Crescent Energy Co S-1/A, filed Sep 6, 2022
Crescent Energy Co (CRGY)
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As filed with the Securities and Exchange Commission on September 6, 2022
Registration No. 333-264220
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 5
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Crescent Energy Company
(Exact name of registrant as specified in its charter)
| Delaware | 1311 | 87-1133610 | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(IRS Employer Identification Number) |
600 Travis Street, Suite 7200
Houston, Texas 77002 (713) 337-4600
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Bo Shi General Counsel
600 Travis Street, Suite 7200
Houston, Texas 77002
(713) 337-4600
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
| Douglas E. McWilliams 845 Texas Avenue, Suite 4700 Houston, Texas 77002 |
David Azarkh Brian E. Rosenzweig 425 Lexington Avenue New
York, New York 10017 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
| Emerging growth company | ☐ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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The information in this prospectus is not complete and may be changed. The securities described herein may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities, in any state or jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 6, 2022
5,000,000 Shares
Crescent Energy Company
Class A Common Stock
The selling stockholder identified in this prospectus is offering 5,000,000 shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”). We will not receive any of the proceeds from the sale of the shares by the selling stockholder.
Our Class A Common Stock is listed on The New York Stock Exchange (“NYSE”) under the symbol “CRGY.” The last reported sales price of our Class A Common Stock on the NYSE on September 2, 2022 was $16.77 per share.
Investing in our Class A Common Stock involves risks. See “Risk Factors” on page 26.
| Per Share | Total | |||||||
| Price to Public |
$ | $ | ||||||
| Underwriting Discounts and Commissions(1) |
$ | $ | ||||||
| Proceeds to the Selling Stockholder, Before Expenses |
$ | $ | ||||||
| (1) | See “Underwriting (Conflicts of Interest)” for additional information regarding underwriting compensation. |
The selling stockholder has granted the underwriters the option to purchase up to 750,000 additional shares of Class A Common Stock on the same terms and conditions set forth above within 30 days from the date of this prospectus.
Delivery of the shares of Class A Common Stock will be made on or about , 2022.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| Credit Suisse |
KKR | Wells Fargo Securities |
J.P. Morgan |
| BofA Securities |
RBC Capital Markets |
Truist Securities |
The date of this prospectus is , 2022.
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| Crescent Energy Company | ||
| Proved Reserves at SEC Pricing(1) |
598 MMBoe | |
| Proved Reserves % Liquids / % Developed at SEC Pricing(1) |
55% / 83% | |
| Proved PV-10 at SEC Pricing(1) |
$6.2 Bn | |
| Proved PV-10 at 6/30/2022 NYMEX Pricing |
$8.6 Bn | |
| First Year PDP Decline (%)(1) |
22% | |
| 2022E Capital Budget ($MM)(2) |
$600 – $700 | |
| % Operated of Capital Budget (%)(2) |
80 – 85% | |
| Total Gross Inventory(3) |
1,679 | |
| Total Net Inventory(3) |
810 | |
Note: As of December 31, 2021, after giving effect to the Uinta Acquisition, which closed on March 30, 2022.
| (1) | SEC reserves based on reports prepared or audited by our independent reserve engineers. |
| (2) | For more information, see “Summary—Development program and capital budget.” |
| (3) | For more information, see “Summary—Attractive development opportunities.” |
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| MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS |
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You should rely only on the information included or incorporated by reference in this prospectus and any free writing prospectus prepared by us or on behalf of us or the information to which we have referred you. Neither we, the underwriters, the selling stockholder nor any of our or their representatives have authorized anyone to provide you with information different from that included or incorporated by reference in this prospectus and any free writing prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The selling stockholder and the underwriters are offering to sell shares of Class A Common Stock and seeking offers to buy shares of Class A Common Stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the Class A Common Stock. Our business, financial condition, results of operations and prospects may have changed since that date.
This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. See “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”
Industry and Market Data
The market data and certain other statistical information included or incorporated by reference in this prospectus are based on our own internal company surveys, the good faith estimates of management, independent industry publications, government publications and other independently published sources. Although we believe our internal surveys, estimates of management and these third-party sources are reliable as of their respective dates, neither we nor the underwriters have independently verified the accuracy or completeness of this information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.
Trademarks and Trade Names
We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and does not, imply a relationship with us or an endorsement or sponsorship by or of us. Solely for convenience, the trademarks, service marks and trade
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names referred to in this prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names.
Merger Transactions
On December 7, 2021, we completed the Merger Transactions (as defined below), pursuant to which the business of Contango Oil & Gas Company, a Texas corporation (“Contango”), and the business of Independence Energy LLC (“Independence”), a Delaware limited liability company and our predecessor for financial reporting purposes, combined indirectly under a new publicly traded holding company named “Crescent Energy Company.” Our Class A Common Stock is listed on the NYSE under the symbol “CRGY.” The combined company is structured as an “Up-C,” with all of our assets and operations (including those of Contango) indirectly held by our operating subsidiary, Crescent Energy OpCo LLC, a Delaware limited liability company (“OpCo”). Our sole material asset consists of economic, non-voting limited liability company interests in OpCo (“OpCo Units” and, the holders of such OpCo Units, “OpCo Unitholders”). We are the sole managing member of OpCo. Former Contango stockholders own shares of our Class A Common Stock, which have both voting and economic rights. The former owners of Independence (“Former Independence Owners”) own OpCo Units and shares of our Class B Common Stock (as defined below), which have voting (but no economic) rights. OpCo Units (together with shares of Class B Common Stock) may be redeemed or exchanged for Class A Common Stock or, at our election, cash on the terms and conditions set forth in Amended and Restated Limited Liability Company Agreement of OpCo.
Basis of Presentation
Holding Company Structure
Crescent Energy Company is a holding company that conducts substantially all of its business through its consolidated subsidiaries. See “Summary—Our Corporate Structure.” The predecessor of Crescent Energy Company is Independence, which merged with and into OpCo, a subsidiary of Crescent Energy Company, on December 7, 2021, pursuant to the Merger Transactions. Crescent Energy Company is the sole managing member of OpCo and is responsible for all operational, management and administrative decisions relating to OpCo’s business and consolidates the financials results of OpCo and its subsidiaries. In the sections of this prospectus that describe our business, except as otherwise indicated or required by the context, references to the “Company,” “we,” “us,” “our” and like terms refer (i) prior to the consummation of the Merger Transactions, to Independence and its subsidiaries, and (ii) subsequent to the consummation of the Merger Transactions, to Crescent Energy Company and its subsidiaries, including OpCo and its subsidiaries.
Pro Forma Presentation
This prospectus also includes or incorporates by reference certain pro forma financial and operating data. As used herein, except as otherwise indicated, the term “pro forma” when used with respect to any financial or operating data, refers to the historical data of Crescent Energy Company (including, as applicable, its predecessor, Independence), as adjusted after giving effect to the Merger Transactions. In addition, the pro forma financial data includes adjustments relating to (i) the redemption by certain of Independence’s consolidated subsidiaries of the noncontrolling equity interests held in such subsidiaries by a certain third-party investor in exchange for its proportionate share of the underlying oil and natural gas interests held directly or indirectly by such subsidiaries (the “Carve-Out”) and the redemption by certain of Independence’s consolidated subsidiaries of the noncontrolling equity interests held in such subsidiaries by certain third-party investors in exchange for membership interests in Independence in April 2021 (the “April 2021 Exchange,” and together with the Carve-Out, the “Carve-Out/Exchange”), (ii) the entry into the Revolving Credit Facility (as defined below) and the offering of the Original Notes (as defined below) (the “Independence Refinancing”), (iii) the acquisition of a portfolio of oil and natural gas mineral assets located in the DJ Basin from an unrelated third-party operator (the “DJ Basin Acquisition”), (iv) the acquisition of certain operated producing oil and natural gas properties predominantly located in the Central Basin Platform in Texas and New Mexico (the “Central Basin Platform Acquisition”), (v) the February 2022 issuance of the New Notes (as defined below) and the use of proceeds
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therefrom to repay amounts outstanding under the Revolving Credit Facility (the “Crescent Refinancing” and together with the Carve-Out/Exchange, the Independence Refinancing, the DJ Basin Acquisition and the Central Basin Platform Acquisition, the “Crescent Transactions”) and (vi) the Uinta Acquisition (as defined under “Summary—Recent Developments”) consummated on March 30, 2022. Further, Contango completed the acquisition of Mid-Con Energy Partners, LP (the “Mid-Con Acquisition”), the acquisition of Grizzly Operating, LLC (the “Grizzly Acquisition”), and the acquisition of certain assets located in the Wind River Basin of Wyoming (the “Wind River Basin Acquisition” and, together with the Mid-Con Acquisition and the Grizzly Acquisition, the “Contango Transactions”) during the period presented.
The unaudited pro forma condensed combined statement of operations (the “pro forma statement of operations”) for the year ended December 31, 2021 gives effect to each of the Merger Transactions, the Crescent Transactions, the Uinta Acquisition and the Contango Transactions (together, the “Transactions”) as if they had been consummated on January 1, 2021. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2022 give effect to the Uinta Acquisition as if it had occurred on January 1, 2021. Pro forma financial data contains certain reclassification adjustments to conform the historical Contango financial statement presentation to our financial statement presentation. In each case, the pro forma data is presented for illustrative purposes only and should not be relied upon as an indication of the financial condition or the operating results that would have been achieved if the Transactions had taken place on the specified dates. In addition, future results may vary significantly from the results reflected in such pro forma financial and operating data and should not be relied on as an indication of future results. For additional information regarding the pro forma data included or incorporated by reference herein, see our pro forma statements of operations, together with the related notes thereto, as filed on our Current Report on Form 8-K on April 8, 2022, our Current Report on Form 8-K/A on May 19, 2022, and our Current Report on Form 8-K on August 19, 2022, in each case as incorporated by reference herein.
Rounding; Percentages
Further, the financial information and certain other information presented in this prospectus have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column in certain tables in this prospectus. In addition, certain percentages presented in this prospectus reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers or may not sum due to rounding.
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This summary highlights information included elsewhere in, or incorporated by reference into, this prospectus. This summary does not contain all of the information that you should consider before investing in our Class A Common Stock. You should carefully read the entire prospectus, together with the additional information described under “Information Incorporated by Reference,” before investing in our Class A Common Stock. The information presented in this prospectus assumes, unless otherwise indicated, that the underwriters’ option to purchase additional shares of Class A Common Stock is not exercised. References in this prospectus to the “selling stockholder” refer to the selling stockholder that is offering shares of Class A Common Stock as set forth in the section entitled “Selling Stockholder.” This prospectus includes certain terms commonly used in the oil and natural gas industry, which are defined elsewhere in this prospectus in the “Glossary of Terms” contained in Annex A. Unless otherwise indicated, the estimates of our proved, probable and possible reserves as of December 31, 2021 have been prepared or audited, as applicable, by Netherland, Sewell & Associates, Inc. (“NSAI”), Haas Petroleum Engineering Services, Inc., Cawley, Gillespie & Associates, Inc. (“CG&A”) and William M. Cobb & Associates, Inc., our independent reserve engineers (collectively, “Independent Reserve Engineers”).
Our Company
Overview
We are a well-capitalized U.S. independent energy company with a portfolio of low-decline assets in proven regions across the lower 48 states that generate substantial cash flow and deliver significant stockholder returns. Our core leadership team is a group of experienced investment, financial and industry professionals who continue to execute on the strategy we have employed since 2011. Our mission is to invest in energy assets and deliver better returns through strong operations and stewardship. We seek to deliver attractive risk-adjusted investment returns and predictable cash flows across cycles by employing our differentiated approach to investing in the oil and gas industry. Our approach employs a unique business model that combines an investor mindset and deep operational expertise to pursue a cash flow-based investment mandate focused on operated working interests with an active risk management strategy. Our Class A Common Stock trades on the NYSE under the symbol “CRGY.”
We pursue our strategy through the production, development and acquisition of oil, natural gas and natural gas liquid (“NGL”) reserves. Our free cash flow-focused portfolio includes a balanced set of oil and natural gas assets in proven onshore U.S. basins with substantial existing production, a low decline rate and an acreage position that is 96% held by production, inclusive of the assets acquired in the Uinta Acquisition. Based on forecasts used in our reserve reports, our PDP reserves as of December 31, 2021 have estimated average five-year and ten-year annual decline rates of approximately 13% and 11%, respectively, and an estimated 2022 PDP decline rate of 22%. The relatively higher decline rate in 2022 is due primarily to the high initial production profiles of certain more recently drilled PDP wells acquired in the Uinta Acquisition, which we expect to decrease over time as wellbore pressure gradually declines and stabilizes. As a result of this overall low decline profile, we require relatively minimal capital expenditures to maintain our production and cash flows while supporting our dividend policy. We have a robust inventory of attractive operated undeveloped locations, providing for optimal flexibility to maintain or grow our production base. Our portfolio is enhanced and complemented by our additional interests in mineral acreage and midstream infrastructure, which provide operational benefits and enhance our cash flow margins.
We have built a substantial portfolio of reserves, production, cash flows and reinvestment opportunities. On a pro forma basis after giving effect to the Transactions, our portfolio of assets:
| • | at December 31, 2021, consisted of 597.8 net MMBoe of proved reserves, of which approximately 55% were liquids, reflecting: |
| • | $6.0 billion in net proved standardized measure and $6.2 billion in net proved present value discounted at PV-10 at SEC pricing; and |
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| • | $8.6 billion in net proved present value discounted at PV-10 at NYMEX pricing as of June 30, 2022; |
| • | during the year ended December 31, 2021, produced 148 net MBoe/d and during the six months ended June 30, 2022, produced 145 net MBoe/d; |
| • | during the year ended December 31, 2021, generated a $245.2 million net loss, $963.5 million of Adjusted EBITDAX and $665.4 million of Levered Free Cash Flow, and during the six months ended June 30, 2022, generated $25.7 million of net loss, $698.7 million of Adjusted EBITDAX and $357.1 million of Levered Free Cash Flow; and |
| • | at December 31, 2021 had 1,679 gross (810 net) undrilled locations, including 718 gross (575 net) operated drilling locations. Of our total 810 net locations, 211 net locations are identified as PUD drilling locations. In total, our drilling locations represent an aggregate of over $4.7 billion of reinvestment potential, of which $1.3 billion is attributable to PUD drilling locations in total. |
For definitions of Adjusted EBITDAX and Levered Free Cash Flow, including reconciliations to the nearest U.S. generally accepted accounting principles (“GAAP”) measure, see “—Summary Historical Financial Data—Non-GAAP Financial Measures.”
Free cash flow-focused portfolio promotes return of capital to investors
We have constructed a liquids-weighted portfolio of long-lived reserves and low decline production that generates substantial cash flow with a robust inventory of attractive undeveloped locations. We believe that the stable nature of our producing assets combined with our hedging strategy and low leverage profile provides us the ability to generate strong free cash flow in a variety of commodity price environments, which positions us to maintain financial strength and consistently return capital to stockholders. Our estimated 2022 PDP decline rate of 22%, based on forecasts used in our reserve reports, is substantially lower than the industry average. The low decline nature of our asset base requires minimal reinvestment to maintain our production, and provides us with significant flexibility to pursue both reinvestment opportunities within our current portfolio, strategic acquisitions and/or return capital to investors. While many of our peers have historically outspent their cash flows, we have averaged a reinvestment rate, which we define as our historical capital expenditures (excluding acquisitions) over a specified period as a percentage of our historical Adjusted EBITDAX for such period, of 40% of Adjusted EBITDAX since 2018. This highlights management’s capital discipline and commitment to returning capital to stockholders. Adjusted EBITDAX is a non-GAAP financial measure, as discussed further under “—Summary Historical Financial Data—Non-GAAP Financial Measures.”
Our fixed within a framework dividend policy is generally set annually and targets distributing 10% of Adjusted EBITDAX. Our dividend is designed to deliver a reliable return of capital to our stockholders and we believe it is more stable than that of our peers as it is not impacted by capital expenditures with Crescent’s dividends taking priority to reinvestment decisions and is supported by an active hedging program. Our management team has a long history of paying dividends to stockholders and Independence, our predecessor, paid dividends for nine consecutive years as a private company, through volatile commodity and market conditions and while maintaining a low leverage profile.
Low-decline production base underpins free cash flow generation and dividend
Based on forecasts used in our reserve reports, our PDP reserves as of December 31, 2021 have estimated average five-year and ten-year annual decline rates of approximately 13% and 11%, respectively, and an estimated 2022 PDP decline rate of 22%. The relatively higher decline rate in 2022 is due primarily to the high initial production profiles of certain more recently drilled PDP wells acquired in the Uinta Acquisition, which we expect to decrease over time as wellbore pressure gradually declines and stabilizes. As a result of this overall low decline profile, we require relatively minimal capital expenditures to maintain our production
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and cash flows while supporting our dividend policy. Our properties located in the Eagle Ford, Rockies and Barnett represent approximately 80% of our proved reserves as of December 31, 2021, and provide us with diversification from both a regional location and commodity price perspective, which provides us certain downside protection as it relates to commodity-specific pressures, isolated infrastructure constraints or severe weather events. Our net proved standardized measure totaled $6.0 billion as of December 31, 2021. The table below illustrates the aggregate leasehold acreage positions, reserve volumes and weighted average decline profiles associated with our proved assets as of December 31, 2021.
| Net Acreage |
Net Proved Reserves (1) |
% Oil & Liquids (1) |
Net PD Reserves (1) |
Weighted Average Annual PDP Decline (2) |
Net Proved PV-10 (1)(3) |
Net PD PV-10 (1)(3) |
Net Proved PV-10 (1)(3) |
Net PD PV-10 (1)(3) |
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| Operating Area |
Five Year |
Ten Year |
SEC (1) | NYMEX (6) | ||||||||||||||||||||||||||||||||||||
| (M) | (MMBoe) | (MMBoe) | (MM) | (MM) | (MM) | (MM) | ||||||||||||||||||||||||||||||||||
| Eagle Ford |
143 | 136 | 79 | % | 84 | 13 | % | 11 | % | $ | 1,954 | $ | 1,307 | $ | 2,593 | $ | 1,697 | |||||||||||||||||||||||
| Rockies (4) |
243 | 147 | 52 | % | 143 | 10 | % | 10 | % | 1,319 | 1,250 | 1,877 | 1,794 | |||||||||||||||||||||||||||
| Barnett |
133 | 130 | 16 | % | 129 | 6 | % | 6 | % | 605 | 605 | 930 | 930 | |||||||||||||||||||||||||||
| Permian |
107 | 54 | 69 | % | 37 | 15 | % | 12 | % | 594 | 458 | 779 | 611 | |||||||||||||||||||||||||||
| Other (5) |
402 | 65 | 68 | % | 66 | 13 | % | 10 | % | 687 | 685 | 912 | 907 | |||||||||||||||||||||||||||
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| Total excluding Uinta Acquisition |
1,028 | 532 | 54 | % | 459 | 11 | % | 10 | % | $ | 5,159 | $ | 4,305 | $ | 7,091 | $ | 5,939 | |||||||||||||||||||||||
| Uinta Acquisition |
145 | 66 | 65 | % | 40 | 28 | % | 21 | % | 1,054 | 733 | 1,551 | 1,091 | |||||||||||||||||||||||||||
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| Total including Uinta Acquisition |
1,174 | 598 | 55 | % | 499 | 13 | % | 11 | % | $ | 6,213 | $ | 5,038 | $ | 8,642 | 7,030 | ||||||||||||||||||||||||
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| (1) | Our reserves and present value (discounted at ten percent, or PV-10) were determined using average first-day-of-the-month prices for the prior 12 months in accordance with guidance from the Securities and Exchange Commission (“SEC”). For oil and NGL volumes, the average WTI posted price of $66.56 per barrel as of December 31, 2021, was adjusted for items such as gravity, quality, local conditions, gathering, transportation fees and distance from market. For natural gas volumes, the average Henry Hub Index spot price of $3.598 per MMBtu as of December 31, 2021, was similarly adjusted for items such as quality, local conditions, gathering, transportation fees and distance from market. All prices are held constant throughout the lives of the properties. The average adjusted product prices over the remaining lives of the properties are $64.84 per barrel of oil, $3.46 per Mcf of natural gas and $27.21 per barrel of NGLs. |
| (2) | Reflects the estimated annualized decline rates of our PDP reserves as of December 31, 2021 from the monthly period ending January 31, 2022 and the monthly period ending January 31, 2027 for the five-year decline and from the monthly period ending January 31, 2022 and the monthly period ending January 31, 2032 for the ten-year decline, in each case based on the forecasts used in estimating our proved reserves. |
| (3) | Reflects the net Proved and PD present values reflected in our proved reserve estimates as of December 31, 2021. PV-10 is not a financial measure prepared in accordance with GAAP. See “—Summary Reserve and Operating Data” for additional discussion. |
| (4) | We have a contractual right to participate in 29 thousand net acres in the DJ Basin through an agreement with a large operator and will be entitled to receive our proportionate share of acreage in the future based on our participation in proposed wells. |
| (5) | Includes working interest properties located in Mid-Con, California as well as diversified mineral and royalty interests. |
| (6) | The NYMEX reserves, PV-0 and PV-10 of Crescent Energy Company and the Uinta Acquisition were determined using index prices for oil and natural gas, respectively, without giving effect to derivative transactions and were calculated based on settlement prices to better reflect the market expectations as of that date, as adjusted for our estimates of quality, transportation fees, and market differentials. The NYMEX reserves calculations are based on NYMEX futures pricing at closing on June 30, 2022 for oil and natural gas. The average adjusted product prices over the remaining lives of the properties are $70.17 per barrel of oil, $4.45 per Mcf of natural gas and $29.40 per barrel of NGLs as of December 31, 2021. We believe that the use of forward prices provides investors with additional useful information about our reserves, as the forward prices are based on the market’s forward-looking expectations of oil and natural gas prices as of a certain date, although we caution investors that this information should be viewed as a helpful alternative, not a substitute, for the data presented based on SEC Pricing. See “—Summary Reserve and Operating Data—Summary Reserve Data based on NYMEX Pricing.” |
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Attractive development opportunities
Our development inventory is low-risk and located in proven basins with substantial well control. As of December 31, 2021, we have identified 1,679 gross (810 net) undrilled locations, including 718 gross (575 net) operated drilling locations. Of our total 810 net locations, 211 net locations are identified as PUD drilling locations as of December 31, 2021. The majority of these locations are on acreage that is held by production, providing valuable optionality. This allows us to react quickly to commodity price fluctuations and focus on opportunities that provide high return on invested capital.
Eagle Ford. We have operated and non-operated Eagle Ford development opportunities with attractive return profiles in Dimmit, Frio, Atascosa, Zavala and Webb Counties, Texas. As of December 31, 2021, we have identified 890 gross (393 net) undrilled locations in the Eagle Ford basin, including 270 gross (259 net) operated drilling locations. Of our total 393 net locations, 123 net locations are reflected as PUDs.
Permian. We have operated and non-operated Permian development opportunities with attractive return profiles in Reeves, Ector and Pecos Counties, Texas targeting the Wolfcamp, Bone Spring and Spraberry formations. As of December 31, 2021, we have identified 326 gross (123 net) undrilled locations in the Permian basin, including 153 gross (88 net) operated drilling locations. Of our total 123 net locations, 18 net locations are reflected as PUDs.
Uinta. As a result of the Uinta Acquisition, we have operated Uinta development opportunities with attractive return profiles in Duchesne and Uintah Counties, Utah targeting the Uteland Butte and Wasatch formations. As of December 31, 2021, on a pro forma basis after giving effect to the Uinta Acquisition, we have identified 151 gross (125 net) undrilled locations in the Uinta basin, all of which are operated. Of our total 125 net locations, 52 net locations are reflected as PUDs.
Total identified drilling locations. The following table describes our net identified drilling locations and total reinvestment opportunity calculated based on the estimated net drilling and completion (“D&C”) expenditures by area, in each case, as of December 31, 2021.
| Total Net Identified Drilling Locations (1) |
Operated Net Identified Drilling Locations (1) |
Total Estimated Net D&C Expenditures |
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| (in millions) | ||||||||||||
| Eagle Ford |
393 | 259 | $ | 2,166 | ||||||||
| Permian |
123 | 88 | 842 | |||||||||
| Other (2) |
169 | 103 | 587 | |||||||||
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|||||||
| Total excluding Uinta Acquisition |
685 | 450 | $ | 3,595 | ||||||||
| Uinta Acquisition |
125 | 125 | 1,100 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total including Uinta Acquisition |
810 | 575 | $ | 4,745 | ||||||||
|
|
|
|
|
|
|
|||||||
| (1) | Includes 123, 18, 19 and 52 net PUD locations in the Eagle Ford, Permian, other operating areas and Uinta, respectively, with associated estimated net D&C expenditures of $766 million, $136 million, $21 million and $391 million, respectively. Does not include minerals. For information regarding the assumptions underlying our identified reinvestment opportunities, see “Items 1 and 2. Business and Properties” in our Annual Report on Form 10-K for the year ended December 31, 2021, incorporated herein by reference. |
| (2) | Includes drilling locations in the Rockies, Barnett and other areas. |
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In addition to our identified drilling locations listed in the table above and the Uinta Acquisition assets, we have additional undeveloped locations under our mineral and royalty interests that, when developed by the oil and natural gas companies designated as the operators on such acreage, will provide cash flows unburdened by capital costs.
Business Strategies
Our primary business objective is to deliver free cash flow and attractive risk-adjusted returns for our investors through the execution of the following strategies:
| • | Build and operate a diversified portfolio of proven, low-risk, cash-flowing assets. We have constructed a liquids-weighted portfolio of long-lived reserves and low decline production that generates substantial cash flow with a robust inventory of attractive undeveloped locations. We believe that the stable nature of our producing assets combined with our hedging strategy and low leverage profile provides us the opportunity to generate strong free cash flow in a variety of commodity price environments, which positions us to consistently return capital to stockholders. For example, while many of our peers have historically outspent their cash flows in pursuit of production growth and left themselves particularly vulnerable to declines in commodity prices, we have averaged a reinvestment rate of 40% of Adjusted EBITDAX since 2018. For a definition of Adjusted EBITDAX, including a reconciliation to the nearest GAAP measure, see “—Summary Historical Financial Data—Non-GAAP Financial Measures.” We expect to continue to utilize the free cash flow generated from our producing assets to pay dividends to stockholders, maintain conservative leverage levels, reinvest in existing development opportunities and strategically pursue complementary, accretive acquisitions. |
| • | Maximize returns to stockholders through disciplined reinvestment. We believe we have an extensive inventory of low-risk, high-return development opportunities that are capable of generating attractive cash on cash returns. However, we seek to find the right balance between returning additional capital to investors in the short-term and investing for longer-term value creation, such as through drilling and accretive acquisitions. As of December 31, 2021, we identified 1,679 gross (810 net) undrilled locations, including 718 gross (575 net) operated drilling locations representing over $4.7 billion of reinvestment potential. Of our total 810 net locations, 211 net locations were identified as PUD drilling locations and reflect $1.3 billion of anticipated capital spend. After accounting for the Uinta Acquisition, our 2022 expected capital program, which totals between $600 million and $700 million, is approximately 95% allocated to D&C (80 to 85% to our operated assets primarily in the Eagle Ford and Uinta basins and 10 to 15% to non-operated activity) and approximately 5% to other capital expenditures. Our high degree of operational control and the fact that our asset base is largely held by production provides flexibility over the execution of our development program, including the timing, amount and allocation of our capital expenditures. Including the Uinta Acquisition assets, approximately 96% of our net acreage as of December 31, 2021 was held by production. |
| • | Focus on financial strength and flexibility. We intend to maintain a conservative and flexible capital structure to actively manage risk across the business. As of June 30, 2022, we had $508 million in liquidity, including $55 million in cash and cash equivalents and $453 million of available borrowings under the credit agreement (the “Revolving Credit Facility”), and total outstanding principal indebtedness of $1.5 billion. We intend to maintain conservative leverage in the future with a long-term corporate leverage target at or below 1.0x net debt to Adjusted EBITDAX. See “—Summary Historical Financial Data—Non-GAAP Financial Measures” for our definition of Adjusted EBITDAX and reconciliations of Adjusted EBITDAX to net income (loss), the nearest comparable GAAP measure. In addition, we employ an active hedging strategy that allows us to protect the balance sheet and corporate returns while maintaining adequate exposure to commodity prices and upside therefrom. |
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| • | Develop industry-leading environmental, social and governance (“ESG”) practices that benefit our stakeholders and the communities in which we operate. We view exceptional performance in managing ESG issues as an opportunity to differentiate ourselves from our peers, mitigate risks and strengthen operational performance, as well as benefit our stakeholders and the communities in which we operate. Our ESG program is overseen by senior management, executed together with experienced industry professionals throughout our organization and supported by the resources of the KKR Group, along with the assistance of expert third-party advisors for insights on best practices. In December 2021, we released our inaugural ESG report, which included key performance metrics according to Value Reporting Foundation’s Sustainability Accounting Standards Board (“SASB”) Standard for Oil & Gas – Exploration & Production and also established our key ESG priorities. We are committed to engaging across our organization to assess and manage key ESG issues. In connection with that commitment, we have also established an ESG Advisory Council to advise management and our board of directors on ESG-related issues. We are also working to reduce greenhouse gas (“GHG”) emissions by implementing aggressive methane reduction targets and eliminating routine flaring where feasible, among other initiatives. In February 2022, we joined the Oil & Gas Methane Partnership (“OGMP”) 2.0 Initiative to enhance reporting of methane emissions reduction programs. Our inaugural OGMP 2.0 submission was rated the highest-level, “Gold Standard.” We plan to include short- and long-term ESG targets focused on EHS and emissions in our 2021 ESG report. |
| • | Evaluate and pursue opportunistic and value-oriented acquisitions focused on cash-on-cash returns. Our business has been built over time through a series of strategic mergers and acquisitions. We are experienced acquirers and have been executing a strategy of opportunistically acquiring well understood cash flow oriented assets since the founding of the business. We employ a differentiated business model that combines an investor mindset with deep operational expertise to deliver sustainable stockholder value creation. Since 2020, we have completed ten acquisitions, including the Uinta Acquisition (as defined below), as discussed further under “—Recent Developments.” We believe today’s market dynamic creates an attractive market for consolidation, driven by historically low equity capital formation and an increasing supply of assets and businesses for sale. We anticipate a large and increasing universe of attractive target opportunities from the divestiture programs of majors and large-cap independents, subscale public and private companies, private and unnatural owners seeking liquidity and bolt-on opportunities near existing assets. We will continue to evaluate acquisitions consistent with our cash flow-based strategy to further improve our asset portfolio and enhance investor returns. Our recent Uinta Acquisition highlights our acquisition strategy to buy low-risk cash flow oriented assets that are accretive and enhance our portfolio while maintaining low leverage. |
Competitive Strengths
We believe that the following competitive strengths differentiate us from our peers and uniquely position us to achieve our primary business objective.
| • | Diversified free cash flow-generating production base supports the dividend and drives enhanced stockholder returns. Our fixed within a framework dividend policy is generally set annually and targets distributing 10% of Adjusted EBITDAX. Our dividend is designed to deliver a reliable return of capital to our stockholders and we believe it is more stable than that of our peers as it is not impacted by capital expenditures with Crescent’s dividends taking priority to reinvestment decisions and is supported by an active hedging program. Our management team has a long history of paying dividends to stockholders and Independence, our predecessor, paid dividends for nine consecutive years as a private company, through volatile commodity and market conditions and while maintaining a low leverage profile. Our dividend is supported by our large, balanced portfolio of producing properties that generate substantial free cash flow and our |
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| significant developmental upside that enhances our production, free cash flow and stockholder returns. Our reserves are generally long-lived and characterized by relatively low production decline rates. Our estimated 2022 PDP decline rate of 22% is substantially lower than the industry average. The low decline nature of our asset base requires minimal capital reinvestment to maintain our production, and provides us with significant flexibility to pursue both reinvestment opportunities within our current portfolio, strategic acquisitions and/or return capital to investors. Our producing properties have been substantially de-risked from years of development and have sufficient existing infrastructure to transport our production to market. Our geographic diversity also leaves us less susceptible to geographically isolated infrastructure constraints, severe weather events and other risks. We believe the combination of our low decline and liquids-weighted asset profile combined with our active hedging strategy and low leverage profile positions us to generate free cash flow throughout the commodity cycles that may be returned to stockholders through dividends. |
| • | Disciplined investment in development and complementary opportunities. We have a proven history of utilizing cash flows generated from our producing assets to reinvest in the development of our oil and natural gas assets. As of December 31, 2021, we identified 1,679 gross (810 net) undrilled locations, of which 211 net drilling locations are identified as PUD drilling locations, representing over $4.7 billion of reinvestment potential, of which $1.3 billion is attributable to PUD drilling locations. We believe that our reinvestment in development opportunities has generated attractive risk-adjusted returns through strong operations, commercial creativity, capital discipline and strong risk management. Additionally, we will continue to strategically evaluate accretive acquisitions of oil and natural gas assets in targeted areas that are complementary to our underlying asset base and are supported by strong cash flow. |
| • | Aligned management team with a proven track record and ESG focus. Our executive leadership team is a group of experienced investment, financial and industry professionals who have a demonstrated track record of employing our strategy since 2011, with experience in asset management, capital allocation, ESG stewardship, risk management, investing, finance and accounting. Our differentiated approach, which was created through combining superior financial and risk management capabilities with premier operational capabilities, provides us with a competitive advantage in navigating a variety of commodity price and market environments. Our talented and highly motivated operational leadership are experts in their respective geographies and utilize their expertise to drive the day-to-day operations of our assets. Furthermore, the performance-based incentive structure of our Management Agreement (as defined below) and the significant equity ownership of stockholders associated with our Manager provide for alignment of interests for long-term value creation. Additionally, our relationship with the KKR Group also provides us access to a constellation of global resources, including a deep bench of experienced investment professionals and resources specifically dedicated to monitoring and understanding issues and trends, recommending strategies, providing assistance and otherwise helping companies navigate changing market dynamics with respect to ESG-related issues, including the KKR Group’s Global Institute and Public Affairs team. |
| • | Well-capitalized balance sheet and strong liquidity profile supported by active risk management approach. As of June 30, 2022, we had total principal indebtedness of $1.5 billion and $508 million in liquidity, including $55 million in cash and cash equivalents and $453 million of available borrowings under the Revolving Credit Facility. Since our inception, our strategy has been to maintain a conservative balance sheet, low leverage and an active risk management program. For example, our net leverage ratio on a net debt to trailing twelve month Adjusted EBITDAX basis has averaged 1.2x since 2011. While maintaining these conservative leverage levels, we generated a net loss of $432.2 million and Levered Free Cash Flow of $276.7 million for the year ended December 31, 2021, and during the six months ended June 30, 2022, we generated a net loss of |
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| $124.1 million and Levered Free Cash Flow of $226.7 million. See “—Summary Historical Financial Data—Non-GAAP Financial Measures” for definitions of Adjusted EBITDAX and Levered Free Cash Flow and reconciliations to the nearest comparable GAAP metrics. |
Development Program and Capital Budget
Our development program is designed to prioritize the generation of attractive risk-adjusted returns and meaningful free cash flow and is inherently flexible, with the ability to modify our capital program as necessary to react to the current market environment. On a pro forma basis for the Transactions, our capital expenditures, excluding acquisitions, incurred during the year ended December 31, 2021 and the six months ended June 30, 2022 totaled approximately $231.6 million and $278.9 million, respectively.
After accounting for the Uinta Acquisition, our 2022 expected capital program, which totals between $600 million and $700 million, is approximately 95% allocated to D&C drilling and completion (80 to 85% to our operated assets primarily in the Eagle Ford and Uinta basins and 10 to 15% to non-operated activity) and approximately 5% to other capital expenditures. Due to the flexible nature of our capital program and the fact that our acreage is 96% held by production, inclusive of the Uinta Acquisition, we could choose to defer a portion or all of these planned capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated prices for oil, gas and NGLs and resulting well economics, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other interest owners.
Our Relationship with the KKR Group
On December 7, 2021, in connection with the closing of the Merger Transactions, we entered into the management agreement (the “Management Agreement”), dated as of December 7, 2021, by and between the Company and KKR Energy Assets Manager LLC, a Delaware limited liability company (the “Manager”), that engages the Manager to provide certain management and investment advisory services to us and our subsidiaries. Our management team provides services to us pursuant to the Management Agreement.
The Manager is an indirect subsidiary of KKR & Co. Inc. (together with its subsidiaries, the “KKR Group”). The KKR Group is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions.
Pursuant to the Management Agreement, the Manager has agreed to provide us with management services, including senior members of our full executive and corporate management teams, and other assistance, including with respect to strategic planning, risk management, identifying and screening potential acquisitions, identifying and analyzing ESG issues and providing such other assistance as we may require. Furthermore, entities affiliated with the KKR Group invested in the predecessor of Crescent, helped found the strategy we have employed since 2011 and continue to hold a significant investment in our company.
Through our integration with the KKR Group’s global platform, we believe that we benefit from: the power of the “KKR” brand; KKR Global Macro and Asset Allocation, which assists with assessing the impact of macroeconomic factors on potential investments and helps identify market opportunities; KKR Capital Markets, which assists with optimizing the capital structure of investments and underwrites and arranges debt, equity and other forms of financing for both KKR portfolio companies and independent clients; KKR Public Affairs, which, together with the KKR Global Institute, provides insight into public policy, government and regulatory affairs, including experience working with key stakeholders, such as labor unions, industry and trade associations and non-governmental organizations, and ESG issues and
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opportunities; and KKR Capstone, which creates value by assisting with due diligence and identifying and delivering sustainable operational performance improvements within the KKR Group’s portfolio companies.
For additional information regarding our Management Agreement and our relationship with the KKR Group, see “Risks related to our business and the oil and natural gas industry” in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, incorporated herein by reference, “Underwriting (Conflicts of Interest)” and “Selling Stockholder” herein.
Merger Transactions and Our Corporate Structure
On December 7, 2021, we completed the transactions contemplated by the Transaction Agreement, which included the merger of Independence with and into OpCo, the merger of IE Merger Sub Inc., a Delaware corporation, with and into Contango, with Contango surviving the merger as a direct wholly owned corporate subsidiary of the Company (the “Contango Merger”), the subsequent merger of Contango with and into IE L Merger Sub LLC, a Delaware limited liability company, with IE L Merger Sub LLC surviving the merger as a wholly owned subsidiary of us, which we describe as the “Merger”, and the subsequent contribution of such surviving subsidiary by us to OpCo (such transactions, the “Merger Transactions”), pursuant to which Contango’s business combined with Independence’s business indirectly under a new publicly traded holding company named “Crescent Energy Company.” From and after December 8, 2021, our Class A Common Stock has been listed on the NYSE and trades under the symbol “CRGY.” Our company is structured as an “Up-C.” Former Contango stockholders own shares of our Class A Common Stock, which have both voting and economic rights. Former Independence Owners own OpCo Units and corresponding shares of Class B common stock, par value $0.0001 per share, of the Company (“Class B Common Stock” and, together with Class A Common Stock, “Common Stock”), which shares of Class B Common Stock have voting (but no economic) rights. We are a holding company, and our sole material asset consists of OpCo Units. We are the sole managing member of OpCo. We are therefore responsible for all operational, management and administrative decisions relating to OpCo’s business and consolidate the financial results of OpCo and its subsidiaries.
The shares of our Class A Common Stock being sold in this offering by the selling stockholder represent shares of Class A Common Stock to be issued upon redemption by such selling stockholder of an equivalent number of OpCo Units and a corresponding number of shares of our Class B Common Stock.
Concurrent OpCo Unit Purchase
In connection with this offering, we intend to purchase from PT Independence Energy Holdings LLC (“PT Independence”) an aggregate of 2,233,727 OpCo Units at a price per OpCo Unit equal to the price per share at which the underwriters purchase shares of our Class A Common Stock from the selling stockholder in this offering (the “Concurrent OpCo Unit Purchase”) and to cancel a corresponding number of shares of Class B Common Stock held by PT Independence. The total amount paid by us to PT Independence will be $ . If the underwriters exercise their option to purchase additional shares from the selling stockholder in this offering, we intend to purchase a number of additional OpCo Units from PT Independence and to cancel a corresponding number of shares of Class B Common Stock held by PT Independence in equal proportion to the number of additional shares of Class A Common Stock sold hereby pursuant to the underwriters’ option. This offering is not conditioned upon the completion of the Concurrent OpCo Unit Purchase, but the Concurrent OpCo Unit Purchase is conditioned upon the completion of this offering.
We intend to fund the Concurrent OpCo Unit Purchase with cash on hand.
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The following diagram displays our simplified ownership structure, as of July 31, 2022 and after giving effect to the Concurrent OpCo Unit Purchase, the in-kind distribution described under the section titled “Selling Stockholder” and this offering, assuming that the underwriters do not exercise their option to purchase additional shares:
| (1) | Former Independence Owners include the selling stockholder and PT Independence. The shares of Class A Common Stock to be sold by the selling stockholder represent the shares of Class A Common Stock to be issued upon redemption of an equivalent number of OpCo Units and a corresponding number of shares of Class B Common Stock immediately prior to the closing of this offering. See “Selling Stockholder.” Any pro forma share counts included in this prospectus have been adjusted for the in-kind distribution described in the section titled “Selling Stockholder” expected to take place concurrently with this offering. |
| (2) | Guarantors under the Revolving Credit Facility and Senior Notes. |
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Recent Developments
Uinta Basin Acquisition
On March 30, 2022, one of our operating subsidiaries (the “Purchaser”), and OpCo consummated the purchase from Verdun Oil Company II LLC, a Delaware limited liability company (the “Seller”), all of the issued and outstanding membership interests (the “Purchased Interests”) of Uinta AssetCo, LLC, a Texas limited liability company and wholly owned subsidiary of the Seller (“UtahCo” and, such transactions, the “Uinta Acquisition”), pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Seller, with an effective date of January 1, 2022. As a result, UtahCo—and indirectly the Company—now holds all previously held development and production assets of, and certain obligations of, EP Energy E&P Company, L.P. (“EP Energy”) located in the state of Utah. Such assets include an aggregate approximately 145,000 net acres, primarily located in Duchesne and Uintah Counties, Utah, with approximately 400 currently producing wells. Through this acquisition, we acquired low-risk assets with a strong production base and what we believe to be a multiyear inventory of high-quality oil-weighted undeveloped locations. The proved reserves we acquired in the Uinta Acquisition assets had, as of December 31, 2021, an associated $1.0 billion in net proved standardized measure and $1.1 billion and $1.6 billion in net proved present value (discounted at ten percent, or PV-10) at SEC Pricing as of December 31, 2021 and NYMEX Pricing as of June 30, 2022, respectively. For additional information regarding the reserves acquired in the Uinta Acquisition, see “—Summary Reserve and Operating Data.”
Total consideration was approximately $690 million at closing, inclusive of purchase price adjustments, expenses and costs incurred in connection with modifying certain hedges that we assumed from EP Energy at closing. The Uinta Acquisition was funded with cash on hand and borrowings under the Revolving Credit Facility. In connection with the closing of the transaction, we entered into an amendment to the Revolving Credit Facility (the “Revolving Credit Facility Amendment”) to, among other things, increase the borrowing base to $1.8 billion and the elected commitment amount to $1.3 billion.
Commodity Hedging Program
A key tenet of our focused risk management effort is an active economic hedging strategy to mitigate near-term price volatility while maintaining long-term exposure to underlying commodity prices. Our hedging program limits our near-term exposure to product price volatility and allows us to protect the balance sheet and corporate returns through commodity cycles and return capital to investors. Future transactions may include price swaps whereby we will receive a fixed price for our production and pay a variable market price to the contract counterparty. Additionally, we may enter into collars, whereby we receive the excess, if any, of the fixed floor over the floating rate or pay the excess, if any of the floating rate over the fixed ceiling.
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As of June 30, 2022, our derivative portfolio had an aggregate notional value of approximately $2.0 billion. We determine the fair value of our oil and natural gas commodity derivatives using valuation techniques that utilize market quotes and pricing analysis. Inputs include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. The following table details our net volume positions by commodity as of June 30, 2022.
| Production Period |
Volumes | Weighted Average Fixed Price |
Fair Value |
|||||||||
| (in thousands) | (in thousands) | |||||||||||
| Crude oil swaps (Bbls): |
||||||||||||
| WTI |
||||||||||||
| 2022 |
6,881 | $ | 64.35 | $ | (234,085 | ) | ||||||
| 2023 |
9,710 | $ | 60.00 | (248,904 | ) | |||||||
| 2024 |
5,721 | $ | 63.82 | (80,403 | ) | |||||||
| Brent |
||||||||||||
| 2022 |
252 | $ | 56.36 | (11,398 | ) | |||||||
| 2023 |
527 | $ | 52.52 | (19,454 | ) | |||||||
| 2024 |
276 | $ | 68.65 | (4,029 | ) | |||||||
| Crude oil collars – WTI (Bbls): |
||||||||||||
| 2023 |
1,155 | $ | 48.68 - $57.87 | (32,709 | ) | |||||||
| Natural gas swaps (MMBtu): |
||||||||||||
| 2022 |
40,814 | $ | 2.77 | (116,709 | ) | |||||||
| 2023 |
62,248 | $ | 2.73 | (119,329 | ) | |||||||
| 2024 |
9,604 | $ | 4.14 | (2,288 | ) | |||||||
| NGL swaps (Bbls): |
||||||||||||
| 2022 |
1,505 | $ | 32.64 | (15,023 | ) | |||||||
| 2023 |
1,379 | $ | 40.80 | 3,351 | ||||||||
| Crude oil basis swaps (Bbls): |
||||||||||||
| 2022 |
2,857 | $ | (0.13 | ) | (5,154 | ) | ||||||
| Natural gas basis swaps (MMBtu): |
||||||||||||
| 2022 |
12,654 | $ | (0.17 | ) | (2,610 | ) | ||||||
| Calendar Month Average (“CMA”) roll swaps (Bbls): |
||||||||||||
| 2022 |
740 | $ | 1.08 | (1,557 | ) | |||||||
| Natural gas collars (MMBtu): |
||||||||||||
| 2023 |
550 | $ | 2.63 - $3.01 | (1,145 | ) | |||||||
| 2024 |
18,300 | $ | 3.38 - $4.56 | (7,603 | ) | |||||||
|
|
|
|||||||||||
| Total |
$ | (899,049 | ) | |||||||||
|
|
|
|||||||||||
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The Offering
Class A Common Stock offered by
| the selling stockholder |
5,000,000 shares (or 5,750,000 shares if the underwriters exercise their option to purchase additional shares in full). All of such shares represent shares of Class A Common Stock to be issued to the selling stockholder upon redemption of an equivalent number of OpCo Units and a corresponding number of shares of Class B Common Stock immediately prior to the closing of this offering. See “Selling Stockholder.” |
Class A Common Stock outstanding
| immediately after this offering |
47,457,509 shares (or 48,282,164 shares if the underwriters exercise their option to purchase additional shares in full). |
Class B Common Stock outstanding
| immediately after this offering and the Concurrent OpCo Unit Purchase |
119,805,036 shares (or 118,645,322 shares if the underwriters exercise their option to purchase additional shares in full). |
Shares held by the selling stockholder
| immediately after this offering |
82,656,349 shares of Class B Common Stock (or 81,831,694 shares of Class B Common Stock if the underwriters exercise their option to purchase additional shares in full). See “Selling Stockholder.” |
Voting power of Class A Common Stock
| after giving effect to this offering and the Concurrent OpCo Unit Purchase |
28% (or 100% if all outstanding OpCo Units held by the OpCo Unitholders were redeemed (along with a corresponding number of shares of our Class B Common Stock) for newly issued shares of Class A Common Stock on a one-for-one basis). |
Voting power of Class B Common Stock
| after giving effect to this offering and the Concurrent OpCo Unit Purchase |
72% (or 0% if all outstanding OpCo Units held by the OpCo Unitholders were redeemed (along with a corresponding number of shares of our Class B Common Stock) for newly issued shares of Class A Common Stock on a one-for-one basis). |
| Voting rights |
Prior to the Trigger Date (as defined in the section herein titled “Description of Capital Stock”), holders of our Common Stock will not be entitled to elect directors to our Board of Directors. On and after the Trigger Date, the holders of our Common Stock will be entitled to elect directors but will not have cumulative voting rights in the election of directors. Holders of our Common Stock will otherwise be entitled to one vote per share held of |
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| record on all matters to be voted upon by the stockholders. Holders of our Class A Common Stock and Class B Common Stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or by our amended and restated certificate of incorporation. See the section titled “Description of Capital Stock.” |
| Use of proceeds |
We will not receive any of the proceeds from the sale of shares of our Class A Common Stock by the selling stockholder in this offering (including any sales pursuant to the underwriters’ option to purchase additional shares from the selling stockholder). |
| Dividend policy |
On August 9, 2022, our Board of Directors approved a quarterly cash dividend of $0.17 per share, or $0.68 per share on an annualized basis, to be paid to our shareholders. The quarterly dividend was paid on September 6, 2022 to shareholders of record as of the close of business on August 23, 2022. Future dividend payments will depend on our level of earnings, financial requirements and other factors and will be subject to approval by our board of directors, applicable law and the terms of our existing debt documents. Please see the section titled “Dividend Policy.” |
| Listing and trading symbol |
Shares of our Class A Common Stock trade on the NYSE under the symbol “CRGY.” |
| Risk factors |
You should carefully read and consider the information set forth under the heading “Risk Factors” and all other information set forth in this prospectus before deciding to invest in our Class A Common Stock. |
| Conflicts of interest |
Affiliates of KKR Capital Markets LLC own in excess of 10% of our issued and outstanding common stock. Accordingly, this offering will be conducted in accordance with Rule 5121 of the Financial Industry Regulatory Authority (“FINRA”). Pursuant to that rule, the appointment of a “qualified independent underwriter” is not required in connection with this offering as a “bona fide public market,” as defined in paragraph (f)(3) of Rule 5121, exists for our Class A Common Stock. KKR Capital Markets LLC will not confirm sales to any account over which it exercises discretionary authority without the specific written approval of the account holder. |
The number of shares of our Class A Common Stock and Class B Common Stock to be outstanding after this offering is based on 41,959,809 shares of our Class A Common Stock and 127,536,463 shares of our Class B Common Stock outstanding as of July 31, 2022 after giving effect to the Concurrent OpCo Unit Purchase and the in-kind distribution described under the section titled “Selling Stockholder” and excludes 861,349 shares of Class A Common Stock reserved for issuance under our 2021 Equity Incentive Plan as of December 31, 2021, any shares of Class A Common Stock issuable under the 2021 Manager Incentive Plan, and any shares of Class A Common Stock issuable pursuant to the Management Agreement. See “Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder
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Matters—Equity Compensation Plan Information” and “Items 1 and 2. Business and Properties—Management Agreement” in our Annual Report on Form 10-K for the year ended December 31, 2021 incorporated herein by reference for more information.
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Summary Historical Financial Data
The following table shows our summary historical financial data for each of the periods indicated. The summary historical financial data as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 were derived from our audited combined and consolidated financial statements incorporated by reference herein. The summary historical financial data as of June 30, 2022 and for the six months ended June 30, 2022 and 2021, were derived from our unaudited condensed consolidated financial statements incorporated by reference herein. The summary pro forma financial data for the year ended December 31, 2021 and for the six months ended June 30, 2022 were derived from our unaudited pro forma condensed combined and consolidated financial statements incorporated by reference herein, which have been prepared from the respective historical consolidated financial statements of the Company for the six months ended June 30, 2022 and for the year ended December 31, 2021 and the statements of revenues and direct operating expenses of certain exploration and production assets acquired from the Uinta Acquisition for the period from January 1, 2022 through June 30, 2022 and for the year ended December 31, 2021. Pro forma financial data gives effect to the Transactions as if they had been consummated on January 1, 2021. See our Current Report on Form 8-K filed on April 8, 2022, our Current Report on Form 8-K/A filed on May 19, 2022, and our Current Report on Form 8-K filed on August 19, 2022, each incorporated by reference herein.
Neither our historical nor pro forma results are necessarily indicative of future operating results. The summary financial data presented below are qualified in their entirety by reference to, and should be read in conjunction with, “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included or incorporated by reference elsewhere in this prospectus, and the historical and pro forma financial statements and related notes incorporated by reference in this prospectus.
| Historical | Pro Forma | Historical | ||||||||||||||||||||||||||
| Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2022 | 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||
| Statement of operations data: |
||||||||||||||||||||||||||||
| Revenues and other operating income |
||||||||||||||||||||||||||||
| Oil |
$ | 883,087 | $ | 491,780 | $ | 785,750 | $ | 1,404,058 | $ | 1,107,236 | $ | 975,076 | $ | 405,743 | ||||||||||||||
| Natural gas |
354,298 | 149,317 | 173,386 | 588,716 | 366,152 | 350,488 | 143,492 | |||||||||||||||||||||
| Natural gas liquids |
185,530 | 69,902 | 86,473 | 235,600 | 155,043 | 155,043 | 74,291 | |||||||||||||||||||||
| Midstream and other |
54,062 | 43,222 | 41,631 |
|
69,421 |
|
26,737 | 26,737 | 24,464 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total revenues |
1,476,977 | 754,221 | 1,087,240 | 2,297,795 | 1,655,168 | 1,507,344 | 647,990 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Expenses |
||||||||||||||||||||||||||||
| Lease operating expense |
243,501 | 202,180 | 255,106 | — | — | 201,198 | 117,628 | |||||||||||||||||||||
| Workover expense |
10,842 | 6,385 | 9,789 | — | — | 34,976 | 4,891 | |||||||||||||||||||||
| Asset operating expense |
45,940 | 39,023 | 40,364 | — | — | 33,862 | 13,496 | |||||||||||||||||||||
| Gathering, transportation and marketing |
187,059 | 173,122 | 142,214 | — | — | 86,514 | 91,422 | |||||||||||||||||||||
| Production and other taxes |
108,992 | 61,124 | 88,696 | — | — | 111,980 | 52,186 | |||||||||||||||||||||
| Operating expense |
— | — | — | 843,922 | 485,937 | — | — | |||||||||||||||||||||
| Depreciation, depletion, and amortization |
312,787 | 372,300 | 311,185 | 495,773 | 256,129 | 230,592 | 160,097 | |||||||||||||||||||||
| Impairment of oil and natural gas properties |
— | 247,215 | — | 761 | — | — | — | |||||||||||||||||||||
| Exploration expense |
1,180 | 486 | 469 | 1,661 | 1,939 | 1,939 | 79 | |||||||||||||||||||||
| Midstream operating expense |
13,389 | 9,472 | 9,968 | 15,355 | 6,422 | 6,422 | 6,330 | |||||||||||||||||||||
| General and administrative expense |
78,342 | 16,542 | 2,357 | 171,327 | 42,178 | 42,178 | 22,751 | |||||||||||||||||||||
| Gain on sale of assets |
(8,794 | ) | — | (22 | ) | (9,232 | ) | (4,987 | ) | (4,987 | ) | (9,417 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total expenses |
993,238 | 1,127,849 | 860,126 | 1,519,567 | 787,618 | 744,674 | 459,463 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
16
Table of Contents
| Historical | Pro Forma | Historical | ||||||||||||||||||||||||||
| Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2022 | 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||
| Income (loss) from |
483,739 | (373,628 | ) | 227,114 | 778,228 | 867,550 | 762,670 | 188,527 | ||||||||||||||||||||
| Other income (expense) |
||||||||||||||||||||||||||||
| Interest expense |
(50,740 | ) | (38,107 | ) | (53,577 | ) | (73,698 | ) | (41,461 | ) | (41,461 | ) | |
(24,826 |
) | |||||||||||||
| Gain (loss) on derivatives(1) |
(866,020 | ) | 195,284 | (127,202 | ) | (970,659 | ) | (850,695 | ) | (850,695 | ) | (602,810 | ) | |||||||||||||||
| Income (loss) from equity affiliates |
368 | — | — | (1,529 | ) | 3,252 | 3,252 | — | ||||||||||||||||||||
| Gain on extinguishment of debt |
— | — | — | 3,369 | — | — | — | |||||||||||||||||||||
| Other income (expense) |
120 | 341 | 402 | 5,926 | (1,802 | ) | (1,802 | ) | |
(6 |
) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total other income (expense) |
(916,272 | ) | 157,518 | (180,377 | ) | (1,036,591 | ) | (890,706 | ) | (890,706 | ) | |
(627,642 |
) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Income (loss) before income taxes |
(432,533 | ) | (216,110 | ) | 46,737 | (258,363 | ) | (23,156 | ) | (128,036 | ) | |
(439,115 |
) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Income tax benefit (expense) |
306 | (14 | ) | (28 | ) | 13,153 | (2,519 | ) | 3,927 | |
(14 |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net income (loss) |
(432,227 | ) | (216,124 | ) | 46,709 | (245,210 | ) | (25,675 | ) | (124,109 | ) | |
(439,129 |
) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Less: net (income) loss attributable to Predecessor |
339,168 | 118,649 | (45,839 | ) | — | — | — | 425,237 | ||||||||||||||||||||
| Less: net (income) loss attributable to noncontrolling interests(2) |
14,922 | 97,475 | (870 | ) | 3,570 | (1,183 | ) | (1,183 | ) | 13,892 | ||||||||||||||||||
| Less: net loss attributable to redeemable noncontrolling interests |
58,761 | — | — | 181,682 | 15,896 | 94,815 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net income (loss) attributable to Crescent Energy |
$ | (19,376 | ) | $ | — | $ | — | $ |
(59,958 |
) |
$ | (10,962 | ) | $ | (30,477 | ) | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance sheet data (at period end): |
|
|||||||||||||||||||||||||||
| Cash and cash equivalents |
$ | 128,578 | $ | 36,861 | $ | 19,894 | $ | 54,580 | ||||||||||||||||||||
| Property, plant and equipment, net |
4,555,113 | 3,642,147 | 3,773,539 | 5,462,964 | ||||||||||||||||||||||||
| Total assets |
5,157,462 | 3,907,369 | 3,997,520 | 6,273,672 | ||||||||||||||||||||||||
| Total debt |
1,030,406 | 751,075 | 972,100 | 1,515,702 | ||||||||||||||||||||||||
| Total liabilities |
2,137,805 | 1,014,209 | 1,285,454 | 3,484,953 | ||||||||||||||||||||||||
| Redeemable noncontrolling interests |
2,325,013 | — | — | 2,167,413 | ||||||||||||||||||||||||
| Total equity |
694,644 | 2,893,160 | 2,712,066 | 621,306 | ||||||||||||||||||||||||
| Net cash provided by (used in): |
||||||||||||||||||||||||||||
| Operating activities |
$ | 233,147 | $ | 411,028 | $ | 485,515 | $ | 398,454 | $ | 35,678 | ||||||||||||||||||
| Investing activities |
(244,595 | ) | (124,940 | ) | (328,158 | ) | (864,036 | ) | (86,670 | ) | ||||||||||||||||||
| Financing activities |
105,145 | (272,089 | ) | (153,192 | ) | 394,613 | 90,209 | |||||||||||||||||||||
| Non-GAAP financial measures(3): |
||||||||||||||||||||||||||||
| Adjusted EBITDAX |
$ | 520,051 | $ | 465,064 | $ | 512,842 | $ | 963,505 | $ | 698,667 | $ | 568,250 | $ | 261,320 | ||||||||||||||
| Levered Free Cash Flow |
276,670 | 309,323 | 146,347 | 665,377 | 357,121 | 226,704 | 169,768 | |||||||||||||||||||||
17
Table of Contents
| (1) | Our realized loss on commodity derivatives for the year ended December 31, 2021 includes non-recurring early settlement of derivative contracts. |
| (2) | Certain third parties hold noncontrolling equity interests in certain of our operating subsidiaries. See “Basis of presentation,” “—Our corporate structure” and the unaudited pro forma condensed consolidated and combined financial statements and the related notes thereto incorporated by reference into this prospectus. |
| (3) | See “—Non GAAP financial measures” for definitions of Adjusted EBITDAX and Levered Free Cash Flow and reconciliations to the nearest comparable GAAP metric. |
Non-GAAP Financial Measures
Adjusted EBITDAX
We define 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 of oil and natural gas properties, non-cash equity-based compensation, write-offs of other long-term assets, (gain) loss on sale of assets, other (income) expense, certain redeemable noncontrolling interest distributions made by OpCo related to management compensation, transaction and nonrecurring expenses and early settlement of derivative contracts.
Adjusted EBITDAX is not a measure of performance as determined by GAAP. We believe Adjusted EBITDAX is a useful performance measure because it allows for an effective evaluation of our operating performance when compared against our peers, without regard to our financing methods, corporate form or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially within our 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. Our presentation of Adjusted EBITDAX should not be construed as an inference that our results will be unaffected by unusual or nonrecurring items. Our computations of Adjusted EBITDAX may not be identical to other similarly titled measures of other companies. In addition, the Revolving Credit Facility and the Senior Notes include a calculation of Adjusted EBITDAX for purposes of covenant compliance.
Levered Free Cash Flow
We define 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 (expense), tax-related redeemable noncontrolling interest 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 our management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Levered Free Cash Flow is a useful performance measure because it allows for an effective evaluation of our operating and financial performance and the ability of our operations to generate cash flow that is available to reduce leverage or distribute to our 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
18
Table of Contents
of actual operating performance or investing activities. Our computations of Levered Free Cash Flow may not be comparable to other similarly titled measures of other companies.
Adjusted EBITDAX and Levered Free Cash Flow should be read in conjunction with the information contained in our combined and consolidated financial statements prepared in accordance with GAAP.
The following table presents a reconciliation of Adjusted EBITDAX and Levered Free Cash Flow to net income (loss), the most directly comparable financial measure calculated in accordance with GAAP.
| Historical | Pro Forma | Historical | ||||||||||||||||||||||||||
| Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2022 | 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||||||
| Net income (loss) |
$ | (432,227 | ) | $ | (216,124 | ) | $ | 46,709 | $ | (245,210 | ) | $ | (25,675 | ) | $ | (124,109 | ) | $ | (439,129 | ) | ||||||||
| Adjustments to reconcile to Adjusted EBITDAX: |
||||||||||||||||||||||||||||
| Interest expense |
50,740 | 38,107 | 53,577 | 73,698 | 41,461 | 41,461 | 24,826 | |||||||||||||||||||||
| Realized (gain) loss on interest rate derivatives |
7,373 | 12,435 | 2,189 | 7,373 | — | — | 7,022 | |||||||||||||||||||||
| Income tax expense (benefit) |
(306 | ) | 14 | 28 | (13,153 | ) | 2,519 | (3,927 | ) | 14 | ||||||||||||||||||
| Depreciation, depletion and amortization |
312,787 | 372,300 | 311,185 | 495,773 | 256,129 | 230,592 | 160,097 | |||||||||||||||||||||
| Exploration expense |
1,180 | 486 | 469 | 1,661 | 1,939 | 1,939 | 79 | |||||||||||||||||||||
| Non-cash (gain) loss on derivatives |
330,368 | (10,910 | ) | 98,026 | 391,347 | 408,030 | 408,030 | 304,579 | ||||||||||||||||||||
| Impairment of oil and natural gas properties |
— | 247,215 | — | 761 | — | — | — | |||||||||||||||||||||
| Non-cash equity-based compensation expense |
39,919 | (797 | ) | (2,721 | ) | 65,010 | 20,470 | |
20,470 |
|
9,736 | |||||||||||||||||
| Write-offs of other long-term assets |
— | — | 3,804 | — | — | — | — | |||||||||||||||||||||
| (Gain) loss on sale of assets |
(8,794 | ) | — | (22 | ) | (9,232 | ) | (4,987 | ) | (4,987 | ) | (9,417 | ) | |||||||||||||||
| Other (income) expense |
(120 | ) | (341 | ) | (402 | ) | (9,295 | ) | 1,802 | 1,802 | 6 | |||||||||||||||||
| Certain redeemable noncontrolling interest distributions made by OpCo related to Manager Compensation |
(2,706 | ) | — | — | (40,107 | ) | (20,128 | ) | (20,128 | ) | — | |||||||||||||||||
| Transaction and nonrecurring expenses (1) |
23,149 | 22,679 | — | 46,191 | 17,107 | 17,107 | 4,819 | |||||||||||||||||||||
| Early settlement of derivative contracts (2) |
198,688 | — | — | 198,688 | — | — | 198,688 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Adjusted EBITDAX (non-GAAP) |
$ | 520,051 | $ | 465,064 | $ | 512,842 | $ | 963,505 | $ | 698,667 | $ | 568,250 | $ | 261,320 | ||||||||||||||
| Adjustments to reconcile to Levered Free Cash Flow: |
||||||||||||||||||||||||||||
| Interest expense, excluding non-cash deferred financing cost amortization |
(40,551 | ) | (33,166 | ) | (48,848 | ) | (59,193 | ) | (37,535 | ) | (37,535 | ) | (19,417 | ) | ||||||||||||||
| Realized (gain) loss on interest rate derivatives |
(7,373 | ) | (12,435 | ) | (2,189 | ) | (7,373 | ) | — | — | (7,022 | ) | ||||||||||||||||
| Current income tax benefit (expense) |
(629 | ) | (14 | ) | (28 | ) | 84 | (7,976 | ) | (7,976 | ) | (14 | ) | |||||||||||||||
| Tax-related redeemable noncontrolling interest distributions made by OpCo |
— | — | — | — | (17,167 | ) |
|
(17,167 |
) |
— | ||||||||||||||||||
| Development of oil and natural gas properties |
(194,828 | ) | (110,126 | ) | (315,430 | ) | (231,646 | ) | (278,868 | ) | (278,868 | ) | (65,099 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Levered Free Cash Flow (non-GAAP) |
$ | 276,670 | $ | 309,323 | $ | 146,347 | $ | 665,377 | $ | 357,121 | $ | 226,704 | $ | 169,768 | ||||||||||||||
|
|
|
|
|
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|
|||||||||||||||
19
Table of Contents
| (1) | Transaction and nonrecurring expenses of $17.1 million for the six months ended June 30, 2022 were primarily related to (i) legal, consulting, transition service agreement costs, related restructuring of acquired derivative contracts and other fees incurred for the Uinta Acquisition and Merger Transactions, (ii) severance costs subsequent to the Merger Transactions and (iii) acquisition and debt transaction related costs. Transaction and nonrecurring expenses of $4.8 million for the six months ended June 30, 2021 were primarily related to legal, consulting and other fees related to the formation of Independence, the acquisition of Titan Energy Holdings, LLC (f/k/a Liberty Energy LLC) (the “Titan Acquisition”) and the related reorganization transactions. Transaction expenses of $23.1 million during the year ended December 31, 2021 were primarily related to legal, consulting and other fees incurred for the Noncontrolling Interest Carve-out, the redemption by certain of Independence’s consolidated subsidiaries of the noncontrolling equity interests held in such subsidiaries by certain third-party investors in exchange for membership interests in Independence in April 2021 (the “April 2021 Exchange”) and the Merger Transactions, partially offset by $3.4 million received in connection with a midstream legal settlement. Transaction expenses of $22.7 million for the year ended December 31, 2020 included (i) $7.9 million related to the formation of Independence, the acquisition of Titan Energy Holdings, LLC (f/k/a/ Liberty Energy LLC) (the “Titan Acquisition”) and the related reorganization transactions, (ii) $12.0 million for the termination of a midstream contract at our Eagle Ford business, (iii) $1.9 million of severance costs and (iv) $0.9 million for settlement of a royalty owner lawsuit. |
| (2) | Represents the settlement in June 2021 of certain outstanding derivative oil commodity contracts for open positions associated with calendar years 2022 and 2023. Subsequent to the settlement, we entered into new commodity derivative contracts at prevailing market prices. |
20
Table of Contents
Summary Reserve and Operating Data
The following tables summarize our estimated net proved reserves and the estimated net proved reserves acquired in the Uinta Acquisition as of December 31, 2021. For more information regarding our reserve volume and values, see “Items 1 and 2. Business and Properties—Oil, Natural Gas and NGL Reserve Data” in our Annual Report on Form 10-K for the year ended December 31, 2021, and “Item 8.01. Other Events” in our Current Report on Form 8-K filed on April 8, 2022, which are both incorporated by reference in this prospectus.
Summary Reserve Data based on SEC Pricing
The following table provides historical reserves, PV-0, PV-10 and standardized measure as of December 31, 2021 for Crescent Energy Company and the reserves acquired in the Uinta Acquisition, in each case prepared in accordance with the SEC’s rules regarding reserve reporting currently in effect, including the use of an average price, calculated as prices equal to the 12-month unweighted arithmetic average of the first day of the month prices for each of the preceding 12 months as adjusted for location and quality differentials, unless prices are defined by contractual arrangements, excluding escalations based on future conditions (“SEC Pricing”). The reserve estimates presented in the tables below are based, with respect to Crescent Energy Company, on the reserve reports of the Independent Reserve Engineers, and with respect to the reserves acquired in the Uinta Acquisition, on a report prepared by CG&A.
| Crescent Energy Company(1) |
Uinta Acquisition(2) | |||||||
| As of December 31, 2021 | ||||||||
| Net Proved Reserves: |
||||||||
| Oil (MBbls) |
210,160 | 42,924 | ||||||
| Natural gas (MMcf) |
1,469,953 | 139,329 | ||||||
| NGLs (MBbls) (3) |
76,493 | — | ||||||
| Total Proved Reserves (MBoe) |
531,645 | 66,146 | ||||||
| Standardized Measure (millions) (4) |
$ | 4,958 | $ | 1,027 | ||||
| PV-0 (millions) (4) |
$ | 9,391 | $ | 1,524 | ||||
| PV-10 (millions) (4) |
$ | 5,159 | $ | 1,054 | ||||
| Net Proved Developed Reserves: |
||||||||
| Oil (MBbls) |
158,091 | 24,871 | ||||||
| Natural gas (MMcf) |
1,404,570 | 92,094 | ||||||
| NGLs (MBbls) (3) |
66,402 | — | ||||||
| Total Proved Developed Reserves (MBoe) |
458,588 | 40,220 | ||||||
| PV-0 (millions) (4) |
$ | 7,495 | $ | 954 | ||||
| PV-10 (millions) (4) |
$ | 4,305 | $ | 733 | ||||
| Net Proved Undeveloped Reserves: |
||||||||
| Oil (MBbls) |
52,069 | 18,054 | ||||||
| Natural gas (MMcf) |
65,383 | 47,235 | ||||||
| NGLs (MBbls) (3) |
10,091 | — | ||||||
| Total Proved Undeveloped Reserves (MBoe) |
73,057 | 25,926 | ||||||
| PV-0 (millions) (4) |
$ | 1,896 | $ | 571 | ||||
| PV-10 (millions) (4) |
$ | 854 | $ | 321 | ||||
| (1) | Crescent Energy Company’s reserves and present value (discounted at ten percent, or PV-10) were determined using average first-day-of-the-month prices for the prior 12 months in accordance with SEC guidance. For oil and NGL volumes, the average WTI posted price of $66.56 per barrel and $39.56 per barrel as of December 31, 2021 and 2020, was adjusted for items such as gravity, quality, |
21
Table of Contents
| local conditions, gathering, transportation fees and distance from market. For natural gas volumes, the average Henry Hub Index spot price of $3.598 per MMBtu and $1.99 per MMBtu as of December 31, 2021 and 2020, was similarly adjusted for items such as quality, local conditions, gathering, transportation fees and distance from market. All prices are held constant throughout the lives of the properties. The average adjusted product prices over the remaining lives of the properties are $64.84 per barrel of oil, $3.46 per Mcf of natural gas and $27.21 per barrel of NGLs as of December 31, 2021. The average adjusted product prices over the remaining lives of the properties were $37.67 per barrel of oil, $1.62 per Mcf of natural gas and $10.66 per barrel of NGLs as of December 31, 2020. |
| (2) | The Uinta Acquisition’s reserves and present value (discounted at ten percent, or PV-10) were determined using average first-day-of-the-month prices for the prior 12 months in accordance with SEC guidance. The base SEC oil and gas prices calculated for December 31, 2021 were $66.56 per Bbl and $3.598 per MMBtu, respectively. As specified by the SEC, a company must use a 12-month average price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period. The base oil price is based upon WTI-Cushing spot prices (EIA) during 2021 and the base gas price is based upon Henry Hub spot prices (Gas Daily) during 2021. Adjustments to oil and gas prices were calculated by the Company and applied as received by CG&A. For all properties, oil price differentials were forecast at -$10.26 per Bbl and gas price differentials were forecast at -$1.51 per Mcf. Adjustments may include treating costs, transportation charges, plant processing, and/or crude quality and gravity corrections. After these adjustments, the net realized prices over the life of the proved properties was estimated to be $56.30 per Bbl for oil and $2.088 per Mcf for gas. All economic factors were held constant in accordance with SEC guidelines. |
| (3) | Natural gas reserves acquired in the Uinta Acquisition are shown in “wet” MMcf, which includes NGLs. Crescent Energy Company uses three-stream reserve information, with NGL reserves reported separately. As a result, reserve estimates of Crescent Energy Company are not comparable to reserve estimates for the Uinta Acquisition. |
| (4) | Present value (discounted at PV-0 and PV-10) is not a financial measure calculated in accordance with GAAP because it does not include the effects of income taxes on future net revenues. 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 the 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 its investors as supplemental disclosure to the standardized measure of future net cash flows, or after tax amount, because it presents the discounted future net cash flows attributable to our reserves prior to taking into account future income taxes and our specific tax characteristics. For Crescent Energy Company, the PV-0 and PV-10 income tax amounts included in the net proved standardized measure but not included in PV-0 and PV-10 were $352.1 million and $200.5 million, respectively. Standardized measure for the Uinta Acquisition is shown pro forma as if the assets acquired in the Uinta Acquisition had been owned by Crescent Energy Company as of December 31, 2021. For the Uinta Acquisition, the PV-0 and PV-10 income tax amounts included in the net proved standardized measure but not included in PV-0 and PV-10 were $39.8 million and $27.1 million, respectively. We and others in our industry use PV-0 and PV-10 as a measure to compare the relative size and value of proved reserves without regard to specific tax characteristics. 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. |
22
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Summary Reserve Data based on NYMEX Pricing
The following table provides historical reserves, PV-0 and PV-10 as of December 31, 2021 for Crescent Energy Company and the reserves acquired in the Uinta Acquisition using average annual NYMEX forward-month contract pricing in effect as of June 30, 2022 (“NYMEX Pricing”). We have included this reserve sensitivity in order to provide an additional method of presentation of the fair value of our assets and the cash flows that we expect to generate from those assets based on the market’s forward-looking pricing expectations as of June 30, 2022. The historical 12-month pricing average in our 2021 disclosures under the heading “Summary Reserve Data based on SEC Pricing” does not reflect the oil and natural gas futures. We believe that the use of forward prices provides investors with additional useful information about our reserves, as the forward prices are based on the market’s forward-looking expectations of oil and natural gas prices as of a certain date, although we caution investors that this information should be viewed as a helpful alternative, not a substitute, for the data presented based on SEC Pricing. In addition, we believe strip pricing provides relevant and useful information because it is widely used by investors in our industry as a basis for comparing the relative size and value of our proved reserves to our peers and in particular addresses the impact of differentials compared with our peers. Our estimated historical reserves, PV-0 and PV-10 based on NYMEX Pricing, were otherwise prepared on the same basis as our estimations based on SEC Pricing reserves for the comparable period. Reserve estimates using NYMEX Pricing are calculated using the internal systems of the management of the Company and have not been prepared or audited by an independent, third-party reserve engineer, but otherwise contain the same parameters, except for price and minor system differences.
| Crescent Energy Company | Uinta Acquisition | |||||||
| As of December 31, 2021(1) | ||||||||
| Net Proved Reserves: |
||||||||
| Oil (MBbls) |
209,908 | 43,142 | ||||||
| Natural gas (MMcf) |
1,534,371 | 141,098 | ||||||
| NGLs (MBbls) (3) |
78,615 | — | ||||||
| Total Proved Reserves (MBoe) |
544,252 | 66,659 | ||||||
| PV-0 (millions) (2) |
$ | 12,183 | $ | 2,110 | ||||
| PV-10 (millions) (2) |
$ | 7,091 | $ | 1,551 | ||||
| Net Proved Developed Reserves: |
||||||||
| Oil (MBbls) |
157,868 | 25,062 | ||||||
| Natural gas (MMcf) (3) |
1,468,815 | 93,735 | ||||||
| NGLs (MBbls) (3) |
68,499 | — | ||||||
| Total Proved Developed Reserves (MBoe) |
471,169 | 40,685 | ||||||
| PV-0 (millions) (2) |
$ | 9,930 | $ | 1,362 | ||||
| PV-10 (millions) (2) |
$ | 5,939 | $ | 1,091 | ||||
| Net Proved Undeveloped Reserves: |
||||||||
| Oil (MBbls) |
52,040 | 18,080 | ||||||
| Natural gas (MMcf) |
65,556 | 47,363 | ||||||
| NGLs (MBbls) (3) |
10,116 | — | ||||||
| Total Proved Undeveloped Reserves (MBoe) |
73,083 | 25,974 | ||||||
| PV-0 (millions) (2) |
$ | 2,253 | $ | 748 | ||||
| PV-10 (millions) (2) |
$ | 1,152 | $ | 460 | ||||
| (1) | The NYMEX reserves, PV-0 and PV-10 of Crescent Energy Company and the Uinta Acquisition were determined using index prices for oil and natural gas, respectively, without giving effect to derivative transactions and were calculated based on settlement prices to better reflect the market expectations as of that date, as adjusted for our estimates of quality, transportation fees, and market differentials. The NYMEX reserves calculations are based on NYMEX futures pricing at closing on June 30, 2022 for oil and natural gas. The average adjusted product prices over the remaining lives of the properties are |
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| $70.17 per barrel of oil, $4.45 per Mcf of natural gas and $29.40 per barrel of NGLs as of December 31, 2021. We believe that the use of forward prices provides investor with additional useful information about our reserves, as the forward prices are based on the market’s forward-looking expectations of oil and natural gas prices as of a certain date, although we caution investors that this information should be viewed as a helpful alternative, not as a substitute, for the data presented based on SEC Pricing. See “Item 1A. Risk Factors—Risks related to the oil and natural gas industry and our operations—Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves” in our Annual Report on Form 10-K for the year ended December 31, 2021, incorporated herein by reference. |
| (2) | Present value (discounted at PV-0 and PV-10) is not a financial measure calculated in accordance with GAAP because it does not include the effects of income taxes on future net revenues. Neither PV-0 nor PV-10 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 the 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 of discounted future net cash flows. We believe that the presentation of PV-0 and PV-10 is relevant and useful to our investors about the future net cash flows of our reserves in the absence of a comparable measure such as standardized measure. We and others in our industry use PV-0 and PV-10 as a measure 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 neither of PV-0 and PV-10 represent an estimate of the fair market value of our proved reserves. 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) | Natural gas reserves acquired in the Uinta Acquisition are shown in “wet” MMcf, which includes NGLs. Crescent Energy Company uses three-stream reserve information, with NGL reserves reported separately. As a result, reserve estimates of Crescent Energy Company are not comparable to reserve estimates for the Uinta Acquisition. |
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Summary Operating Data
The following table summarizes production, price and cost data for the years ended December 31, 2021, 2020, and 2019 and the six months ended June 30, 2022 and 2021.
| Crescent Energy Company | ||||||||||||||||||||
| Year Ended December 31, | Six Months Ended June 30, |
|||||||||||||||||||
| 2021 | 2020 | 2019 | 2022 | 2021 | ||||||||||||||||
| Net Production: |
||||||||||||||||||||
| Oil (MBbls) |
13,237 | 13,132 | 13,752 | 9,766 | 6,669 | |||||||||||||||
| Natural gas (MMcf) |
89,455 | 78,541 | 73,747 | 62,367 | 43,305 | |||||||||||||||
| NGLs (MBbls) |
6,099 | 5,078 | 5,188 | 3,612 | 2,937 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total (MBoe) |
34,245 | 31,300 | 31,232 | 23,773 | 16,824 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Average daily production (MBoe/d) |
94 | 86 | 86 | 131 | 93 | |||||||||||||||
| Average Realized Prices (before effects of derivatives): |
||||||||||||||||||||
| Oil (per Bbl) |
$ | 66.71 | $ | 37.45 | $ | 57.14 | $ | 99.84 | $ | 60.84 | ||||||||||
| Natural gas (per Mcf) |
3.96 | 1.90 | 2.35 | 5.62 | 3.31 | |||||||||||||||
| NGLs (per Bbl) |
30.42 | 13.77 | 16.67 | 42.92 | 25.30 | |||||||||||||||
| Average Realized Prices (after effects of derivatives): |
||||||||||||||||||||
| Oil (per Bbl) |
$ | 53.07 | $ | 48.85 | $ | 53.92 | $ | 74.57 | $ | 50.95 | ||||||||||
| Natural gas (per Mcf) |
3.06 | 2.32 | 2.41 | 3.32 | 3.26 | |||||||||||||||
| NGLs (per Bbl) |
19.15 | 16.61 | 19.18 | 28.44 | 17.07 | |||||||||||||||
| Average Operating Costs per Boe: |
||||||||||||||||||||
| Operating expense excluding production and other tax |
$ | 14.62 | $ | 13.74 | $ | 14.65 | $ | 15.27 | $ | 13.89 | ||||||||||
| Production and other tax |
3.18 | 1.95 | 2.84 | 4.71 | 3.10 | |||||||||||||||
| Depreciation, depletion, and amortization |
9.13 | 11.89 | 9.96 | 9.70 | 9.52 | |||||||||||||||
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An investment in our Class A Common Stock involves a significant degree of risk. You should carefully consider the risk factors and all of the other information included in this prospectus and the documents we have incorporated by reference into this prospectus, including those in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and our Quarterly Report on Form 10-Q for the period ended June 30, 2022, incorporated herein by reference, before making an investment decision. Any of these risks and uncertainties could have a material adverse effect on our business, financial condition, cash flows and results of operations could be materially adversely affected. If that occurs, we might not be able to pay distributions on our Class A Common Stock, the trading price of our Class A Common Stock could decline materially, and you could lose all or part of your investment.
The risks included in this prospectus and the documents we have incorporated by reference into this prospectus are not the only risks we face. We may experience additional risks and uncertainties not currently known to us, or as a result of developments occurring in the future. Conditions that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, cash flows and results of operations, and our ability to pay distributions to stockholders.
Risks Related to This Offering and our Common Stock
The prevailing market price of shares of Class A Common Stock may be volatile.
The prevailing market price of shares of Class A Common Stock may fluctuate due to a variety of factors, including:
| • | general market conditions, including fluctuations in commodity prices and continuing or worsening inflation and related changes in monetary policy; |
| • | our operating and financial performance; |
| • | the number of identified drilling locations and our reserves estimates; |
| • | quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues, capital expenditures, production, and unit costs; |
| • | the public reaction to our press releases (including press releases relating to this offering), our other public announcements and our filings with the SEC; |
| • | strategic actions by our competitors; |
| • | changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; |
| • | speculation in the press or investment community; |
| • | the failure of research analysts to cover our Class A Common Stock; |
| • | sales of our Class A Common Stock by us or other stockholders, or the perception that such sales may occur; |
| • | changes in accounting principles, policies, guidance, interpretations or standards; |
| • | additions or departures of key management personnel; |
| • | actions by our stockholders; |
| • | domestic and international economic, geopolitical, legal and regulatory factors unrelated to our performance; |
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| • | general economic and political conditions, such as the effects of the COVID-19 pandemic, recessions, interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or terrorism, including the armed conflict in Ukraine; and |
| • | the realization of any risks described in this “Risk Factors” section or in the “Risk Factors” section in our most recent Annual Report on Form 10-K or subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. |
These market and industry factors may materially reduce the prevailing market price of shares of Class A Common Stock regardless of our operating performance.
Armed conflict, geopolitical risk and/or civil unrest, including as a result of the existing conflict in Ukraine, could harm our business.
Terrorist activities, anti-terrorist efforts and other armed conflicts involving the United States or other countries may adversely affect the United States and global economies and could prevent us from meeting our financial and other obligations. For example, on February 24, 2022, Russia launched a large-scale invasion of Ukraine that has led to significant armed hostilities. As a result, the United States, the United Kingdom, the member states of the European Union and other public and private actors have levied severe economic sanctions on Russia. The geopolitical and macroeconomic consequences of this invasion and associated sanctions cannot be predicted, and such events, or any further hostilities in Ukraine or elsewhere, could severely impact the world economy. If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for oil and natural gas, potentially putting downward pressure on demand for our products and causing a reduction in our revenues. The markets for commodities such as oil, gas and NGLs have experienced significant volatility, which may impact demand and have other negative macroeconomic effects. Oil, natural gas and NGL related facilities could be direct targets of terrorist attacks, and our operations could be adversely impacted if infrastructure integral to our or our customers’ operations is destroyed or damaged. Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all.
If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our Class A Common Stock.
Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We cannot be certain that our efforts to develop and maintain internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to develop or maintain effective internal controls, or difficulties encountered in implementing or improving internal controls, could harm our operating results or cause us to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our Class A Common Stock.
An active, liquid and orderly trading market for our Class A Common Stock may not develop or be maintained.
Prior to the Merger Transactions, our Class A Common Stock had not been traded on any market. An active, liquid and orderly trading market for our Class A Common Stock may not be maintained. Active, liquid and orderly trading markets usually result in less price volatility and more efficiency in carrying out investors’ purchase and sale orders. Consequently, you may not be able to sell shares of our Class A Common Stock at prices equal to or greater than the assumed price attributable to such shares.
The stock markets in general have experienced extreme volatility that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may
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adversely affect the trading price of our Class A Common Stock. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us could result in very substantial costs, divert management’s attention and resources and harm our business, operating results and financial condition.
Future sales of our Class A Common Stock in the public market, or the perception that such sales may occur, could reduce the price of our Class A Common Stock, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.
We, the selling stockholder or other holders of our Common Stock may sell additional shares of our Class A Common Stock in subsequent offerings. In addition, subject to certain limitations and exceptions, OpCo Unitholders may redeem their OpCo Units (together with a corresponding number of shares of our Class B Common Stock) for shares of our Class A Common Stock (on a one-for-one basis, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions) and then sell those shares of our Class A Common Stock. As of July 31, 2022, we had 41,959,809 outstanding shares of Class A Common Stock and 127,536,463 outstanding shares of Class B Common Stock. Former Independence Owners, including the selling stockholder, own all of the outstanding shares of our Class B Common Stock, representing approximately 75% of our total outstanding common stock. The registration rights agreement we entered into at closing of the Merger Transactions requires us to effect the registration of their shares in certain circumstances, and this offering on behalf of the selling stockholder named herein is being conducted pursuant to such registration rights agreement.
In connection with this offering, we, our executive officers, directors and certain holders of our outstanding Common Stock (including the selling stockholder) will sign lock-up agreements with the underwriters that will, subject to certain customary exceptions, restrict the sale of the shares of our Class A Common Stock and certain other securities held by them for 60 days following the date of this prospectus. Credit Suisse Securities (USA) LLC may, in its sole discretion and at any time without notice, release all or any portion of the shares or securities subject to the lock-up agreements. See “Underwriting (Conflicts of Interest)” for a description of these lock-up agreements.
Upon the expiration of the lock-up agreements described above, all of such shares will be eligible for resale in a public market pursuant to Rule 144, subject to our compliance with the public information requirement and, in the case of shares held by our affiliates, to volume, manner of sale and other limitations under Rule 144. We expect that certain of our existing stockholders will be considered affiliates upon the expiration of the lock-up period based on their expected share ownership, as well as their board nomination rights (if applicable). Certain other of our stockholders may also be considered affiliates at that time.
In addition, we filed a registration statement with the SEC on Form S-8 providing for the registration of 4,218,398 shares of our Class A Common Stock issued or reserved for issuance under the Contango Oil & Gas Company Third Amended and Restated 2009 Incentive Compensation Plan, as proposed to be amended and assumed by us and our Class A Common Stock issued or reserved for issuance under the Crescent Energy Company 2021 Equity Incentive Plan. Subject to the satisfaction of vesting conditions, the expiration of lock-up agreements and the requirements of Rule 144, shares registered under the registration statement on Form S-8 have been made available for resale immediately in the public market without restriction.
We cannot predict the size of future issuances of our Class A Common Stock or securities convertible into Class A Common Stock or the effect, if any, that future issuances and sales of shares of our Class A Common Stock will have on the market price of our Class A Common Stock. Sales of substantial amounts of our Class A Common Stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our Class A Common Stock.
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This offering is not conditioned on the closing of the Concurrent OpCo Unit Purchase, so the fully diluted ownership of our Common Stock may not give effect to the Concurrent OpCo Unit Purchase.
This offering is not conditioned upon the closing of the Concurrent OpCo Unit Purchase. If we do not consummate the Concurrent OpCo Unit Purchase, your relative ownership percentage in us will be less than it would be if we purchase such OpCo Units and cancel a corresponding number of shares of Class B Common Stock.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our Class A Common Stock or if our operating results do not meet their expectations, the trading price of our Class A Common Stock could decline.
The trading market for our Class A Common Stock will be influenced by the research and reports that industry or securities analysts publish about us or its business. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrades our Class A Common Stock or if our operating results do not meet their expectations, the trading price of our Class A Common Stock could decline.
The Inflation Reduction Act of 2022 could accelerate the transition to a low carbon economy and will impose new costs on our operations.
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA 2022”) into law pursuant to the budget reconciliation process. The IRA 2022 contains hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions. These incentives could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could decrease demand for the oil and gas we produce and consequently materially and adversely affect our business and results of operations. In addition, the IRA 2022 imposes the first ever federal fee on the emission of GHGs through a methane emissions charge. The IRA 2022 amends the federal Clean Air Act to impose a fee on the emission of methane from sources required to report their GHG emissions to the U.S. Environmental Protection Agency (“EPA”), including those sources in the onshore petroleum and natural gas production and gathering and boosting source categories. The methane emissions charge will start in calendar year 2024 at $900 per ton of methane, increase to $1,200 in 2025, and be set at $1,500 for 2026 and each year thereafter. Calculation of the fee is based on certain thresholds established in the IRA 2022. The methane emissions charge could increase our operating costs and adversely affect our business and results of operations.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The information in this prospectus contains or incorporates by reference information that includes or is based upon “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”). All statements, other than statements of historical facts, included or incorporated by reference herein concerning, among other things, planned capital expenditures, increases in oil, natural gas and NGL production, the number of anticipated wells to be drilled or completed after the date hereof, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, among others:
| • | commodity price volatility; |
| • | our business strategy; |
| • | the length, scope, and severity of the ongoing COVID-19 pandemic, including the effects of related public health concerns and the impact of continued actions taken by governmental authorities and other third parties in response to the pandemic and its impact on commodity prices, supply and demand considerations, and storage capacity; |
| • | our ability to identify and select possible acquisition and disposition opportunities; |
| • | capital requirements and uncertainty of obtaining additional funding on terms acceptable to us; |
| • | risks and restrictions related to our debt agreements and the level of our indebtedness; |
| • | our reliance on KKR Energy Assets Manager LLC as our external manager; |
| • | our hedging strategy and results; |
| • | political and economic conditions and events in foreign oil, natural gas and NGL producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, the armed conflict in Ukraine and associated economic sanctions on Russia, conditions in South America, Central America and China and acts of terrorism or sabotage; |
| • | realized oil, natural gas and NGL prices; |
| • | general economic conditions, including the impact of continued inflation and associated changes in monetary policy; |
| • | timing and amount of our future production of oil, natural gas and NGLs; |
| • | a decline in oil, natural gas and NGL production, and the impact of general economic conditions on the demand for oil, natural gas and NGLs and the availability of capital; |
| • | unsuccessful D&C activities and the possibility of resulting write downs; |
| • | our ability to meet our proposed drilling schedule and to successfully drill wells that produce oil, natural gas and NGLs in commercially viable quantities; |
| • | shortages of equipment, supplies, services and qualified personnel and increased costs for such equipment, supplies, services and personnel; |
| • | adverse variations from estimates of reserves, production, prices and expenditure requirements, and our inability to replace our reserves through exploration and development activities; |
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| • | incorrect estimates associated with properties we acquire relating to estimated proved reserves, the presence or recoverability of estimated oil, natural gas and NGL reserves and the actual future production rates and associated costs of such acquired properties; |
| • | hazardous, risky drilling operations, including those associated with the employment of horizontal drilling techniques, and adverse weather and environmental conditions; |
| • | limited control over non-operated properties; |
| • | title defects to our properties and inability to retain our leases; |
| • | our ability to successfully develop our large inventory of undeveloped acreage; |
| • | our ability to retain key members of our senior management and key technical employees; |
| • | risks relating to managing our growth, particularly in connection with the integration of significant acquisitions; |
| • | impact of environmental, occupational health and safety, and other governmental regulations, and of current or pending legislation, including as a result of the recent change in presidential administrations; |
| • | federal and state regulations and laws, including IRA 2022; |
| • | our ability to predict and manage the effects of actions of OPEC and agreements to set and maintain production levels; |
| • | changes in tax laws; |
| • | effects of competition; and |
| • | seasonal weather conditions. |
We caution you that these forward-looking statements are subject to all of the risks and uncertainties incident to the development, production, gathering and sale of oil, natural gas and NGLs, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability and cost of drilling and production equipment and services, project construction delays, environmental risks, drilling and other operating risks, lack of availability or capacity of midstream gathering and transportation infrastructure, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2022 and June 30, 2022, incorporated herein by reference.
Reserve engineering is a process of estimating underground accumulations of hydrocarbons that cannot be measured in an exact way. The accuracy of any reserve estimates depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development program. Accordingly, reserve estimates may differ significantly from the quantities of oil, natural gas and NGLs that are ultimately recovered.
Should one or more of the risks or uncertainties described in this prospectus occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this prospectus are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this prospectus.
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We will not receive any of the proceeds from the sale of shares of our Class A Common Stock by the selling stockholder pursuant to this prospectus (including any sales pursuant to the underwriters’ option to purchase additional shares from the selling stockholder). We have agreed to pay expenses of the selling stockholder in connection with this offering and the registration of such shares pursuant to the registration statement of which this prospectus forms a part. See “Selling Stockholder.”
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On August 9, 2022, our Board of Directors approved a quarterly cash dividend of $0.17 per share, or $0.68 per share on an annualized basis, to be paid to our shareholders. The quarterly dividend was paid on September 6, 2022 to shareholders of record as of the close of business on August 23, 2022. Our fixed within a framework dividend policy is generally set annually and targets distributing 10% of Adjusted EBITDAX, but payments will depend on our level of earnings, financial requirements and other factors and will be subject to approval by our Board of Directors, applicable law and the terms of our existing debt documents, including the credit agreement governing the Revolving Credit Facility and the indenture governing the Senior Notes.
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The following table sets forth information regarding the beneficial ownership of our Common Stock by the selling stockholder, the number of shares of our Class A Common Stock offered hereby by the selling stockholder and information with respect to shares to be beneficially owned by the selling stockholder after completion of this offering and the Concurrent OpCo Unit Purchase. The number of shares of Common Stock outstanding and percentages of beneficial ownership provided in the table below are based on the beneficial ownership as of July 31, 2022 and are based on 41,959,809 shares of our Class A Common Stock and 127,536,463 shares of our Class B Common Stock outstanding as of July 31, 2022.
Beneficial ownership has been determined under rules promulgated by the SEC. The information does not necessarily indicate beneficial ownership for any other purpose. Shares of common stock subject to currently exercisable and convertible securities currently convertible, or exercisable or convertible within 60 days after the date of this prospectus, are deemed outstanding for purposes of computing the percentage beneficially owned by the person or entity holding such securities but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person or entity.
| Name of Beneficial Owner |
Class A Common Stock |
Class B Common Stock |
Combined Voting Power |
Number of shares of Class A Common Stock offered if the underwriters’ option to purchase additional shares is not exercised |
Number of shares of Class A Common Stock offered if the underwriters’ option to purchase additional shares is exercised in full |
Shares Beneficially Owned After this Offering and the Concurrent OpCo Unit Purchase (Assuming No Exercise of the Underwriters’ Option to Purchase Additional Shares)(1) (2) |
Shares Beneficially Owned After this Offering and the Concurrent OpCo Unit Purchase (Assuming the Full Exercise of Underwriters’ Option to Purchase Additional Shares)(1) (2) |
|||||||||||||||||||||||||||||||||||||
| Number | Number | % | Class A Common Stock |
Class B Common Stock |
Combined Voting Power |
Class A Common Stock |
Class B Common Stock |
Combined Voting Power |
||||||||||||||||||||||||||||||||||||
| Independence Energy Aggregator |
— | 88,154,049 | 52.0 | % | 5,000,000 | 5,750,000 | 497,700 | (5) | 82,656,349 | 49.7 | % | 572,355 | (5) | 81,831,694 | 49.4 | % | ||||||||||||||||||||||||||||
| (1) | Represents the amounts of shares that will be held by the selling stockholder after completion of this offering based on the assumptions that: (a) all shares registered for sale by the registration statement of which this prospectus is a part will be sold by or on behalf of the selling stockholder; and (b) no other shares of our Common Stock will be acquired prior to completion of this offering by the selling stockholder. The selling stockholder may sell all, some or none of the shares offered pursuant to this prospectus and may sell other shares of our Common Stock that it may own pursuant to another registration statement under the Securities Act or sell some or all of its shares pursuant to an exemption from the registration requirements of the Securities Act, including under Rule 144 promulgated thereunder or any successor rule. To our knowledge, there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares that may be held by the selling stockholder after completion of this offering or otherwise. |
| (2) | The Concurrent OpCo Unit Purchase is conditioned on the consummation of this offering, but this offering is not conditioned on the consummation of the Concurrent OpCo Unit Purchase. See “Summary—Concurrent OpCo Unit Purchase.” |
| (3) | Independence Energy Aggregator L.P. is the direct beneficial owner of the securities reported and is the entity through which certain unaffiliated limited partners and affiliated entities hold their interests in the Company and OpCo. Independence Energy Aggregator GP LLC (“Aggregator GP”) is the general partner of Independence Energy Aggregator L.P. KKR Upstream Associates LLC is the sole member of Aggregator GP. KKR Group Assets Holdings III L.P. and KKR Financial Holdings LLC are the controlling members of KKR Upstream Associates LLC. KKR Group Assets III GP LLC is the general partner of KKR Group Assets Holdings III L.P. KKR Group Partnership L.P. is the sole member of each of KKR Group Assets III GP LLC |
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| and KKR Financial Holdings LLC. KKR Group Holdings Corp. is the general partner of KKR Group Partnership L.P. KKR & Co. Inc. is the sole stockholder of KKR Group Holdings Corp. KKR Management LLP is the Series I preferred stockholder of KKR & Co. Inc. Henry R. Kravis and George R. Roberts are the founding partners of KKR Management LLP. Each of such beneficial owners disclaims beneficial ownership of such securities in excess of their pecuniary interest therein. Pursuant to our Amended & Restated Certificate of Incorporation, Independence Energy Aggregator L.P., as the sole owner of our Non-Economic Series I Preferred Stock (as defined below) has the exclusive right to appoint our Board of Directors and holds approval rights over certain other actions prior to such actions being taken by us. See “Description of Capital Stock—Non-Economic Series I Preferred Stock” for additional information. |
| (4) | The shares of Class A Common Stock to be sold by the selling stockholder represents the shares of Class A Common Stock to be issued to the selling stockholder upon redemption by such selling stockholder of an equivalent number of OpCo Units and a corresponding number of shares of Class B Common Stock immediately prior to the closing of this offering. |
| (5) | Consists of shares of Class A Common Stock that the selling stockholder is expected to hold directly until completion of an in-kind distribution to its affiliates post-offering. |
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The following summary of certain material provisions of Crescent Energy Company’s (“we,” “us” and “our”) capital stock does not purport to be complete and is subject to and qualified by reference to our amended and restated certificate of incorporation (our “Amended and Restated Charter”), and our amended and restated bylaws (our “Amended and Restated Bylaws”). The summary below is also qualified by reference to the provisions of the DGCL.
General
Our authorized capital stock consists of 2,000,000,000 shares, divided into the following classes:
| • | 1,000,000,000 shares of Class A Common Stock, par value $0.0001 per share (our “Class A Common Stock”); |
| • | 500,000,000 shares of Class B Common Stock, par value $0.0001 per share (our “Class B Common Stock); and |
| • | 500,000,000 shares of preferred stock, of which (y) 1,000 shares are Non-Economic Series I Preferred Stock (our “Non-Economic Series I Preferred Stock”) and (z) the remaining 499,999,000 shares may be designated from time to time in accordance with our Amended and Restated Charter (together, with the Non-Economic Series I Preferred Stock, our “Preferred Stock”). |
Class A Common Stock
Voting Rights. Prior to the Trigger Date (as defined in the section herein titled “Non-Economic Series I Preferred Stock”), holders of our Class A Common Stock will not be entitled to elect directors to our Board of Directors. On and after the Trigger Date (as defined below), the holders of our Class A Common Stock will be entitled to elect directors but will not have cumulative voting rights in the election of directors. Holders of our Class A Common Stock will otherwise be entitled to one vote per share held of record on all matters to be voted upon by the stockholders. Holders of our Class A Common Stock and our Class B Common Stock will vote together as a single class on all matters presented to stockholders for their vote or approval, except with respect to the amendment of certain provisions of our Amended and Restated Charter that would alter or change the powers, preferences or special rights of our Non-Economic Series I Preferred Stock or our Class B Common Stock so as to affect them adversely, which amendments must be by a majority of the votes entitled to be cast by the holders of the class of stock affected by the amendment, voting as a separate class, or as otherwise required by applicable law.
Dividend Rights. Holders of our Class A Common Stock will be entitled to ratably receive dividends when and if declared by our Board of Directors out of funds legally available for that purpose, subject to any statutory or contractual restrictions on the payment of dividends and to any prior rights and preferences that may be applicable to any outstanding Preferred Stock.
Liquidation Rights. Upon our liquidation, dissolution, distribution of assets or other winding up, the holders of our Class A Common Stock will be entitled to receive ratably the assets available for distribution to the stockholders after payment of liabilities and the liquidation preference of any of outstanding shares of our Preferred Stock.
Other Matters. Our Class A Common Stock will have no preemptive or conversion rights and there are no redemption or sinking fund provisions applicable to our Class A Common Stock.
Class B Common Stock
Voting Rights. Prior to the Trigger Date, holders of our Class B Common Stock will not be entitled to elect directors to our Board of Directors. On and after the Trigger Date, the holders of our Class B Common Stock will be entitled
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to elect directors but will not have cumulative voting rights in the election of directors. Holders of our Class B Common Stock will otherwise be entitled to one vote per share held of record on all matters to be voted upon by the stockholders. Holders of our Class A Common Stock and our Class B Common Stock will vote together as a single class on all matters presented to stockholders for their vote or approval, except with respect to the amendment of certain provisions of our Amended and Restated Charter that would alter or change the powers, preferences or special rights of our Non-Economic Series I Preferred Stock or our Class B Common Stock so as to affect them adversely, which amendments must be by a majority of the votes entitled to be cast by the holders of the class of stock affected by the amendment, voting as a separate class, or as otherwise required by applicable law.
Dividend and Liquidation Rights. Holders of our Class B Common Stock will not have any right to receive dividends, unless the dividend consists of shares of our Class B Common Stock or of rights, options, warrants or other securities convertible or exercisable into or exchangeable for our Class B Common Stock paid proportionally with respect to each outstanding share of our Class B Common Stock and a dividend consisting of shares of our Class A Common Stock or of rights, options, warrants or other securities convertible or exercisable into or exchangeable for our Class A Common Stock on the same terms as simultaneously paid to the holders of our Class A Common Stock. Holders of our Class B Common Stock will not have any right to receive a distribution upon liquidation or winding up.
Preferred Stock
Our Board of Directors is authorized, subject to limitations prescribed by Delaware law, to issue our Preferred Stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers (including voting powers), preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by our stockholders (except as may be required by the terms of any preferred stock then outstanding). Our Board of Directors may (except where otherwise provided in the applicable preferred stock designation) increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares outstanding) the number of shares of any series of our Preferred Stock, without any further vote or action by our stockholders. Our Board of Directors may authorize the issuance of our Preferred Stock with voting or conversion rights that could adversely affect the proportion of voting power held by, or other relative rights of, the holders of our Class A Common Stock or our Class B Common Stock.
Non-Economic Series I Preferred Stock
Dividends and Liquidation Rights. Except for any distribution required by the DGCL to be made upon a dissolution event, the holder of the Non-Economic Series I Preferred Stock (the “Preferred Stockholder”) does not have any rights to receive dividends. Upon any voluntary or involuntary liquidation, dissolution or winding up of us, the holder of our Non-Economic Series I Preferred Stock will be entitled to a payment equal to $0.01 per share of our Non-Economic Series I Preferred Stock.
Voting Rights. The holder of our Non-Economic Series I Preferred Stock are entitled to one vote per share on any matter that is submitted to a vote of stockholders. In addition, the holder of our Non-Economic Series I Preferred Stock will have the exclusive right to elect the members of our Board of Directors prior to the date (the “Trigger Date”) following the earlier of (i) the first date on which the Preferred Stockholder and its affiliates no longer collectively beneficially own the Minimum Retained Ownership (as defined in our Amended and Restated Charter) and (ii) the date the Preferred Stockholder elects, by delivering written notice to us, to cause the Trigger Date to occur. Upon occurrence of the Trigger Date, all rights, powers, preferences and privileges associated with shares of our Non-Economic Series I Preferred Stock and associated with being the Preferred Stockholder in its capacity as the owner of the Non-Economic Series I Preferred Stock will automatically terminate in all respects and all shares of our Non-Economic Series I Preferred Stock will be automatically cancelled and forfeited for no consideration.
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Actions Requiring Preferred Stockholder Approval. Prior to the Trigger Date, certain actions will require the prior approval of the Preferred Stockholder, including, without limitation:
| • | entry into a debt financing arrangement in an amount in excess of 10% of our then existing long-term indebtedness (other than with respect to intercompany debt financing arrangements); |
| • | issuances of securities that would (i) represent at least 5% of any class of equity securities or (ii) have designations, preferences, rights priorities or powers that are more favorable than our Class A Common Stock or Class B Common Stock; |
| • | adoption of a stockholder rights plan; |
| • | amendment of our Amended and Restated Charter and certain provisions of our Amended and Restated Bylaws relating to our Board of Directors, our officers, quorum, adjournment and the conduct of stockholder meetings, and provisions related to stock certificates, registrations of transfers, maintenance of books and records and amendments of our Amended and Restated Bylaws; |
| • | the appointment or removal of our Chief Executive Officer or a Co-Chief Executive Officer, provided that, a majority of our directors that are independent for purposes of the Audit Committee of the Board of Directors under the rules and regulations of The New York Stock Exchange, the Exchange Act and the Sarbanes-Oxley Act of 2002, as amended (the “Independent Directors”) may remove a Chief Executive Officer without the prior approval of the Preferred Stockholder solely for Cause (as defined in our Amended and Restated Charter); |
| • | the termination of the employment of any of our officers without Cause; |
| • | the merger, sale or other dispositions of all or substantially all of the assets, taken as a whole, of us and our subsidiaries; and |
| • | the liquidation or dissolution of us. |
Transferability. The holder of our Non-Economic Series I Preferred Stock may transfer all or any part of our Non-Economic Series I Preferred Stock held by it without first obtaining approval of any other stockholder so long as (i) it obtains prior written approval of a majority of the Independent Directors of our Board of Directors and (ii) the transferee assumes the rights and duties of our Non-Economic Series I Preferred Stock under our Amended and Restated Charter and agrees to be bound by the provisions of our Amended and Restated Charter.
Corporate Opportunities
Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders. To the fullest extent permitted by law, each of our directors and officers will have the right to engage in businesses of every type and description and other activities for profit and to engage in and possess an interest in other business ventures of any and every type or description, including business interests and activities in direct competition with the business and activities of us, and we will waive and renounce any interest or expectancy therein. In addition, the doctrine of corporate opportunity will not apply with respect to us, any of our officers or directors, the Preferred Stockholder or any of their respective affiliates in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have, and we will renounce any expectancy that such persons will offer any such corporate opportunity of which he, she or it may become aware to us. Notwithstanding the foregoing, we will not renounce our interest in any corporate opportunity offered to any of our directors or officers if such opportunity is expressly offered in writing to such person solely in his or her capacity as a director or officer of us and is one that such director or officer has no duty (contractual or fiduciary) to offer to KKR & Co., Inc. or its affiliates.
Anti-Takeover Provisions
Our Amended and Restated Charter and our Amended and Restated Bylaws and the DGCL contain provisions that are intended to enhance the likelihood of continuity and stability in the composition of our Board of
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Directors and to discourage certain types of transactions that may involve an actual or threatened acquisition of us. These provisions are intended to avoid costly takeover battles, reduce our vulnerability to a hostile change in control or other unsolicited acquisition proposal, and enhance the ability of our Board of Directors to maximize stockholder value in connection with any unsolicited offer to acquire us. However, these provisions may have the effect of delaying, deterring or preventing a merger or acquisition of us by means of a tender offer, a proxy contest or other takeover attempt that a stockholder might consider in its best interest, including attempts that might result in a premium over the prevailing market price for the shares of our Class A Common Stock held by stockholders. The following is a summary of certain provisions that may be deemed to have such effects:
Election and Removal of Directors
Prior to the Trigger Date, the Preferred Stockholder has the sole authority to elect directors. Prior to the Trigger Date, the Preferred Stockholder has the sole authority to remove and replace any director, with or without cause, at any time, subject to limited exceptions during the Protected Periods (as defined in the Amended and Restated Charter). In addition, our Amended and Restated Charter also provides that, any newly created directorship on our Board of Directors that results from an increase in the number of directors and any vacancies on our Board of Directors will be filled by the Preferred Stockholder.
Actions Requiring Preferred Stockholder Approval
Prior to the Trigger Date, certain actions will require the prior approval of the Preferred Stockholder. See the section titled “Non-Economic Series I Preferred Stock” above.
Amendments to our Amended and Restated Charter
Except as otherwise expressly provided by applicable law, only the vote of the Preferred Stockholder, together with the approval of our Board of Directors, shall be required in order to amend our Amended and Restated Charter and certain provisions of our Amended and Restated Bylaws. See the section titled “Non-Economic Series I Preferred Stock” above.
Special Stockholder Meetings
Our Amended and Restated Charter provides that special meetings of the holders of our Class A Common Stock and Class B Common Stock may be called at any time by our Board of Directors, the Preferred Stockholder or, prior to the Trigger Date, a majority of our Independent Directors.
Stockholder Action by Written Consent
Our Amended and Restated Charter provides that, if consented to by our Board of Directors and the Preferred Stockholder in writing, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding Class A Common Stock and Class B Common Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted and such consent or consents are delivered in accordance with Section 228 of the DGCL.
Requirements for Advance Notification of Stockholder Proposals
Our Amended and Restated Bylaws will establish advance notice procedures with respect to stockholder proposals relating to the limited matters on which our Class A Common Stock and Class B Common Stock may be entitled to vote. Generally, to be timely, a stockholder’s notice must be received at our principal executive offices not less than 90 days or more than 120 days prior to the first anniversary date of the immediately preceding annual meeting of stockholders. Our Amended and Restated Bylaws will also specify requirements as to the form and content of a stockholder’s notice. Our Amended and Restated Bylaws will allow the chairman of the meeting at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings, which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may deter, delay or discourage a potential acquirer from attempting to influence or obtain control of us.
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Merger, Sale or Other Disposition of Assets
Our Amended and Restated Charter provides that we may not sell, exchange, lease or otherwise dispose of all or substantially all of our assets in a single transaction or a series of related transactions, or consummate any merger, sale or other similar combination without the prior approval of the Preferred Stockholder.
Choice of Forum
Unless we consent in writing to the selection of an alternative forum, (a) the Court of Chancery of the State of Delaware (or, solely to the extent that the Court of Chancery lacks subject matter jurisdiction, the federal district court located in the State of Delaware) is the exclusive forum for resolving (i) any derivative action, suit or proceeding brought on behalf of the corporation, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee or stockholder of the corporation to the corporation or the corporation’s stockholders, (iii) any action, suit or proceeding asserting a claim arising pursuant to any provision of the DGCL, our Amended and Restated Charter or our Amended and Restated Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action, suit or proceeding asserting a claim governed by the internal affairs doctrine, and (b) the federal district courts of the United States shall be the exclusive forum for the resolution of any action, suit or proceeding asserting a cause of action arising under the Securities Act, in each case except as otherwise provided in our Amended and Restated Charter for any series of our Preferred Stock.
Business Combinations
We have elected to opt out of Section 203 of the DGCL, which provides that an “interested stockholder” (a person other than the corporation or any direct or indirect majority-owned subsidiary who, together with affiliates and associates, owns, or, if such person is an affiliate or associate of the corporation, within three years did own, 15% or more of the outstanding voting stock of a corporation) may not engage in “business combinations” (which is broadly defined to include a number of transactions, such as mergers, consolidations, asset sales and other transactions in which an interested stockholder receives or could receive a financial benefit on other than a pro rata basis with other stockholders) with the corporation for a period of three years after the date on which the person became an interested stockholder without certain statutorily mandated approvals.
Limitation of Liability and Indemnification Matters
Our amended and restated certificate of incorporation limits the liability of our directors for monetary damages for breach of their fiduciary duty as directors, except for liability that cannot be eliminated under the DGCL. Delaware law provides that directors of a company will not be personally liable for monetary damages for breach of their fiduciary duty as directors, except for liabilities:
| • | for any breach of their duty of loyalty to us or our stockholders; |
| • | for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; |
| • | for unlawful payment of dividend or unlawful stock repurchase or redemption, as provided under Section 174 of the DGCL; or |
| • | for any transaction from which the director derived an improper personal benefit. |
Any amendment, repeal or modification of these provisions will be prospective only and would not affect any limitation on liability of a director for acts or omissions that occurred prior to any such amendment, repeal or modification. If the DGCL is amended to provide for further limitations on the personal liability of directors or officers of corporations, then the personal liability of our directors and officers will be further limited to the fullest extent permitted by the DGCL.
We have entered into indemnification agreements with each of our current and future directors and officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law
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against liability that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We believe that the limitation of liability provision that is in our amended and restated certificate of incorporation and the indemnification agreements will facilitate our ability to continue to attract and retain qualified individuals to serve as directors and officers.
Registration Rights
For a description of registration rights with respect to our Class A Common Stock, see “Registration Rights Agreement” in “Certain Relationships and Related Transactions” in our Annual Report on Form 10-K for the year ended December 31, 2021, incorporated herein by reference.
Transfer Agent and Registrar
The transfer agent and registrar for our Class A Common Stock and Class B Common Stock is American Stock Transfer & Trust Company.
Listing
Our Class A Common Stock is listed on the NYSE under the symbol “CRGY.”
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The following is a summary of certain considerations associated with the acquisition and holding of shares of common stock by employee benefit plans that are subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”) or employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA), non-United States plans (as described in Section 4(b)(4) of ERISA) or other plans that are not subject to the foregoing but may be subject to provisions under any other federal, state, local, non-United States or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, “Similar Laws”), and entities whose underlying assets are considered to include “plan assets” of any such plan, account or arrangement (each, a “Plan”).
This summary is based on the provisions of ERISA and the Code (and related regulations and administrative and judicial interpretations) as of the date of this registration statement. This summary does not purport to be complete, and no assurance can be given that future legislation, court decisions, regulations, rulings or pronouncements will not significantly modify the requirements summarized below. Any of these changes may be retroactive and may thereby apply to transactions entered into prior to the date of their enactment or release. This discussion is general in nature and is not intended to be all inclusive, nor should it be construed as investment or legal advice.
General Fiduciary Matters
ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code (an “ERISA Plan”) and prohibit certain transactions involving the assets of an ERISA Plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of an ERISA Plan or the management or disposition of the assets of an ERISA Plan, or who renders investment advice for a fee or other compensation to an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan.
In considering an investment in shares of common stock with a portion of the assets of any Plan, a fiduciary should consider the Plan’s particular circumstances and all of the facts and circumstances of the investment and determine whether the acquisition and holding of shares of common stock is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code, or any Similar Law relating to the fiduciary’s duties to the Plan, including, without limitation:
| • | whether the investment is prudent under Section 404(a)(1)(B) of ERISA and any other applicable Similar Laws; |
| • | whether, in making the investment, the ERISA Plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA and any other applicable Similar Laws; |
| • | whether the investment is permitted under the terms of the applicable documents governing the Plan; |
| • | whether the acquisition or holding of the shares of common stock will constitute a “prohibited transaction” under Section 406 of ERISA or Section 4975 of the Code (please see discussion under “—Prohibited Transaction Issues” below); and |
| • | whether the Plan will be considered to hold, as plan assets, (i) only shares of common stock or (ii) an undivided interest in our underlying assets (please see the discussion under “—Plan Asset Issues” below). |
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Prohibited Transaction Issues
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from engaging in specified transactions involving plan assets with persons or entities who are “parties in interest,” within the meaning of ERISA, or “disqualified persons,” within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engages in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the ERISA Plan that engages in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code. The acquisition and/or holding of shares of common stock by an ERISA Plan with respect to which the issuer or an underwriter is considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption.
Because of the foregoing, shares of common stock should not be acquired or held by any person investing “plan assets” of any Plan unless such acquisition and holding will not constitute a non-exempt prohibited transaction under ERISA and the Code or a similar violation of any applicable Similar Laws.
Plan Asset Issues
Additionally, a fiduciary of a Plan should consider whether the Plan will, by investing in us, be deemed to own an undivided interest in our assets, with the result that we would become a fiduciary of the Plan and our operations would be subject to the regulatory restrictions of ERISA, including its prohibited transaction rules, as well as the prohibited transaction rules of the Code and any other applicable Similar Laws.
The Department of Labor (the “DOL”) regulations provide guidance with respect to whether the assets of an entity in which ERISA Plans acquire equity interests would be deemed “plan assets” under some circumstances. Under these regulations, an entity’s assets generally would not be considered to be “plan assets” if, among other things:
| (a) | the equity interests acquired by ERISA Plans are “publicly-offered securities” (as defined in the DOL regulations)—i.e., the equity interests are part of a class of securities that is widely held by 100 or more investors independent of the issuer and each other, are freely transferable, and are either registered under certain provisions of the federal securities laws or sold to the ERISA Plan as part of a public offering under certain conditions; |
| (b) | the entity is an “operating company” (as defined in the DOL regulations)—i.e., it is primarily engaged in the production or sale of a product or service, other than the investment of capital, either directly or through a majority-owned subsidiary or subsidiaries; or |
| (c) | there is no significant investment by “benefit plan investors” (as defined in the DOL regulations)—i.e., immediately after the most recent acquisition by an ERISA Plan of any equity interest in the entity, less than 25% of the total value of each class of equity interest (disregarding certain interests held by persons (other than benefit plan investors) with discretionary authority or control over the assets of the entity or who provide investment advice for a fee (direct or indirect) with respect to such assets, and any affiliates thereof) is held by ERISA Plans and certain other Plans (but not including governmental plans, foreign plans and certain church plans), and entities whose underlying assets are deemed to include plan assets by reason of a Plan’s investment in the entity. |
Our assets should not be considered “plan assets” under these regulations because any investment in us by an ERISA Plan will satisfy the requirements in (a) above.
Due to the complexity of these rules and the excise taxes, penalties and liabilities that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries, or other
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persons considering acquiring and/or holding shares of our common stock on behalf of, or with the assets of, any Plan, consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment and whether an exemption would be applicable to the acquisition and holding of shares of common stock. Purchasers of shares of common stock have the exclusive responsibility for ensuring that their acquisition and holding of shares of common stock complies with the fiduciary responsibility rules of ERISA and does not violate the prohibited transaction rules of ERISA, the Code or applicable Similar Laws. The sale of shares of common stock to a Plan is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by any such Plan or that such investment is appropriate for any such Plan.
Representation
Accordingly, by its acquisition and acceptance of shares of our common stock (or any interest therein), each purchaser and subsequent transferee of shares of our common stock will be deemed to have represented and warranted by its acquisition and holding thereof that either (i) no portion of the assets used by such purchaser or transferee to acquire or hold the shares of our common stock (or any interest therein) constitutes assets of any Plan or (ii) the acquisition, holding, and subsequent disposition of the shares of our common stock (or any interest therein) by such purchaser or subsequent transferee will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a similar violation under any applicable Similar Laws.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a summary of the material U.S. federal income tax considerations related to the purchase, ownership and disposition of our Class A Common Stock by a non-U.S. holder (as defined below) that holds our Class A Common Stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This summary is based on the provisions of the Code, U.S. Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as in effect on the date hereof, and all of which are subject to change or differing interpretations, possibly with retroactive effect. We cannot assure you that a change in law will not significantly alter the tax considerations that we describe in this summary. We have not sought any ruling from the Internal Revenue Service (“IRS”) with respect to the statements made and the positions and conclusions described in the following summary, and there can be no assurance that the IRS or a court will agree with such statements, positions and conclusions.
This summary does not address all aspects of U.S. federal income taxation that may be relevant to non-U.S. holders in light of their personal circumstances. In addition, this summary does not address the impact of the Medicare surtax on certain net investment income, U.S. federal estate or gift tax laws, any U.S. state or local or non-U.S. tax laws or any tax treaties. This summary also does not address all U.S. federal income tax considerations that may be relevant to particular non-U.S. holders in light of their personal circumstances or that may be relevant to certain categories of investors that may be subject to special rules, such as:
| • | banks, insurance companies or other financial institutions; |
| • | tax-exempt or governmental organizations; |
| • | tax-qualified retirement plans; |
| • | “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code (or any entities all of the interests of which are held by a qualified foreign pension fund); |
| • | dealers in securities or foreign currencies; |
| • | persons whose functional currency is not the U.S. dollar; |
| • | “controlled foreign corporations,” “passive foreign investment companies” and corporations that accumulate earnings to avoid U.S. federal income tax; |
| • | traders in securities that use the mark-to-market method of accounting for U.S. federal income tax purposes; |
| • | persons subject to the alternative minimum tax; |
| • | entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes or holders of interests therein; |
| • | persons deemed to sell our Class A Common Stock under the constructive sale provisions of the Code; |
| • | persons that acquired our Class A Common Stock through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan; |
| • | certain former citizens or long-term residents of the United States; and |
| • | persons that hold our Class A Common Stock as part of a straddle, appreciated financial position, synthetic security, hedge, conversion transaction or other integrated investment or risk reduction transaction. |
PROSPECTIVE INVESTORS ARE ENCOURAGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS (INCLUDING ANY POTENTIAL FUTURE CHANGES THERETO) TO THEIR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR CLASS A
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COMMON STOCK ARISING UNDER ANY OTHER TAX LAWS, INCLUDING U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY U.S. STATE OR LOCAL OR NON-U.S. TAXING JURISDICTION, OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Non-U.S. Holder Defined
For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of our Class A Common Stock that is not for U.S. federal income tax purposes a partnership or any of the following:
| • | an individual who is a citizen or resident of the United States; |
| • | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| • | an estate the income of which is subject to U.S. federal income tax regardless of its source; or |
| • | a trust (i) the administration of which is subject to the primary supervision of a U.S. court and which has one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) who have the authority to control all substantial decisions of the trust or (ii) which has made a valid election under applicable U.S. Treasury regulations to be treated as a United States person. |
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our Class A Common Stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, we urge partners in partnerships (including entities or arrangements treated as partnerships for U.S. federal income tax purposes) considering the purchase of our Class A Common Stock to consult their tax advisors regarding the U.S. federal income tax considerations of the purchase, ownership and disposition of our Class A Common Stock by such partnership.
Distributions
Distributions of cash or other property on our Class A Common Stock, if any, will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, the distributions will be treated as a non-taxable return of capital to the extent of the non-U.S. holder’s tax basis in our Class A Common Stock and thereafter as capital gain from the sale or exchange of such common stock. See “—Gain on Sale or Other Taxable Disposition of Class A Common Stock.”
Subject to the withholding requirements under FATCA (as defined below) and with respect to effectively connected dividends, each of which is discussed below, any distribution made to a non-U.S. holder on our Class A Common Stock generally will be subject to U.S. withholding tax at a rate of 30% of the gross amount of the distribution unless an applicable income tax treaty provides for a lower rate. To receive the benefit of a reduced treaty rate, a non-U.S. holder must provide the applicable withholding agent with an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor form) certifying qualification for the reduced rate.
Dividends paid to a non-U.S. holder that are effectively connected with a trade or business conducted by the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, are treated as attributable to a permanent establishment maintained by the non-U.S. holder in the United States) generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons. Such effectively connected dividends will not be subject to U.S. withholding tax if the non-U.S. holder satisfies certain certification requirements by providing the applicable withholding agent with a properly executed IRS Form W-8ECI certifying eligibility for exemption. If the non-U.S. holder is a corporation for U.S. federal income tax purposes, it may also be subject to a branch profits tax (at a 30% rate or such lower rate as specified by an
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applicable income tax treaty) on its effectively connected earnings and profits (as adjusted for certain items), which will include effectively connected dividends.
Gain on Sale or Other Taxable Disposition of Class A Common Stock
Subject to the discussion below under “—Backup Withholding and Information Reporting” a non-U.S. holder generally will not be subject to U.S. federal income or withholding tax on any gain realized upon the sale or other taxable disposition of our Class A Common Stock unless:
| • | the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; |
| • | the gain is effectively connected with a trade or business conducted by the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States); or |
| • | our Class A Common Stock constitutes a United States real property interest by reason of our status as a United States real property holding corporation (“USRPHC”) for U.S. federal income tax purposes and as a result such gain is treated as effectively connected with a trade or business conducted by the non-U.S. holder in the United States. |
A non-U.S. holder described in the first bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) on the amount of such gain, which generally may be offset by U.S. source capital losses provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
A non-U.S. holder whose gain is described in the second bullet point above or, subject to the exceptions described in the next paragraph, the third bullet point above, generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons. If the non-U.S. holder is a corporation for U.S. federal income tax purposes whose gain is described in the second bullet point above, then such gain would also be included in its effectively connected earnings and profits (as adjusted for certain items), which may be subject to a branch profits tax (at a 30% rate or such lower rate as specified by an applicable income tax treaty).
Generally, a corporation is a USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. We believe that we currently are, and expect to remain for the foreseeable future, a USRPHC for U.S. federal income tax purposes. However, as long as our Class A Common Stock is and continues to be “regularly traded on an established securities market” (within the meaning of the U.S. Treasury regulations), only a non-U.S. holder that actually or constructively owns, or owned at any time during the shorter of the five-year period ending on the date of the disposition or the non-U.S. holder’s holding period for the Class A Common Stock, more than 5% of our Class A Common Stock will be treated as disposing of a United States real property interest and will be taxable on gain realized on the disposition of our Class A Common Stock as a result of our status as a USRPHC. If our Class A Common Stock were not considered to be regularly traded on an established securities market, each non-U.S. holder (regardless of the percentage of stock owned) would be treated as disposing of a United States real property interest and would be subject to U.S. federal income tax on a taxable disposition of our Class A Common Stock (as described in the preceding paragraph), and a 15% withholding tax would apply to the gross proceeds from such disposition.
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NON-U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE FOREGOING RULES TO THEIR OWNERSHIP AND DISPOSITION OF OUR CLASS A COMMON STOCK, INCLUDING REGARDING POTENTIALLY APPLICABLE INCOME TAX TREATIES THAT MAY PROVIDE FOR DIFFERENT RULES.
Backup Withholding and Information Reporting
Any dividends paid to a non-U.S. holder must be reported annually to the IRS and to the non-U.S. holder. Copies of these information returns may be made available to the tax authorities in the country in which the non-U.S. holder resides or is established. Payments of dividends to a non-U.S. holder generally will not be subject to backup withholding if the non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor form).
Payments of the proceeds from a sale or other disposition by a non-U.S. holder of our Class A Common Stock effected by or through a U.S. office of a broker generally will be subject to information reporting and backup withholding (at the applicable rate) unless the non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor form) and certain other conditions are met. Information reporting and backup withholding generally will not apply to any payment of the proceeds from a sale or other disposition of our Class A Common Stock effected outside the United States by a non-U.S. office of a broker. However, unless such broker has documentary evidence in its records that the non-U.S. holder is not a United States person and certain other conditions are met, or the non-U.S. holder otherwise establishes an exemption, information reporting will apply to a payment of the proceeds of the disposition of our Class A Common Stock effected outside the United States by such a broker if it has certain relationships within the United States.
Backup withholding is not an additional tax. Rather, the U.S. federal income tax liability (if any) of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the IRS.
Additional Withholding Requirements under FATCA
Sections 1471 through 1474 of the Code, and the U.S. Treasury regulations and administrative guidance issued thereunder (“FATCA”), impose a 30% withholding tax on any dividends on our Class A Common Stock and, subject to the proposed U.S. Treasury regulations discussed below, on proceeds from sales or other dispositions of shares of our Class A Common Stock, if paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code) (including, in some cases, when such foreign financial institution or non-financial foreign entity is acting as an intermediary), unless (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are non-U.S. entities with U.S. owners), (ii) in the case of a non-financial foreign entity, such entity certifies that it does not have any “substantial United States owners” (as defined in the Code) or provides the applicable withholding agent with a certification identifying the direct and indirect substantial United States owners of the entity (in either case, generally on an IRS Form W-8BEN-E), or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation (such as an IRS Form W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing these rules may be subject to different rules. Under certain circumstances, a holder might be eligible for refunds or credits of such taxes. While gross proceeds from a sale or other disposition of our common stock paid after January 1, 2019, would have originally been
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subject to withholding under FATCA, proposed U.S. Treasury regulations provide that such payments of gross proceeds do not constitute withholdable payments. Taxpayers may generally rely on these proposed U.S. Treasury regulations until they are revoked or final U.S. Treasury regulations are issued. Non-U.S. holders are encouraged to consult their own tax advisors regarding the effects of FATCA on an investment in our Class A Common Stock.
INVESTORS CONSIDERING THE PURCHASE OF OUR CLASS A COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS (INCLUDING ANY POTENTIAL FUTURE CHANGES THERETO) TO THEIR PARTICULAR SITUATIONS AND THE APPLICABILITY AND EFFECT OF ANY OTHER TAX LAWS, INCLUDING U.S. FEDERAL ESTATE AND GIFT TAX LAWS AND ANY U.S. STATE OR LOCAL OR NON-U.S. TAX LAWS, AND TAX TREATIES.
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UNDERWRITING (CONFLICTS OF INTEREST)
Under the terms and subject to the conditions contained in an underwriting agreement dated , 2022, the selling stockholder has agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC, KKR Capital Markets LLC and Wells Fargo Securities, LLC are acting as representatives, the following respective aggregate numbers of shares of Class A Common Stock:
| Underwriter |
Number of Shares | |||
| Credit Suisse Securities (USA) LLC |
||||
| KKR Capital Markets LLC |
||||
| Wells Fargo Securities, LLC |
||||
| J.P. Morgan Securities LLC |
||||
| BofA Securities, Inc. |
||||
| RBC Capital Markets, LLC |
||||
| Truist Securities, Inc. |
||||
|
|
|
|||
| Total |
5,000,000 | |||
|
|
|
|||
The underwriting agreement provides that the underwriters are obligated to purchase all the shares of Class A Common Stock in the offering if any are purchased, other than those shares covered by the option to purchase additional shares described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.
We and the selling stockholder have agreed to indemnify the underwriters and certain of their controlling persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of those liabilities.
The selling stockholder has granted the underwriters the option to purchase up to an additional 750,000 shares of Class A Common Stock within 30 days from the date of this prospectus at the public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of Class A Common Stock.
The underwriters propose to offer the shares of Class A Common Stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of up to $ per share. After the initial offering of the shares of Class A Common Stock, the underwriters may change the public offering price and concession.
We will pay all expenses of the registration of the shares of common stock to be sold by the selling stockholder pursuant to the Registration Rights Agreement, including, without limitation, SEC filing fees and expenses of compliance with state securities or “blue sky” laws and the selling stockholder’s expenses; provided, however, that the selling stockholder will pay all underwriting discounts and selling commissions and stock transfer taxes applicable to the sale of its shares of Class A Common Stock and fees and disbursements of its counsel, if any.
The following table summarizes the underwriting discounts and commissions the selling stockholder will pay. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to 750,000 additional shares of Class A Common Stock:
| Per Share | Total | |||||||||||||||
| No Exercise | Full Exercise | No Exercise | Full Exercise | |||||||||||||
| Underwriting Discounts and Commissions paid by the selling stockholder |
$ | $ | $ | $ | ||||||||||||
We estimate that our out-of-pocket expenses for this offering will be approximately $0.7 million. We have also agreed to reimburse the underwriters up to $40,000 for expenses related to the review of this offering by FINRA. In accordance with FINRA Rule 5110, this reimbursed fee is deemed underwriting compensation for this offering.
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Our Class A Common Stock is listed on the NYSE under the symbol “CRGY.”
We have agreed that, subject to certain exceptions, we will not, directly or indirectly, take any of the following actions: (i) offer, sell, issue, contract to sell, pledge, lend or otherwise dispose of shares of our Class A Common Stock or any securities convertible into or exchangeable or exercisable for any shares of our Class A Common Stock, (ii) offer, sell, issue, contract to sell, contract to purchase or grant any option, right or warrant to purchase shares of our Class A Common Stock or any securities convertible into or exchangeable or exercisable for any shares of our Class A Common Stock, (iii) enter into any swap, hedge or any other agreement that transfers, in whole or in part, the economic consequences of ownership of shares of our Class A Common Stock or any securities convertible into or exchangeable or exercisable for any shares of our Class A Common Stock, (iv) establish or increase a put equivalent position or liquidate or decrease a call equivalent position in shares of our Class A Common Stock or any securities convertible into or exchangeable or exercisable for any shares of our Class A Common Stock within the meaning of Section 16 of the Exchange Act or (v) file with the SEC a registration statement under the Securities Act relating to shares of our Class A Common Stock or any securities convertible into or exchangeable or exercisable for any shares of our Class A Common Stock, or publicly disclose the intention to take any such action, without the prior written consent of Credit Suisse Securities (USA) LLC, for a period of 60 days after the date of this prospectus.
Our executive officers, directors, the selling stockholder and certain other holders of our outstanding Common Stock have agreed that they will not offer, sell, contract to sell, pledge, lend or otherwise dispose of, directly or indirectly, any shares of our Class A Common Stock or any securities convertible into or exchangeable or exercisable for any shares of our Class A Common Stock, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our Class A Common Stock, whether any such aforementioned transaction is to be settled by delivery of our Class A Common Stock or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge, loan or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC, for a period of 60 days after the date of this prospectus, subject to certain exceptions.
In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids.
| • | Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
| • | Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase through the option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares the underwriters may purchase through the option to purchase additional shares. The underwriters may close out any covered short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. |
| • | Syndicate covering transactions involve purchases of the Class A Common Stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the option to purchase additional shares. If the underwriters sell more shares than could be covered by the option to purchase additional shares, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. |
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| • | Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the Class A Common Stock originally sold by the syndicate member is purchased in a stabilizing transaction or a syndicate covering transaction to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our Class A Common Stock or preventing or retarding a decline in the market price of the Class A Common Stock. As a result the price of our Class A Common Stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NYSE and, if commenced, may be discontinued at any time.
A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.
The underwriters and their respective affiliates are full-service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, the selling stockholder and our and its respective affiliates, for which they received or will receive customary fees and expenses.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. These investments and securities activities may involve securities and/or instruments of ours, the selling stockholder’s or our or its respective affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Conflicts of Interest
Affiliates of KKR Capital Markets LLC own in excess of 10% of our issued and outstanding common stock. Accordingly, this offering will be conducted in accordance with Rule 5121 of FINRA. Pursuant to that rule, the appointment of a “qualified independent underwriter” is not required in connection with this offering as a “bona fide public market,” as defined in paragraph (f)(3) of Rule 5121, exists for our Class A Common Stock. KKR Capital Markets LLC will not confirm sales to any account over which it exercises discretionary authority without the specific written approval of the account holder.
Selling Restrictions
Notice to Prospective Investors in Canada
The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
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Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area (each, a “Member State”), no shares have been offered or will be offered to the public in that Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that of shares may be made to the public in that Member State at any time under the following exemptions under the Prospectus Regulation:
| (a) | to any legal entity which is a qualified investor as defined under the Prospectus Regulation; |
| (b) | to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
| (c) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
provided that no such offer of shares require the Issuer or any Manager to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
For the purposes of this provision, the expression an “offer to the public” in relation to any shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any Shares and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
Notice to Prospective Investors in the United Kingdom
Each of the underwriters severally represents, warrants and agrees as follows:
| (a) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or “FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21 of the FSMA does not apply to us; and |
| (b) | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom. |
Notice to Prospective Investors in Hong Kong
The shares may not be offered or sold in Hong Kong by means of any document other than (i) to “professional investors” as defined in the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rules made under that Ordinance, or (ii) in other circumstances which do not result in the document being a “prospectus” as
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defined in the Companies Ordinance (Cap.32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the depositary shares may be issued or may be in the possession of any person for the purpose of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to depositary shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the securities under Section 275 of the SFA except: (1) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; (2) where no consideration is given for the transfer; (3) by operation of law; (4) as specified in Section 276(7) of the SFA; or (5) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
Notice to Prospective Investors in Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the Company or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, or FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.
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The validity of the shares of our Class A Common Stock offered by this prospectus will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas. Certain legal matters in connection with this offering will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP and for the selling stockholder by Debevoise & Plimpton LLP and Richards, Layton & Finger, P.A.
The financial statements of Crescent Energy Company as of December 31, 2021 and 2020, and for each of the three years in the period ended December 31, 2021, incorporated by reference in this prospectus, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report. Such financial statements are incorporated by reference in reliance upon the report of such firm given their authority as experts in accounting and auditing.
The audited financial statements of Contango Oil & Gas Company as of December 31, 2020 and 2019 and for each of the two years in the period ended December 31, 2020, incorporated by reference in the registration statement have been so incorporated by reference in reliance upon the report of Grant Thornton LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.
The audited historical statement of revenues and direct operating expenses of the Uinta Basin Assets for the year ended December 31, 2021, incorporated by reference in the registration statement have been so incorporated by reference in reliance upon the report of EEPB, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.
Estimates of our oil and natural gas reserves and related future net cash flows and present values thereof related to our properties as of December 31, 2021 incorporated by reference herein and elsewhere in this registration statement were based on the proved reserves estimates prepared or audited by Haas Petroleum Engineering Services, Inc., Cawley, Gillespie & Associates, Inc., Netherland, Sewell & Associates, Inc. and William M. Cobb & Associates, Inc., our independent reserve engineers, summary letters of which are incorporated by reference herein. We have incorporated these estimates in reliance on the authority of such firms as experts in such matters.
Estimates of the oil and natural gas reserves and related future net cash flows and present values thereof related to the properties acquired in the Uinta Acquisition as of December 31, 2021 incorporated by reference herein and elsewhere in this registration statement were based on the proved reserves estimates prepared by Cawley, Gillespie & Associates, Inc., a summary letter of which is incorporated by reference herein. We have incorporated these estimates in reliance on the authority of such firm as an expert in such matters.
The information incorporated by reference herein as of December 31, 2020 regarding Contango’s estimates of the oil and gas reserves associated with its oil and gas properties have been audited by W.D. Von Gonten and Company and William M. Cobb & Associates, Inc., independent petroleum engineering firms. The description of the audit of such estimates is included and incorporated by reference into this prospectus upon the authority of said firm as an expert in these matters.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 (including the exhibits, schedules and amendments thereto) under the Securities Act, with respect to the shares of our Class A Common Stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to us and the Class A Common Stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract, agreement or any other document are summaries
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of the material terms of such contract, agreement or other document and are not necessarily complete. With respect to each of these contracts, agreements or other documents filed as an exhibit to the registration statement, reference is made to the exhibits for a more complete description of the matter involved.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. Our registration statement, of which this prospectus constitutes a part, and the exhibits and schedules thereto can be downloaded from the SEC’s website. We file with or furnish to the SEC periodic reports and other information. These reports and other information may be obtained from the SEC’s website as provided above. Our website is located at www.crescentenergyco.com. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports and other information filed with or furnished to the SEC available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus, and investors should not rely on such information in making a decision to purchase our Class A Common Stock.
We furnish or make available to our stockholders annual reports containing our audited financial statements prepared in accordance with GAAP. We also furnish or make available to our stockholders quarterly reports containing our unaudited interim financial information, including the information required by Form 10-Q, for the first three fiscal quarters of each fiscal year.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to “incorporate by reference” the information we file with the SEC. This means we can disclose important information to you without actually including the specific information in this prospectus by referring to those documents. The information incorporated by reference is an important part of this prospectus.
If information in incorporated documents conflicts with information in this prospectus, you should rely on the most recent information. If information in an incorporated document conflicts with information in another incorporated document, you should rely on the most recent incorporated document.
The documents listed below have been filed by us pursuant to the Exchange Act and are incorporated by reference in this prospectus (other than, in each case, any information therein deemed furnished rather than filed):
| • | our Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 10, 2022; |
| • | our Current Reports on Form 8-K and Form 8-K/A, as applicable, filed on February 7, 2022, February 10, 2022, February 16, 2022, April 5, 2022, April 8, 2022, May 10, 2022, May 19, 2022, May 25, 2022 and August 19, 2022; |
| • | our Quarterly Reports on Form 10-Q for the periods ended March 31, 2022, filed on May 10, 2022, and June 30, 2022, filed on August 9, 2022; and |
| • | the description of our Class A Common Stock contained in our Registration Statement on Form 8-A, filed on December 7, 2021 including any amendments or reports filed for the purpose of updating the description. |
You may request a copy of any document incorporated by reference in this prospectus, at no cost, by writing or calling us at the following address:
600 Travis Street, Suite 7200
Houston, Texas 77002
(713) 337-4600
Attention: Investor Relations
You should rely only on the information incorporated by reference or provided in this prospectus. We have not authorized anyone else to provide you with any information. You should not assume that the information incorporated by reference or provided in this prospectus is accurate as of any date other that the date on the front of each document.
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GLOSSARY OF OIL AND NATURAL GAS TERMS
The following are abbreviations and definitions of certain terms used in this document, which are commonly used in the oil and natural gas industry:
“Bbl” means 42 U.S. gallons liquid volume per stock tank barrel.
“Boe” means barrels of oil equivalent.
“Btu” means British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water one degree Fahrenheit.
“DJ” means Denver Julesburg.
“M” means in thousands.
“MM” means in millions.
“MBbls” means thousand barrels of oil or NGL.
“MBoe” means thousand Boe.
“Mcf” means thousand cubic feet of natural gas.
“MMBoe” means million Boe.
“MMBtu” means million British thermal units.
“MMcf” means million cubic feet of natural gas.
“NYMEX” means the New York Mercantile Exchange.
“NYMEX Henry Hub” or “Henry Hub Index” means the major exchange for pricing natural gas futures on the New York Mercantile Exchange.
“oil equivalent” means natural gas is converted to a crude oil equivalent at the ratio of six Mcf of natural gas to one Boe.
“PD” means proved developed.
“PDP” means proved developed producing.
“PUD” means proved undeveloped reserves.
“PV-0 value” means the present value of estimated future oil and gas revenues, net of estimated direct expenses, discounted at an annual discount rate of 0% used to estimate the present value of proved oil and natural gas reserves.
“PV-10 value” means the present value of estimated future oil and gas revenues, net of estimated direct expenses, discounted at an annual discount rate of 10% used to estimate the present value of proved oil and natural gas reserves.
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“SEC Pricing” means the unweighted average first-day-of-the-month commodity price for crude oil or natural gas for the period beginning January 1, 2021 and ending December 1, 2021, adjusted by lease for market differentials (quality, transportation, fees, energy content, and regional price differentials). The SEC provides a complete definition of prices in “Modernization of Oil and Gas Reporting” (Final Rule, Release Nos. 33-8995; 34-59192).
“WTI” or “West Texas Intermediate” means a light crude oil produced in the United States with an American Petroleum Institute gravity of approximately 38 to 40 and the sulfur content is approximately 0.3%.
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Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
| Item 13. | Other Expenses of Issuance and Distribution |
The following table sets forth an itemized statement of the amounts of all expenses (excluding underwriting discounts and commissions) payable by us in connection with the registration of the shares of Class A Common Stock offered hereby. With the exception of the SEC registration fee and the FINRA filing fee, the amounts set forth below are estimates.
| SEC registration fee |
$ | 9,936 | ||
| FINRA filing fee |
11,750 | |||
| Accounting fees and expenses |
275,000 | |||
| Legal fees and expenses |
250,000 | |||
| Printing and engraving expenses |
80,000 | |||
| Transfer agent and registrar fees |
5,000 | |||
| Miscellaneous |
18,314 | |||
|
|
|
|||
| Total |
$ | 650,000 | ||
|
|
|
| Item 14. | Indemnification of Directors and Officers |
Section 145 of the DGCL provides that a corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise), against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. A similar standard is applicable in the case of derivative actions (i.e., actions by or in the right of the corporation), except that indemnification extends only to expenses, including attorneys’ fees, incurred in connection with the defense or settlement of such action and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation.
Our amended and restated certificate of incorporation contains provisions that limit the liability of our directors and officers for monetary damages to the fullest extent permitted by the DGCL. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except liability:
| • | for any breach of the director’s duty of loyalty to our company or our stockholders; |
| • | for any act or omission not in good faith or that involve intentional misconduct or knowing violation of law; |
| • | under Section 174 of the DGCL regarding unlawful dividends and stock purchases; or |
| • | for any transaction from which the director derived an improper personal benefit. |
Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal. If the DGCL is amended to provide for further limitations on the personal liability of directors or officers of corporations, then the personal liability of our directors and officers will be further limited to the fullest extent permitted by the DGCL.
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In addition, we have entered into indemnification agreements with our current directors and officers containing provisions that are in some respects broader than the specific indemnification provisions contained in the DGCL. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law against liability that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future directors and officers.
We maintain liability insurance policies that indemnify our directors and officers against various liabilities, including certain liabilities under arising under the Securities Act and the Exchange Act, that may be incurred by them in their capacity as such.
The proposed form of Underwriting Agreement to be filed as Exhibit 1.1 to this registration statement provides for indemnification by the underwriters of us, our directors and officers and the selling stockholder, and by us and the selling stockholder of the underwriters, for certain liabilities arising under the Securities Act or otherwise in connection with this offering.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
| Item 15. | Recent Sales of Unregistered Securities |
On December 7, 2021, the Company issued an aggregate 127,536,463 shares of its Class B Common Stock in connection with, and as consideration for, the closing of the Merger Transactions.
OpCo LLC Agreement
On December 7, 2021, in connection with the closing of the Merger Transactions, the Company entered into the OpCo LLC Agreement. The rights and obligations of the holders of OpCo Units are set forth in the OpCo LLC Agreement.
Pursuant to the OpCo LLC Agreement, each OpCo Unitholder other than the Company and its wholly owned subsidiaries (such group, the “Company Group”) has, subject to certain limitations, the right, pursuant to a redemption right specified in the OpCo LLC Agreement (the “Redemption Right”), to cause OpCo to redeem all or a portion of its OpCo Units for, at OpCo’s election, (i) a corresponding number of shares of the Company’s Class A Common Stock, subject to conversion rate adjustments for stock splits, stock dividends, and reclassifications, or (ii) an approximately equivalent amount of cash as determined pursuant to the terms of the OpCo LLC Agreement. Alternatively, upon the exercise of the Redemption Right by an OpCo Unitholder, the Company Group (instead of OpCo) will have the right, pursuant to a call right specified in the OpCo LLC Agreement (the “Call Right”), to acquire each tendered OpCo Unit directly from such OpCo Unitholder for, at the Company’s election, (i) one share of Class A Common Stock, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions, or (ii) an approximately equivalent amount of cash as determined pursuant to the terms of the OpCo LLC Agreement.
In addition, subject to certain exceptions, once the Company Group holds more than 95% of the OpCo Units, the Company Group will have the right to effect the redemption of all of the OpCo Units held by each member of OpCo (other than the members of the Company Group). In connection with any redemption of OpCo Units pursuant to the Redemption Right (or an acquisition of OpCo Units by the Company Group pursuant to the Call Right), the corresponding number of shares of Class B Common Stock will be cancelled. As the OpCo Unitholders cause their OpCo Units to be redeemed, holding other assumptions constant, the number of OpCo Units held by the Company Group will correspondingly increase, the number of shares of Class A Common Stock outstanding will correspondingly increase and the number of shares of Class B Common Stock will correspondingly decrease.
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The foregoing description of the OpCo LLC Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the OpCo LLC Agreement, a copy of which is filed as Exhibit 10.2 to this registration statement and is incorporated herein by reference.
| Item 16. | Exhibits and Financial Statement Schedules |
(a) Exhibits.
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| * | Filed herewith. |
| ** | Previously filed. |
| † | Management contract or compensatory plan or agreement. |
(b) Financial Statement Schedules. Financial statement schedules are omitted because the required information is not applicable, not required or included in the financial statements or the notes thereto incorporated by reference in the prospectus that forms a part of this registration statement.
| Item 17. | Undertakings |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such
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liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on September 6, 2022.
| CRESCENT ENERGY COMPANY | ||
| By: | /s/ Bo Shi | |
| Name: | Bo Shi | |
| Title: | General Counsel | |
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities indicated below on September 6, 2022.
| /s/ David Rockecharlie David Rockecharlie |
Chief Executive Officer and Director (Principal Executive Officer) | |||
| /s/ Brandi Kendall Brandi Kendall |
Chief Financial Officer and Director (Principal Financial Officer) | |||
| /s/ Todd Falk Todd Falk |
Chief Accounting Officer (Principal Accounting Officer) | |||
| * John C. Goff |
Chairman of the Board and Director | |||
| * Robert G. Gwin |
Director | |||
| * Claire S. Farley |
Director | |||
| * Erich Bobinsky |
Director | |||
| * Ellis “Lon” McCain |
Director | |||
| * Bevin Brown |
Director | |||
| * |
Director | |||
| Karen Simon | ||||
| *By: | /s/ Bo Shi | |
| Bo Shi, Attorney-In-Fact |
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Exhibit 1.1
CRESCENT ENERGY COMPANY
Class A Common Stock
UNDERWRITING AGREEMENT
[•], 2022
CREDIT SUISSE SECURITIES (USA) LLC
KKR CAPITAL MARKETS LLC
WELLS FARGO SECURITIES, LLC
As Representatives of the Several Underwriters,
c/o Credit Suisse Securities (USA) LLC,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
c/o KKR Capital Markets LLC
30 Hudson Yards
New York, N.Y. 10001
c/o Wells Fargo Securities, LLC
500 West 33rd Street, 14th Floor
New York, New York 10001
Dear Sirs:
1. Introductory. Independence Energy Aggregator L.P. (the “Selling Stockholder”), as a stockholder of Crescent Energy Company, a Delaware corporation (“Company”), agrees with the several underwriters named in Schedule A hereto (“Underwriters”) to sell to the several Underwriters 5,000,000 shares of its Class A common stock of the Company, par value $0.0001 (the “Class A Common Stock” or the “Firm Securities”). The Selling Stockholder also agrees to sell to the Underwriters, at the option of the Underwriters, an aggregate of not more than 750,000 additional shares of Class A Common Stock of the Company (“Optional Securities”), as set forth below. The Firm Securities and the Optional Securities are herein collectively called the “Offered Securities”. The shares of Class A Common Stock of the Company to be outstanding after giving effect to the sale of the Offered Securities are referred to herein as the “Stock”.
The Offered Securities consist of shares of Class A Common Stock that are issuable upon redemption of units representing limited liability company interests (the “OpCo Units”) of Crescent Energy OpCo LLC, a Delaware limited liability company (“OpCo”), together with the redemption of an equal number of shares of Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), of the Company, pursuant to the Amended and Restated Limited Liability Company Agreement of OpCo, dated December 7, 2021 (the “OpCo LLC Agreement”), immediately prior to the Closing Date (as hereinafter defined) on which the Offered Securities are to be sold (such redemption being hereinafter referred to as a “Redemption Transaction” and any such Shares issued in a Redemption Transaction hereinafter referred to as “Redemption Shares”). In order to exercise their redemption right pursuant to the terms of the OpCo LLC Agreement, the Selling Stockholder shall deliver a Redemption Notice (as defined in the OpCo LLC Agreement) to the Company and OpCo prior to the Closing Date.
2. Representations and Warranties of the Company and the Selling Stockholder. (i) The Company represents and warrants to, and agrees with, the several Underwriters that:
(a) Filing and Effectiveness of Registration Statement; Certain Defined Terms. The Company has filed with the Commission (as defined below) a registration statement on Form S-1 (No. 333-264220) covering the registration of the Offered Securities under the Act (as defined below), including a related preliminary prospectus or prospectuses. At any particular time, this initial registration statement, in the form then on file with the Commission, including all material then incorporated by reference therein, all information contained in the registration statement (if any) pursuant to Rule 462(b) and then deemed to be a part of the initial registration statement, and all 430A Information and 430C Information (each as defined below), that in any case has not then been superseded or modified, shall be referred to as the “Initial Registration Statement”. The Company may also have filed, or may file with the Commission, a Rule 462(b) registration statement covering the registration of the Offered Securities. At any particular time, this Rule 462(b) registration statement, in the form then on file with the Commission, including the contents of the Initial Registration Statement incorporated by reference therein and including all 430A Information and all 430C Information, that in any case has not then been superseded or modified, shall be referred to as the “Additional Registration Statement”.
As of the time of execution and delivery of this Agreement, the Initial Registration Statement has been declared effective under the Act and is not proposed to be amended. Any Additional Registration Statement has or will become effective upon filing with the Commission pursuant to Rule 462(b) and is not proposed to be amended. The Offered Securities all have been or will be duly registered under the Act pursuant to the Initial Registration Statement and, if applicable, the Additional Registration Statement.
For purposes of this Agreement:
“430A Information”, with respect to any Registration Statement (as defined below), means information included in a prospectus and retroactively deemed to be a part of such Registration Statement pursuant to Rule 430A(b).
“430C Information”, with respect to any Registration Statement, means information included in a prospectus then deemed to be a part of such Registration Statement pursuant to Rule 430C.
“Act” means the Securities Act of 1933, as amended.
“Applicable Time” means [•]:00 [a./p.]m. (Eastern time) on the date of this Agreement.
“Closing Date” has the meaning defined in Section 3 hereof.
“Commission” means the Securities and Exchange Commission.
“Effective Time” with respect to the Initial Registration Statement or, if filed prior to the execution and delivery of this Agreement, the Additional Registration Statement means the date and time as of which such Registration Statement was declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c). If an Additional Registration Statement has not been filed prior to the execution and delivery of this Agreement but the Company has advised Credit Suisse Securities (USA) LLC, KKR Capital Markets LLC and Wells Fargo Securities, LLC (the “Representatives”) that it proposes to file one, “Effective Time” with respect to such Additional Registration Statement means the date and time as of which such Additional Registration Statement is filed and becomes effective pursuant to Rule 462(b).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Final Prospectus” means the Statutory Prospectus that discloses the public offering price, other 430A Information and other final terms of the Offered Securities and otherwise satisfies Section 10(a) of the Act.
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“General Use Issuer Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its being so specified in Schedule B to this Agreement.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433, relating to the Offered Securities in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
“Limited Use Issuer Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not a General Use Issuer Free Writing Prospectus.
The Initial Registration Statement and any Additional Registration Statement, after the filing thereof, are referred to collectively as the “Registration Statements” and each is individually referred to as a “Registration Statement”. A “Registration Statement” with reference to a particular time means the Initial Registration Statement and any Additional Registration Statement as of such time. A “Registration Statement” without reference to a time means such Registration Statement as of its Effective Time. For purposes of the foregoing definitions, 430A Information with respect to a Registration Statement shall be considered to be included in such Registration Statement as of the time specified in Rule 430A.
“Rules and Regulations” means the rules and regulations of the Commission.
“Securities Laws” means, collectively, the Sarbanes-Oxley Act of 2002, as amended and all rules and regulations promulgated thereunder or implementing the provisions thereof (“Sarbanes-Oxley”), the Act, the Exchange Act, the Rules and Regulations, the auditing principles, rules, standards and practices applicable to auditors of “issuers” (as defined in Sarbanes-Oxley) promulgated or approved by the Public Company Accounting Oversight Board and, as applicable, the rules of The New York Stock Exchange (“Exchange Rules”).
“Statutory Prospectus” with reference to a particular time means the prospectus included in a Registration Statement immediately prior to that time, including any document incorporated by reference therein and any 430A Information or 430C Information with respect to such Registration Statement. For purposes of the foregoing definition, 430A Information shall be considered to be included in the Statutory Prospectus as of the actual time that form of prospectus is filed with the Commission pursuant to Rule 424(b) or Rule 462(c) and not retroactively.
“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on either Section 5(d) of, or Rule 163B under, the Act.
“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Act.
Unless otherwise specified, a reference to a “rule” or “Rule” is to the indicated rule under the Act.
(b) Compliance with Act Requirements. (i) (A) At their respective Effective Times, (B) on the date of this Agreement and (C) on each Closing Date, each of the Initial Registration Statement and the Additional Registration Statement (if any) conformed and will conform in all material respects to the requirements of the Act and the Rules and Regulations, including that the interactive data in Extensible Business Reporting Language included or incorporated by reference in the Registration Statement fairly presents the information called for in all material respects and has been prepared in accordance with the applicable Rules and Regulations, and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) on its date, at the time of filing of the Final Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Time of the Additional Registration Statement in which the Final Prospectus is included, and on each Closing Date, the Final Prospectus will conform in all material respects to the requirements of the Act and the Rules and Regulations and will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein,
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in light of the circumstances under which they are made, not misleading. The preceding sentence does not apply to statements in or omissions from any such document based upon written information furnished to the Company by any Underwriter through any Representative specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 8(c) hereof.
(c) Ineligible Issuer Status. (i) At the time of the initial filing of the Initial Registration Statement and (ii) at the date of this Agreement, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, including (x) the Company or any subsidiary of the Company in the preceding three years not having been convicted of a felony or misdemeanor or having been made the subject of a judicial or administrative decree or order as described in Rule 405 and (y) the Company in the preceding three years not having been the subject of a bankruptcy petition or insolvency or similar proceeding, not having had a registration statement be the subject of a proceeding under Section 8 of the Act and not being the subject of a proceeding under Section 8A of the Act in connection with the offering of the Offered Securities, all as described in Rule 405.
(d) General Disclosure Package. As of the Applicable Time, neither (i) the General Use Issuer Free Writing Prospectus(es), if any, issued at or prior to the Applicable Time, the preliminary prospectus, dated [•], 2022 (which is the most recent Statutory Prospectus distributed to investors generally) and the other information, if any, stated in Schedule B to this Agreement to be included in the General Disclosure Package, all considered together (collectively, the “General Disclosure Package”), (ii) any individual Limited Use Issuer Free Writing Prospectus, nor (iii) any individual Testing-the-Waters Communication, when considered together with the General Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from any Statutory Prospectus, any Issuer Free Writing Prospectus or any Testing-the-Waters Communication in reliance upon and in conformity with written information furnished to the Company by any Underwriter through any Representative specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 8(c) hereof.
(e) Issuer Free Writing Prospectuses. Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Offered Securities or until any earlier date that the Company notified or notifies the Representatives as described in Section 5(c) below, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information then contained in the Registration Statement.
(f) Good Standing of the Company. The Company has been duly incorporated and is validly existing as a corporation and in good standing under the laws of the State of Delaware with power and authority (corporate and other) to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Final Prospectus and to enter into and perform its obligations under this Agreement; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect (as defined below).
(g) Subsidiaries. Each subsidiary of the Company has been duly incorporated or organized and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with power and authority (corporate and other) to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Final Prospectus; and each subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except as would not
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reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; all of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable (except, in the case of subsidiaries that are limited partnerships or limited liability companies, as such non-assessability may be limited by applicable state law); and the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects, other than those arising under the Company’s Credit Agreement (as defined below).
(h) Offered Securities. All outstanding shares of capital stock of the Company have been duly authorized; all outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, and will conform to the information in the General Disclosure Package and to the description of capital stock contained in the Final Prospectus in all material respects; at the Closing Date, the Redemption Shares will have been duly authorized, validly issued, fully paid and non-assessable and will conform to the information in the General Disclosure Package and to the description of capital stock contained in the Final Prospectus in all material respects; the stockholders of the Company have no preemptive rights with respect to the Offered Securities; and none of the outstanding shares of capital stock of the Company have been issued in violation of any preemptive or similar rights of any security holder of the Company. Except as disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus, there are no outstanding (A) securities or obligations of the Company convertible into or exchangeable for any capital stock of the Company, (B) warrants, rights or options to subscribe for or purchase from the Company any such capital stock or any such convertible or exchangeable securities or obligations or (C) obligations of the Company to issue or sell any shares of capital stock, any such convertible or exchangeable securities or obligations or any such warrants, rights or options. The Company has not, directly or indirectly, offered or sold any of the Offered Securities by means of any “prospectus” (within the meaning of the Act and the Rules and Regulations) or used any “prospectus” or made any offer (within the meaning of the Act and the Rules and Regulations) in connection with the offer or sale of the Offered Securities, in each case other than the preliminary prospectus referred to in Section 2(i)(e) hereof, the General Disclosure Package and the Final Prospectus.
(i) No Restrictions on Subsidiaries. No subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock or similar ownership interest, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s properties or assets to the Company or any other subsidiary of the Company, other than those arising under the Amended and Restated Limited Liability Company Agreement of Crescent Energy OpCo LLC (“OpCo”), dated December 7, 2021, the Company’s Credit Agreement and the Indenture.
(j) No Finder’s Fee. Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against any of them or any of the Underwriters for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Offered Securities.
(k) Registration Rights. Except as disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to a Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act (collectively, “registration rights”), and any person to whom the Company has granted registration rights has agreed not to exercise such rights until after the expiration of the Lock-Up Period referred to in Section 5(k) hereof (other than the Selling Stockholder as contemplated by this Agreement).
(l) Listing. The Offered Securities will be listed on The New York Stock Exchange when issued.
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(m) Absence of Further Requirements. No consent, approval, authorization, or order of, or filing or registration with, any person (including any governmental agency or body or any court) is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement in connection with the offering and sale of the Offered Securities, except such as have been obtained, or made and such as may be required under state or foreign securities or “Blue Sky” laws or by the Financial Industry Regulatory Authority (“FINRA”), other than those that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
(n) Title to Property. Except as disclosed in the General Disclosure Package and the Final Prospectus, the Company and its subsidiaries have (i) defensible title to all of their interests in the oil and gas properties described or incorporated by reference in the Registration Statement, the General Disclosure Package and the Final Prospectus as being owned or leased by them, title investigations, having been carried out by the Company or its subsidiaries consistent with reasonable practice in the oil and gas industry in the areas in which the Company and its subsidiaries operate and (ii) good and marketable title to, or have valid rights to lease or otherwise use, all other real property and all personal property that are material to the respective businesses of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except (v) royalties, overriding royalties and other burdens under oil and gas leases, (w) those that are described or incorporated by reference in the Registration Statement, the General Disclosure Package or the Final Prospectus, (x) those that do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries, (y) those that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect or (z) those that secure the revolving credit agreement entered into by the Company on May 6, 2021 (as amended to the date hereof, the “Credit Agreement”).
(o) Easements and Rights-of-Way. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries have such consents, easements, rights-of-way or licenses from any person as are necessary to enable the Company and its subsidiaries to conduct their respective business in the manner described in the Registration Statement, the General Disclosure Package and the Final Prospectus, subject to qualifications as may be set forth in the Registration Statement, the General Disclosure Package and the Final Prospectus.
(p) No Conflicts. The execution, delivery and performance by the Company of this Agreement, and the consummation by the Company of the transactions contemplated by this Agreement will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, result in the termination, modification or acceleration of, or result in the creation or imposition of any lien, charge or encumbrance upon any property, right or asset of the Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any property or asset of the Company or any of its subsidiaries is subject, except as otherwise would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, (ii) result in any violation of the provisions of the charter, certificate of formation, by-laws or limited liability company agreements or similar organizational documents of the Company or any of its subsidiaries or (iii) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except as otherwise would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
(q) No Violation or Default. Neither the Company nor any of its subsidiaries is (i) in violation of its respective charter, certificate of formation, by-laws or limited liability company agreement or similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any subsidiary is a party or by which the Company or any subsidiary is bound or to which any property or asset of the Company or any subsidiary is subject; or (iii) in violation of any law or statute or any judgment, order, rule or regulation
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of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (ii) and (iii) above, for any such default or violation that would not reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its subsidiaries taken as a whole (“Material Adverse Effect”).
(r) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Company.
(s) Possession of Licenses and Permits. The Company and its subsidiaries possess all licenses, sub-licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in each of the Registration Statement, the General Disclosure Package and the Final Prospectus, except where the failure to possess or make the same would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; and except as described in each of the Registration Statement, the General Disclosure Package and the Final Prospectus, neither the Company nor any of its subsidiaries has received notice of any revocation or modification of any such license, certificate, permit or authorization or has any reason to believe that any such license, sub-license, certificate, permit or authorization will not be renewed in the ordinary course, except that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(t) Absence of Labor Dispute. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company or any of its subsidiaries, is contemplated or threatened and the Company and its subsidiaries are not aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary’s principal suppliers, manufacturers, customers or contractors that would, in either case, reasonably be expected to have a Material Adverse Effect.
(u) Possession of Intellectual Property. (i) The Company and its subsidiaries own or have the right to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, domain names and other source indicators, copyrights and copyrightable works, know-how, trade secrets, systems, procedures, proprietary or confidential information and all other worldwide intellectual property, industrial property and proprietary rights (collectively, “Intellectual Property”) used in the conduct of their respective businesses; (ii) the conduct of the Company’s and its subsidiaries’ respective businesses does not infringe, misappropriate or otherwise violate any such rights of others and (iii) to the knowledge of the Company, such rights of the Company and its subsidiaries are not being infringed, misappropriated or otherwise violated by any person, except, in each case, as would not reasonably be expected, in the aggregate, to have a Material Adverse Effect.
(v) Cybersecurity; Data Protection. The Company and its subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and perform in all material respects as required in connection with the operation of the business of the Company and its subsidiaries as currently conducted, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants. The Company and its subsidiaries have implemented and maintained commercially reasonable controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data (including all personal, personally identifiable, sensitive, confidential or regulated data (“Personal Data”), if any) used in connection with their businesses, and there have been no breaches, violations, outages or unauthorized uses of or accesses to same, except for those that have been remedied without material cost or liability or the duty to notify any person, nor any incidents under internal review or investigations relating to the same. The Company and its subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders,
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rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Personal Data, if any, and to the protection of such IT Systems and Personal Data, if any, from unauthorized use, access, misappropriation or modification, except, in each case, as would not reasonably be expected to have a Material Adverse Effect.
(w) Environmental Laws. (i) The Company and its subsidiaries (x) are in compliance with all, and have not violated any, applicable federal, state, local and foreign laws, rules, regulations, requirements, decisions, judgments, decrees, orders and other legally enforceable requirements relating to pollution or the protection of human health or safety (to the extent related to exposure to hazardous or toxic substances), the environment, natural resources, hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “Environmental Laws”); (y) have received and are in compliance with all, and have not violated any, permits, licenses, certificates or other authorizations or approvals required of them under any Environmental Laws to conduct their respective businesses; and (z) have not received written notice of any actual or potential liability or obligation under or relating to, or any actual or potential violation of, any Environmental Laws, including for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, and have no knowledge of any event or condition that would reasonably be expected to result in any such notice, and (ii) there are no costs or liabilities associated with Environmental Laws of or relating to the Company or its subsidiaries, except in the case of each of (i) and (ii) above, for any such matter as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (iii) except as described in each of the Registration Statement, the General Disclosure Package and the Final Prospectus, (x) there is no proceeding that is pending, or that is known to be contemplated, against the Company or any of its subsidiaries under any Environmental Laws in which a governmental entity is also a party, other than such proceeding regarding which it is reasonably believed no monetary sanctions of $300,000 or more will be imposed, (y) the Company and its subsidiaries are not aware of any facts or issues regarding compliance with Environmental Laws, or liabilities or other obligations under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants, that could reasonably be expected to have a material effect on the capital expenditures, earnings or competitive position of the Company and its subsidiaries, and (z) none of the Company or its subsidiaries anticipates material capital expenditures to achieve compliance with any Environmental Laws.
(x) Accurate Disclosure. The statements in the Registration Statement, the General Disclosure Package and the Final Prospectus under the headings “Material U.S. Federal Income Tax Considerations for Non-U.S. Holders” and “Description of Capital Stock”, insofar they purport to constitute summaries of the terms of statutes, rules or regulations, legal or governmental proceedings or contracts and other documents or descriptions of the Offered Securities constitute accurate summaries of the terms of such statutes, rules and regulations, legal and governmental proceedings and contracts in all material respects, subject to the assumptions and qualifications set forth therein.
(y) Absence of Manipulation. Neither the Company nor any affiliate of the Company has taken, or will take, directly or indirectly, any action designed to or that would reasonably be expected to cause or result in any stabilization or manipulation of the price of the Offered Securities or result in a violation of Regulation M under the Exchange Act.
(z) Statistical and Market-Related Data. Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data included or incorporated by reference in each of the Registration Statement, a Statutory Prospectus, the General Disclosure Package, the Final Prospectus or any Written Testing-the-Waters Communication is not based on or derived from sources that are reliable and accurate in all material respects.
(aa) Compliance with the Sarbanes-Oxley Act. The Company has taken all necessary actions to ensure that, upon the effectiveness of the Registration Statement, it will be in compliance with any applicable provision of Sarbanes-Oxley that are then in effect and with which the Company is required to comply as of the effectiveness of the Registration Statement.
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(bb) Accounting Controls. The Company and its subsidiaries maintain systems of internal accounting controls sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in each of the Registration Statement, the General Disclosure Package and the Final Prospectus, there are no material weaknesses in the Company’s internal controls.
(cc) Disclosure Controls. The Company and its subsidiaries maintain an effective system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Exchange Act) that complies with the requirements of the Exchange Act and that has been designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure. The Company and its subsidiaries have carried out evaluations of the effectiveness of their disclosure controls and procedures as required by Rule 13a-15 of the Exchange Act.
(dd) Litigation. Except as described in each of the Registration Statement, the General Disclosure Package and the Final Prospectus, there are no legal, governmental or regulatory investigations, actions, demands, claims, suits, arbitrations, inquiries or proceedings (“Actions”) pending to which the Company or any of its subsidiaries is or may be a party or to which any property of the Company or any of its subsidiaries is or may be the subject that, individually or in the aggregate, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have a Material Adverse Effect; and to the knowledge of the Company, no such Actions are threatened or contemplated by any governmental or regulatory authority or others.
(ee) Financial Statements. (i) The historical financial statements and the related notes thereto of the Company and its consolidated subsidiaries included or incorporated by reference in each of the Registration Statement and the General Disclosure Package and the Final Prospectus present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles accepted in the United States (“GAAP”) applied on a consistent basis throughout the periods covered thereby; (ii) the other financial information of the Company and its consolidated subsidiaries included or incorporated by reference in each of the Registration Statement and the General Disclosure Package and the Final Prospectus has been derived from the accounting records of the Company and its consolidated subsidiaries, and presents fairly the information shown thereby, (iii) Grant Thornton LLP has certified the historical financial statements and the related notes thereto of Contango Oil & Gas Company and its subsidiaries (the “Contango Entities”) incorporated by reference in each of the Registration Statement and the General Disclosure Package and the Final Prospectus, and to the knowledge of the Company such financial statements and the related notes thereto present fairly in all material respects the financial position of the Contango Entities as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified and (iv) EEPB, P.C. has certified the historical statement of revenues and direct operating expenses of the issued and outstanding membership interests of Javelin Uinta, LLC that holds certain exploration and production assets (the “Uinta Basin Assets”) incorporated by reference in each of the Registration Statement and the General Disclosure Package and the Final Prospectus, and to the knowledge of the Company such financial statements and the related notes thereto present fairly in all material respects
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the statement of revenues and direct operating expenses as of the dates indicated; to the knowledge of the Company, such financial statements have been prepared in conformity with GAAP applied on a consistent basis throughout the periods covered thereby. The unaudited pro forma financial information and the related notes thereto included or incorporated by reference in each case in each of the Registration Statement and the General Disclosure Package and the Final Prospectus has been prepared in accordance with the Commission’s rules and guidance with respect to pro forma financial information, and the assumptions underlying such pro forma financial information are reasonable and are set forth or incorporated by reference in each of the Registration Statement and the General Disclosure Package and the Final Prospectus.
(ff) No Material Adverse Change in Business. Except as disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus, since the end of the period covered by the latest audited financial statements of the Company included or incorporated by reference in each of the Registration Statement and the General Disclosure Package and the Final Prospectus (i) there has been no change, nor any development or event involving a prospective change, in the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its subsidiaries, taken as a whole, that is material and adverse, (ii) except as disclosed in or contemplated by the Registration Statement, the General Disclosure Package and the Final Prospectus, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock, (iii) except as disclosed in or contemplated by the General Disclosure Package and the Final Prospectus, there has been no material adverse change in the capital stock, short term indebtedness, long term indebtedness, net current assets or net assets of the Company or any of its subsidiaries, (iv) there has been no material transaction entered into and there is no material transaction that is probable of being entered into by the Company or any of its subsidiaries other than transactions in the ordinary course of business, (v) there has been no obligation, direct or contingent, that is material to the Company or any of its subsidiaries taken as a whole, incurred by the Company or any of its subsidiaries, except obligations incurred in the ordinary course of business, and (vi) neither the Company nor any of its subsidiaries has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority.
(gg) Investment Company Act. The Company is not required to register as an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Investment Company Act”).
(hh) Taxes. Except, in each case, as would not reasonably be expected to have a Material Adverse Effect, the Company and each of its subsidiaries have (i) filed all federal, state, local and foreign tax returns required to be filed through the date hereof, subject to permitted extensions, and (ii) paid all taxes due, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP.
(ii) Insurance. The Company and its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, which insurance is in amounts and insures against such losses and risks as are reasonably adequate to protect the Company and its subsidiaries and their respective businesses; and neither the Company nor any of its subsidiaries has (i) received notice from any insurer or agent of such insurer that capital improvements or other material expenditures (other than the payment of premiums due) are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain substantially similar coverage at reasonable cost from substantially similar insurers as may be necessary to continue its business.
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(jj) No Unlawful Payments. Neither the Company nor any of its subsidiaries, nor to the knowledge of the Company and its subsidiaries, any director, officer or employee of the Company or any of its subsidiaries or any agent, affiliate or other person associated with or acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made or taken an act in furtherance of an offer, promise or authorization of any direct or indirect unlawful payment or benefit to any foreign or domestic government official or employee, including of any government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom, or any other applicable anti-bribery or anti-corruption law; or (iv) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit.
(kk) Compliance with Anti-Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, including those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Company or any of its subsidiaries conducts business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company or any of its subsidiaries, threatened.
(ll) Economic Sanctions. Neither the Company nor any of its subsidiaries, nor any director, officer, or employee thereof, nor, to the knowledge of the Company or any of its subsidiaries, any agent, affiliate or representative of the Company or any of its subsidiaries or any agent, affiliate or other person associated with or acting on behalf of the Company or any of its subsidiaries, is an individual or entity (“Person”) that is, or is owned or controlled by a Person that is: subject or target of any U.S. sanctions administered or enforced by the U.S. government, (including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, the European Union, Her Majesty’s Treasury, the Swiss Secretariat of Economic Affairs, the Hong King Momentary Authority, the Monetary Authority of Singapore, or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company or any of its subsidiaries located, organized or resident in a country or territory that is the subject or target of Sanctions, including, without limitation, Crimea, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic or any other Covered Region of Ukraine identified pursuant to Executive Order 14065, Cuba, Iran, North Korea and Syria (each, a “Sanctioned Country”). For the past five years, the Company and its subsidiaries have not knowingly engaged in, are not now knowingly engaged in, or in and will not engage in, any dealings or transactions with any person, or in any country or territory, that at the time of the dealing or transaction is or was the subject or target of Sanctions.
(mm) Other Offerings. Except in connection with the Redemption Transaction. the Company has not sold, issued or distributed any security (as defined in the Act) during the six-month period preceding the date hereof including any sales pursuant to Rule 144A under, or Regulation D or Regulation S of the Act, other than sales pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans, pursuant to outstanding options, rights or warrants or in connection with the issuance of shares of Class A Common Stock and Class B common stock, par value $0.0001 (the “Class B Common Stock”) as disclosed in the Company’s filings with the Commission.
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(nn) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement, the General Disclosure Package or the Final Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required, except as otherwise would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
(oo) Capitalization. All the outstanding shares of capital stock or other equity interests of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable (except, in the case of subsidiaries that are limited partnerships or limited liability companies, as such non-assessability may be limited by applicable state law) and all such outstanding shares of capital stock or other equity interests owned directly or indirectly by the Company are owned free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party (collectively, “Liens”), except pursuant to Credit Agreement.
(pp) Independent Accountants. (i) Deloitte & Touche LLP (“Deloitte”), who have certified certain financial statements of the Company and its subsidiaries are independent public accountants with respect to the Company and its subsidiaries, (ii) Grant Thornton LLP (“GT”), who have certified certain financial statements of the Contango entities are independent public accountants with respect to the Contango Entities, (iii) EEPB, P.C. (“EEPB”), who have certified certain financial statements of the Uinta Basin Assets are independent public accountants with respect to the Uinta Basin Assets and (iv), in each case, within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants and its interpretations and rulings thereunder.
(qq) Independent Reserve Engineers. Each of Netherland, Sewell & Associates, Inc. (“NSAI”), Cawley, Gillespie & Associates, Inc. (“CGAI”), Haas Petroleum Engineering Services, Inc. (“HPES”) and William M. Cobb & Associates, Inc. (“Cobb”), whose reports appear or are incorporated by reference in the Registration Statement, the General Disclosure Package and the Final Prospectus and who has delivered and will deliver the letters referred to in Section 7(k) hereof, was, as of the date of such reports, and is, as of the date hereof, an independent petroleum engineer with respect to the Company (or the applicable subsidiary thereof named in the Registration Statement, the General Disclosure Package and the Final Prospectus).
(rr) No Undisclosed Relationships. No material relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, members, stockholders, unitholders or other affiliates of the Company, on the other, that is not so described in each of the Registration Statement, the General Disclosure Package and the Final Prospectus.
(ss) Compliance with ERISA. (i) Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), for which the Company or any member of its “Controlled Group” (defined as any entity, whether or not incorporated, that is under common control with the Company within the meaning of Section 4001(a)(14) of ERISA or any entity that would be regarded as a single employer with the Company under Section 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any liability (each, a “Plan”) has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code; (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan, excluding transactions effected pursuant to a statutory or administrative exemption; (iii) for each Plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no Plan has failed (whether or not waived), or is reasonably expected to fail, to satisfy the minimum funding standards (within the meaning of Section 302 of ERISA or Section 412 of the Code) applicable to such Plan; (iv) no Plan
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is, or is reasonably expected to be, in “at risk status” (within the meaning of Section 303(i) of ERISA), and no Plan that is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA is in “endangered status” or “critical status” (within the meaning of Sections 304 and 305 of ERISA); (v) the fair market value of the assets of each Plan exceeds the present value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan); (vi) no “reportable event” (within the meaning of Section 4043(c) of ERISA and the regulations promulgated thereunder) has occurred or is reasonably expected to occur; (vii) each Plan that is intended to be qualified under Section 401(a) of the Code is so qualified, and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification; (viii) neither the Company nor any member of the Controlled Group has incurred, nor reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation, in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA); and (ix) none of the following events has occurred or is reasonably likely to occur: (A) a material increase in the aggregate amount of contributions required to be made to all Plans by the Company or its Controlled Group affiliates in the current fiscal year of the Company and its Controlled Group affiliates compared to the amount of such contributions made in the Company’s and its Controlled Group affiliates’ most recently completed fiscal year; or (B) a material increase in the Company or its subsidiaries’ “accumulated post-retirement benefit obligations” (within the meaning of Accounting Standards Codification Topic 715-60) compared to the amount of such obligations in the Company and its subsidiaries’ most recently completed fiscal year, except in each case with respect to the events or conditions set forth in (i) through (ix) hereof, as would not, in the aggregate, have a Material Adverse Effect.
(tt) Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Act and Section 21E of the Exchange Act) included or incorporated by reference in any of the Registration Statement, the General Disclosure Package and the Final Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
(uu) Incorporated Documents. The documents incorporated by reference in each of the Registration Statement, the General Disclosure Package and the Final Prospectus, when they were filed with the Commission, conformed or will conform, as the case may be, in all material respects to the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder.
(vv) Stock Options. The Company has not granted stock options (the “Stock Options”) pursuant to the stock-based compensation plans of the Company and its subsidiaries. The Company has not granted, and there is no and has been no policy or practice of the Company of granting, Stock Options prior to, or otherwise coordinating the grant of Stock Options with, the release or other public announcement of material information regarding the Company or its subsidiaries or their results of operations or prospects.
(ww) Testing-the-Waters Communication. The Company (a) has not alone engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representatives (x) with entities that are qualified institutional buyers (“QIBs”) within the meaning of Rule 144A under the Act or institutions that are accredited investors within the meaning of Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Act (“IAIs”) and otherwise in compliance with the requirements of Section 5(d) of the Act or (y) with entities that the Company reasonably believed to be QIBs or IAIs and otherwise in compliance with the requirements of Rule 163B under the Act and (b) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on the Company’s behalf in undertaking Testing-the-Waters Communication. The Company has not presented to any potential investors or otherwise distributed any Written Testing-the-Waters Communication.
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(ii) The Selling Stockholder represents and warrants to, and agrees with, the several Underwriters that:
(a) Title to Securities. The Selling Stockholder has and on each Closing Date hereinafter mentioned will have, valid and unencumbered title to the Offered Securities to be delivered by the Selling Stockholder on such Closing Date and full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Offered Securities to be delivered by the Selling Stockholder on such Closing Date hereunder; and upon the delivery of and payment for the Offered Securities on each Closing Date hereunder the several Underwriters will acquire valid and unencumbered title to the Offered Securities to be delivered by the Selling Stockholder on such Closing Date.
(b) Absence of Further Requirements. No consent, approval, authorization, or order of, or filing or registration with, any person (including any governmental agency or body or any court) is required to be obtained or made by the Selling Stockholder for the consummation of the transactions contemplated by this Agreement in connection with the sale of the Offered Securities, except such as have been obtained, or made and such as may be required under state or foreign securities or “Blue Sky” laws or by FINRA, other than those that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
(c) No Conflicts. The execution, delivery and performance by the Selling Stockholder of this Agreement, and the sale of the Offered Securities will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Selling Stockholder is a party or by which the Selling Stockholder is bound or to which any property or asset of the Selling Stockholder is subject, except as otherwise would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, (ii) result in any violation of the provisions of the charter, certificate of formation, by-laws or limited liability company agreements or similar organizational documents of the Selling Stockholder or (iii) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except as otherwise would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
(d) Final Prospectus. On its date, at the time of filing of the Final Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Time of the Additional Registration Statement in which the Final Prospectus is included, and on each Closing Date, the Final Prospectus will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The preceding sentence applies only to written information furnished to the Company by the Selling Stockholder specifically for use in the Final Prospectus, it being understood and agreed that the only such information is that described as such in Section 8(b) hereof.
(e) General Disclosure Package. As of the Applicable Time, the General Disclosure Package did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence applies only to written information furnished to the Company by the Selling Stockholder specifically for use in the General Disclosure Package, it being understood and agreed that the only such information is that described as such in Section 8(b) hereof.
(f) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Selling Stockholder.
(g) No Finder’s Fee. The Selling Stockholder is not a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against the Selling Stockholder or any of the Underwriters for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Offered Securities.
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(h) Absence of Manipulation. The Selling Stockholder has not taken, and will not take, directly or indirectly, any action designed to or that would reasonably be expected to cause or result in any stabilization or manipulation of the price of the Offered Securities .
(i) Testing-the-Waters Communication. The Selling Stockholder has not engaged in any Testing-the-Waters Communication.
(j) Economic Sanctions. The Selling Stockholder will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person (i) to fund or facilitate any activities or business of or with any person or in any country or territory that, at the time of such funding or facilitation, is the subject or target of any Sanctions, (ii) to fund or facilitate any activities of or business in any Sanctioned Country or (iii) in any other manner that will result in a violation of Sanctions by any person (including any person participating in the offering, whether as underwriter, advisor, investor or otherwise).
(k) Organization and Good Standing. The Selling Stockholder has been duly organized and is validly existing and in good standing under the laws of its respective jurisdictions of organization.
(l) Delivery, DTC. Upon payment for the Offered Securities to be sold by such Selling Stockholder pursuant to this Agreement, delivery of such Offered Securities, as directed by the Underwriters, to Cede & Co. (“Cede”) or such other nominee as may be designated by The Depository Trust Company (“DTC”), registration of such Offered Securities in the name of Cede or such other nominee and the crediting of such Offered Securities on the books of DTC to securities accounts (within the meaning of Section 8-501 of New York UCC) of the Underwriters (assuming that neither DTC nor any such Underwriter has notice of any adverse claim (within the meaning of Section 8-105 of the New York UCC) to such Offered Securities), (A) DTC shall be a “protected purchaser” of such Offered Securities within the meaning of Section 8-303 of the New York UCC, (B) under Section 8-501 of the New York UCC, the Underwriters will acquire a valid security entitlement in respect of such Offered Securities and (C) no action based on any “adverse claim”, within the meaning of Section 8-102 of the New York UCC, to such Offered Securities may be asserted against the Underwriters with respect to such security entitlement; for purposes of this representation, such Selling Stockholder may assume that when such payment, delivery and crediting occur, (x) such Offered Securities will have been registered in the name of Cede or another nominee designated by DTC, in each case on the Company’s share registry in accordance with its certificate of incorporation, bylaws and applicable law, (y) DTC will be registered as a “clearing corporation” within the meaning of Section 8-102 of the New York UCC and (z) appropriate entries to the accounts of the several Underwriters on the records of DTC will have been made pursuant to the Section 8-501 of the New York UCC.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements and subject to the terms and conditions set forth herein, the Selling Stockholder agrees to sell to the several Underwriters, and each of the Underwriters agree, severally and not jointly, to purchase from the Selling Stockholder, at a purchase price of $[•] per share, that number of Firm Securities (rounded up or down, as determined by Credit Suisse Securities (USA) LLC (“Credit Suisse”) in its discretion, in order to avoid fractions) obtained by multiplying 5,000,000 Firm Securities by a fraction the numerator of which is the number of Firm Securities set forth opposite the name of such Underwriter in Schedule A hereto and the denominator of which is the total number of Firm Securities.
The Selling Stockholder will deliver the Firm Securities to or as instructed by Credit Suisse for the accounts of the several Underwriters in a form reasonably acceptable to Credit Suisse against payment of the purchase price by the Underwriters in Federal (same day) funds by wire transfer to an account at a bank reasonably acceptable to Credit Suisse specified by the Selling Stockholder, at the office of Simpson Thacher & Bartlett LLP, at 10:00 A.M., New York time, on [•], 2022, or at such other time not later than seven full
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business days thereafter as Credit Suisse, the Company and the Selling Stockholder determine, such time being herein referred to as the “First Closing Date”. For purposes of Rule 15c6-1 under the Exchange Act, the First Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the Offered Securities sold pursuant to the offering. The Firm Securities so to be delivered or evidence of their issuance will be made available for checking at the above office of Simpson Thacher & Bartlett LLP on or before the business day prior to the First Closing Date.
In addition, upon written notice from Credit Suisse given to the Company and the Selling Stockholder from time to time not more than 30 days subsequent to the date of the Final Prospectus, the Underwriters may purchase all or less than all of the Optional Securities at the purchase price per share to be paid for the Firm Securities less an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm Securities but not payable on the Optional Securities. The Selling Stockholder agrees to sell to the Underwriters the number of Optional Securities specified in such notice and the Underwriters agree, severally and not jointly, to purchase such Optional Securities (subject to their respective maximum amounts of Optional Securities set forth opposite their respective names in Schedule A hereto). Such Optional Securities shall be purchased from the Selling Stockholder for the account of each Underwriter in the same proportion as the number of shares of Firm Securities set forth opposite such Underwriter’s name bears to the total number of shares of Firm Securities (subject to adjustment by Credit Suisse to eliminate fractions) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by Credit Suisse to the Company and the Selling Stockholder.
Each time for the delivery of and payment for the Optional Securities, being herein referred to as an “Optional Closing Date”, which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a “Closing Date”), shall be determined by Credit Suisse but shall be not later than five full business days after written notice of election to purchase Optional Securities is given. The Selling Stockholder will deliver the Optional Securities being purchased on each Optional Closing Date to or as instructed by Credit Suisse for the accounts of the several Underwriters in a form reasonably acceptable to Credit Suisse, against payment of the purchase price therefore in Federal (same day) funds by wire transfer to an account at a bank reasonably acceptable to Credit Suisse specified by the Selling Stockholder, at the above office of Simpson Thacher & Bartlett LLP. The certificates for the Optional Securities being purchased on each Optional Closing Date or evidence of their issuance will be made available for checking at the above office of Simpson Thacher & Bartlett LLP at a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Offered Securities for sale to the public as set forth in the Final Prospectus.
5. Certain Agreements of the Company and the Selling Stockholder. The Company agrees with the several Underwriters and the Selling Stockholder that:
(a) Additional Filings. Unless filed pursuant to Rule 462(c) as part of the Additional Registration Statement in accordance with the next sentence, the Company will file the Final Prospectus, in a form approved by Credit Suisse, with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by Credit Suisse, subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement or (B) the fifteenth business day after the Effective Time of the Initial Registration Statement. The Company will advise the Representatives promptly of any such filing pursuant to Rule 424(b) and provide satisfactory evidence to Credit Suisse of such timely filing. If an Additional Registration Statement is necessary to register a portion of the Offered Securities under the Act but the Effective Time thereof has not occurred as of the execution and delivery of this Agreement, the Company will file the Additional Registration Statement or, if filed, will file a post-effective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on the date of this Agreement or, if earlier, on or prior to the time the Final Prospectus is finalized and distributed to any Underwriter, or will make such filing at such later date as shall have been consented to by Credit Suisse.
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(b) Filing of Amendments: Response to Commission Requests. The Company will promptly advise the Representatives of any proposal to amend or supplement at any time the Initial Registration Statement, any Additional Registration Statement or any Statutory Prospectus and will not effect such amendment or supplementation without Credit Suisse’s consent; and the Company will also advise the Representatives promptly of (i) the effectiveness of any Additional Registration Statement (if its Effective Time is subsequent to the execution and delivery of this Agreement), (ii) any amendment or supplementation of a Registration Statement or any Statutory Prospectus, (iii) any request by the Commission or its staff for any amendment to any Registration Statement, for any supplement to any Statutory Prospectus or for any additional information, (iv) the institution by the Commission of any stop order proceedings in respect of a Registration Statement or the threatening of any proceeding for that purpose, and (v) the receipt by the Company of any notification with respect to the suspension of the qualification of the Offered Securities in any jurisdiction or the institution or threatening of any proceedings for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof.
(c) Continued Compliance with Securities Laws. If, at any time when a prospectus relating to the Offered Securities is (or but for the exemption in Rule 172 would be) required to be delivered under the Act by any Underwriter or dealer, any event occurs as a result of which the Final Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Registration Statement or supplement the Final Prospectus to comply with the Act, the Company will promptly notify the Representatives of such event and will promptly prepare and, subject to Credit Suisse’s consent, file with the Commission and furnish, at its own expense, to the Underwriters and the dealers and any other dealers upon request of Credit Suisse, an amendment or supplement in the form approved by Credit Suisse which will correct such statement or omission or an amendment which will effect such compliance. Neither Credit Suisse’s consent to, nor the Underwriters’ delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 7 hereof.
(d) Testing-the-Waters Communication. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such statement or omission.
(e) Rule 158. As soon as practicable, Company will make generally available to its security holders an earnings statement covering a period of at least 12 months beginning after the date hereof and satisfying the provisions of Section 11(a) of the Act and Rule 158 under the Act covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the “effective date” (as defined in Rule 158) of the Registration Statement.
(f) Furnishing of Prospectuses. The Company will furnish to the Representatives copies of each Registration Statement (three of which will be signed and will include all exhibits), each related Statutory Prospectus, and, so long as a prospectus relating to the Offered Securities is (or but for the exemption in Rule 172 would be) required to be delivered under the Act, the Final Prospectus and all amendments and supplements to such documents, in each case in such quantities as Credit Suisse requests. The Final Prospectus shall be so furnished on or prior to 3:00 P.M., New York time, on the business day following the execution and delivery of this Agreement, unless otherwise agreed by the Company and Credit Suisse. All other such documents shall be so furnished as soon as available. The Company will pay the expenses of printing and distributing to the Underwriters all such documents.
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(g) Blue Sky Qualifications. The Company will cooperate with the Underwriters and counsel for the Underwriters to qualify the Offered Securities for sale under the laws of such jurisdictions as Credit Suisse designates and will continue such qualifications in effect so long as required for the distribution. Notwithstanding the foregoing, the Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process or taxation in any such jurisdiction where it is not presently qualified or subject to taxation.
(h) Reporting Requirements. During the period of five (5) years hereafter, the Company will furnish to the Representatives and, upon request, to each of the other Underwriters, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to the Representatives (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to stockholders, and (ii) from time to time, such other information concerning the Company as Credit Suisse may reasonably request. However, so long as the Company is subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act and is timely filing reports with the Commission on its Electronic Data Gathering, Analysis and Retrieval system (or any successor system) (“EDGAR”), it is not required to furnish such reports or statements to the Underwriters.
(i) Payment of Expenses. The Company agrees with the several Underwriters that the Company will pay all expenses incident to the performance of the obligations of the Company and the Selling Stockholder under this Agreement, including but not limited to any filing fees and other expenses (including fees and disbursements of counsel to the Underwriters) incurred in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions as Credit Suisse designates and the preparation and printing of memoranda relating thereto, costs and expenses related to the review by FINRA of the Offered Securities (including filing fees and the fees and expenses of counsel for the Underwriters relating to such review), costs and expenses relating to investor presentations or any “road show” in connection with the offering and sale of the Offered Securities including, without limitation, any travel expenses of the Company’s officers and employees and any other expenses of the Company including the fees and expenses incident to listing the Offered Securities on The New York Stock Exchange, fees and expenses in connection with the registration of the Offered Securities under the Exchange Act, any transfer taxes payable in connection with the delivery of the Offered Securities to the Underwriters and expenses incurred in distributing preliminary prospectuses and the Final Prospectus (including any amendments and supplements thereto) to the Underwriters and for expenses incurred for preparing, printing and distributing any Issuer Free Writing Prospectuses to investors or prospective investors.
(j) Absence of Manipulation. The Company and the Selling Stockholder will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, stabilization or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Offered Securities.
(k) Restriction on Sale of Securities by Company. For the period specified below (the “Lock-Up Period”), the Company will not, directly or indirectly, take any of the following actions with respect to its Stock, its Class B Common Stock or any securities convertible into or exchangeable or exercisable for any of its Securities or Class B Common Stock (collectively, the “Lock-Up Securities”): (i) offer, sell, issue, contract to sell, pledge, lend or otherwise dispose of Lock-Up Securities, (ii) offer, sell, issue, contract to sell, contract to purchase or grant any option, right or warrant to purchase Lock-Up Securities, (iii) enter into any swap, hedge or any other agreement that transfers, in whole or in part, the economic consequences of ownership of Lock-Up Securities, (iv) establish or increase a put equivalent position or liquidate or decrease a call equivalent position in Lock-Up Securities within the meaning of Section 16 of the Exchange Act or (v) file with the Commission a registration statement under the Act relating to Lock-Up Securities, or publicly
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disclose the intention to take any such action, without the prior written consent of Credit Suisse. Notwithstanding the foregoing, nothing shall prohibit the filing of a registration statement by the Company, pursuant to the demand rights under the Registration Rights Agreement, dated December 7, 2021, by and between the Company and the signatories thereto; provided that no Lock-Up Securities shall be sold or transferred during the Lock-Up Period. The initial Lock-Up Period will commence on the date hereof and continue for 60 days after the date hereof or such earlier date that Credit Suisse consents to in writing, except (i) issuances of Lock-Up Securities pursuant to this Agreement, (ii) issuances of Lock-Up Securities pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options, in each case outstanding on the date hereof and described in the Registration Statement, the General Disclosure Package and the Final Prospectus, (iii) the units representing economic limited liability company interests in OpCo and shares of Class B Common Stock expected to be purchased by the Company substantially concurrently with the closing of the offering of the Offered Securities, in such number and as described in the Registration Statement, Disclosure Package and the Final Prospectus, (iv) the filing of a registration statement on Form S-8 relating to securities granted or to be granted pursuant to the terms of a plan in effect as of and described in the General Disclosure Package and the Final Prospectus and (v) issuances of Lock-Up Securities issued as consideration for the acquisition of equity interests or assets of any person, or the acquiring by the Company by any other manner of any business, properties, assets, or persons, in one transaction or a series of related transactions or the filing of a registration statement related to such Lock-Up Securities; provided that (x) no more than an aggregate of 10% of the number of shares of the Company’s capital stock outstanding as of the First Closing Date are issued as consideration in connection with all such acquisitions and (y) prior to the issuance of such shares of the Company’s capital stock each recipient of such shares agrees in writing to be subject to the “lock-up” described in this Section 5(k) for the remaining term of the Lock-Up Period.
6. Issuer Free Writing Prospectuses. The Company represents and agrees that, unless it obtains the prior consent of Credit Suisse, and each Underwriter represents and agrees that, unless it obtains the prior consent of the Company and Credit Suisse, it has not made and will not make any offer relating to the Offered Securities that would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405, required to be filed with the Commission; and the Selling Stockholder represents and agrees that, without the prior consent of the Company and Credit Suisse, it has not made and will not make any offer relating to the Offered Securities that would constitute a “free writing prospectus,” as defined in Rule 405, required to be filed with the Commission. Any such free writing prospectus consented to by the Company and Credit Suisse is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company and Credit Suisse agree that any such Permitted Free Writing Prospectus is listed on Schedule B hereto. The Company represents that it has treated and agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and has complied and will comply with the requirements of Rules 164 and 433 applicable to any Permitted Free Writing Prospectus, including timely Commission filing where required, legending and record keeping.
7. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties of the Company and the Selling Stockholder herein (as though made on such Closing Date), to the accuracy of the statements of Company officers and of the Selling Stockholder made pursuant to the provisions hereof, to the performance by the Company and the Selling Stockholder of their obligations hereunder and to the following additional conditions precedent:
(a) Accountants’ Comfort Letters.
(i) The Representatives shall have received letters, dated, respectively, the date hereof and each Closing Date, of Deloitte, confirming that they are a registered public accounting firm and independent public accountant within the meaning of the Securities Laws and in the form and substance reasonably satisfactory to Credit Suisse (except that, in any letter dated a Closing Date, the specified date referred to in the comfort letters shall be a date no more than three days prior to such Closing Date).
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(ii) The Representatives shall have received letters, dated, respectively, the date hereof and each Closing Date, of GT, confirming that they are a registered public accounting firm and independent public accountant within the meaning of the Securities Laws and in the form and substance reasonably satisfactory to Credit Suisse (except that, in any letter dated a Closing Date, the specified date referred to in the comfort letters shall be a date no more than three days prior to such Closing Date).
(iii) The Representatives shall have received letters, dated, respectively, the date hereof and each Closing Date, of EEPB, confirming that they are a registered public accounting firm and independent public accountant within the meaning of the Securities Laws and in the form and substance reasonably satisfactory to Credit Suisse (except that, in any letter dated a Closing Date, the specified date referred to in the comfort letters shall be a date no more than three days prior to such Closing Date).
(b) Effectiveness of Registration Statement. If the Effective Time of the Additional Registration Statement (if any) is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or, if earlier, the time the Final Prospectus is finalized and distributed to any Underwriter, or shall have occurred at such later time as shall have been consented to by Credit Suisse. The Final Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) hereof. Prior to such Closing Date, no stop order suspending the effectiveness of a Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Selling Stockholder, the Company or the Representatives, shall be contemplated by the Commission.
(c) No Material Adverse Change. Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its subsidiaries taken as a whole which, in the judgment of Credit Suisse, is material and adverse and makes it impractical or inadvisable to market the Offered Securities; (ii) any downgrading in the rating of any debt securities of the Company by any “nationally recognized statistical rating organization” (as defined in Section 3(a)(62) of the Exchange Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any change in either U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls the effect of which is such as to make it, in the judgment of Credit Suisse, impractical to market or to enforce contracts for the sale of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market; (iv) any suspension or material limitation of trading in securities generally on The New York Stock Exchange or the Nasdaq Stock Market, or any setting of minimum or maximum prices for trading on such exchange; (v) any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (vi) any banking moratorium declared by any U.S. federal or New York authorities; (vii) any major disruption of settlements of securities, payment or clearance services in the United States or any other country where such securities are listed or (viii) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States, any declaration of war by Congress or any other national or international calamity or emergency if, in the judgment of Credit Suisse, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency is such as to make it impractical to market the Offered Securities or to enforce contracts for the sale of the Offered Securities.
(d) Opinion and 10b-5 Statement of Counsel for the Company. The Representatives shall have received an opinion and 10b-5 statement, dated such Closing Date, of Vinson & Elkins L.L.P., counsel for the Company, substantially in the form attached hereto as Exhibit A.
(e) Opinion of Counsel for the Selling Stockholder. The Representatives shall have received an opinion, dated such Closing Date, of (x) Debevoise & Plimpton LLP, counsel for the Selling Stockholder, substantially in the form attached hereto as Exhibit B and (y) Richards, Layton & Finger, P.A., counsel for the Selling Stockholder, substantially in the form attached hereto as Exhibit C.
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(f) Opinion and 10b-5 Statement of Counsel for Underwriters. The Representatives shall have received from Simpson Thacher & Bartlett LLP, counsel for the Underwriters, such opinion or opinions and 10b-5 statement, dated such Closing Date, with respect to such matters as Credit Suisse may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters.
(g) Officers’ Certificate. The Representatives shall have received a certificate, dated such Closing Date, of (x) an executive officer of the Company and a principal financial or accounting officer of the Company in which such officers shall state that: the representations and warranties of the Company in this Agreement are true and correct; the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date; no stop order suspending the effectiveness of any Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the best of their knowledge and after reasonable investigation, are contemplated by the Commission; the Additional Registration Statement (if any) satisfying the requirements of subparagraphs (1) and (3) of Rule 462(b) was timely filed pursuant to Rule 462(b), including payment of the applicable filing fee in accordance with Rule 456(a) or (b); and, subsequent to the dates of the most recent financial statements in the General Disclosure Package and the Final Prospectus, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its subsidiaries taken as a whole except as set forth in the General Disclosure Package and the Final Prospectus or as described in such certificate; and (y) the Selling Stockholder, in form and substance reasonably satisfactory to the Representative, confirming that the representations and warranties of such Selling Stockholder in this agreement are true and correct and that the such Selling Stockholder has complied with all agreements and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to such Closing Date.
(h) Lock-Up Agreements. On or prior to the date hereof, the Representatives shall have received lockup agreements substantially in the form set forth on Exhibit D hereto from each executive officer, director, stockholder and other equity holder, including the Selling Stockholder, of the Company specified in Schedule C to this Agreement.
(i) FinCEN Certificate. On or before the date of this Agreement, the Representatives shall have received a certificate satisfying the beneficial ownership due diligence requirements of the Financial Crimes Enforcement Network from the Selling Stockholder in form and substance reasonably satisfactory to Credit Suisse, along with such additional supporting documentation as Credit Suisse have requested in connection with the verification of the foregoing certificate.
(j) CFO Certificate. The Representatives shall have received a certificate dated the date hereof and each Closing Date, of the Company’s chief financial officer with respect to certain financial and reserve data contained or incorporated by reference in the Registration Statement, General Disclosure Package and Final Prospectus, providing “management comfort” with respect to such information, in form and substance reasonably satisfactory to Credit Suisse.
(k) Reserve Engineer Letters.
(i) The Representatives shall have received letters, dated, respectively, the date hereof and each Closing Date, of NSAI, in form and substance reasonably satisfactory to Credit Suisse, confirming that they are independent reserve engineers for the Company and that, as of the date of such letters, no information has come to their attention that could reasonably have been expected to cause them to withdraw their reserve reports.
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(ii) The Representatives shall have received letters, dated, respectively, the date hereof and each Closing Date, of CGAI, in form and substance reasonably satisfactory to Credit Suisse, confirming that they are independent reserve engineers for the Company and that, as of the date of such letters, no information has come to their attention that could reasonably have been expected to cause them to withdraw their reserve reports.
(iii) The Representatives shall have received letters, dated, respectively, the date hereof and each Closing Date, of HPES, in form and substance reasonably satisfactory to Credit Suisse, confirming that they are independent reserve engineers for the Company and that, as of the date of such letters, no information has come to their attention that could reasonably have been expected to cause them to withdraw their reserve reports.
(iv) The Representatives shall have received letters, dated, respectively, the date hereof and each Closing Date, of Cobb, in form and substance reasonably satisfactory to Credit Suisse, confirming that they are independent reserve engineers for the Company and that, as of the date of such letters, no information has come to their attention that could reasonably have been expected to cause them to withdraw their reserve reports.
(l) The Selling Stockholder will deliver to Credit Suisse a properly completed and executed United States Treasury Department Form W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof).
The Selling Stockholder and the Company will furnish the Representatives with such conformed copies of such opinions, certificates, letters and documents as Credit Suisse reasonably requests. Credit Suisse may in its sole discretion waive on behalf of the Underwriters compliance with any conditions to the obligations of the Underwriters hereunder, whether in respect of an Optional Closing Date or otherwise.
8. Indemnification and Contribution. (a) Indemnification of Underwriters by Company. The Company will indemnify and hold harmless each Underwriter, its partners, members, directors, officers, employees, agents, affiliates and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (each an “Indemnified Party”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject, under the Act, the Exchange Act, other Federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact, in the case of any Registration Statement, contained in any part thereof at any time or upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and in the case of any Statutory Prospectus, the Final Prospectus, any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication, included in any part thereof as of any time or upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending against any loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Indemnified Party is a party thereto), whether threatened or commenced, and in connection with the enforcement of this provision with respect to any of the above as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Credit Suisse specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (c) below.
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(b) Indemnification of Underwriters by Selling Stockholder. The Selling Stockholder will indemnify and hold harmless each Indemnified Party against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject, under the Act, the Exchange Act, other Federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact, in the case of any Registration Statement, contained in any part thereof at any time or upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and in the case of any Statutory Prospectus, the Final Prospectus, any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication, included in any part thereof as of any time or upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending against any loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Indemnified Party is a party thereto), whether threatened or commenced, and in connection with the enforcement of this provision with respect to the above as such expenses are incurred; provided, however, that the Selling Stockholder will only be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company the Selling Stockholder specifically for use therein, it being understood and agreed that the only such information furnished by the Selling Stockholder consists of information in the Final Prospectus under the caption “Selling Stockholder”, provided, further, that the liability of the Selling Stockholder pursuant to this subsection (b) shall not exceed the aggregate net proceeds (after underwriting discounts but before deducting expenses) received by the Selling Stockholder from the Underwriters for the Offered Securities sold by the Selling Stockholder hereunder.
(c) Indemnification of Company and Selling Stockholder. Each Underwriter will severally and not jointly indemnify and hold harmless the Company, each of its directors and each of its officers who signs a Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and the Selling Stockholder, (each, an “Underwriter Indemnified Party”) against any losses, claims, damages or liabilities to which such Underwriter Indemnified Party may become subject, under the Act, the Exchange Act, or other Federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact, in the case of any Registration Statement, contained in any part thereof at any time or upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and in the case of any Statutory Prospectus, the Final Prospectus, any Written Testing-the-Waters Communication or any Issuer Free Writing Prospectus, included in any part thereof as of any time or upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by such Underwriter Indemnified Party in connection with investigating or defending against any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Underwriter Indemnified Party is a party thereto), whether threatened or commenced, based upon any such untrue statement or omission, or any such alleged untrue statement or omission as such expenses are incurred, it being understood and agreed that the only such information furnished by any Underwriter consists of (i) the following information in the Final Prospectus furnished on behalf of each Underwriter: the concession and reallowance figures appearing in the fifth paragraph under the caption “Underwriting (Conflicts of Interest)” and the information contained in the twelfth paragraph under the caption “Underwriting (Conflicts of Interest)”.
(d) Actions against Parties; Notification. Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under subsection (a), (b) or (c) above, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a), (b) or (c) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that
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the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a), (b) or (c) above. In case any such action is brought against any indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section, as the case may be, for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party.
(e) Contribution. If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a), (b) or (c) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Selling Stockholder on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Stockholder bear to the total underwriting discounts and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Stockholder or the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (e). Notwithstanding the provisions of this subsection (e), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. The Company, the Selling Stockholder and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8(e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8(e).
9. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Offered Securities hereunder on either the First Closing Date or any Optional Closing Date and the aggregate number of shares of Offered Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date, Credit Suisse may make arrangements satisfactory to the Company and the Selling Stockholder for the purchase of such Offered Securities by other persons, including any of the
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Underwriters, but if no such arrangements are made by such Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate number of shares of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to Credit Suisse, the Company and the Selling Stockholder for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholder, except as provided in Section 10 (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement will not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term “Underwriter” includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default.
10. Termination. The Underwriters may terminate this Agreement by notice given by Credit Suisse to the Company and the Selling Stockholder, if after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of The New York Stock Exchange or The Nasdaq Stock Market, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a material disruption in securities settlement, payment or clearance services in the United States shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in the judgment of Credit Suisse, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in the judgment of Credit Suisse, impracticable to proceed with the offer, sale or delivery of the Offered Securities on the terms and in the manner contemplated in the Registration Statement, the General Disclosure Package or the Final Prospectus.
11. Survival of Certain Representations and Obligations. The respective indemnities, rights of contribution, agreements, representations, warranties and other statements of the Selling Stockholders, of the Company or its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the Selling Stockholder, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If the purchase of the Offered Securities by the Underwriters is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 9 or Section 10 (excluding clause (ii) thereof) hereof, the Company and the Selling Stockholder will, jointly and severally, reimburse the Underwriters for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities, and the respective obligations of the Company, the Selling Stockholder and the Underwriters pursuant to Section 8 hereof shall remain in effect. In addition, if any Offered Securities have been purchased hereunder, the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect.
12. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to the Representatives, c/o Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: IBCM Legal, c/o KKR Capital Markets LLC, 30 Hudson Yards, New York, N.Y. 10001 and c/o Wells Fargo Securities, LLC, 500 West 33rd Street, New York, New York 10001, Attention: Equity Syndicate Department (fax no: (212) 214-5918) or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 600 Travis Street, Suite 7200 Houston, TX 77002, Attention: General Counsel or, if sent to the Selling Stockholder, will be mailed, delivered, or telegraphed and confirmed to it at c/o Kohlberg Kravis Roberts & Co. L.P., 30 Hudson Yards, New York, New York 10001, Attention: General Counsel; provided, however, that any notice to an Underwriter pursuant to Section 8 will be mailed, delivered or telegraphed and confirmed to such Underwriter.
13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder.
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14. Representation of Underwriters. Credit Suisse will act for the several Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by Credit Suisse will be binding upon all the Underwriters.
15. Affiliated Underwriter. With respect to any Underwriter (the “Affiliated Underwriter”) who is affiliated with any person or entity engaged to act as an investment adviser on behalf of an investor who has a direct or indirect interest in the Offered Securities being sold by the Selling Stockholder, the Offered Securities which such Affiliated Underwriter shall procure purchasers for or failing which shall underwrite, shall not include any Class A Common Stock attributable to such investor (with any such Class A Common Stock instead being allocated and sold to purchasers procured by, failing which underwritten by, the other Underwriters) and, accordingly, the fees or other amounts received by such Affiliated Underwriter in connection with the transactions contemplated hereby shall not include any fees or other amounts attributable to the Class A Common Stock attributable to such investor.
16. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. The words “execution,” “signed,” “signature,” “delivery” and words of like import in or relating to this Agreement or any document to be signed in connection with this Agreement shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means.
17. Absence of Fiduciary Relationship. The Company and the Selling Stockholder acknowledge and agree that:
(a) No Other Relationship. The Representatives have been retained solely to act as underwriters in connection with the sale of the Offered Securities and that no fiduciary, advisory or agency relationship between the Company or the Selling Stockholder, on the one hand, and the Representatives, on the other, has been created in respect of any of the transactions contemplated by this Agreement or the Final Prospectus, irrespective of whether the Representatives have advised or are advising the Company or the Selling Stockholder on other matters;
(b) Arms’ Length Negotiations. The price of the Offered Securities set forth in this Agreement was established by the Company and the Selling Stockholder following discussions and arms-length negotiations with the Representatives and the Company and the Selling Stockholder are capable of evaluating and understanding and understand and accept the terms, risks and conditions of the transactions contemplated by this Agreement;
(c) Absence of Obligation to Disclose. The Company and the Selling Stockholder have been advised that the Representatives and their affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company and the Selling Stockholder and that the Representatives have no obligation to disclose such interests and transactions to the Company and the Selling Stockholder by virtue of any fiduciary, advisory or agency relationship; and
(d) Waiver. The Company and the Selling Stockholder waive, to the fullest extent permitted by law, any claims they may have against the Representatives for breach of fiduciary duty or alleged breach of fiduciary duty and agree that the Representatives shall have no liability (whether direct or indirect) to the Company or the Selling Stockholder in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company or the Selling Stockholder, including stockholders, employees or creditors of the Company.
(e) Regulation Best Interest. The Selling Stockholder further acknowledges and agrees that, although the Underwriters may provide the Selling Stockholder with certain Regulation Best Interest and Form CRS disclosures or other related documentation in connection with the Offering, the Underwriters are not making a recommendation to the Selling Stockholder to participate in the Offering, enter into a “lock-up” agreement, or sell any Stock at the purchase price per share determined in the Offering, and nothing set forth in such disclosures or documentation is intended to suggest that any Underwriter is making such a recommendation.
18. Applicable Law. This Agreement and any claim, controversy or dispute arising under or related to this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
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The Company and the Selling Stockholder hereby submit to the exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Company and the Selling Stockholder irrevocably and unconditionally waive any objection to the laying of venue of any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in Federal and state courts in the Borough of Manhattan in the City of New York and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an inconvenient forum.
19. Waiver of Jury Trial. The Company and the Selling Stockholder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
20. Recognition of the U.S. Special Resolution Regimes.
(i) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(ii) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
As used in this Section 20:
“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).
“Covered Entity” means any of the following:
(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
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If the foregoing is in accordance with the Representatives’ understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement among the Selling Stockholder, the Company and the several Underwriters in accordance with its terms.
| Very truly yours, | ||
| CRESCENT ENERGY COMPANY | ||
| By: |
| |
| Name: | ||
| Title: | ||
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| INDEPENDENCE ENERGY AGGREGATOR L.P. | ||
| By: | [•] | |
| By: |
| |
| Name: | ||
| Title: | ||
29
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written.
Acting on behalf of itself and as the Representatives of the several Underwriters.
| CREDIT SUISSE SECURITIES (USA) LLC | ||
| By: |
| |
| Name: | ||
| Title: | ||
| KKR CAPITAL MARKETS LLC | ||
| By: |
| |
| Name: | ||
| Title: | ||
| WELLS FARGO SECURITIES, LLC | ||
| By: |
| |
| Name: | ||
| Title: | ||
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SCHEDULE A
| Underwriter |
Number of Firm Securities to be Purchased |
Number of Optional Securities to be Purchased if Maximum Option Exercised |
||||||
| Credit Suisse Securities (USA) LLC |
||||||||
| KKR Capital Markets LLC |
||||||||
| Wells Fargo Securities LLC |
||||||||
| J.P. Morgan Securities LLC |
||||||||
| BofA Securities, Inc. |
||||||||
| RBC Capital Markets, LLC |
||||||||
| Truist Securities, Inc. |
||||||||
|
|
|
|
|
|||||
| Total |
5,000,000 | 750,000 | ||||||
|
|
|
|
|
|||||
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SCHEDULE B
| 1. | General Use Free Writing Prospectuses (included in the General Disclosure Package) |
“General Use Issuer Free Writing Prospectus” includes each of the following documents:
[•]1
| 2. | Other Information Included in the General Disclosure Package |
The following information is also included in the General Disclosure Package:
1. The initial price to the public of the Offered Securities.
2. [•]2
| 1 | NTD: To be confirmed. |
| 2 | NTD: To be confirmed. |
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SCHEDULE C
David Rockecharlie
Brandi Kendall
Todd Falk
Benjamin Conner
John Clayton “Clay” Rynd
Bo Shi
John Goff
Claire Farley
Robert Gwin
Ellis L. “Lon” McCain
Karen Simon
Erich Bobinsky
Bevin Brown
Independence Energy Aggregator L.P.
PT Independence Energy Holdings LLC
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Exhibit A
Form of Opinion and 10b-5 Statement of Counsel to the Company
[To Come]
Exhibit B
Form of Opinion of Counsel to the Selling Stockholder
[To Come]
Exhibit C
Form of Opinion of Counsel to the Selling Stockholder
[To Come]
Exhibit D
Form of Lock-Up Agreement
[Insert date]
Crescent Energy Company
600 Travis Street, Suite 7200
Houston, Texas 77002
Credit Suisse Securities (USA) LLC
KKR Capital Markets LLC
Wells Fargo Securities, LLC
| c/o | Credit Suisse Securities (USA) LLC |
Eleven Madison Avenue
New York, NY 10010-3629
| c/o | KKR Capital Markets LLC |
30 Hudson Yards
New York, NY 10010
| c/o | Wells Fargo Securities, LLC |
500 West 33rd Street, 14th Floor
New York, New York 10001
Ladies and Gentlemen:
As an inducement to the underwriters to execute the Underwriting Agreement (the “Underwriting Agreement”), pursuant to which an offering (the “Offering”) will be made of Class A Common Stock and in consideration thereof, with respect to the Class A Common Stock, Class B Common Stock or any securities convertible into or exchangeable for any of its Class A Common Stock or Class B Common Stock (collectively, the “Securities”) of Crescent Energy Company, and any successor (by merger or otherwise) thereto, (the “Company”), the undersigned hereby agrees that during the period specified in the following paragraph (the “Lock-Up Period”), the undersigned will not offer, sell, contract to sell, pledge, lend or otherwise dispose of, directly or indirectly, any Securities, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Securities, whether any such aforementioned transaction is to be settled by delivery of the Securities or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge, loan or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC (the “Representative”). In addition, the undersigned agrees that, without the prior written consent of the Representative, it will not, during the Lock-Up Period, make any demand for or exercise any right with respect to, the registration of any Securities. Notwithstanding the foregoing, nothing shall prohibit the filing of a demand registration statement by the Company pursuant to the demand rights under the Registration Rights Agreement, dated December 7, 2021, by and between the Company and the signatories thereto; provided that no Securities shall be sold or transferred during the Lock-Up Period. Capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Underwriting Agreement.
The Lock-Up Period will commence on the date of this Lock-Up Agreement and continue and include the date that is 60 days after the public offering date set forth on the final prospectus used to sell the Securities (the “Public Offering Date”) pursuant to the Underwriting Agreement, to which you are or expect to become parties.
Any Securities received upon exercise of options granted to the undersigned will also be subject to this Lock-Up Agreement. These restrictions shall not apply to (a) (I) the transactions contemplated by the Underwriting Agreement and (II) the units representing economic limited liability company interests in Crescent Energy OpCo LLC and shares of Class B Common Stock of the Company expected to be purchased by the Company substantially
concurrently with the closing of the Offering, in such number and as described in the Underwriting Agreement, including the Optional Securities, (b) any transactions relating to Securities acquired in the open market after the closing of the Offering; provided that, with respect to any sale or other disposition of such Securities, no filing under the Securities Exchange Act of 1934 (the “ Exchange Act ”) (other than on Form 5) or other public announcement shall be required or shall be voluntarily made by any party in connection with subsequent sales of such Securities acquired in such open market transactions during the Lock-Up Period, (c) any exercise of options or vesting or exercise of any other equity-based award, in each case, outstanding on the Public Offering Date pursuant to the Company’s equity incentive plan or any other plan or agreement in effect as of and described in the Registration Statement, the General Disclosure Package and the Final Prospectus and the withholding of Securities by the Company for the payment of taxes due upon such exercise or vesting; provided that any Securities received upon such exercise or vesting will also be subject to this Lock-Up Agreement, (d) transfers as a bona fide gift or gifts, (e) transfers to a family member, trust, family limited partnership or family limited liability company for the direct or indirect benefit of the undersigned or his or her family members, (f) transfers by testate or intestate succession, (g) by operation of law, such as pursuant to a qualified domestic order, divorce settlement, divorce decree or separation agreement or other final order of a court or regulatory agency, (h) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity, (I) to another corporation, partnership, limited liability company, trust or other business entity that is an affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned, or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the undersigned or affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), or (II) as part of a distribution to members or shareholders of the undersigned; provided that in each transfer pursuant to the foregoing clauses (d)-(h), the transferee agrees to be bound in writing by the terms of this Lock-Up Agreement prior to such transfer, such transfer shall not involve a disposition for value and no filing or public announcement by any party (donor, donee, transferor or transferee) under the Exchange Act or otherwise shall be required or shall be voluntarily made in connection with such transfer (other than a filing on a Form 5); provided further that, with respect to clause (h), if any filing under Section 16(a) of the Exchange Act, or other public filing, report or announcement reporting a reduction in beneficial ownership of the Securities in connection with such transfer or distribution shall be legally required during the Lock-up Period, such filing, report or announcement shall clearly indicate in the footnotes thereto the nature and conditions of such transfer, (i) (I) the establishment of any written contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1 (a “Rule 10b5-1 Plan”) under the Exchange Act or (II) sales pursuant to any Rule 10b5-1 plan currently in effect on the date hereof; provided, however, that with respect to clause (I), no sales or transfers of Securities shall be made pursuant to such a Rule 10b5-1 Plan prior to the expiration of the Lock-Up Period (as the same may be extended pursuant to the provisions hereof); and provided further, that with respect to clauses (I) and (II), no filing by any party under the Exchange Act or other public announcement shall be required or made voluntarily in connection with such trading plan and, with respect to clause (I), no party is required to publicly announce, file, or report the establishment of such Rule 10b5-1 Plan in any public report, announcement, or filing with the Securities and Exchange Commission under the Exchange Act during the Lock-Up Period and does not otherwise voluntarily effect any such public report, announcement, or filing regarding such Rule 10b5-1 Plan, [or] (j) a bona fide third-party tender offer, merger, consolidation or other similar transaction made to all holders of the Securities and approved by the board of directors of the Company, and the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of at least 50% of total voting power of the voting stock of the Company or the surviving entity (a “Change of Control Transaction”); provided that in the event that the Change of Control Transaction is not completed, the undersigned’s shares shall remain subject to the provisions of this Lock-Up Agreement [or (k) the pledge, hypothecation or other granting of a security interest in shares of the Securities or securities convertible into or exchangeable for the Securities to one or more lending institutions as collateral or security for any loan, advance or extension of credit; provided that the undersigned shall provide the Representative with prior written notice informing it of any public filing, report or announcement with respect to such pledge, hypothecation or other grant of a security interest; and provided further that no transfer upon foreclosure upon such Securities to such lending institution shall be made during the Lock-Up Period].3 A transfer of Securities to a family member or trust may be made; provided that the transferee agrees to be bound in writing by the terms of this Lock-Up Agreement prior to such transfer, such transfer shall not involve a disposition for value and no filing by any party (donor, donee, transferor or transferee) under the Exchange Act shall be required or shall be voluntarily made in connection with such transfer (other than a filing on a Form 5 made after the expiration of the Lock-Up Period). For purposes of this Lock-Up
Agreement, a “family member” shall mean any relationship by blood, marriage, domestic partnership or adoption, not more remote than first cousin.
| 3 | NTD: To be included for lock-ups delivered by entities only. |
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In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of Securities if such transfer would constitute a violation or breach of this Lock-Up Agreement.
Notwithstanding anything in this Lock-Up Agreement to the contrary, it is understood and agreed that, in the event of the release of any party listed in Schedule C to the Underwriting Agreement (collectively, the “Lock-Up Parties”) from any or all of the obligations hereunder, the Representative shall promptly notify and endeavor to release the undersigned to the same relative extent as the released Lock-Up Party.
The undersigned acknowledges and agrees that the underwriters have not provided any recommendation or investment advice nor have the underwriters solicited any action from the undersigned with respect to the Offering of the Class A Common Stock and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisors to the extent deemed appropriate. The undersigned further acknowledges and agrees that, although the Representative may be required or choose to provide certain Regulation Best Interest and Form CRS disclosures to you in connection with the Offering, the Representative and the other underwriters are not making a recommendation to you to enter into this Lock-Up Agreement, and nothing set forth in such disclosures is intended to suggest that the Representative or any underwriter is making such a recommendation.
This Lock-Up Agreement shall be binding on the undersigned and the successors, heirs, personal representatives and assigns of the undersigned. This Lock-Up Agreement shall lapse and become null and void if the Public Offering Date shall not have occurred on or before [ ], 20224. This agreement and any claim, controversy or dispute arising under or related to this agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
[Signature page follows]
| 4 | NTD: Date to be confirmed; 15 days from launch. |
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Very truly yours,
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Exhibit 5.1
September 6, 2022
Crescent Energy Company
600 Travis Street, Suite 7200
Houston, Texas 77002
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel for Crescent Energy Company, a Delaware corporation (the “Company”), in connection with the proposed offer and sale (the “Offering”) by a selling stockholder of the Company (the “Selling Stockholder”), pursuant to a prospectus forming a part of a Registration Statement on Form S-1, originally filed with the Securities and Exchange Commission on April 8, 2022 (such Registration Statement, as amended at the effective date thereof, being referred to herein as the “Registration Statement”), of up to an aggregate 5,000,000 shares (the “Firm Shares”) of Class A common stock of the Company, par value $0.0001 per share (the “Class A common stock”), and up to an additional aggregate 750,000 shares of Class A common stock that may be sold by the Selling Stockholder pursuant to the underwriters’ option to purchase additional shares of Class A common stock (together with the Firm Shares, the “Subject Shares”). The Subject Shares to be offered by the Selling Stockholder consist of Subject Shares that are issuable upon redemption of membership interests (“OpCo LLC Units”) in Crescent Energy OpCo LLC, a Delaware limited liability company (“OpCo”), together with an equal number of shares of Class B common stock of the Company (the “Class B common stock”), pursuant to the Amended and Restated Limited Liability Company Agreement of Crescent Energy OpCo LLC, dated as of December 7, 2021 (the “OpCo LLC Agreement”).
In connection with this opinion, we have assumed that (i) the Registration Statement, and any amendments thereto (including post-effective amendments), will have become effective, (ii) the Subject Shares will be issued and sold in all material respects in the manner described in the Registration Statement and the prospectus relating thereto, (iii) a definitive underwriting agreement, in substantially the form filed as an exhibit to the Registration Statement, with respect to the sale of the Subject Shares will have been duly authorized and validly executed and delivered by the Company and the other parties thereto and (iv) any Subject Shares issuable upon redemption of OpCo LLC Units and shares of Class B common stock will have been issued in accordance with the OpCo LLC Agreement.
In connection with the opinion expressed herein, we have examined, among other things, (i) the Amended and Restated Certificate of Incorporation of the Company and the Amended and Restated Bylaws of the Company, (ii) the OpCo LLC Agreement, (iii) the records of corporate proceedings that have occurred prior to the date hereof with respect to the Offering, (iv) the Registration Statement and (v) the form of underwriting agreement filed as an exhibit to the Registration Statement. We have also reviewed such questions of law as we have deemed necessary or appropriate. As to matters of fact relevant to the opinion expressed herein, and as to factual matters arising in connection with our examination of corporate documents, records and other documents and writings, we relied upon certificates and other communications of corporate officers of the Company, without further investigation as to the facts set forth therein. In making such examination and rendering the opinions set forth below, we have assumed without verification the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted to us as copies and the legal capacity of all individuals executing any of the foregoing documents.
Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that the Subject Shares have been duly authorized and, when such Subject Shares have been issued upon redemption and exchange of OpCo LLC Units and shares of Class B common stock for an equivalent amount of Subject Shares in accordance with the OpCo LLC Agreement, will be validly issued, fully paid and nonassessable.
The foregoing opinions are limited in all respects to the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act (including the applicable provisions of the Delaware Constitution and the reported judicial decisions interpreting these laws) and the federal laws of the United States of America, and we do not express any opinions as to the laws of any other jurisdiction. This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended, and the foregoing opinions are limited to the matters expressly stated herein, and no opinion is to be inferred or implied beyond the opinions expressly set forth herein. We undertake no, and hereby disclaim any, obligation to make any inquiry after the date hereof or to advise you of any changes in any matter set forth herein, whether based on a change in the law, a change in any fact relating to the Company or any other person or any other circumstance.
We hereby consent to the statements with respect to us under the heading “Legal Matters” in the prospectus forming a part of the Registration Statement and to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
| Very truly yours, |
| /s/ Vinson & Elkins L.L.P. |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement No. 333-264220 on Form S-1 of our report dated March 9, 2022 relating to the financial statements of Crescent Energy Company, appearing in the Annual Report on Form 10-K of Crescent Energy Company for the year ended December 31, 2021. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ Deloitte & Touche LLP
Houston, Texas
September 6, 2022
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated March 10, 2021 with respect to the consolidated financial statements of Contango Oil & Gas Company incorporated by reference in this Registration Statement of Crescent Energy Company. We consent to the incorporation by reference of the aforementioned report in this Registration Statement, and to the use of our name as it appears under the caption “Experts.”
/s/ GRANT THORNTON LLP
Houston, Texas
September 6, 2022
Exhibit 23.3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated May 13, 2022, with respect to the Statement of Revenues and Direct Expenses of the Uinta Basin Assets for the year ended December 31, 2021. We consent to the incorporation by reference of the aforementioned report in this Registration Statement. We also consent to the reference to us under the heading “Experts”.
/s/ EEPB
Houston, Texas
September 6, 2022