Crescent Energy Company provided initial 2022 guidance and an updated corporate presentation in conjunction with scheduled analyst and investor meetings. In addition, the Company disclosed its year-end 2021 proved reserves. Complete fourth quarter and year-end 2021 financial and operating results are currently scheduled for release in early March 2022.
- Significant Free Cash Flow: Anticipate delivering $800 – $850 million of Adjusted EBITDAX and $325 – $375 million of levered free cash flow at $75 per barrel (“Bbl”) WTI oil and $3.75 per million british thermal units (“MMBtu”) NYMEX Henry Hub gas(1)
- Approximately two-thirds of estimated 2022 production hedged
- Disciplined Capital Investment Strategy: Organic capital investments expected to be $375 – $425 million, with operated Eagle Ford representing the largest area of investment
- Meaningful Return of Cash to Shareholders: Projected $80 – $85 million of annual dividends, based on its 10% of Adjusted EBITDAX dividend framework and initial Adj. EBITDAX guidance(2)
- Implies a quarterly dividend of $0.12/share at current shares outstanding(2)
- Intends to pay a dividend in the first quarter of 2022(2)
- Maintain Strong Balance Sheet: Current net leverage of 1.4x(3), consistent with Crescent’s low leverage strategy
- Consistent Low-Decline Production: Estimated production of 114 – 124 thousand barrels of oil equivalent per day (“MBoe/d”), ~3% higher than pro forma production for the nine-month period ended September 30, 2021(3)
Leading proved developed producing decline rate estimated at 17% in year one
- Substantial Proved Reserves: Proved reserves at year-end 2021 totaled 532 million barrels of oil equivalent (“MMBoe”), of which 54% were liquids and 86% were proved developed.
- Proved reserves SEC PV-10 at year-end was approximately $5.2 billion(1)(4)
- Commitment to ESG: Published inaugural 2020 Environmental, Social and Governance (“ESG”) report in December 2021 and identified ESG priorities and actions for 2022
- Attractive Acquisition Market: Strong growth potential through existing M&A strategy and current acquisition pipeline
“For the last decade, management has executed a clearly defined strategy to deliver responsibly what the market requires today,” said Chief Executive Officer David Rockecharlie. “Our stable asset base, financial strength and disciplined investment continue to generate significant free cash for shareholders. We see high growth potential in the acquisition market, and we will continue to create value by investing in our best organic and acquisition opportunities to generate attractive returns on capital.”
John Goff, Crescent Chairman, said, “The objective of this merger was not only to combine the talents of two companies, but also to create the financial power to continue the strategy of growth through acquisitions. We believe the scale and financial flexibility that the merger provided will allow us to benefit from expected divestitures by the majors as well as continued consolidation in the industry. We are now well positioned for significant growth.”
Crescent’s 2022 capital program is allocated 70 to 75% to its operated assets, primarily in the Eagle Ford, where the Company expects to bring online 32 – 38 gross operated wells with greater than 90% working interest on average. Capital investments are expected to be weighted to the first half of the year with approximately one-third of the operated Eagle Ford wells expected to come online in the first quarter. Non-operated activity is expected to comprise 15 to 20% of total investment across the Eagle Ford, Permian and DJ basins, based primarily on preliminary partner discussions.
Crescent has a sound framework for sustainably returning cash to shareholders through dividends. Using 10% of Adjusted EBITDAX, the initial 2022 outlook implies an annual dividend between $80 and $85 million, or a $0.12 quarterly dividend per share, paid to the Class A and Class B shares (170.6 million currently outstanding). The Company expects to pay a dividend in the first quarter of 2022, subject to board approval and compliance with applicable laws.
Post dividends, the Company plans to use the remaining free cash to reduce net debt (i.e., total debt less cash and cash equivalents), to opportunistically fund acquisitions and for general corporate purposes. Crescent targets 1.0x net leverage, defined as net debt divided by Adjusted EBITDAX. Crescent’s current net leverage as of September 30, 2021 is 1.4x(3) on a pro forma basis for the business combination between Crescent’s predecessor, Independence Energy LLC (“Independence”), and Contango Oil & Gas Company (“Contango”).
Commitment to ESG
Crescent aims to build a company where ESG is integrated into governance, strategy and decision making. In December 2021, Crescent issued its inaugural 2020 ESG report, which reported key ESG performance metrics according to SASB Standards(7). The report also established the Company’s key priorities as:
Climate Change – Work to reduce greenhouse gas emissions
Environmental, Health and Safety – Aspire to be a zero incident workplace
Water Management – Manage and reduce fresh water use
Community Engagement – Listen and respond to community and stakeholder concerns
Diversity, Equity and Inclusion – Develop a diverse and inclusive workforce
In 2022, the Company plans to publish a report covering ESG performance for calendar year 2021 and provide additional details on its short and long-term ESG targets.
2021 Year End Reserves
Crescent’s year-end 2021 proved reserves totaled 532 MMBoe, of which 86% were proved developed and 54% were liquids. The first year decline rate of Crescent’s proved developed producing reserves, based on production type curves used in the Company’s third party reserve reports, is 17%.
Crescent’s proved reserves and associated PV-0 and PV-10 estimates as of December 31, 2021 were prepared or audited by its independent reserve engineers in accordance with applicable rules and guidelines of the Securities and Exchange Commission (“SEC”). At year-end, the Company’s proved reserves PV-10, utilizing SEC pricing(4), was $5.2 billion.