Crescent Energy Announces Transition to Single Class of Common Stock and Elimination of Up-C Structure

Rhea-AI Summary

Crescent Energy (NYSE: CRGY) has announced a significant corporate restructuring by eliminating its umbrella partnership-C (Up-C) structure through the conversion of all remaining Class B common stock into Class A common stock, effective April 4, 2025.

The Corporate Simplification will result in all stockholders holding Class A common stock with identical economic and voting interests. KKR maintains its 10% ownership and has agreed to a 180-day share lock-up period.

The company expects this simplification to:

• Reduce organizational complexity
• Improve financial presentation clarity
• Eliminate certain compliance and reporting costs
• Enhance accessibility for future investors

The restructuring aligns with Crescent's strategic goal of 'simplifying to grow' and positions the company to capitalize on opportunities with its strong balance sheet and well-hedged free cash flow generation.

Positive

• Elimination of Up-C structure reduces administrative complexity and costs
• Enhanced accessibility for broader investor base could improve stock liquidity
• KKR maintains long-term commitment with 10% ownership stake
• Strong balance sheet and well-hedged free cash flow generation
• Unified share structure aligns all shareholder interests

Negative

• 180-day lock-up period for KKR's shares may temporarily limit stock trading flexibility
• Implementation costs associated with corporate restructuring

Insights

Corporate Structure Expert

Crescent Energy's elimination of its Up-C structure represents a significant corporate governance enhancement that aligns shareholder interests under a single class of stock. This structural simplification removes the two-tier ownership system that often creates potential conflicts between different shareholder classes. The transition specifically improves transparency and alignment of interests between all equity holders.

Up-C structures, while beneficial for tax purposes during post-IPO periods, typically create unnecessary complexity that can confuse investors and limit institutional investment. By consolidating to a single share class, Crescent eliminates the compliance burden and administrative costs associated with maintaining dual reporting structures. This streamlining should translate to more straightforward financial reporting and potentially fewer footnotes and reconciliations in quarterly statements.

The 180-day lock-up agreement with KKR (maintaining its 10% position) is particularly noteworthy as it prevents potential market disruption during this transition period while signaling KKR's continued confidence in Crescent's long-term prospects. This provides important stability during the corporate restructuring phase.

From a governance perspective, this move aligns with modern corporate best practices by eliminating the control-enhancing mechanisms often associated with dual-class structures. The timing of this simplification during market volatility demonstrates management's proactive approach to positioning the company advantageously in the capital markets.

Financial Analyst

Crescent Energy's structural simplification should positively impact its capital markets positioning through several financial mechanisms. First, simplified corporate structures typically enhance trading liquidity by expanding the investor universe - many institutional investors have mandates restricting investment in companies with complex governance structures or unequal voting rights.

While the article doesn't quantify expected cost savings, the reduced administrative and compliance burden should create modest operational efficiencies. More importantly, this move potentially addresses the "conglomerate discount" often applied to companies with complex organizational structures where investors struggle to clearly value the underlying assets.

The strategic timing during market volatility suggests management is positioning Crescent to capitalize on acquisition opportunities with a more streamlined equity structure. A single class of stock simplifies future equity-based transactions and makes Crescent shares more attractive as acquisition currency.

When evaluating this restructuring, investors should consider potential tradeoffs. While Up-C structures offer tax advantages to certain stakeholders through tax basis step-ups and tax receivable agreements, these benefits might be outweighed by improved market perception and simplified investor messaging.

The company's emphasis on its "low-decline, cash-flow oriented assets" in the Eagle Ford and Uinta basins paired with this corporate simplification creates a cleaner investment thesis focused on value and cash flow generation - attributes particularly attractive in the current market environment for energy companies.

HOUSTON--(BUSINESS WIRE)-- Crescent Energy Company (NYSE: CRGY) (“Crescent” or the “Company”), today announced the simplification of its corporate structure by eliminating the Company’s umbrella partnership-C corporation (“Up-C”) structure through conversion of all remaining Class B common stock into Class A common stock, effective as of April 4, 2025 (the “Corporate Simplification”).

As a result of the Corporate Simplification, all of the Company’s stockholders now hold Class A common stock, with the same aligned economic and voting interests. The Company anticipates that simplifying its organizational structure and capitalization table will unlock shareholder value through reduced complexity, improving clarity of financial presentation, eliminating certain compliance and reporting costs, and enhancing accessibility for a broader pool of future investors.

There is no transfer of ownership contemplated in connection with the Corporate Simplification. KKR retains its existing 10% 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 committed long-term investor in Crescent, and as part of this Corporate Simplification, has agreed to a 180-day lock-up of its shares.

Crescent CEO David Rockecharlie said, “Today’s announcement is in-line with our strategic goal of simplifying to grow, and we believe our streamlined corporate structure will deliver value to our existing Crescent shareholders while enabling us to expand our investor base and capital markets access.

Moreover, the Corporate Simplification is a result of the proactive approach our team has taken during this period of market volatility. With our consistent strategy, strong balance sheet and significant, well-hedged free cash flow generation, we believe we are well positioned to capitalize on opportunities for long-term value in any environment.”

About Crescent Energy Company

Crescent is a differentiated U.S. energy company committed to delivering value for shareholders through a disciplined growth through acquisition strategy and consistent return of capital. Crescent’s portfolio of low-decline, cash-flow oriented assets comprises both mid-cycle unconventional and conventional assets with a long reserve life and deep inventory of high-return development locations in the Eagle Ford and Uinta basins. Crescent’s leadership is an experienced team of investment, financial and industry professionals that combines proven investment and operating expertise. For more than a decade, Crescent and its predecessors have executed on a consistent strategy focused on cash flow, risk management and returns. For additional information, please visit www.crescentenergyco.com.

Cautionary Statement Regarding Forward-Looking Statements

This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on current expectations. The words and phrases “should”, “could”, “may”, “will”, “believe”, “plan”, “intend”, “expect”, “potential”, “possible”, “anticipate”, “estimate”, “forecast”, “view”, “efforts”, “goal” and similar expressions identify forward-looking statements and express the Company’s expectations about future events. All statements, other than statements of historical facts, included in this communication that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the Company’s control. Such risks and uncertainties include, but are not limited to, weather, political, economic and market conditions, including a decline in the price and market demand for natural gas, natural gas liquids and crude oil, uncertainties inherent in estimating natural gas and oil reserves and in projecting future rates of production; the anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the company’s operations; our hedging strategy and results; federal and state regulations and laws; upcoming elections and associated political volatility; the severity and duration of public health crises; actions by the Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC oil-producing countries; the impact of the armed conflict in Ukraine; continued hostilities in the Middle East, including the Israel-Hamas conflict and rising tensions with Iran; the impact of disruptions in the capital markets; the timing and success of business development efforts, including acquisition and disposition opportunities; our reliance on our external manager, sustained cost inflation, elevated interest rates, the effects of tariffs 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.

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Crescent Energy Investor Relations Contacts

IR@crescentenergyco.com

Crescent Energy Media Contacts

Media@crescentenergyco.com

Source: Crescent Energy

FAQ

When will Crescent Energy (CRGY) complete its corporate structure simplification?

The corporate simplification will be effective as of April 4, 2025, when all Class B common stock will be converted into Class A common stock.

How long is KKR's lock-up period for CRGY shares following the restructuring?

KKR has agreed to a 180-day lock-up period for its shares as part of the corporate simplification.

What percentage ownership does KKR maintain in Crescent Energy (CRGY) after the restructuring?

KKR retains its existing 10% ownership in Crescent Energy through an indirect subsidiary.

What are the main benefits of CRGY's corporate structure simplification?

The simplification reduces complexity, improves financial clarity, eliminates certain compliance costs, and enhances accessibility for future investors.

Where are Crescent Energy's (CRGY) main operational assets located?

Crescent Energy's assets are located in the Eagle Ford and Uinta basins, featuring low-decline, cash-flow oriented conventional and unconventional assets.