, the Contribution Agreement, the Recapitalization, and the issuance of the Class B Common Stock. The obligations of Earthstone, EEH, Lynden, Lynden Sub, Bold Holdings and Bold to complete the Transaction are subject to the satisfaction or waiver of the conditions to closing set forth in the Contribution Agreement. You should read this entire proxy statement carefully, including the documents incorporated by reference. In particular, we urge you to read the section entitled “Risk Factors.”

We thank you for your consideration and continued support.

Sincerely,

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this proxy statement or determined that this proxy statement is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement is dated April 7, 2017, and is being mailed to stockholders on or about April 7, 2017.

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Earthstone Energy, Inc.

1400 Woodloch Forest Drive, Suite 300

The Woodlands, Texas 77380

NOTICE OF THE SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 9, 2017

To the Stockholders of Earthstone Energy, Inc.:

We are pleased to invite you to attend a special meeting of the stockholders of Earthstone Energy, Inc., a Delaware corporation, which we refer to as “Earthstone,” “us,” “our,” and “we,” which will be held at our principal offices, located at 1400 Woodloch Forest Drive, Suite 300, The Woodlands, Texas 77380, on May 9, 2017 at 8:00 a.m., local time, for the following purposes:

We do not expect to transact any other business at the special meeting. Stockholders of record at the close of business on March 13, 2017, will be entitled to notice of and to vote at the special meeting and at any adjournments or postponements thereof. A complete list of our stockholders entitled to vote at the meeting will be available for examination at our offices in The Woodlands, Texas, during ordinary business hours for a period of ten (10) days prior to the special meeting.

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The board of directors recommends that stockholders vote “FOR” each of the proposals to be voted on at the special meeting. Because of their mutual dependence, if the proposal to approve and adopt the Contribution Agreement and the transactions contemplated thereby, which includes the business combination with Bold, the proposal to approve and adopt the exchange of assets, the proposal to approve and adopt the amendment to our amended and restated certificate of incorporation, the proposal to approve and adopt the reclassification and conversion of Common Stock into Class A Common Stock, and the proposal to approve the issuance of Class A Common Stock upon exchange of EEH Units and shares of Class B Common Stock are not all approved, then none will be deemed to have been approved.

We cordially invite you to attend the special meeting in person. However, to ensure your representation at the special meeting, please complete and promptly mail your proxy card in the return envelope enclosed, or authorize the individuals named on your proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with your proxy card. This will not prevent you from voting in person, but will help to secure a quorum and avoid added solicitation costs. If your shares are held in “street name” by your broker or other nominee, only that holder can vote your shares and the vote cannot be cast unless you provide instructions to your broker. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Your proxy may be revoked at any time before it is voted. Please review the proxy statement accompanying this notice for more complete information regarding the matters to be voted on at the meeting.

The Woodlands, Texas

April 7, 2017

IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, WE ASK YOU TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED OR TO VOTE BY TELEPHONE OR ON THE INTERNET USING THE INSTRUCTIONS ON THE PROXY CARD.

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ADDITIONAL INFORMATION

This proxy statement incorporates important business and financial information about Earthstone from other documents that are not included in or delivered with this proxy statement. For a listing of the documents incorporated by reference into this proxy statement, see “Where You Can Find More Information” beginning on page 127.

This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this proxy statement, other than certain exhibits to these documents, by requesting them in writing or by telephone from us at the following address and telephone number:

Earthstone Energy, Inc.

1400 Woodloch Forest Drive, Suite 300

The Woodlands, Texas 77380

Attention: Corporate Secretary

Telephone: (281) 298-4246

or

Advantage Proxy, Inc.

P.O. Box 13581

Des Moines, Washington 98198

Toll Free: (877) 870-8565

Collect: (206) 870-8565

If you would like to request documents, please do so no later than five (5) business days before the date of the special meeting of stockholders (which is May 2, 2017) to receive them before the special meeting.

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ORGANIZATIONAL STRUCTURE

The following diagram depicts our organizational structure immediately following the closing of the Transaction.

Notes: Numbers do not sum to 100% due to rounding.

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QUESTIONS AND ANSWERS ABOUT

THE PROPOSED TRANSACTION AND THE SPECIAL MEETING

The following questions and answers briefly address some commonly asked questions about Earthstone, the proposed transaction, Bold and the special meeting. They may not include all the information that is important to our stockholders. You should carefully read this entire proxy statement, including the annexes and the other documents referred to or incorporated by reference herein.

Q: What is the Contribution Agreement?

A: Earthstone Energy, Inc., a Delaware corporation (“Earthstone,” “we,” “our” and “us”), Earthstone Energy Holdings, LLC, a newly formed Delaware limited liability company and wholly owned subsidiary of Earthstone (“EEH”), Lynden USA Inc., a Utah corporation and wholly owned subsidiary of Earthstone (“Lynden”), Lynden USA Operating, LLC, a Texas limited liability company and wholly owned subsidiary of Lynden (“Lynden Sub”), Bold Energy Holdings, LLC, a Texas limited liability company (“Bold Holdings”), and Bold Energy III LLC, a Texas limited liability company (“Bold”), entered into a contribution agreement dated as of November 7, 2016 and as amended on March 21, 2017 (the “Contribution Agreement”). The purpose of the Contribution Agreement is to provide for, among other things, the business combination between EEH and Bold, which owns significant developed and undeveloped oil and natural gas properties in the Midland Basin of Texas (the “Transaction”). Bold Holdings and Bold are each affiliates of investment entities controlled by EnCap Investments L.P. (“EnCap”). EnCap through its investment entities indirectly owns 23.6% of Earthstone but may be deemed to own beneficially 41.1% of Earthstone. A copy of the Contribution Agreement is attached as Annex A to this proxy statement. The Contribution Agreement contains the terms and conditions of the Transaction.

Q: What are the proposed transactions pursuant to the Contribution Agreement?

A: We have entered into a Contribution Agreement pursuant to which:

Each EEH Unit held by Bold Holdings, together with one share of Class B Common Stock will be convertible into Class A Common Stock on a one-for-one basis.

Q: Why are our stockholders receiving this proxy statement?

A: We are sending these materials to our stockholders to help them decide how to vote their shares of Common Stock with respect to the Transaction and the other matters to be considered at the special meeting. We are holding a special meeting to vote on the proposals necessary to complete the Transaction. Information about the special meeting, the Contribution Agreement, the Transaction and the other business to be considered at the special meeting is contained in this proxy statement.

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The Transaction cannot be completed unless the stockholders approve the proposals contained in this proxy statement.

Q: Will stockholders receive any consideration in the Transaction?

A: No. The stockholders will not receive any consideration in the Transaction, since it relates primarily to the business combination with Bold. The stockholders will continue to own their existing shares of Common Stock, except that, as part of the Transaction, Earthstone will recapitalize and each share of Common Stock will be converted into one share of Class A Common Stock, with the same rights and privileges as the Common Stock.

Q: When do we expect to complete the Transaction?

A: We are working to complete the Transaction as soon as practicable. We currently expect that the Transaction will be completed in the second quarter of 2017. We cannot predict, however, the actual date on which the Transaction will be completed because it is subject to conditions beyond our control. See “The Contribution Agreement—Conditions to Completion of the Transaction” beginning on page 72.

Q: What are stockholders being asked to vote on?

A: We are asking our stockholders to vote on the following proposals:

1. The Contribution Agreement Proposal – To approve and adopt the Contribution Agreement and the transactions contemplated thereby, which includes the business combination with Bold. A copy of the Contribution Agreement is attached hereto as Annex A.

2. The Exchange of Assets Proposal – To approve and adopt the exchange of all or substantially all of our assets for EEH Units as contemplated by the Contribution Agreement. A copy of the Contribution Agreement is attached hereto as Annex A.

3. The Amendment to the Amended and Restated Certificate of Incorporation Proposal – To approve and adopt an amendment to our amended and restated certificate of incorporation (the “Second Amended and Restated Certificate of Incorporation”) that will increase the number of authorized shares of our Common Stock from 100 million shares to 250 million shares, which will be divided into 200 million shares of Class A Common Stock and 50 million shares of Class B Common Stock. A copy of the form of Second Amended and Restated Certificate of Incorporation is attached hereto as Annex B.

4. The Reclassification Proposal – To approve the reclassification and conversion of each share of Common Stock issued and outstanding immediately prior to closing of the Contribution Agreement into one (1) share of Class A Common Stock. A copy of the Contribution Agreement is attached hereto as Annex A.

5. The NYSE MKT Proposal – To approve, for purposes of complying with applicable listing rules of the NYSE MKT, of the issuance and sale of shares of Class A Common Stock in connection with the future exchange of EEH Units and shares of Class B Common Stock issued pursuant to the Contribution Agreement.

6. The Plan Proposal – To approve and adopt an amendment to the Plan to increase the number of shares available for issuance pursuant to the Plan by 4.3 million shares. A copy of the form of Amendment No. 2 to the Earthstone Energy, Inc. 2014 Long-Term Incentive Plan is attached hereto as Annex H.

7. The Adjournment Proposal – To approve and authorize our board of directors, in its discretion, to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in favor of the proposals listed above.

Q: Are the proposals conditioned on one another?

A: Yes. The closing of the Transaction is conditioned on the approval of the Contribution Agreement Proposal, the Exchange of Assets Proposal, the Amendment to the Amended and Restated Certificate of Incorporation Proposal, the Reclassification Proposal and the NYSE MKT Proposal at the special meeting. The Plan Proposal is conditioned on the approval of the Contribution Agreement Proposal, the Exchange of Assets Proposal, the Amendment to the Amended and Restated Certificate of Incorporation Proposal, the Reclassification Proposal and the NYSE MKT Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement.

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Q: What constitutes a quorum at the special meeting?

A: The presence at the special meeting, in person or by proxy, of shares representing a majority of the issued and outstanding Common Stock entitled to be voted at the special meeting will constitute a quorum for the transaction of business at the special meeting. As of the record date for the special meeting, 11,136,911 shares of Common Stock would constitute a quorum for the special meeting.

Q: What vote is required to approve each proposal at the special meeting?

A: The approval and adoption of the Contribution Agreement Proposal and the Exchange of Assets Proposal each require the affirmative vote of (i) a majority of the issued and outstanding shares of our Common Stock and (ii) a majority of the shares of our Common Stock represented in person or by proxy at the special meeting and voting on the proposal that are not held by our largest stockholder of record, Oak Valley Resources, LLC (“Oak Valley”), or our executive officers. The approval and adoption of the Amendment to the Amended and Restated Certificate of Incorporation Proposal and the Reclassification Proposal each require the affirmative vote of a majority of the issued and outstanding shares of our Common Stock. The approval of the NYSE MKT Proposal and the Plan Proposal each require the affirmative vote of a majority of the issued and outstanding shares of our Common Stock represented in person or by proxy at the special meeting and voting on the proposal, provided that such shares voting affirmatively must also constitute a majority of the required quorum for the special meeting. Approval of the Adjournment Proposal requires that the votes cast in favor of such proposal exceed the votes cast against such proposal.

Oak Valley has entered into a voting and support agreement (the “Voting and Support Agreement”) with Bold Holdings and Earthstone, pursuant to which Oak Valley has agreed, subject to the terms and conditions of the Voting and Support Agreement, to vote shares of Common Stock held by Oak Valley in favor of the Contribution Agreement Proposal, the Exchange of Assets Proposal, the Amendment to the Amended and Restated Certificate of Incorporation Proposal, the Reclassification Proposal and the NYSE MKT Proposal. As of the date of the Contribution Agreement, 9,162,452 shares of Common Stock, representing 41.1% of the total voting power of the outstanding shares of Common Stock, were subject to the Voting and Support Agreement. See “The Voting and Support Agreement” on page 85.

Q: How does the board of directors recommend that I vote at the special meeting?

A: The board of directors recommends that stockholders vote “FOR” all of the proposals.

Q: How do I vote?

A: A stockholder may vote by proxy or in person at the special meeting. To vote by proxy, a stockholder may use one of the following methods:

Proxies submitted by telephone or via the Internet must be received by 11:59 p.m. Eastern Time on May 8, 2017.

Q: When and where is the special meeting?

A: The special meeting of stockholders will be held at 1400 Woodloch Forest Drive, Suite 300, The Woodlands, Texas 77380, at 8:00 a.m., Central Time, on May 9, 2017. Subject to space availability, all stockholders as of the record date, or their duly appointed proxies, may attend the meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 7:30 a.m. Central Time.

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Q: If my shares of Common Stock are held in street name, will my broker, bank or nominee vote my shares of Common Stock at the special meeting?

A: No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. We believe the proposals presented to the stockholders will be considered non-discretionary and therefore your broker, bank, or nominee cannot vote your shares without your instruction. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide. See “The Special Meeting.”

Q: What if I fail to vote or abstain from voting?

A: For purposes of the special meeting, an abstention occurs when a stockholder attends the special meeting in person and does not vote or returns a proxy with an “abstain” vote. We will count a properly executed proxy marked “Abstain” with respect to a particular proposal as present for purposes of determining whether quorum is present. For purposes of approval, failure to vote or an abstention will have no effect on the NYSE MKT Proposal, the Plan Proposal or the Adjournment Proposal; however, it will have the effect as a vote AGAINST the Contribution Agreement Proposal, the Exchange of Assets Proposal, the Amendment to the Amended and Restated Certificate of Incorporation Proposal and the Reclassification Proposal.

Q: What will happen if I sign and return my proxy without indicating how to vote?

A: If you sign and return your proxy without indicating how to vote on any particular proposal, the shares of Common Stock represented by your proxy will be voted as recommended by the board of directors with respect to that proposal. The board of directors has recommended a vote “FOR” each of the proposals.

Q: May I change my vote after I have delivered my proxy?

A: Yes. You may revoke your proxy at any time before it is exercised by:

Voting by proxy will in no way limit your right to vote at the special meeting if you later decide to attend in person. If your stock is held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, to be able to vote at the special meeting. If no direction is given and the proxy is validly executed, the stock represented by the proxy will be voted in favor of the proposals. The persons authorized under the proxies will vote upon any other business that may properly come before the special meeting according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote. Other than the approval of the matters above, we do not anticipate that any other matters will be raised at the special meeting.

Q: Do I have appraisal or dissenters’ rights in connection with the Transaction?

A: No. Under Delaware law, our stockholders will not be entitled to exercise any appraisal rights in connection with the Transaction or the other transactions contemplated by the Contribution Agreement.

Q: What are our reasons for the Transaction?

A: The board of directors considered many factors in making its determination that the Contribution Agreement and the transactions contemplated thereby (including the Transaction and the issuance of shares of Class A Common Stock and Class B Common Stock pursuant to the Contribution Agreement), were fair and reasonable and in the best interests of Earthstone and our stockholders. The factors considered by the board of directors in making that determination included, among others, the Transaction will further enhance our assets in the Midland

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Basin in Texas as Bold’s primary assets include significant oil and natural gas acreage there, and will result in significant increases in production and proved reserves for Earthstone. For a more complete discussion of these factors, see “The Transaction—Recommendation of the Board of Directors and its Reasons for the Transaction.”

Q: What are the potentially negative factors considered by the board of directors in considering the Transaction?

A: In addition to considering the positive attributes of the Transaction, the board of directors also considered potentially negative factors before determining that the Transaction is in the best interests of Earthstone and our stockholders. These potentially negative factors included, among others, the capital requirements necessary to grow the combined company, the potential decrease in oil and natural gas prices and the potential disruption to our business that could result from the announcement of the Transaction. For a more complete discussion of these factors, see “The Transaction—Recommendation of the Board of Directors and its Reasons for the Transaction.”

Q: Has the board of directors unanimously approved the Contribution Agreement and the transactions contemplated thereby?

A: After careful consideration, our board of directors has unanimously (i) determined that the Contribution Agreement, the transactions contemplated thereby and the Transaction are fair, from a financial point of view, to our stockholders and are in the best interests of Earthstone; (ii) approved the Contribution Agreement, the Transaction, the exchange of assets and the other transactions contemplated thereby; (iii) approved the amendment to our amended and restated certificate of incorporation increasing the authorized number of shares of our Common Stock and dividing the Common Stock into two classes, Class A Common Stock and Class B Common Stock; (iv) approved the reclassification and conversion of our Common Stock into Class A Common Stock; (v) approved the issuance of the Class A Common Stock in connection with the future exchange of Class B Common Stock and EEH Units as required by the applicable listing rules of the NYSE MKT; (vi) approved the amendment to the Plan; and (vii) approved the proposal to authorize our board of directors, in its discretion, to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

Q: What do I need to do now?

A: After carefully reading and considering the information contained in this proxy statement, please vote your shares of Common Stock as soon as possible so that your shares of Common Stock will be represented at the special meeting. Please follow the instructions set forth on the proxy card.

Q: Who can help answer my questions?

A: Stockholders who have questions about the Transaction or desire additional copies of this proxy statement should contact:

Neil K. Cohen

Vice President Finance, Treasurer

Earthstone Energy, Inc.

(281) 298-4246

or

Advantage Proxy, Inc.

P.O. Box 13581

Des Moines, Washington 98198

Toll Free: (877) 870-8565

Collect: (206) 870-8565

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains statements that Earthstone believes to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than historical facts, including, without limitation, statements regarding the expected benefits of the Transaction to Earthstone and Bold and their stockholders, the anticipated completion of the Transaction or the timing thereof, the expected future reserves, production, financial position, business strategy, revenues, earnings, costs, capital expenditures and debt levels of the combined company, and plans and objectives of management for future operations, are forward-looking statements. When used in this document, words such as “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe” or “should” or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements.

These risks and uncertainties include, but are not limited to:

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Except as required by law, Earthstone assumes no obligation, and disclaims any duty, to update the forward-looking statements in this proxy statement.

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RISK FACTORS

In addition to the other information included and incorporated by reference into this proxy statement, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 7, you should carefully consider the following risks before deciding whether to vote for the approval and adoption of the Contribution Agreement and the transactions contemplated thereby proposal, the approval and adoption of the exchange of assets proposal, the approval and adoption of the amendment to our amended and restated certificate of incorporation proposal, the approval of the reclassification and conversion of our Common Stock into Class A Common Stock proposal, the approval, for purposes of the applicable listing rules of the NYSE MKT, of the issuance of the Class A Common Stock upon exchange of the Class B Common Stock issued pursuant to the Contribution Agreement proposal, the approval and adoption of an amendment to the Earthstone Energy, Inc. 2014 Long-Term Incentive Plan proposal or the adjournment proposal. In addition, you should read and consider the risks associated with the business of Earthstone. Descriptions of some of these risks can be found in Earthstone’s Annual Report on Form 10-K for the year ended December 31, 2016, as updated by any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this proxy statement. You should also read and consider the other information in this proxy statement and the other documents incorporated by reference into this proxy statement. See the section entitled “Where You Can Find More Information” beginning on page 127.

Risk Relating to the Transaction

After the closing of the Transaction, we will be a holding company. Our sole material asset will be our equity interest in EEH and, accordingly, we will be dependent upon distributions from EEH to pay taxes and cover our corporate and other overhead expenses.

After the closing of the Transaction, we will be a holding company and have no material assets other than our equity interest in EEH. We will have no independent means of generating revenue. We expect EEH to reimburse us for our corporate and other overhead expenses, and to the extent EEH has available cash, we intend to cause EEH to make distributions to the holders of EEH Units, including us, in an amount sufficient to cover all applicable U.S. federal, state and local income taxes and non-U.S. tax liabilities of Earthstone, Lynden Energy Corp., a corporation existing under the laws of British Columbia and a wholly owned subsidiary, and Lynden, if any, at assumed tax rates. We will likely be limited, however, in our ability to cause EEH and its subsidiaries to make these and other distributions due to the restrictions in the revolving credit facility that we anticipate EEH will enter into at the closing of the Transaction. To the extent that we need funds and EEH or its subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of their financing arrangements, or are otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition.

Our principal stockholders will collectively hold a substantial majority of the voting power of the Class A Common Stock and Class B Common Stock after the closing of the Transaction.

Holders of Class A Common Stock and Class B Common Stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or the second amended and restated certificate of incorporation. EnCap through Bold Holdings will hold approximately 59.1% of our ownership interests. EnCap also owns 57.3% of Oak Valley which will own approximately 15.7% of our Class A Common Stock. The existence of this significant stockholder may also have the effect of limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our company or delaying or preventing changes in control or changes in management.

So long as EnCap and certain of its affiliates (through their direct and indirect ownership in Bold, Bold Holdings and Oak Valley or otherwise) continue to control a significant amount of our outstanding voting securities, they will continue to be able to have significant influence over all matters requiring stockholder approval, regardless of whether or not other stockholders believe that a potential transaction is in their own best interests. Also, in any of these matters, the interests of our management team may differ or conflict with the interests of our other stockholders. In addition, EnCap and its affiliates may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are significant existing or potential acquisition candidates or industry partners. EnCap and its affiliates may acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue. Moreover, this concentration of stock ownership may also adversely affect the trading price of our Class A Common Stock to the extent investors perceive a disadvantage in owning stock of a company with a controlling stockholder.

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After the closing of the Transaction, we anticipate that we will be a “controlled company” within the meaning of the NYSE MKT rules and, as a result, qualify for and rely on exemptions from certain corporate governance requirements.

Upon the closing of the Transaction, EnCap will control a majority of the combined voting power of all classes of our outstanding voting stock. As a result, we expect to be a controlled company within the meaning of the NYSE MKT corporate governance standards. Under the NYSE MKT rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain NYSE MKT corporate governance requirements, including the requirements that:

These requirements will not apply to us as long as we remain a controlled company. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE MKT.

Bold Holdings will have the right to have its EEH Units and shares of Class B Common Stock exchanged for Class A Common Stock pursuant to the terms of the First Amended and Restated Limited Liability Company Agreement of EEH.

After the closing of the Transaction, we will have an aggregate of approximately 36.1 million shares of Class A Common Stock issuable upon redemption or exchange of EEH Units and shares of Class B Common Stock that are held by Bold Holdings. Subject to certain restrictions set forth in the First Amended and Restated Limited Liability Company Agreement, Bold Holdings is entitled to have its EEH Units and shares of Class B Common Stock exchanged for shares of our Class A Common Stock. We will also enter into a Registration Rights Agreement pursuant to which the shares of Class A Common Stock issued to Bold Holdings upon redemption or exchange of EEH Units and shares of Class B Common Stock, subject to certain limitations set forth therein, shall be registered by us shortly after the closing of the Transaction pursuant to one or more registration statements for subsequent offers and sales by Bold Holdings and its permitted transferees. See “Registration Rights Agreement” beginning on page 87 for more information.

We cannot predict the amount of future issuances of our Class A Common Stock or the effect, if any, that future issuances and sales of shares of our Class A Common Stock may have on the market price of our Class A Common Stock. Sales or distributions of substantial amounts of our Class A Common Stock, including shares issued in connection with an acquisition, or the perception that such sales or distributions could occur, may cause the market price of our Class A Common Stock to decline.

The number of shares of Class B Common Stock to be issued to Bold Holdings is fixed and will not be adjusted in the event of any change in Earthstone’s stock price.

Upon completion of the Transaction, we will issue approximately 36.1 million shares of Class B Common Stock to Bold Holdings. This share amount was fixed in the Contribution Agreement and will not be adjusted to reflect changes in the market price of our Common Stock before the Transaction is completed. Stock price changes may result from a variety of factors (many of which are beyond our control), including the following:

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The price of our Common Stock (Class A Common Stock after the closing) at the completion of the Transaction will most likely be different from the Common Stock price on the date the Contribution Agreement was executed and from prices existing on the date of this proxy statement and on the date of the special meeting. As a result, the market value represented by the consideration to be paid by us, meaning the number of shares of Class A Common Stock that may be acquired by Bold Holdings multiplied by the trading price of our Class A Common Stock, could also change significantly. For example, based on the range of closing prices of the Common Stock during the period from November 7, 2016, the last trading day before public announcement of the Transaction, through April 6, 2017, the latest practicable date before the date of this proxy statement, the consideration to be paid represented an implied value ranging from a low of $315.1 million to a high of $568.8 million.

Failure to complete the Transaction could negatively affect our stock price, future business and financial results.

Completion of the Transaction is not assured and is subject to risks, including the risks that approval of the Transaction by our stockholders will not be obtained or that certain other closing conditions will not be satisfied. If the Transaction is not completed, our ongoing business and financial results may be adversely affected and we will be subject to several risks, including:

Delays in completing the Transaction may substantially reduce the expected benefits of the Transaction.

Satisfying the conditions to, and completion of, the Transaction may take longer than, and could cost more than, we expect. Any delay in completing or any additional conditions imposed in order to complete the Transaction may materially adversely affect the synergies and other benefits that we expect to achieve from the Transaction and the integration of our respective businesses. In addition, each of us and Bold Holdings has the right to terminate the Contribution Agreement if the Transaction is not completed by June 30, 2017.

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The Contribution Agreement limits our ability to pursue alternatives to the Transaction, which may discourage a potential acquirer from making an alternative proposal and, in certain circumstances, could require us to pay to Bold Holdings a significant termination fee.

Under the Contribution Agreement, we are restricted, subject to limited exceptions, from pursuing or entering into alternative transactions in lieu of the Transaction. In general, unless and until the Contribution Agreement is terminated, we are restricted from soliciting alternative proposals and providing information to or engaging in discussions with third parties, except in the limited circumstances as provided in the Contribution Agreement. Our board of directors is limited in its ability to change its recommendation with respect to the Transaction proposal. We have the right to terminate the Contribution Agreement and enter into an agreement with another party with respect to a “superior proposal,” but only if specified conditions have been satisfied, including compliance with the non-solicitation provisions of the Contribution Agreement, the expiration of certain waiting periods that may give Bold an opportunity to amend the Contribution Agreement so the “superior proposal” is no longer a “superior proposal” and the payment of a required termination fee. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of Earthstone from considering or proposing such an acquisition, even if such third party were prepared to pay consideration with a higher per share cash or market value than the consideration proposed to be realized in the Transaction, or might result in a potential acquirer proposing to pay a lower price than it would otherwise have proposed to pay because of the added expense of the termination fee that may become payable.

We will incur substantial fees and costs in connection with the Transaction.

We expect to incur significant non-recurring expenses in connection with the Transaction. Additional unanticipated costs may be incurred, including, without limitation, unexpected costs and other expenses in the course of the integration of the businesses of Earthstone and Bold. In addition, the companies cannot be certain that the elimination of duplicative costs or the realization of other efficiencies related to the integration of the two businesses will offset the integration costs in the near term, or at all.

We will be subject to various uncertainties and contractual restrictions while the Transaction is pending that could adversely affect our financial results.

Uncertainty about the effect of the Transaction on employees, service providers, suppliers and industry partners may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Transaction is completed and for a period of time thereafter, and could cause service providers, suppliers and others who deal with us to seek to change their existing business relationships. Employee retention and recruitment may be particularly challenging prior to completion of the Transaction, as employees and prospective employees may experience uncertainty about their future roles with the combined company.

The pursuit of the Transaction and the preparation for the integration of the businesses of the two companies may place a significant burden on our management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could adversely affect our financial results or the financial results of the combined company.

In addition, the Contribution Agreement restricts us from taking certain specified actions while the Transaction is pending without first obtaining Bold Holdings’ prior written consent. These restrictions may limit us from pursuing attractive business opportunities and making other changes to our business prior to completion of the Transaction or termination of the Contribution Agreement.

Risks Relating to Our Business Following Completion of the Transaction

We may experience difficulties in integrating our business with Bold’s business, which could cause the combined company to fail to realize many of the anticipated potential benefits of the Transaction.

We entered into the Contribution Agreement with the expectation that the Transaction will result in various benefits, including, but not limited to, operating and cost efficiencies related to drilling, completion and production operations and savings associated with general and administrative costs. Achieving the anticipated benefits of the Transaction will depend in part upon whether we integrate our business and Bold’s business in an efficient and effective manner. We may not be able to accomplish this integration process successfully. The difficulties of combining the businesses of the two companies potentially will include, among other things, the integration of certain operations following the Transaction will require the dedication of significant management resources, which may temporarily distract management’s attention from the day-to-day business of the combined company.

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An inability to realize the full extent of the anticipated benefits of the Transaction, as well as any delays encountered in the transition process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may, in turn, affect the value of our Class A Common Stock after the closing of the Transaction.

The market price of our Class A Common Stock may decline in the future as a result of the Transaction.

The market price of our Class A Common Stock may decline in the future as a result of the Transaction for a number of reasons, including the unsuccessful integration of the businesses of Earthstone and Bold (including for the reasons set forth in the preceding risk factor) or our failure to achieve the perceived benefits of the Transaction, including financial and operating results, as rapidly as or to the extent anticipated by financial or industry analysts. These factors are, to some extent, beyond our control.

Our current stockholders will have a reduced ownership and voting interest after the Transaction.

As a result of the Class B Common Stock that we expect to issue as part of the Transaction, current stockholders are expected to hold approximately 38.9% of Earthstone’s voting securities on a fully diluted basis immediately following completion of the Transaction. When the Transaction occurs, each stockholder will have a percentage ownership of Earthstone that will be smaller than the stockholder’s percentage ownership prior to the Transaction. As a result of the reduced ownership percentages, stockholders will have less voting power after the Transaction than they now have now.

The pro forma condensed combined financial information included in this proxy statement is presented for illustrative purposes only and may not be an indication of the combined company’s financial condition or results of operations following the Transaction.

The pro forma condensed combined financial information contained in this proxy statement is presented for illustrative purposes only, is based on various adjustments, assumptions and preliminary estimates and may not be an indication of Earthstone’s financial condition or results of operations following the Transaction. See “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 107. The actual financial condition and results of operations of the combined company following the Transaction may not be consistent with, or evident from, these pro forma financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the combined company’s financial condition or results of operations following the Transaction. Any potential decline in Earthstone’s financial condition or results of operations may cause significant variations in the stock price of Earthstone.

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THE COMPANIES

Earthstone Energy, Inc.

Earthstone Energy, Inc., a Delaware corporation (“Earthstone,” “we,” “our” or “us”), is a growth-oriented independent oil and natural gas development and production company engaged in developing and acquiring oil and natural gas reserves through an active and diversified program that includes acquiring, drilling and developing undeveloped leases, asset and corporate acquisitions and exploration activities, with its current primary assets located in the Midland Basin of west Texas, the Eagle Ford trend of south Texas and the Williston Basin of North Dakota and Montana. All of these properties and operations are held by and conducted through four wholly-owned subsidiaries of Earthstone. Through another wholly-owned subsidiary, Lynden Corp., Earthstone holds various non-operated working interests in the Midland Basin and Eastern Shelf located in the Permian Basin in west Texas and in the Paradox Basin Project, located in Utah. Lynden Corp. was acquired by Earthstone in May 2016.

As of December 31, 2016, Earthstone’s estimated proved reserves totaled 12,051 MBOE. Earthstone’s average daily production was 4,002 BOE/d for the year ended December 31, 2016. For the year ended December 31, 2016, Earthstone had total revenues of approximately $42.3 million and a net loss of approximately $54.5 million. See “Summary—Earthstone Selected Historical Financial Data” on page 18.

Four of Earthstone’s subsidiaries will be contributed to EEH at the closing of the Transaction. As the sole managing member of EEH, Earthstone will be responsible for all operational, management and administrative decisions relating to EEH’s business and will consolidate the financial results of EEH and its subsidiaries.

Earthstone’s principal offices are located at 1400 Woodloch Forest Drive, Suite 300, The Woodlands, Texas 77380, and its telephone number is (281) 298-4246. The Common Stock is listed on the NYSE MKT under the symbol “ESTE.”

Earthstone Energy Holdings, LLC

Earthstone Energy Holdings, LLC, a Delaware limited liability company and wholly owned subsidiary of Earthstone (“EEH”), was formed on November 4, 2016, for the purpose of entering into the Contribution Agreement and facilitating the Transaction. EEH will issue approximately 22.3 million EEH Units to Earthstone and Lynden and approximately 36.1 million EEH Units to Bold Holdings in exchange for Earthstone transferring the membership interests of four of its subsidiaries to EEH, Lynden transferring its membership interests in Lynden Sub to EEH and Bold Holdings transferring its membership interests in Bold to EEH. Earthstone will be the sole managing member of EEH. After the closing of the Transaction, EEH will act as a holding company of operating subsidiaries that own and operate our assets and Bold’s assets that are used in the exploration, development, production and acquisition of oil and natural gas properties.

See “The First Amended and Restated Limited Liability Company Agreement of EEH” beginning on page 83 for information regarding the proposed operations of EEH and the respective rights, duties and obligations of its members.

EEH’s principal offices are located at 1400 Woodloch Forest Drive, Suite 300, The Woodlands, Texas 77380, and its telephone number is (281) 298-4246.

Lynden USA Inc.

Lynden USA Operating, LLC

Lynden Energy Corp. is a corporation organized under the laws of British Columbia, Canada that was acquired by Earthstone in May 2016. Its wholly-owned subsidiary, Lynden USA Inc., a Utah corporation (“Lynden”), in turn holds all of the membership interests of Lynden USA Operating, LLC, a Texas limited liability company (“Lynden Sub”). Lynden will contribute the membership interest of Lynden Sub to EEH at the closing of the Transaction.

Lynden’s and Lynden Sub’s principal offices are located at 1400 Woodloch Forest Drive, Suite 300, The Woodlands, Texas 77380, and their telephone number is (281) 298-4246.

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Bold Energy Holdings, LLC

Bold Energy III LLC

Bold Energy Holdings, LLC, a Texas limited liability company (“Bold Holdings”), was formed on November 4, 2016, and is owned by EnCap Energy Capital Fund IX, L.P., a Texas limited partnership and affiliate of EnCap (“EnCap Fund IX”).

Bold Energy III LLC, a Texas limited liability company (“Bold”), commenced operations on April 5, 2013 and is owned by Bold Energy Management Holdings III LLC, a Texas limited liability company (“BEMH III”), Bold Energy Management III LLC, a Texas limited liability company (“BEM III”), and EnCap Fund IX.

Effective immediately prior to the consummation of the transactions contemplated by the Contribution Agreement, BEMH III, BEM III and EnCap Fund IX will contribute all of the issued and outstanding membership interests in Bold to Bold Holdings in exchange for all of the issued and outstanding membership interests in Bold Holdings. Bold Holdings will then contribute the membership interests of Bold to EEH at the closing of the Transaction.

Bold is an independent domestic oil and natural gas company focused on the acquisition and development of unconventional, oil-weighted reserves in the Midland Basin of West Texas. Bold’s operational focus is on the horizontal development of multiple benches in the Wolfcamp formation as well as the Lower Spraberry. As of December 31, 2016, Bold had acquired approximately 20,900 net acres in the Midland Basin, primarily in Reagan, Upton and Midland counties.

As of December 31, 2016, Bold’s estimated proved reserves totaled 13,888 MBOE. For the year ended December 31, 2016, Bold’s average daily production was 1,556 BOE/d. For the year ended December 31, 2016, Bold had total revenues of approximately $19.5 million and a net loss of approximately $12.4 million. See “Summary—Bold Selected Historical Financial Data” on page 19.

Bold Holdings’ and Bold’s principal offices are located at 600 N. Marienfeld, Suite 1000, Midland, Texas 79701, and their telephone number is (432)  686-1100.

Oak Valley Resources, LLC

Oak Valley Resources, LLC, a Delaware limited liability company (“Oak Valley”), owns approximately 41.1% of the Common Stock. Five affiliated investment funds under the management of EnCap (collectively, the “EnCap Oak Valley Funds”), specifically EnCap Energy Capital Fund VII, L.P. (“EnCap Fund VII”), EnCap Energy Capital Fund VI, L.P. (“EnCap Fund VI”), EnCap VI-B Acquisitions, L.P. (“EnCap Fund VI-B”), EnCap Energy Capital Fund V, L.P. (“EnCap Fund V”), and EnCap V-B Acquisitions, L.P. (“EnCap Fund V-B”), each a Texas limited partnership, collectively own 57.3% of the membership interests of Oak Valley and have the contractual right to nominate a majority of the members of the board of managers of Oak Valley.

Oak Valley’s principal offices are located at 1400 Woodloch Forest Drive, Suite 300, The Woodlands, Texas 77380, and its telephone number is (281) 298-4246.

EnCap Investments L.P.

EnCap Investments L.P., a Delaware limited partnership (“EnCap”), is the general partner of EnCap Equity Fund V GP, L.P. EnCap Equity Fund VI GP, L.P., EnCap Equity Fund VII GP, L.P. and EnCap Equity Fund IX GP, L.P., which are the general partners, or in the case of EnCap Fund V-B and EnCap Fund VI-B indirectly controls the general partner, of the EnCap Oak Valley Funds and EnCap Fund IX. EnCap Partners, LLC (“EnCap Partners”) is the managing member of EnCap Investments Holdings, LLC, which is the sole member of EnCap Investments GP, L.L.C., which is the general partner of EnCap. Therefore, EnCap Partners and certain of its affiliates through their direct and indirect ownership may be deemed to share the right to direct the disposition of the Common Stock held by Oak Valley through the EnCap Oak Valley Funds’ interest in Oak Valley and EnCap Fund IX’s ownership of Bold.

EnCap’s principal offices are located at 1100 Louisiana Street, Suite 4900, Houston, Texas 77002, and its telephone number is (713) 659-6100.

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THE SPECIAL MEETING

General

This proxy statement is being furnished to our stockholders in connection with the solicitation of proxies by our board of directors to be used at the special meeting of stockholders to be held at our offices, located at 1400 Woodloch Forest Drive, Suite 300, The Woodlands, Texas 77380, on May 9, 2017, at 8:00 a.m., local time, and at any adjournment or postponement of that meeting. This proxy statement and the enclosed form of proxy card are first being sent to our stockholders on or about April 7, 2017.

Purpose of the Special Meeting

At the special meeting, holders of Common Stock as of the record date of March 13, 2017 will be asked to consider and vote on:

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Recommendation of the Board of Directors

Our board of directors has unanimously (i) determined that the Contribution Agreement, the transactions contemplated thereby and the Transaction are fair, from a financial point of view, to our stockholders and are in the best interests of Earthstone; (ii) approved the Contribution Agreement, the Transaction, the exchange of assets and the other transactions contemplated thereby; (iii) approved the amendment to our amended and restated certificate of incorporation increasing the authorized number of shares of our Common Stock and dividing the Common Stock into two classes, Class A Common Stock and Class B Common Stock; (iv) approved the reclassification and conversion of our Common Stock into Class A Common Stock; (v) approved the issuance of the Class A Common Stock in connection with the future exchange of Class B Common Stock and EEH Units as required by the applicable listing rules of the NYSE MKT; (vi) approved an amendment to our 2014 Long-Term Incentive Plan increasing the number of shares available for issuance thereunder; and (vii) approved the proposal to authorize our board of directors, in its discretion, to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

Our board of directors unanimously recommends that our stockholders vote:

See “The Transaction—Recommendation of the Board of Directors and its Reasons for the Transaction.”

Record Date and Voting

The board of directors has fixed the close of business on March 13, 2017 as the record date for determining the holders of shares of Common Stock entitled to receive notice of and to vote at the special meeting and any adjournments or postponements thereof. Only holders of record of shares of Common Stock at the close of business on that date will be entitled to vote at the special meeting and at any adjournment or postponement of that meeting. At the close of business on the record date, there were 22,273,820 shares of Common Stock outstanding, held by approximately 1,800 holders of record.

Each holder of shares of Common Stock outstanding on the record date will be entitled to one vote for each share held of record upon each matter properly submitted at the special meeting and at any adjournment or postponement thereof. In order for us to satisfy our quorum requirements, the holders of at least a majority of the total number of outstanding shares of Common Stock entitled to vote at the meeting must be present. You will be deemed to be present if you attend the meeting or if you submit a proxy (including through the mail or by telephone or the Internet) that is received at or prior to the meeting (and not revoked).

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If your proxy is properly executed and received by us in time to be voted at the special meeting, the shares represented by your proxy (including those given through the mail or by telephone or the Internet) will be voted in accordance with your instructions. If you execute your proxy but do not provide us with any instructions, your shares will be voted “FOR” the proposals set forth in the notice of special meeting.

The only matters that we expect to be presented at the special meeting are set forth in the notice of special meeting. If any other matters properly come before the special meeting, the persons named in the proxy card will vote the shares represented by all properly executed proxies on such matters in their best judgment.

Quorum

If you vote in person or by proxy at the special meeting, you will be counted for purposes of determining whether there is a quorum at the meeting. Shares of Common Stock present in person or by proxy at the special meeting that are entitled to vote will be counted for the purpose of determining whether there is a quorum for the transaction of business at the special meeting. Our bylaws provide that a majority of the outstanding shares of Common Stock entitled to vote at the meeting, represented in person or by proxy, constitutes a quorum at a meeting of our stockholders.

As of the record date:

We currently expect that our directors and executive officers will vote their shares of Common Stock “FOR” all of the proposals set forth in the notice of special meeting.

Vote Required

Approval and adoption of the Contribution Agreement (Proposal 1). Approval of the proposal to approve and adopt the Contribution Agreement and the transactions contemplated thereby, which includes the business combination with Bold, requires the affirmative vote of (i) a majority of the issued and outstanding shares of our Common Stock and (ii) a majority of the shares of our Common Stock represented in person or by proxy at the special meeting and voting on the proposal that are not held by Oak Valley or our executive officers.

Approval and adoption of the exchange of all or substantially all of our assets for EEH Units as contemplated by the Contribution Agreement (Proposal 2). Approval of the proposal to approve and adopt the exchange of all or substantially all of our assets for EEH Units as contemplated by the Contribution Agreement requires the affirmative vote of (i) a majority of the issued and outstanding shares of our Common Stock and (ii) a majority of the issued and outstanding shares of our Common Stock represented in person or by proxy at the special meeting and voting on the proposal that are not held by Oak Valley or our executive officers.

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Approval and adoption of the Amendment to Our Amended and Restated Certificate of Incorporation (Proposal 3). Approval of the proposal to approve the amendment to our amended and restated certificate of incorporation requires the affirmative vote of a majority of the issued and outstanding shares of our Common Stock.

Approval of the reclassification and conversion of our Common Stock into Class A Common Stock (Proposal 4). Approval of the proposal to approve the reclassification and conversion of our Common Stock into Class A Common Stock requires the affirmative vote of a majority of the issued and outstanding shares of our Common Stock.

Approval of the NYSE MKT Proposal (Proposal 5). Approval, for purposes of complying with applicable listing rules of the NYSE MKT, of the issuance and sale of shares of Class A Common Stock in connection with the future exchange of EEH Units and shares of Class B Common Stock issued pursuant to the Contribution Agreement requires the affirmative vote of a majority of the issued and outstanding shares of Common Stock represented in person or by proxy at the special meeting and voting on the proposal, provided that such shares voting affirmatively must also constitute a majority of the required quorum for the meeting.

Approval and adoption of the Amendment to the Earthstone Energy, Inc. 2014 Long-Term Incentive Plan (Proposal 6). Approval of the proposal to approve and adopt the amendment to the Earthstone Energy, Inc. 2014 Long-Term Incentive Plan requires the affirmative vote of a majority of the issued and outstanding shares of our Common Stock represented in person or by proxy at the special meeting and voting on the proposal, provided that such shares voting affirmatively must also constitute a majority of the required quorum for the meeting.

Approval of the adjournment of the special meeting (Proposal 7). Approval of the proposal to authorize our board of directors, in its discretion, to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposals listed above requires the affirmative vote of a majority of the shares of Common Stock represented in person or by proxy at the special meeting and voting on the proposal, even if less than a quorum.

Revocability of Proxies

The presence of a stockholder at the special meeting will not automatically revoke that stockholder’s proxy. However, a stockholder may revoke a proxy at any time prior to its exercise by:

Voting Methods

A stockholder of record may vote by attending the special meeting in person. You may also complete and mail your proxy card in the return envelope enclosed or authorize the individuals named on your proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with your proxy card or voting instruction card.

Solicitation of Proxies

The solicitation of proxies from our stockholders is made on behalf of our board of directors. The costs and expenses of printing and mailing this proxy statement and all fees paid to the SEC shall be paid by us. We will pay the costs of soliciting and obtaining proxies from our stockholders, including the costs of reimbursing brokers, banks and other financial institutions for forwarding proxy materials to their customers. Proxies may be solicited, without extra compensation, by our directors, officers and employees by mail, telephone, fax, personal interviews or other methods of communication. We have also made arrangements with Advantage Proxy, Inc. to assist us in soliciting proxies for our Common Stock and have agreed to pay Advantage Proxy $5,500, plus reasonable expenses for these services.

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THE PROPOSALS

As discussed elsewhere in this proxy statement, our stockholders will consider and vote on a proposal to approve and adopt the Contribution Agreement and the transactions contemplated thereby, which includes the business combination with Bold. Our stockholders should read carefully this proxy statement in its entirety, including the annexes, for more detailed information concerning the Contribution Agreement. In particular, our stockholders are directed to the Contribution Agreement, a copy of which is attached as Annex A to this proxy statement. Approval and adoption of the Contribution Agreement and the transactions contemplated thereby requires the affirmative vote of (i) a majority of the issued and outstanding shares of Common Stock and (ii) a majority of the shares of Common Stock represented in person or by proxy at the special meeting and voting on the proposal that are not held by Oak Valley or our executive officers.

The board of directors recommends a vote “FOR” the Contribution Agreement Proposal (Proposal 1).

As discussed elsewhere in this proxy statement, our stockholders will consider and vote on a proposal to approve and adopt the exchange of all or substantially all of our assets, which consists of the membership interests in five of our operating subsidiaries, for EEH Units as contemplated by the Contribution Agreement. Under the Delaware General Corporation Law (the “DGCL”), the sale, lease or exchange of all or substantially all of a corporation’s assets, including the assets of its subsidiaries, requires approval of its stockholders. Sales, leases and exchanges to wholly-owned and controlled subsidiaries do not require such stockholder approval. Since EEH will not be wholly-owned by Earthstone upon closing of the Contribution Agreement, for purposes of certainty under Delaware law, we are asking for stockholder approval of the exchange of all or substantially all of our assets, in addition to approval of the Contribution Agreement in Proposal 1 above.

Approval and adoption of the exchange of assets proposal requires the affirmative vote of (i) a majority of the issued and outstanding shares of Common Stock and (ii) a majority of the issued and outstanding shares of Common Stock represented in person or by proxy at the special meeting and voting on the proposal that are not held by Oak Valley or our executive officers.

The board of directors recommends a vote “FOR” the exchange of assets proposal (Proposal 2).

As discussed elsewhere in this proxy statement, our stockholders will consider and vote on a proposal to approve and adopt an amendment to our amended and restated certificate of incorporation that will increase the authorized shares of our common stock, from 100 million shares, $0.001 par value per share, to 250 million shares, $0.001 par value per share, divided into 200 million shares of Class A Common Stock, $0.001 par value per share, and 50 million shares of Class B Common Stock, $0.001 par value per share. See the “Form of Second Amended and Restated Certificate of Incorporation” included as Annex B to this proxy statement.

Approval and adoption of the amendment to our amended and restated certificate of incorporation proposal requires the affirmative vote of a majority of the issued and outstanding shares of Common Stock. Both broker non-votes and abstentions will act as a vote against the amendment to our amended and restated certificate of incorporation.

The board of directors recommends a vote “FOR” the amendment to our amended and restated certificate of incorporation proposal (Proposal 3).

As discussed elsewhere in this proxy statement, our stockholders will consider and vote on a proposal to approve the reclassification and conversion of each share of our Common Stock issued and outstanding immediately prior to closing of the Contribution Agreement into one (1) share of our Class A Common Stock.

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Approval of the reclassification proposal requires the affirmative vote of a majority of the issued and outstanding shares of our Common Stock. Both broker non-votes and abstentions will act as a vote against the reclassification proposal.

The board of directors recommends a vote “FOR” the reclassification proposal (Proposal 4).

As discussed elsewhere in this proxy statement, our stockholders will consider and vote on a proposal to approve, for purposes of complying with applicable listing rules of the NYSE MKT, the issuance and sale of shares of Class A Common Stock in connection with the future exchange of EEH Units and shares of Class B Common Stock issued pursuant to the Contribution Agreement.

Approval, for purposes of complying with applicable listing rules of the NYSE MKT, of the issuance and sale of shares of Class A Common Stock in connection with the future exchange of EEH Units and shares of Class B Common Stock issued pursuant to the Contribution Agreement requires the affirmative vote of a majority of the shares of our Common Stock represented in person or by proxy at the special meeting and voting on the proposal.

The board of directors recommends a vote “FOR” the NYSE MKT proposal (Proposal 5).

As discussed elsewhere in this proxy statement, our stockholders will consider and vote on a proposal to approve and adopt an amendment (the “Amendment”) to the Earthstone Energy, Inc. 2014 Long-Term Incentive Plan, as amended (the “Plan”), to increase the number of shares of our Common Stock authorized to be issued under the Plan by 4.3 million shares. At the special meeting of our stockholders on December 19, 2014, the Plan was adopted by our stockholders. At the annual meeting of our stockholders on October 22, 2015, an amendment increasing the number of shares available under by the Plan by 750,000 shares was adopted by our stockholders. See the “Amendment No. 2 to the Earthstone Energy, Inc. 2014 Long-Term Incentive Plan” included as Annex H to this proxy statement.

Description and Text of the Proposed Amendment

Our board of directors has determined that, to give us the ability to attract and retain the executive and key employee talent necessary for our continued growth and success, the number of shares of our Common Stock available for issuance under the Plan should be increased by 4.3 million shares, and is proposing an amendment to effect such an increase. In evaluating the amount of the increase in the number of shares available under the Plan, the board of directors considered our employee headcount and the board of directors believes that equity compensation should be a larger portion of overall compensation. In approving and recommending the increase in the number of shares of Common Stock authorized for issuance under the Plan, the board of directors concluded such increase was advisable and in our best interests to provide us with maximum flexibility to use equity awards to continue to support our growth strategy and maintain our ability to attract and retain talented executives and employees. Because the amount and timing of specific equity awards in the future is dependent on our employee headcount, management performance, competitive compensation practices, our stock price and a variety of other factors, some of which are beyond our control, it is not possible to determine when or if the currently proposed increase in shares under the Plan will be exhausted or the amount of subsequent dilution that may ultimately result from such awards.

To effect the increase in the aggregate number of shares of our Common Stock that may be issued under the Plan, it is proposed that the first sentence of Section 3.1 of the Plan be deleted in its entirety and replaced with the following:

“Subject to the limitations set forth herein, 5,800,000 shares of Common Stock are reserved for issuance pursuant to Awards made under this Plan.”

Summary of Principal Terms of the Plan

As provided in the Plan, following the recapitalization and conversion of the Common Stock into Class A Common Stock, the Plan will be amended so that all references to Common Stock will be to Class A Common Stock. The

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following is a summary description of the material features of the Plan, as proposed to be amended. The statements made in this proxy statement regarding the Amendment to the Plan should be read in conjunction with and are qualified in their entirety by reference to the Plan, a copy of which is available as Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on December 29, 2014 and the Amendment No. 1 to the Plan, a copy of which is available as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on October 26, 2015. Prior filings with the SEC are available through our website at www.earthstoneenergy.com or in printed form upon request by any stockholder.

The Plan currently is effective until December 18, 2024. The purposes of the Plan are to create incentives which are designed to motivate participants to put forth maximum effort toward our success and growth and to enable us to attract and retain experienced individuals who, by their position, ability and diligence are able to make important contributions to our success.

Under the Plan, we may grant stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance units, performance bonuses, stock awards and other incentive awards to our employees or those of our subsidiaries or affiliates. We may also grant nonqualified stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance units, stock awards and other incentive awards to any persons rendering consulting or advisory services and non-employee directors, subject to the conditions set forth in the Plan. Generally, all classes of our employees are eligible to participate in the Plan. As of April 6, 2017, there were approximately 51 full-time employees, one part-time employees, and six non-employee directors of Earthstone that are eligible to participate in the Plan.

The Plan currently provides that a maximum of 1,500,000 shares of our Common Stock may be issued in conjunction with awards granted under the Plan. At December 31, 2016, 718,500 shares of our Common Stock remained available for awards to be granted under the Plan. If the Plan is amended as proposed herein, 5.8 million shares of our Common Stock would be available for issuance under the Plan. If the closing of the Contribution Agreement occurs, all references to “Common Stock” under the Plan will be amended to refer to “Class A Common Stock.” Shares underlying awards that are forfeited under the Plan will again be eligible for issuance as though the forfeited awards had never been issued. Similarly, awards settled in cash will not be counted against the shares authorized for issuance upon exercise or settlement of awards under the Plan. On April 6, 2017, the closing price of a share of our Common Stock on the NYSE MKT was $14.51.

The Plan limits the aggregate number of shares of our Common Stock that may be issued in conjunction with stock options and/or stock appreciation rights to any eligible employee in any calendar year to 250,000 shares. The Plan also limits the aggregate number of shares of our Common Stock that may be issued in conjunction with the grant of restricted stock awards, restricted stock unit awards, performance unit awards, stock awards and other incentive awards to any eligible employee in any calendar year to 150,000 shares. The Plan also limits the maximum aggregate amount that may be paid in cash pursuant to awards (other than stock options or stock appreciation rights) made to any eligible employee in any calendar year to $2 million.

Administration

Our board of directors or a committee appointed by the board of directors administers the Plan. Except as set forth in the Plan, the committee will serve at the pleasure of the board of directors.

Awards to directors under the Plan must be approved by the board of directors.

In connection with the administration of the Plan, the board of directors or the committee, with respect to awards to be made to any officer, employee or consultant who is not one of our non-employee directors, will:

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In addition, the board of directors or the committee will:

Types of Awards

The Plan permits the board of directors or the committee to make several types of awards and grants, including awards of shares of restricted stock, awards of restricted stock units, the grant of options to purchase shares of Common Stock, awards of stock appreciation rights (“SARs”), awards of performance units, awards of performance bonuses, stock awards and other incentive awards.

Restricted Stock. Restricted shares of Common Stock may be granted under the Plan subject to such terms and conditions, including forfeiture and vesting provisions, and restrictions against sale, transfer or other disposition as the board of directors or committee may determine to be appropriate at the time of making the award. In addition to any time vesting conditions determined by the board of directors or committee, vesting and/or the grant of restricted stock awards may be subject to our achievement of specified performance criteria. In addition, the board of directors or committee may direct that share certificates representing restricted stock be inscribed with a legend as to the restrictions on sale, transfer or other disposition, and may direct that the certificates, along with a stock power signed in blank by the employee, be delivered to and held by us until such restrictions lapse. Shares of restricted stock will generally vest upon the occurrence of a change of control. The board of directors or committee, in its discretion, may provide for an acceleration of vesting of restricted stock in the event of death or permanent disability of the employee, or for such other reasons as the board of directors or committee may deem appropriate in the event of the termination of a participant.

Restricted Stock Units. A restricted stock unit entitles the recipient to receive a payment from us, following the lapse of restrictions on the award, equal to the fair market value of a share of Common Stock. The Plan provides for payment in the form of shares of Common Stock or cash. Restricted stock units may be granted under the Plan subject to such terms and conditions, including forfeiture and vesting provisions, as the board of directors or committee may determine to be appropriate at the time of making the award. In addition to any time vesting conditions determined by the board of directors or committee, vesting and/or the grant of restricted stock units may be subject to our achievement of specified performance criteria. Restricted stock units would generally vest upon the occurrence of a change of control. The board of directors or committee, in its discretion, may provide for an acceleration of vesting of restricted stock units in the event of death or permanent disability of the employee, or for such other reasons as the board of directors or committee may deem appropriate in the event of the termination of a participant.

The Plan also permits the board of directors or committee to grant tandem cash dividend rights or dividend unit rights with respect to restricted stock units. A cash dividend right is a contingent right to receive an amount in cash equal to the cash distributions made by us with respect to a share of Common Stock during the period the tandem restricted stock unit is outstanding. A grant of cash dividend rights may provide that such cash payments shall be paid directly to the participant at the time of payment of the related dividend, be credited to a bookkeeping account subject to the same vesting and payment provisions as the tandem restricted stock unit award (with or without interest in the discretion of the board of directors or committee), or be subject to such other provisions or restrictions as determined in the discretion of the board of directors or committee. A dividend unit right is a contingent right to have an additional number of restricted stock units credited to a participant in respect of a restricted stock unit award equal to the number of shares of Common Stock that could be purchased at fair market value upon, and with the amount of, each cash distribution made by us with respect to a share of Common Stock during the period the tandem restricted stock unit is outstanding. A grant of dividend unit rights may provide that such dividend unit rights shall be subject to the same vesting and payment provisions as the tandem restricted stock unit award or be subject to such other provisions and restrictions as determined in the discretion of the board of directors or committee.

Stock Options. Stock options are contractual rights entitling an optionee who has been granted a stock option to purchase a stated number of shares of Common Stock at an exercise price per share determined at the date of the grant. Options are evidenced by stock option agreements with the respective optionees. The exercise price for each stock option granted under the Plan will be determined by the board of directors or committee at the time of the grant. Either the board of directors or committee will also determine the duration of each option; however, no option may be exercisable more than ten years after the date the option is granted. Within the foregoing limitations, either

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the board of directors or committee may, in its discretion, impose limitations on the exercise of all or some options granted under the Plan, such as specifying minimum periods of time after grant during which options may not be exercised. The Plan generally provides for acceleration of the right of an individual employee to exercise his or her stock option in the event we experience a change of control.

The Plan provides that the stock options may either be incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified options, which are stock options other than incentive stock options.

Incentive Stock Options. Incentive stock options may be granted only to our employees or employees of our subsidiaries, and must be granted at a per share exercise price not less than the fair market value of Common Stock on the date the incentive stock option is granted. In the case of an incentive stock option granted to a stockholder who owns shares of our outstanding stock of all classes representing more than 10% of the total combined voting power of all of our outstanding stock of all classes entitled to vote in the election of directors, the per share exercise price may not be less than 110% of the fair market value of the Common Stock on the date the incentive stock option is granted and the term of such option may not exceed five years. As required by the Code, the aggregate fair market value, determined at the time an incentive stock option is granted, of Common Stock with respect to which incentive stock options may be exercised by an optionee for the first time during any calendar year under all of our incentive stock option plans may not exceed $100,000.

Nonqualified Options. Nonqualified options are stock options which do not qualify as incentive stock options under the Code. Nonqualified options may be granted to directors and consultants, as well as to employees, or those directors, consultants, and employees of subsidiaries in which we have a controlling interest. The exercise price for nonqualified options will be determined by the board of directors or the committee at the time the nonqualified options are granted, but may not be less than the fair market value of our Common Stock on the date the nonqualified option is granted. Nonqualified options are not subject to any of the restrictions described above with respect to incentive stock options. Incentive stock options and nonqualified options are treated differently for federal income tax purposes as described below under “– Tax Treatment.”

The Plan provides that the exercise price of stock options may be paid (1) in cash, (2) subject to the prior approval by the board of directors or committee, in whole shares of Common Stock, (3) subject to the prior approval by the board of directors or committee, by withholding shares of Common Stock which otherwise would be acquired on exercise, or (4) subject to the prior approval by the board of directors or committee, by a combination of the foregoing, equal in value to the exercise price. The board of directors or committee may also permit a stock option to be exercised by a broker-dealer acting on behalf of a participant through procedures approved by the board of directors or committee, as applicable.

Stock Appreciation Rights. Awards of stock appreciation rights, which we refer to as SARs, entitle the recipient to receive a payment from us equal to the amount of any increase in the fair market value of the shares of Common Stock subject to the SAR award between the date of the grant of the SAR award and the exercise date. The Plan provides for payment in the form of shares of Common Stock or cash. The Plan generally provides for acceleration of the right of an individual employee to exercise his or her SAR in the event we experience a change of control.

Performance Unit Awards. Performance units entitle the recipient to receive a certain target, maximum or minimum value in cash or Common Stock per unit upon the achievement of performance goals established by the board of directors or committee.

Performance Bonuses. A performance bonus entitles the recipient to receive a cash bonus upon the attainment of a performance target established by the board of directors or committee. The Plan permits payment of performance bonuses in the form of cash or Common Stock.

Stock Awards. A stock award entitles the recipient to shares of Common Stock not subject to vesting or forfeiture restrictions. Stock awards are awarded with respect to such number of shares of Common Stock and at such times as the board of directors or committee may determine, and the board of directors or committee may require a participant to pay a stipulated purchase price for each share of Common Stock covered by a stock award.

Other Incentive Awards. The Plan permits the grant of other incentive awards based upon, payable in or otherwise related to, in whole or in part, shares of Common Stock if the board of directors or committee determines that such other incentive awards are consistent with the purposes of the Plan. Such other incentive awards may include, but are not limited to, Common Stock awarded as a bonus, dividend equivalents, convertible or exchangeable debt

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securities, other rights convertible or exchangeable into Common Stock, purchase rights for Common Stock, awards with value and payment contingent upon our performance or any other factors designated by the board of directors or committee, and awards valued by reference to the book value of Common Stock or the value of securities or the performance of specified subsidiaries. Long-term cash awards are also permitted under the Plan. Cash awards are also permitted as an element of or a supplement to any awards permitted under the Plan. Awards are permitted in lieu of obligations to pay cash or deliver other property under the Plan or under other plans or compensation arrangements, subject to any applicable provision under Section 16 of the Exchange Act.

Code Section 162(m)

The Plan provides the board of directors or committee discretion to determine whether all or any portion of a restricted stock award, restricted stock unit award, performance unit award, performance bonus, stock award or other incentive award is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code (the “162(m) Requirements”). The performance criteria for any such award that is intended to satisfy the 162(m) Requirements would be established in writing by a committee composed of two or more “outside directors” within the meaning of Section 162(m) of the Code based on one or more performance criteria listed above not later than 90 days after commencement of the performance period with respect to such award or any such other date as may be required or permitted for “performance-based compensation” under the 162(m) Requirements; provided that the outcome of the performance in respect of the goals remains substantially uncertain as of such time. At the time of the grant of an award and to the extent permitted under the 162(m) Requirements, the committee may provide for the manner in which the performance goals would be measured in light of specified corporate transactions, extraordinary events, accounting changes or other similar occurrences. All determinations made by the committee as to the establishment or the achievement of performance goals, or the final settlement of an award intended to satisfy the 162(m) Requirements, would be required to be made in writing. The committee would have discretion to reduce, but not to increase, the amount payable and/or the number of shares of Common Stock to be granted, issued, retained or vested pursuant to any such award.

The performance criteria to be used for purposes of awards under the Plan that are intended to meet the 162(m) Requirements are set in the sole discretion of the board of directors or committee and may be described in terms of objectives that are related to the individual participant or objectives that are company-wide or related to a subsidiary, division, department, region, function or business unit of Earthstone in which the participant is employed or with respect to which the participant performs services, and shall consist of one or more or any combination of the following criteria: operational criteria, including reserve additions/replacements, finding and development costs, production volume and production costs; financial criteria, including earnings (net income, earnings before interest, taxes, depreciation and amortization (“EBITDA”), earnings per share), free cash flow, cash flow, operating income, general and administrative expenses, ratios of debt to equity, debt to cash flow, debt to EBITDA, EBITDA to interest, return on assets, return on equity, return on invested capital, and profit returns/margins; and stock performance criteria, including stock price appreciation, total stockholder return and relative stock price performance.

Transferability

Nonqualified options are transferable on a limited basis. Other types of awards authorized under the Plan are not transferable other than by will or by the laws of descent and distribution. In no event may a stock option be exercised after the expiration of its stated term.

Termination

Rights to restricted stock, restricted stock units, SARs, performance units, performance bonuses and other incentive awards which have not vested will generally terminate immediately upon the holder’s termination of employment with us or any of our subsidiaries or affiliates, unless the board of directors or committee specifies otherwise in an award agreement or elects to accelerate the vesting of the award. Unless the board of directors or committee specifies otherwise in an award agreement, if an employee’s employment with us or any of our subsidiaries or affiliates terminates as a result of death or disability, the employee (or personal representative in the case of death) may exercise any vested incentive stock options for a period of up to one year after such termination and any vested nonqualified option during the remaining term of the option. Unless the board of directors or committee specifies otherwise in an award agreement, if an employee’s employment with us or any of our subsidiaries or affiliates terminates for any other reason, the employee may exercise any vested option for a period of up to three months after such termination. Unless the board of directors or committee specifies otherwise in an award agreement, if a consultant ceases to provide services to us or any of our subsidiaries or affiliates or a director terminates service as a

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director, the unvested portion of any award will be forfeited unless otherwise accelerated by the board of directors or committee. Unless the board of directors or committee specifies otherwise in an award agreement, a consultant or director may have three years following the date he or she ceases to provide consulting services or ceases to be a director, as applicable, to exercise any nonqualified options which are otherwise exercisable on the date of termination of service. No stock option or SAR may be exercised following the expiration date of the stock option or SAR.

Dilution; Substitution

The Plan provides protection against substantial dilution or enlargement of the rights granted to holders of awards in the event of stock splits, recapitalizations, mergers, consolidations, reorganizations or similar transactions. The Plan provides that, upon the occurrence of a change of control event, the board of directors or committee would have discretion, without the consent of any participant or holder of an award, to the extent permitted by applicable law, to cancel awards and make payments in respect thereof in cash; replace awards with other rights or property selected by the board of directors or committee; provide that awards will be assumed by a successor or survivor entity (or a parent or subsidiary thereof) or be exchanged for similar rights or awards based on the equity of the successor or survivor (or a parent or subsidiary thereof); adjust outstanding awards as appropriate to reflect the change of control event; accelerate any vesting schedule to which an award is subject; provide that awards are payable; and/or provide that awards terminate upon such event.

Amendment

The board of directors may amend the Plan at any time. However, without stockholder approval, the Plan may not be amended in a manner that would increase the number of shares that may be issued under the Plan, materially modify the requirements as to eligibility for participation in the Plan, or materially increase the benefits to participants provided by the Plan.

Tax Treatment

The following is a brief description of the federal income tax consequences, under existing law, with respect to awards that may be granted under the Plan. This summary is not intended to provide or supplement tax advice to eligible employees. This summary is not intended to be exhaustive and does not describe state, local or foreign consequences, employment tax consequences, or the effect, if any, of gift, estate and inheritance taxes.

Restricted Stock. A recipient of restricted stock generally will not recognize taxable income until the shares of restricted stock become freely transferable or are no longer subject to a substantial risk of forfeiture. At that time, the excess of the fair market value of the restricted stock over the amount, if any, paid for the restricted stock is taxable to the recipient as ordinary income. If a recipient of restricted stock subsequently sells the shares, he or she generally will realize capital gain or loss (long-term or short-term depending on the holding period) in the year of such sale in an amount equal to the difference between the amount realized from the sale and his or her basis in the stock, which is equal to the price paid for the stock, if any.

A recipient has the opportunity, within certain limits, to fix the amount and timing of the ordinary income attributable to a grant of restricted stock. Section 83(b) of the Code permits a recipient of restricted stock, which is not yet required to be included in taxable income, to elect, within 30 days of the award of restricted stock, to include in ordinary income immediately the difference between the fair market value of the shares of restricted stock at the date of the award and the amount paid for the restricted stock, if any. The election permits the recipient of restricted stock to fix the amount of income that must be recognized by virtue of the restricted stock grant. Subject to Section 162(m) of the Code, we generally will be entitled to a deduction in the year the recipient is required (or elects) to recognize income by virtue of receipt of restricted stock, equal to the amount of taxable income recognized by the recipient.

Restricted Stock Units. A recipient of restricted stock units generally will not recognize taxable income until the recipient receives cash and/or the transfer of shares in satisfaction of the restricted stock unit award. At that time, an amount equal to the aggregate of any cash and the fair market value of any shares received is taxable to the recipient as ordinary income. If a recipient of restricted stock units subsequently sells any shares so transferred, he or she generally will realize capital gain or loss (long-term or short-term depending on the holding period) in the year of such sale in an amount equal to the difference between the amount realized from the sale and his or her basis in the stock, which is equal to the amount previously included in income as ordinary income with respect to such shares.

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Subject to Section 162(m) of the Code, we generally will be entitled to a deduction in the year the recipient is required to recognize income by virtue of receipt of cash or shares, equal to the amount of taxable income recognized by the recipient.

Incentive Stock Options. An optionee will not realize taxable income upon the grant of an incentive stock option. As long as the optionee has been an employee of Earthstone or of one of our permissible corporate subsidiaries from the date of grant through the date the incentive stock option is exercised and if the incentive stock option is exercised during his or her period of employment and within three months after termination, the optionee will not recognize taxable income upon exercise. Upon exercise, however, the amount by which the fair market value of the shares with respect to which the incentive stock option is exercised (determined on the date of exercise) exceeds the exercise price paid will be an item of tax preference to which the alternative minimum tax may apply, depending on each optionee’s individual circumstances. If the optionee does not dispose of the shares of Common Stock acquired by exercising an incentive stock option within two years from the date of the grant of the incentive stock option or within one year after the shares are transferred to the optionee, when the optionee later sells or otherwise disposes of the stock, any amount realized by the optionee in excess of the exercise price will be taxed as a long-term capital gain and any loss will be recognized as a long-term capital loss. We generally will not be entitled to an income tax deduction with respect to the grant or exercise of an incentive stock option.

If any shares of Common Stock acquired upon exercise of an incentive stock option are resold or disposed of before the expiration of the prescribed holding periods, the optionee will realize ordinary compensation income (and perhaps some short-term capital gain as well) instead of long-term capital gain. The amount of the ordinary compensation income realized will generally be equal to the lesser of (i) the excess of the fair market value of the stock on the exercise date over the exercise price; or (ii) the excess of the amount realized upon the sale over the exercise price. Any additional gain would generally be short-term capital gain.

In the event of a premature disposition of shares of stock acquired by exercising an incentive stock option, subject to Section 162(m) of the Code, we generally would be entitled to a deduction equal to the amount of ordinary compensation income realized by the optionee.

If an optionee uses already owned shares of Common Stock to pay the exercise price under an incentive stock option, the resulting tax consequences will depend upon whether the already owned shares of Common Stock are “statutory option stock,” and, if so, whether the statutory option stock has been held by the optionee for the applicable holding period referred to in Section 424(c)(3)(A) of the Code. In general, “statutory option stock” is any stock acquired through the exercise of an incentive stock option or an option granted pursuant to an employee stock purchase plan, but not stock acquired through the exercise of a nonqualified stock option. If the stock is statutory option stock with respect to which the applicable holding period has been satisfied, or if the stock is not statutory option stock, no income will be recognized by the optionee upon the transfer of the stock in payment of the exercise price of an incentive stock option. If the stock used to pay the exercise price is statutory option stock with respect to which the applicable holding period has not been satisfied, the transfer of the stock will be a premature disposition, as described above, which will result in the recognition of ordinary income by the optionee in an amount equal to the excess of the fair market value of the statutory option stock at the time the incentive stock option covering the stock was exercised over the amount paid for the stock.

If an optionee effects a net exercise of an incentive stock option by surrendering a portion of the shares of stock with respect to which the option is exercisable to pay the exercise price, the surrender of the stock will result in the recognition of ordinary income by the optionee in an amount equal to the fair market value of the surrendered stock.

Nonqualified Options. An optionee will not realize taxable income upon the grant of a nonqualified option. At the time the optionee exercises the nonqualified option, the amount by which the fair market value, at the time of exercise, of the shares with respect to which the nonqualified option is exercised exceeds the exercise price paid upon exercise will constitute ordinary income to the optionee in the year of such exercise. Subject to Section 162(m) of the Code, we generally will be entitled to a corresponding income tax deduction in the year of exercise equal to the ordinary income recognized by the optionee. If the optionee thereafter sells such shares, the difference between any amount realized on the sale and the fair market value of the shares at the time of exercise will be taxed to the optionee as a capital gain or loss, short-term or long-term depending on the length of time the stock was held by the optionee before sale.

If an optionee uses already owned shares of Common Stock to pay the exercise price under a nonqualified option, the number of shares received pursuant to the nonqualified option which is equal to the number of shares delivered in payment of the exercise price will be considered received in a nontaxable exchange, and the fair market value of the remaining shares received by the optionee upon the exercise will be taxable to the optionee as ordinary income.

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Stock Appreciation Rights. A recipient of SARs will not realize taxable income upon the grant of a SAR. At the time the recipient exercises the SAR, an amount equal to the aggregate of any cash and the fair market value of any shares received is taxable to the recipient as ordinary income in the year of such exercise. Subject to Section 162(m) of the Code, we generally will be entitled to a corresponding income tax deduction in the year of exercise equal to the ordinary income recognized by the recipient. If the recipient thereafter sells any shares received upon exercise, the difference between any amount realized on the sale and the fair market value of the shares at the time of exercise will be taxed to the recipient as a capital gain or loss, short-term or long-term depending on the length of time the stock was held by the recipient before sale.

Performance Units and Performance Bonuses. A recipient of performance units or a performance bonus generally will not realize taxable income upon the grant of such award. The recipient will recognize ordinary income upon the receipt of cash and/or the transfer of shares in satisfaction of the award of performance units or performance bonus in an amount equal to the aggregate of any cash and the fair market value of any shares received. If an award is “performance-based compensation” under Section 162(m) of the Code, we generally will be entitled to a corresponding income tax deduction in the year of exercise equal to the ordinary income recognized by the recipient. Otherwise, our deduction may be limited by Section 162(m) of the Code as described below. If the recipient thereafter sells any shares received in satisfaction of the award, the difference between any amount realized on the sale and the fair market value of the shares at the time of their receipt will be taxed to the recipient as a capital gain or loss, short-term or long-term depending on the length of time the stock was held by the recipient before sale.

Stock Awards. A recipient of a stock award will recognize ordinary income upon the receipt of shares in an amount equal to the fair market value of any shares received over the amount, if any, paid for the shares. Subject to Section 162(m) of the Code, we generally will be entitled to a corresponding income tax deduction equal to the ordinary income recognized by the recipient. If a recipient subsequently sells the shares, he or she generally will realize capital gain or loss (long-term or short-term depending on the holding period) in the year of such sale in an amount equal to the difference between the net proceeds from the sale and the participant’s basis in the stock, which is generally equal to the fair market value of the stock on the date of receipt.

Other Incentive Awards. The specific tax consequences applicable with respect to other incentive awards granted under the Plan will depend on the terms and conditions applicable to the award.

Code Section 162(m). Section 162(m) of the Code places a $1 million cap on the deductible compensation that may be paid to certain executives of publicly traded corporations. Amounts that qualify as “performance-based compensation” under Section 162(m) of the Code are exempt from the cap and do not count toward the $1 million limit. In order to be “performance-based compensation” exempt from the $1 million deductibility limitation, the grant or vesting of the award relating to the compensation must (among other things) be based on the satisfaction of one or more performance goals specified by a compensation committee made up of at least two “outside directors.” Generally, stock options and stock appreciation rights are intended to qualify as performance-based compensation. Other awards may or may not so qualify, depending on their terms. In any event, we reserve the right to award compensation that is not “performance-based compensation” and that is not deductible under Section 162(m) of the Code, and in no event shall we or any member of the board of directors or a committee of the board of directors be liable in the event that any award fails to qualify as “performance-based compensation” under Section 162(m) of the Code.

To ensure compliance with Treasury Department Circular 230, participants are hereby notified that (i) any discussion of U.S. federal tax issues in this proxy statement is not intended to be written or used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Code, and (ii) participants should seek advice based on their particular circumstances from an independent tax advisor.

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Equity Compensation Plan Information

The following table provides information related to our Common Stock which may be issued under our existing equity compensation plans as of December 31, 2016, including the Plan:

Approval by the Stockholders of the Proposal

Approval of the proposal to approve and adopt the Amendment requires the affirmative vote of a majority of the shares of Common Stock represented in person or by proxy at the special meeting and voting on such proposal; provided that such shares voting affirmatively must also constitute a majority of the required quorum for the meeting.

Our board of directors believes that approval and adoption of the Amendment will promote our interests and the interests of the stockholders and continue to enable us to attract, retain and reward persons important to our success and to provide incentives based on the attainment of corporate objectives and increases in shareholder value. Members of the board of directors are eligible to participate in the Plan, and thus, have a personal interest in the approval and adoption of the Amendment.

The board of directors recommends a vote “FOR” the Amendment to the Earthstone Energy, Inc. 2014 Long-Term Incentive Plan proposal (Proposal 6).

The special meeting may be adjourned to another time or place, if necessary or appropriate, to permit, among other things, further solicitation of proxies to obtain additional votes in favor of the above proposals.

If, at the special meeting, the number of shares of Common Stock present or represented and voting in favor of the above proposals is insufficient to approve such proposals, we intend to move to adjourn the special meeting in order to enable the board of directors to solicit additional proxies for approval of such proposals.

In the adjournment proposal, we are asking the stockholders to authorize the holder of any proxy solicited by the board of directors to vote in favor of granting discretionary authority to the proxyholders, and each of them individually, to adjourn the special meeting to another time and place for the purpose of soliciting additional proxies. If the stockholders approve the adjournment proposal, we could adjourn the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from stockholders who have previously voted.

Approval of the adjournment proposal requires that the votes cast in favor of such proposal exceed the votes cast against such proposal.

The board of directors recommends a vote “FOR” the adjournment proposal (Proposal 7).

Other Matters to Come Before the Meeting

No other matters are intended to be brought before the special meeting by Earthstone, and we do not know of any matters to be brought before the meeting by others. If, however, any other matters properly come before the special meeting, the persons named in the proxy will vote the shares represented thereby in accordance with the judgment of management on any such matter.

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THE TRANSACTION

General

The Transaction has been organized in a manner commonly known as an “Up-C” structure. Under this structure and the Contribution Agreement, Earthstone will recapitalize its Common Stock into two classes – Class A Common Stock and Class B Common Stock, and all of its existing outstanding Common Stock will be converted into Class A Common Stock. Bold Holdings will purchase approximately 36.1 million shares of Class B Common Stock for nominal consideration, with the Class B Common Stock having no economic or other rights in Earthstone other than voting rights on a pari passu basis with the Class A Common Stock. The Class B Common Stock is being authorized and issued to Bold Holdings in order to give it voting rights in Earthstone with respect to its ownership of EEH Units.

At the closing of the Transaction, EEH will issue approximately 22.3 million EEH Units to Earthstone and one of Earthstone’s wholly-owned subsidiaries, in the aggregate, and 36.1 million EEH Units to Bold Holdings in exchange for the parties transferring all of their assets to EEH. Each EEH Unit held by Bold Holdings, together with one share of Class B Common Stock, will be convertible into Class A Common Stock on a one-for-one basis. Therefore, upon the closing of the Transaction, stockholders of Earthstone and unitholders of Bold Holdings would own approximately 39% and 61%, respectively, of the combined company’s then outstanding Class A Common Stock on a fully diluted, as converted, basis. After the closing of the Transaction, Earthstone will conduct its activities through EEH and will be its sole managing member.

The sole member, managers, and directors, as applicable, of the parties to the Contribution Agreement and the ancillary agreements contemplated by the Contribution Agreement have determined that the Contribution Agreement and the transactions contemplated thereby are fair to, advisable and in the best interests of their respective equity holders, and have unanimously approved the Contribution Agreement and the transactions contemplated thereby. The Contribution Agreement and the transactions contemplated thereby are subject to approval of Earthstone’s stockholders at the special meeting and other closing conditions.

Background of the Transaction

Over the last 40 years, Frank A. Lodzinski, Chairman of the Board, Chief Executive Officer and President of Earthstone, has organized and managed several oil and natural gas companies, utilizing a strategy of building them to a point when they could be merged into or sold to larger entities in order to maximize value and create liquidity for stockholders. Mr. Lodzinski became Chairman, President and Chief Executive Officer of Earthstone in December 2014, when Earthstone merged with Oak Valley Resources, LLC, a Delaware limited liability company (“Oak Valley”), that Mr. Lodzinski organized in December 2012. Shortly thereafter, Mr. Lodzinski and the new Earthstone management team began implementing their business strategy, which had been developed and refined by Mr. Lodzinski and his management team in several prior oil and natural gas companies. This strategy consists of:

As part of its overall strategy, Earthstone’s management team has maintained a regular, ongoing dialogue with investment bankers, institutional investors, private equity firms, and potential joint venture parties, to access potential transactions and/or capital, but also to discuss general industry conditions, Earthstone’s near-term and long-term strategy, capital markets, and various means of maximizing Earthstone’s value for the benefit of its stockholders. Mr. Lodzinski’s policy is to keep Earthstone’s board of directors apprised of the substance of these meetings, inform them of current market conditions and trends in various aspects of the oil and natural gas exploration and production business, and describe recent transactions and prices being paid for reserves, production, acreage, and operating companies.

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In furtherance of this strategy, Earthstone acquired Lynden Energy Corp. (“Lynden Corp.”) in May 2016, which provided Earthstone with a non-operated working interest presence in the highly prolific Midland Basin, which is part of the Permian Basin in Texas. To further enhance its presence in the Midland Basin and to continue its growth strategy, Earthstone has continued to seek new opportunities for the purpose of creating significant operated working interest holdings in this area.

Bold Energy III LLC (“Bold”) was formed in March 2013 and subsequently capitalized by affiliates of EnCap Investments L.P. (“EnCap”), a private equity firm, and the Bold management team. Bold’s management and professional staff have significant experience acquiring, developing and operating oil and gas properties in the Permian Basin. Since commencement of operations in April 2013, Bold has established an operated position in approximately 20,900 net acres in the Midland Basin with estimated production of 3,340 barrels of oil equivalent per day (71% oil, 87% liquids) during December 2016. In addition, EnCap is the largest investor in Oak Valley, which became the principal stockholder of Earthstone in December 2014, as mentioned above. In light of market conditions in the Permian Basin in early and mid-2015, Bold hired Tudor, Pickering, Holt & Co. (“TPH”) in June 2015 to determine whether there was a market for Bold’s assets.

Unless otherwise noted, Earthstone was represented in the discussions described below by Frank A. Lodzinski, its President and Chief Executive Officer, Robert J. Anderson, its Executive Vice President, Corporate Development and Engineering, and Neil K. Cohen, its Vice President, Finance, and Treasurer. Bold was represented by Joseph L. Castillo, its President, David L. Cox, its Executive Vice President – Business Development, and James R. Lawrence, its Chief Financial Officer. Unless otherwise specified, references made below to EnCap are intended to reference Brad A. Thielemann, EnCap Managing Director (and a director of Earthstone), Bryan Stahl, EnCap Vice President, and Jason Hajdik, EnCap Vice President, who were Earthstone’s primary contacts within EnCap and worked closely with Earthstone on the Transaction. Wynne M. Snoots, EnCap Partner, Mark Burroughs, Jr., EnCap Managing Director, and George W. Purgason, EnCap Vice President, separately worked with Bold on the Transaction. EnCap took efforts to maintain separation between the EnCap professionals who advised Earthstone and the EnCap professionals who advised Bold. All meetings were held in Houston, Texas unless otherwise noted.

On June 25, 2015, Earthstone met with Wells Fargo Securities LLC (“Wells”) to discuss potential acquisition or merger targets for Earthstone. Wells compiled its list at the request of Mr. Lodzinski with direction to consider entities or assets owned directly or indirectly by private equity firms. Bold was one of several potential entities identified by Wells as a possible target. Wells performed a limited amount of investigation, provided a summary of the potential targets and discussed them with Earthstone. The entities and the vast majority of the underlying assets were all located in Texas. Of these entities, Mr. Lodzinski and his management team initially rejected several due to the location and nature of their properties and asked Wells to contact one group about the possibility of a merger combination transaction, but discussions did not proceed in any significant degree because the potential target indicated it wanted its operations to remain solely in one oil and natural gas basin.

Further investigation of the remainder of the potential targets did not proceed in any significant depth due to a common theme that such companies’ valuations of their assets were substantially above market ranges that Earthstone management believed were reasonable for the properties and equally important, such companies indicated they would only be amenable to all cash offers, rather than stock or stock and cash offers, which Earthstone’s management preferred. Thus, Earthstone’s management determined promptly after a review of materials and through preliminary discussions with management of the targets that these potential acquisitions were not actionable and should not be considered further at that time.

With respect to Bold, Wells informed Earthstone that TPH was assisting Bold in a potential sale of its oil and gas assets with bids due in August 2015. Although Earthstone felt the Bold assets were economically attractive, after reviewing an executive summary provided by TPH, Earthstone chose not to pursue the opportunity due principally to the size of Bold’s acreage position, limited production and uncertainty with the ability of Earthstone to obtain adequate cash financing, particularly considering the anticipated volatility in commodity prices and Earthstone’s likely acquisition of Lynden Corp. with Earthstone common stock, which Earthstone ultimately announced in December 2015 and closed in May 2016.

Subsequently, Earthstone became aware that a sale of Bold did not occur, in Earthstone’s view due to falling commodity prices. Historically, Mr. Lodzinski and his management team have often pursued assets they thought attractive and potentially accretive to Earthstone’s activities and share price, that have not sold in a publicly marketed process. As a result, in early November 2015, Mr. Lodzinski initiated discussions with EnCap regarding potential acquisition targets (other than those identified by Wells and discussed above) and proposed the possible acquisition of or merger with Bold or other EnCap portfolio companies. On November 12, 2015, EnCap provided Earthstone with a presentation that had previously been used by TPH to market Bold to potential buyers during the summer of 2015. The presentation included a summary of the Bold management team, an overview of TPH’s marketing process and timeline, and details on Bold’s assets and activities within Reagan County, Texas, and other counties in the Midland Basin, including, in particular, geology, drilling and completion practices and costs, type curves for each primary development area and zone, midstream infrastructure, land, and a proposed development program with associated financial projections and economic results.

On November 17, 2015, Earthstone and EnCap generally discussed a possible combination between Earthstone and Bold during a conference call. The discussion briefly addressed the possibility of a merger with Earthstone for equity, the likely impact on Earthstone’s position in the public markets and future capital funding alternatives. Earthstone informed EnCap that a combination could be beneficial to both parties and that it would immediately begin a more comprehensive review of Bold’s assets.

On November 19, 2015, Earthstone and EnCap signed a confidentiality agreement regarding information concerning Bold to be provided to Earthstone by Bold and EnCap. The Earthstone board was not informed of this development at the time.

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In late November 2015 and early December 2015, EnCap provided Earthstone, on behalf of Bold, with certain Bold information and access to the TPH data room established during the prior marketing process.

On December 7, 2015, representatives of W. D. Von Gonten & Co. (“WDVG”) hosted a brief technical meeting with Earthstone management and certain of Earthstone’s technical employees. WDVG provided a technical presentation of the geology and limited engineering of the various intervals within the Midland Basin that were being targeted for horizontal drilling and development which included multiple members of the Wolfcamp formation as well as the shallower Spraberry formation, with a significant portion of the discussion spent discussing Reagan County, where a majority of the Bold acreage is located. A discussion of geologic factors influencing the Wolfcamp formation such as faults and depths impacting oil and natural gas production were discussed. WDVG displayed internally-generated maps and provided its interpretation of the gross oil- in-place potential for these various targeted intervals; however, WDVG did not provide any materials to Earthstone. WDVG did not receive any compensation in respect of this meeting.

On December 8, 2015, Earthstone and Bold signed a confidentiality agreement, which was suggested by TPH, in order for Earthstone to review detailed technical, operational, financial and analytical information prepared by Bold and TPH in the course of their marketing efforts.

On December 10, 2015, TPH presented to Earthstone and EnCap a technical overview of Bold’s assets. No Bold representatives were present. The presentation was based on the same data room information that was used by TPH in its effort to market Bold’s assets in the summer of 2015.

Between mid-December 2015 and mid-January 2016, Earthstone met separately with three investment banking firms and solicited their independent views on valuation parameters related to Bold’s assets, methods to fund their development and equity market receptivity to the potential acquisition of Bold assets. The overall consensus of the meetings was that (i) Bold’s assets were in an attractive area of the southern Midland Basin and had the potential to generate compelling rates of return; (ii) a combination with Bold would be deemed transformative by current and prospective investors; and (iii) the equity markets would likely be receptive towards funding development of Bold’s assets. None of the firms received any payment for any of such advice.

On December 18, 2015, Earthstone, EnCap and TPH met to discuss the Bold assets, including land and infrastructure issues and a development model for the properties.

On January 19, 2016, Earthstone and EnCap met to discuss the Bold assets and the state of the capital markets, particularly as related to current trends in the oil and gas industry. Both parties concluded that with the significant downward pressure on oil prices then being experienced, equity markets being virtually closed to the industry, and Earthstone’s pending closing of the Lynden Corp. transaction, it would be best to defer discussions on a possible business combination with Bold to a later date.

On January 21, 2016, Mr. Anderson called Mr. Castillo to discuss the outcome of the Earthstone and EnCap meeting held on January 19, 2016, and reiterated that discussions would be placed on hold largely due to current market conditions.

On April 29, 2016, Earthstone re-engaged with EnCap to discuss updated thoughts on the value of Bold given the recent improvement in commodity prices, energy equities, and recent Permian Basin acquisition activity.

On May 2, 2016, EnCap provided to Earthstone further details on Bold’s property development schedule. EnCap indicated it would begin to build an independent valuation model of Earthstone and Bold solely for its internal use in evaluating any potential business combination between Earthstone and Bold.

On May 11, 2016, Earthstone presented to EnCap materials that indicated an equity valuation of Bold of approximately $305 million in shares of Earthstone common stock, and illustrations showing the pro forma impact on Earthstone of a business combination with Bold. The equity valuation was generally predicated on a discounted cash flow analysis that considered Bold’s currently producing wells, near-term drilling obligations, and medium and long-term drilling opportunities. EnCap indicated that it would review Earthstone’s valuations with TPH.

On May 18, 2016, after further internal evaluation, Earthstone presented to EnCap updated materials that indicated an equity valuation of Bold of approximately $335 million in shares of Earthstone common stock, and again illustrated the pro forma impact on Earthstone of a business combination with Bold. The increase in valuation over the presentation materials provided on May 11, 2016 was largely attributable to the inclusion of acreage that had been recently acquired by Bold that was not included in Earthstone’s prior valuation presented on May 11, 2016.

On May 23, 2016, EnCap facilitated an email exchange between Earthstone and TPH that later resulted in a conference call between EnCap and TPH. Earthstone subsequently provided to TPH access to its corporate data room on May 23, 2016, which included a combined corporate model of Earthstone and Bold and an Earthstone net asset value model.

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On June 2, 2016, Mr. Anderson and Mr. Castillo discussed telephonically various aspects of Bold’s assets that resulted in a mutual desire for a potential meeting.

On June 3, 2016, after a meeting that occurred between EnCap and TPH, Earthstone met with TPH to discuss the current asset and divestiture market, inclusive of transactions occurring in the Midland Basin and Eagle Ford areas of Texas and the Bakken area of North Dakota where Earthstone has property interests. Later that day, Mr. Thielemann of EnCap sent an email to Messrs. Lodzinski and Anderson that provided a suggested action plan to be carried out during the ensuing weeks and months, relating to a possible transaction between the two companies, including an in-person meeting among Messrs. Lodzinski, Anderson, and Castillo.

On June 7, 2016, a telephone call was held between EnCap and Earthstone to discuss the matters set forth in Mr. Thielemann’s June 3, 2016 email.

On June 10, 2016, Mr. Castillo met with Messrs. Lodzinski and Anderson at Earthstone’s offices, which was followed by a meeting with EnCap and TPH at EnCap’s offices, wherein TPH provided its views on equity market receptivity to a combination of Earthstone and Bold.

On June 21, 2016 an email exchange occurred between Mr. Anderson and Mr. Castillo in regards to a meeting in Midland to begin a due diligence review. This review would include an overview of the assets of both companies and a tour of Bold’s field facilities.

On June 27, 2016, members of Earthstone’s management team met with certain members of Bold’s management team and certain of its employees along with Messrs. Snoots and Purgason and certain members of TPH in Midland, Texas, to review the Bold assets in further detail. Bold discussed its development plans for the remainder of 2016 including geologic, land, drilling, completion and production operations. The review also included a history of the Bold team and development of Bold’s oil and gas properties to date. Additional due diligence materials were exchanged, including detailed land records, well files, reserve reports, development plans and financial projections. On June 28, 2016, certain operational employees of Earthstone went on a field visit of certain of Bold’s properties, including certain horizontal well locations and facilities in Upton, Reagan and Midland counties, Texas. Also, on June 28, 2016, Earthstone provided access to its corporate data room to Bold.

On July 6, 2016, a preliminary organizational meeting among Earthstone, EnCap, and counsel to EnCap was held at EnCap’s offices. The purpose of the meeting was to develop a preliminary timeline to complete a possible transaction, identify the participants and their counsel, and assign responsibilities to complete the proposed transaction.

On July 8, 2016, a conference call was held among Earthstone, counsel to Earthstone, and two independent directors of Earthstone, being Jay F. Joliat and Zachary G. Urban, to discuss (i) a potential transaction with Bold, (ii) the formation of a special committee of the board of directors of Earthstone with the understanding that Messrs. Joliat and Urban were best suited to serve on the special committee given their independent status (the “Special Committee”), and (iii) certain investment banks that the Special Committee might want to consider to provide financial advisory services and a fairness opinion, it being understood that the Special Committee would select and engage an investment bank, in its sole discretion.

During the next week, the Special Committee interviewed three law firms regarding acting as counsel to the Special Committee. The Special Committee determined to hire Richards, Layton & Finger, P.A. (“RLF”) of Wilmington, Delaware, based on their experience and because they had no conflicts with any of the potential parties.

On July 12, 2016, Mr. Lodzinski had a conversation with Messrs. Cox and Lawrence. Topics discussed included various matters related to Earthstone and the process Earthstone intended to follow to consummate a transaction. Mr. Lodzinski generally commented on accounting matters, tax issues, issuance of Earthstone common stock to Bold via a private placement with registration rights, formation of the Special Committee, and stockholder approvals. The parties also generally discussed employee matters and future composition of Earthstone’s board of directors, but no specific plans were agreed upon.

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On July 19 and 20, 2016, certain operational employees of Earthstone met with certain technical employees of Bold and visited Bold’s then-current drilling location in the Midland Basin and reviewed Bold’s overall drilling and completion practices and techniques.

On July 19, 2016, the Special Committee met with RLF and company counsel to discuss the Special Committee process and next steps.

On July 22, 2016, the Special Committee met with RLF, Mr. Lodzinski, Mr. Anderson, Mr. Cohen, Mr. Ray Singleton (Executive Vice President, Northern Region of Earthstone) and counsel to Earthstone to discuss the background and proposed structure of the potential transaction, the role of the Special Committee and the scope of the Special Committee’s charter and authority, as well as communication guidelines as between Earthstone management and the Special Committee and between the Special Committee and Bold. The Special Committee also discussed potential financial advisers. After discussion, the Special Committee determined to contact six investment banking firms regarding providing financial advisory services to the Special Committee.

On July 25, 2016, the Special Committee met with RLF to discuss its fiduciary duties in connection with the potential transaction and to go over a list of questions for potential financial advisers regarding their experience and relationships with other participants in the potential transaction.

On July 27, 2016, the Special Committee met with RLF to discuss the responses from the six investment banking firms that had been contacted regarding potentially providing financial advice to the Special Committee. After discussion, the Special Committee determined to engage Stephens based on its extensive experience in the oil and gas industry, its lack of any conflicting relationships, and its experience giving valuation testimony before the Delaware Court of Chancery.

On July 28, 2016, Mr. Joliat notified Stephens that it would likely be selected to advise the Special Committee in connection with the potential transaction with Bold.

On July 29, 2016, the board of directors of Earthstone formally established the Special Committee consisting of Messrs. Joliat and Urban, who are both independent directors. Information concerning these two directors and their business experience can be found in Item 10 of Earthstone’s Annual Report on Form 10-K incorporated in this proxy statement by reference. The board established the Special Committee consisting of two independent directors because EnCap is the largest owner of Oak Valley, which in turn is the largest stockholder of Earthstone, and EnCap owns more than 95% of the membership interests of Bold.

In addition to establishing the Special Committee, the Earthstone board also adopted the Special Committee’s charter which provided it with the power, among other things, to:

The Special Committee’s charter also provided that the Earthstone board would not approve a transaction with Bold without a prior favorable recommendation of the transaction by the Special Committee.

On July 29, 2016, Stephens provided Earthstone with a due diligence list. Earthstone provided to Stephens and the Special Committee access to its corporate data room and TPH’s summer 2015 and December 2015 data room containing Bold information.

On August 1, 2016, Earthstone and representatives of Stephens met at Earthstone’s offices for the purpose of Earthstone providing to Stephens additional details regarding the contemplated transaction.

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On August 1, 2016, Stephens sent an engagement letter to the Special Committee, and on August 4, 2016, the Special Committee executed and returned the engagement letter to Stephens.

On August 1, 2016, the Special Committee met with RLF to discuss the financial terms of the Stephens engagement. Later that same day, the Special Committee met with RLF and Mr. Lodzinski to discuss certain matters related to the Stephens engagement, the possibility of exclusivity and whether given the noncontingent nature of the Stephens fee, EnCap would be willing to agree to reimburse Earthstone for the Stephens fee if Bold was sold to a third party.

On August 3, 2016, the Special Committee met with RLF and representatives of Stephens to discuss the structure of the potential transaction, recent precedent transactions in the Permian Basin, Stephens due diligence process and the timing of Stephens’ preliminary financial analysis of the proposed transaction.

On August 10, 2016, Earthstone held a regularly scheduled board meeting. Among other business topics, the directors discussed the potential Bold transaction and its pro forma financial and operational impact on Earthstone. All directors were supportive of a transaction between Earthstone and Bold and directed the proper officers to continue to pursue such a transaction.

On August 16, 2016, the Special Committee met with RLF and representatives of Stephens to receive Stephens’ preliminary financial analysis of a proposed transaction between Earthstone and Bold. After receiving that presentation, the Special Committee discussed the terms of an offer to Bold regarding a potential transaction. After further discussion the Special Committee determined to meet with management to discuss certain issues relating to the proposed transaction.

Later in the day on August 16, 2016, the Special Committee met with RLF, Mr. Anderson and counsel to Earthstone, to discuss, among other matters, the proposed transaction, recent transactions in the Midland Basin, competition, management’s current views on valuation and contribution analysis, the sources of the information provided to Stephens, anticipated market impacts on Earthstone and submission of a proposal to Bold.

On August 19, 2016, the Special Committee met with RLF and Stephens to discuss several issues relating to the proposed offer letter to be sent to Bold. After discussion, the Special Committee authorized management to offer $325 million in Earthstone common stock for Bold, less net financial obligations, valuing Earthstone’s common stock on a 20-day volume weighted average basis, but not below $10.50 per share.

On August 19, 2016, Mr. Lodzinski, pursuant to authorization of the Special Committee, submitted to Mr. Castillo a written proposal, whereby Earthstone would combine with Bold in an all-stock transaction that valued Bold at $325 million, including the assumption of net financial obligations not to exceed $25 million. The number of shares of Earthstone common stock to be issued would be calculated by dividing $325 million less net financial obligations by the greater of (i) Earthstone’s volume weighted average share price for the twenty (20) trading days preceding the date a definitive agreement is signed by the parties or (ii) $10.50 per share. Assuming a $300 million equity valuation, net of an assumed $25 million of net financial obligations and $10.50 per share, the offer would have resulted in Bold owning approximately 55% of the combined entity on a fully diluted basis.

On August 22, 2016, Earthstone met with Grant Thornton, its independent auditor, to discuss the proposed transaction and the contemplated accounting treatment whereby Earthstone would be deemed the accounting acquirer.

On August 24, 2016, Messrs. Lodzinski and Anderson met with Mr. Castillo at Earthstone’s offices to begin more detailed negotiations on the broader terms of the proposed transaction, particularly including Earthstone’s proposed relative valuation.

On August 31, 2016, after Messrs. Castillo, Cox and Lawrence had several conversations with certain members of TPH and Messrs. Snoots and Burroughs, Mr. Castillo responded by email to Mr. Lodzinski’s written proposal of August 19, 2016, with a 62.5%, on a fully diluted basis, all-stock proposal for Bold, including the assumption of debt and certain other liabilities of Bold. Bold’s letter provided updated net debt amounts and high-level support for a higher value than offered by Earthstone attributable to certain Bold producing wells that were performing above expectations, further reductions in its capex, and based on performance metrics of publicly-traded peers and comparable asset transactions.

On September 1, 2016, the Special Committee met with RLF, representatives of Stephens and Messrs. Lodzinski, Anderson and Cohen to discuss the counteroffer received from Bold. It was noted that the counteroffer included

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certain recently acquired acreage and acreage that Bold was negotiating to acquire but was not yet under agreement and updated capital expenditure information. Management indicated their proposal included the acreage but that the updated information would increase the cash flow from Bold’s wells and thus the overall discounted cash flow values. The Special Committee authorized management to request from Bold whatever information they felt they needed to evaluate Bold’s counterproposal, and to provide that information to Stephens so it could update its analysis.

On September 2, 2016, Earthstone, in the course of its due diligence activities, requested that Bold provide additional financial information and an updated development plan for its oil and gas properties.

On September 6, 2016, the Special Committee met with RLF and representatives of Stephens and received an updated valuation analysis from Stephens. The Special Committee discussed a possible counter to Bold’s counterproposal. The Special Committee then requested Messrs. Lodzinski and Anderson to join the meeting. After discussion, the Special Committee authorized Mr. Lodzinski to prepare a counteroffer to the Bold proposal which would issue approximately 60% of Earthstone’s common stock on a pro forma basis in exchange for Bold.

On September 6, 2016, Messrs. Lodzinski and Anderson met with EnCap to discuss the current status of the Bold transaction. In general, and without any specific details related to valuation, the parties briefly discussed the fact that management of Earthstone intended to submit a revised proposal, subject to approval of the Special Committee, and further generally discussed steps required to consummate a transaction.

On September 8, 2016, the Special Committee met with RLF and Mr. Lodzinski to discuss Earthstone’s proposed response to Bold’s counteroffer. The response involved the issuance of approximately 60% of Earthstone’s common stock in exchange for Bold and also requested exclusivity. After discussion, the Special Committee authorized Mr. Lodzinski to make the counteroffer.

On September 8, 2016, Mr. Lodzinski, pursuant to the authorization of the Special Committee, submitted to Mr. Castillo a revised written proposal, whereby Bold would receive a 60.0% ownership (34.593 million shares of Earthstone common stock) in the combined company.

On September 9, 2016, Mr. Castillo submitted to Mr. Lodzinski a letter reiterating his position that Bold should have 62.5% ownership of the combined company on a fully diluted basis and summarizing other differences in views with respect to employees’ severance and transition, operations, and exclusivity in transaction negotiations.

On September 12, 2016, Mr. Lodzinski and Mr. Castillo had a general telephonic discussion regarding Earthstone’s proposal as stated in Mr. Lodzinski’s letter dated September 8, 2016 and Mr. Castillo’s response of September 9, 2016. Mr. Lodzinski stated to Mr. Castillo that subject to the approval of the Special Committee, Earthstone might be able to increase its proposal from 34.593 million shares of Earthstone common stock to 35.5 million shares of Earthstone common stock, as a result of rapidly increasing values for Permian Basin assets based on comparative transactions and asset sales. Mr. Castillo agreed to consider the proposal. Mr. Lodzinski stated that he would refer the substance of the discussion with Mr. Castillo to the Special Committee and seek its further direction.

On September 13, 2016, the Special Committee met with RLF and representatives of Stephens to discuss potentially increasing the percentage of Earthstone’s common stock issuable in consideration of the Bold assets from the 60.0% previously offered.

On September 19, 2016, pursuant to an email exchange, Mr. Lodzinski agreed to refer to the Special Committee for its consideration and decision, and Mr. Castillo agreed to refer to EnCap, Bold’s principal owner, a transaction whereby Bold would receive 36.0 million shares of Earthstone common stock, or a 61.0% ownership of the combined company. Mr. Lodzinski also agreed to request authority from the Special Committee to increase the offer up to 36.5 million shares of Earthstone common stock, or a 61.3% ownership, of the combined company if necessary to come to a final agreement on the transaction consideration.

Although Earthstone previously received, considered and evaluated substantive information from both Bold and EnCap, on September 21, 2016 Earthstone submitted its detailed due diligence request list to Bold. Topics included corporate matters; securities issuances; debt financing; material agreements; sales and marketing; real and personal properties; oil and gas properties; intellectual property; insurance; litigation; tax matters; financial information; governmental compliance matters; employee matters; benefits plans; and environmental matters. Certain requested material related to production, drilling, and land were previously provided to Earthstone in July, August, and September 2016. By October 14, 2016, Bold had posted all remaining applicable materials to the shared data room.

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On September 23, 2016, the Special Committee met with RLF, Messrs. Lodzinski, Anderson and Cohen and counsel to Earthstone. Mr. Lodzinski updated the Special Committee on negotiations with Bold. After discussion, the Special Committee authorized Mr. Lodzinski to finalize negotiations with Bold for up to 36.5 million shares of Earthstone common stock.

On September 26, 2016, Bold submitted its due diligence request list to Earthstone. Topics included corporate matters; mergers, acquisitions and dispositions; non-oil and gas assets; oil and gas matters; financial matters, agreements and consents; governmental compliance and environmental matters; legal proceedings; tax; employee matters; intellectual property; and other material agreements. By October 3, 2016, Earthstone had posted applicable materials to the shared data room.

Throughout September and October 2016, the management of Earthstone continued in-depth evaluations of the assets of Bold, including analyses of Bold’s financial, production and capital expenditure forecasts, reserve reports, production history, lease operating statements and land data. The purpose was to further its understanding of Bold’s developed and undeveloped properties, particularly including its projected capital expenditures for the remainder of 2016 and for the year 2017, and expected near-term production.

On September 30, 2016, counsel to Earthstone provided a first draft of the Contribution Agreement, described in detail under “The Contribution Agreement” below, to Earthstone management and the Special Committee and its counsel. The draft was based on transactions of a similar nature, and the operative business terms and conditions were provided to counsel by Earthstone management after its discussions with, and upon the direction of, the Special Committee. The draft also included specific advice of the Special Committee’s independent Delaware counsel, RLF, particularly with respect to: (i) appropriate “fiduciary out” provisions in the event Earthstone is presented with an alternative proposal its board believes is a proposal superior to Bold’s, and (ii) a requirement that in addition to approval of Earthstone’s stockholders under Delaware law, that the approval of a majority of disinterested stockholders also be obtained. See “The Special Meeting—Vote Required.”

On October 3, 2016, the Special Committee met with RLF and representatives of Stephens to review Stephens updated valuation analysis. The Stephens representatives identified certain changes in the valuations in light of recent trends in the Permian Basin and updated Bold and Earthstone performance data.

On October 4 and 5, 2016, comments of Earthstone management and counsel to the Special Committee were received and added to the initial draft of the Contribution Agreement.

On October 4, 2016, Messrs. Lodzinski and Anderson met with Messrs. Castillo, Cox and Lawrence at Bold’s offices in Midland, Texas, to discuss employee matters and other transaction details.

On October 7, 2016, the first draft of the Contribution Agreement was provided to counsel to Bold on behalf of Earthstone and the Special Committee.

On October 17, 2016, Mr. Lodzinski informed Mr. Castillo that Earthstone would issue an additional 150,000 shares of Class A Common Stock to certain members of Bold.

On October 19, 2016, counsel to Bold provided comments to the first draft of the Contribution Agreement. There were several clarifications and other appropriate edits made, and a section on Bold employee retention and transitioning was added.

On October 27, 2016, a meeting was held in EnCap’s offices. The meeting was attended by numerous parties, including Messrs. Lodzinski and Anderson, from Earthstone, Messrs. Castillo, Cox and Lawrence, from Bold, Messrs. Thielemann, Stahl, Hajdik and Burroughs from EnCap and their respective legal advisors. The purpose of the meeting was to further discuss various contractual matters.

On October 22, 28 and 31, and November 2, 3 and 4, 2016, counsel to Earthstone, assisted by counsel to the Special Committee, exchanged several drafts of the Contribution Agreement. No substantive business terms or conditions from the initial draft were materially changed, but the technical structure of the transaction was refined to provide for newly formed limited liability companies to be parties to the Contribution Agreement, primarily for tax planning purposes. Bold however did suggest a $6.0 million termination fee if Earthstone were to enter into an alternative transaction. During this period in late October and early November 2016, the various ancillary agreements to the Contribution Agreement were also prepared and reviewed by the appropriate parties and their counsel. These

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agreements and documents include those described herein in detail under “The First Amended and Restated Limited Liability Company Agreement of EEH,” “The Voting and Support Agreement,” “The Voting Agreement,” and “The Registration Rights Agreement.”

On November 5, 2016, in the process of finalizing the Contribution Agreement and the specific number of shares of Class B Common Stock to be issued thereunder, Earthstone and Bold finalized and agreed that, at closing, 36,070,828 shares of Class B Common Stock would be issued to Bold and 150,000 shares of Class A Common Stock would be issued to certain members of Bold.

On November 7, 2016, the Special Committee met with RLF to consider the proposed transaction. Representatives of Stephens and Messrs. Lodzinski, Anderson, Cohen and Singleton and counsel to Earthstone were present for portions of the meeting. Mr. Lodzinski updated the Special Committee on the negotiations with Bold over the transaction documents and developments in the Permian Basin. Counsel to Earthstone then reviewed with the Special Committee the principal terms of the Contribution Agreement, its terms and conditions, the reclassification and conversion of Common Stock to Class A Common Stock, the issuance to Bold Holdings of Class B Common Stock with voting rights but no economics, the relative contributions of membership interests by Earthstone, Lynden, and Bold Holdings to EEH, the terms of the First Amended and Restated Limited Liability Company Agreement of EEH, the issuance of EEH Units by EEH to Earthstone, Lynden and Bold Holdings, respectively, the fiduciary out and majority of disinterested vote requirement provisions of the Contribution Agreement and the conduct of operations and post-transaction management provisions. Mr. Lodzinski and counsel to Earthstone were then excused from the meeting.

Representatives of Stephens then presented the Special Committee with their financial analyses of the fairness of the proposed Transaction. Stephens recited the financial metrics they had considered relating to its fairness opinion, which included an overview of Earthstone and Bold and each method of valuation analyses utilized by Stephens, as well as financial analyses of both companies. After reviewing that analysis with the Special Committee, Stephens delivered its oral opinion that the consideration to be paid by Earthstone in the Transaction was fair to Earthstone and its public stockholders, from a financial point of view, and that its written opinion, confirming its oral opinion, which was based on and subject to various assumptions made, procedures followed and matters considered in connection with such opinion, would be forthcoming on November 7, 2016. More information regarding Stephens’ financial analyses and its fairness opinion is set forth herein under “The Transaction—Opinion of Stephens Inc. to the Special Committee.” Representatives from Stephens were then excused from the meeting.

RLF then discussed with the Special Committee a presentation regarding its fiduciary duties in connection with the proposed Transaction. The Special Committee, after considering the foregoing, unanimously: (i) approved the Transaction, the Contribution Agreement, and the ancillary agreements and documents appended thereto and each of the transactions contemplated therein, and (ii) recommended that the Transaction and Contribution Agreement be approved by the full board of Earthstone and be submitted to Earthstone stockholders for approval in accordance with the terms of the Contribution Agreement and Delaware law.

Later the same day, on November 7, 2016, the full Earthstone board and counsel met telephonically to engage in final discussions regarding the proposed Transaction with Bold and associated issues. All directors were present. The terms of the Contribution Agreement were discussed. Earthstone’s counsel provided an overview of the proposed Transaction, the Contribution Agreement, and the ancillary agreements and documents, including those appended to the Contribution Agreement as exhibits. See the Contribution Agreement attached as Annex A to this proxy statement.

Counsel particularly discussed certain provisions of the Contribution Agreement, including the major representations and warranties made by Earthstone to Bold, the prohibitions against any solicitations of better offers by any Earthstone representative, the operation of Earthstone’s business prior to the closing of the Transaction, conditions to closing of the Transaction, Special Committee and board responsibilities in the case of an unsolicited alternative proposal, the requirement that the Transaction be approved by a majority of disinterested stockholders (i.e., stockholders other than Oak Valley and management), termination provisions, and the termination fee of $5.5 million if Earthstone were to receive and accept a superior offer, which fee had been reached as a compromise between Earthstone’s proposed $5.0 million and Bold’s proposed $6.0 million.

The chair of the Special Committee then presented the Special Committee’s recommendation that the board approve the Transaction, the Contribution Agreement and the ancillary agreements. Following receipt of such recommendation, the board unanimously approved and declared advisable the Transaction, the Contribution Agreement, and each of the ancillary agreements and documents appended thereto, and resolved to recommend that stockholders approve the Contribution Agreement and the transactions contemplated therein.

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On November 8, 2016, Earthstone and Bold issued a joint press release announcing the proposed Transaction, and Earthstone filed a Current Report on Form 8-K with the SEC regarding the entry into the Contribution Agreement.

On March 21, 2017, the parties to the Contribution Agreement agreed to amend the Contribution Agreement and extend the termination date to June 30, 2017.

Recommendation of the Board of Directors and its Reasons for the Transaction

The Earthstone board of directors determined that the Contribution Agreement and the transactions contemplated by the Contribution Agreement are fair to, and in the best interests of Earthstone and its stockholders. Accordingly, our board of directors unanimously adopted resolutions (i) determining that the Contribution Agreement and the transactions contemplated thereby are fair to, advisable and in the best interests of Earthstone and its stockholders, (ii) approving and adopting the Contribution Agreement and the transactions contemplated thereby, (iii) directing that the Contribution Agreement be submitted to a vote of our stockholders at a special meeting, and (iv) recommending that the stockholders vote “FOR” the approval and adoption of the Contribution Agreement and the transactions contemplated thereby.

The board of directors consulted with the Special Committee, our management, and our legal advisors, and considered a variety of factors in determining its recommendation, including the following material factors:

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The board of directors considered other information and a number of additional factors in reaching its decision including:

The board of directors also considered, and balanced against the potentially positive aspects of the Transaction, the following material potential risks and other negative factors in connection with its deliberations:

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This discussion of the information and factors considered by our board of directors in reaching its decision and recommendation includes the material factors considered by the board of directors, but is not intended to be exhaustive and may not include all of the factors considered by the board of directors. In view of the wide variety of factors considered in connection with its evaluation of the Transaction and the complexity of these matters, the board of directors did not consider it practical, nor did it attempt, to quantify, rank or otherwise assign relative weights to the different factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination. Rather, the board of directors viewed its decision as being based on the totality of the information presented to it and the factors it considered, particularly including the recommendation of the Special Committee, its discussion with, and the questioning of, members of management and outside legal advisors. In addition, individual members of the board of directors may have given different weight to different factors.

Opinion of Stephens Inc. to the Special Committee

Pursuant to an engagement letter executed as of August 4, 2016, the Special Committee retained Stephens Inc. (“Stephens”) to act as financial advisor and render a fairness opinion in connection with the business combination between Earthstone and Bold.

In the Transaction, each of Earthstone and Bold Holdings, will contribute all of its assets to EEH, and Bold Holdings will receive the following consideration (the “Bold Consideration”): (i) 36,070,828 shares of Class B Common Stock and (ii) 36,070,828 EEH Units. In addition, certain members of Bold will receive an aggregate of 150,000 shares (the “Bold Employee Consideration”) of Class A Common Stock. Immediately after the Transaction, on a fully diluted basis (i) the shares of Class B Common Stock owned by Bold Holdings will represent 60.8% of all shares of Common Stock outstanding and the EEH Units owned by Bold Holdings will represent 60.8% of all EEH Units outstanding and (ii) the shares of Class A Common Stock owned by Bold employees will represent 0.3% of all shares of Common Stock outstanding. The Bold Consideration and the Bold Employee Consideration are collectively referred to by Stephens as the “Combination Consideration.” Shares of Class B Common Stock will not be entitled to receive dividends or distributions upon liquidation but will vote equally with shares of Class A Common Stock on all matters submitted to a vote of Earthstone’s stockholders. Shares of Class B Common Stock, together with an equal number of EEH Units, will be exchangeable for (and are assumed for purposes of Stephens’ opinion to be economically equivalent to) shares of Class A Common Stock.

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At the meeting of the Special Committee on November 7, 2016, Stephens rendered its oral opinion, subsequently confirmed in writing, to the Special Committee that, as of the date of the opinion, and based upon and subject to the various assumptions, methodologies, limitations and considerations described in such opinion, the Combination Consideration in the proposed Transaction is fair to Earthstone and its public stockholders from a financial point of view. For purposes of Stephens’ opinion, “public stockholders” of Earthstone means the holders of outstanding shares of the Common Stock, other than EnCap and its directors, officers and affiliates and the directors, officers, managers and affiliates, including Oak Valley, of Earthstone. No limitations were imposed by the Special Committee upon Stephens with respect to the investigations made or procedures followed in rendering its opinion.

The issuance of Stephens’ opinion was approved by a fairness opinion committee of Stephens on October 25, 2016.

The full text of the written opinion of Stephens which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex G to this proxy statement. Earthstone’s stockholders are urged to read the opinion in its entirety. Stephens’ written opinion is addressed to the Special Committee and is directed only to the Combination Consideration in the Transaction and does not constitute a recommendation to any Earthstone stockholder as to how such stockholder should vote at the special meeting. Stephens has not assumed any responsibility for updating or revising its opinion based on circumstances or events occurring after the date of its opinion. The summary of the opinion of Stephens set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion.

In connection with developing its opinion Stephens:

Stephens relied on the accuracy and completeness of the information and financial data provided to it by Earthstone and Bold (including but not limited to reserve reports and analyses) and of the other information reviewed by Stephens in connection with the preparation of the opinion, and the opinion is based upon such information. Stephens has not assumed any responsibility for independent verification of the accuracy or completeness of any of such information or financial data. The managements of Earthstone and Bold have assured Stephens that they are not aware of any relevant information that has been omitted or remains undisclosed to Stephens. While Stephens has reviewed reserve reports of Earthstone and Bold and management estimates of the oil and gas reserves of Earthstone and Bold, Stephens has not assumed any responsibility for making or undertaking an independent evaluation or appraisal of any of the assets, oil and gas reserves or liabilities of Earthstone or of Bold, and Stephens has not been furnished with any such evaluations or appraisals; nor has Stephens evaluated the solvency or fair value of Earthstone or of Bold under any laws relating to bankruptcy, insolvency or similar matters. Stephens has not assumed any obligation to conduct any physical inspection of the properties or facilities of Earthstone or of Bold.

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With respect to the financial forecasts and estimates and assessments of oil and gas reserves prepared by the managements of Earthstone and Bold, Stephens has assumed that they have been reasonably prepared and reflect the best currently available estimates, assessments and judgments of the managements of Earthstone and Bold as to the future financial performance of Earthstone and Bold and Stephens has relied thereon. Stephens is not an expert in the evaluation of oil and gas reserves and Stephens expressed no view as to the reserve quantities or the potential for development and production (including, without limitation, the feasibility or timing thereof) of any oil and gas properties. Stephens has relied, without independent verification, upon the assessments of Earthstone and Bold management as to their respective oil and gas reserves and as to market trends and prospects relating to the oil and gas industry and the potential effects of such trends and prospects on Earthstone and Bold, including without limitation the assumptions as to commodity prices reflected in the financial forecasts and estimates referred to above, which prices are subject to significant volatility and which, if different from such assumptions, could have a material impact on Stephens’ opinion. Stephens has also assumed that the representations and warranties contained in the Transaction Agreement and all related documents are true, correct and complete in all material respects.

Earthstone maintains an internally prepared reserve report, which is updated periodically throughout each year to reflect, among other factors that may affect reserve estimates, changes in producing well performance, commodity prices and differentials, capital and operating costs and reserve estimates of non-producing locations, including additional locations, if any. The basis for these reports is the prior year-end reserve report prepared by Earthstone’s independent third-party engineering firm. The internally generated reserve reports are also used for Earthstone’s reserve-based credit facility and its semi-annual redetermination and to update projections of future production, revenues, expenses, estimated future cash flows and discounted present values. An updated Earthstone reserve report, which was prepared by Earthstone in November 2016, was provided to Stephens for purposes of updating the valuation related to the fairness opinion to the Special Committee. The reserve report was prepared effective November 1, 2016, using SEC and Society of Petroleum Engineers guidelines for classification of reserves, but using commodity price scenarios specified by Stephens (see below), which were adjusted for transportation and basis differentials to establish an estimated realized wellhead price.

Earthstone also prepared an internal evaluation of the Bold assets per SEC and Society of Petroleum Engineer guidelines consistent with its practices for evaluating potential transactions. The Bold reserve report was also prepared effective November 1, 2016, using SEC and Society of Petroleum Engineers guidelines for classification of reserves, but using commodity price scenarios specified by Stephens (see below), which were adjusted for transportation and basis differentials to establish an estimated realized wellhead price. This reserve report was based on production information supplied by Bold, as well as public information and Earthstone’s independent estimates. The information Earthstone used related to acreage ownership, capital costs, lease operating expenses and timing of development in the near term. Consistent with the normal practices of Earthstone of reviewing the reasonableness of such data, further analysis included review of title or ownership accompanied by preparation of estimated drilling and completion costs by Earthstone’s engineers. Further, Earthstone also reviewed well performance of wells located on acreage offsetting Bold’s properties for further information to estimate reserves associated with various targeted horizons. From this review, Earthstone developed a set of analog type curves that were the basis for the estimated reserves for the future locations. The projections of the currently producing wells and type curves were consolidated into the reserve report, which was updated in November 2016 and provided to Stephens for purposes of valuation of the Bold assets.

Both reserve reports were prepared under the supervision of Earthstone management. Preparation of the reports included substantive geologic and engineering review by Earthstone’s experienced internal professionals. Mr. Robert J. Anderson, an Executive Vice President of Earthstone, is responsible for Earthstone’s reservoir engineering. He is a qualified reserve estimator and auditor and is primarily responsible for overseeing the preparation of all of Earthstone’s internal and external reserve reports. His professional qualifications meet or exceed the qualifications of reserve estimators and auditors set forth in the “Standards Pertaining to Estimation and Auditing of Oil and Gas Reserves Information” promulgated by the Society of Petroleum Engineers. His qualifications include a Bachelor of Science degree in Petroleum Engineering from the University of Wyoming in 1986; a Master of Business Administration degree from the University of Denver in 1988; member of the Society of Petroleum Engineers since 1985; and more than 29 years of practical experience in estimating and evaluating reserve information with more than five of those years being in charge of estimating and evaluating reserves.

In reaching its opinion, Stephens applied and considered the results of valuation methods that Stephens believes are customarily used in investment banking practice for developing fairness opinions. The following is a summary of the material financial analyses utilized by Stephens in connection with providing its opinion and does not claim to be a complete description of the analysis underlying Stephens’ opinion.

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In the Bold reserve report provided by Earthstone on which Stephens relied, as noted above, Earthstone preliminarily classified a portion (~38%) of Bold’s undeveloped reserves as proved undeveloped reserves (“PUDs”) and a portion (~62%) as probable reserves (“Probables”), subject to further review with its third party engineering firm. Except where specifically stated otherwise, Stephens’ analysis assumed that 100% of the Bold PUDs shown in the Earthstone provided reserve report were classified as Probables (non-proved reserves) rather than PUDs (proved reserves). Where specifically noted, Stephens also considered an alternative case (the “Sensitivity Case”), which assumed that 50% of the Bold reserves preliminarily classified by Earthstone as PUDs are Probables (non-proved reserves) and 50% are PUDs (proved reserves).

Earthstone Energy, Inc. Valuation

In determining a range of estimated enterprise and equity values for Earthstone, Stephens conducted each of the following analyses with respect to Earthstone.

Publicly Traded Comparable Companies

Using publicly available information, Stephens determined the following companies were relevant to an evaluation of Earthstone based on Stephens’ view of the comparability of the operating and financial characteristics of these companies, in terms of market capitalization, enterprise value, geography, and size and characteristics of oil and gas reserves and acreage:

Abraxas Petroleum Corporation, Carrizo Oil & Gas Inc., Contango Oil & Gas Company, Northern Oil & Gas, Inc., and Sanchez Energy Corporation

The implied values for Earthstone were based on a multiple range for the following four metrics determined by reference to the corresponding multiple ranges for the selected comparable companies. The following table sets forth the mean and median multiples for the selected comparable companies.

The proved reserves and daily production values for each of the selected comparable companies were based on SEC filings adjusted for public data regarding acquisitions and divestitures made after their respective quarterly reports were submitted. In the following analyses, (i) implied equity value is calculated as implied enterprise value less net debt, plus mark-to-market hedge value, in each case, as of October 31, 2016, and (ii) implied share price is calculated as implied enterprise value less net debt, plus mark-to-market hedge value, in each case, as of October 31, 2016, divided by Earthstone’s fully diluted shares outstanding. The multiples selected to apply to Earthstone metrics were not entirely mathematical in nature, but required careful consideration to adjust for differences in the

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operating characteristics of the companies as well as other market factors which could affect the market value of selected companies.

Comparable Transactions

Using publicly available information for 73 asset and corporate transactions announced between January 2012 and November 2016 involving oil- and gas- related assets in the Eagle Ford Shale, Midland Basin, Bakken / Three Forks, East Texas, and Other regions of the United States, Stephens reviewed the purchase price multiples paid for proved reserves, daily production, and net acreage in each transaction and selected appropriate benchmark multiples for the valuation of Earthstone. The Other region includes various areas of Texas, Oklahoma, Montana, Wyoming, and Nebraska, in which the company owns oil and gas assets and/or acreage. Given Earthstone’s large acreage position in the Eagle Ford Shale region, the net acreage multiples applied to Earthstone in this region were based on sub-regions within the Eagle Ford Shale, including the Northeast Eagle Ford Shale region, the Central Eagle Ford Shale region, and the Southwest Eagle Ford Shale region. In the Midland Basin, Stephens reviewed transactions in both the Southern Midland Basin and the broader Midland Basin, but chose to apply multiples based on the Southern Midland Basin given the location of Earthstone’s acreage.

Based on public and other available market information, the following table sets forth the summary multiples for the transactions referred to above. This analysis utilized the relevant transaction multiples of proved reserves, daily production, and net acreage and applied them to the corresponding metrics of Earthstone to determine an implied enterprise value for Earthstone. In the following analyses, (i) implied equity value is calculated as implied enterprise value less net debt, plus mark-to-market hedge value, in each case, as of October 31, 2016, and (ii) implied share price is calculated as implied enterprise value less net debt, plus mark-to-market hedge value, in each case, as of October 31, 2016, divided by Earthstone’s fully diluted shares outstanding. The transaction multiples selected to apply to Earthstone metrics were not entirely mathematical in nature, but required careful consideration to adjust for differences in the prevailing commodity price environments and acquisition and divestiture markets. In light of these factors, in certain cases, greater weight was given to more recent transactions.

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