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Crescent Energy Reports Second Quarter 2022 Financial and Operating Results

·15-min read

Declares Cash Dividend of $0.17 per Share
In First Full Quarter of Ownership, Uinta Assets Significantly Impact Results

HOUSTON, August 09, 2022--(BUSINESS WIRE)--Crescent Energy Company (NYSE: CRGY), ("Crescent" or the "Company"), today announced financial and operating results for the second quarter of 2022 and a quarterly cash dividend of $0.17 per share. The Company plans to host a conference call and webcast to discuss the results at 10 a.m. CT, Wednesday, August 10, 2022. Details can be found in this release.

Second Quarter 2022 Highlights

  • Produced 142 MBoe/d, an 18% increase over the first quarter, primarily driven by Uinta volumes following close of the acquisition on March 30, 2022

    • Produced 64 MBbl/d of oil, a 45% increase over the first quarter; oil comprised 45% of total second quarter volumes on an equivalent basis

  • Reported $282 million of net income and $226 million of Adjusted Net Income(1)

  • Generated $373 million of Adjusted EBITDAX(1), $640 million of Unhedged Adjusted EBITDAX(1) and $137 million of Levered Free Cash Flow(1), representing a 92%, 73% and 53% quarter-over-quarter increase, respectively

  • Exited the second quarter at 1.2x Net LTM Leverage(1), in-line with its long-term corporate target

  • Operating expense and general and administrative ("G&A") expenses decreased on a Boe basis

  • Crescent's inaugural Oil & Gas Methane Partnership 2.0 submission rated highest-level "Gold Standard"

  • Capital investments, excluding acquisitions, during the second quarter were $193 million, in-line with guidance

Crescent CEO David Rockecharlie said, "Through mid-year, we continue to perform incredibly well across the business and execute our business plan to add long-term value for our shareholders. We are seeing solid early-time results from our new assets in the Uinta, which are contributing significantly to our near 100% quarter-over-quarter increase in cash flow. Although industry-wide inflation and service availability are creating headwinds, our people continue to find ways to mitigate these pressures, while generating significant returns on invested capital."

Second Quarter 2022 Results
Crescent reported $282 million of net income and $226 million of Adjusted Net Income(1). The Company generated $373 million of Adjusted EBITDAX(1), $640 million of Unhedged Adjusted EBITDAX(1) and $137 million of Levered Free Cash Flow(1) for the period, a 92%, 73% and 53% increase, respectively, relative to the first quarter, reflecting the addition of Uinta volumes and higher commodity prices.

Costs and expenses during the quarter were in-line with Company expectations. Lower costs per Boe from Uinta volumes resulted in a 3% decrease in operating expense relative to the first quarter, and an 8% decrease excluding production and other taxes. This improvement includes certain transaction expenses from the Uinta acquisition and incremental workover activity during the quarter. G&A expense and Adjusted Recurring Cash G&A(1) (includes manager compensation and excludes non-cash equity-based compensation) totaled $1.52 and $1.40 per Boe, a 27% and 18% decrease relative to the first quarter, respectively, reflecting limited incremental overhead from the Uinta acquisition.

Crescent produced 142 net MBoe/d in the second quarter (comprised of 45% oil, 14% NGLs, and 41% gas), an 18% increase above first quarter volumes, and in-line with guidance.

Average realized price for the second quarter, excluding the effect of commodity derivatives, totaled $68.96 per Boe, a 27% increase relative to $54.28 in the first quarter. Excluding the effect of commodity derivatives, average realized price by commodity in the second quarter was $104.23 per barrel of oil, $6.40 per Mcf of gas, and $46.98 per barrel of NGLs

Capital investments, excluding acquisitions, were $193 million during the quarter. The Company drilled 16 gross operated locations in the Uinta and 9 in the Eagle Ford. In addition, Crescent brought online 4 gross wells in the Uinta and 9 in the Eagle Ford. Crescent is planning to operate two rigs (one Uinta, one Eagle Ford) for the remainder of the year.

Financial Position
As of June 30, 2022, the Company had total debt of $1.5 billion, consisting of $700 million of senior unsecured notes and $829 million of outstanding borrowings on its revolving credit facility (the "Credit Facility"). Total liquidity as of June 30, 2022, was $508 million, including availability on its revolver ($1.3 billion elected commitment with a $1.8 billion borrowing base), cash and cash equivalents of $55 million, and outstanding letters of credit of $18 million. Crescent exited the quarter with a Net LTM Leverage(1) ratio of 1.2x, in-line with its stated target. The Company expects to generate significant Levered Free Cash Flow for the remainder of 2022, which it plans to use to fund its dividend and further strengthen the balance sheet.

Dividend
Consistent with the Company’s framework to return cash to shareholders, the Board approved a quarterly cash dividend of $0.17 per share, payable on September 6, 2022, to shareholders of record as of the close of business on August 23, 2022. Crescent expects to pay a $0.17 per share quarterly dividend for the remainder of 2022, subject to Board approval and applicable law.

Risk Management
Crescent utilizes hedges to manage commodity price risks, protect the balance sheet, and ensure returns on invested capital. Crescent is approximately 60% hedged for the remainder of 2022 at the midpoint of its production guidance range. Approximately 50% of the Company’s current hedge book was entered into in connection with prior acquisitions. As certain acquisition hedges are rolled off, the Company will more fully participate at market pricing. Complete details on the Company's derivative positions can be found in its investor presentation located at https://ir.crescentenergyco.com/events-presentations/.

Second Quarter 2022 Conference Call Information
Crescent plans to host a conference call to discuss its second quarter 2022 financial and operating results at 10 a.m. CT on Wednesday, August 10. Complete details are below. A webcast replay will be available on the website following the call. Crescent has provided an investor slide deck on its second quarter 2022 results on its website, www.crescentenergyco.com.

Date: Wednesday, August 10, 2022
Time: 10 a.m. CT (11 a.m. ET)
Conference Dial-In: 877-407-0989 / 201-389-0921 (Domestic / International)
Webcast Link: https://ir.crescentenergyco.com/events-presentations/

About Crescent Energy Company
Crescent is a well-capitalized, U.S. independent energy company with a portfolio of assets in key proven basins across the lower 48 states and substantial cash flow supported by a predictable base of production. Crescent’s core leadership team is a group of experienced investment, financial and industry professionals who continue to execute on the strategy management has employed since 2011. The Company’s mission is to invest in energy assets and deliver better returns, operations and stewardship. For additional information, please visit www.crescentenergyco.com.

Cautionary Statement Regarding Forward-Looking Statements
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on current expectations, including with respect to the Uinta Acquisition. The words and phrases "should", "could", "may", "will", "believe", "plan", "intend", "expect", "potential", "possible", "anticipate", "estimate", "forecast", "view", "efforts", "goal" and similar expressions identify forward-looking statements and express the Company’s expectations about future events. All statements, other than statements of historical facts, included in this communication that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the Company’s control. Such risks and uncertainties include, but are not limited to, weather, political, economic and market conditions, including a decline in the price and market demand for natural gas, natural gas liquids and crude oil, the impact of pandemics such as COVID-19, actions by the Organization of the Petroleum Exporting Countries ("OPEC") and non-OPEC oil producing countries, the impact of armed conflict, including in Ukraine, the timing and success of business development efforts, sustained cost inflation and central bank policy changes associated therewith, and other uncertainties. Consequently, actual future results could differ materially from expectations. The Company assumes no duty to update or revise its respective forward-looking statements based on new information, future events or otherwise.

Financial Presentation
On December 7, 2021, Crescent was formed through the merger of Independence Energy ("Independence"), and Contango Oil and Gas ("Contango"). Referenced results for the three and six months ended June 30, 2022, as well as the three months ended March 31, 2022, reflect the combined Company. Referenced results for the three and six months ended June 30, 2021, reflect only legacy Independence, Crescent's predecessor for financial reporting purposes.

While OpCo Units and corresponding shares of Class B common stock are outstanding in our "Up-C" structure, and in accordance with the terms of our Management Agreement under which Class A shareholders bear only their proportionate share of Manager Compensation, portions of Manager Compensation, income tax provision (benefit) amounts and dividends paid corresponding to such ownership are required to be classified as distributions to redeemable noncontrolling interests rather than G&A expense, income tax provision (benefit), and dividends paid to Class A Common Stock, respectively. We define those redeemable noncontrolling interest ("RNCI") distributions made by OpCo related to (i) Manager Compensation as "Manager Compensation RNCI Distributions," (ii) income tax provision (benefit), as "Income Tax RNCI Distributions," and (iii) dividends paid as "Dividend RNCI Distributions."

To facilitate comparison of our G&A expense, dividends paid to Class A Common Stock, and income tax provision (benefit) to peer companies with varying corporate and management structures, Adjusted EBITDAX, Unhedged Adjusted EBITDAX and Levered Free Cash Flow, for both (i) historical periods since the Merger Transaction and (ii) periods for which we provide guidance, are presented assuming the full redemption of all outstanding OpCo Units for shares of our Class A common stock and a corresponding cancellation of all shares of our Class B Common Stock. Management believes this presentation is most useful to investors, as the full amounts of Manager Compensation as G&A expense, dividends paid to Class A Common Stock, and income tax provision (benefit) are thereby reflected as such.

Crescent Operational Summary

For the three months ended

June 30, 2022

March 31, 2022

June 30, 2021

Average daily net sales volumes:

Oil (MBbls/d)

64

44

37

Natural gas (MMcf/d)

356

333

247

NGLs (MBbls/d)

20

20

16

Total (MBoe/d)

142

120

94

Average realized prices, before effects of derivative settlements:

Oil ($/Bbl)

$

104.23

$

93.47

$

64.70

Natural gas ($/Mcf)

6.40

4.77

2.78

NGLs ($/Bbl)

46.98

38.97

25.60

Total ($/Boe)

68.96

54.28

36.96

Average realized prices, after effects of derivative settlements:

Oil ($/Bbl)(2)

$

78.84

$

68.36

$

51.60

Natural gas ($/Mcf)

3.51

3.11

2.68

NGLs ($/Bbl)

32.15

24.81

17.25

Total ($/Boe)(2)

48.37

38.02

30.15

Expense (per Boe)

Operating expense, excluding production and other taxes(3)

$

14.68

$

15.97

$

14.06

Production and other taxes

5.05

4.30

3.01

Depreciation, depletion and amortization

10.15

9.16

8.87

General and administrative expense

1.52

2.08

1.88

Non-GAAP expense (per Boe)

Adjusted Recurring Cash G&A(1)(4)

$

1.40

$

1.69

$

0.70

(1)

Non-GAAP financial measure. Please see "Reconciliation of Non-GAAP Measures" for discussion and reconciliations of such measures to their most directly comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP").

(2)

For the three months ended June 30, 2021, the realized price excludes the impact of the settlement of certain of our outstanding derivative oil commodity contracts associated with calendar years 2022 and 2023 for $198.7 million in June 2021. Subsequent to the settlement, we entered into new commodity derivative contracts at prevailing market prices.

(3)

Operating Expense, excluding production taxes includes lease operating expense, workover expense, asset operating expense, gathering, transportation and marketing, and midstream operating expense. Includes certain costs that are contractually indexed to commodity prices, such as CO2 purchase costs related to Crescent's CO2 flood asset in Wyoming, and certain gathering and transportation expenses. These contractual commodities indexed operating expenses move in tandem with commodity prices and as commodity prices increase, higher contractual commodity-linked operating costs are offset by higher realizations.

(4)

Crescent defines Adjusted Recurring Cash G&A as General and Administrative Expense, excluding non-cash equity-based compensation and transaction and nonrecurring expenses, and including Manager Compensation RNCI Distributions. Management believes Adjusted Recurring Cash G&A is a useful performance measure because it excludes transaction and nonrecurring expenses and non-cash equity-based compensation and includes Manager Compensation RNCI Distributions, facilitating the ability for investors to compare Crescent's cash G&A expense against peer companies.

Crescent Income Statement

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands, except per share data)

2022

2021

2022

2021

Revenues:

Oil

$

602,567

$

216,820

$

975,076

$

405,743

Natural gas

207,177

62,449

350,488

143,492

Natural gas liquids

83,864

38,192

155,043

74,291

Midstream and other

14,826

12,668

26,737

24,464

Total revenues

908,434

330,129

1,507,344

647,990

Expenses:

Lease operating expense

106,375

60,970

201,198

117,628

Workover expense

25,017

2,630

34,976

4,891

Asset operating expense

17,243

6,369

33,862

13,496

Gathering, transportation and marketing

38,238

48,250

86,514

91,422

Production and other taxes

65,496

25,873

111,980

52,186

Depreciation, depletion and amortization

131,573

76,228

230,592

160,097

Exploration expense

1,848

23

1,939

79

Midstream operating expense

3,344

2,598

6,422

6,330

General and administrative expense

19,656

16,122

42,178

22,751

Gain on sale of assets

(197

)

(9,417

)

(4,987

)

(9,417

)

Total expenses

408,593

229,646

744,674

459,463

Income (loss) from operations

499,841

100,483

762,670

188,527

Other income (expense):

Gain (loss) on derivatives

(177,209

)

(355,996

)

(850,695

)

(602,810

)

Interest expense

(24,937

)

(17,443

)

(41,461

)

(24,826

)

Other income (expense)

(303

)

96

(1,802

)

(6

)

Income from equity affiliates

2,304

3,252

Total other income (expense)

(200,145

)

(373,343

)

(890,706

)

(627,642

)

Income (loss) before taxes

299,696

(272,860

)

(128,036

)

(439,115

)

Income tax benefit (expense)

(17,798

)

(1

)

3,927

(14

)

Net income (loss)

281,898

(272,861

)

(124,109

)

(439,129

)

Less: net (income) loss attributable to Predecessor

269,608

425,237

Less: net (income) loss attributable to noncontrolling interests

(713

)

3,253

(1,183

)

13,892

Less: net (income) loss attributable to redeemable noncontrolling interests

(226,662

)

94,815

Net income (loss) attributable to Crescent Energy

$

54,523

$

$

(30,477

)

$

Net income (loss) per share:

Class A common stock – basic

$

1.30

$

(0.73

)

Class A common stock – diluted

$

1.30

$

(0.73

)

Class B common stock – basic and diluted

$

$

Weighted average shares outstanding:

Class A common stock – basic

41,954

41,954

Class A common stock - diluted

41,956

41,954

Class B common stock – basic and diluted

127,536

127,536

Crescent Balance Sheet

(Unaudited)

June 30,

2022

December 31,

2021

(in thousands, except share data)

ASSETS

Current assets:

Cash and cash equivalents

$

54,580

$

128,578

Accounts receivable, net

594,478

321,855

Accounts receivable – affiliates

1,714

20,341

Prepaid and other current assets

22,274

8,844

Total current assets

673,046

479,618

Property, plant and equipment:

Oil and natural gas properties at cost, successful efforts method

Proved

7,091,516

6,043,602

Unproved

367,643

308,721

Oil and natural gas properties at cost, successful efforts method

7,459,159

6,352,323

Field and other property and equipment, at cost

165,034

144,318

Total property, plant and equipment

7,624,193

6,496,641

Less: accumulated depreciation, depletion, amortization and impairment

(2,161,229

)

(1,941,528

)

Property, plant and equipment, net

5,462,964

4,555,113

Goodwill

76,826

76,564

Derivative assets – noncurrent

579

Investment in equity affiliates

15,624

15,415

Other assets

45,212

30,173

TOTAL ASSETS

$

6,273,672

$

5,157,462

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

597,266

$

337,881

Accounts payable – affiliates

38,486

8,675

Derivative liabilities – current

640,016

253,525

Financing lease obligations – current

2,074

1,606

Other current liabilities

12,737

14,438

Total current liabilities

1,290,579

616,125

Long-term debt

1,515,702

1,030,406

Derivative liabilities – noncurrent

259,033

133,471

Asset retirement obligations

294,099

258,102

Deferred tax liability

96,713

82,537

Financing lease obligations – noncurrent

4,211

3,512

Other liabilities

24,616

13,652

Total liabilities

3,484,953

2,137,805

Commitments and contingencies

Redeemable noncontrolling interests

2,167,413

2,325,013

Equity:

Class A common stock, $0.0001 par value; 1,000,000,000 shares authorized, 43,105,376 shares issued, and 41,954,385 shares outstanding as of June 30, 2022 and December 31, 2021

4

4

Class B common stock, $0.0001 par value; 500,000,000 shares authorized and 127,536,463 shares issued and outstanding as of June 30, 2022 and December 31, 2021

13

13

Preferred stock, $0.0001 par value; 500,000,000 shares authorized and 1,000 Series I preferred shares issued and outstanding as of June 30, 2022 and December 31, 2021

Treasury stock, at cost; 1,150,991 shares of Class A common stock as of June 30, 2022 and December 31, 2021

(18,448

)

(18,448

)

Additional paid-in capital

683,541

720,016

Accumulated deficit

(49,853

)

(19,376

)

Noncontrolling interests

6,049

12,435

Total equity

621,306

694,644

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

$

6,273,672

$

5,157,462

Crescent Cash Flow Statement

(Unaudited)

Six Months Ended June 30,

2022

2021

Cash flows from operating activities:

(in thousands)

Net income (loss)

$

(124,109

)

$

(439,129

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Depreciation, depletion and amortization

230,592

160,097

Deferred income taxes (benefit)

(11,901

)

(Gain) loss on derivatives

850,695

602,810

Net cash (paid) received on settlement of derivatives

(442,665

)

(296,039

)

Non-cash equity-based compensation expense

20,470

9,736

Amortization of debt issuance costs and discount

3,926

5,409

Gain on sale of oil and natural gas properties

(4,987

)

(9,417

)

Restructuring of acquired derivative contracts

(51,994

)

Settlement of acquired derivative contracts

(23,101

)

Other

(7,636

)

2,541

Changes in operating assets and liabilities:

Accounts receivable

(265,459

)

(54,375

)

Accounts receivable – affiliates

18,627

Prepaid and other current assets

(13,471

)

24,113

Accounts payable and accrued liabilities

191,134

39,587

Accounts payable – affiliates

29,811

(9,169

)

Other

(1,478

)

...