Crescent Energy Co 8-K/A, filed May 19, 2022
Crescent Energy Co (CRGY)
About this 8-K/A
Crescent Energy Co filed this 8-K/A on May 19, 2022, reporting on events of March 30, 2022.
Items reported
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 18, 2022 (
(Exact Name of Registrant as Specified in Charter)
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
| |
||
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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 13(a) of the Exchange Act. ☐
Introductory Note
This Current Report on Form 8-K/A (this “Amendment”) amends the Original Report to include the financial statements required by Item 9.01(a) and the pro forma financial information required by Item 9.01(b). In addition, this Amendment provides certain disclosure updates as described further under Item 8.01 below. Except as provided herein, the disclosures made in the Original Report remain unchanged.
| Item 8.01. | Other Events. |
On or about the date of this Amendment, the Company intends to file Amendment No. 1 to its Registration Statement on Form S-1 (the “Amended Registration Statement”) relating to the proposed offering by the Company of shares of its Class A common stock, par value $0.0001 per share. In connection with the filing of such Amended Registration Statement, the Company is providing to potential investors certain disclosures that have been revised since the original filing of the Registration Statement, the relevant excerpts of which are set forth below. Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Registration Statement.
* * * * *
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 March 31, 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 March 31, 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) |
211,497 | 43,252 | ||||||
| Natural gas (MMcf) |
1,533,009 | 141,439 | ||||||
| NGLs (MBbls) (3) |
78,790 | — | ||||||
| Total Proved Reserves (MBoe) |
545,788 | 66,825 | ||||||
| PV-0 (millions) (2) |
$ | 11,931 | $ | 2,025 | ||||
| PV-10 (millions) (2) |
$ | 6,781 | $ | 1,466 | ||||
| Net Proved Developed Reserves: |
||||||||
| Oil (MBbls) |
159,332 | 25,162 | ||||||
| Natural gas (MMcf) (3) |
1,467,322 | 94,028 | ||||||
| NGLs (MBbls) (3) |
68,653 | — | ||||||
2
| Total Proved Developed Reserves (MBoe) |
472,539 | 40,833 | ||||||
| PV-0 (millions) (2) |
$ | 9,681 | $ | 1,300 | ||||
| PV-10 (millions) (2) |
$ | 5,658 | $ | 1,029 | ||||
| Net Proved Undeveloped Reserves: |
||||||||
| Oil (MBbls) |
52,164 | 18,090 | ||||||
| Natural gas (MMcf) |
65,687 | 47,411 | ||||||
| NGLs (MBbls) (3) |
10,137 | — | ||||||
| Total Proved Undeveloped Reserves (MBoe) |
73,429 | 25,992 | ||||||
| PV-0 (millions) (2) |
$ | 2,249 | $ | 725 | ||||
| PV-10 (millions) (2) |
$ | 1,123 | $ | 437 |
| (1) | The NYMEX reserves, PV-0, and PV-10 of the 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 March 31, 2022 for oil and natural gas. The average adjusted product prices over the remaining lives of the properties are $70.04 per barrel of oil, $4.24 per Mcf of natural gas and $29.49 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 as a substitute, for the data presented based on SEC Pricing. |
| (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. 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. The Company uses three-stream reserve information, with NGL reserves reported separately. As a result, reserve estimates of the Company are not comparable to reserve estimates for the Uinta Acquisition. |
* * * * *
3
As of April 29, 2022, our derivative portfolio had an aggregate notional value of approximately $1.0 billion. We determine the fair value of our oil and natural gas commodity derivatives using valuation techniques that utilize market quotes and pricing analysis. Inputs include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. The following table details the Company’s open commodity derivative contracts as of April 29, 2022.
| WTI | Brent | Natural Gas | NGLs | |||||||||||||||||||||||||||||
| Volume | Avg Price | Volume | Avg Price | Volume | Avg Price | Volume | Avg Price | |||||||||||||||||||||||||
| (MBbl) | ($/Bbl) | (MBbl) | ($/Bbl) | (BBtu) | $/MMBtu | (MBbl) | $/Bbl | |||||||||||||||||||||||||
| Q2’22 |
3,715 | $ | 65.20 | 125 | $ | 56.35 | 21,690 | $ | 2.77 | 873 | $ | 17.13 | ||||||||||||||||||||
| Q3’22 |
3,580 | $ | 64.59 | 126 | $ | 56.36 | 20,634 | $ | 2.76 | 768 | $ | 32.74 | ||||||||||||||||||||
| Q4’22 |
3,301 | $ | 64.08 | 126 | $ | 56.36 | 20,180 | $ | 2.78 | 736 | $ | 32.55 | ||||||||||||||||||||
| FY’23 |
10,865 | $ | 59.78 | 527 | $ | 52.52 | 62,798 | $ | 2.73 | 1,379 | $ | 40.80 | ||||||||||||||||||||
| FY’24 |
5,721 | $ | 63.82 | 276 | $ | 68.65 | 27,904 | $ | 4.09 | — | — | |||||||||||||||||||||
Note: Includes hedges from April 1, 2022 through December 31, 2024. Included in the figures above are Henry Hub collar positions totaling 550 BBtu and 18,300 BBtu in 2023 and 2024, respectively. For the same periods, these collars have a weighted average floor price of $2.63 / MMBtu and $3.38 / MMBtu, respectively and a weighted average ceiling price of $3.01 / MMBtu and $4.56 / MMBtu, respectively. Also included in the figures above are WTI collars totaling 1,155 MBbl for 2023 with a weighted average floor and ceiling price of $48.68 / Bbl and $57.87 / Bbl, respectively. Weighted average price for collar positions in the table above calculated using April 29, 2022 strip pricing.
* * * * *
| Item 9.01 | Financial Statements and Exhibits. |
| (a) | Financial Statements of Businesses Acquired |
The following historical financial statements of the business acquired in the Transaction, attached as Exhibit 99.1 hereto:
| • | Audited Statement of Revenues and Direct Operating Expenses of the Uinta Basin Assets for the year ended December 31, 2021; |
| • | Unaudited Statement of Revenues and Direct Operating Expenses of the Uinta Basin Assets for the period from January 1, 2022 through March 30, 2022; and |
| • | Notes to the Statement of Revenues and Direct Operating Expenses |
| (b) | Pro Forma Financial Information |
The following unaudited pro forma condensed combined financial information of the Company, giving effect to the Uinta Acquisition, attached as Exhibit 99.2 hereto:
| • | Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2022; |
| • | Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2021; and |
| • | Notes to the Unaudited Pro Forma Condensed Combined Financial Statements. |
| (d) | Exhibits. |
4
| * | Filed Herewith. |
5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 18, 2022
| CRESCENT ENERGY COMPANY | ||
| By: | /s/ Bo Shi | |
| Name: | Bo Shi | |
| Title: | General Counsel | |
6
Exhibit 23.1
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 Current Report. We also consent to the reference to us under the heading “Experts”.
/s/ EEPB
Houston, Texas
May 18, 2022
Exhibit 23.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
As independent petroleum engineers, we hereby consent to the references to our firm, in the context in which they appear, and to the references to, and the inclusion of, our reserve report and oil, natural gas and NGL reserves estimates and forecasts of economics as of December 31, 2021, included in or made part of this Current Report on Form 8-K, of Crescent Energy Company.
| CAWLEY, GILLESPIE & ASSOCIATES, INC. |
| Texas Registered Engineering Firm |
| /s/ W. Todd Brooker |
| W. Todd Brooker, P.E. President |
Austin, Texas
May 18, 2022
Exhibit 23.3
WILLIAM M. COBB & ASSOCIATES, INC.
Worldwide Petroleum Consultants
| 12770 Coit Road, Suite 907 Dallas, Texas 75251 |
Tel: (972) 385-0354 Fax: (972) 788-5165 E-Mail: office@wmcobb.com |
May 18, 2022
Crescent Energy Company
600 Travis Street, Suite 7200
Houston, Texas, 77002
Re: Crescent Energy Company
Gentlemen:
The firm of William M. Cobb & Associates, Inc. consents to the use of its name and to the use of its projections for Crescent Energy Company’s Proved Reserves and Future Net Revenue included in this Current Report on Form 8-K of Crescent Energy Company
William M. Cobb & Associates, Inc. has no interests in Crescent Energy Company or in any affiliated companies or subsidiaries and is not to receive any such interest as payment for such reports and has no director, officer, or employee otherwise connected with Crescent Energy Company. Crescent Energy Company does not employ us on a contingent basis.
| Sincerely, |
| WILLIAM M. COBB & ASSOCIATES, INC. |
| Texas Registered Engineering Firm F-84 |
| /s/ Tor Meling |
| Tor Meling |
| Senior Vice President |
Exhibit 23.4
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
As independent petroleum engineers, we hereby consent to the incorporation by reference into or inclusion in this Current Report on Form 8-K (including any amendments or supplements thereto, related appendices, and financial statements) (this “Current Report”) of Crescent Energy Company (the “Company”) of our firm’s audit letter dated January 14, 2022 and reserves report dated January 17, 2022, respectively, each prepared for the Company as of December 31, 2021. We hereby further consent to all references to our firm or such letters included in or incorporated by reference into this Current Report.
| NETHERLAND, SEWELL & ASSOCIATES, INC. | ||
| By: |
/s/ Danny D. Simmons | |
| Danny D. Simmons, P.E. | ||
| President and Chief Operating Officer | ||
Houston, Texas
May 18, 2022
Exhibit 23.5
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
As independent petroleum engineers, we hereby consent to the inclusion of information included in this Current Report on Form 8-K of Crescent Energy Company with respect to the information from our firm’s reserves reports dated January 31, 2022, prepared for Crescent Energy Company as of December 31, 2021, in reliance upon the reports of this firm and upon the authority of this firm as experts in petroleum engineering.
| HAAS PETROLEUM ENGINEERING SERVICES, INC. |
| Texas Registered Engineering Firm |
| /s/ Michael A. Link |
| Michael A. Link, P.E. |
| Director |
Dallas, Texas
May 18, 2022
Exhibit 99.1
Statements of Revenues and Direct Operating Expenses of the
Uinta Basin Assets to be Acquired
Following are the audited Statements of Revenues and Direct Operating Expenses of the Uinta Basin assets acquired from Verdun Oil Company II, LLC (“Verdun”), for the year ended December 31, 2021, and the unaudited interim Statements of Revenues and Direct Operating Expenses for the period from January 1, 2022 through March 30, 2022. Complete financial and operating information related to the Uinta Basin assets, including balance sheet and cash flow information, are not presented because the assets acquired were not accounted for as a separate subsidiary or division of Verdun and complete financial statements are not available.
| Page | ||||
| Independent Auditor’s Report |
2 | |||
| Statements of Revenues and Direct Operating Expenses of the Uinta Basin Assets (as described in Note 1) for the year ended December 31, 2021 (Audited) and for the period from January 1, 2022 through March 30, 2022 (Unaudited) |
4 | |||
| Notes to Statements of Revenues and Direct Operating Expenses of the Uinta Basin Assets (as described in Note 1) |
5 | |||
| Supplementary Oil and Gas Disclosures |
7 | |||
1
INDEPENDENT AUDITOR’S REPORT
To the Members
Verdun Oil Company II, LLC
Opinion
We have audited the accompanying Statement of Revenues and Direct Operating Expenses of the Uinta Basin Assets (the “statement”) for the year ended December 31, 2021, and the related notes to the statement.
In our opinion, the statement referred to above presents fairly, in all material respects, the revenues and direct operating expenses of the Uinta Basin Assets for the year ended December 31, 2021, in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Information section of our report. We are required to be independent and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Information
Management is responsible for the preparation and fair presentation of the statement in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibilities for the Audit of the Financial Information
Our objectives are to obtain reasonable assurance about whether the statement is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the statement.
In performing an audit in accordance with generally accepted auditing standards, we:
| • | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| • | Identify and assess the risks of material misstatement of the statement, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the statement. |
2
| • | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. Accordingly, no such opinion is expressed. |
| • | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
As described in Note 1, the accompanying statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of the operations of the properties. Our opinion is not modified with respect to this matter.
/s/ EEPB
Houston, Texas
May 13, 2022
3
Statements of Revenues and Direct Operating Expenses of the
Uinta Basin Assets (as described in Note 1)
| Period from January 1, 2022 through March 30, 2022 |
Year Ended December 31, 2021 |
|||||||
| (Unaudited) | (Audited) | |||||||
| (in thousands) | ||||||||
| Revenues |
||||||||
| Oil |
$ | 132,160 | $ | 292,034 | ||||
| Natural Gas |
15,664 | 37,925 | ||||||
|
|
|
|
|
|||||
| Total Revenues |
147,824 | 329,959 | ||||||
| Direct Operating Expenses |
||||||||
| Lease Operating Expenses |
8,623 | 29,965 | ||||||
| Production Taxes |
8,784 | 18,491 | ||||||
|
|
|
|
|
|||||
| Total Direct Operating Expenses |
17,407 | 48,456 | ||||||
|
|
|
|
|
|||||
| Revenues in excess of direct operating expenses |
$ | 130,417 | $ | 281,503 | ||||
|
|
|
|
|
|||||
See accompanying notes to the Statements of Revenues and Direct Operating Expenses.
4
Notes to Statements of Revenues and Direct Operating Expenses of the
Uinta Basin Assets (as described in Note 1)
(1) — Basis of Presentation
On March 30, 2022 (the “Closing Date”), Crescent Energy Company (NYSE: CRGY) (the “Company”) consummated the acquisition contemplated by the Membership Interest Purchase Agreement (the “Purchase Agreement”) dated February 15, 2022, by and among a subsidiary of Crescent, Crescent Energy OpCo LLC, a Delaware limited liability company (“Opco”), and Verdun Oil Company II LLC, a Delaware limited liability company (“Verdun”), pursuant to which Crescent agreed to purchase from Verdun all of the issued and outstanding membership interests of Javelin Uinta, LLC, a Texas limited liability company and wholly-owned subsidiary of Verdun that holds certain exploration and production assets located in the State of Utah (the “Uinta Basin Assets”). Verdun had acquired the Uinta Basin Assets pursuant to a membership interest purchase agreement with EPE Acquisition, LLC, (“EPE”) which also closed on March 30, 2022.
The accompanying statements include revenues from crude oil and natural gas production and direct operating expenses associated with the Uinta Basin Assets. The accompanying statements vary from a complete income statement in accordance with accounting principles generally accepted in the United States of America in that they do not reflect certain indirect expenses that were incurred in connection with the ownership and operation of the Uinta Basin Assets including, but not limited to, general and administrative expenses, interest expense and federal and state income tax expenses. These costs were not separately allocated to the Uinta Basin Assets in the accounting records of EPE or Verdun. In addition, these allocations, if made using historical general and administrative structures and tax burdens, would not produce allocations that would be indicative of the historical performance of the Uinta Basin Assets had it been a Crescent property due to the differing size, structure, operations and accounting policies of EPE, Verdun and Crescent. The accompanying statements also do not include provisions for depreciation, depletion, amortization and accretion, as such amounts would not be indicative of the costs that Crescent will incur upon the allocation of the purchase price paid for the Uinta Basin Assets. Furthermore, no balance sheet has been presented for the Uinta Basin Assets because the acquired properties were not accounted for as a separate subsidiary or division of EPE or Verdun and complete financial statements are not available, nor has information about the Uinta Basin Asset’s operating, investing and financing cash flows been provided for similar reasons. Accordingly, the historical Statements of Revenues and Direct Operating Expenses of the Uinta Basin Assets are presented in lieu of the full financial statements that would otherwise have been required under Item 3-05 of Securities and Exchange Commission (“SEC”) Regulation S-X.
These Statements of Revenues and Direct Operating Expenses are not indicative of the results of operations for the Uinta Basin Assets on a go forward basis.
(2) — Summary of Significant Accounting Policies
Use of Estimates — The Statements of Revenues and Direct Operating Expenses are derived from the historical operating statements of EPE. Accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the amounts reported in the Statements of Revenues and Direct Operating Expenses. Actual results could be different from those estimates.
Revenue Recognition — Our revenues are generated primarily through the physical sale of crude oil and natural gas to third party customers at spot or market prices under both short and long-term contracts. We recognize revenue upon satisfaction of our contractual performance obligations requiring us to deliver crude oil and natural gas to a delivery point. Our performance obligation is satisfied upon transfer of control of the commodity to the customer. Transfer of control varies depending on the
5
product and delivery method, but typically occurs when delivery and passage of title and risk of loss have occurred at a pipeline or gathering line delivery point interconnect when delivered via pipeline or at the wellhead or tank battery to purchasers who transport the oil via truck. Realized prices for each barrel of oil or MMcf of natural gas are based upon index prices or refiners’ posted prices at various delivery points. Realized transaction prices received are generally less than the stated index prices as a result of contractual deductions, differentials from the index to the delivery point, adjustments for time, and/or discounts for quality or grade.
Revenue is recorded net of any royalty interest or other profit interest in the produced product. Revenues related to products delivered, but not yet billed are estimated each month. These estimates are based on contract data, commodity price and preliminary throughput and allocation measurements. When actual sales volumes exceed our entitled share of sales volumes, an overproduced imbalance occurs. To the extent the overproduced imbalance exceeds our share of the remaining estimated proved natural gas reserves for a given property, we record a liability.
Direct Operating Expenses — Direct operating expenses are recognized when incurred and include (a) lease operating expenses which consist of chemical treating, repairs and maintenance, equipment rental, saltwater disposal and other direct operating expenses (b) production taxes and (c) ad valorem taxes.
(3) — Contingencies
Pursuant to the terms of the Crescent MIPA, certain liabilities arising in connection with ownership of the Uinta Basin Assets prior to the effective date are retained by Verdun. Management is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the combined statements of revenues and direct operating expenses.
(4) — Subsequent Events
Management has evaluated subsequent events through May 13, 2022, the date the Statements of Revenues and Direct Operating Expenses were available to be issued and has concluded no events need to be reported during this period.
6
Supplementary Oil and Gas Disclosures (Unaudited)
Supplemental reserve information
The following tables summarize the net ownership interest in the proved crude oil and natural gas reserves, the standardized measure and changes in the standardized measure of discounted future net cash flows of the Uinta Basin Assets and are based on estimates of proved reserves derived from the reserve reports prepared by independent third-party reserve engineers as of December 31, 2021. The standardized measure and changes in the standardized measure presented here exclude income taxes as the tax basis of the Uinta Basin Assets is not applicable on a going forward basis. The proved oil and gas reserve estimates and other components of the standardized measure were determined in accordance with the authoritative guidance of the Financial Accounting Standards Board and the SEC
Estimated quantities of crude oil and natural gas reserves
The following table sets forth certain data pertaining to the Uinta Basin Asset’s proved, proved developed and proved undeveloped reserves for the year ended December 31, 2021.
| Oil | Gas | Total | ||||||||||
| (MBbl) | (MMCF) | (MBOE) | ||||||||||
| 2021 |
||||||||||||
| Proved Reserves |
||||||||||||
| Beginning balance |
24,785 | 64,985 | 35,615 | |||||||||
| Revision of previous estimates |
5,737 | 30,165 | 10,765 | |||||||||
| Extensions, discoveries and other additions |
17,394 | 59,517 | 27,314 | |||||||||
| Improved recovery |
— | — | — | |||||||||
| Purchase of reserves in-place |
— | — | — | |||||||||
| Sale of reserves in-place |
— | — | — | |||||||||
| Production |
(4,992 | ) | (15,338 | ) | (7,548 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Ending balance |
42,924 | 139,329 | 66,146 | |||||||||
|
|
|
|
|
|
|
|||||||
| Proved Developed Reserves, December 31 |
24,871 | 92,094 | 40,220 | |||||||||
|
|
|
|
|
|
|
|||||||
| Proved Undeveloped Reserves, December 31 |
18,053 | 47,235 | 25,926 | |||||||||
|
|
|
|
|
|
|
|||||||
Standardized Measure of Discounted Future Net Cash Flows
The Standardized Measure of Discounted Future Net Cash Flows (excluding income tax expense) relating to proved crude oil and gas reserves is presented below:
| Year Ended December 31, 2021 |
||||
| (Unaudited) | ||||
| (In thousands) | ||||
| Future cash inflows |
$ | 2,707,561 | ||
| Future production costs |
(620,982 | ) | ||
| Future development costs |
(562,182 | ) | ||
|
|
|
|||
| Future net cash flows |
1,524,397 | |||
| Less 10% annual discount to reflect timing of cash flows |
(470,276 | ) | ||
|
|
|
|||
| Standard measure of discounted future net cash flows |
$ | 1,054,121 | ||
|
|
|
|||
7
The Standardized Measure of Discounted Future Net Cash Flows (discounted at 10%) from production of proved reserves was developed as follows:
| 1. | An estimate was made of the quantity of proved reserves and the future periods in which they are expected to be produced based on year-end economic conditions. |
| 2. | In accordance with SEC guidelines, the engineers’ estimates of future net revenues from proved properties and the present value thereof for 2021 and subsequent periods are made using the twelve-month average of the first-day-of-the-month reference prices as adjusted for location and quality differentials. These prices are held constant throughout the life of the properties, except where such guidelines permit alternate treatment. The realized sales prices used in the reserve report were $56.30 per barrel of crude oil and $2.09 per MCF of natural gas. |
| 3. | The future gross revenue streams were reduced by estimated future operating costs and future development and abandonment costs, all of which were based on current costs in effect at December 31, 2021 and held constant throughout the life of the properties. |
As described in Note 1, these Statements of Revenue and Direct Operating Expenses do not include income tax expense therefore income tax estimates were omitted from the Standardized Measure of Discounted Future Net Cash Flows calculation.
The principal sources of changes in the Standardized Measure of Discounted Future Net Cash Flows for the year ended December 31, 2021, are as follows:
| Year Ended December 31, 2021 |
||||
| (Unaudited) | ||||
| (In thousands) | ||||
| Standardized measure — beginning of period |
$ | 192,031 | ||
| Revisions to reserves proved in prior periods: |
||||
| Net change in sales prices and production costs related to future production |
397,038 | |||
| Net change in estimated future development costs |
(1,740 | ) | ||
| Net change due to revisions in quantity estimates |
210,529 | |||
| Accretion of discount |
19,203 | |||
| Changes in production rates (timing) and other |
34,487 | |||
| Net change due to extensions and discoveries, net of estimated future development and production costs |
460,629 | |||
| Sales of oil and gas produced, net of production costs |
(281,503 | ) | ||
| Previously estimated development costs incurred |
23,447 | |||
|
|
|
|||
| Standardized measure — end of period |
$ | 1,054,121 | ||
|
|
|
|||
8
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On March 30, 2022, Crescent Energy Company (“Crescent” or the “Company”), consummated the acquisition contemplated by the Membership Interest Purchase Agreement (the “Purchase Agreement”) dated February 15, 2022, by and among certain of the Company’s subsidiaries, including Crescent Energy OpCo LLC (“OpCo”), and Verdun Oil Company II LLC, a Delaware limited liability company, pursuant to which the Company purchased all of the issued and outstanding membership interests of Javelin Uinta, LLC, a Texas limited liability company that holds certain exploration and production assets (the “Uinta Basin Assets”) located in the State of Utah (such transactions contemplated by the Purchase Agreement, collectively, the “Uinta Acquisition”).
The following unaudited pro forma condensed combined financial statements (the “pro forma financial statements”) have been prepared from the respective historical consolidated financial statements of Crescent for the three months ended March 31, 2022 and for the year ended December 31, 2021 and the statements of revenues and direct operating expenses of the Uinta Basin Assets for the period from January 1, 2022 through March 30, 2022 and for the year ended December 31, 2021, adjusted to give effect to the Uinta Acquisition as if it had been consummated on January 1, 2021.
The following pro forma financial statements are based on, and should be read in conjunction with, the historical unaudited condensed consolidated financial statements for the three months ended March 31, 2022 included in the Company’s Quarterly Report on Form 10-Q and the historical audited combined and consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K and the statements of revenues and direct operating expenses of the Uinta Basin Assets for the period from January 1, 2022 through March 30, 2022 and for the year ended December 31, 2021 included as Exhibit 99.1 included in the Company’s Current Report on Form 8-K dated May 18, 2022. Additionally, the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 is based on, and should be read in conjunction with, the unaudited pro forma condensed combined financial statement for the year ended December 31, 2021 included in the Company’s Current Report on Form 8-K dated April 8, 2022.
The accompanying pro forma financial statements were derived by making certain transaction accounting adjustments to the historical and pro forma financial statements noted above. The adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual impact of the Uinta Acquisition may differ from the adjustments made to the pro forma financial statements. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects for the periods presented as if the Uinta Acquisition had been consummated earlier, and that all adjustments necessary to present fairly the pro forma financial statements have been made. The pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma financial statements presented below.
The pro forma financial statements and related notes are presented for illustrative purposes only and should not be relied upon as an indication of the financial condition or the operating results that the Company would have achieved if the Purchase Agreement had been entered into and the Uinta Acquisition had taken place on January 1, 2021. The pro forma financial statements do not reflect future events that may occur after the consummation of the Uinta Acquisition, including, but not limited to, the anticipated realization of ongoing savings from potential operating efficiencies, asset dispositions, cost savings, or economies of scale that the Company may achieve with respect to the combined operations. As a result, future results may vary significantly from the results reflected in the pro forma financial statements and should not be relied on as an indication of the future results of the Company.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2022
(in thousands, except per share data)
| Crescent (Historical) |
Uinta Basin Assets (Historical) |
Uinta Acquisition Transaction Adjustments |
Crescent Pro Forma Combined |
|||||||||||||
| Revenues: |
||||||||||||||||
| Oil |
$ | 372,509 | $ | 132,160 | $ | — | $ | 504,669 | ||||||||
| Natural gas |
143,311 | 15,664 | — | 158,975 | ||||||||||||
| Natural gas liquids |
71,179 | — | — | 71,179 | ||||||||||||
| Midstream and other |
11,911 | — | — | 11,911 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
598,910 | 147,824 | — | 746,734 | ||||||||||||
| Expenses: |
||||||||||||||||
| Operating expense |
216,161 | 17,407 | — | 233,568 | ||||||||||||
| Depreciation, depletion and amortization |
99,019 | — | 25,537 | (a) | 124,556 | |||||||||||
| Exploration expense |
91 | — | — | 91 | ||||||||||||
| Midstream operating expense |
3,078 | — | — | 3,078 | ||||||||||||
| General and administrative expense |
22,522 | — | — | 22,522 | ||||||||||||
| Gain on sale of assets |
(4,790 | ) | — | — | (4,790 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
336,081 | 17,407 | 25,537 | 379,025 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other income (expense): |
||||||||||||||||
| Loss on derivatives |
(673,486 | ) | — | — | (673,486 | ) | ||||||||||
| Interest expense |
(16,524 | ) | — | — | (16,524 | ) | ||||||||||
| Other income (expense) |
(1,499 | ) | — | — | (1,499 | ) | ||||||||||
| Income (loss) from equity method investments |
948 | — | — | 948 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income (expense) |
(690,561 | ) | — | — | (690,561 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (loss) before taxes |
(427,732 | ) | 130,417 | (25,537 | ) | (322,852 | ) | |||||||||
| Income tax benefit (expense) |
21,725 | — | (6,446 | )(b) | 15,279 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
(406,007 | ) | 130,417 | (31,983 | ) | (307,573 | ) | |||||||||
| Less: net (income) loss attributable to noncontrolling interests |
(470 | ) | — | — | (470 | ) | ||||||||||
| Less: net (income) loss attributable to redeemable noncontrolling interests |
321,477 | — | (78,919 | )(c) | 242,558 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) attributable to Crescent |
$ | (85,000 | ) | $ | 130,417 | $ | (110,902 | ) | $ | (65,485 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Loss per Share: |
||||||||||||||||
| Class A - basic and diluted |
$ | (2.03 | ) | $ | (1.56 | )(d) | ||||||||||
| Class B - basic and diluted |
$ | — | $ | — | ||||||||||||
| Weighted Average Common Shares Outstanding |
||||||||||||||||
| Class A - basic and diluted |
41,954 | 41,954 | ||||||||||||||
| Class B - basic and diluted |
127,536 | 127,536 | ||||||||||||||
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2021
(in thousands, except per share data)
| Crescent Pro Forma Combined Prior to Uinta Acquisition |
Uinta Basin Assets (Historical) |
Uinta Acquisition Transaction Adjustments |
Crescent Pro Forma Combined |
|||||||||||||
| Revenues: |
||||||||||||||||
| Oil |
$ | 1,112,024 | $ | 292,034 | $ | — | $ | 1,404,058 | ||||||||
| Natural gas |
550,791 | 37,925 | — | 588,716 | ||||||||||||
| Natural gas liquids |
235,600 | — | — | 235,600 | ||||||||||||
| Midstream and other |
69,421 | — | — | 69,421 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
1,967,836 | 329,959 | — | 2,297,795 | ||||||||||||
| Expenses: |
||||||||||||||||
| Operating expense |
795,466 | 48,456 | — | 843,922 | ||||||||||||
| Depreciation, depletion and amortization |
416,160 | — | 79,613 | (a) | 495,773 | |||||||||||
| Impairment and abandonment of oil and natural gas properties |
761 | — | — | 761 | ||||||||||||
| Exploration expense |
1,661 | — | — | 1,661 | ||||||||||||
| Midstream operating expense |
15,355 | — | — | 15,355 | ||||||||||||
| General and administrative expense |
171,327 | — | — | 171,327 | ||||||||||||
| Gain on sale of assets |
(9,232 | ) | — | — | (9,232 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
1,391,498 | 48,456 | 79,613 | 1,519,567 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other income (expense): |
||||||||||||||||
| Loss on derivatives |
(970,659 | ) | — | — | (970,659 | ) | ||||||||||
| Interest expense |
(73,698 | ) | — | — | (73,698 | ) | ||||||||||
| Gain on extinguishment of debt |
3,369 | — | — | 3,369 | ||||||||||||
| Other income (expense) |
5,926 | — | — | 5,926 | ||||||||||||
| Income (loss) from equity method investments |
(1,529 | ) | — | — | (1,529 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income (expense) |
(1,036,591 | ) | — | — | (1,036,591 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (loss) before taxes |
(460,253 | ) | 281,503 | (79,613 | ) | (258,363 | ) | |||||||||
| Income tax benefit (expense) |
25,561 | — | (12,408 | )(b) | 13,153 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
(434,692 | ) | 281,503 | (92,021 | ) | (245,210 | ) | |||||||||
| Less: net (income) loss attributable to noncontrolling interests |
3,570 | — | — | 3,570 | ||||||||||||
| Less: net (income) loss attributable to redeemable noncontrolling interests |
333,598 | — | (151,916 | )(c) | 181,682 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) attributable to Crescent |
$ | (97,524 | ) | $ | 281,503 | $ | (243,937 | ) | $ | (59,958 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Loss per Share: |
||||||||||||||||
| Class A - basic and diluted |
$ | (2.32 | ) | $ | (1.43 | )(d) | ||||||||||
| Class B - basic and diluted |
$ | — | $ | — | ||||||||||||
| Weighted Average Common Shares Outstanding |
||||||||||||||||
| Class A - basic and diluted |
41,954 | 41,954 | ||||||||||||||
| Class B - basic and diluted |
127,536 | 127,536 | ||||||||||||||
Notes to unaudited pro forma condensed combined financial statements
NOTE 1 – Basis of pro forma presentation
The pro forma financial statements have been derived from the historical financial statements of Crescent and statements of revenues and direct operating expenses for the Uinta Basin Assets. Additionally, the pro forma statement of operations for the year ended December 31, 2021 has been derived from certain pro forma financial statements included in the Company’s Current Report on Form 8-K dated April 8, 2022. The pro forma statements of operations for the three months ended March 31, 2022 and for the year ended December 31, 2021 give effect to the Uinta Acquisition as if it occurred on January 1, 2021.
The statements of revenues and direct operating expenses for the Uinta Basin Assets, which are being presented in accordance with Article 3-05 of Regulation S-X, represent abbreviated financial statements that include less information about the historical business associated with the Uinta Basin Assets or about our current and future results as the owner of the Uinta Basin Assets than full financial statements. For example, the statements of revenues and direct operating expenses do not include information about capital structure, interest expense, entity-level taxes, or depreciation, depletion and amortization.
The pro forma financial statements reflect pro forma adjustments that are based on available information and certain assumptions that management believes are reasonable. However, actual results may differ from those reflected in these statements. In management’s opinion, all adjustments known to date that are necessary to present fairly the pro forma information have been made. The pro forma financial statements do not purport to represent what the combined entity’s results of operations would have been if the Uinta Acquisition had actually occurred on the date indicated above, nor are they indicative of Crescent’s future results of operations.
These pro forma financial statements should be read in conjunction with Crescent’s historical financial statements for the three months ended March 31, 2022 and for the year ended December 31, 2021 included in the Company’s Quarterly Report on Form 10-Q and Annual Report on Form 10-K, respectively.
NOTE 2 – Purchase price allocation
In March 2022, Crescent consummated the acquisition contemplated by the Purchase Agreement, pursuant to which Crescent purchased all of the issued and outstanding membership interests of Javelin Uinta, LLC, a Texas limited liability company that holds the Uinta Basin Assets. Upon closing of the Uinta Acquisition, Crescent paid $621.3 million in cash consideration and transaction fees and assumed certain commodity derivatives. The Uinta Acquisition was funded with cash on hand and borrowings under Crescent’s Revolving Credit Facility. The Uinta Acquisition was accounted for as an asset acquisition, with Crescent recording $781.6 million of proved oil and natural gas properties and $70.7 million of unproved oil and natural gas properties, net of acquired commodity derivative liabilities of $179.7 million, asset retirement obligations of $37.2 million and accounts payable of $14.3 million.
NOTE 3 – Adjustments to the pro forma financial statement
The pro forma financial statements have been prepared to illustrate the effect of the Uinta Acquisition and have been prepared for informational purposes only.
The preceding pro forma financial statements have been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and allows for supplemental disclosure of the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management Adjustments”). Management has elected not to disclose Management Adjustments.
The pro forma provision for income taxes does not necessarily reflect the amounts that would have resulted had the combined company filed consolidated income tax returns during the periods presented.
The pro forma net income (loss) per share amounts presented in the pro forma statements of operations are based upon the number of shares of Crescent Class A Common Stock and Crescent Class B Common Stock outstanding, assuming the Uinta Acquisition occurred on January 1, 2021.
Pro forma statement of operations adjustments
The adjustments included in the pro forma statements of operations for the three months ended March 31, 2022 and for the year ended December 31, 2021 are as follows:
| (a) | Reflects the pro forma depletion expense calculated in accordance with the successful efforts method of accounting for oil and gas properties totaled $25.5 million and $79.6 million for the three months ended March 31, 2022 and for the year ended December 31, 2021, respectively. |
| (b) | Reflects the income tax effect of the pro forma adjustments presented. The tax rate applied to the pro forma adjustments was the estimated combined federal and state statutory rate after the effect of noncontrolling interests of 6.1% for the three months ended March 31, 2022 and for the year ended December 31, 2021. The effective rate of the Company could be significantly different (either higher or lower) depending on a variety of factors. |
| (c) | Reflects the impact of the allocation of net income (loss) attributable to redeemable noncontrolling interests for the portion of OpCo not owned by Crescent. |
| (d) | Reflects the impact of the allocation of net income (loss) attributable to Crescent on the computation of basic and diluted net income (loss) per share. |
NOTE 4 – Supplemental pro forma oil and natural gas reserves information
Oil and natural gas reserves
The following tables present the estimated pro forma combined net proved developed and undeveloped oil, natural gas, and NGLs reserves information as of December 31, 2021 for our consolidated operations, along with a summary of changes in quantities of net remaining proved reserves for the year ended December 31, 2021 for our consolidated operations. Immaterial amounts for proved developed oil, natural gas, and NGLs of our equity affiliates totaling 3,665 MBoe as of December 31, 2021 have been omitted from presentation below. The estimates below are in certain instances presented on a “barrels of oil equivalent or “Boe” basis. To determine Boe in the following tables, natural gas is converted to a crude oil equivalent at the ratio of six Mcf of natural gas to one barrel of crude oil equivalent.
The following estimated pro forma oil and natural gas reserves information is not necessarily indicative of the results that might have occurred had the Uinta Acquisition been completed on January 1, 2021 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in “Risk Factors” included in the Company’s Annual Report on Form 10-K.
| Oil and Condensate (MBbls) | ||||||||||||
| Crescent Pro Forma Combined Prior To Uinta Acquisition |
Uinta Basin Assets (Historical) |
Crescent Pro Forma Combined |
||||||||||
| Proved Developed and Undeveloped Reserves as of: |
||||||||||||
| December 31, 2020 |
208,978 | 24,785 | 233,763 | |||||||||
| Revisions of previous estimates |
11,137 | 5,737 | 16,874 | |||||||||
| Extensions, discoveries, and other additions |
7,763 | 17,394 | 25,157 | |||||||||
| Sales of reserves in place |
(854 | ) | — | (854 | ) | |||||||
| Purchases of reserves in place |
— | — | — | |||||||||
| Production |
(16,864 | ) | (4,992 | ) | (21,856 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| December 31, 2021 |
210,160 | 42,924 | 253,084 | |||||||||
|
|
|
|
|
|
|
|||||||
| Proved Developed Reserves as of: |
||||||||||||
| December 31, 2020 |
127,038 | 13,877 | 140,915 | |||||||||
| December 31, 2021 |
158,091 | 24,871 | 182,962 | |||||||||
| Proved Undeveloped Reserves as of: |
||||||||||||
| December 31, 2020 |
81,940 | 10,908 | 92,848 | |||||||||
| December 31, 2021 |
52,069 | 18,053 | 70,122 | |||||||||
| Natural Gas (MMcf) | ||||||||||||
| Crescent Pro Forma Combined Prior To Uinta Acquisition |
Uinta Basin Assets (Historical) |
Crescent Pro Forma Combined |
||||||||||
| Proved Developed and Undeveloped Reserves as of: |
||||||||||||
| December 31, 2020 |
1,266,894 | 64,985 | 1,331,879 | |||||||||
| Revisions of previous estimates |
343,306 | 30,165 | 373,471 | |||||||||
| Extensions, discoveries, and other additions |
17,705 | 59,517 | 77,222 | |||||||||
| Sales of reserves in place |
(26,226 | ) | — | (26,226 | ) | |||||||
| Purchases of reserves in place |
— | — | — | |||||||||
| Production |
(131,726 | ) | (15,338 | ) | (147,064 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| December 31, 2021 |
1,469,953 | 139,329 | 1,609,282 | |||||||||
|
|
|
|
|
|
|
|||||||
| Proved Developed Reserves as of: |
||||||||||||
| December 31, 2020 |
1,192,020 | 46,038 | 1,238,058 | |||||||||
| December 31, 2021 |
1,404,570 | 92,094 | 1,496,664 | |||||||||
| Proved Undeveloped Reserves as of: |
||||||||||||
| December 31, 2020 |
74,874 | 18,947 | 93,821 | |||||||||
| December 31, 2021 |
65,383 | 47,235 | 112,618 | |||||||||
| NGLs (MBbls) | ||||||||||||
| Crescent Pro Forma Combined Prior To Uinta Acquisition |
Uinta Basin Assets (Historical) |
Crescent Pro Forma Combined |
||||||||||
| Proved Developed and Undeveloped Reserves as of: | ||||||||||||
| December 31, 2020 | 64,838 | — | 64,838 | |||||||||
| Revisions of previous estimates |
19,046 | — | 19,046 | |||||||||
| Extensions, discoveries, and other additions |
2,179 | — | 2,179 | |||||||||
| Sales of reserves in place |
(1,972 | ) | — | (1,972 | ) | |||||||
| Purchases of reserves in place |
— | — | — | |||||||||
| Production |
(7,598 | ) | — | (7,598 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| December 31, 2021 |
76,493 | — | 76,493 | |||||||||
|
|
|
|
|
|
|
|||||||
| Proved Developed Reserves as of: |
||||||||||||
| December 31, 2020 |
52,936 | — | 52,936 | |||||||||
| December 31, 2021 |
66,402 | — | 66,402 | |||||||||
| Proved Undeveloped Reserves as of: |
||||||||||||
| December 31, 2020 |
11,902 | — | 11,902 | |||||||||
| December 31, 2021 |
10,091 | — | 10,091 | |||||||||
| Total (Mboe) | ||||||||||||
| Crescent Pro Forma Combined Prior To Uinta Acquisition |
Uinta Basin Assets (Historical) |
Crescent Pro Forma Combined |
||||||||||
| Proved Developed and Undeveloped Reserves as of: |
||||||||||||
| December 31, 2020 |
484,950 | 35,615 | 520,565 | |||||||||
| Revisions of previous estimates |
87,401 | 10,765 | 98,166 | |||||||||
| Extensions, discoveries, and other additions |
12,893 | 27,314 | 40,207 | |||||||||
| Sales of reserves in place |
(7,197 | ) | — | (7,197 | ) | |||||||
| Purchases of reserves in place |
— | — | — | |||||||||
| Production |
(46,402 | ) | (7,548 | ) | (53,950 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| December 31, 2021 |
531,645 | 66,146 | 597,791 | |||||||||
|
|
|
|
|
|
|
|||||||
| Proved Developed Reserves as of: |
||||||||||||
| December 31, 2020 |
378,628 | 21,549 | 400,177 | |||||||||
| December 31, 2021 |
458,588 | 40,220 | 498,808 | |||||||||
| Proved Undeveloped Reserves as of: |
||||||||||||
| December 31, 2020 |
106,322 | 14,066 | 120,388 | |||||||||
| December 31, 2021 |
73,057 | 25,926 | 98,983 | |||||||||
Standardized measure of discounted future net cash flows
The following tables present the estimated pro forma standardized measure of discounted future net cash flows (the “pro forma standardized measure”) at December 31, 2021. The pro forma standardized measure information set forth below gives effect to the Uinta Acquisition as if it had been completed on January 1, 2021. Uinta Acquisition Transaction Adjustments reflect adjustments related to the tax effects resulting from the Uinta Acquisition. The disclosures below were determined by referencing the “Standardized Measure of Discounted Future Net Cash Flows” for the year ended December 31, 2021 reported in the Company’s Current Report on Form 8-K dated April 8, 2022. An explanation of the underlying methodology applied, as required by SEC regulations, can be found within the historical financial statements. The calculations assume the continuation of existing economic, operating and contractual conditions at December 31, 2021. Immaterial amounts for the pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves of our equity affiliates totaling $23.2 million as of December 31, 2021 have been omitted from presentation below.
The following estimated pro forma standardized measure is not necessarily indicative of the results that might have occurred had the Uinta Acquisition been completed on January 1, 2021 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in “Risk Factors” included in the Company’s Annual Report on Form 10-K.
The pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves of our consolidated operations as of December 31, 2021 is as follows:
| (in thousands) | ||||||||||||||||
| Crescent Pro Forma Combined Prior To Uinta Acquisition |
Uinta Basin Assets (Historical) |
Uinta Acquisition Transaction Adjustments |
Crescent Pro Forma Combined |
|||||||||||||
| Future cash inflows |
$ | 21,063,117 | $ | 2,707,561 | $ | — | $ | 23,770,678 | ||||||||
| Future production costs |
(10,194,648 | ) | (620,982 | ) | — | (10,815,630 | ) | |||||||||
| Future development costs (1) |
(1,477,562 | ) | (562,182 | ) | — | (2,039,744 | ) | |||||||||
| Future income taxes |
(352,136 | ) | — | (39,750 | ) | (391,886 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Future net cash flows |
9,038,771 | 1,524,397 | (39,750 | ) | 10,523,418 | |||||||||||
| Annual discount of 10% for estimated timing |
(4,080,471 | ) | (470,276 | ) | 12,612 | (4,538,135 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Standardized measure of discounted future net cash flows as of December 31, 2021 |
$ | 4,958,300 | $ | 1,054,121 | $ | (27,138 | ) | $ | 5,985,283 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Future development costs include future abandonment and salvage costs. |
Changes in standardized measure
The changes in the pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves of our consolidated operations for the year ended December 31, 2021 are as follows:
| (in thousands) | ||||||||||||||||
| Crescent Pro Forma Combined Prior To Uinta Acquisition |
Uinta
Basin Assets (Historical) |
Uinta Acquisition Transaction Adjustments |
Crescent Pro Forma Combined |
|||||||||||||
| Balance at December 31, 2020 |
$ | 1,713,753 | $ | 192,031 | $ | — | $ | 1,905,784 | ||||||||
| Net change in prices and production costs |
4,153,142 | 397,038 | — | 4,550,180 | ||||||||||||
| Net change in future development costs |
97,435 | (1,740 | ) | — | 95,695 | |||||||||||
| Sales and transfers of oil and natural gas produced, net of production expenses |
(1,148,889 | ) | (281,503 | ) | — | (1,430,392 | ) | |||||||||
| Extensions, discoveries, additions and improved recovery, net of related costs |
190,585 | 460,629 | — | 651,214 | ||||||||||||
| Purchases of reserves in place |
— | — | — | — | ||||||||||||
| Sales of reserves in place |
(53,004 | ) | — | — | (53,004 | ) | ||||||||||
| Revisions of previous quantity estimates |
(209,591 | ) | 210,529 | — | 938 | |||||||||||
| Previously estimated development costs incurred |
95,879 | 23,447 | — | 119,326 | ||||||||||||
| Net change in taxes |
835 | — | (27,138 | ) | (26,303 | ) | ||||||||||
| Accretion of discount |
169,784 | 19,203 | — | 188,987 | ||||||||||||
| Changes in timing and other |
(51,629 | ) | 34,487 | — | (17,142 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at December 31, 2021 |
$ | 4,958,300 | $ | 1,054,121 | $ | (27,138 | ) | $ | 5,985,283 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||