Crescent Energy Provides Initial 2022 Guidance
Crescent Energy Company (NYSE: CRGY) reported year-end 2021 proved reserves of 532 million barrels of oil equivalent (MMBoe), valued at approximately $5.2 billion SEC PV-10. For 2022, the company anticipates $800-$850 million in Adjusted EBITDAX and $325-$375 million in levered free cash flow based on a $75 per barrel oil price. Organic capital investment is expected to range from $375-$425 million, predominantly in the Eagle Ford region. The company plans to return an estimated $80-$85 million to shareholders through dividends, implying a quarterly payout of $0.12 per share.
- Projected Adjusted EBITDAX of $800-$850 million for 2022.
- Estimated levered free cash flow between $325-$375 million.
- Approximately 66% of 2022 production is hedged.
- Planned return of $80-$85 million to shareholders through dividends.
- Stable production estimate of 114-124 MBoe/d, ~3% higher than prior period.
- Strong balance sheet with net leverage at 1.4x.
- No substantial negatives identified.
Year-End 2021 Proved Reserves Total 532 MMBoe with
Highlights:
-
Significant Free Cash Flow: Anticipate delivering
–$800 of Adjusted EBITDAX and$850 million –$325 of levered free cash flow at$375 million per barrel (“Bbl”) WTI oil and$75 per million british thermal units (“MMBtu”) NYMEX Henry Hub gas(1)$3.75 - Approximately two-thirds of estimated 2022 production hedged
-
Disciplined Capital Investment Strategy: Organic capital investments expected to be
–$375 , with operated$425 million Eagle Ford representing the largest area of investment -
Meaningful Return of Cash to Shareholders: Projected
–$80 of annual dividends, based on its$85 million 10% of Adjusted EBITDAX dividend framework and initial Adj. EBITDAX guidance(2)-
Implies a quarterly dividend of
/share at current shares outstanding(2)$0.12 - Intends to pay a dividend in the first quarter of 2022(2)
-
Implies a quarterly dividend of
- Maintain Strong Balance Sheet: Current net leverage of 1.4x(3), consistent with Crescent’s low leverage strategy
-
Consistent Low-Decline Production: Estimated production of 114 – 124 thousand barrels of oil equivalent per day (“MBoe/d”), ~
3% higher than pro forma production for the nine-month period endedSeptember 30, 2021 (3)-
Leading proved developed producing decline rate estimated at
17% in year one
-
Leading proved developed producing decline rate estimated at
-
Substantial Proved Reserves: Proved reserves at year-end 2021 totaled 532 million barrels of oil equivalent (“MMBoe”), of which
54% were liquids and86% were proved developed.-
Proved reserves SEC PV-10 at year-end was approximately
(1)(4)$5.2 billion
-
Proved reserves SEC PV-10 at year-end was approximately
-
Commitment to ESG: Published inaugural 2020 Environmental, Social and Governance (“ESG”) report in
December 2021 and identified ESG priorities and actions for 2022 - Attractive Acquisition Market: Strong growth potential through existing M&A strategy and current acquisition pipeline
“For the last decade, management has executed a clearly defined strategy to deliver responsibly what the market requires today,” said Chief Executive Officer
Crescent’s 2022 capital program is allocated 70 to
Additional information on initial 2022 guidance is below:
|
Full Year 2022* |
EBITDAX and Levered Free Cash Flow(1) |
|
Adjusted EBITDAX (non-GAAP) |
|
Unhedged Adjusted EBITDAX (non-GAAP) |
|
Levered Free Cash Flow (non-GAAP) |
|
Price Deck Assumed |
|
|
|
Production and Midstream Revenue |
|
Production |
114-124 MBoe/d |
% Oil / % Liquids |
~ |
% Hedged (based on |
~ |
Midstream and Other Revenue(5) |
|
|
|
Capital (Excludes Potential Acquisitions) |
|
|
|
Operated drilling and completion |
70 |
Non-operated drilling and completion |
15 |
Other(6) |
~ |
Operated Eagle Ford Wells Online |
32-38 Gross (> |
|
|
Per Unit Expenses |
|
Operating Expense |
|
Cash G&A (includes management fee)(1) |
|
|
|
Financial Policy |
|
Dividend Framework(2) |
|
Implied 2022 Quarterly Dividend(2) |
|
Long-term Leverage Target |
1.0x net leverage |
|
|
* All amounts are approximations based on currently available information and are subject to change based on events and circumstances after the date hereof. Please see “Cautionary Statement Regarding Forward-Looking Information.”
Financial Policy
Crescent has a sound framework for sustainably returning cash to shareholders through dividends. Using
Post dividends, the Company plans to use the remaining free cash to reduce net debt (i.e., total debt less cash and cash equivalents), to opportunistically fund acquisitions and for general corporate purposes. Crescent targets 1.0x net leverage, defined as net debt divided by Adjusted EBITDAX. Crescent’s current net leverage as of
Commitment to ESG
Crescent aims to build a company where ESG is integrated into governance, strategy and decision making. In
- Climate Change – Work to reduce greenhouse gas emissions
- Environmental, Health and Safety – Aspire to be a zero incident workplace
- Water Management – Manage and reduce fresh water use
- Community Engagement – Listen and respond to community and stakeholder concerns
- Diversity, Equity and Inclusion – Develop a diverse and inclusive workforce
In 2022, the Company plans to publish a report covering ESG performance for calendar year 2021 and provide additional details on its short and long-term ESG targets.
2021 Year End Reserves
Crescent’s year-end 2021 proved reserves totaled 532 MMBoe, of which
Crescent’s proved reserves and associated PV-0 and PV-10 estimates as of
|
Proved Reserves |
|
Present Value(1) |
||||
|
Net Oil
|
|
Net NGL
|
Net Total
|
|
PV-0
|
PV-10
|
Proved Developed |
158 |
1,405 |
66 |
459 |
|
|
|
Proved Undeveloped |
52 |
65 |
10 |
73 |
|
|
|
Total Proved Reserves |
210 |
1,470 |
76 |
532 |
|
|
|
Risk Management - Commodity Hedging
The following table details the Company’s open commodity derivative contracts as of
WTI |
Brent |
Natural Gas |
NGLs |
|||||
|
Volume
|
Avg Price
|
Volume
|
Avg Price
|
Volume
|
Avg Price
|
Volume
|
Avg Price
|
Q1’22 |
2,862 |
|
123 |
|
22,534 |
|
914 |
|
Q2’22 |
2,664 |
|
125 |
|
21,690 |
|
873 |
|
Q3’22 |
2,519 |
|
126 |
|
20,634 |
|
610 |
|
Q4’22 |
2,419 |
|
126 |
|
20,180 |
|
587 |
|
FY’23 |
7,627 |
|
527 |
|
57,278 |
|
-- |
-- |
FY’24 |
2,975 |
|
189 |
|
9,604 |
|
-- |
-- |
Note: As of 12/31/21. Included in the figures above are minor
- Adjusted EBITDAX, Unhedged Adjusted EBITDAX, Levered Free Cash Flow, PV-10, PV-0 and Cash G&A are non-GAAP financial measures. Please see “Non-GAAP Measures” for further discussion of such measures.
- Dividends are subject to board approval and applicable law.
-
Net leverage as of
September 30, 2021 and production for the nine month period endedSeptember 30, 2021 are presented on pro forma basis for the business combination between Independence and Contango. Net leverage calculated as pro forma net debt as ofSeptember 30, 2021 divided by annualized pro forma Adjusted EBITDAX for the nine months endedSeptember 30, 2021 . -
Proved reserve estimates based on
SEC pricing of per Bbl for WTI oil and$66.56 per MMBtu for$3.60 Henry Hub natural gas. - Midstream operating expense reflected in Operating Expense.
- Other capex includes midstream and field development, leasehold, P&A and sustainability/ESG initiatives.
- Value Reporting Foundation’s SASB Standard for Oil & Gas – Exploration & Production.
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. 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, 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 initial 2022 guidance 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 Cash G&A as General and Administrative Expense, excluding noncash equity-based compensation.
In addition, pre-tax undiscounted present value (“PV-0”) and pre-tax present value discounted at ten percent (“PV-10”) are considered non-GAAP measures. The most directly comparable GAAP financial measure is standardized measure of discounted future net cash flows. None of PV-0, PV-10 and standardized measure represent an estimate of the fair market value of our oil and natural gas properties. Our PV-0 measurement does not provide a discount rate to estimated future cash flows. PV-0 therefore does not reflect risk associated with future cash flow projections like PV-10 does. PV-0 should therefore only be evaluated in connection with an evaluation of our PV-10 and standardized measure of discounted future net cash flows. We believe that the presentation of PV-0 and PV-10 is relevant and useful to our investors as supplemental disclosure to the standardized measure of future net cash flows, or after tax amount, because it presents the undiscounted or discounted, as applicable, future net cash flows attributable to our reserves prior to taking into account future income taxes and our current tax structure. We and others in the industry use PV-0 and PV-10 as measures to compare the relative size and value of proved reserves held by companies without regard to the specific tax characteristics of such entities. Investors should be cautioned that none of PV-0, PV-10 and standardized measure represent an estimate of the fair market value of our proved reserves.
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
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