Crescent Energy Reports Third Quarter 2022 Financial and Operating Results

Declares Cash Dividend of $0.17 per Share

Reaffirms Full Year 2022 Production, Capex, Adj. EBITDAX and LFCF Guidance

HOUSTON–(BUSINESS WIRE)– Crescent Energy Company (NYSE: CRGY), (“Crescent” or the “Company”), today announced financial and operating results for the third quarter of 2022 and a quarterly cash dividend of $0.17 per share. Crescent has provided a supplemental slide deck on its third quarter results, which can be found at www.crescentenergyco.com. The Company plans to host its third quarter conference call and webcast at 10 a.m. CT, Thursday, November 10, 2022. Details can be found in this release.

Third Quarter 2022 Highlights

• Produced 150 MBoe/d, a 6% quarter-over-quarter increase; oil comprised 46% of total third quarter volumes on an equivalent basis
• Reported $555 million of net income and $179 million of Adjusted Net Income(1)
• Generated $359 million of Adjusted EBITDAX(1), $570 million of Unhedged Adjusted EBITDAX(1)
• Announced $144 million of Levered Free Cash Flow(1)
• Exited the third quarter at 1.0x Net LTM Leverage(1), in-line with the Company’s long-term target
• Capital investments, excluding acquisitions, were $190 million, in-line with expectations
• Announced positive amendments to its revolving credit facility (the “Credit Facility”)
• Completed secondary equity offering, and concurrent buyback of OpCo Units, increasing public equity float by 15%
• Entered into a definitive purchase agreement to sell non-core Permian assets for $80 million, subject to customary purchase price adjustments
• Reaffirms full year 2022 guidance for production, capital expenditures, Adjusted EBITDAX and Levered Free Cash Flow assuming prior pricing assumptions and adjusted for divestitures
• Published second environmental, social and governance (“ESG”) report, setting targets for five ESG priority areas, as well as benchmarks for measuring future performance. The document, which can be found on Crescent’s website, reports against the Task Force on Climate-related Financial Disclosures (“TCFD”) framework and offers guidance on the Company’s role in a lower carbon future

Crescent CEO David Rockecharlie said, “Since going public less than a year ago, we’ve executed exceptionally well and advanced our top priorities: generating significant cash flow, completing accretive acquisitions, accessing the capital markets, executing on our high-return, multi-rig development program and publishing our second ESG report. Our year-to-date achievements are a testament to the quality of both our asset base and our people – each of these accomplishments align with our strategy and broader goals to create long-term shareholder value.”

Third Quarter 2022 Results

Crescent reported $555 million of net income and $179 million of Adjusted Net Income(1). The Company generated $359 million of Adjusted EBITDAX(1), $570 million of Unhedged Adjusted EBITDAX(1) and $144 million of Levered Free Cash Flow(1) for the period, a 4% decrease, 11% decrease and 5% increase, respectively, relative to the second quarter.

Costs and expenses, stated on a Boe basis, were generally in-line with Company expectations, despite industry-wide inflationary pressures. Operating costs and operating costs excluding production and other taxes, were both 4% higher relative to the second quarter, and in excess of our operating cost guide, reflecting incremental inflation and infrastructure maintenance as well as overall elevated workover activity. This increase includes $0.46 per Boe of transaction and nonrecurring operating expenses. G&A expense and Adjusted Recurring Cash G&A(1) (includes manager compensation and excludes non-cash equity-based compensation) totaled $1.25 and $1.40 per Boe, a 17% decrease and nominal percent increase relative to the second quarter, respectively.

Crescent produced 150 net MBoe/d in the third quarter (comprised of 46% oil, 13% NGLs, and 41% gas), a 6% increase above the prior quarter, and in-line with the Company’s expectations.

Average realized price for the third quarter, excluding the effect of commodity derivatives, totaled $61.65 per Boe, 11% lower than the second quarter. Excluding the effect of commodity derivatives during the quarter, average realized prices by commodity were $86.77 per barrel of oil (95% of WTI), $6.99 per Mcf of gas (95% of Henry Hub) and $35.22 per barrel of NGLs (38% of WTI).

Third quarter capital investments, excluding acquisitions, were $190 million. The Company drilled five gross operated locations in the Uinta and five in the Eagle Ford. In addition, Crescent brought online 13 gross wells in the Uinta. Crescent is planning to operate two rigs (one Uinta, one Eagle Ford) for the remainder of the year.

On November 4, 2022, subsequent to quarter end, Crescent entered into a definitive purchase and sale agreement to divest non-core Permian basin assets in Ector County, Texas for $80 million in cash, subject to customary purchase price adjustments. Closing is expected to occur by year-end 2022. Closing is subject to customary closing conditions. Proceeds are expected to reduce outstanding borrowings on the Company’s Credit Facility. Year to date, the Company has divested non-core assets for combined proceeds in excess of $100 million.

Financial Position

In late September, the Company announced positive amendments to its Credit Facility, effective September 23, 2022. The amendments were approved by the 11 member banks supporting the facility. Highlights include: (i) an 11% borrowing base increase to $2.0 billion from $1.8 billion, (ii) a flat elected commitment amount of $1.3 billion, (iii) a facility term extension through September 2027 and (iv) a 50 bps decrease in the interest rate margin for amounts outstanding on the Credit Facility.

As of September 30, 2022, the Company had total long-term debt of $1.4 billion, consisting of $700 million of senior unsecured notes and $685 million of outstanding borrowings on its revolving credit facility (the “Credit Facility”). Total liquidity as of September 30, 2022, was $625 million, including availability on its revolver ($1.3 billion elected commitment with a $2.0 billion borrowing base), cash and cash equivalents of $22 million, and outstanding letters of credit of $12 million. Crescent exited the quarter with a Net LTM Leverage(1) ratio of 1.0x, in-line with its stated target. The Company expects to generate additional 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 third quarter cash dividend of $0.17 per share, payable on December 7, 2022, to shareholders of record as of the close of business on November 23, 2022. Crescent expects to pay a $0.17 per share quarterly dividend for the fourth quarter of 2022, subject to Board approval and applicable law.

Guidance

Crescent reiterates full year 2022 guidance for production, capital, Adj. EBITDAX, and Levered Free Cash Flow, assuming prior pricing assumptions of $100/Bbl WTI and $6/MMBtu Henry Hub, when adjusted for divestitures. Additional guidance details are available in supplemental materials provided on the Company’s website.

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. 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/.

Third Quarter 2022 Conference Call Information

Crescent plans to host a conference call to discuss its third quarter 2022 financial and operating results at 10 a.m. CT on Thursday, November 10, 2022. Complete details are below. A webcast replay will be available on the website following the call. Crescent has provided an investor presentation on its third quarter 2022 results on its website, www.crescentenergyco.com.

Date: Thursday, November 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 nine months ended September 30, 2022, as well as the three months ended June 30, 2022, reflect the combined Company. Referenced results for the three and nine months ended September 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.

Reconciliation of Non-GAAP Measures

This release includes financial measures that have not been calculated in accordance with GAAP. These non-GAAP measures include Adjusted EBITDAX, Levered Free Cash Flow, Unhedged Adjusted EBITDAX, 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, depreciation, depletion and amortization, exploration expense, non-cash gain (loss) on derivative contracts, impairment of oil and natural gas properties, non-cash equity-based compensation, gain (loss) on sale of assets, other (income) expense, transaction and nonrecurring expenses and early settlement of derivative contracts and further adjusted to include Manager Compensation RNCI Distributions. 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 and the 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 provision (benefit), Income Tax 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:

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:

Unhedged Adjusted EBITDAX

Crescent defines Unhedged Adjusted EBITDAX as Adjusted EBITDAX plus realized (gain) loss on commodity derivatives. Management believes Unhedged 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 commodity derivatives, which can vary substantially within its industry depending upon peers hedging strategies and when hedges were entered into. Unhedged 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 Unhedged Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s realized derivative loss or gain, cost of capital and tax burden, as well as the historic costs of depreciable assets, none of which are reflected in Unhedged Adjusted EBITDAX. The Company’s presentation of Unhedged Adjusted EBITDAX should not be construed as an inference that its results will be unaffected by unusual or nonrecurring items. Crescent’s computations of Unhedged Adjusted EBITDAX may not be identical to other similarly titled measures of other companies.

The following table presents a reconciliation of Unhedged Adjusted EBITDAX (non-GAAP) to Adjusted EBITDAX (non-GAAP). In the table above, Adjusted EBITDAX (non-GAAP) is reconciled to net income (loss), the most directly comparable financial measure calculated in accordance with GAAP:

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 GAAP measure most directly comparable to Adjusted Net Income is net income (loss).

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:

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(4). 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 the portion of Manager compensation that is not reflected as G&A expense, facilitating the ability for investors to compare Crescent’s cash G&A expense against peer companies. As discussed elsewhere, these adjustments are made to Adjusted EBITDAX, Adjusted Unhedged EBITDAX and Levered Free Cash Flow for historical periods and periods for which we present guidance.

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.

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, facilitating the ability for investors to compare Crescent’s dividends paid against peer companies.

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. 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 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.

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Company Contact
For additional information, please reach out to IR@crescentenergyco.com.

Source: Crescent Energy