Crescent Energy Announces Highly Accretive Acquisition of High-Margin Oil Assets in the Uinta Basin
Crescent Energy (NYSE: CRGY) has announced an agreement to acquire Uinta Basin assets from Verdun Oil Company II LLC for
- Transaction expected to increase annualized cash flow per share by ~55%.
- Pro forma net debt to LTM adjusted EBITDAX ratio remains low at 1.4x.
- Acquisition adds multi-year inventory of high-value oil-weighted development opportunities.
- None.
- Transaction immediately accretive on key financial metrics: cash flow per share, free cash flow per share and free cash flow yield, on an actual and debt-adjusted basis(1)
- Scales Crescent’s production base in the Rockies region and adds multi-year inventory of proven, high-return development locations
- Maintains financial strength with pro forma Net Debt / LTM Adj. EBITDAX ratio of 1.4x(2)
Acquisition Consistent with Crescent’s Strategy:
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Highly Accretive Oil Acquisition Expands Rockies Asset Base: Acquisition multiple of <2.0x 2022E Adj. EBITDAX(1)(3)generates ~
55% accretion to annualized cash flow per share and ~30% accretion to annualized free cash flow per share
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Low-Risk Assets with Strong Production and Cash flow: Increasing annualized Adjusted EBITDAX(1)(3) by
-$400 at$465 million /Bbl NYMEX WTI pricing, ~$75 85% of which is from existing production and current drilled but uncompleted wells
- Proven Opportunity for Disciplined Reinvestment: Multi-year inventory of high value, oil-weighted development opportunities; planning to operate two rigs on the assets in 2022 post-closing
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Enhances Key Asset Portfolio Characteristics: Maintains our peer-leading decline rate (~
21% pro forma), expands production from the Rockies &Eagle Ford to ~65% of our total production base, increases our percent operated to ~70% based on 2022 expected production
- Maintains Financial Strength and Increases Scale: Adding meaningful scale to the business while maintaining modest leverage (pro forma 1.4x Net Debt / LTM Adj. EBITDAX(2))
“We are acquiring these assets at a compelling valuation. They are a great addition to our existing Rockies footprint and align perfectly with our cash flow based strategy,” said Crescent CEO
The transaction will be funded with borrowings under Crescent’s revolving credit facility and cash on hand. Crescent’s lenders authorized an increase of the Company’s elected commitment amount under the existing revolving credit facility to
Uinta Asset Overview:
Large, Contiguous Acreage Position: The transaction will provide Crescent with more than 145,000 contiguous net acres (>
Deep, Undeveloped Inventory of Drilling Locations: Acquisition to provide Crescent with a multi-year inventory of high value, oil-weighted development opportunities. The Uinta basin has a significant amount of resource in place across multiple stacked reservoirs providing attractive long-term resource potential beyond the horizontal targets actively being developed today.
Preliminary 2022 Pro Forma Outlook:
Post-closing of the transaction, Crescent plans to operate two rigs in the
Updated Preliminary 2022E guidance is below, pro forma for the acquisition assuming nine months of contribution, based on
* 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.”
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CRGY Standalone
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Pro Forma CRGY
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Annualized
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EBITDAX and Levered Free Cash Flow(3) |
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Adjusted EBITDAX (non-GAAP) |
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Unhedged Adj. EBITDAX (non-GAAP) |
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Levered Free Cash Flow (non-GAAP) |
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Production |
114 - 124 MBoe/d |
134 - 148 MBoe/d |
148 Mboe/d |
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% Oil / % Liquids |
~ |
~ |
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Capital (Excl. Potential Acquisitions) |
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Per Unit Expenses |
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Operating Expense |
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Adj. Cash G&A (includes management fee)(3) |
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Implied 2022 Quarterly Dividend(5) |
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Outstanding Share Count (Class A & B) |
169.5 MM |
169.5 MM |
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Net Debt / LTM Adj. EBITDAX(2) |
1.3x |
1.4x |
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Fourth Quarter and Full Year 2021 Earnings Release and Call
Date:
Time:
Webcast Link
Live-Link (live stream of audio, after the event the on demand webcast will be available under this URL): https://www.webcast-eqs.com/crescentenergy20220310/en
Telephone Conference Dial-In
International Dial-in Number: 201-389-0921
Replay Information
A webcast replay will be available at the link above within several hours after the conclusion of the event. An updated investor presentation will also be available under Events and Presentations in the Investors section of the Company’s website prior to the start of the conference call, or directly at https://www. https://ir.crescentenergyco.com/.
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Based on preliminary guidance expectations assuming
per Bbl NYMEX WTI and$75 per MMbtu Henry Hub.$3.75 - Estimated LTM Adj. EBITDAX as of 3/31/22.
- Adjusted EBITDAX, Unhedged Adjusted EBITDAX, Levered Free Cash Flow and Adjusted Cash G&A are non-GAAP financial measures. Please see “Non-GAAP Measures” for further discussion of such measures.
- Annualized pro forma mid-point includes annualized cash flows from the acquisition.
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Dividends are subject to board approval and applicable law. Pro forma dividend expectation based on
10% of Adj. EBITDAX framework.
About
Cautionary Statement Regarding Forward-Looking Information
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 proposed transaction. The words and phrases “should”, “could”, “may”, “will”, “believe”, “think”, “plan”, “intend”, “expect”, “potential”, “possible”, “anticipate”, “estimate”, “forecast”, “view”, “efforts”, “target”, “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, the ability of the parties to consummate the transaction in a timely manner or at all; satisfaction of the conditions precedent to consummation of the transaction, including the ability to secure required consents and regulatory approvals in a timely manner or at all; the possibility of litigation (including related to the transaction itself), 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
The transactions and outlook announced today is based on information currently available to the Company, depends on certain estimates and assumptions and is subject to change.
Non-GAAP Measures
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 non-controlling interest distributions made by
In certain instances, this release refers to pro forma Annualized Adjusted EBITDAX. This pro forma measure is related to the business combination between Independence and Contango. Please refer to the Current Report on Form 8-K/A filed on
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 non-controlling 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.
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 derivate 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 non-recurring items. Crescent’s computations of Unhedged Adjusted EBITDAX may not be identical to other similarly titled measures of other companies.
Crescent defines Adjusted Cash G&A as General and Administrative Expense, excluding noncash equity-based compensation, and including certain non-controlling interest distributions made by OpCo related to the management fee.
Due to the forward-looking nature of the non-GAAP measures presented in this release, 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 our 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.
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IR@crescentenergyco.com
Source:
FAQ
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