Crescent Energy Co 8-K, filed Dec 21, 2021
Crescent Energy Co (CRGY)
About this 8-K
Crescent Energy Co filed this 8-K on December 21, 2021.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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OF THE SECURITIES EXCHANGE ACT OF 1934
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Item 2.02. Results of Operations and Financial Condition.
On December 21, 2021, Crescent Energy Company (the “Company”) announced certain operational updates. A copy of the Company’s press release relating to such operational updates is furnished as Exhibit 99.1 to this report on Form 8-K and is incorporated herein by this reference.
On December 21, 2021, the Company posted an updated investor presentation to its website www.crescentenergyco.com entitled “Creating A Differentiated U.S. Energy Company.” A copy of the investor presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference. The information contained on the Company’s website shall not be deemed part of this report.
The information contained in this Item 2.01, including the exhibits, shall not be deemed “filed” with the U.S. Securities and Exchange Commission (“SEC”) nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended (the “Securities Act”).
Item 7.01. Regulation FD Disclosure.
The information set forth in Item 2.02 above is incorporated herein by reference.
The information contained in this Item 7.01, including the exhibits, shall not be deemed “filed” with the SEC nor incorporated by reference in any registration statement filed by the Company under the Securities Act.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. |
Description | |
| 99.1 | Press Release, dated December 21, 2021. | |
| 99.2 | Investor Presentation, dated December 21, 2021 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
2
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: December 21, 2021
| CRESCENT ENERGY COMPANY | ||
| By: | /s/ Bo Shi | |
| Name: | Bo Shi | |
| Title: | General Counsel | |
3
Exhibit 99.1
Crescent Energy Reports Pro Forma Financial and Operational Results for the Nine Month Period Ended
September 30, 2021 Related to the Combination of Independence and Contango
Results Demonstrate Continued Strong Execution of Cash Flow Focused Investment Strategy
Crescent Remains Well-Positioned for Long-Term Value Creation Through Cycles
Houston, Texas, December 21, 2021 – Crescent Energy Company (“Crescent” or the “Company”) (NYSE: CRGY) today announced pro forma financial and operational results for the nine-month period ended September 30, 2021 (the “Year to Date Period”) related to the business combination between Independence Energy LLC (“Independence”) and Contango Oil & Gas Company (“Contango”).
Highlights and Recent Developments
| • | Formed Crescent Energy on December 7, 2021 with the successful completion of the merger between Independence and Contango; stock is now trading on the NYSE under ticker symbol “CRGY” |
| • | Delivered strong pro forma financial results underpinned by predictable, low-decline PDP Base |
| • | Implemented a disciplined capex program focused on risk-adjusted returns |
| • | Reduced risk via balance sheet strength and a consistent commodity hedging program |
| • | Executed on its consolidation strategy, closing three acquisitions in 2H’21 including Contango |
| • | Financial Highlights for the Year to Date and Annualized Period: |
| 9 Months Ended 9/30/21 | Annualized | |||||||
| Production |
115 MBoe/d | |||||||
| % Liquids |
57% | |||||||
| % Hedged (Predecessor Only) |
81% | |||||||
| Total Revenues (GAAP) |
$ | 1,254 MM | $ | 1,672 MM | ||||
| Net Loss (GAAP)1 |
$ | (678) MM | NM | |||||
| Adj. EBITDAX (non-GAAP)2 |
$ | 467 MM | $ | 623 MM | ||||
| Levered Free Cash Flow (non-GAAP) 2 |
$ | 286 MM | $ | 381 MM | ||||
| Unhedged Adj. EBITDAX (non-GAAP)2 |
$ | 674 MM | $ | 899 MM | ||||
| Net Debt |
$830 MM | |||||||
| Net Debt / Annualized Adj. EBITDAX |
1.3x | |||||||
| Net Debt / Ann. Unhedged Adj. EBITDAX |
0.9x | |||||||
| 1 | Includes $592 million of unrealized derivative losses and $199 million of expense related to an early settlement of certain outstanding derivative oil commodity contracts for open positions associated with calendar years 2022 and 2023. Subsequent to the settlement, the Company entered into new commodity derivative contracts at prevailing market prices. |
| 2 | Adjusted EBITDAX, Unhedged Adjusted EBITDAX, Annualized Adjusted EBITDAX, Annualized Unhedged Adjusted EBITDAX, Levered Free Cash Flow and Annualized Levered Free Cash Flow are non-GAAP financial measures. Please see “Reconciliation of Non-GAAP Measures” for discussion and reconciliations of such measures to their most directly comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Note that the Year to Date Period does not reflect Adjusted EBITDAX and Unhedged Adjusted EBITDAX generated by certain recent acquisitions. |
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
| • | 2022 Outlook: |
| • | Targets quarterly dividends of approximately 10% of Adjusted EBITDAX3 and intends to pay a dividend in the first quarter of 2022, based on fourth quarter 2021 Adjusted EBITDAX |
| • | Low decline asset base with 15% estimated 2022 proved developed producing (PDP) decline rate |
| • | Modest capital requirements with 45% average historical re-investment rate4 since 2014 |
| • | Plans to release 2022 annual guidance early in the first quarter of 2022 |
David Rockecharlie, CEO, commented: “We are pleased with what we have accomplished in 2021. Our talented organization continued to execute our disciplined, cash flow-based strategy. The team delivered strong operational performance while closing several valuable acquisitions throughout the year, culminating in the completion of our merger with Contango. The combined business generates significant cash flow, supported by our robust hedge book and low leverage. Given the strength of our underlying base business, we expect to lead industry consolidation by generating superior risk-adjusted returns for our shareholders.”
A summary of certain pro forma financial statements related to the business combination between Independence and Contango are provided in this release. Please refer to the Current Report on Form 8-K/A filed on December 17, 2021, which can be found at the SEC’s website at www.sec.gov, for additional details and information regarding the historical financial results of Independence and Contango and the assumptions made in preparing the pro forma financial statements derived therefrom that are summarized herein.
Generated Impressive Results on a Pro Forma Basis
Total pro forma production averaged 115 thousand barrels of oil equivalent per day (“MBoe/d”) for the Year to Date Period, with pro forma liquids production totaling 66 thousand barrels per day, or 57% of total production.
Pro forma total revenues and net loss for the Year to Date Period totaled $1.3 billion and $678 million, respectively. The net loss was impacted by a significant change in the market value of the Company’s commodity derivatives associated with the rise in oil and gas prices throughout 2021, including $592 million of unrealized derivative losses and $199 million of expense related to an early settlement of certain outstanding derivative oil commodity contracts for open positions associated with calendar years 2022 and 2023. Subsequent to the settlement, the Company entered into new commodity derivative contracts at prevailing market prices.
Pro forma Adjusted Unhedged EBITDAX and pro forma Adjusted EBITDAX for the Year to Date Period totaled $674 million and $467 million, respectively. Pro forma levered free cash flow for the Year to Date Period totaled $286 million with pro forma capital expenditures related to drilling and completion activity of $136 million (brought online 68 gross (16 net) working interest wells in the DJ, Eagle Ford and Permian basins).
| 3 | Subject to approval by its Board of Directors (the “Board”). |
| 4 | Represents non-acquisition capex spend as a percentage of historical Adjusted EBITDAX since 2014 for Independence, Crescent’s predecessor. |
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Strong Financial Position on a Pro Forma Combined Basis
As of September 30, 2021, the Company had principal amount of indebtedness of $897 million on a pro forma combined basis, which consisted of $500 million of senior unsecured notes and $397 million of outstanding borrowings on its reserve based lending credit facility (“Crescent Credit Facility”). Crescent ended the quarter with a net debt to Annualized Adjusted EBITDAX ratio of 1.3x and a net debt to Annualized Unhedged Adjusted EBITDAX ratio of 0.9x, on a pro forma combined basis.
Upon the closing of the merger with Contango, the Company’s borrowing base increased to $1.3 billion with an elected commitment of $700 million. Based on the elected commitment for the merged company, total liquidity as of September 30, 2021 on a pro forma combined basis was $349 million, including outstanding letters of credit of $21 million and cash and cash equivalents of $67 million. Subsequent to September 30, 2021, Crescent closed on a $71 million acquisition of producing assets and funded the purchase with borrowings under the Crescent Credit Facility and cash on hand.
| Pro Forma Capitalization as of September 30, 2021 (in millions) |
||||
| Cash & Cash Equivalents |
$ | 67 | ||
| Borrowings Under Crescent Credit Facility |
$ | 397 | ||
| 7.25% Senior Notes |
500 | |||
|
|
|
|||
| Total Principal Debt Outstanding |
$ | 897 | ||
| Net Debt |
830 | |||
| Liquidity: |
||||
| Elected Commitment Under Crescent Credit Facility |
$ | 700 | ||
| Less: Borrowings Under Crescent Credit Facility |
(397 | ) | ||
| Plus: Cash & Cash Equivalents |
67 | |||
| Less: Letters of Credit |
(21 | ) | ||
|
|
|
|||
| Total Liquidity |
$ | 349 | ||
| Leverage: |
||||
| Net Debt / Annualized Adj. EBITDAX ($623 MM) |
1.3x | |||
| Net Debt / Annualized Unhedged Adj. EBITDAX ($899 MM) |
0.9x | |||
| Total Class A and Class B Shares Outstanding (MM) |
170.6 | |||
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Acquisitions and Divestitures
On December 7, 2021, Crescent announced the successful completion of the combination of Independence and Contango, creating a premier, diversified and well-capitalized U.S. energy company focused on consolidation. Crescent’s Class A common stock started trading on the New York Stock Exchange under the ticker symbol “CRGY” at the open of trading on December 8, 2021. As previously announced, each eligible share of Contango common stock issued and outstanding immediately prior to the effective time of the transaction was exchanged for 0.2000 shares of Crescent Class A common stock.
Crescent closed three transactions in the second half of 2021, including two asset acquisitions (for approximately $140 million of aggregate consideration) and the merger with Contango.
| Transaction |
Closing |
Asset |
Market Theme | |||
| Gas-Weighted PDP Asset | Q3 2021 | Rockies | Large-Cap Divestiture | |||
| High-Margin Conventional Asset | Q4 2021 | Rockies and Permian | Private Company Seeking Liquidity | |||
| Contango Oil and Gas | Q4 2021 | Rockies, Permian and Mid-Continent |
Strategic M&A |
Dividend Policy
Crescent targets quarterly dividends of approximately 10% of Adjusted EBITDAX, subject to approval by the Board. The Company intends to pay a dividend in the first quarter of 2022, based on fourth quarter 2021 Adjusted EBITDAX.
2022 Guidance
The Company plans to release its 2022 outlook early in the first quarter 2022.
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Risk Management - Pro Forma Commodity Hedging5
The following table details the Company’s open commodity derivative contracts as of December 1, 2021 on a pro forma combined basis. Crescent actively hedges oil, gas, NGLs, basis and calendar month average roll exposure to protect cash flow and maintain prudent leverage.
| Crude Oil | Natural Gas | NGLs | ||||||||||||||||||||||
| Hedged Volume (MBbl) |
Weighted Average Price ($ / Bbl) |
Hedged Volume (MMcf) |
Weighted Average Price ($ / MMBtu) |
Hedged Volume (MBbl) |
Weighted Average Price ($ / Bbl) |
|||||||||||||||||||
| Q4 2021 |
3,082 | $ | 53.56 | 23,135 | $ | 2.88 | 969 | $ | 17.80 | |||||||||||||||
| Q1 2022 |
2,985 | $ | 61.45 | 22,534 | $ | 2.79 | 914 | $ | 17.20 | |||||||||||||||
| Q2 2022 |
2,789 | $ | 60.98 | 21,690 | $ | 2.77 | 873 | $ | 17.13 | |||||||||||||||
| Q3 2022 |
2,645 | $ | 59.53 | 20,634 | $ | 2.76 | 610 | $ | 29.87 | |||||||||||||||
| Q4 2022 |
2,545 | $ | 59.58 | 20,180 | $ | 2.78 | 587 | $ | 29.74 | |||||||||||||||
| Q1 2023 |
2,378 | $ | 57.55 | 18,289 | $ | 2.60 | ||||||||||||||||||
| Q2 2023 |
2,088 | $ | 58.37 | 15,914 | $ | 2.55 | ||||||||||||||||||
| Q3 2023 |
1,870 | $ | 58.35 | 11,931 | $ | 2.49 | ||||||||||||||||||
| Q4 2023 |
1,818 | $ | 58.33 | 11,145 | $ | 2.49 | ||||||||||||||||||
| Q1 2024 |
1,387 | $ | 55.21 | 2,394 | $ | 3.57 | ||||||||||||||||||
| Q2 2024 |
1,269 | $ | 59.32 | 2,390 | $ | 3.00 | ||||||||||||||||||
| Q3 2024 |
451 | $ | 60.98 | 2,412 | $ | 3.03 | ||||||||||||||||||
| Q4 2024 |
58 | $ | 57.75 | 2,408 | $ | 3.25 | ||||||||||||||||||
About Crescent Energy
Crescent Energy is a diversified, well capitalized, U.S. independent energy company with a portfolio of assets in key proven basins across the lower 48 states. 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. The Company’s mission is to invest in energy assets and deliver better returns, operations and stewardship. For additional information, please visit www.crescentenergyco.com.
| 5 | As of 12/1/21; includes all Q4 2021 hedges including those that were previously settled. Included in the figures above are minor Henry Hub and WTI collar positions. Henry Hub collar positions have with a weighted average floor price in Q4 2021, Q1 2022, Q1 2023 and 2024 of $3.00 / MMBtu, $3.00 / MMBtu, $2.63 / MMBtu and $3.00 / MMBtu, respectively and a weighted average ceiling price for the same periods of $3.41 / MMBtu, $3.41 / MMBtu, $3.01 / MMBtu and $3.87 / MMbtu, respectively. WTI collar positions have a weighted average floor price in Q4 2021 of $52.00 / Bbl and a weighted average ceiling price for the same period of $58.80 / Bbl. Weighted average price for minor collar positions calculated off December 1, 2021 strip. |
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Cautionary Statement Regarding Forward-Looking Information
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on current expectations. The words and phrases “should”, “could”, “may”, “will”, “believe”, “plan”, “intend”, “expect”, “potential”, “possible”, “anticipate”, “estimate”, “forecast”, “view”, “efforts”, “goal” and similar expressions identify forward-looking statements and express the Company’s expectations about future events. All statements, other than statements of historical facts, included in this communication that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the Company’s control. Such risks and uncertainties include, but are not limited to, weather, political, economic and market conditions, including a decline in the price and market demand for natural gas, natural gas liquids and crude oil, the impact of pandemics such as COVID-19, actions by the Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC oil producing countries, the timing and success of business development efforts, and other uncertainties. Consequently, actual future results could differ materially from expectations. The Company assumes no duty to update or revise their respective forward-looking statements based on new information, future events or otherwise.
Selected Unaudited Pro Forma Condensed Combined Financial Information
The following selected unaudited pro forma condensed combined financial information of Crescent (the “selected pro forma information”) is based on the historical financial statements of Independence, as its predecessor. Under the acquisition method of accounting, Contango’s assets acquired and liabilities assumed by Crescent will be recorded at their fair values measured as of the acquisition date. The excess, if any, of the purchase price over the estimated fair values of Contango’s assets acquired and liabilities assumed will be recorded as goodwill.
The selected pro forma information has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial statements of Crescent included in the Current Report on Form 8-K/A filed on December 17, 2021, which can be found at the SEC’s website at www.sec.gov and the accompanying notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements have been prepared from, and should be read in conjunction with, the historical consolidated financial statements of Independence and Contango and the accompanying notes thereto, each of which were also included on such Current Report on Form 8-K/A, adjusted to give effect to the transactions discussed therein (the “Pro Forma Transactions”).
The selected pro forma information has been presented for informational purposes only and is not necessarily indicative of what Crescent’s actual financial position or results of operations would have been had the Pro Forma Transactions been completed as of the dates indicated. In addition, the selected pro forma information does not purport to project the future financial position or operating results of the post-combination business. The following table presents Crescent’s selected unaudited pro forma financial and operating data for the periods indicated:
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Crescent Pro Forma Combined Income Statement
| (in thousands, except per share data) | For the nine months ended September 30, 2021 |
For the year ended December 31, 2020 |
||||||
| REVENUES: |
||||||||
| Oil and condensate sales |
$ | 776,456 | $ | 672,610 | ||||
| Natural gas sales |
284,247 | 208,288 | ||||||
| Natural gas liquids sales |
156,891 | 103,888 | ||||||
| Midstream and other |
36,501 | 49,805 | ||||||
|
|
|
|
|
|||||
| Total revenues |
1,254,095 | 1,034,591 | ||||||
| EXPENSES: |
||||||||
| Operating expense |
530,735 | 671,625 | ||||||
| Depreciation, depletion and amortization |
300,285 | 556,644 | ||||||
| Impairment and abandonment of oil and natural gas properties |
712 | 657,925 | ||||||
| Exploration expense |
1,288 | 17,032 | ||||||
| Midstream operating expense |
8,716 | 9,092 | ||||||
| General and administrative expense |
95,486 | 145,089 | ||||||
| Gain on sale of assets |
(9,879 | ) | (3,849 | ) | ||||
|
|
|
|
|
|||||
| Total expenses |
927,343 | 2,053,558 | ||||||
|
|
|
|
|
|||||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest expense |
(47,270 | ) | (63,347 | ) | ||||
| Gain (loss) on derivatives |
(1,004,580 | ) | 238,905 | |||||
| Gain (loss) from investment in affiliates, net of income taxes |
(1,897 | ) | 27 | |||||
| Gain on extinguishment of debt |
3,369 | — | ||||||
| Other income |
3,655 | 1,769 | ||||||
|
|
|
|
|
|||||
| Total other income (expense) |
(1,046,723 | ) | 177,354 | |||||
|
|
|
|
|
|||||
| NET LOSS BEFORE INCOME TAXES |
(719,971 | ) | (841,613 | ) | ||||
| Income tax benefit |
41,859 | 42,183 | ||||||
|
|
|
|
|
|||||
| NET LOSS |
(678,112 | ) | (799,430 | ) | ||||
|
|
|
|
|
|||||
| Less: Net (income) loss attributable to noncontrolling interests |
531,361 | 619,613 | ||||||
|
|
|
|
|
|||||
| NET LOSS ATTRIBUTABLE TO COMPANY |
$ | (146,751 | ) | $ | (179,817 | ) | ||
|
|
|
|
|
|||||
| NET LOSS PER SHARE: |
||||||||
| Class A - basic and diluted |
$ | (3.40 | ) | $ | (4.17 | ) | ||
| Class B - basic and diluted |
$ | — | $ | — | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
||||||||
| Class A - basic and diluted |
43,099 | 43,099 | ||||||
| Class B - basic and diluted |
127,536 | 127,536 | ||||||
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Crescent Pro Forma Combined Balance Sheet
| (in thousands, except share data) | As of September 30, 2021 |
|||
| CURRENT ASSETS: |
||||
| Cash and cash equivalents |
$ | 66,625 | ||
| Accounts receivable, net |
273,717 | |||
| Accounts receivable - affiliates |
5,423 | |||
| Drilling advances |
6,212 | |||
| Prepaid and other assets |
15,055 | |||
|
|
|
|||
| Total current assets |
367,032 | |||
| PROPERTY, PLANT AND EQUIPMENT: |
||||
| Oil and natural gas properties, successful efforts method of accounting: |
||||
| Proved properties |
5,977,005 | |||
| Unproved properties |
313,259 | |||
| Other property & equipment |
136,968 | |||
| Accumulated depreciation, depletion, amortization and impairment |
(1,863,981 | ) | ||
|
|
|
|||
| Total property, plant and equipment, net |
4,563,251 | |||
| OTHER NON-CURRENT ASSETS: |
||||
| Investments in affiliates |
4,896 | |||
| Goodwill |
106,523 | |||
| Right-of-use lease assets |
3,673 | |||
| Other assets |
23,152 | |||
|
|
|
|||
| Total other non-current assets |
138,244 | |||
|
|
|
|||
| TOTAL ASSETS |
$ | 5,068,527 | ||
|
|
|
|||
| CURRENT LIABILITIES: |
||||
| Accounts payable and accrued liabilities |
$ | 359,265 | ||
| Accounts payable - affiliates |
3,942 | |||
| Derivative liabilities - current |
417,255 | |||
| Current asset retirement obligations |
5,193 | |||
| Other current liabilities |
3,726 | |||
|
|
|
|||
| Total current liabilities |
789,381 | |||
| NON-CURRENT LIABILITIES: |
||||
| Long-term debt |
883,531 | |||
| Derivative liabilities - noncurrent |
168,068 | |||
| Asset retirement obligations |
232,565 | |||
| Lease liabilities |
3,673 | |||
| Deferred tax liabilities |
145,812 | |||
| Other liabilities |
27,798 | |||
|
|
|
|||
| Total non-current liabilities |
1,461,447 | |||
|
|
|
|||
| TOTAL LIABILITIES |
2,250,828 | |||
|
|
|
|||
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
| (in thousands, except share data) | As of September 30, 2021 |
|||
| COMMITMENTS AND CONTINGENCIES |
||||
| REDEEMABLE NONCONTROLLING INTERESTS |
2,204,773 | |||
| SHAREHOLDERS’ EQUITY: |
||||
| Crescent Class A common stock, $0.0001 par value, 1,000,000,000 shares authorized and 43,099,100 shares issued and outstanding at September 30, 2021 on a pro forma basis |
4 | |||
| Crescent Class B common stock, $0.0001 par value, 500,000,000 shares authorized and 127,536,463 shares issued and outstanding at September 30, 2021 on a pro forma basis |
13 | |||
| Crescent preferred stock, $0.0001 par value, 500,000,000 shares authorized and 1,000 Series I preferred shares issued and outstanding at September 30, 2021 on a pro forma basis |
— | |||
| Additional paid-in capital |
638,521 | |||
| Accumulated deficit |
(39,279 | ) | ||
| Noncontrolling interests |
13,667 | |||
|
|
|
|||
| Total shareholders’ equity |
612,926 | |||
|
|
|
|||
| TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY |
$ | 5,068,527 | ||
|
|
|
|||
Crescent Pro Forma Combined Production
| For the nine months ended September 30, 2021 |
For the year ended December 31, 2020 |
|||||||
| Average daily net sales volumes: |
||||||||
| Oil (MBbls/d) |
45 | 51 | ||||||
| Natural gas (MMcf/d) |
297 | 329 | ||||||
| NGLs (MBbls/d) |
21 | 21 | ||||||
|
|
|
|
|
|||||
| Total (MBoe/d) |
115 | 127 | ||||||
Reconciliation of Non-GAAP Measures
This release includes financial measures that have not been calculated in accordance with GAAP. These non-GAAP measures include Adjusted EBITDAX, Annualized Adjusted EBITDAX, Annualized Unhedged Adjusted EBITDAX, Levered Free Cash Flow, Annualized Levered Free Cash Flow and Unhedged Adjusted EBITDAX.
Adjusted EBITDAX, Annualized Adjusted EBITDAX, Annualized Unhedged Adjusted EBITDAX, Levered Free Cash Flow, Annualized Levered Free Cash Flow and Unhedged Adjusted EBITDAX, should be read in conjunction with the information contained in Crescent’s unaudited combined and consolidated financial statements prepared in accordance with GAAP.
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Adjusted EBITDAX Definition
Crescent defines Adjusted EBITDAX as net income (loss) before interest expense, realized (gain) loss on interest rate derivatives, income tax expense, depreciation, depletion and amortization, exploration expense, non-cash gain (loss) on derivatives, impairment of oil and natural gas properties, equity-based compensation, (gain) loss on sale of assets, other (income) expense and transaction expenses. Management believes Adjusted EBITDAX is a useful performance measure because it allows for an effective evaluation of the Company’s operating performance when compared against its peers, without regard to financing methods, corporate form or capital structure. The Company excludes the items listed above from net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially within its industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP, of which such measure is the most comparable GAAP measure. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax burden, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDAX. The Company’s presentation of Adjusted EBITDAX should not be construed as an inference that its results will be unaffected by unusual or non-recurring items. Crescent’s computations of Adjusted EBITDAX may not be identical to other similarly titled measures of other companies. In addition, the Company’s Credit Agreement and the notes include a calculation of Adjusted EBITDAX for purposes of covenant compliance.
Annualized Adjusted EBITDAX and Annualized Unhedged Adjusted EBITDAX Definition
In certain instances, this release refers to pro forma Annualized Adjusted EBITDAX and pro forma Annualized Unhedged Adjusted EBITDAX. Pro forma Annualized Adjusted EBITDAX and pro forma Annualized Unhedged Adjusted EBITDAX were calculated by multiplying 4/3 by pro forma Adjusted EBITDAX and pro forma Unhedged Adjusted EBITDAX for the nine months ended September 30, 2021, respectively. Pro forma Annualized Adjusted EBITDAX and pro forma Unhedged Adjusted EBITDAX should not be considered as a substitute for a measure of historical or pro forma Adjusted EBITDAX or pro forma Unhedged Adjusted EBITDAX for the twelve-month period ended September 30, 2021, respectively, or as an indicator that pro forma results for such twelve-month period would be equivalent to pro forma Annualized Adjusted EBITDAX or pro forma Unhedged Adjusted EBITDAX, respectively.
Levered Free Cash Flow Definition
Crescent defines Levered Free Cash Flow as Adjusted EBITDAX less interest expense, excluding noncash deferred financing cost amortization, realized gain (loss) on interest rate derivatives, current income tax provision and development of oil and natural gas properties. Levered Free Cash Flow does not take into account amounts incurred on acquisitions. Levered Free Cash Flow is not a measure of performance as determined by GAAP. Levered Free Cash Flow is a supplemental non-GAAP performance measure that is used by Crescent’s management and external users of its financial statements, such as industry analysts, investors, lenders and rating agencies. Management believes Levered Free Cash Flow is a useful performance measure because it allows for an effective evaluation of operating and financial performance and the ability of the Company’s operations to generate cash flow that is available to reduce leverage or distribute to equity holders. Levered Free Cash Flow should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP, of which such measure is the most comparable GAAP measure, or as an indicator of actual operating performance or investing activities. The Company’s computations of Levered Free Cash Flow may not be comparable to other similarly titled measures of other companies.
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Annualized Levered Free Cash Flow Definition
In certain instances, this release refers to pro forma Annualized Levered Free Cash Flow. Pro forma Annualized Levered Free Cash Flow is calculated by multiplying 4/3 by pro forma Levered Free Cash Flow for the nine months ended September 30, 2021. Pro forma Annualized Levered Free Cash Flow should not be considered as a substitute for a measure of historical or pro forma Levered Free Cash Flow for the twelve-month period ended September 30, 2021, respectively, or as an indicator that pro forma results for such twelve-month period would be equivalent to pro forma Annualized Levered Free Cash Flow.
Pro Forma Combined Adjusted EBITDAX and Free Cash Flow Reconciliation
The following table presents a reconciliation of pro forma Adjusted EBITDAX (non-GAAP) and pro forma Levered Free Cash Flow (non-GAAP) to pro forma net income (loss), the most directly comparable financial measure calculated in accordance with GAAP:
| (in thousands) | For the nine months ended September 30, 2021 |
For the year ended December 31, 2020 |
||||||
| Net loss |
$ | (678,112 | ) | $ | (799,430 | ) | ||
| Adjustments to reconcile to Adjusted EBITDAX: |
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| Interest expense |
47,270 | 63,347 | ||||||
| Realized loss on interest rate derivatives |
7,373 | 12,435 | ||||||
| Income tax benefit |
(41,859 | ) | (42,183 | ) | ||||
| Depreciation, depletion and amortization |
300,285 | 556,644 | ||||||
| Exploration expense |
1,288 | 17,032 | ||||||
| Non-cash (gain) loss on derivatives |
591,535 | (17,585 | ) | |||||
| Impairment of oil and natural gas properties |
712 | 657,925 | ||||||
| Noncash equity-based compensation |
34,416 | 59,114 | ||||||
| (Gain) loss on sale of assets |
(9,879 | ) | (3,849 | ) | ||||
| Other income |
(3,655 | ) | (1,769 | ) | ||||
| Transaction expenses6 |
19,042 | 52,452 | ||||||
| Early settlement of derivative contracts7 |
198,688 | — | ||||||
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| Adjusted EBITDAX (non-GAAP) |
$ | 467,104 | $ | 554,133 | ||||
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| Less adjustments to reconcile to Levered Free Cash Flow: |
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| Interest expense, excluding noncash amortization |
(37,919 | ) | (52,575 | ) | ||||
| Realized loss on interest rate derivatives |
(7,373 | ) | (12,435 | ) | ||||
| Current income tax benefit (provision) |
305 | (782 | ) | |||||
| Total development of oil and gas properties |
(136,154 | ) | (201,977 | ) | ||||
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| Levered Free Cash Flow (non-GAAP) |
$ | 285,963 | $ | 286,364 | ||||
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| 6 | Transaction expenses primarily relate to legal, consulting and other fees incurred for certain acquisitions and restructuring transactions in 2020 and 2021, as well as the termination of a midstream contract at the Eagle Ford business in 2020. |
| 7 | 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, the Company entered into new commodity derivative contracts at prevailing market prices. |
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Unhedged Adjusted EBITDAX Definition and Reconciliation
Crescent defines Unhedged Adjusted EBITDAX as Adjusted EBITDAX plus realized (gain) loss on commodity derivatives. Management believes Unhedged Adjusted EBITDAX is a useful performance measure because it allows for an effective evaluation of the Company’s operating performance when compared against its peers, without regard to commodity derivatives, which can vary substantially within its industry depending upon peers hedging strategies and when hedges were entered into. Unhedged Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP, of which such measure is the most comparable GAAP measure. Certain items excluded from Unhedged Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s realized derivate loss or gain, cost of capital and tax burden, as well as the historic costs of depreciable assets, none of which are reflected in Unhedged Adjusted EBITDAX. The Company’s presentation of Unhedged Adjusted EBITDAX should not be construed as an inference that its results will be unaffected by unusual or non-recurring items. Crescent’s computations of Unhedged Adjusted EBITDAX may not be identical to other similarly titled measures of other companies.
The following table presents a reconciliation of pro forma Unhedged Adjusted EBITDAX (non-GAAP) to pro forma Adjusted EBITDAX (non-GAAP). In the table above, pro forma Adjusted EBITDAX (non-GAAP) is reconciled to pro forma net income (loss), the most directly comparable financial measure calculated in accordance with GAAP:
| (in thousands) | For the nine months ended September 30, 2021 |
For the year ended December 31, 2020 |
||||||
| Adjusted EBITDAX (non-GAAP) |
$ | 467,104 | $ | 554,133 | ||||
| Plus realized (gain) loss on commodity derivatives |
206,984 | (233,755 | ) | |||||
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| Unhedged Adjusted EBITDAX (non-GAAP) |
$ | 674,088 | $ | 320,378 | ||||
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Company Contact
For additional information, please reach out to IR@crescentenergyco.com
| Crescent Energy Company 600 Travis, Suite 7200, Houston, Texas 77002 Telephone: +1 (713) 332-7001 IR@crescentenergyco.com |
crescentenergyco.com |
Exhibit 99.2 December 2021 (NYSE: CRGY) Creating A Differentiated U.S. Energy Company + C R E S C E N T E N E R G Y
Disclaimer This presentation relates to Crescent Energy Company (the “Company”) following its recent consummation of the business combination (the “Transaction”) between Independence Energy LLC (“Independence”) and Contango Oil & Gas (“Contango”) and contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included in this communication that address activities, events or developments that Independence, Contango or the Company expects, believes or anticipates will or may occur in the future, including without limitation those relating to the Transaction, are forward- looking statements and are based on current expectations. Words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “possible,” “create,” “intend,” “should,” “could,” “may,” “foresee,” “plan,” “will,” “guidance,” “look,” “outlook,” “view,” “efforts,” “goal,” “future,” “assume,” “forecast,” “build,” “focus,” “work,” “commitment,” “approach,” “continue” or the negative of such terms or other variations thereof and words and terms of similar substance (including labels “NTM” and “E”) used in connection with any discussion of future plans, actions, or events identify forward- looking statements and express our expectations about future events. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements include, but are not limited to, statements regarding the Transaction, pro forma descriptions of the combined company and its operations, integration and transition plans, synergies, opportunities, anticipated future performance, future commodity prices, future production targets, future earnings, EBITDAX, leverage targets, future capital spending plans, operational and cost efficiencies, inventory life, hedging activities, business strategy and market position, estimated reserves, cash flows, liquidity and accretive effects of the Transaction, financial strategy, budget, projections and future operating results. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. These include the ability to have successfully integrated the businesses, risks related to disruption of management time from ongoing business operations due to the closing of the Transaction, the risk that any announcements relating to the Transaction could have adverse effects on the market price of the Company’s common stock, the risk that the closing of the Transaction could have a continuing adverse effect on the ability of the Company to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on their operating results and businesses generally, the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the Company not operating as effectively and efficiently as expected, the risk that the Company may be unable to achieve synergies or that it may take longer than expected to achieve those synergies, the impact of reduced demand for the Company’s products and products made from them due to governmental and societal actions taken in response to the COVID-19 pandemic, the uncertainties, costs and risks involved in the Company’s operations, including as a result of employee misconduct, natural disasters, pandemics, epidemics (including the COVID-19 pandemic and any escalation or worsening thereof) or other public health conditions and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and may be beyond the Company’s control, including those detailed in that certain final prospectus on Form 424B3 (the “Final Prospectus”) filed with the U.S. Securities and Exchange Commission (the “SEC”) relating to the Transaction that is available on the SEC’s website at http://www.sec.gov and Contango’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8- K that are available on the SEC’s website at http://www.sec.gov. All forward-looking statements are based on a number of assumptions, risks and uncertainties that the Company believes to be reasonable but that may not prove to be accurate. Many of such risks, uncertainties and assumptions are beyond the Company’s ability to control or predict. Because of these risks, uncertainties and assumptions, readers are cautioned not to, and should not, place undue reliance on these forward-looking statements. The Company does not give any assurance (1) that they will achieve their expectations, or (2) to any regulatory action, administrative proceedings, government investigations, litigation, warning letters, consent decree, cost reductions, business strategies, earnings or revenue trends or future financial results. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct, revise or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. All subsequent written and oral forward-looking statements concerning the Company, Independence, Contango, the Transaction or other matters and attributable thereto or to any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reservoir 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 drilling. Unless otherwise indicated, reserve estimates shown herein are based on third-party reserve reports as of December 31, 2020 and were prepared using commodity prices based on Henry Hub and West Texas Intermediate futures prices, referred to herein as “strip” pricing, rather than SEC pricing guidelines. The Company believes that the use of strip pricing provides useful information about its 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. Strip prices are not necessarily a projection of future oil and natural gas prices and should be carefully considered in addition to, and not as a substitute for, SEC prices when considering the Company’s oil, natural gas and natural gas liquid reserves. This presentation includes certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These measures include (i) EBITDAX, (ii) Adj. EBITDAX, (iii) Unhedged Adj. EBITDAX, (iv) Net Debt, (v) Leverage, (vi) Levered Free Cash Flow and (vii) Reinvestment Rate. The Company defines EBITDAX as net income (loss) before interest expense, taxes, depreciation, depletion and amortization, and oil and gas exploration expenses. The Company defines Net Debt as total debt less unrestricted cash & cash equivalents. The Company defines Leverage as the ratio of Net Debt to Adj. EBITDAX. The Company defines Levered Free Cash Flow as Adj. EBITDAX less cash paid for interest, cash paid or refunded for income tax and capital expenditures associated with the development of oil and gas properties and purchases of other property and equipment excluding acquisitions. The Company defines Reinvestment Rate as capital expenditures as a percentage of Adj. EBITDAX. The Company has not provided reconciliations for forward-looking and pro forma non-GAAP measures because the Company cannot do so without unreasonable effort and any attempt to do so would be inherently imprecise. C R E S C E N T E N E R G Y 2
Crescent Energy: A Differentiated U.S. Energy Company A Diversified and Well-Capitalized Energy Company with an Investor Mindset and a Focus on Sustainable Value Creation • Substantial Cash Flow Generation Supported by Predictable PDP Base Mid-Con • Attractive Growth Through Q3’21 YTD: ~12 Mboe/d Rockies Disciplined Investment Q3’21 YTD: ~35 Mboe/d Barnett • Committed to ESG Q3’21 YTD: ~23 Mboe/d Other Assets Progress & Engagement Q3’21 YTD: ~7 Mboe/d • Quarterly Dividend of 10% of Adjusted EBITDAX Permian Eagle Ford Q3’21 YTD: ~10 Mboe/d Q3’21 YTD: ~28 Mboe/d (1) (Commence in Q1’22) (3) Q3’21 YTD Production: ~115 Mboe/d Q3’21 YTD Ann. Unhedged Adj. EBITDAX : ~$899MM Crescent (4) Est. Annual PDP Decline: ~15% Historical Reinvestment Rate : ~45% Metrics (2) (5) (3) At a Glance Commodity Mix : ~57% Liquids Leverage: ~1.3x (~0.9x Unhedged Adj. EBITDAX ) (1) All dividend payments are subject to approval by the Board of Directors. (2) Commodity mix based on Q3’21 YTD production. (3) Represents annualized YTD Q3 2021 Unhedged Adjusted EBITDAX based on pro forma combined financials for Crescent related to the Contango and Independence merger. See reconciliation in Appendix. (4) Represents non-acquisition capex spend as a percentage of historical Adjusted EBITDAX since 2014 for Independence Energy, Crescent’s predecessor. C R E S C E N T E N E R G Y 3 (5) Current Leverage represents net debt as of 9/30/21 divided by Q3 2021 YTD Annualized EBITDAX based on pro forma combined financials for Crescent related to the Contango and Independence merger. See reconciliation of Q3 2021 YTD Annualized EBITDAX in Appendix.
Consistently Executing Our Strategy We Seek to Deliver Attractive Risk-Adjusted Investment Returns and Predictable Cash Flows Across Cycles Employing a differentiated business model that combines an investor mindset and deep operational expertise Investing capital with discipline and a focus on cash flow Acquiring and developing a portfolio of low-risk assets Engaging on key Environmental, Social & Governance (“ESG”) principles with a commitment to continuous improvement Providing downside protection through strong risk management C R E S C E N T E N E R G Y 4
Sustainable Value Creation: Our Free Cash Flow Model Stable Asset Base Generates Predictable Free Cash Flow, Supported by Financial Discipline and Growth Through Returns-Driven Investing Cash flow is the foundation of our business, and each dollar flows through our disciplined framework Targeting 1.0x 10% of Focused on Value Creation Leverage Adj. EBITDAX Disciplined Targeted Focused on debt Returned to our reinvestment into consolidation through service & shareholders as a (1) our assets to drive value accretive maintaining balance dividend attractive growth acquisitions sheet strength First Priority Growth through Returns-Driven Investing (1) All dividend payments are subject to approval by the Board of Directors. C R E S C E N T E N E R G Y 5
Low-Decline Production Base Drives FCF Generation Scaled Portfolio of Stable, Low-Decline Production from a Diversified Asset Base Generates Substantial and Predictable Free Cash Flow (1) 2022E PDP Decline vs. Peers • Low-decline FCF from PDP base underpins value and supports growth through flexible, returns-driven investment • Basin & commodity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 diversification support cash flow stability Asset Late-Cycle Mid-Cycle Total Base (2) (3) Statistics Low Decline Unconventional Production Q3'21 YTD Production: ~59 ~56 ~115 (Mboe/d) • Midstream assets PDP Decline: ~8% ~20% ~15% enhance cash margins (2022E) (4) and supplement free Unhedged Adj. EBITDAX : ~$349 ~$550 ~$899 ($MM | Q3’21 YTD Ann.) cash flow (5) Historical Reinvestment Rate ~45% (1) Peer estimates per Enverus. (2) Late-Cycle Low Decline Unhedged Asset FCF includes $37MM of midstream free cash flow. (3) Mid-Cycle Unconventional Assets includes all Crescent assets with 2022E expected base PDP decline rate greater than 10%. (4) Represents annualized YTD Q3 2021 Unhedged Adjusted EBITDAX based on pro forma combined financials for Crescent related to the Contango and Independence C R E S C E N T E N E R G Y merger. See reconciliation in Appendix. 6 (5) Represents non-acquisition capex spend as a percentage of historical Adjusted EBITDAX since 2014 for Independence Energy, Crescent’s predecessor. 32% 26% 26% 25% 25% 25% 24% 24% 23% 23% 23% 22% 21% 20% 20% 19% 18% 18% 15% 12% 8%
Flexible & Returns-Driven Organic Growth Potential Balanced Portfolio of Attractive, Low-Risk Reinvestment Opportunities in Key Proven Basins Across The Lower 48 • Extensive low-risk capital opportunity • Attractive & competitive development returns • Minimal drilling (1) Reinvestment Opportunities : requirements provide Operated Assets Non-Operated Assets valuable optionality Operated & Non-Operated Assets Operated Unconventional Asset Non Other Total Statistics Operated Assets Portfolio Eagle Ford Permian • Strategic minerals % Held by Production ~78% ~100% ~72% ~100% ~89% portfolio enhances TBU locations, % HBP & returns Locations: 280 / 260 80 / 60 980 / 230 180 / 150 1,520 / 700 (Gross / Net) based on current strip margins (2) Avg Development MOIC : >2.5x >3.5x >2.5x >2.0x >2.5x (12/1 NYMEX) % of Capex Program: ~75% ~20% ~5% 100% (2022E) (1) Map of Reinvestment Opportunities only includes select assets and is not representative of full Crescent asset base. C R E S C E N T E N E R G Y (2) “MOIC” represents multiple on invested capital or total projected cash flow divided by development cost. Development returns based the assumptions used to estimate 7 YE20 PUD reserves.
An Attractive Market for Consolidation Historically Low Equity Capital Formation and An Increasing Supply of Assets and Businesses For Sale Has Created a Unique Market Opportunity (1) (2) Large, Increasing Universe (Capital | $Bn) (Deals ) of Attractive Target Primary Equity Raised $50 $46 200 Private Equity Raised Opportunities Deals on the Market $40 $38 • Divestiture programs of 150 majors & large-cap Attractive Market $30 Opportunity independents 100 $20 • Subscale public & $12 private companies $10 50 $10 $4 • Private & unnatural $1 $- - owners seeking liquidity 2016 2017 2018 2019 2020 '21 YTD $72 $73 $86 $94 $53 $57 • Bolt-on opportunities (3) Total Upstream M&A and A&D Market Size ($Bn) near existing assets (1) Represents total primary equity issuances by US upstream companies and total energy-dedicated private equity raised. C R E S C E N T E N E R G Y 8 (2) Represents total North American deals on the market per Enverus as of November 2021. (3) Represents total annual USA upstream focused transactions (A&D + Corporate M&A) per Enverus as of November 2021.
Continuing Our Active Acquisition Strategy Differentiated Business Model, Scaled Asset Base & Investment Experience Uniquely Position Crescent to Further Capitalize on the Market Opportunity Consistent Acquisition Strategy Crescent Actively Pursuing Acquisitions Since 2011 Acquisitions Focused on Accretive 8 Acquisitions 6 4 3 3 3 • Cash flow oriented assets in proven U.S. 2012-16 2017 2018 2019 2020 2021 basins Avg. / Year 2021 Crescent Acquisitions • Opportunistic & value Transaction Closing Region Market Theme oriented; focused on Q1 2021 Subscale Public Company cash-on-cash returns Diversified & PDP- Q1 2021 Private Company Seeking Liquidity Focused Assets • Low-risk assets with Cash Flowing Q1 2021 Large-Cap Divestiture Minerals Portfolio duration and multiple Gas-Weighted Q3 2021 Large-Cap Divestiture upside opportunities PDP Asset High-Margin Q4 2021 Private Company Seeking Liquidity Conventional Asset Q4 2021 Strategic M&A C R E S C E N T E N E R G Y 9
Disciplined Financial & Risk Management Program • Target investment grade credit metrics Prioritize Balance Sheet Strength • Long-term target leverage at or below 1.0x • Disciplined reinvestment of a portion of cash flow Returns Focused Reinvestment Decisions• Deliver full-cycle cash-on-cash returns • Monitor and manage enterprise risk Proactive Risk Management Strategy • Hedging program protects cash flow and reinvestment returns • Evaluate acquisitions consistent with cash-flow based strategy Accretive Acquisitions • Focus on complementary assets with strong full-cycle returns • Long track record of returning capital through dividends Return of Capital (1) Through Dividends• Target quarterly dividend of 10% of Adj. EBITDAX (1) All dividend payments are subject to approval by the Board of Directors. C R E S C E N T E N E R G Y 10
Commitment to Financial Strength and Flexibility Continued Commitment to Target Leverage At or Below 1.0x (4) Pro Forma Capitalization Table as of 9/30 ($ in MM, unless noted) Targeting Investment Grade Cash & Cash Equivalents $67 Balance Sheet Metrics RBL Borrowings $397 7.25% Senior Notes 500 (1) • Current leverage of ~1.3x Total Principal Debt Outstanding $897 (~0.9x Unhedged Adj. Elected Commitment Under RBL $700 (2) EBITDAX ) Corporate Credit Ratings (Moody's / S&P) B1 / B Issuer Credit Ratings (Moody's / S&P) B2 / B+ (3) • ~$349 MM of available liquidity Total Class A and Class B Shares Outstanding (MM) (NYSE: CRGY) 170.6 Significant Capital Flexibility PDP-Cash Flow vs. Debt Maturities Ability to repay all debt over next ~2.5 years with ($MM) (5) hedged PDP cash flow • No near-term debt maturities $1,500 Illustrative Debt Pay-Off • Disciplined approach to capital $1,000 allocation, focused on balance $500 sheet strength $500 $330 • Rolling hedge strategy mitigates $- cash flow volatility Rem. 21 2022 2023 2024 2025 2026 (4)(6) RBL Senior Notes Cum. PDP FCF (1) Current Leverage represents net debt as of 9/30/21 divided by Q3 2021 YTD Annualized EBITDAX based on pro forma combined financials for Crescent related to the Contango and Independence merger. See reconciliation of Q3 2021 YTD Annualized EBITDAX for in Appendix. (2) Calculated with annualized YTD Q3 2021 Unhedged Adjusted EBITDAX based on pro forma combined financials for Crescent related to the Contango and Independence merger. (3) Liquidity based on 9/30 RBL Elected Commitment Amount less amount drawn less outstanding letters of credit plus cash outstanding as of 9/30. (4) Subsequent to September 30, 2021, Crescent closed on a $71 million transaction and funded the purchase with borrowings under the Crescent Credit Facility and cash on hand. (5) Based on YE 2020 third party reserve reports at 7/1/21 strip pricing adjusted for 2021 acquisitions and normal course production downtime, and includes the impact of hedges and C R E S C E N T E N E R G Y 11 general & administrative expenses. (6) RBL balance represents 9/30 pro forma RBL drawn less cash balance.
Our Dividend Framework Our EBITDAX-Based Dividend Framework is Designed to Deliver a Reliable (1) Return of Capital to Our Shareholders Illustrative Dividend Returning Capital to Shareholders (Assuming $1Bn of EBITDAX) is a Key Component of Our ($MM) Strategy Dividend Policy Crescent Framework (% of EBITDAX) • We target 10% of Adj EBITDAX $150 Illustrative Peer Policy for quarterly dividends (plan to (% of FCF) commence in Q1’22) $100 • Dividends are planned before Crescent any capital is allocated to growth Framework through reinvestment or consolidation $50 EBITDAX-Based Dividend Eliminates Variability vs. FCF- $0 Based Alternatives 25% 50% 75% 100% Annual Reinvestment Rate • Dividends paid first, unaffected by changes in reinvestment rate (1) All dividend payments are subject to approval by the Board of Directors. C R E S C E N T E N E R G Y 12
Our Commitment to ESG Progress We seek to be a quantitative leader in ESG stewardship. Our key guiding principles include the following: We will improve the ESG performance of assets during ownership Crescent operations will seek to continuously improve environmental, health and safety performance, water management, workplace diversity and inclusion, and community relations as well as reduce greenhouse gas emissions (“GHG”) We will be transparent with our performance with all of our stakeholders Crescent will establish consistent benchmarks and key performance indicators (“KPIs”) to track, measure and publicly report on ESG performance. We will collaborate with NGOs, external advisors and third-party experts to continuously improve ESG performance We intend to develop a strategy to operate our business and implement these principles in a manner consistent with our understanding of the transition to a net-zero world Crescent will establish ambitious GHG reduction targets; reduce methane emissions, with a focus on eliminating flaring and minimizing leaks; and identify and execute on capital projects in existing fields to drive sustained operational improvements C R E S C E N T E N E R G Y 13
Aligned Management & Board with Investor Mindset Uniquely Aligned Management Team with High Insider Ownership and Exclusively Performance-Based Long-Term Incentive Structure David Brandi Todd Ben Clay Bo Rockecharlie Kendall Falk Conner Rynd Shi CEO CFO CAO Executive VP Executive VP General Counsel • Following the merger, Wilkie Colyer Jr. and Farley Dakan will continue to manage Contango, and its consistent acquisition strategy, as a Crescent operating subsidiary (1) • Industry-leading insider ownership of ~22% provides exceptional alignment towards long-term value creation • The company will receive certain management and advisory services from affiliates of, and have access to, KKR’s global platform, while maintaining favorable General & Administrative costs versus peers • Experienced and cohesive core management team has worked together for an average of 6+ years on our consistent strategy • While traditional energy companies largely pursue incentive compensation plans with a mix of time and (2) performance based grants, Crescent Manager’s is 100% performance based and 100% stock. rd (1) Represents direct ownership interest of KKR & Co (excludes 3 party managed capital) and Crescent Board of Directors. C R E S C E N T E N E R G Y (2) Crescent Energy Company has entered into a management agreement with KKR Energy Assets Manager LLC (the “Crescent Manager”) pursuant to which the Crescent Manager has 14 agreed to provide certain management and investment advisory services to Crescent Energy Company and its subsidiaries.
Crescent Energy: A Compelling Investment A Diversified and Well-Capitalized Energy Company with an Investor Mindset and a Focus on Sustainable Value Creation Unique business model combining an investor mindset & deep operational expertise Investing capital with discipline and a focus on cash flow Acquiring and developing a portfolio of low risk assets Engaging on key ESG principles with a commitment to continuous improvement Providing downside protection through strong risk management C R E S C E N T E N E R G Y 15
Appendix C R E S C E N T E N E R G Y
Our Operating Model Employing a Differentiated Business Model that Combines an Investor Mindset and Deep Operational Expertise to Deliver Sustainable Value Creation • Operating through three scaled asset strategies with financial incentives tied directly to cash-on-cash returns • Crescent Energy executive leadership focused on capital allocation, financing & capital market activity and long-term corporate strategy along with day-to-day operation of the business • Crescent Energy will benefit from the perspectives of KKR resources, including KKR’s Global Macro team, Public Affairs team, KKR Capital Markets, the KKR Global Institute, the Client and Partner Group and KKR’s Sustainability Expert Advisory Council Operated Operated Non-Operated & Conventional & Unconventional Minerals Low-Decline C R E S C E N T E N E R G Y 17
Our Proactive Hedge Strategy Longer-Term Rolling Hedge Strategy Mitigates Near-Term Price Volatility and Protects Cash Flow and Reinvestment Returns (1) Target Hedge Levels Base PDP: Actively hedge (% of PDP Production) oil, gas, NGLs, basis and 80% CMA roll exposure to protect cash flow and maintain prudent leverage Development: Execute 0 - 50% hedges in parallel with 37% reinvestment decisions to protect underwritten returns New Acquisitions: Execute 7% hedges at signing for any new acquisition to protect investment returns Years 1-3 Years 4-5 2022E 2023E - Years 1-3 Target: 80% Crescent Rolling (2) Industry Average Strategy - Years 4-5 Target: 0-80% Source: Company, equity research. C R E S C E N T E N E R G Y (1) Represents targeted hedge levels for future production as part of Crescent’s risk management program. 18 (2) Industry average represents average % of oil production (per JP Morgan as of November 2021).
Our Board of Directors Crescent’s Board of Directors Brings Together a Diverse Group of Seasoned Executives with a Broad Range of Valuable Expertise (1) • Crescent Board comprised of more than 75% Independent Directors • One Director to serve on separate and dedicated ESG Advisory Council John Goff David Erich • Crescent Board Rockecharlie Bobinsky Chairman • Crescent CEO• Director, Liberty Mutual • Founder, Crescent Real Investments • Partner & Head of KKR Estate & Goff Capital Energy Real Assets Bevin Brown Claire Farley Bob Gwin • Board member of • Board member of • Managing Director, Technip FMC & Pembina Pipeline Corp Liberty Mutual Investments LyondellBasell N.V. & Enable Midstream Partners • Former Partner, KKR • Former President, • Former President, Anadarko Corporation Texaco North America Brandi Lon McCain Karen Simon • Board member of • Board member of Kendall Cheniere Energy Energean PLC & Aker • Crescent CFO Partners, GP & ASA Continental Resources • Managing Director, KKR • Former Vice Chairman, Energy Real Assets • Former CFO, Ellora Investment Banking at Energy, Inc JP Morgan (1) Based on NYSE independent director criteria. C R E S C E N T E N E R G Y 19
ESG Advisory Council Our ESG Advisory Council meets quarterly and advises management and the board on a variety of ESG topics, including environmental, health & safety; climate change & greenhouse gas emissions reduction; water management; community relations; and diversity, equity & inclusion ESG Advisory Council Founding Members • Provides constructive and independent input & Karen Simon - Board Representative Karen Simon is newly retired from J.P. Morgan as a Vice Chairman in the feedback on our ESG- Investment Bank with over 35 years of corporate finance experience with the firm. Her career included senior roles in oil & gas, debt capital markets and related policies, private equity coverage. She is currently Chair of Energean plc, which has won several awards for its work on ESG, most recently “Best ESG Energy Growth programs and targets Strategy Europe 2021”, and a Director on the Board of Aker ASA. She will provide a direct channel to bring the perspective of the Council to the Board, as well as offer extensive experience in capital markets and governance. • Shares lessons learned John Mingé and industry best- John Mingé served as chairman and president of BP America until his retirement practices in 2019. Prior to leading the company, he spent four years overseeing BP in Alaska; before that, he held executive and engineering positions in the United States, United Kingdom, Vietnam and Indonesia. He brings decades of operational and EHS expertise. John Mingé also acts as an industry advisor to • ESG priorities further KKR. supported by Dr. Michael E. Webber engagement with KKR Dr. Michael E. Webber is the Josey Centennial Professor in Energy Resources and the firm’s global at The University of Texas at Austin and CTO of Energy Impact Partners. From September 2018 to August 2021, Webber was based in Paris, France where he platform served as the Chief Science and Technology Officer at ENGIE. Webber’s expertise spans research and education at the convergence of engineering, policy and commercialization on topics related to innovation, energy and the environment, including expertise in methane monitoring and innovation. C R E S C E N T E N E R G Y 20
Summary Hedge Position Crude Oil Natural Gas NGLs Hedged Volume Weighted Average Hedged Volume Weighted Average Hedged Volume Weighted Average (MBbl) Price ($ / Bbl) (MMcf) Price ($ / MMBtu) (MBbl) Price ($ / Bbl) Q4 2021 3,082 $53.56 23,135 $2.88 969 $17.80 Q1 2022 2,985 $61.45 22,534 $2.79 914 $17.20 Q2 2022 2,789 $60.98 21,690 $2.77 873 $17.13 Q3 2022 2,645 $59.53 20,634 $2.76 610 $29.87 Q4 2022 2,545 $59.58 20,180 $2.78 587 $29.74 Q1 2023 2,378 $57.55 18,289 $2.60 Q2 2023 2,088 $58.37 15,914 $2.55 Q3 2023 1,870 $58.35 11,931 $2.49 Q4 2023 1,818 $58.33 11,145 $2.49 Q1 2024 1,387 $55.21 2,394 $3.57 Q2 2024 1,269 $59.32 2,390 $3.00 Q3 2024 451 $60.98 2,412 $3.03 Q4 2024 58 $57.75 2,408 $3.25 Note: As of 12/1/21; includes all Q4 2021 hedges including those that were previously settled. Included in the figures above are minor Henry Hub and WTI collar positions. Henry Hub collar positions have with a weighted average floor price in Q4 2021, Q1 2022, Q1 2023 and 2024 of $3.00 / MMBtu, $3.00 / MMBtu, $2.63 / MMBtu and $3.00 / MMBtu, respectively and a weighted C R E S C E N T E N E R G Y average ceiling price for the same periods of $3.41 / MMBtu, $3.41 / MMBtu, $3.01 / MMBtu and $3.87 / MMbtu, respectively. WTI collar positions have a weighted average floor price in Q4 21 2021 of $52.00 / Bbl and a weighted average ceiling price for the same period of $58.80 / Bbl. Weighted average price for minor collar positions calculated off December 1, 2021 strip.
Our “Up-C” Organizational Structure The Diagram Below Depicts Our Organizational Structure Immediately Following the Closing of the Merger with Contango Oil & Gas Co. • Up-C Investors and Crescent Energy Company (“PubCo”) hold units (“OpCo Units”) Public Up-C in an operating company (“OpCo”) that is Investors Stockholders (Former Contango treated as a partnership for U.S. federal (Independence Energy Investors) Stockholders) income tax purposes (no tax receivable agreement entered into as a part of this Class B Class A transaction) Common Stock Common Stock 75% Voting Interest 25% Voting Interest 25% Economic Interest • Former Contango shareholders (“Public Stockholders”) hold Class A common stock in Non-Economic Preferred PubCo Stockholder • Up-C Investors also hold non-economic Class Series I B common stock in PubCo that provides voting Preferred Stock rights commensurate with the economic interest represented by their OpCo Units Crescent Energy Company (“PubCo”) • Class A common stock and Class B common stock have equal voting rights OpCo Units 75% Economic • One OpCo Unit and one share of Class B Interest Crescent Energy common stock, together, are exchangeable for OpCo LLC one share of Class A common stock (“OpCo”) • An affiliate of KKR holds all Series I Preferred Stock in PubCo, which is a non-economic Crescent Energy interest that has the sole right to elect directors Finance and provides for certain veto rights C R E S C E N T E N E R G Y 22
Non-GAAP Reconciliation For the nine months ended (in thousands) September 30, 2021 Net loss $(678,112) Adjustments to reconcile to Adjusted EBITDAX: Interest expense 47,270 Realized loss on interest rate derivatives 7,373 Income tax benefit (41,859) Depreciation, depletion and amortization 300,285 Exploration expense 1,288 Non-cash (gain) loss on derivatives 591,535 Impairment of oil and natural gas properties 712 Noncash equity-based compensation 34,416 (Gain) loss on sale of assets (9,879) Other income (3,655) (1) Transaction expenses 19,042 (2) Early settlement of derivative contracts 198,688 Adjusted EBITDAX (non-GAAP) $467,104 Less adjustments to reconcile to Levered Free Cash Flow: Interest expense, excluding noncash amortization (37,919) Realized loss on interest rate derivatives (7,373) Current income tax benefit (provision) 305 Total development of oil and gas properties (136,154) Levered Free Cash Flow (non-GAAP) $285,963 For the nine months ended (in thousands) September 30, 2021 Adjusted EBITDAX (non-GAAP) $467,104 Plus realized (gain) loss on commodity derivatives 206,984 Unhedged Adjusted EBITDAX (non-GAAP) $674,088 Note: Please refer to the Current Report on Form 8-K/A filed on December 17, 2021, which can be found at the SEC’s website at www.sec.gov, for additional details and information regarding the historical financial results of Independence and Contango and the assumptions made in preparing the pro forma financial statements derived therefrom that are summarized herein. (1) Transaction expenses primarily relate to legal, consulting and other fees incurred for certain acquisitions and restructuring transactions in 2020 and 2021, as well as the termination of a midstream contract at the Eagle Ford Business in 2020. C R E S C E N T E N E R G Y (2) Represents the settlement in June 2021 of certain outstanding derivative oil commodity contracts for open positions associated with calendar years 2022 and 2023. 23 Subsequent to the settlement, the Company entered into new commodity derivative contracts at prevailing market prices.
Stay Connected. Emily Newport IR@crescentenergyco.com 600 Travis Street Suite 7200 Houston, Texas 77002 + 1 (713) 332-7001 www.crescentenergyco.com