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May 10, 2022

Crescent Energy Reports First Quarter 2022 Financial and Operating Results

Increased 2022 Outlook Based on Updated Commodity Prices

Declared Cash Dividend of $0.17 per Share, a 40% Increase Quarter over Quarter

HOUSTON–(BUSINESS WIRE)–Crescent Energy Company (NYSE: CRGY) today announced financial and operating results for the first quarter of 2022 and increased its quarterly cash dividend by 40% to $0.17 per share. The Company plans to host a conference call and webcast to discuss the results at 10 a.m. CT, Wednesday, May 11, 2022. Details can be found in this release.

Recent Highlights

  • Produced 120 MBoe/d (54% liquids) and incurred $85 million of capital
  • Generated $406 million net loss (including $498 million of unrealized derivative losses)
  • Reported $195 million of Adjusted EBITDAX(1), $371 million of Unhedged Adjusted EBITDAX(1) and $90 million of Levered Free Cash Flow(1)
  • Closed accretive acquisition of Uinta Basin assets (the “Uinta Acquisition”) on March 30, 2022 for total cash consideration of approximately $690 million(2)
  • Exited the quarter at 1.3x Net LTM Leverage(1)
  • Continued to advance ESG initiatives – joined the Oil & Gas Methane Partnership 2.0 initiative and plan to publish second ESG report this summer with ESG targets focused on EHS and emissions
  • Raised the mid-point of 2022 Adjusted EBITDAX(1) and Levered Free Cash Flow(1) guidance to $1.35 billion and $575 million, respectively, to reflect current commodity prices
    • $650 million capital program focused on high-return multi-year inventory in Eagle Ford and Uinta

Crescent CEO David Rockecharlie said, “We delivered strong operating results in the first quarter, generated significant free cash flow and solid investment returns and increased our quarterly dividend to $0.17 per share. At the end of March, we closed the accretive acquisition of Uinta Basin assets, which significantly increased our scale and added high margin oil production at a very attractive price. Today, Crescent remains well positioned with scale in high-return basins, a clear framework to return cash to shareholders, a strong balance sheet and a track record of making accretive acquisitions.”

First Quarter 2022 Results
Crescent produced 120 net MBoe/d in the first quarter 2022, in line with previous guidance (excluding Uinta Acquisition). Average realized price for the first quarter 2022, excluding the effect of commodity derivatives, was $54.28 per barrel of oil equivalent, compared to $48.87 for the fourth quarter 2021, an 11% increase. Excluding the effect of commodity derivatives, averaged realized price by commodity in the first quarter was $93.47 per barrel of oil, $4.77 per Mcf of gas and $38.97 per barrel of NGL.

Operating expense, excluding production and other taxes, of $15.97 per Boe, was in line with previous guidance (excluding Uinta Acquisition) when adjusting for certain contractual commodity-linked costs (~$0.25-$0.50 per Boe)(3), which increased in the higher commodity price environment relative to guidance issued at $75 / Bbl WTI. These higher contractual commodity-linked costs were more than offset by higher realized prices and improved margins. General and administrative expense totaled $2.08 per Boe, including non-cash equity compensation and certain non-recurring transaction related costs. Adjusted Recurring Cash G&A(1) totaled $1.69 per Boe, which was in line with previous guidance (excluding Uinta Acquisition).

During the quarter, Crescent incurred approximately $85 million in capital expenditures, excluding acquisitions. The Company operated one rig in the Eagle Ford during the quarter and brought online 9 gross (9 net) operated wells. In addition, Crescent participated in 7 gross (1 net) non-operated wells in the Eagle Ford. Upon closing the Uinta Acquisition, Crescent took over operations from the previous operator and has maintained their two rig development program.

Crescent generated $406 million net loss (including $498 million of unrealized derivative losses), $195 million of Adjusted EBITDAX(1), $371 million of Unhedged Adjusted EBITDAX(1) and $90 million of Levered Free Cash Flow(1) for the period.

Financial Position
As of March 31, 2022, the Company had principal amount of indebtedness of $1.6 billion and net debt of approximately $1.5 billion, consisting of $700 million of senior unsecured notes and $941 million of outstanding borrowings on its revolving credit facility (the “Credit Facility”). In connection with the closing of the Uinta Acquisition in March, the Company’s borrowing base was increased to $1.8 billion with an elected commitment of $1.3 billion. In February 2022, Crescent issued $200 million in aggregate principal amount of 7.250% senior notes due 2026 at 101% of par and used the proceeds to repay amounts outstanding on the Credit Facility. Total liquidity as of March 31, 2022 was $451 million, including outstanding letters of credit of $21 million and cash and cash equivalents of $113 million. Crescent exited the quarter with a Net LTM Leverage(1) ratio of 1.3x. The Company expects to generate significant free cash flow for the remainder of 2022, which is expected to be used to fund dividends and further strengthen the balance sheet.

Dividend
Consistent with the Company’s framework to return cash to shareholders, the Board of Directors approved a quarterly cash dividend of $0.17 per share, a 40% increase relative to the prior quarter, or $0.68 per share on an annualized basis. The quarterly dividend is payable on June 7, 2022 to shareholders of record as of the close of business on May 24, 2022. Subject to board approval and applicable law, Crescent intends to pay a $0.17 per share quarterly dividend for the remainder of 2022.

2022 Guidance (Including Uinta Acquisition)
Crescent increased the midpoint of its 2022 outlook for Adjusted EBITDAX(1) and Levered Free Cash Flow(1) (including Uinta Acquisition) by 17% and 35%, respectively, based on the strength of commodity prices. Full-year production and capital guidance was reiterated and remains unchanged. Operating expense, excluding production taxes, also remained unchanged with the exception of an increase to reflect a portion of costs that are contractually indexed to commodity prices. Today, Crescent continues to operate one rig in the Eagle Ford and two rigs in the Uinta Basin.

Prior at $75/Bbl and

$3.75/MMBtu

Updated at $100/Bbl

and $6.00/MMBtu

EBITDAX and Levered Free Cash Flow

Adjusted EBITDAX (non-GAAP)(1)

$1,100 – $1,200 MM

$1,300 – $1,400 MM

Unhedged Adj. EBITDAX (non-GAAP)(1)

$1,400 – $1,500 MM

$2,125 – $2,225 MM

Levered Free Cash Flow (non-GAAP)(1)

$375 – $475 MM

$525 – $625 MM

Production(4)

134 – 148 MBoe/d

134 – 148 MBoe/d

% Oil / % Liquids

~45% / ~58%

~45% / ~58%

Capital (Excluding Acquisitions)

$600 – $700 MM

$600 – $700 MM

Per Unit Expenses

Operating Expense, excluding production taxes(3)

$12.75 – $13.75 / Boe

$13.25 – $14.25 / Boe

Production taxes (% commodity revenue)

7 – 8%

7 – 8%

Adj. Recurring Cash G&A (Incl. Manager Comp)(1)

$1.45 – $1.55 / Boe

$1.45 – $1.55 / Boe

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.”

Commodity Hedging
Crescent is approximately 60% hedged for the remainder of 2022 at the midpoint of its production guidance range. The following table details the Company’s open commodity derivative contracts related to swaps and collars as of April 29, 2022. The Company’s full hedge book, including basis and calendar month average roll hedges is available in its presentation on the Company’s website.

WTI

Brent

Natural Gas

NGLs

Swaps:

Volume

(MBbl)

Avg Price

($/Bbl)

Volume

(MBbl)

Avg Price

($/Bbl)

Volume

(BBtu)

Avg Price

($/MMBtu)

Volume

(MBbl)

Avg Price

($/Bbl)

Q2’22

3,715

$65.20

125

$56.35

21,690

$2.77

873

$17.13

Q3’22

3,580

$64.59

126

$56.36

20,634

$2.76

768

$32.74

Q4’22

3,301

$64.08

126

$56.36

20,180

$2.78

736

$32.55

2023

9,710

$60.00

527

$52.52

62,248

$2.73

1,379

$40.80

2024

5,721

$63.82

276

$68.65

9,604

$4.14

WTI

Brent

Natural Gas

NGLs

Collars:

Volume

(MBbl)

Avg Put Price

($/Bbl)

Avg Call Price

($/Bbl)

Volume

(MBbl)

Avg Put Price

($/Bbl)

Avg Call Price

($/Bbl)

Volume

(BBtu)

Avg Put Price

($/MMBtu)

Avg Call Price

($/MMBtu)

Volume

(MBbl)

Avg Put Price

($/Bbl)

Avg Call Price

($/Bbl)

2023

1,155

$48.68

$57.87

—

$—

$—

550

$2.63

$3.01

—

$—

$—

2024

—

$—

$—

—

$—

$—

18,300

$3.38

$4.56

—

$—

$—

First Quarter 2022 Conference Call Information
Crescent plans to host a conference call to discuss its first quarter 2022 financial and operating results. Details are below. A webcast replay will be available on the website following the call. In connection with the call, Crescent has provided information in an earnings presentation on its website, www.crescentenergyco.com, regarding its first quarter 2022 financial and operating results.

Date: Wednesday, May 11, 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/

(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)

Includes net cash paid at closing, restructuring costs associated with the assumption of certain derivatives and certain transaction fees.

(3)

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 commodity 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)

In addition to its production, the Company projects generating $45-$50 million of Midstream and other revenue.

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, and other uncertainties. Consequently, actual future results could differ materially from expectations. The Company assumes no duty to update or revise their 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 months ended March 31, 2022 reflect the combined Company. Referenced results for the three months ended December 31, 2021 reflect legacy results of Independence from October 1 through December 6, 2021 and 25 days of Crescent results beginning December 7, 2021. Referenced results for the three months ended March 31, 2021 reflect only legacy Independence.

Crescent Operational Summary

For the three months ended

March 31, 2022

March 31, 2021

December 31, 2021

Average daily net sales volumes:

Oil (MBbls/d)

44

37

37

Natural gas (MMcf/d)

333

231

267

NGLs (MBbls/d)

20

16

18

Total (MBoe/d)

120

91

99

Average realized prices, before effects of derivative settlements:

Oil ($/Bbl)

$

93.47

$

56.93

$

75.73

Natural gas ($/Mcf)

4.77

3.89

5.06

NGLs ($/Bbl)

38.97

24.98

39.68

Total ($/Boe)

54.28

37.17

48.87

Average realized prices, after effects of derivative settlements:

Oil ($/Bbl)

$

68.36

$

50.28

$

56.31

Natural gas ($/Mcf)

3.11

3.88

2.80

NGLs ($/Bbl)

24.81

16.87

25.01

Total ($/Boe)

38.02

33.04

32.95

Expense (per Boe)

Operating expense, excluding production and other taxes

$

15.97

$

13.72

$

15.79

Production and other taxes

4.30

3.20

3.17

Depreciation, depletion and amortization

9.16

10.19

8.78

General and administrative expense

2.08

0.81

4.91

Non-GAAP expense (per Boe)

Adjusted Recurring Cash G&A

1.69

0.32

0.89

Crescent Income Statement

For the three months ended

(in thousands, except per share data)

March 31, 2022

March 31, 2021

December 31, 2021

Revenues:

Oil

$

372,509

$

188,923

$

255,270

Natural gas

143,311

81,043

124,027

Natural gas liquids

71,179

36,099

63,917

Midstream and other

11,911

11,796

20,045

Total revenues

598,910

317,861

463,259

Expenses:

Lease operating expense

94,823

56,658

67,535

Workover expense

9,959

2,261

3,019

Asset operating expense

16,619

7,127

21,634

Gathering, transportation and marketing

48,276

43,172

51,003

Production and other taxes

46,484

26,313

28,716

Depreciation, depletion and amortization

99,019

83,869

79,665

Exploration expense

91

56

347

Midstream operating expense

3,078

3,732

4,541

General and administrative expense

22,522

6,629

44,567

Gain on sale of assets

(4,790

)

—

624

Total expenses

336,081

229,817

301,651

Income (loss) from operations

262,829

88,044

161,608

Other income (expense):

Gain (loss) on derivatives

(673,486

)

(246,814

)

19,012

Interest expense

(16,524

)

(7,383

)

(12,930

)

Other income (expense)

(1,499

)

(102

)

174

Income from equity method investments

948

—

368

Total other income (expense)

(690,561

)

(254,299

)

6,624

Income (loss) before taxes

(427,732

)

(166,255

)

168,232

Income tax benefit (expense)

21,725

(13

)

713

Net income (loss)

(406,007

)

(166,268

)

168,945

Less: net (income) loss attributable to Predecessor

—

155,629

(246,636

)

Less: net (income) loss attributable to noncontrolling interests

(470

)

10,639

(446

)

Less: net loss attributable to redeemable noncontrolling interests

321,477

—

58,761

Net loss attributable to Crescent Energy

$

(85,000

)

$

—

$

(19,376

)

Net loss per share:

Class A common stock – basic and diluted

$

(2.03

)

$

(0.46

)

Class B common stock – basic and diluted

$

—

$

—

Weighted average shares outstanding:

Class A common stock – basic and diluted

41,954

41,954

Class B common stock – basic and diluted

127,536

127,536

Crescent Balance Sheet

March 31,

2022

December 31,

2021

(in thousands, except share data)

ASSETS

Current assets:

Cash and cash equivalents

$

112,548

$

128,578

Accounts receivable, net

508,199

321,855

Accounts receivable – affiliates

5,135

20,341

Drilling advances

2,090

200

Prepaid and other current assets

21,108

8,644

Total current assets

649,080

479,618

Property, plant and equipment:

Oil and natural gas properties at cost, successful efforts method

Proved

6,899,590

6,043,602

Unproved

377,772

308,721

Oil and natural gas properties at cost, successful efforts method

7,277,362

6,352,323

Field and other property and equipment, at cost

144,836

144,318

Total property, plant and equipment

7,422,198

6,496,641

Less: accumulated depreciation, depletion, amortization and impairment

(2,034,508

)

(1,941,528

)

Property, plant and equipment, net

5,387,690

4,555,113

Goodwill

76,826

76,564

Derivative assets – noncurrent

—

579

Investment in equity affiliates

20,113

15,415

Other assets

40,777

30,173

TOTAL ASSETS

$

6,174,486

$

5,157,462

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

529,746

$

337,881

Accounts payable – affiliates

32,286

8,675

Derivative liabilities – current

654,409

253,525

Financing lease obligations – current

1,726

1,606

Other current liabilities

15,730

14,438

Total current liabilities

1,233,897

616,125

Long-term debt

1,626,873

1,030,406

Derivative liabilities – noncurrent

357,396

133,471

Asset retirement obligations

290,612

258,102

Deferred tax liability

35,647

82,537

Financing lease obligations – noncurrent

3,489

3,512

Other liabilities

18,537

13,652

Total liabilities

3,566,451

2,137,805

Commitments and contingencies

Redeemable noncontrolling interests

2,176,060

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 March 31, 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 March 31, 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 March 31, 2022 and December 31, 2021

—

—

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

(18,448

)

(18,448

)

Additional paid-in capital

541,181

720,016

Accumulated deficit

(104,376

)

(19,376

)

Noncontrolling interests

13,601

12,435

Total equity

431,975

694,644

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

$

6,174,486

$

5,157,462

Crescent Cash Flow Statement

For the three months ended

March 31, 2022

March 31, 2021

Cash flows from operating activities:

(in thousands)

Net income (loss)

$

(406,007

)

$

(166,268

)

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

Depreciation, depletion and amortization

99,019

83,869

Deferred income taxes (benefit)

(26,675

)

—

(Gain) loss on derivatives

673,486

246,814

Net cash (paid) received on settlement of derivatives

(175,801

)

(30,555

)

Non-cash equity-based compensation expense

11,115

3,337

Amortization of debt issuance costs and discount

1,597

850

Gain on sale of oil and natural gas properties

(4,790

)

—

Restructuring of acquired derivative contracts

(51,994

)

—

Other

(2,781

)

(2

)

Changes in operating assets and liabilities:

Accounts receivable

(179,180

)

(41,295

)

Accounts receivable – affiliates

15,206

—

Prepaid and other current assets

(14,469

)

19,947

Accounts payable and accrued liabilities

174,512

9,103

Accounts payable – affiliates

23,611

(357

)

Other

442

808

Net cash provided by operating activities

137,291

126,251

Cash flows from investing activities:

Development of oil and natural gas properties

(93,816

)

(29,380

)

Acquisitions of oil and natural gas properties

(620,342

)

(64,090

)

Proceeds from the sale of oil and natural gas properties

764

3

Purchases of restricted investment securities – HTM

(1,800

)

(3,165

)

Maturities of restricted investment securities – HTM

1,800

3,165

Other

—

(472

)

Net cash used in investing activities

(713,394

)

(93,939

)

Cash flows from financing activities:

Proceeds from the issuance of Senior Notes and related premium

202,000

—

Revolving Credit Facility borrowings

771,000

—

Revolving Credit Facility repayments

(373,000

)

—

Payment of debt issuance costs

(15,831

)

(211

)

Prior Credit Agreement borrowings

—

42,100

Prior Credit Agreement repayments

—

(66,900

)

Repayments of finance lease obligations

(456

)

(104

)

Member distributions

—

(9,448

)

Dividend to Class A common stock

(5,035

)

—

Distributions to redeemable noncontrolling interests related to Class A common stock dividend

(15,323

)

—

Distributions to redeemable noncontrolling interests related to Manager Compensation

(2,726

)

—

Noncontrolling interest distributions

(645

)

(289

)

Noncontrolling interest contributions

1,533

—

Net cash provided by (used in) financing activities

561,517

(34,852

)

Net change in cash, cash equivalents and restricted cash

(14,586

)

(2,540

)

Cash, cash equivalents and restricted cash, beginning of period

135,117

41,420

Cash, cash equivalents and restricted cash, end of period

$

120,531

$

38,880

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 Recurring Cash G&A 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.

Due to the forward-looking nature of certain non-GAAP measures presented in this release for the year ending December 31, 2022, including Adjusted EBITDAX, Levered Free Cash Flow, Unhedged Adjusted EBITDAX and Adjusted Recurring Cash G&A and Net LTM Leverage for such period, no reconciliations of the non-GAAP measures to their most directly comparable GAAP measure is available without unreasonable efforts. This is due to the inherent difficulty of forecasting the timing or amount of various reconciling items that would impact the most directly comparable forward-looking GAAP financial measure, that have not yet occurred, are out of the Company’s control and/or cannot be reasonably predicted. Accordingly, such reconciliations are excluded from this release. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

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 derivatives, impairment of oil and natural gas properties, equity-based compensation, (gain) loss on sale of assets, other (income) expense, certain redeemable noncontrolling interest distributions made by Crescent Energy OpCo, LLC (“OpCo”) related to Manager Compensation, nonrecurring expenses and transaction expenses. 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 excludes the items listed above from net income (loss) 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 noncash deferred financing cost amortization, realized gain (loss) on interest rate derivatives, current income tax provision, tax-related redeemable noncontrolling interest distributions made by OpCo 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 presents a reconciliation of 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:

For the three months ended

March 31, 2022

March 31, 2021

December 31, 2021

(in thousands)

Net income (loss)

$

(406,007

)

$

(166,268

)

$

168,945

Adjustments to reconcile to Adjusted EBITDAX:

Interest expense

16,524

7,383

12,930

Realized (gain) loss on interest rate derivatives

—

3,628

—

Income tax expense (benefit)

(21,725

)

13

(713

)

Depreciation, depletion and amortization

99,019

83,869

79,665

Exploration expense

91

56

347

Non-cash (gain) loss on derivatives

497,685

209,120

(163,330

)

Non-cash equity-based compensation expense

11,115

3,337

25,865

(Gain) loss on sale of assets

(4,790

)

—

624

Other (income) expense

1,499

102

(174

)

Certain redeemable noncontrolling interest distributions made by OpCo related to Manager Compensation(5)

(10,064

)

—

(2,706

)

Transaction and nonrecurring expenses(6)

11,559

644

14,113

Adjusted EBITDAX (non-GAAP)

$

194,906

$

141,884

$

135,566

Adjustments to reconcile to Levered Free Cash Flow:

Interest expense, excluding non-cash deferred financing cost amortization

(14,927

)

(6,533

)

(12,091

)

Realized (gain) loss on interest rate derivatives

—

(3,628

)

—

Current income tax provision

(4,950

)

(13

)

(222

)

Current tax-related redeemable noncontrolling interest distributions by OpCo

—

—

—

Development of oil and natural gas properties

(85,480

)

(24,827

)

(86,830

)

Levered Free Cash Flow (non-GAAP)

$

89,549

$

106,883

$

36,423

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:

For the three months ended

March 31, 2022

March 31, 2021

December 31, 2021

(in thousands)

Net cash provided by operating activities

137,291

126,251

84,515

Changes in operating assets and liabilities

(20,122

)

11,794

23,705

Restructuring of acquired derivative contracts(7)

51,994

—

—

Certain redeemable noncontrolling interest distributions made by OpCo related to Manager Compensation(5)

(10,064

)

—

(2,706

)

Transaction and nonrecurring expenses(6)

11,559

644

14,113

Other

4,371

(6,979

)

3,626

Adjusted cash provided by operating activities

175,029

131,710

123,253

Development of oil and natural gas properties

(85,480

)

(24,827

)

(86,830

)

Levered Free Cash Flow (non-GAAP)

89,549

106,883

36,423

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:

For the three months ended

March 31, 2022

March 31, 2021

December 31, 2021

(in thousands)

Adjusted EBITDAX (non-GAAP)

$

194,906

$

141,884

$

135,566

Plus realized (gain) loss on commodity derivatives

175,801

34,066

144,318

Unhedged Adjusted EBITDAX (non-GAAP)

$

370,707

$

175,950

$

279,884

Adjusted Recurring Cash G&A
Crescent defines Adjusted Recurring Cash G&A as General and Administrative Expense, excluding noncash equity-based compensation and transaction and nonrecurring expenses, and including certain redeemable noncontrolling interest distributions made by OpCo related to the Manager Compensation(5).

For the three months ended

March 31, 2022

March 31, 2021

December 31, 2021

(in thousands)

General and administrative expense

$

22,522

$

6,629

$

44,567

Less: non-cash equity-based compensation expense

(11,115

)

(3,337

)

(25,865

)

Less: transaction and nonrecurring expenses(8)

(3,144

)

(644

)

(13,361

)

Plus: certain redeemable noncontrolling interest distributions made by OpCo related to Manager Compensation(5)

10,064

—

2,706

Adjusted Recurring Cash G&A

$

18,327

$

2,648

$

8,047

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.

March 31, 2022

(in thousands)

Total principal debt(9)

$

1,641,000

Less: cash and cash equivalents

(112,548

)

Net Debt

$

1,528,452

LTM Adjusted EBITDAX for Leverage Ratio

$

1,180,701

Net LTM Leverage

1.3x

(5)

Relates to the pro rata share of Manager Compensation attributable to Class B shareholders (redeemable noncontrolling interests), which began on December 7, 2021 at close of the acquisition of Contango Oil & Gas Company and related restructuring of Crescent (the “Merger Transactions”) when our Up-C structure was established. Amounts shown for the quarter ended December 31, 2021 only include such distributions for 25 days. If the Merger Transactions had occurred on January 1, 2021, certain redeemable noncontrolling interest distributions made by OpCo related to Manager Compensation for the three months ended March 31, 2021 and December 31, 2021 would have increased by approximately $10.1 million, or $1.29 per Boe, and $7.3 million, or $0.81 per Boe, respectively.

(6)

Transaction and nonrecurring expenses of $12 million for the three months ended March 31, 2022 were primarily related to legal, consulting and other fees incurred for the Uinta Acquisition, related restructuring of acquired derivative contracts, legal settlements and severance costs subsequent to the Merger Transactions. Transaction and nonrecurring expenses of $1 million for the three months ended March 31, 2021 were primarily related to legal, consulting and other fees related to the formation of Independence, the acquisition of Titan Energy Holdings, LLC (f/k/a Liberty Energy LLC) (the “Titan Acquisition”) and the related reorganization transactions. Transaction and nonrecurring expenses of $14 million for the three months ended December 31, 2021 were primarily related to legal, consulting and other fees incurred related to the Merger Transactions.

(7)

In connection with the Uinta Acquisition, Crescent acquired commodity derivative liabilities totaling $180 million from the seller, which reduced the cash cost at closing of the Uinta Acquisition. 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.

(8)

Transaction and nonrecurring expenses of $3 million for the three months ended March 31, 2022 were primarily related to legal, consulting and other fees incurred for the Uinta Acquisition, related restructuring of acquired derivative contracts, legal settlements and severance costs subsequent to the Merger Transactions. Transaction and nonrecurring expenses of $1 million for the three months ended March 31, 2021 were primarily related to legal, consulting and other fees related to the formation of Independence, the Titan Acquisition and the related reorganization transactions. Transaction and nonrecurring expenses of $13 million for the three months ended December 31, 2021 were primarily related to legal, consulting and other fees incurred related to the Merger Transactions and costs associated with the termination of our agreement with FDL Operating LLC.

(9)

Excludes $14 million of unamortized debt discount and issuance costs.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20220510006351/en/

Emily Newport
IR@crescentenergyco.com

Source: Crescent Energy

Crescent Energy

Crescent Energy Company
600 Travis, Suite 7200
Houston, Texas 77002
United States
+1 (713) 337-4600

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Todd Falk

Chief Accounting Officer

Todd Falk has served as Crescent Energy Company’s Chief Accounting Officer since December 2021, prior to which he served as Vice President, Finance of Crescent’s predecessor entity. Mr. Falk joined KKR in 2018 and is a Managing Director and Chief Accounting Officer of KKR’s Energy Real Assets business. Prior to joining KKR, Mr. Falk served as Director of Finance and Controller of Vitruvian Exploration. Mr. Falk began his career at Deloitte, where as a senior manager he assisted clients with complex financial reporting issues, specializing in initial public offerings and other interactions with the SEC. Mr. Falk has over 18 years of finance and accounting experience in the energy industry, is a Certified Public Accountant and holds a B.S., magna cum laude, in Accounting and an M.S. in Finance from Texas A&M University.

 
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Clay Rynd

Executive Vice President, Investments

Clay Rynd has served as Crescent Energy Company’s Executive Vice President of Investments since December 2021, prior to which he served as Executive Vice President of Crescent’s predecessor entity. Mr. Rynd joined KKR in 2015 and is currently a Managing Director on the Energy Real Assets team. Prior to joining KKR, Mr. Rynd was with Tudor, Pickering, Holt & Co. in the investment banking division, where he focused primarily on strategic advisory and M&A transactions for companies across the energy sector. Prior to that, he worked within the equity research division at Tudor, Pickering, Holt & Co. Mr. Rynd holds a B.A. in both Economics and History from Texas A&M University.

 
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Brandi Kendall

Chief Financial Officer and Member of the Board of Directors

Brandi Kendall has served as Crescent Energy Company’s Chief Financial Officer and a director on Crescent’s Board since December 2021, prior to which she served as Chief Financial Officer and member of the Board of Crescent’s predecessor entity. Ms. Kendall joined KKR in 2013 and is currently a Managing Director. Prior to joining KKR, Ms. Kendall served as director, finance and planning at Marlin Midstream and finance associate at NFR Energy. Ms. Kendall began her career in the energy investment banking industry, having held positions at JP Morgan and Tudor, Pickering, Holt & Co. Ms. Kendall earned a BA in Economics, Managerial Studies and Kinesiology from Rice University.

 
×

Bo Shi

General Counsel

Bo Shi has served as Crescent Energy Company’s General Counsel and Corporate Secretary since December 2021, prior to which he served as General Counsel of Crescent’s predecessor entity. Prior to joining the Company, Mr. Shi worked as a Senior Associate at Vinson & Elkins L.L.P and Senior Counsel at IPSCO Tubulars Inc. Mr. Shi received a J.D. from Harvard Law School and a B.A. in Political Science and Policy Studies from Rice University.

 
×

David Rockecharlie

Chief Executive Officer and Member of the Board of Directors

David C. Rockecharlie has served as Crescent Energy Company’s Chief Executive Officer and a director on Crescent’s Board since December 2021, prior to which he served as Chief Executive Officer and a member of the Board of Crescent’s predecessor entity. Mr. Rockecharlie joined KKR in 2011 and is currently a Partner and Head of KKR’s Energy Real Assets business and Chairman of KKR’s Energy Investment Committee. Prior to joining KKR, Mr. Rockecharlie was co-founder and co-CEO of RPM Energy, LLC, a privately-owned oil and gas company. Previously, Mr. Rockecharlie served as co-head of Jefferies & Company’s Energy Investment Banking Group and before that was an executive with El Paso Corp., where he led a variety of corporate activities. Mr. Rockecharlie began his career as an energy investment banker with S.G. Warburg and Donaldson, Lufkin & Jenrette. Mr. Rockecharlie received an A.B., magna cum laude, from Princeton University.

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