Crescent Energy Company First Quarter 2023 Results

Crescent Energy Co. announced financial and operating results for the first quarter of 2023 and declared a quarterly cash dividend for the period of $0.12 per share. Crescent has provided a supplemental slide deck on its first quarter results, which can be found at www.crescentenergyco.com. The Company plans to host a conference call and webcast at 10 a.m. CDT, Thursday, May 11, 2023. Details can be found in this release.

Crescent CEO David Rockecharlie said, "We had solid results in the first quarter and continued to execute on our proven business model that provides a stable, low-risk base business and opportunistic growth through our acquisition strategy. Our average daily production was in the upper half of our annual outlook range, and we continued to deliver operational efficiencies. Our strong operational performance and debt reduction during last year's period of higher commodity prices positioned us well to be opportunistic in today's market. Our recent Eagle Ford bolt-on acquisition adds long-life production and significantly expands our development inventory at an attractive valuation. We believe this acquisition meaningfully enhances the value of our business through increased scale and operatorship in a core area for Crescent."

Crescent reported $256 million of net income and $54 million of Adjusted Net Income⁽¹⁾ in the first quarter. The Company generated $232 million of Adjusted EBITDAX⁽¹⁾ and $240 million of Operating Cash Flow for the period. Levered Free Cash Flow⁽¹⁾ for the period was $1 million, as drilling and completion efficiencies moved a larger portion of the annual capex program into the end of the first quarter. However, annual capex guidance remains unchanged.

First quarter production averaged 137 net MBoe/d (composed of 43% oil and 57% liquids). The slight decrease quarter-over-quarter was primarily related to winter weather. Average realized prices per Boe for the first quarter, including and excluding the effect of commodity derivatives, were $43.10 and $46.94, respectively. Crescent's average realized natural gas price, excluding derivative settlements, totaled $5.14 per MMBtu for the quarter, a 150% premium to Henry Hub, driven by exposure to West Coast markets.

First quarter operating expense and adjusted operating expense excluding production and other taxes⁽¹⁾, stated on a per Boe basis, were $22.12 and $16.57, respectively. Operating expenses were impacted by higher-cost residue gas related to increased natural gas prices, which were more than offset by higher realized prices. Adjusting for these costs, Crescent's adjusted operating expense per Boe was in line with expectations. G&A expense and Adjusted Recurring Cash G&A⁽¹⁾ (includes Manager Compensation and excludes non-cash equity-based compensation) each totaled $21 million.

Crescent operated one rig in the Uinta and one rig in the Eagle Ford during the first quarter and incurred capital investments of $202 million. The Company drilled 15 gross operated wells (seven in the Eagle Ford and eight in the Uinta) and brought online 18 gross operated wells (13 in the Eagle Ford and five in the Uinta). Per-well capital costs were in line with expectations and wells were brought online slightly ahead of schedule driven by operational efficiencies, including faster drill times. Crescent reaffirmed its $575 - $650 million 2023 capital budget, which takes into account accelerated first quarter activity and excludes any additional activity related to the Western Eagle Ford bolt-on acquisition.

Financial Position

Crescent maintains a strong balance sheet and a low leverage profile. As of March 31, 2023, the Company had total long-term debt of $1.3 billion, a Net LTM Leverage⁽¹⁾ ratio of 1.0x, in-line with its stated long-term target and liquidity of $1.1 billion.

In February 2023, the Company issued $400 million aggregate principal amount of 9.250% Senior Unsecured Notes due 2028 (together with the 7.250% Senior Unsecured Notes due 2026, the "Senior Notes") and used net proceeds to repay amounts outstanding on its revolving credit facility (the "Revolving Credit Facility"). The offering demonstrated Crescent's commitment to balance sheet strength and increased its liquidity.

Return of Capital

Consistent with the Company's framework to return cash to shareholders, the Company's board of directors (the "Board") approved a first quarter cash dividend of $0.12 per share, which is in-line with Crescent's fixed-within-a-framework policy to distribute 10% of Adjusted EBITDAX at guidance pricing. The first quarter cash dividend is payable on June 7, 2023, to shareholders of record as of the close of business on May 24, 2023. Any payment of future dividends is subject to Board approval and other factors.

Risk Management

Crescent utilizes hedges to manage commodity price risks, support the balance sheet and protect returns on invested capital. Consistent with its strategy, the Company added hedges in connection with the signing of the Western Eagle Ford acquisition to protect returns on invested capital. Complete details on the Company's derivative positions can be found in its investor presentation located at https://ir.crescentenergyco.com/events-presentations/.

Western Eagle Ford Bolt-On

On May 2, 2023, Crescent announced that it had entered into a definitive purchase agreement to acquire operatorship and incremental working interest in its existing Western Eagle Ford assets from Mesquite Energy, Inc. for total consideration of $600 million in cash, subject to customary purchase price adjustments. The accretive acquisition is consistent with Crescent's strategy of acquiring high-value, cash flowing assets while maintaining financial strength and is expected to close early in the third quarter of 2023, subject to customary closing conditions. The Company expects to update its 2023 outlook to incorporate the acquisition upon closing.