Added Scale at Attractive Value with Closing
and Integration of $850 Million of Accretive Acquisitions
Capital Efficiencies Improving Well Costs,
Accelerating Activity and Increasing Cash Flow
Improved Absolute Scope 1 GHG Emissions by 27%
Relative to 2021 Baseline
Crescent Energy Company (NYSE: CRGY) ("Crescent" or the
"Company") today announced results for the third quarter of 2023,
published its 2022 Sustainability Report and declared a quarterly
cash dividend for the period of $0.12 per share. A supplemental
slide deck on third quarter results can be found at
www.crescentenergyco.com. The Company plans to host a conference
call and webcast at 10 a.m. CT, Tuesday, November 7, 2023. Details
can be found in this release.
Highlights
– Reported $131 million of net loss and $59 million of Adjusted
Net Income(1) – Generated $290 million of Adjusted EBITDAX(1),
strong Operating Cash Flow of $189 million and record quarterly
Levered Free Cash Flow(1) of $160 million – Achieved record Company
production of 157 Mboe/d, a 13% increase over the prior quarter,
driven by acquired volumes and strong well performance; oil and
liquids comprised 46% and 62% of volumes, respectively – Completed
Western Eagle Ford integration ahead of schedule and already
realizing 20% improvement in well costs since assuming operatorship
– Raised approximately $600 million in the capital markets to
partially fund the Western Eagle Ford acquisitions – Published 2022
Sustainability Report, delivering on its commitment to improve
emissions and continue transparent reporting on key initiatives –
Exited the third quarter at 1.4x net LTM leverage(1) with more than
$1.1 billion of liquidity – Declared quarterly cash dividend of
$0.12 per share – Re-affirmed full year capital guidance of $580 -
$630 million despite increased activity driven by operational
efficiencies
Crescent CEO David Rockecharlie said, “Our third quarter
performance was exceptional – record production, record cash flow.
We are demonstrating operational efficiencies that will make us
stronger and more profitable in 2024 and beyond. Additionally, we
have proven our ability to grow accretively. We have captured
high-value transactions and financed them in a fashion that
maintains a strong balance sheet. We are increasing value and
scale, doubling our business in less than three years, and we are
well-equipped to continue to do so.
We also released our 2022 Sustainability Report and I am proud
of the meaningful progress we made improving our Scope 1 carbon
footprint. As we continue to scale the business, we remain
committed to improving the sustainability-related performance of
our assets while delivering attractive returns for our
investors.”
Third Quarter 2023
Results
Crescent reported $131 million of net loss and $59 million of
Adjusted Net Income(1) in the third quarter. The Company generated
$290 million of Adjusted EBITDAX(1), $189 million of Operating Cash
Flow and $160 million of Levered Free Cash Flow(1) for the
period.
Third quarter production averaged 157 Mboe/d (46% oil and 62%
liquids). Average realized prices per Boe, including and excluding
the effect of commodity derivatives, were $39.92 and $43.73,
respectively.
Third quarter operating expense and adjusted operating expense
excluding production and other taxes(1), stated on a per Boe basis,
were $18.74 and $15.45, respectively, and were in line with
expectations. Production and other taxes during the period were
$2.53 per Boe. G&A expense and Adjusted Recurring Cash
G&A(1) (includes Manager Compensation and excludes non-cash
equity-based compensation) totaled $44 million and $21 million,
respectively.
Crescent incurred capital expenditures (excluding acquisitions)
of $94 million during the third quarter. The Company drilled nine
gross operated wells (six in the Eagle Ford and three in the Uinta)
and brought online 10 gross operated wells in the Eagle Ford.
2023 Outlook
Crescent re-affirmed its full-year 2023 outlook for production
and capital expenditures, which was previously updated in September
2023, despite incremental activity being pulled forward into 2023.
Guidance reflects improved capital efficiencies through higher
expected production and lower planned capital investments relative
to initial guidance.
Initial FY 2023
Re-Affirmed FY
2023
Change at the
Midpoint
Total Production (Mboe/d)
143 - 151
146 - 151
+1.5 or 1%
% Oil / % Liquids
~45% / ~58%
~45% / ~60%
— / 2%
Capital Expenditures (Excl.
Acquisitions) ($MM)
$630 - $705
$580 - $630
($62.5) or (9%)
Note: All amounts are approximations based on currently
available information and estimates and are subject to change based
on events and circumstances after the date hereof. Please see
“Cautionary Statement Regarding Forward-Looking Information.”
Initial FY 2023 outlook includes initial FY 2023 outlook disclosed
in March 2023 plus the midpoint of the contribution from the
Western Eagle Ford acquisitions that closed in July and October
2023. Additional details can be found in Crescent's investor
presentation.
Sustainability
The Company released its 2022 Sustainability Report, delivering
on Crescent’s commitment to transparent year-over-year reporting.
Crescent improved its Scope 1 GHG emissions profile by 27% relative
to its 2021 baseline. The Company monitors and evaluates all of its
assets to identify opportunities for improvement and its 2022
progress was primarily achieved through a carbon sequestration
project in Wyoming and the replacement of pneumatic devices. In
Wyoming, Crescent is capturing and sequestering carbon dioxide that
was previously vented and selling these volumes to an unrelated
third-party for use in enhanced oil recovery. In addition, Crescent
established a bi-annual aerial methane emissions monitoring program
that scanned substantially all of its assets in 2022, consistent
with Crescent’s commitment to more accurate methane measurement and
its membership in the Oil & Gas Methane Partnership (OGMP 2.0).
The report can be found on Crescent’s website at
www.crescentenergyco.com/#sustainability.
This year's report and its highlighted initiatives are supported
by Crescent's Sustainability Advisory Council, a team of
cross-functional experts who advise Company leadership on
sustainability-related matters. The council serves as an active
forum for candid, internal guidance on goal setting, performance
measurement and disclosure.
Acquisitions &
Divestitures
In two separate acquisitions, Crescent increased its legacy ~15%
non-operated working interest to a ~63% operated position in its
existing Western Eagle Ford assets located primarily in Dimmit and
Webb Counties, Texas for a combined consideration of approximately
$850 million. Crescent acquired approximately 32 Mboe/d of net
production and about $1.1 billion of proved developed PV-10(1)(2),
while nearly doubling its operated Eagle Ford inventory.
On July 3, 2023, Crescent closed the acquisition of operatorship
and an estimated 35% working interest in its existing Western Eagle
Ford assets for approximately $600 million in cash. On October 2,
2023, Crescent closed the acquisition of an additional 12% working
interest for approximately $250 million in cash. Both transactions
are subject to customary purchase price adjustments.
Crescent divested $24 million of assets during the nine month
period ended September 30, 2023. Proceeds from the sales were used
for debt repayment.
Acquisition Financing
During the third quarter, Crescent completed three capital
markets transactions totaling over $600 million in gross proceeds,
including a $155 million primary equity offering (including the
overallotment option) and $450 million in aggregate of add-ons to
the existing 9.250% senior notes due 2028 through two transactions.
Net proceeds from the offerings were used to fund a portion of the
Western Eagle Ford acquisitions. Following the equity offering, the
amount of stock held by public holders increased to 49%, with
approximately 89 million Class A shares outstanding and 180 million
combined Class A and Class B shares outstanding.
Financial Position
Crescent maintains a strong balance sheet and a low leverage
profile. As of September 30, 2023, the Company had total long term
debt of $1.9 billion, net debt of $1.7 billion, a Net LTM
Leverage(1) ratio of 1.4x and $1.1 billion of liquidity. The $250
million Western Eagle Ford acquisition that closed in October 2023
was funded with cash on hand.
In July 2023, S&P upgraded Crescent's issuer credit rating
to B+ and its senior unsecured notes rating to BB- with a stable
outlook. Following the upgrade, Crescent was added to the BB high
yield index with two BB- unsecured notes ratings. Crescent's
ratings were upgraded by Moody's earlier in the year(3).
Return of Capital
For the third quarter of 2023, the Company's board of directors
approved a cash dividend of $0.12 per share. The third quarter
dividend is payable on December 4, 2023, to shareholders of record
as of the close of business on November 20, 2023. Payment of future
dividends is subject to board approval and other factors.
Third Quarter 2023 Conference Call
Information
Crescent plans to host a conference call to discuss its third
quarter 2023 financial and operating results at 10 a.m. CT on
Tuesday, November 7, 2023. A webcast replay will be available on
the website following the call.
Date: Tuesday, November 7, 2023 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 growth-oriented U.S. independent energy company
engaged in the acquisition, development and operation of oil and
natural gas properties. Crescent’s portfolio of low-decline,
cash-flow oriented assets comprises both mid-cycle unconventional
and conventional assets with a long reserve life and deep inventory
of low-risk, high-return development locations in the Eagle Ford
and Uinta basins. Crescent’s leadership is an experienced team of
investment, financial and industry professionals that combines
proven investment and operating expertise. For more than a decade,
Crescent and its predecessors have executed on a consistent growth
through acquisition strategy focused on cash flow, risk management
and returns. 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. 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, uncertainties
inherent in estimating natural gas and oil reserves and in
projecting future rates of production; our hedging strategy and
results, federal and state regulations and laws, the impact of
pandemics such as COVID-19, actions by the Organization of the
Petroleum Exporting Countries (“OPEC”) and non-OPEC oil-producing
countries, including recent production cuts by OPEC, the impact of
armed conflicts, including in and around Ukraine and Israel, the
impact of disruptions in the banking industry and capital markets,
the timing and success of business development efforts, including
acquisition and disposition opportunities, our reliance on our
external manager, cost inflation and central bank policy changes
associated therewith and other uncertainties. Consequently, actual
future results could differ materially from expectations.
Additional information regarding any forward-looking statements or
risks related to our sustainability commitments and progress can be
found in our Sustainability Report. The Company assumes no duty to
update or revise its respective forward-looking statements based on
new information, future events or otherwise.
Financial Presentation
While units ("OpCo Units") representing limited liability
interests in Crescent Energy OpCo LLC ("OpCo") 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 and Levered Free Cash Flow, for both (i)
historical periods 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
September 30, 2023
September 30, 2022
June 30, 2023
Average daily net sales
volumes:
Oil (MBbls/d)
72
69
64
Natural gas (MMcf/d)
359
367
335
NGLs (MBbls/d)
25
20
19
Total (Mboe/d)
157
150
139
Average realized prices, before effects
of derivative settlements:
Oil ($/Bbl)
$
75.70
$
86.77
$
67.68
Natural gas ($/Mcf)
2.18
6.99
1.71
NGLs ($/Bbl)
24.10
35.22
19.38
Total ($/Boe)
43.73
61.65
37.89
Average realized prices, after effects
of derivative settlements:
Oil ($/Bbl)
$
66.50
$
72.55
$
63.14
Natural gas ($/Mcf)
2.38
3.56
1.92
NGLs ($/Bbl)
24.10
32.04
25.72
Total ($/Boe)(4)
39.92
46.32
37.21
Expense (per Boe)
Operating expense
$
18.74
$
20.51
$
17.85
Depreciation, depletion and
amortization
12.91
10.50
12.65
General and administrative expense
3.04
1.25
3.26
Non-GAAP and other expense (per
Boe)
Adjusted operating expense, excluding
production and other taxes(1)(5)
$
15.45
$
14.36
$
14.84
Production and other taxes
2.53
5.18
1.96
Adjusted Recurring Cash G&A(1)
1.42
1.40
1.50
Crescent Income Statement
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Revenues:
(in thousands, except per
share data)
Oil
$
504,660
$
550,823
$
1,270,244
$
1,525,899
Natural gas
72,097
235,830
286,172
586,318
Natural gas liquids
54,724
64,810
131,098
219,853
Midstream and other
10,917
13,494
37,360
40,231
Total revenues
642,398
864,957
1,724,874
2,372,301
Expenses:
Lease operating expense
120,791
121,554
364,796
322,752
Workover expense
16,148
21,126
47,402
56,102
Asset operating expense
27,116
20,791
65,206
54,653
Gathering, transportation and
marketing
61,722
44,757
160,650
131,271
Production and other taxes
36,475
71,511
116,223
183,491
Depreciation, depletion and
amortization
186,492
145,008
492,879
375,600
Exploration expense
—
1,909
1,541
3,848
Midstream and other operating expense
8,289
3,550
13,803
9,972
General and administrative expense
43,831
17,311
106,235
59,489
(Gain) loss on sale of assets
—
(127
)
—
(5,114
)
Total expenses
500,864
447,390
1,368,735
1,192,064
Income (loss) from operations
141,534
417,567
356,139
1,180,237
Other income (expense):
Gain (loss) on derivatives
(252,108
)
205,130
(68,211
)
(645,565
)
Interest expense
(42,200
)
(27,057
)
(102,648
)
(68,518
)
Other income (expense)
917
(2,670
)
1,206
(4,472
)
Income (loss) from equity affiliates
116
834
396
4,086
Total other income (expense)
(293,275
)
176,237
(169,257
)
(714,469
)
Income (loss) before taxes
(151,741
)
593,804
186,882
465,768
Income tax benefit (expense)
20,639
(38,455
)
(4,899
)
(34,528
)
Net income (loss)
(131,102
)
555,349
181,983
431,240
Less: net (income) loss attributable to
noncontrolling interests
(48
)
(904
)
(453
)
(2,087
)
Less: net (income) loss attributable to
redeemable noncontrolling interests
78,280
(436,084
)
(169,455
)
(341,269
)
Net income (loss) attributable to
Crescent
$
(52,870
)
$
118,361
$
12,075
$
87,884
Net income (loss) per share:
Class A common stock – basic
$
(0.67
)
$
2.74
$
0.21
$
2.07
Class A common stock – diluted
$
(0.67
)
$
2.74
$
0.21
$
2.07
Class B common stock – basic and
diluted
$
—
$
—
$
—
$
—
Weighted average shares
outstanding:
Class A common stock – basic
78,709
43,197
58,663
42,377
Class A common stock – diluted
78,709
43,210
59,142
42,382
Class B common stock – basic and
diluted
91,048
125,797
109,244
126,950
Crescent Consolidated Balance
Sheet
(Unaudited)
September 30, 2023
December 31, 2022
(in thousands, except share
data)
ASSETS
Current assets:
Cash and cash equivalents
$
228,614
$
—
Restricted cash
33,422
8,000
Accounts receivable, net
577,982
457,071
Accounts receivable – affiliates
1,146
2,681
Derivative assets – current
4,278
14,878
Drilling advances
911
14,655
Prepaid expenses
50,547
13,241
Other current assets
6,214
6,213
Total current assets
903,114
516,739
Property, plant and equipment:
Oil and natural gas properties at cost,
successful efforts method
Proved
8,153,621
7,113,819
Unproved
290,753
314,255
Oil and natural gas properties at cost,
successful efforts method
8,444,374
7,428,074
Field and other property and equipment, at
cost
189,605
176,831
Total property, plant and equipment
8,633,979
7,604,905
Less: accumulated depreciation, depletion,
amortization and impairment
(2,620,453
)
(2,167,135
)
Property, plant and equipment, net
6,013,526
5,437,770
Investment in equity affiliates
10,780
15,038
Other assets
59,006
50,302
TOTAL ASSETS
$
6,986,426
$
6,019,849
LIABILITIES, REDEEMABLE NONCONTROLLING
INTERESTS AND EQUITY
Current liabilities:
Accounts payable and accrued
liabilities
$
565,262
$
524,690
Accounts payable – affiliates
37,727
27,652
Derivative liabilities – current
243,199
312,975
Financing lease obligations – current
4,250
3,341
Other current liabilities
30,360
25,091
Total current liabilities
880,798
893,749
Long-term debt
1,912,187
1,247,558
Derivative liabilities – noncurrent
31,371
63,737
Asset retirement obligations
372,572
346,868
Deferred tax liability
234,166
147,348
Financing lease obligations –
noncurrent
7,760
7,412
Other liabilities
31,632
14,183
Total liabilities
3,470,486
2,720,855
Commitments and contingencies
Redeemable noncontrolling interests
1,888,862
2,436,703
Equity:
Class A common stock, $0.0001 par value;
1,000,000,000 shares authorized, 89,680,353 and 49,433,154 shares
issued, 88,608,800 and 48,282,163 shares outstanding as of
September 30, 2023 and December 31, 2022, respectively
9
5
Class B common stock, $0.0001 par value;
500,000,000 shares authorized, 91,048,124 and 118,645,323 shares
issued and outstanding as of September 30, 2023 and December 31,
2022, respectively
9
12
Preferred stock, $0.0001 par value;
500,000,000 shares authorized and 1,000 Series I preferred shares
issued and outstanding as of September 30, 2023 and December 31,
2022
—
—
Treasury stock, at cost; 1,071,553 and
1,150,991 shares of Class A common stock as of September 30, 2023
and December 31, 2022, respectively
(17,143
)
(18,448
)
Additional paid-in capital
1,567,967
804,587
Retained earnings
50,906
61,957
Noncontrolling interests
25,330
14,178
Total equity
1,627,078
862,291
TOTAL LIABILITIES, REDEEMABLE
NONCONTROLLING INTERESTS AND EQUITY
$
6,986,426
$
6,019,849
Crescent Cash Flow Statement
(Unaudited)
Nine Months Ended September
30,
2023
2022
Cash flows from operating
activities:
(in thousands)
Net income (loss)
$
181,983
$
431,240
Adjustments to reconcile net income
(loss) to net cash provided by operating activities
Depreciation, depletion and
amortization
492,879
375,600
Deferred income tax expense (benefit)
3,988
27,428
(Gain) loss on derivatives
68,211
645,565
Net cash (paid) received on settlement of
derivatives
(110,775
)
(654,377
)
Non-cash equity-based compensation
expense
64,648
26,306
Amortization of debt issuance costs and
discount
9,175
6,431
(Gain) loss on sale of oil and natural gas
properties
—
(5,114
)
Restructuring of acquired derivative
contracts
—
(51,994
)
Settlement of acquired derivative
contracts
(48,977
)
(39,046
)
Other
(17,332
)
(6,941
)
Changes in operating assets and
liabilities:
Accounts receivable
(105,430
)
(189,512
)
Accounts receivable – affiliates
1,310
18,809
Prepaid and other current assets
(10,587
)
(22,011
)
Accounts payable and accrued
liabilities
67,396
213,428
Accounts payable – affiliates
12,741
24,560
Other
3,670
(3,018
)
Net cash provided by operating
activities
612,900
797,354
Cash flows from investing
activities:
Development of oil and natural gas
properties
(471,275
)
(440,375
)
Acquisitions of oil and natural gas
properties
(622,698
)
(627,539
)
Proceeds from the sale of oil and natural
gas properties
24,356
4,800
Purchases of restricted investment
securities – HTM
(10,651
)
(7,175
)
Maturities of restricted investment
securities – HTM
10,722
5,400
Other
3,308
3,955
Net cash used in investing
activities
(1,066,238
)
(1,060,934
)
Cash flows from financing
activities:
Proceeds from the issuance of Senior
Notes, after premium, discount and underwriting fees
833,500
199,250
Revolving Credit Facility borrowings
1,678,000
1,118,000
Revolving Credit Facility repayments
(1,845,449
)
(976,000
)
Payment of debt issuance costs
(5,461
)
(20,028
)
Proceeds from the Equity Issuance after
underwriting fees
145,665
—
Payment of Equity Issuance costs
(2,340
)
—
Redeemable noncontrolling interest
contributions
1,238
5,985
Redeemable noncontrolling interest
distributions
(417
)
—
Dividend to Class A common stock
(23,127
)
(19,301
)
Distributions to redeemable noncontrolling
interests related to Class A common stock dividend
(45,333
)
(58,705
)
Distributions to redeemable noncontrolling
interests related to Manager Compensation
(26,207
)
(22,779
)
Contributions from (distributions to)
redeemable noncontrolling interests related to income taxes
4
(17,970
)
Repurchase of redeemable noncontrolling
interests related to Equity Transactions
—
(36,220
)
Repurchase of noncontrolling interest
—
(4,060
)
Noncontrolling interest distributions
(3,549
)
(6,326
)
Noncontrolling interest contributions
1,771
55
Cash paid for treasury stock acquired for
equity-based compensation tax withholding
(72
)
—
Other
(2,855
)
(3,784
)
Net cash provided by financing
activities
705,368
158,117
Net change in cash, cash equivalents
and restricted cash
252,030
(105,463
)
Cash, cash equivalents and restricted
cash, beginning of period
15,304
135,117
Cash, cash equivalents and restricted
cash, end of period
$
267,334
$
29,654
Reconciliation of Non-GAAP
Measures
This release includes financial measures that have not been
calculated in accordance with GAAP. These supplemental non-GAAP
performance measures are used by Crescent's management and external
users of its financial statements, such as industry analysts,
investors, lenders and rating agencies. These non-GAAP measures
include Adjusted EBITDAX, Levered Free Cash Flow, Adjusted Net
Income, Adjusted Recurring Cash G&A, Adjusted Current Income
Tax, Adjusted Dividends Paid and Net LTM Leverage. These non-GAAP
measures should be read in conjunction with the information
contained in Crescent’s audited combined and consolidated financial
statements prepared in accordance with GAAP.
Adjusted EBITDAX and Levered Free Cash Flow
Crescent defines Adjusted EBITDAX as net income (loss) before
interest expense, realized (gain) loss on interest rate
derivatives, income tax expense (benefit), depreciation, depletion
and amortization, exploration expense, non-cash gain (loss) on
derivatives, impairment expense, non-cash equity-based
compensation, (gain) loss on sale of assets, other (income)
expense, transaction and nonrecurring expenses and early settlement
of derivative contracts. Additionally, we further subtract Manager
Compensation RNCI Distributions and settlement of acquired
derivative contracts. Management believes Adjusted EBITDAX is a
useful performance measure because it allows for an effective
evaluation of the Company’s operating performance when compared
against its peers, without regard to financing methods, corporate
form or capital structure. The Company adjusts net income (loss)
for the items listed above in arriving at Adjusted EBITDAX because
these amounts can vary substantially within its industry depending
upon accounting methods and book values of assets, capital
structures and the method by which the assets were acquired.
Adjusted EBITDAX should not be considered as an alternative to, or
more meaningful than, net income (loss) as determined in accordance
with GAAP, of which such measure is the most comparable GAAP
measure. Certain items excluded from Adjusted EBITDAX are
significant components in understanding and assessing a company’s
financial performance, such as a company’s cost of capital and tax
burden, as well as the historic costs of depreciable assets, none
of which are reflected in Adjusted EBITDAX. The Company’s
presentation of Adjusted EBITDAX should not be construed as an
inference that its results will be unaffected by unusual or
nonrecurring items. Crescent’s computations of Adjusted EBITDAX may
not be identical to other similarly titled measures of other
companies. In addition, the Company’s Credit Agreement (as defined
below) and the 9.250% senior notes due 2028 and the 7.250% senior
notes due 2026 (together, the "Senior Notes") include a calculation
of Adjusted EBITDAX for purposes of covenant compliance.
Crescent defines Levered Free Cash Flow as Adjusted EBITDAX less
interest expense, excluding non-cash deferred financing cost
amortization, realized gain (loss) on interest rate derivatives,
current income tax benefit (provision), Tax RNCI Distributions and
development of oil and natural gas properties. Levered Free Cash
Flow does not take into account amounts incurred on acquisitions.
Levered Free Cash Flow is not a measure of performance as
determined by GAAP. Levered Free Cash Flow is a supplemental
non-GAAP performance measure that is used by Crescent’s management
and external users of its financial statements, such as industry
analysts, investors, lenders and rating agencies. Management
believes Levered Free Cash Flow is a useful performance measure
because it allows for an effective evaluation of operating and
financial performance and the ability of the Company’s operations
to generate cash flow that is available to reduce leverage or
distribute to equity holders. Levered Free Cash Flow should not be
considered as an alternative to, or more meaningful than, net
income (loss) as determined in accordance with GAAP, of which such
measure is the most comparable GAAP measure, or as an indicator of
actual operating performance or investing activities. The Company’s
computations of Levered Free Cash Flow may not be comparable to
other similarly titled measures of other companies.
The following table reconciles Adjusted EBITDAX (non-GAAP) and
Levered Free Cash Flow (non-GAAP) to net income (loss), the most
directly comparable financial measure calculated in accordance with
GAAP:
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Net income (loss)
$
(131,102
)
$
555,349
$
181,983
$
431,240
Adjustments to reconcile to Adjusted
EBITDAX:
Interest expense
42,200
27,057
102,648
68,518
Income tax expense (benefit)
(20,639
)
38,455
4,899
34,528
Depreciation, depletion and
amortization
186,492
145,008
492,879
375,600
Exploration expense
—
1,909
1,541
3,848
Non-cash (gain) loss on derivatives
197,138
(416,842
)
(42,564
)
(8,812
)
Non-cash equity-based compensation
expense
29,492
5,836
64,648
26,306
(Gain) loss on sale of assets
—
(127
)
—
(5,114
)
Other (income) expense
(917
)
2,670
(1,206
)
4,472
Manager Compensation RNCI
Distributions
(7,030
)
(9,471
)
(23,765
)
(29,599
)
Transaction and nonrecurring
expenses(6)
7,989
8,861
14,188
25,968
Settlement of acquired derivative
contracts(7)
(13,999
)
(15,945
)
(48,977
)
(39,046
)
Adjusted EBITDAX (non-GAAP)
$
289,624
$
342,760
$
746,274
$
887,909
Adjustments to reconcile to Levered Free
Cash Flow:
Interest expense, excluding non-cash
deferred financing cost amortization
(35,373
)
(24,552
)
(93,473
)
(62,087
)
Current income tax benefit (expense)
470
877
(911
)
(7,099
)
Tax RNCI (Contributions) Distributions
(20
)
(803
)
108
(17,970
)
Development of oil and natural gas
properties
(94,431
)
(189,928
)
(444,245
)
(468,796
)
Levered Free Cash Flow (non-GAAP)
$
160,270
$
128,354
$
207,753
$
331,957
Reconciliation of Operating Cash Flow to Levered Free Cash Flow
(non-GAAP)
The table below reconciles net cash provided by operating
activities to Levered Free Cash Flow:
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Net cash provided by operating
activities
$
189,344
$
398,900
$
612,900
$
797,354
Changes in operating assets and
liabilities
51,870
(83,092
)
30,900
(42,256
)
Restructuring of acquired derivative
contracts(8)
—
—
—
51,994
Manager Compensation RNCI
Distributions
(7,030
)
(9,471
)
(23,765
)
(29,599
)
Tax RNCI (Contributions) Distributions
(20
)
(803
)
108
(17,970
)
Transaction and nonrecurring
expenses(6)
7,989
8,861
14,188
25,968
Other
12,548
3,887
17,667
15,262
Adjusted cash provided by operating
activities
$
254,701
$
318,282
$
651,998
$
800,753
Development of oil and natural gas
properties
(94,431
)
(189,928
)
(444,245
)
(468,796
)
Levered Free Cash Flow (non-GAAP)
$
160,270
$
128,354
$
207,753
$
331,957
Adjusted Net Income
Crescent defines Adjusted Net Income as net income (loss),
adjusted for certain items. Management believes that Adjusted Net
Income is useful to investors in evaluating operational trends of
the Company and its performance relative to other oil and gas
companies. Adjusted Net Income is not a measure of financial
performance under GAAP and should not be considered in isolation or
as a substitute for net income as an indicator of financial
performance.
The following table presents a reconciliation of Adjusted Net
Income (non-GAAP) to net income (loss), the most directly
comparable financial measure calculated in accordance with
GAAP:
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Net income (loss)
$
(131,102
)
$
555,349
$
181,983
$
431,240
Unrealized (gain) loss on derivatives
197,138
(416,842
)
(42,564
)
(8,812
)
Non-cash equity-based compensation
expense
29,492
5,836
64,648
26,306
(Gain) loss on sale of assets
—
(127
)
—
(5,114
)
Manager Compensation RNCI
Distributions
(7,030
)
(9,471
)
(23,765
)
(29,599
)
Transaction and nonrecurring
expenses(6)
7,989
8,861
14,188
25,968
Settlement of acquired derivative
contracts(7)
(13,999
)
(15,945
)
(48,977
)
(39,046
)
Tax effects of adjustments(9)
(23,260
)
27,335
3,042
1,868
Adjusted Net Income (non-GAAP)
$
59,228
$
154,996
$
148,555
$
402,811
Adjusted Recurring Cash G&A
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 allows investors to compare Crescent's cash
G&A expense against peer companies. As discussed elsewhere,
these adjustments are made to Adjusted EBITDAX and Levered Free
Cash Flow for historical periods and periods for which we present
guidance.
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
General and administrative expense
$
43,831
$
17,311
$
106,235
$
59,489
Less: non-cash equity-based compensation
expense
(29,492
)
(5,836
)
(64,648
)
(26,306
)
Less: transaction and nonrecurring
expenses (G&A) (10)
(834
)
(1,558
)
(5,061
)
(6,951
)
Plus: Manager Compensation RNCI
Distributions
7,030
9,471
23,765
29,599
Adjusted Recurring Cash G&A
$
20,535
$
19,388
$
60,291
$
55,831
Adjusted Current Income Tax
Crescent defines Adjusted Current Income Tax as current income
tax provision (benefit) plus Income Tax RNCI Distributions.
Management believes Adjusted Current Income Tax is a useful
performance measure because it reflects as tax provision (benefit)
the amount of cash distributed for taxes that is otherwise
classified as redeemable noncontrolling interest distributions,
facilitating the ability for investors to compare Crescent’s tax
provision (benefit) against peer companies, and is included in the
Company’s Levered Free Cash Flow calculation for historical periods
and for periods for which guidance is provided.
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Current income tax provision
(benefit)(11)
$
(470
)
$
(877
)
$
911
$
7,099
Tax RNCI Distributions (Contributions)
20
803
(108
)
17,970
Adjusted Current Income Tax
$
(450
)
$
(74
)
$
803
$
25,069
Adjusted Dividends Paid
Crescent defines Adjusted Dividends Paid as Dividend to Class A
Common Stock plus Dividend RNCI Distributions. Management believes
Adjusted Dividends Paid is a useful performance measure because it
reflects the full amount of cash distributed for dividends that is
otherwise classified as distributions to redeemable noncontrolling
interests, allowing investors to compare Crescent’s dividends paid
against peer companies.
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Dividend to Class A common stock
$
9,116
$
7,133
$
23,127
$
19,301
Dividend RNCI Distributions
10,926
21,701
45,333
58,705
Adjusted Dividends Paid
$
20,042
$
28,834
$
68,460
$
78,006
Net LTM Leverage
Crescent defines Net LTM Leverage as the ratio of consolidated
total debt to consolidated Adjusted EBITDAX as calculated under the
credit agreement (the "Credit Agreement") governing Crescent’s
Revolving Credit Facility. Management believes Net LTM Leverage is
a useful measurement because it is a measure of financial strength
that takes into account the impact of acquisitions. For purposes of
the Credit Agreement, (i) consolidated total debt is calculated as
total principal amount of Senior Notes, plus borrowings on our
Revolving Credit Facility and unreimbursed drawings under letters
of credit, less cash and cash equivalents not to exceed 10% of the
$1.3 billion elected commitment amount as defined in the Credit
Agreement and (ii) consolidated Adjusted EBITDAX includes certain
adjustments to account for EBITDAX contributions associated with
acquisitions the Company has closed within the last twelve months.
Adjusted EBITDAX is a non-GAAP financial measure.
September 30, 2023
(in millions)
Total principal debt(12)
$
1,942
Less: cash and cash equivalents
(130
)
Net debt for credit purposes
$
1,812
LTM Adjusted EBITDAX for Leverage
Ratio
$
1,255
Net LTM Leverage
1.4x
(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)
Based on YE’22 reserves sensitized to
NYMEX pricing as of 8/31/23. GAAP does not prescribe any
corresponding measure for PV-10 of reserves based on pricing other
than SEC pricing. As a result, it is not practicable for us to
reconcile our PV-10 using NYMEX pricing to standardized measure as
determined in accordance with GAAP.
(3)
Credit ratings are statements of opinions
and are not statements of fact or recommendations to purchase, hold
or sell securities. They do not address the suitability of
securities or the suitability of securities for investment
purposes, and should not be relied on as investment advice.
(4)
Does not include the $14.0 million and
$15.9 million impact from the settlement of acquired derivative
contracts for the three months ended September 30, 2023 and
September 30, 2022, respectively. Total average realized prices,
after effects of derivatives settlements, would have been
$38.96/Boe and $45.17/Boe for the three months ended September 30,
2023 and September 30, 2022, respectively.
(5)
Adjusted operating expense excluding
production and other taxes includes lease operating expense,
workover expense, asset operating expense, gathering,
transportation and marketing expense and midstream and other
revenue net of expense.
(6)
Transaction and nonrecurring expenses of
$8.0 million and $14.2 million for the three and nine months ended
September 30, 2023 were primarily related to our Western Eagle Ford
Acquisitions and costs associated with the series of transactions
pursuant to which we indirectly combined the businesses of Contango
Oil & Gas Company and Independence Energy LLC (the "Merger
Transactions"). Transaction and nonrecurring expenses of $8.9
million and $26.0 million for the three and nine months ended
September 30, 2022 were primarily related to (i) legal, consulting,
transition service agreement costs, related restructuring of
acquired derivative contracts, and other fees incurred for the
acquisition of certain Uinta Basin assets (the "Uinta Transaction")
and the Merger Transactions, (ii) severance costs subsequent to the
Merger Transactions, (iii) merger integration costs and (iv)
acquisition and debt transaction related costs.
(7)
Represents the settlement of certain oil
commodity derivative contracts acquired in connection with the
Uinta Transaction.
(8)
In connection with the Uinta Transaction,
Crescent acquired commodity derivative liabilities totaling $180
million from the seller, which reduced the cash cost at closing of
the Uinta Transaction. Concurrent with the close of the
transaction, Crescent settled certain of these acquired oil
commodity derivative positions and entered into new commodity
derivative contracts for 2022 with a swap price of $75 per barrel
for a net cost of $52 million.
(9)
The tax effects of adjustments are
calculated using our estimated blended statutory rate (after
excluding noncontrolling interests) of approximately 11% and 8% for
the three and nine months ended September 30, 2023 and
approximately 6% for the three and nine months ended September 30,
2022.
(10)
Transaction and nonrecurring expenses
(G&A) of $0.8 million and $5.1 million for the three and nine
months ended September 30, 2023, were primarily related to system
integration expenses. Transaction and nonrecurring expenses of $1.6
million and $7.0 million for the three and nine months ended
September 30, 2022, were primarily related to legal, consulting and
other fees related to the Merger Transactions.
(11)
Current income tax provision (benefit) is
the amount of income tax (benefit) expense recognized in our
statements of operations for the three months ended September 30,
2023 and September 30, 2022. Actual cash paid (refunded) for income
taxes for the three months ended September 30, 2023 and September
30, 2022, was $4.7 million (refunded) and $0.1 million paid,
respectively.
(12)
Excludes $29.8 million of unamortized debt
discount and issuance costs.
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version on businesswire.com: https://www.businesswire.com/news/home/20231106315446/en/
Emily Newport IR@crescentenergyco.com
Crescent Energy (NYSE:CRGY)
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