Crescent Energy Reports Record Third Quarter 2023 Results
- Crescent Energy Company achieved record production of 157 Mboe/d in the third quarter, a 13% increase over the previous quarter.
- The company generated $290 million of Adjusted EBITDAX, $189 million of Operating Cash Flow, and $160 million of Levered Free Cash Flow in the third quarter.
- Crescent completed the integration of Western Eagle Ford ahead of schedule and already realized a 20% improvement in well costs.
- They raised approximately $600 million in the capital markets to partially fund the Western Eagle Ford acquisitions.
- Crescent published its 2022 Sustainability Report, showing a 27% improvement in Scope 1 GHG emissions relative to the 2021 baseline.
- The company declared a quarterly cash dividend of $0.12 per share.
- None.
Added Scale at Attractive Value with Closing and Integration of
Capital Efficiencies Improving Well Costs, Accelerating Activity and Increasing Cash Flow
Improved Absolute Scope 1 GHG Emissions by
Highlights
– Reported
– Generated
– Achieved record Company production of 157 Mboe/d, a
– Completed Western Eagle Ford integration ahead of schedule and already realizing
– Raised approximately
– Published 2022 Sustainability Report, delivering on its commitment to improve emissions and continue transparent reporting on key initiatives
– Exited the third quarter at 1.4x net LTM leverage(1) with more than
– Declared quarterly cash dividend of
– Re-affirmed full year capital guidance of
Crescent CEO David Rockecharlie said, “Our third quarter performance was exceptional – record production, record cash flow. We are demonstrating operational efficiencies that will make us stronger and more profitable in 2024 and beyond. Additionally, we have proven our ability to grow accretively. We have captured high-value transactions and financed them in a fashion that maintains a strong balance sheet. We are increasing value and scale, doubling our business in less than three years, and we are well-equipped to continue to do so.
We also released our 2022 Sustainability Report and I am proud of the meaningful progress we made improving our Scope 1 carbon footprint. As we continue to scale the business, we remain committed to improving the sustainability-related performance of our assets while delivering attractive returns for our investors.”
Third Quarter 2023 Results
Crescent reported
Third quarter production averaged 157 Mboe/d (
Third quarter operating expense and adjusted operating expense excluding production and other taxes(1), stated on a per Boe basis, were
Crescent incurred capital expenditures (excluding acquisitions) of
2023 Outlook
Crescent re-affirmed its full-year 2023 outlook for production and capital expenditures, which was previously updated in September 2023, despite incremental activity being pulled forward into 2023. Guidance reflects improved capital efficiencies through higher expected production and lower planned capital investments relative to initial guidance.
|
Initial
|
Re-Affirmed
|
Change at the
|
Total Production
|
143 - 151 |
146 - 151 |
+1.5 or |
% Oil / % Liquids |
~ |
~ |
— / |
Capital Expenditures (Excl. Acquisitions)
|
|
|
( |
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.” Initial FY 2023 outlook includes initial FY 2023 outlook disclosed in March 2023 plus the midpoint of the contribution from the Western Eagle Ford acquisitions that closed in July and October 2023. Additional details can be found in Crescent's investor presentation.
Sustainability
The Company released its 2022 Sustainability Report, delivering on Crescent’s commitment to transparent year-over-year reporting. Crescent improved its Scope 1 GHG emissions profile by
This year's report and its highlighted initiatives are supported by Crescent's Sustainability Advisory Council, a team of cross-functional experts who advise Company leadership on sustainability-related matters. The council serves as an active forum for candid, internal guidance on goal setting, performance measurement and disclosure.
Acquisitions & Divestitures
In two separate acquisitions, Crescent increased its legacy ~
On July 3, 2023, Crescent closed the acquisition of operatorship and an estimated
Crescent divested
Acquisition Financing
During the third quarter, Crescent completed three capital markets transactions totaling over
Financial Position
Crescent maintains a strong balance sheet and a low leverage profile. As of September 30, 2023, the Company had total long term debt of
In July 2023, S&P upgraded Crescent's issuer credit rating to B+ and its senior unsecured notes rating to BB- with a stable outlook. Following the upgrade, Crescent was added to the BB high yield index with two BB- unsecured notes ratings. Crescent's ratings were upgraded by Moody's earlier in the year(3).
Return of Capital
For the third quarter of 2023, the Company's board of directors approved a cash dividend of
Third Quarter 2023 Conference Call Information
Crescent plans to host a conference call to discuss its third quarter 2023 financial and operating results at 10 a.m. CT on Tuesday, November 7, 2023. A webcast replay will be available on the website following the call.
Date: Tuesday, November 7, 2023
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/
About Crescent Energy Company
Crescent is a growth-oriented
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; our hedging strategy and results, federal and state regulations and laws, the impact of pandemics such as COVID-19, actions by the Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC oil-producing countries, including recent production cuts by OPEC, the impact of armed conflicts, including in and around
Financial Presentation
While units ("OpCo Units") representing limited liability interests in Crescent Energy OpCo LLC ("OpCo") and corresponding shares of Class B Common Stock are outstanding in our "Up-C" structure, and in accordance with the terms of our Management Agreement under which Class A shareholders bear only their proportionate share of Manager Compensation, portions of Manager Compensation, income tax provision (benefit) amounts and dividends paid corresponding to such ownership are required to be classified as distributions to redeemable noncontrolling interests rather than G&A expense, income tax provision (benefit), and dividends paid to Class A Common Stock, respectively. We define those redeemable noncontrolling interest ("RNCI") distributions made by OpCo related to (i) Manager Compensation as “Manager Compensation RNCI Distributions,” (ii) income tax provision (benefit) as “Income Tax RNCI Distributions,” and (iii) dividends paid as “Dividend RNCI Distributions.”
To facilitate comparison of our G&A expense, dividends paid to Class A Common Stock, and income tax provision (benefit) to peer companies with varying corporate and management structures, Adjusted EBITDAX and Levered Free Cash Flow, for both (i) historical periods and (ii) periods for which we provide guidance, are presented assuming the full redemption of all outstanding OpCo Units for shares of our Class A Common Stock and a corresponding cancellation of all shares of our Class B Common Stock. Management believes this presentation is most useful to investors, as the full amounts of Manager Compensation as G&A expense, dividends paid to Class A Common Stock, and income tax provision (benefit) are thereby reflected as such.
Crescent Operational Summary |
||||||||
|
For the three months ended |
|||||||
|
September 30, 2023 |
|
September 30, 2022 |
|
June 30, 2023 |
|||
Average daily net sales volumes: |
|
|
|
|
|
|||
Oil (MBbls/d) |
|
72 |
|
|
69 |
|
|
64 |
Natural gas (MMcf/d) |
|
359 |
|
|
367 |
|
|
335 |
NGLs (MBbls/d) |
|
25 |
|
|
20 |
|
|
19 |
Total (Mboe/d) |
|
157 |
|
|
150 |
|
|
139 |
Average realized prices, before effects of derivative settlements: |
|
|
|
|
|
|||
Oil ($/Bbl) |
$ |
75.70 |
|
$ |
86.77 |
|
$ |
67.68 |
Natural gas ($/Mcf) |
|
2.18 |
|
|
6.99 |
|
|
1.71 |
NGLs ($/Bbl) |
|
24.10 |
|
|
35.22 |
|
|
19.38 |
Total ($/Boe) |
|
43.73 |
|
|
61.65 |
|
|
37.89 |
Average realized prices, after effects of derivative settlements: |
|
|
|
|
|
|||
Oil ($/Bbl) |
$ |
66.50 |
|
$ |
72.55 |
|
$ |
63.14 |
Natural gas ($/Mcf) |
|
2.38 |
|
|
3.56 |
|
|
1.92 |
NGLs ($/Bbl) |
|
24.10 |
|
|
32.04 |
|
|
25.72 |
Total ($/Boe)(4) |
|
39.92 |
|
|
46.32 |
|
|
37.21 |
Expense (per Boe) |
|
|
|
|
|
|||
Operating expense |
$ |
18.74 |
|
$ |
20.51 |
|
$ |
17.85 |
Depreciation, depletion and amortization |
|
12.91 |
|
|
10.50 |
|
|
12.65 |
General and administrative expense |
|
3.04 |
|
|
1.25 |
|
|
3.26 |
Non-GAAP and other expense (per Boe) |
|
|
|
|
|
|||
Adjusted operating expense, excluding production and other taxes(1)(5) |
$ |
15.45 |
|
$ |
14.36 |
|
$ |
14.84 |
Production and other taxes |
|
2.53 |
|
|
5.18 |
|
|
1.96 |
Adjusted Recurring Cash G&A(1) |
|
1.42 |
|
|
1.40 |
|
|
1.50 |
Crescent Income Statement |
|||||||||||||||
(Unaudited) |
|||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Revenues: |
(in thousands, except per share data) |
||||||||||||||
Oil |
$ |
504,660 |
|
|
$ |
550,823 |
|
|
$ |
1,270,244 |
|
|
$ |
1,525,899 |
|
Natural gas |
|
72,097 |
|
|
|
235,830 |
|
|
|
286,172 |
|
|
|
586,318 |
|
Natural gas liquids |
|
54,724 |
|
|
|
64,810 |
|
|
|
131,098 |
|
|
|
219,853 |
|
Midstream and other |
|
10,917 |
|
|
|
13,494 |
|
|
|
37,360 |
|
|
|
40,231 |
|
Total revenues |
|
642,398 |
|
|
|
864,957 |
|
|
|
1,724,874 |
|
|
|
2,372,301 |
|
Expenses: |
|
|
|
|
|
|
|
||||||||
Lease operating expense |
|
120,791 |
|
|
|
121,554 |
|
|
|
364,796 |
|
|
|
322,752 |
|
Workover expense |
|
16,148 |
|
|
|
21,126 |
|
|
|
47,402 |
|
|
|
56,102 |
|
Asset operating expense |
|
27,116 |
|
|
|
20,791 |
|
|
|
65,206 |
|
|
|
54,653 |
|
Gathering, transportation and marketing |
|
61,722 |
|
|
|
44,757 |
|
|
|
160,650 |
|
|
|
131,271 |
|
Production and other taxes |
|
36,475 |
|
|
|
71,511 |
|
|
|
116,223 |
|
|
|
183,491 |
|
Depreciation, depletion and amortization |
|
186,492 |
|
|
|
145,008 |
|
|
|
492,879 |
|
|
|
375,600 |
|
Exploration expense |
|
— |
|
|
|
1,909 |
|
|
|
1,541 |
|
|
|
3,848 |
|
Midstream and other operating expense |
|
8,289 |
|
|
|
3,550 |
|
|
|
13,803 |
|
|
|
9,972 |
|
General and administrative expense |
|
43,831 |
|
|
|
17,311 |
|
|
|
106,235 |
|
|
|
59,489 |
|
(Gain) loss on sale of assets |
|
— |
|
|
|
(127 |
) |
|
|
— |
|
|
|
(5,114 |
) |
Total expenses |
|
500,864 |
|
|
|
447,390 |
|
|
|
1,368,735 |
|
|
|
1,192,064 |
|
Income (loss) from operations |
|
141,534 |
|
|
|
417,567 |
|
|
|
356,139 |
|
|
|
1,180,237 |
|
Other income (expense): |
|
|
|
|
|
|
|
||||||||
Gain (loss) on derivatives |
|
(252,108 |
) |
|
|
205,130 |
|
|
|
(68,211 |
) |
|
|
(645,565 |
) |
Interest expense |
|
(42,200 |
) |
|
|
(27,057 |
) |
|
|
(102,648 |
) |
|
|
(68,518 |
) |
Other income (expense) |
|
917 |
|
|
|
(2,670 |
) |
|
|
1,206 |
|
|
|
(4,472 |
) |
Income (loss) from equity affiliates |
|
116 |
|
|
|
834 |
|
|
|
396 |
|
|
|
4,086 |
|
Total other income (expense) |
|
(293,275 |
) |
|
|
176,237 |
|
|
|
(169,257 |
) |
|
|
(714,469 |
) |
Income (loss) before taxes |
|
(151,741 |
) |
|
|
593,804 |
|
|
|
186,882 |
|
|
|
465,768 |
|
Income tax benefit (expense) |
|
20,639 |
|
|
|
(38,455 |
) |
|
|
(4,899 |
) |
|
|
(34,528 |
) |
Net income (loss) |
|
(131,102 |
) |
|
|
555,349 |
|
|
|
181,983 |
|
|
|
431,240 |
|
Less: net (income) loss attributable to noncontrolling interests |
|
(48 |
) |
|
|
(904 |
) |
|
|
(453 |
) |
|
|
(2,087 |
) |
Less: net (income) loss attributable to redeemable noncontrolling interests |
|
78,280 |
|
|
|
(436,084 |
) |
|
|
(169,455 |
) |
|
|
(341,269 |
) |
Net income (loss) attributable to Crescent |
$ |
(52,870 |
) |
|
$ |
118,361 |
|
|
$ |
12,075 |
|
|
$ |
87,884 |
|
Net income (loss) per share: |
|
|
|
|
|
|
|
||||||||
Class A common stock – basic |
$ |
(0.67 |
) |
|
$ |
2.74 |
|
|
$ |
0.21 |
|
|
$ |
2.07 |
|
Class A common stock – diluted |
$ |
(0.67 |
) |
|
$ |
2.74 |
|
|
$ |
0.21 |
|
|
$ |
2.07 |
|
Class B common stock – basic and diluted |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
||||||||
Class A common stock – basic |
|
78,709 |
|
|
|
43,197 |
|
|
|
58,663 |
|
|
|
42,377 |
|
Class A common stock – diluted |
|
78,709 |
|
|
|
43,210 |
|
|
|
59,142 |
|
|
|
42,382 |
|
Class B common stock – basic and diluted |
|
91,048 |
|
|
|
125,797 |
|
|
|
109,244 |
|
|
|
126,950 |
|
Crescent Consolidated Balance Sheet |
|
|
|
||||
(Unaudited) |
|||||||
|
September 30, 2023 |
|
December 31, 2022 |
||||
|
(in thousands, except share data) |
||||||
ASSETS |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
228,614 |
|
|
$ |
— |
|
Restricted cash |
|
33,422 |
|
|
|
8,000 |
|
Accounts receivable, net |
|
577,982 |
|
|
|
457,071 |
|
Accounts receivable – affiliates |
|
1,146 |
|
|
|
2,681 |
|
Derivative assets – current |
|
4,278 |
|
|
|
14,878 |
|
Drilling advances |
|
911 |
|
|
|
14,655 |
|
Prepaid expenses |
|
50,547 |
|
|
|
13,241 |
|
Other current assets |
|
6,214 |
|
|
|
6,213 |
|
Total current assets |
|
903,114 |
|
|
|
516,739 |
|
Property, plant and equipment: |
|
|
|
||||
Oil and natural gas properties at cost, successful efforts method |
|
|
|
||||
Proved |
|
8,153,621 |
|
|
|
7,113,819 |
|
Unproved |
|
290,753 |
|
|
|
314,255 |
|
Oil and natural gas properties at cost, successful efforts method |
|
8,444,374 |
|
|
|
7,428,074 |
|
Field and other property and equipment, at cost |
|
189,605 |
|
|
|
176,831 |
|
Total property, plant and equipment |
|
8,633,979 |
|
|
|
7,604,905 |
|
Less: accumulated depreciation, depletion, amortization and impairment |
|
(2,620,453 |
) |
|
|
(2,167,135 |
) |
Property, plant and equipment, net |
|
6,013,526 |
|
|
|
5,437,770 |
|
Investment in equity affiliates |
|
10,780 |
|
|
|
15,038 |
|
Other assets |
|
59,006 |
|
|
|
50,302 |
|
TOTAL ASSETS |
$ |
6,986,426 |
|
|
$ |
6,019,849 |
|
|
|
|
|
||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable and accrued liabilities |
$ |
565,262 |
|
|
$ |
524,690 |
|
Accounts payable – affiliates |
|
37,727 |
|
|
|
27,652 |
|
Derivative liabilities – current |
|
243,199 |
|
|
|
312,975 |
|
Financing lease obligations – current |
|
4,250 |
|
|
|
3,341 |
|
Other current liabilities |
|
30,360 |
|
|
|
25,091 |
|
Total current liabilities |
|
880,798 |
|
|
|
893,749 |
|
Long-term debt |
|
1,912,187 |
|
|
|
1,247,558 |
|
Derivative liabilities – noncurrent |
|
31,371 |
|
|
|
63,737 |
|
Asset retirement obligations |
|
372,572 |
|
|
|
346,868 |
|
Deferred tax liability |
|
234,166 |
|
|
|
147,348 |
|
Financing lease obligations – noncurrent |
|
7,760 |
|
|
|
7,412 |
|
Other liabilities |
|
31,632 |
|
|
|
14,183 |
|
Total liabilities |
|
3,470,486 |
|
|
|
2,720,855 |
|
Commitments and contingencies |
|
|
|
||||
Redeemable noncontrolling interests |
|
1,888,862 |
|
|
|
2,436,703 |
|
Equity: |
|
|
|
||||
Class A common stock, |
|
9 |
|
|
|
5 |
|
Class B common stock, |
|
9 |
|
|
|
12 |
|
Preferred stock, |
|
— |
|
|
|
— |
|
Treasury stock, at cost; 1,071,553 and 1,150,991 shares of Class A common stock as of September 30, 2023 and December 31, 2022, respectively |
|
(17,143 |
) |
|
|
(18,448 |
) |
Additional paid-in capital |
|
1,567,967 |
|
|
|
804,587 |
|
Retained earnings |
|
50,906 |
|
|
|
61,957 |
|
Noncontrolling interests |
|
25,330 |
|
|
|
14,178 |
|
Total equity |
|
1,627,078 |
|
|
|
862,291 |
|
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
$ |
6,986,426 |
|
|
$ |
6,019,849 |
|
Crescent Cash Flow Statement |
|||||||
(Unaudited) |
|||||||
|
Nine Months Ended September 30, |
||||||
|
2023 |
|
2022 |
||||
Cash flows from operating activities: |
(in thousands) |
||||||
Net income (loss) |
$ |
181,983 |
|
|
$ |
431,240 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities |
|
|
|
||||
Depreciation, depletion and amortization |
|
492,879 |
|
|
|
375,600 |
|
Deferred income tax expense (benefit) |
|
3,988 |
|
|
|
27,428 |
|
(Gain) loss on derivatives |
|
68,211 |
|
|
|
645,565 |
|
Net cash (paid) received on settlement of derivatives |
|
(110,775 |
) |
|
|
(654,377 |
) |
Non-cash equity-based compensation expense |
|
64,648 |
|
|
|
26,306 |
|
Amortization of debt issuance costs and discount |
|
9,175 |
|
|
|
6,431 |
|
(Gain) loss on sale of oil and natural gas properties |
|
— |
|
|
|
(5,114 |
) |
Restructuring of acquired derivative contracts |
|
— |
|
|
|
(51,994 |
) |
Settlement of acquired derivative contracts |
|
(48,977 |
) |
|
|
(39,046 |
) |
Other |
|
(17,332 |
) |
|
|
(6,941 |
) |
Changes in operating assets and liabilities: |
|
|
|
||||
Accounts receivable |
|
(105,430 |
) |
|
|
(189,512 |
) |
Accounts receivable – affiliates |
|
1,310 |
|
|
|
18,809 |
|
Prepaid and other current assets |
|
(10,587 |
) |
|
|
(22,011 |
) |
Accounts payable and accrued liabilities |
|
67,396 |
|
|
|
213,428 |
|
Accounts payable – affiliates |
|
12,741 |
|
|
|
24,560 |
|
Other |
|
3,670 |
|
|
|
(3,018 |
) |
Net cash provided by operating activities |
|
612,900 |
|
|
|
797,354 |
|
Cash flows from investing activities: |
|
|
|
||||
Development of oil and natural gas properties |
|
(471,275 |
) |
|
|
(440,375 |
) |
Acquisitions of oil and natural gas properties |
|
(622,698 |
) |
|
|
(627,539 |
) |
Proceeds from the sale of oil and natural gas properties |
|
24,356 |
|
|
|
4,800 |
|
Purchases of restricted investment securities – HTM |
|
(10,651 |
) |
|
|
(7,175 |
) |
Maturities of restricted investment securities – HTM |
|
10,722 |
|
|
|
5,400 |
|
Other |
|
3,308 |
|
|
|
3,955 |
|
Net cash used in investing activities |
|
(1,066,238 |
) |
|
|
(1,060,934 |
) |
Cash flows from financing activities: |
|
|
|
||||
Proceeds from the issuance of Senior Notes, after premium, discount and underwriting fees |
|
833,500 |
|
|
|
199,250 |
|
Revolving Credit Facility borrowings |
|
1,678,000 |
|
|
|
1,118,000 |
|
Revolving Credit Facility repayments |
|
(1,845,449 |
) |
|
|
(976,000 |
) |
Payment of debt issuance costs |
|
(5,461 |
) |
|
|
(20,028 |
) |
Proceeds from the Equity Issuance after underwriting fees |
|
145,665 |
|
|
|
— |
|
Payment of Equity Issuance costs |
|
(2,340 |
) |
|
|
— |
|
Redeemable noncontrolling interest contributions |
|
1,238 |
|
|
|
5,985 |
|
Redeemable noncontrolling interest distributions |
|
(417 |
) |
|
|
— |
|
Dividend to Class A common stock |
|
(23,127 |
) |
|
|
(19,301 |
) |
Distributions to redeemable noncontrolling interests related to Class A common stock dividend |
|
(45,333 |
) |
|
|
(58,705 |
) |
Distributions to redeemable noncontrolling interests related to Manager Compensation |
|
(26,207 |
) |
|
|
(22,779 |
) |
Contributions from (distributions to) redeemable noncontrolling interests related to income taxes |
|
4 |
|
|
|
(17,970 |
) |
Repurchase of redeemable noncontrolling interests related to Equity Transactions |
|
— |
|
|
|
(36,220 |
) |
Repurchase of noncontrolling interest |
|
— |
|
|
|
(4,060 |
) |
Noncontrolling interest distributions |
|
(3,549 |
) |
|
|
(6,326 |
) |
Noncontrolling interest contributions |
|
1,771 |
|
|
|
55 |
|
Cash paid for treasury stock acquired for equity-based compensation tax withholding |
|
(72 |
) |
|
|
— |
|
Other |
|
(2,855 |
) |
|
|
(3,784 |
) |
Net cash provided by financing activities |
|
705,368 |
|
|
|
158,117 |
|
Net change in cash, cash equivalents and restricted cash |
|
252,030 |
|
|
|
(105,463 |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
15,304 |
|
|
|
135,117 |
|
Cash, cash equivalents and restricted cash, end of period |
$ |
267,334 |
|
|
$ |
29,654 |
|
Reconciliation of Non-GAAP Measures
This release includes financial measures that have not been calculated in accordance with GAAP. These supplemental non-GAAP performance measures are used by Crescent's management and external users of its financial statements, such as industry analysts, investors, lenders and rating agencies. These non-GAAP measures include Adjusted EBITDAX, Levered Free Cash Flow, Adjusted Net Income, Adjusted Recurring Cash G&A, Adjusted Current Income Tax, Adjusted Dividends Paid 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.
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 (benefit), depreciation, depletion and amortization, exploration expense, non-cash gain (loss) on derivatives, impairment expense, non-cash equity-based compensation, (gain) loss on sale of assets, other (income) expense, transaction and nonrecurring expenses and early settlement of derivative contracts. Additionally, we further subtract Manager Compensation RNCI Distributions and settlement of acquired derivative contracts. 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 adjusts net income (loss) for the items listed above 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 (as defined below) and the
Crescent defines Levered Free Cash Flow as Adjusted EBITDAX less interest expense, excluding non-cash deferred financing cost amortization, realized gain (loss) on interest rate derivatives, current income tax benefit (provision), Tax RNCI Distributions 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 reconciles 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:
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
(in thousands) |
||||||||||||||
Net income (loss) |
$ |
(131,102 |
) |
|
$ |
555,349 |
|
|
$ |
181,983 |
|
|
$ |
431,240 |
|
Adjustments to reconcile to Adjusted EBITDAX: |
|
|
|
|
|
|
|
||||||||
Interest expense |
|
42,200 |
|
|
|
27,057 |
|
|
|
102,648 |
|
|
|
68,518 |
|
Income tax expense (benefit) |
|
(20,639 |
) |
|
|
38,455 |
|
|
|
4,899 |
|
|
|
34,528 |
|
Depreciation, depletion and amortization |
|
186,492 |
|
|
|
145,008 |
|
|
|
492,879 |
|
|
|
375,600 |
|
Exploration expense |
|
— |
|
|
|
1,909 |
|
|
|
1,541 |
|
|
|
3,848 |
|
Non-cash (gain) loss on derivatives |
|
197,138 |
|
|
|
(416,842 |
) |
|
|
(42,564 |
) |
|
|
(8,812 |
) |
Non-cash equity-based compensation expense |
|
29,492 |
|
|
|
5,836 |
|
|
|
64,648 |
|
|
|
26,306 |
|
(Gain) loss on sale of assets |
|
— |
|
|
|
(127 |
) |
|
|
— |
|
|
|
(5,114 |
) |
Other (income) expense |
|
(917 |
) |
|
|
2,670 |
|
|
|
(1,206 |
) |
|
|
4,472 |
|
Manager Compensation RNCI Distributions |
|
(7,030 |
) |
|
|
(9,471 |
) |
|
|
(23,765 |
) |
|
|
(29,599 |
) |
Transaction and nonrecurring expenses(6) |
|
7,989 |
|
|
|
8,861 |
|
|
|
14,188 |
|
|
|
25,968 |
|
Settlement of acquired derivative contracts(7) |
|
(13,999 |
) |
|
|
(15,945 |
) |
|
|
(48,977 |
) |
|
|
(39,046 |
) |
Adjusted EBITDAX (non-GAAP) |
$ |
289,624 |
|
|
$ |
342,760 |
|
|
$ |
746,274 |
|
|
$ |
887,909 |
|
Adjustments to reconcile to Levered Free Cash Flow: |
|
|
|
|
|
|
|
||||||||
Interest expense, excluding non-cash deferred financing cost amortization |
|
(35,373 |
) |
|
|
(24,552 |
) |
|
|
(93,473 |
) |
|
|
(62,087 |
) |
Current income tax benefit (expense) |
|
470 |
|
|
|
877 |
|
|
|
(911 |
) |
|
|
(7,099 |
) |
Tax RNCI (Contributions) Distributions |
|
(20 |
) |
|
|
(803 |
) |
|
|
108 |
|
|
|
(17,970 |
) |
Development of oil and natural gas properties |
|
(94,431 |
) |
|
|
(189,928 |
) |
|
|
(444,245 |
) |
|
|
(468,796 |
) |
Levered Free Cash Flow (non-GAAP) |
$ |
160,270 |
|
|
$ |
128,354 |
|
|
$ |
207,753 |
|
|
$ |
331,957 |
|
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:
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
(in thousands) |
||||||||||||||
Net cash provided by operating activities |
$ |
189,344 |
|
|
$ |
398,900 |
|
|
$ |
612,900 |
|
|
$ |
797,354 |
|
Changes in operating assets and liabilities |
|
51,870 |
|
|
|
(83,092 |
) |
|
|
30,900 |
|
|
|
(42,256 |
) |
Restructuring of acquired derivative contracts(8) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
51,994 |
|
Manager Compensation RNCI Distributions |
|
(7,030 |
) |
|
|
(9,471 |
) |
|
|
(23,765 |
) |
|
|
(29,599 |
) |
Tax RNCI (Contributions) Distributions |
|
(20 |
) |
|
|
(803 |
) |
|
|
108 |
|
|
|
(17,970 |
) |
Transaction and nonrecurring expenses(6) |
|
7,989 |
|
|
|
8,861 |
|
|
|
14,188 |
|
|
|
25,968 |
|
Other |
|
12,548 |
|
|
|
3,887 |
|
|
|
17,667 |
|
|
|
15,262 |
|
Adjusted cash provided by operating activities |
$ |
254,701 |
|
|
$ |
318,282 |
|
|
$ |
651,998 |
|
|
$ |
800,753 |
|
Development of oil and natural gas properties |
|
(94,431 |
) |
|
|
(189,928 |
) |
|
|
(444,245 |
) |
|
|
(468,796 |
) |
Levered Free Cash Flow (non-GAAP) |
$ |
160,270 |
|
|
$ |
128,354 |
|
|
$ |
207,753 |
|
|
$ |
331,957 |
|
Adjusted Net Income
Crescent defines Adjusted Net Income as net income (loss), adjusted for certain items. Management believes that Adjusted Net Income is useful to investors in evaluating operational trends of the Company and its performance relative to other oil and gas companies. Adjusted Net Income is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for net income as an indicator of financial performance.
The following table presents a reconciliation of Adjusted Net Income (non-GAAP) to net income (loss), the most directly comparable financial measure calculated in accordance with GAAP:
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
(in thousands) |
||||||||||||||
Net income (loss) |
$ |
(131,102 |
) |
|
$ |
555,349 |
|
|
$ |
181,983 |
|
|
$ |
431,240 |
|
Unrealized (gain) loss on derivatives |
|
197,138 |
|
|
|
(416,842 |
) |
|
|
(42,564 |
) |
|
|
(8,812 |
) |
Non-cash equity-based compensation expense |
|
29,492 |
|
|
|
5,836 |
|
|
|
64,648 |
|
|
|
26,306 |
|
(Gain) loss on sale of assets |
|
— |
|
|
|
(127 |
) |
|
|
— |
|
|
|
(5,114 |
) |
Manager Compensation RNCI Distributions |
|
(7,030 |
) |
|
|
(9,471 |
) |
|
|
(23,765 |
) |
|
|
(29,599 |
) |
Transaction and nonrecurring expenses(6) |
|
7,989 |
|
|
|
8,861 |
|
|
|
14,188 |
|
|
|
25,968 |
|
Settlement of acquired derivative contracts(7) |
|
(13,999 |
) |
|
|
(15,945 |
) |
|
|
(48,977 |
) |
|
|
(39,046 |
) |
Tax effects of adjustments(9) |
|
(23,260 |
) |
|
|
27,335 |
|
|
|
3,042 |
|
|
|
1,868 |
|
Adjusted Net Income (non-GAAP) |
$ |
59,228 |
|
|
$ |
154,996 |
|
|
$ |
148,555 |
|
|
$ |
402,811 |
|
Adjusted Recurring Cash G&A
Crescent defines Adjusted Recurring Cash G&A as general and administrative expense, excluding non-cash equity-based compensation and transaction and nonrecurring expenses, and including Manager Compensation RNCI Distributions. Management believes Adjusted Recurring Cash G&A is a useful performance measure because it allows investors to compare Crescent's cash G&A expense against peer companies. As discussed elsewhere, these adjustments are made to Adjusted EBITDAX and Levered Free Cash Flow for historical periods and periods for which we present guidance.
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
(in thousands) |
||||||||||||||
General and administrative expense |
$ |
43,831 |
|
|
$ |
17,311 |
|
|
$ |
106,235 |
|
|
$ |
59,489 |
|
Less: non-cash equity-based compensation expense |
|
(29,492 |
) |
|
|
(5,836 |
) |
|
|
(64,648 |
) |
|
|
(26,306 |
) |
Less: transaction and nonrecurring expenses (G&A) (10) |
|
(834 |
) |
|
|
(1,558 |
) |
|
|
(5,061 |
) |
|
|
(6,951 |
) |
Plus: Manager Compensation RNCI Distributions |
|
7,030 |
|
|
|
9,471 |
|
|
|
23,765 |
|
|
|
29,599 |
|
Adjusted Recurring Cash G&A |
$ |
20,535 |
|
|
$ |
19,388 |
|
|
$ |
60,291 |
|
|
$ |
55,831 |
|
Adjusted Current Income Tax
Crescent defines Adjusted Current Income Tax as current income tax provision (benefit) plus Income Tax RNCI Distributions. Management believes Adjusted Current Income Tax is a useful performance measure because it reflects as tax provision (benefit) the amount of cash distributed for taxes that is otherwise classified as redeemable noncontrolling interest distributions, facilitating the ability for investors to compare Crescent’s tax provision (benefit) against peer companies, and is included in the Company’s Levered Free Cash Flow calculation for historical periods and for periods for which guidance is provided.
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||||
|
(in thousands) |
|||||||||||||
Current income tax provision (benefit)(11) |
$ |
(470 |
) |
|
$ |
(877 |
) |
|
$ |
911 |
|
|
$ |
7,099 |
Tax RNCI Distributions (Contributions) |
|
20 |
|
|
|
803 |
|
|
|
(108 |
) |
|
|
17,970 |
Adjusted Current Income Tax |
$ |
(450 |
) |
|
$ |
(74 |
) |
|
$ |
803 |
|
|
$ |
25,069 |
Adjusted Dividends Paid
Crescent defines Adjusted Dividends Paid as Dividend to Class A Common Stock plus Dividend RNCI Distributions. Management believes Adjusted Dividends Paid is a useful performance measure because it reflects the full amount of cash distributed for dividends that is otherwise classified as distributions to redeemable noncontrolling interests, allowing investors to compare Crescent’s dividends paid against peer companies.
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
|
(in thousands) |
||||||||||
Dividend to Class A common stock |
$ |
9,116 |
|
$ |
7,133 |
|
$ |
23,127 |
|
$ |
19,301 |
Dividend RNCI Distributions |
|
10,926 |
|
|
21,701 |
|
|
45,333 |
|
|
58,705 |
Adjusted Dividends Paid |
$ |
20,042 |
|
$ |
28,834 |
|
$ |
68,460 |
|
$ |
78,006 |
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. Management believes Net LTM Leverage is a useful measurement because it is a measure of financial strength that takes into account the impact of acquisitions. 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 not to exceed
|
September 30,
|
||
|
(in millions) |
||
Total principal debt(12) |
$ |
1,942 |
|
Less: cash and cash equivalents |
|
(130 |
) |
Net debt for credit purposes |
$ |
1,812 |
|
|
|
||
LTM Adjusted EBITDAX for Leverage Ratio |
$ |
1,255 |
|
|
|
||
Net LTM Leverage |
1.4x |
||
(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 |
||
(2) |
Based on YE’22 reserves sensitized to NYMEX pricing as of 8/31/23. GAAP does not prescribe any corresponding measure for PV-10 of reserves based on pricing other than SEC pricing. As a result, it is not practicable for us to reconcile our PV-10 using NYMEX pricing to standardized measure as determined in accordance with GAAP. |
||
(3) |
Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice. |
||
(4) |
Does not include the |
||
(5) |
Adjusted operating expense excluding production and other taxes includes lease operating expense, workover expense, asset operating expense, gathering, transportation and marketing expense and midstream and other revenue net of expense. |
||
(6) |
Transaction and nonrecurring expenses of |
||
(7) |
Represents the settlement of certain oil commodity derivative contracts acquired in connection with the Uinta Transaction. |
||
(8) |
In connection with the Uinta Transaction, Crescent acquired commodity derivative liabilities totaling |
||
(9) |
The tax effects of adjustments are calculated using our estimated blended statutory rate (after excluding noncontrolling interests) of approximately |
||
(10) |
Transaction and nonrecurring expenses (G&A) of |
||
(11) |
Current income tax provision (benefit) is the amount of income tax (benefit) expense recognized in our statements of operations for the three months ended September 30, 2023 and September 30, 2022. Actual cash paid (refunded) for income taxes for the three months ended September 30, 2023 and September 30, 2022, was |
||
(12) |
Excludes |
View source version on businesswire.com: https://www.businesswire.com/news/home/20231106315446/en/
Emily Newport
IR@crescentenergyco.com
Source: Crescent Energy
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