Crescent Energy Company (NYSE: CRGY) ("Crescent" or the "Company") today announced results for the second quarter of 2023 and declared a quarterly cash dividend for the period of $0.12 per share. A supplemental slide deck on its second quarter results can be found at www.crescentenergyco.com. The Company plans to host a conference call and webcast at 10 a.m. CT, Thursday, August 10, 2023. Details can be found in this release.
Second Quarter 2023 Highlights
- Reported $57 million of net income and $25 million of Adjusted Net Income(1)
- Generated $225 million of Adjusted EBITDAX(1), $183 million of Operating Cash Flow and $46 million of Levered Free Cash Flow(1)
- Produced 139 MBoe/d, a 1.5% increase to the prior quarter, and oil and liquids comprised 46% and 60% of volumes, respectively
- Raised full year 2023 outlook for production and cash flow based on operational performance including improved capital efficiencies
- Closed the previously announced Western Eagle Ford acquisition, increasing operating scale and inventory
- Exited the second quarter at 1.1x net LTM leverage(1) and completed a $300 million notes offering in July, which increased liquidity to approximately $800 million
- Senior notes upgraded by S&P and added to the BB high yield index(2)
- Increased public float to 45% from 29% with the completion of the Class A share conversion on July 3
Crescent CEO David Rockecharlie said, “We posted an outstanding quarter, with results exceeding estimates across all key categories driven by strong operational performance and significant efficiencies achieved on our development program. Our successful execution allows us to raise full-year expectations for production and cash flow with lower capital investment. We expect to generate substantial free cash flow throughout the remainder of the year, which will support our return of capital strategy focused on our dividend and debt repayment.
In addition to our operational achievements and increasing cash flow, we continued to execute on our broader strategic objectives, growing production and scale through the accretive Western Eagle Ford acquisition and improving our capital markets presence through increased float and an opportunistic notes offering."
2023 Outlook
Crescent increased its outlook for 2023 to reflect improved capital efficiencies with higher production and lower planned capital investment. Higher production guidance reflects strong well performance year to date across the Company’s asset base. Lower planned capital investment levels reflects realized operational efficiencies, including reduced drilling days and completion optimizations that have driven capital costs per foot 10% lower relative to 2022.
Initial
| Updated
| Change at the
| |
Total Production (Mboe/d) | 140 - 148 | 143 - 148 | +1.5 or 1% |
Capital Expenditures (Excl. Acquisitions) ($MM) | $625 - $700 | $575 - $625 | ($62.5) or (10%) |
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 guidance based on full year 2023 outlook disclosed in March 2023 plus the midpoint of the contribution from the Western Eagle Ford acquisition disclosed in July 2023. Additional updated 2023 guidance details provided in Crescent’s investor presentation, including operating costs, general and administrative costs and corporate cash taxes. |
Second Quarter 2023 Results
Crescent reported $57 million of net income and $25 million of Adjusted Net Income(1)in the second quarter. The Company generated $225 million of Adjusted EBITDAX(1), $183 million of Operating Cash Flow and $46 million of Levered Free Cash Flow(1) for the period.
Second quarter production averaged 139 MBoe/d (46% oil and 60% liquids). Average realized prices per Boe, including and excluding the effect of commodity derivatives, were $37.21 and $37.89, respectively.
Second quarter operating expense and adjusted operating expense excluding production and other taxes(1), stated on a per Boe basis, were $17.85 and $14.84, respectively. Operating expenses for the quarter were in line with expectations and normalized relative to the first quarter, which were impacted by higher-cost residue gas. Production and other taxes were $1.96 per Boe. G&A expense and Adjusted Recurring Cash G&A(1)(includes Manager Compensation and excludes non-cash equity-based compensation) totaled $41 million and $19 million, respectively, during the period.
Crescent operated one rig in the Uinta and one rig in the Eagle Ford during the second quarter and incurred D&C capital investments of $148 million. The Company drilled 16 gross operated wells (12 in the Eagle Ford and four in the Uinta) and brought online 20 gross operated wells (9 in the Eagle Ford and 11 in the Uinta).
Financial Position
Crescent maintains a strong balance sheet and a low leverage profile. As of June 30, 2023, the Company had total long-term debt of $1.4 billion, $62 million of cash and cash deposits related to the Western Eagle Ford acquisition and a Net LTM Leverage(1) ratio of 1.1x.
On July 3, 2023, Crescent closed the Western Eagle Ford acquisition for approximately $600 million in cash, subject to customary purchase price adjustments. Concurrent with closing, Crescent's lenders reaffirmed the borrowing base under its revolving credit facility (the "Revolving Credit Facility") at $2.0 billion with an elected commitment of $1.3 billion. On July 17, 2023, Crescent issued an additional $300 million aggregate principal amount of 9.250% senior notes due 2028 and used net proceeds to repay amounts outstanding on its Revolving Credit Facility. As of June 30, 2023, pro forma for these transactions, the Company had total long-term debt of $1.9 billion, $2 million of cash and approximately $800 million of liquidity.
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(2).
Class A Conversion
Following the completion of the previously announced Class A share conversion, the Company has approximately 76 million Class A shares outstanding, and the combined total of Class A and Class B shares outstanding remains approximately 167 million. Certain KKR-managed funds and accounts continue to hold indirect interests in Class B shares / OpCo Units. In addition, KKR's balance sheet retains its existing 16% ownership, which is held by an indirect subsidiary of KKR & Co. Inc. for its own account and not through its investment funds. KKR remains a long-term investor and has reiterated that it has no present intention of selling the shares in the Company it holds for its own account.
Return of Capital
Consistent with the Company’s framework to return cash to shareholders, the Company's board of directors approved a second quarter cash dividend of $0.12 per share, which is in line with Crescent's fixed-within-a-framework policy to distribute 10% of Adjusted EBITDAX at guidance pricing. The second quarter dividend is payable on September 6, 2023, to shareholders of record as of the close of business on August 23, 2023. Any payment of future dividends is subject to board approval and other factors.
Second Quarter 2023 Conference Call Information
Crescent plans to host a conference call to discuss its second quarter 2023 financial and operating results at 10 a.m. CT on Thursday, August 10, 2023. Complete details are below. A webcast replay will be available on the website following the call. Crescent has provided an investor presentation on its second quarter 2023 results on its website, www.crescentenergyco.com.
Date: Thursday, August 10, 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 well-capitalized, U.S. independent energy company with a portfolio of proven, low-decline assets across the lower 48 states that generate substantial cash flow supported by a predictable base of production. Crescent’s leadership team is a proven team of investment, financial and industry professionals. Together, they have executed a consistent strategy for more than a decade. The Company’s mission is to invest in energy assets and deliver better returns through strong 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. 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 conflict, including in Ukraine, the impact of disruptions in the bank and capital markets, the timing and success of business development efforts, including acquisition and disposition opportunities, our reliance on our external manager, 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
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 | |||||||||
June 30, 2023 | June 30, 2022 | March 31, 2023 | |||||||
Average daily net sales volumes: | |||||||||
Oil (MBbls/d) | 64 | 64 | 59 | ||||||
Natural gas (MMcf/d) | 335 | 356 | 351 | ||||||
NGLs (MBbls/d) | 19 | 20 | 19 | ||||||
Total (MBoe/d) | 139 | 142 | 137 | ||||||
Average realized prices, before effects of derivative settlements: | |||||||||
Oil ($/Bbl) | $ | 67.68 | $ | 104.23 | $ | 69.99 | |||
Natural gas ($/Mcf) | 1.71 | 6.40 | 5.14 | ||||||
NGLs ($/Bbl) | 19.38 | 46.98 | 24.84 | ||||||
Total ($/Boe) | 37.89 | 68.96 | 46.94 | ||||||
Average realized prices, after effects of derivative settlements: | |||||||||
Oil ($/Bbl)(3) | $ | 63.14 | $ | 78.84 | $ | 62.83 | |||
Natural gas ($/Mcf) | 1.92 | 3.51 | 4.61 | ||||||
NGLs ($/Bbl) | 25.72 | 32.15 | 29.21 | ||||||
Total ($/Boe) | 37.21 | 48.37 | 43.10 | ||||||
Expense (per Boe) | |||||||||
Operating expense | $ | 17.85 | $ | 19.73 | $ | 22.12 | |||
Depreciation, depletion and amortization | 12.65 | 10.15 | 11.92 | ||||||
General and administrative expense | 3.26 | 1.52 | 1.73 | ||||||
Non-GAAP and other expense (per Boe) | |||||||||
Adjusted operating expense, excluding production and other taxes(1)(4) | $ | 14.84 | $ | 13.53 | $ | 16.57 | |||
Production and other taxes | 1.96 | 5.05 | 4.47 | ||||||
Adjusted Recurring Cash G&A(1) | 1.50 | 1.40 | 1.69 | ||||||
Note: Operating costs for the three months ended March 31, 2023, were impacted by higher cost residue gas purchases related to increased natural gas prices in the West Coast pricing market. Higher cost residue gas was more than offset by higher realized pricing during such period. |
Crescent Income Statement
(Unaudited) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenues: | (in thousands, except per share data) | ||||||||||||||
Oil | $ | 393,248 | $ | 602,567 | $ | 765,584 | $ | 975,076 | |||||||
Natural gas | 52,054 | 207,177 | 214,075 | 350,488 | |||||||||||
Natural gas liquids | 33,851 | 83,864 | 76,374 | 155,043 | |||||||||||
Midstream and other | 13,186 | 14,826 | 26,443 | 26,737 | |||||||||||
Total revenues | 492,339 | 908,434 | 1,082,476 | 1,507,344 | |||||||||||
Expenses: | |||||||||||||||
Lease operating expense | 113,051 | 106,375 | 244,005 | 201,198 | |||||||||||
Workover expense | 18,683 | 25,017 | 31,254 | 34,976 | |||||||||||
Asset operating expense | 15,872 | 17,243 | 38,090 | 33,862 | |||||||||||
Gathering, transportation and marketing | 51,525 | 38,238 | 98,928 | 86,514 | |||||||||||
Production and other taxes | 24,825 | 65,496 | 79,748 | 111,980 | |||||||||||
Depreciation, depletion and amortization | 159,904 | 131,573 | 306,387 | 230,592 | |||||||||||
Exploration expense | 1,541 | 1,848 | 1,541 | 1,939 | |||||||||||
Midstream and other operating expense | 1,735 | 3,344 | 5,514 | 6,422 | |||||||||||
General and administrative expense | 41,166 | 19,656 | 62,404 | 42,178 | |||||||||||
(Gain) loss on sale of assets | — | (197 | ) | — | (4,987 | ) | |||||||||
Total expenses | 428,302 | 408,593 | 867,871 | 744,674 | |||||||||||
Income (loss) from operations | 64,037 | 499,841 | 214,605 | 762,670 | |||||||||||
Other income (expense): | |||||||||||||||
