Crescent Energy Closes Transformative Acquisition of SilverBow Resources

Rhea-AI Summary

Crescent Energy Company (NYSE: CRGY) has closed its acquisition of SilverBow Resources, creating the second largest operator in the Eagle Ford. The transaction closed ahead of schedule, with $35 million of the projected $65-$100 million annual synergies already captured. Crescent issued approximately 52 million shares of Class A common stock and paid $358 million in cash as part of the deal. Former SilverBow shareholders now own about 23% of the combined company. The merger positions Crescent as a leading mid-cap E&P company with a balanced portfolio and substantial free cash flow generation. Crescent will report Q2 2024 results and provide pro forma guidance on August 5, followed by a conference call on August 6.

Positive

• Acquisition of SilverBow Resources creates second largest operator in Eagle Ford
• $35 million of projected $65-$100 million annual synergies already captured
• Transaction positions Crescent for substantial free cash flow generation
• Company size tripled over the last four years through disciplined investing and operations
• Expanded board of directors with two new independent members

Negative

• Issuance of 52 million new Class A shares may lead to dilution for existing shareholders
• $358 million cash payment for acquisition may impact short-term liquidity

Insights

Financial Analyst

The acquisition of SilverBow Resources by Crescent Energy marks a significant milestone in the company's growth strategy. As a financial analyst, I see several key implications:

• The deal positions Crescent as the second-largest operator in the Eagle Ford, a prime oil and gas producing region. This scale advantage could lead to operational efficiencies and improved bargaining power with suppliers.
• The transaction was primarily equity-based, with only $358 million in cash consideration. This approach preserves Crescent's balance sheet strength, which is important for future acquisitions and weathering commodity price volatility.
• Crescent has already captured $35 million of the projected $65-100 million in annual synergies, primarily through reduced interest expenses. This quick realization of synergies is a positive sign for the deal's success.
• The pro forma company structure, with former SilverBow shareholders owning 23% of the combined entity, aligns interests and provides upside potential for all stakeholders.

However, investors should monitor the integration process closely, as mergers in the energy sector can be complex. The true test will be Crescent's ability to maintain its disciplined capital allocation and free cash flow generation while managing a larger asset base.

Market Research Analyst

From a market perspective, this acquisition reshapes the mid-cap E&P landscape. Here's what stands out:

• The deal creates a leading mid-cap E&P company with a balanced portfolio, potentially attracting more institutional investor interest due to increased scale and liquidity.
• Crescent's strategy of growth through acquisition aligns with current market trends, where consolidation is seen as a path to efficiency in the mature U.S. shale sector.
• The company's focus on free cash flow generation and returns-driven M&A resonates with today's energy investors, who prioritize capital discipline over production growth at all costs.
• The expanded board of directors, now with 11 members and 9 independents, strengthens corporate governance – a key consideration for ESG-focused investors.

The market will likely watch for Crescent's pro forma guidance and Q2 results on August 5th as a first indicator of the combined entity's performance. If the company can demonstrate strong free cash flow and progress on synergies, it could lead to a positive re-rating of the stock.

Company to report second quarter financial and operating results August 5th

HOUSTON--(BUSINESS WIRE)-- Crescent Energy Company (NYSE: CRGY) ("Crescent" or the "Company"), today announced the closing of its acquisition of SilverBow Resources, Inc. (“SilverBow”). The transaction was closed ahead of schedule, and Crescent plans to provide pro forma second half 2024 guidance reflecting the acquisition, as well as issue its second quarter 2024 financial and operating results, after market close on August 5, 2024. A conference call is planned for August 6, 2024.

The SilverBow integration is well underway with approximately $35 million of the previously announced $65 – $100 million in annual synergies captured to date through an improved cost of capital resulting in reduced interest expense.

Crescent Energy is a leading growth through acquisition company primed for sustainable value creation with a focused portfolio of high-quality and long-life assets, an attractive, returns-driven financial framework and strong balance sheet, led by a management team executing on the same strategy for more than a decade. The combined portfolio of assets positions the company for substantial free cash flow generation with balanced and attractive exposure to commodity price upside.

Crescent Energy Offers a Compelling Value Proposition

– Combined company is the second largest operator in the Eagle Ford

– Creates leading mid-cap E&P with scaled, balanced portfolio of high-quality assets

– Substantial free cash flow generation with disciplined capital allocation framework

– Well-positioned for further growth through accretive, returns-driven M&A

“Today is an exciting day for Crescent. We are well positioned to create value, and I am grateful for the trust from our original Crescent and new SilverBow shareholders, each of whom voted with an overwhelming majority to approve our merger and to take equity consideration and participate in the go-forward company,” said Crescent CEO David Rockecharlie. “Through disciplined investing and operations, we have delivered profitable growth, tripling the size of our business over the last four years. We have created a premier growth through acquisition platform by executing on our cash flow and returns-oriented strategy. Today, we are focused on rapidly integrating our new assets and personnel and continuing to deliver on the significant synergies we’ve identified to strengthen returns. We are highly confident in our ability to execute and demonstrate Crescent’s value proposition as a leading mid-cap company.”

Transaction Details

Pursuant to the consideration election mechanics of the transaction, SilverBow shareholders elected to receive in aggregate approximately $358 million in total cash consideration as part of the transaction. Crescent issued approximately 52 million shares of Class A common stock to fund the non-cash portion of the consideration. As of closing, former SilverBow shareholders own approximately 23% of the combined company on a fully diluted basis.

(Shares in MM)	CRGY Status Quo	SBOW Acquisition	CRGY Pro Forma
Class A (Public Shares)	112	52	164
Class B (Private Shares)	66	--	66
Total Shares Outstanding (Public and Private Shares)	177	52	230

Governance Update

Pursuant to the merger agreement, Marc Rowland and Michael Duginski have been appointed to Crescent’s Board of Directors effective as of closing of the acquisition. The additions expand Crescent’s board to a total of eleven directors, of which nine are considered independent directors. The new directors will complement Crescent’s experienced and engaged board. Further detail on the additional directors can be found on the Crescent website (www.crescentenergyco.com).

Conference Call Information

Crescent plans to host a conference call to discuss its second quarter financial and operating results, as well as its pro forma outlook for the remainder of 2024, at 10 a.m. CT on Tuesday, August 6, 2024. Complete details are below. A webcast replay will be available on the website following the call.

Date: August 6, 2024
Time: 10 a.m. CT (11 a.m. ET)
Conference Dial-In: 877-407-0989 / 201-389-0921 (Domestic / International)
Webcast Link: www.crescentenergyco.com

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 combined company’s operations; the ability of Crescent to integrate the business successfully and to achieve anticipated synergies and value creation; the risk that cost savings, synergies and growth may take longer to realize than expected; potential litigation relating to the transaction; the risk that disruptions from the transaction will harm Crescent’s business, including current plans and operations and that management’s time and attention will be diverted on transaction-related issues; potential adverse reactions or changes to business relationships, including with employees, suppliers, customers, competitors or credit rating agencies, resulting from the completion of the transaction; 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 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240729676293/en/

Crescent Energy Investor Relations Contacts

IR@crescentenergyco.com

Crescent Energy Media Contacts

Media@crescentenergyco.com

Source: Crescent Energy

FAQ

What is the strategic importance of Crescent Energy's acquisition of SilverBow Resources?

The acquisition makes Crescent Energy (CRGY) the second largest operator in the Eagle Ford, creating a leading mid-cap E&P company with a scaled, balanced portfolio of high-quality assets. It positions the company for substantial free cash flow generation and further growth through accretive, returns-driven M&A.

How much did Crescent Energy pay for SilverBow Resources?

Crescent Energy (CRGY) issued approximately 52 million shares of Class A common stock and paid $358 million in cash as part of the acquisition of SilverBow Resources.

What synergies are expected from Crescent Energy's acquisition of SilverBow?

Crescent Energy (CRGY) projects $65-$100 million in annual synergies from the SilverBow acquisition. As of the closing, approximately $35 million of these synergies have already been captured through an improved cost of capital resulting in reduced interest expense.

When will Crescent Energy report its Q2 2024 results and provide guidance after the SilverBow acquisition?

Crescent Energy (CRGY) plans to report its Q2 2024 financial and operating results, along with pro forma second half 2024 guidance reflecting the SilverBow acquisition, after market close on August 5, 2024. A conference call is scheduled for August 6, 2024.