UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
On July 30, 2024, Crescent Energy Company, a Delaware corporation (“Crescent”), consummated the merger contemplated by the Agreement and Plan of Merger (the “Merger Agreement”), dated May 15, 2024, between Crescent, SilverBow Resources, Inc., a Delaware corporation (“SilverBow”), Artemis Acquisition Holdings Inc., a Delaware corporation and a direct wholly owned subsidiary of Crescent, Artemis Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of Crescent, and Artemis Merger Sub II LLC, a Delaware limited liability company, pursuant to which, among other things, Crescent has agreed to acquire SilverBow (the “SilverBow Merger”).
Subject to the terms and conditions of the Merger Agreement, each share of SilverBow common stock, par value $0.01 per share (“SilverBow Common Stock”), issued and outstanding immediately prior to the Initial Merger Effective Time (other than the Excluded Shares), was converted into the right to receive, pursuant to an election, one of the following forms of consideration: (A) a combination of 1.866 shares of Crescent’s Class A common stock, par value $0.0001 per share (“Crescent Class A Common Stock”) and $15.31 in cash (the “Mixed Consideration”), (B) $38.00 in cash (the “Cash Election Consideration”), or (C) 3.125 shares of Crescent Class A Common Stock (the “Stock Election Consideration,” and together with the Mixed Consideration and the Cash Election Consideration, the “Merger Consideration”).
The unaudited pro forma condensed combined statements of operations (the “pro forma statements of operations”) have been prepared from the respective historical consolidated statements of operations of Crescent and SilverBow, adjusted to give effect to (i) the SilverBow Merger, (ii) the issuance of $750 million aggregate principal amount of 7.375% Senior Notes due 2033 on June 14, 2024 (the “2033 Notes Offering”), borrowings of $724.0 million under Crescent’s Revolving Credit Facility (the “Crescent Revolving Credit Facility Borrowing”) and the amendment to Crescent’s Revolving Credit Facility entered into in connection with the closing of the SilverBow Merger (the “Crescent Revolving Credit Facility Amendment”), (iii) the July Western Eagle Ford Acquisition and (iv) SilverBow's acquisition of the South Texas Rich Properties (the “Chesapeake Transaction” and together with the 2033 Notes Offering, the Crescent Revolving Credit Facility Borrowing, and the Crescent Revolving Credit Facility Amendment, the “Pro Forma Transactions”) as if each of the Pro Forma Transactions had occurred on January 1, 2023. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 is based in part on, and should be read in conjunction with, the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 included in Crescent’s Current Report on Form 8-K dated March 6, 2024 which gives effect to the July Western Eagle Ford Acquisition. The pro forma statement of operations for the nine months ended September 30, 2024 reflects no impact from the July Western Eagle Ford Acquisition and the Chesapeake Transaction, as these transactions are already reflected in the historical statements of operations of Crescent and SilverBow, respectively, for this period. The pro forma statements of operations contain certain reclassification adjustments to conform SilverBow's historical financial statement presentation with Crescent’s historical financial statement presentation.
The following pro forma statements of operations are based on, and should be read in conjunction with:
•the historical audited consolidated financial statements of Crescent for the year ended December 31, 2023 and the unaudited condensed consolidated financial statements of Crescent as of and for the nine months ended September 30, 2024, and the related notes thereto;
•the historical audited consolidated financial statements of SilverBow for the year ended December 31, 2023 and the unaudited condensed consolidated financial statements of SilverBow as of and for the six months ended June 30, 2024, and the related notes thereto;
•the unaudited statement of revenues and direct operating expenses of the July Western Eagle Ford Assets for the six months ended June 30, 2023 included as Exhibit 99.1 in Crescent's Current Report on Form 8-K/A dated September 6, 2023;
•the unaudited statement of revenues and direct operating expenses of the South Texas Rich Properties for the nine months ended September 30, 2023 included as Exhibit 99.1 in SilverBow's Current Report on Form 8-K/A dated December 5, 2023;
•the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 included as Exhibit 99.1 in Crescent's Current Report on Form 8-K dated March 6, 2024;
•the “Management’s discussion and analysis of financial condition and results of operations” included in the respective Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q of Crescent and SilverBow; and
•the “Risk factors” and other cautionary statements included elsewhere in Crescent’s prospectus filed pursuant to Rule 424(b)(3) on June 28, 2024.
The pro forma statements of operations were derived by making certain transaction accounting adjustments to the historical and pro forma statements of operations noted above. The adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual impact of the Pro Forma Transactions may differ from the adjustments made to the pro forma statements of operations. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects for the period presented as if the Pro Forma Transactions had been consummated earlier, and that all adjustments necessary to fairly present the pro forma statements of operations have been made.
As of the date of this Current Report on Form 8-K, Crescent has not completed the detailed valuation study necessary to arrive at the required final estimates of the fair value of the assets to be acquired and the liabilities to be assumed and the related allocations of purchase price, nor has it identified all adjustments necessary to conform SilverBow’s accounting policies to Crescent’s accounting policies. A final determination of the fair value of SilverBow’s assets and liabilities based on the actual assets and liabilities of SilverBow that existed as of July 30, 2024 (the “Closing Date”) will be finalized during the measurement period not to exceed twelve months from the Closing Date. As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed.
The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma statements of operations presented below. Crescent estimated the fair value of SilverBow’s assets and liabilities based on discussions with SilverBow’s management, preliminary valuation studies, due diligence, and information presented in SilverBow’s SEC filings. Any increases or decreases in the fair value of assets acquired and liabilities assumed upon completion of the final valuations will result in adjustments to the pro forma statements of operations. The final purchase price allocation may be materially different than that reflected in the preliminary pro forma purchase price allocation presented herein.
The pro forma statements of operations and related notes are presented for illustrative purposes only and should not be relied upon as an indication of the operating results that Crescent would have achieved if the Merger Agreement had been entered into and the Pro Forma Transactions had taken place on the assumed dates. The pro forma statements of operations do not reflect future events that may occur after the consummation of the SilverBow Merger, including, but not limited to, the anticipated realization of ongoing savings from potential operating efficiencies, asset dispositions, cost savings, or economies of scale that Crescent may achieve with respect to the combined operations. As a result, future results may vary significantly from the results reflected in the pro forma statements of operations and should not be relied on as an indication of the future results of Crescent.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 2024
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Crescent (Historical) | | SilverBow As Adjusted (See Note 3) | | SilverBow Transaction Adjustments | | Crescent Pro Forma Combined | |
| Revenues: | | | | | | | | |
| Oil | $ | 1,521,946 | | | $ | 405,549 | | | $ | — | | | $ | 1,927,495 | | |
| Natural gas | 210,008 | | | 112,294 | | | — | | | 322,302 | | |
| Natural gas liquids | 221,103 | | | 85,270 | | | — | | | 306,373 | | |
| Midstream and other | 102,573 | | | 592 | | | — | | | 103,165 | | |
Total revenues | 2,055,630 | | | 603,705 | | | — | | | 2,659,335 | | |
| Expenses: | | | | | | | | |
| Lease operating expense | 382,688 | | | 77,117 | | | — | | | 459,805 | | |
| Workover expense | 45,230 | | | 3,158 | | | — | | | 48,388 | | |
| Asset operating expense | 82,020 | | | — | | | — | | | 82,020 | | |
| Gathering, transportation and marketing | 224,825 | | | 82,932 | | | — | | | 307,757 | | |
| Production and other taxes | 106,759 | | | 38,309 | | | — | | | 145,068 | | |
| Depreciation, depletion and amortization | 640,444 | | | 217,624 | | | (135,321) | | (a) | 722,747 | | |
| Exploration expense | 14,758 | | | — | | | — | | | 14,758 | | |
| Midstream and other operating expense | 82,829 | | | — | | | — | | | 82,829 | | |
| General and administrative expense | 249,532 | | | 66,900 | | | 20,673 | | (b) | 337,105 | | |
| Gain on sale of assets | (19,437) | | | — | | | — | | | (19,437) | | |
Total expenses | 1,809,648 | | | 486,040 | | | (114,648) | | | 2,181,040 | | |
Income (loss) from operations | 245,982 | | | 117,665 | | | 114,648 | | | 478,295 | | |
| Other income (expense): | | | | | | | | |
| Loss on derivatives | (4,589) | | | 8,040 | | | — | | | 3,451 | | |
| Interest expense | (146,885) | | | (76,987) | | | 33,240 | | (c) | (219,744) | | |
| | | | | (29,112) | | (d) | | |
| Loss from extinguishment of debt | (59,095) | | | — | | | — | | | (59,095) | | |
| Other income (expense) | 2,405 | | | 108 | | | — | | | 2,513 | | |
| Income from equity affiliates | 122 | | | — | | | — | | | 122 | | |
Total other income (expense) | (208,042) | | | (68,839) | | | 4,128 | | | (272,753) | | |
| Income (loss) before taxes | 37,940 | | | 48,826 | | | 118,776 | | | 205,542 | | |
| Income tax benefit (expense) | (5,678) | | | 2,294 | | | (28,520) | | (e) | (31,904) | | |
Net income (loss) | 32,262 | | | 51,120 | | | 90,256 | | | 173,638 | | |
| Less: net income attributable to noncontrolling interests | (916) | | | — | | | — | | | (916) | | |
| Less: net (income) loss attributable to redeemable noncontrolling interests | (27,912) | | | — | | | (46,036) | | (f) | (73,948) | | |
Net income (loss) attributable to Crescent Energy | $ | 3,434 | | | $ | 51,120 | | | $ | 44,220 | | | $ | 98,774 | | |
| Net loss per share: | | | | | | | | |
| Class A common stock – basic | $ | 0.03 | | | | | | | $ | 0.62 | | (g) |
| Class A common stock – diluted | $ | 0.03 | | | | | | | $ | 0.62 | | (g) |
| Class B common stock – basic and diluted | $ | — | | | | | | | $ | — | | |
| Weighted average common shares outstanding: | | | | | | | | |
| Class A common stock – basic | 117,749 | | | | | | | 158,131 | | (g) |
| Class A common stock – diluted | 119,597 | | | | | | | 159,979 | | (g) |
| Class B common stock – basic and diluted | 72,054 | | | | | | | 72,054 | | |
The accompanying notes are an integral part of these unaudited pro forma condensed combined statements of operations.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2023
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Crescent Pro Forma Combined Prior to SilverBow Merger | | SilverBow As Adjusted (See Note 3) | | SilverBow Transaction Adjustments | | Crescent Pro Forma Combined | |
| Revenues: | | | | | | | | |
| Oil | $ | 1,860,549 | | | $ | 635,213 | | | $ | — | | | $ | 2,495,762 | | |
| Natural gas | 388,291 | | | 242,884 | | | — | | | 631,175 | | |
| Natural gas liquids | 216,014 | | | 142,633 | | | — | | | 358,647 | | |
| Midstream and other | 60,988 | | | — | | | — | | | 60,988 | | |
Total revenues | 2,525,842 | | | 1,020,730 | | | — | | | 3,546,572 | | |
| Expenses: | | | | | | | | |
| Lease operating expense | 524,034 | | | 118,968 | | | — | | | 643,002 | | |
| Workover expense | 58,441 | | | 3,754 | | | — | | | 62,195 | | |
| Asset operating expense | 86,593 | | | — | | | — | | | 86,593 | | |
| Gathering, transportation and marketing | 280,976 | | | 153,326 | | | — | | | 434,302 | | |
| Production and other taxes | 171,353 | | | 59,084 | | | — | | | 230,437 | | |
| Depreciation, depletion and amortization | 699,890 | | | 300,673 | | | (167,562) | | (a) | 833,001 | | |
| Impairment expense | 153,495 | | | — | | | — | | | 153,495 | | |
| Exploration expense | 9,328 | | | — | | | — | | | 9,328 | | |
| Midstream and other operating expense | 39,809 | | | — | | | — | | | 39,809 | | |
| General and administrative expense | 140,918 | | | 24,520 | | | 65,890 | | (b) | 231,328 | | |
Total expenses | 2,164,837 | | | 660,325 | | | (101,672) | | | 2,723,490 | | |
Income (loss) from operations | 361,005 | | | 360,405 | | | 101,672 | | | 823,082 | | |
| Other income (expense): | | | | | | | | |
| Gain (loss) on derivatives | 166,980 | | | 241,309 | | | — | | | 408,289 | | |
| Interest expense | (166,900) | | | (138,072) | | | 86,155 | | (c) | (281,356) | | |
| | | | | (62,539) | | (d) | | |
| Other income (expense) | (282) | | | 197 | | | — | | | (85) | | |
| Loss from equity affiliates | (413) | | | — | | | — | | | (413) | | |
Total other income (expense) | (615) | | | 103,434 | | | 23,616 | | | 126,435 | | |
| Income (loss) before taxes | 360,390 | | | 463,839 | | | 125,288 | | | 949,517 | | |
| Income tax (expense) benefit | (24,217) | | | (101,971) | | | 21,075 | | (e) | (105,113) | | |
Net income (loss) | 336,173 | | | 361,868 | | | 146,363 | | | 844,404 | | |
| Less: net income attributable to noncontrolling interests | (472) | | | — | | | — | | | (472) | | |
| Less: net (income) loss attributable to redeemable noncontrolling interests | (263,168) | | | — | | | (194,003) | | (f) | (457,171) | | |
Net income (loss) attributable to Crescent Energy | $ | 72,533 | | | $ | 361,868 | | | $ | (47,640) | | | $ | 386,761 | | |
| Net income per share: | | | | | | | | |
| Class A common stock – basic | $ | 1.09 | | | | | | | $ | 3.26 | | (g) |
| Class A common stock – diluted | $ | 1.09 | | | | | | | $ | 3.26 | | (g) |
| Class B common stock – basic and diluted | $ | — | | | | | | | $ | — | | |
| Per Share Amounts: | | | | | | | | |
| Basic: Net Income (Loss) | | | $ | 15.48 | | | | | | |
| Diluted: Net Income (Loss) | | | $ | 15.35 | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | |
| Class A common stock – basic | 66,598 | | | | | | 118,790 | (g) |
| Class A common stock – diluted | 67,402 | | | | | | 119,594 | (g) |
| Class B common stock – basic and diluted | 104,271 | | | | | | 104,271 | |
| Weighted-Average Shares Outstanding: | | | | | | | | |
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2023
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted Average Shares Outstanding - Basic | | | 23,371 | | | | | |
| Weighted Average Shares Outstanding - Diluted | | | 23,571 | | | | | |
The accompanying notes are an integral part of these unaudited pro forma condensed combined statements of operations.
Notes to unaudited pro forma condensed combined statements of operations
NOTE 1 – Basis of pro forma presentation
The pro forma statements of operations have been derived from the historical statements of operations of Crescent and SilverBow and the statements of revenues and direct operating expenses for the July Western Eagle Ford Assets and the South Texas Rich Properties. Additionally, the pro forma statement of operations for the year ended December 31, 2023 has been derived from the pro forma statement of operations included in Crescent's Current Report on Form 8-K dated March 6, 2024. The pro forma statements of operations for the nine months ended September 30, 2024 and for the year ended December 31, 2023 give effect to the Pro Forma Transactions as if each had occurred on January 1, 2023.
The pro forma statements of operations 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 pro forma statements of operations. In management’s opinion, all adjustments known to date that are necessary to fairly present the pro forma information have been made. The pro forma statements of operations do not purport to represent what the combined entity’s results of operations would have been if the Pro Forma Transactions had actually occurred on the dates indicated above, nor are they indicative of Crescent’s future results of operations.
These pro forma statements of operations should be read in conjunction with the historical financial statements, and related notes thereto, of Crescent, SilverBow, the July Western Eagle Ford Assets, and the South Texas Rich Properties for the periods presented.
NOTE 2 – Pro forma acquisition accounting
The SilverBow Merger was accounted for using the acquisition method of accounting for business combinations in accordance with ASC 805 with Crescent considered to be the accounting acquirer. The allocation of the preliminary estimated purchase price for SilverBow is based upon management’s estimates of and assumptions related to the fair value of assets acquired and liabilities assumed as of the Closing Date using currently available information. Because the pro forma statements of operations have been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on Crescent’s financial position and results of operations may differ significantly from the pro forma amounts included in this Current Report on Form 8-K. Crescent expects to finalize its allocation of the purchase price as soon as practicable but no later than twelve months after the Closing Date. The cash paid pursuant to the Mixed Consideration and Cash Election Consideration was funded through cash on hand and borrowings under Crescent's Revolving Credit Facility.
The preliminary purchase price allocation is subject to change as a result of several factors, including but not limited to:
•changes in the estimated fair value of SilverBow’s assets acquired and liabilities assumed as of the Closing Date of the SilverBow Merger;
•the tax basis of SilverBow’s assets and liabilities as of the Closing Date; and
•certain of the factors described in “Risk Factors” included elsewhere within Crescent’s prospectus filed pursuant to Rule 424(b)(3) on June 28, 2024.
The preliminary determination of consideration transferred and the fair value of assets acquired and liabilities assumed are as follows (in thousands, except exchange ratio, share, and per share data):
| | | | | |
| Consideration transferred: | |
| Equity consideration: | |
| Shares of SilverBow Common Stock outstanding | 25,539,615 | |
| Weighted-average exchange ratio | 1.972 | |
| Shares of Crescent Class A Common Stock issued | 50,363,304 | |
| Closing price of Crescent Class A Common Stock on July 30, 2024 | $ | 11.82 | |
| Crescent Class A Common Stock issued for outstanding shares of SilverBow Common Stock | $ | 595,294 | |
| Settlement of SilverBow Equity Awards | 34,987 | |
| Cash consideration | 358,092 | |
Consideration transferred | $ | 988,373 | |
| Fair value of assets acquired: | |
| Cash and cash equivalents | $ | 5,200 | |
| Accounts receivable | 140,073 | |
| Derivatives assets – current | 100,601 | |
| Prepaid expenses and other current assets | 7,099 | |
| Oil and natural gas properties - proved | 1,980,500 | |
| Oil and natural gas properties - unproved | 207,191 | |
| Field and other property and equipment | 4,586 | |
| Derivative assets – noncurrent | 37,870 | |
| Other assets | 25,199 | |
| Total assets acquired | 2,508,319 | |
| Fair value of liabilities assumed: | |
| Accounts payable and accrued liabilities | (196,963) | |
| Acquired deferred acquisition consideration | (76,550) | |
| Other current liabilities | (10,029) | |
| Debt | (1,140,625) | |
| Deferred tax liability | (58,670) | |
| Asset retirement obligations | (25,683) | |
| Other liabilities | (11,426) | |
| Total liabilities assumed | (1,519,946) | |
Fair value of assets acquired and liabilities assumed | $ | 988,373 | |
NOTE 3 – Adjustments to SilverBow’s historical statements of operations
Pro forma statement of operations reclassification adjustments for the nine months ended September 30, 2024
Certain reclassification adjustments were made to SilverBow's historical statement of operations in order to conform with Crescent’s financial statement presentation. A reconciliation of amounts derived and presented as "SilverBow As Adjusted" within the pro forma statement of operations for the nine months ended September 30, 2024 is as follows (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| SilverBow (Historical)(1) | | SilverBow (Historical)(2) | | SilverBow Reclassification Adjustments | | SilverBow As Adjusted |
| Revenues: | | | | | | | |
| Oil and gas sales | $ | 510,510 | | | $ | 93,195 | | | $ | (603,705) | | | $ | — | |
| Oil | — | | | — | | | 405,549 | | | 405,549 | |
| Natural gas | — | | | — | | | 112,294 | | | 112,294 | |
| Natural gas liquids | — | | | — | | | 85,270 | | | 85,270 | |
| Midstream and other | — | | | — | | | 592 | | | 592 | |
| Operating Expenses: | | | | | | | |
| Lease operating expense | 64,446 | | | 12,671 | | | — | | | 77,117 | |
| Workovers | 2,561 | | | 597 | | | (3,158) | | | — | |
| Workover expense | — | | | — | | | 3,158 | | | 3,158 | |
| Transportation and gas processing | 69,204 | | | 13,728 | | | (82,932) | | | — | |
| Gathering, transportation and marketing | — | | | — | | | 82,932 | | | 82,932 | |
| Severance and other taxes | 32,354 | | | 5,955 | | | (38,309) | | | — | |
| Production and other taxes | — | | | — | | | 38,309 | | | 38,309 | |
| Depreciation, depletion and amortization | 184,857 | | | 32,031 | | | 736 | | | 217,624 | |
| Accretion of asset retirement obligations | 629 | | | 107 | | | (736) | | | — | |
| General and administrative, net | 33,373 | | | 33,527 | | | (66,900) | | | — | |
| General and administrative expense | — | | | — | | | 66,900 | | | 66,900 | |
| Total Operating Expenses | 387,424 | | | 158,284 | | | — | | | 486,040 | |
| Operating Income | 123,086 | | | (5,421) | | | — | | | 117,665 | |
| Non-Operating Income (Expense) | | | | | | | |
| Gain (loss) on commodity derivatives, net | (63,012) | | | 71,052 | | | (8,040) | | | — | |
| Gain on derivatives | — | | | — | | | 8,040 | | | 8,040 | |
| Interest expense, net | (69,744) | | | (7,243) | | | 76,987 | | | — | |
| Interest expense | — | | | — | | | (76,987) | | | (76,987) | |
| Other income (expense), net | 337 | | | (229) | | | (108) | | | — | |
| Other income | — | | | — | | | 108 | | | 108 | |
| Income (Loss) Before Income Taxes | (9,333) | | | 58,159 | | | — | | | 48,826 | |
| Provision (Benefit) for Income Taxes | (2,298) | | | 4 | | | 2,294 | | | — | |
| Income tax benefit | — | | | — | | | 2,294 | | | 2,294 | |
| Net Income (Loss) | $ | (7,035) | | | $ | 58,155 | | | $ | — | | | $ | 51,120 | |
| | | | | | | |
| Per Share Amounts: | | | | | | | |
| Basic Earnings (Loss) Per Share | $ | (0.28) | | | | | | | |
| Diluted Earnings (Loss) Per Share | $ | (0.28) | | | | | | | |
| Weighted-Average Shares Outstanding: | | | | | | | |
| Weighted-Average Shares Outstanding - Basic | 25,491 | | | | | | | |
| Weighted-Average Shares Outstanding - Diluted | 25,491 | | | | | | | |
______________
(1) Reflects the historical operations of SilverBow for the six months ended June 30, 2024.
(2) Reflects the historical operations of the SilverBow for the period from July 1, 2024 through July 29, 2024.
Pro forma statement of operations reclassification and transaction adjustments for the year ended December 31, 2023
Certain reclassification adjustments were made to SilverBow's historical statement of operations and the statement of revenues and direct operating expenses for the South Texas Rich Properties in order to conform each with Crescent’s financial statement presentation. Additionally, certain transaction adjustments were recorded to give pro forma effect to the Chesapeake Transaction. A reconciliation of amounts derived and presented as "SilverBow As Adjusted" within the pro forma statement of operations for the year ended December 31, 2023 is as follows (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SilverBow (Historical) | | SilverBow Reclassification Adjustments | | South Texas Rich Properties (Historical)(1) | | South Texas Rich Properties (Historical)(2) | | Chesapeake Reclassification Adjustments | | Chesapeake Transaction Adjustments | | SilverBow As Adjusted |
| Revenues: | | | | | | | | | | | | | |
| Oil and gas sales | $ | 652,358 | | | $ | (652,358) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Revenues | — | | | — | | | 291,807 | | | 76,565 | | | (368,372) | | | — | | | — | |
| Oil | — | | | 402,728 | | | — | | | — | | | 232,485 | | | — | | | 635,213 | |
| Natural gas | — | | | 187,340 | | | — | | | — | | | 55,544 | | | — | | | 242,884 | |
| Natural gas liquids | — | | | 62,290 | | | — | | | — | | | 80,343 | | | — | | | 142,633 | |
| Direct operating expenses | — | | | — | | | 122,371 | | | 24,966 | | | (147,337) | | | — | | | — | |
| Operating Expenses: | | | | | | | | | | | | | |
| Lease operating expense | 87,368 | | | — | | | — | | | — | | | 31,600 | | | — | | | 118,968 | |
| Workovers | 2,694 | | | (2,694) | | | — | | | — | | | — | | | — | | | — | |
| Workover expense | — | | | 2,694 | | | — | | | — | | | 1,060 | | | — | | | 3,754 | |
| Transportation and gas processing | 59,032 | | | (59,032) | | | — | | | — | | | — | | | — | | | — | |
| Gathering, transportation and marketing | — | | | 59,032 | | | — | | | — | | | 94,294 | | | — | | | 153,326 | |
| Severance and other taxes | 38,701 | | | (38,701) | | | — | | | — | | | — | | | — | | | — | |
| Production and other taxes | — | | | 38,701 | | | — | | | — | | | 20,383 | | | — | | | 59,084 | |
| Depreciation, depletion and amortization | 219,116 | | | 985 | | | — | | | — | | | — | | | 80,572 | | (aa) | 300,673 | |
| Accretion of asset retirement obligations | 985 | | | (985) | | | — | | | — | | | — | | | — | | | — | |
| General and administrative, net | 24,520 | | | (24,520) | | | — | | | — | | | — | | | — | | | — | |
| General and administrative expense | — | | | 24,520 | | | — | | | — | | | — | | | — | | | 24,520 | |
| Total Operating Expenses | 432,416 | | | — | | | — | | | — | | | 147,337 | | | 80,572 | | | 660,325 | |
| Operating Income (Loss) | 219,942 | | | — | | | — | | | — | | | 221,035 | | | (80,572) | | | 360,405 | |
| Excess of revenues over direct operating expenses | — | | | — | | | 169,436 | | | 51,599 | | | (221,035) | | | — | | | — | |
| Non-Operating Income (Expense) | | | | | | | | | | | | | |
| Net gain (loss) on commodity derivatives | 241,309 | | | (241,309) | | | — | | | — | | | — | | | — | | | — | |
| Gain on derivatives | — | | | 241,309 | | | — | | | — | | | — | | | — | | | 241,309 | |
| Interest expense | (80,119) | | | — | | | — | | | — | | | — | | | (57,953) | | (bb) | (138,072) | |
| Other income (expense), net | 197 | | | (197) | | | — | | | — | | | — | | | — | | | — | |
| Other income | — | | | 197 | | | — | | | — | | | — | | | — | | | 197 | |
| Income (Loss) Before Income Taxes | 381,329 | | | — | | | — | | | — | | | 221,035 | | | (138,525) | | | 463,839 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SilverBow (Historical) | | SilverBow Reclassification Adjustments | | South Texas Rich Properties (Historical)(1) | | South Texas Rich Properties (Historical)(2) | | Chesapeake Reclassification Adjustments | | Chesapeake Transaction Adjustments | | SilverBow As Adjusted |
| Provision (Benefit) for Income Taxes | 83,613 | | | (83,613) | | | — | | | — | | | — | | | — | | | — | |
| Income tax expense | — | | | (83,613) | | | — | | | — | | | — | | | (18,358) | | (cc) | (101,971) | |
| Net Income (Loss) | $ | 297,716 | | | $ | — | | | $ | — | | | $ | — | | | $ | 221,035 | | | $ | (156,883) | | | $ | 361,868 | |
| | | | | | | | | | | | | |
| Per Share Amounts: | | | | | | | | | | | | | |
| Basic: Net Income (Loss) | $ | 12.74 | | | | | | | | | | | $ | 2.74 | | (dd) | $ | 15.48 | |
| Diluted: Net Income (Loss) | $ | 12.63 | | | | | | | | | | | $ | 2.72 | | (dd) | $ | 15.35 | |
| Weighted-Average Shares Outstanding: | | | | | | | | | | | | | |
| Weighted Average Shares Outstanding - Basic | 23,371 | | | | | | | | | | | | | 23,371 | |
| Weighted Average Shares Outstanding - Diluted | 23,571 | | | | | | | | | | | | | 23,571 | |
______________
(1) Reflects the historical operations of the South Texas Rich Properties for the nine months ended September 30, 2023.
(2) Reflects the historical operations of the South Texas Rich Properties for the period from October 1, 2023 through November 30, 2023.
The transaction adjustments included above related to the Chesapeake Transaction for the year ended December 31, 2023 are as follows:
(aa) Reflects the pro forma depletion expense calculated using the unit-of-production method under the full cost method of accounting, and adjusts depletion expense for (i) the increase in depletion reflecting the relative fair values and production volumes attributable to the Chesapeake Transaction and (ii) the revision to SilverBow’s depletion rate reflecting the reserve volumes acquired in the Chesapeake Transaction.
(bb) Reflects the pro forma interest expense related to borrowings under SilverBow’s Second Lien Notes and Credit Facility to fund the Chesapeake Transaction.
(cc) Reflects the income tax effect of the pro forma adjustments presented using SilverBow’s effective tax rate of 22.25%.
(dd) Reflects the impact of the pro forma adjustments on basic and diluted net income (loss) as a result of the Chesapeake Transaction.
NOTE 4 – Adjustments to the pro forma statements of operations
The pro forma statements of operations have been prepared to illustrate the effects of the Pro Forma Transactions and have been prepared for informational purposes only.
The preceding pro forma statements of operations have been prepared in accordance with Article 11 of Regulation S-X which requires the presentation of adjustments to account for the pro forma transactions (“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 present Management Adjustments.
Pro forma statements of operations adjustments for the nine months ended September 30, 2024 and for the year ended December 31, 2023
The adjustments included in the pro forma statements of operations for the nine months ended September 30, 2024 and for the year ended December 31, 2023 are as follows:
(a) Reflects pro forma depreciation expense and depletion expense calculated in accordance with the successful efforts method of accounting for oil and gas properties.
(b) Reflects the impact on general and administrative expense related to increases in Crescent's Management Fee and the Management Incentive Plan related to the issuance of additional shares of Crescent Class A Common Stock as Merger Consideration.
(c) Reflects the decrease in interest expense related to the repayment of SilverBow’s credit facility borrowings due 2026 and Second Lien Notes due 2028 using a portion of the proceeds from the 2033 Notes Offering and proceeds from the Crescent Revolving Credit Facility Borrowing.
(d) Reflects the pro forma interest expense related to the 2033 Notes Offering to fund a portion of the repayment of SilverBow’s credit facility borrowings due 2026 and Second Lien Notes due 2028 and the cash payments for the Cash Election Consideration and Mixed Consideration portions of the Merger Consideration, including cash of $24.5 million to settle SilverBow's Equity Awards.
(e) Reflects the income tax effect of the pro forma adjustments presented. The tax rates applied to the pro forma adjustments for the nine months ended September 30, 2024 and for the year ended December 31, 2023 were the estimated combined federal and state statutory rate, after the effect of noncontrolling interests, of 15.3% and 11.8%, respectively. The effective rate of Crescent could be significantly different (either higher or lower) depending on a variety of factors.
(f) Reflects the impact of the allocation of net income attributable to redeemable noncontrolling interests related to the change in Crescent's ownership of Crescent Energy OpCo LLC resulting from the issuance of additional shares of Crescent Class A Common Stock.
(g) Reflects the impact of the allocation of net income attributable to Crescent and the issuance of additional shares of Crescent Class A Common Stock on the computation of basic and diluted net income (loss) per share.
NOTE 5 – Supplemental unaudited pro forma oil and natural gas reserves information
Oil and natural gas reserves
The following tables present the estimated unaudited pro forma net proved developed and undeveloped oil, natural gas, and NGL reserves information as of December 31, 2023 for Crescent's consolidated operations, along with a summary of changes in quantities of net remaining proved reserves for the year ended December 31, 2023. Crescent's equity affiliates had no proved oil, natural gas, and NGL reserves as of December 31, 2022 and 2023. The disclosures below are derived from the “Oil and natural gas reserves” for the year ended December 31, 2023 reported in Crescent’s Current Report on Form 8-K dated March 6, 2024 and SilverBow’s Annual Report on Form 10-K. 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 unaudited pro forma oil and natural gas reserves information is not necessarily indicative of the results that might have occurred had the Pro Forma Transactions been completed on January 1, 2023 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 Crescent’s and SilverBow’s Annual Reports on Form 10-K.
The unaudited pro forma net proved developed and undeveloped oil, natural gas, and NGL reserves as of December 31, 2023 and 2022 and the changes in the pro forma quantities of net remaining proved reserves for the year ended December 31, 2023 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Oil and Condensate (MBbls) |
| Crescent Pro Forma Combined Prior to SilverBow Merger | | SilverBow (Historical) | | Chesapeake Transaction Adjustments | | SilverBow As Adjusted | | Crescent Pro Forma Combined |
| Proved Developed and Undeveloped Reserves as of: | | | | | | | | | |
| December 31, 2022 | 275,553 | | | 52,189 | | | 30,506 | | | 82,695 | | | 358,248 | |
| Revisions of previous estimates | (21,192) | | | (12,875) | | | (6,397) | | | (19,272) | | | (40,464) | |
| Extensions, discoveries, and other additions | 3,616 | | | 16,355 | | | 23,511 | | | 39,866 | | | 43,482 | |
| Sales of reserves in place | (1,655) | | | — | | | — | | | — | | | (1,655) | |
| Purchases of reserves in place | 19,562 | | | 44,636 | | | (44,636) | | | — | | | 19,562 | |
| Production | (25,419) | | | (5,347) | | | (2,984) | | | (8,331) | | | (33,750) | |
| December 31, 2023 | 250,465 | | | 94,958 | | | — | | | 94,958 | | | 345,423 | |
| | | | | | | | | |
| Proved Developed Reserves as of: | | | | | | | | | |
| December 31, 2022 | 183,350 | | | 23,360 | | | 22,277 | | | 45,637 | | | 228,987 | |
| December 31, 2023 | 176,546 | | | 40,738 | | | — | | | 40,738 | | | 217,284 | |
| | | | | | | | | |
| Proved Undeveloped Reserves as of: | | | | | | | | | |
| December 31, 2022 | 92,203 | | | 28,829 | | | 8,229 | | | 37,058 | | | 129,261 | |
| December 31, 2023 | 73,919 | | | 54,220 | | | — | | | 54,220 | | | 128,139 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Natural Gas (MMcf) |
| Crescent Pro Forma Combined Prior to SilverBow Merger | | SilverBow (Historical) | | Chesapeake Transaction Adjustments | | SilverBow As Adjusted | | Crescent Pro Forma Combined |
| Proved Developed and Undeveloped Reserves as of: | | | | | | | | | |
| December 31, 2022 | 1,687,160 | | | 1,725,552 | | | 315,063 | | | 2,040,615 | | | 3,727,775 | |
| Revisions of previous estimates | (494,997) | | | (420,648) | | | (103,650) | | | (524,298) | | | (1,019,295) | |
| Extensions, discoveries, and other additions | 20,599 | | | 119,845 | | | 145,872 | | | 265,717 | | | 286,316 | |
| Sales of reserves in place | (15,075) | | | — | | | — | | | — | | | (15,075) | |
| Purchases of reserves in place | 115,488 | | | 333,090 | | | (333,090) | | | — | | | 115,488 | |
| Production | (136,759) | | | (79,900) | | | (24,195) | | | (104,095) | | | (240,854) | |
| December 31, 2023 | 1,176,416 | | | 1,677,939 | | | — | | | 1,677,939 | | | 2,854,355 | |
| | | | | | | | | |
| Proved Developed Reserves as of: | | | | | | | | | |
| December 31, 2022 | 1,544,998 | | | 695,482 | | | 229,554 | | | 925,036 | | | 2,470,034 | |
| December 31, 2023 | 1,032,578 | | | 736,075 | | | — | | | 736,075 | | | 1,768,653 | |
| | | | | | | | | |
| Proved Undeveloped Reserves as of: | | | | | | | | | |
| December 31, 2022 | 142,162 | | | 1,030,070 | | | 85,509 | | | 1,115,579 | | | 1,257,741 | |
| December 31, 2023 | 143,838 | | | 941,864 | | | — | | | 941,864 | | | 1,085,702 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NGLs (MBbls) |
| Crescent Pro Forma Combined Prior to SilverBow Merger | | SilverBow (Historical) | | Chesapeake Transaction Adjustments | | SilverBow As Adjusted | | Crescent Pro Forma Combined |
| Proved Developed and Undeveloped Reserves as of: | | | | | | | | | |
| December 31, 2022 | 106,798 | | | 32,656 | | | 41,344 | | | 74,000 | | | 180,798 | |
| Revisions of previous estimates | (14,653) | | | (8,363) | | | (14,295) | | | (22,658) | | | (37,311) | |
| Extensions, discoveries, and other additions | 2,330 | | | 7,358 | | | 18,647 | | | 26,005 | | | 28,335 | |
| Sales of reserves in place | (1,774) | | | — | | | — | | | — | | | (1,774) | |
| Purchases of reserves in place | 18,407 | | | 42,588 | | | (42,588) | | | — | | | 18,407 | |
| Production | (9,476) | | | (3,003) | | | (3,108) | | | (6,111) | | | (15,587) | |
| December 31, 2023 | 101,632 | | | 71,236 | | | — | | | 71,236 | | | 172,868 | |
| | | | | | | | | |
| Proved Developed Reserves as of: | | | | | | | | | |
| December 31, 2022 | 89,614 | | | 19,523 | | | 30,179 | | | 49,702 | | | 139,316 | |
| December 31, 2023 | 87,316 | | | 38,702 | | | — | | | 38,702 | | | 126,018 | |
| | | | | | | | | |
| Proved Undeveloped Reserves as of: | | | | | | | | | |
| December 31, 2022 | 17,184 | | | 13,133 | | | 11,165 | | | 24,298 | | | 41,482 | |
| December 31, 2023 | 14,316 | | | 32,534 | | | — | | | 32,534 | | | 46,850 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total (MBoe) |
| Crescent Pro Forma Combined Prior to SilverBow Merger | | SilverBow (Historical) | | Chesapeake Transaction Adjustments | | SilverBow As Adjusted | | Crescent Pro Forma Combined |
| Proved Developed and Undeveloped Reserves as of: | | | | | | | | | |
| December 31, 2022 | 663,545 | | | 372,437 | | | 124,361 | | | 496,798 | | | 1,160,343 | |
| Revisions of previous estimates | (118,346) | | | (91,346) | | | (37,967) | | | (129,313) | | | (247,659) | |
| Extensions, discoveries, and other additions | 9,380 | | | 43,687 | | | 66,470 | | | 110,157 | | | 119,537 | |
| Sales of reserves in place | (5,942) | | | — | | | — | | | — | | | (5,942) | |
| Purchases of reserves in place | 57,217 | | | 142,739 | | | (142,739) | | | — | | | 57,217 | |
| Production | (57,688) | | | (21,667) | | | (10,125) | | | (31,792) | | | (89,480) | |
| December 31, 2023 | 548,166 | | | 445,850 | | | — | | | 445,850 | | | 994,016 | |
| | | | | | | | | |
| Proved Developed Reserves as of: | | | | | | | | | |
| December 31, 2022 | 530,465 | | | 158,797 | | | 90,715 | | | 249,512 | | | 779,977 | |
| December 31, 2023 | 435,958 | | | 202,120 | | | — | | | 202,120 | | | 638,078 | |
| | | | | | | | | |
| Proved Undeveloped Reserves as of: | | | | | | | | | |
| December 31, 2022 | 133,080 | | | 213,640 | | | 33,646 | | | 247,286 | | | 380,366 | |
| December 31, 2023 | 112,208 | | | 243,730 | | | — | | | 243,730 | | | 355,938 | |
Standardized measure of discounted future net cash flows
The following tables present the estimated unaudited pro forma standardized measure of discounted future net cash flows (the “pro forma standardized measure”) at December 31, 2023. The pro forma standardized measure information set forth below gives effect to the Pro Forma Transactions as if they had been completed on January 1, 2023. Transaction Adjustments reflect adjustments related to the tax effects resulting from the Pro Forma
Transactions. The disclosures below are derived from the “Standardized measure of discounted future net cash flows” for the year ended December 31, 2023 reported in Crescent’s Current Report on Form 8-K dated March 6, 2024 and SilverBow’s Annual Report on Form 10-K. An explanation of the underlying methodology applied, as required by SEC regulations, can be found within the historical financial statements included in Crescent’s and SilverBow’s Annual Report on Form 10-K. The calculations assume the continuation of existing economic, operating and contractual conditions at December 31, 2023.
The pro forma standardized measure is not necessarily indicative of the results that might have occurred had the Pro Forma Transactions been completed on January 1, 2023 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 Crescent’s and SilverBow’s Annual Reports on Form 10-K.
The pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves as of December 31, 2023 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) |
| Crescent Pro Forma Combined Prior to SilverBow Merger | | SilverBow (Historical) | | Chesapeake Transaction Adjustments | | SilverBow As Adjusted | | SilverBow Transaction Adjustments | | Crescent Pro Forma Combined |
| Future cash inflows | $ | 24,267,134 | | | $ | 12,969,683 | | | $ | — | | | $ | 12,969,683 | | | $ | — | | | $ | 37,236,817 | |
| Future production costs | (11,897,791) | | | (4,847,117) | | | — | | | (4,847,117) | | | — | | | (16,744,908) | |
Future development costs (1) | (2,713,247) | | | (2,664,248) | | | — | | | (2,664,248) | | | — | | | (5,377,495) | |
| Future income taxes | (410,721) | | | (735,545) | | | — | | | (735,545) | | | 329,502 | | | (816,764) | |
| Future net cash flows | $ | 9,245,375 | | | $ | 4,722,773 | | | $ | — | | | $ | 4,722,773 | | | $ | 329,502 | | | $ | 14,297,650 | |
| Annual discount of 10% for estimated timing | (3,956,193) | | | (2,403,331) | | | — | | | (2,403,331) | | | (174,992) | | | (6,534,516) | |
| Standardized measure of discounted future net cash flows as of December 31, 2023 | $ | 5,289,182 | | | $ | 2,319,442 | | | $ | — | | | $ | 2,319,442 | | | $ | 154,510 | | | $ | 7,763,134 | |
______________
(1) Future development costs include future abandonment and salvage costs.
Changes in standardized measure
The disclosures below are derived from the “Changes in standardized measure” for the year ended December 31, 2023 reported in Crescent’s Current Report on Form 8-K dated March 6, 2024 and SilverBow’s Annual Report
on Form 10-K. The changes in the pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the year ended December 31, 2023 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) |
| Crescent Pro Forma Combined Prior to SilverBow Merger | | SilverBow (Historical) | | Chesapeake Transaction Adjustments | | SilverBow As Adjusted | | SilverBow Transaction Adjustments | | Crescent Pro Forma Combined |
Balance at December 31, 2022 | $ | 10,240,244 | | | $ | 4,040,246 | | | $ | 1,477,829 | | | $ | 5,518,075 | | | $ | 514,509 | | | $ | 16,272,828 | |
| Net change in prices and production costs | (3,222,493) | | | (2,933,837) | | | (444,040) | | | (3,377,877) | | | — | | | (6,600,370) | |
| Net change in future development costs | (141,382) | | | (50,504) | | | 110,363 | | | 59,859 | | | — | | | (81,523) | |
| Sales and transfers of oil and natural gas produced, net of production expenses | (1,415,229) | | | (464,199) | | | (221,035) | | | (685,234) | | | — | | | (2,100,463) | |
| Extensions, discoveries, additions and improved recovery, net of related costs | 156,147 | | | 340,307 | | | 373,979 | | | 714,286 | | | — | | | 870,433 | |
| Purchases of reserves in place | 568,869 | | | 1,166,443 | | | (1,166,443) | | | — | | | — | | | 568,869 | |
| Sales of reserves in place | (90,157) | | | — | | | — | | | — | | | — | | | (90,157) | |
| Revisions of previous quantity estimates | (2,478,577) | | | (1,132,376) | | | (498,397) | | | (1,630,773) | | | — | | | (4,109,350) | |
| Previously estimated development costs incurred | 331,125 | | | 224,052 | | | 104,000 | | | 328,052 | | | — | | | 659,177 | |
| Net change in taxes | 207,095 | | | 579,378 | | | — | | | 579,378 | | | (411,450) | | | 375,023 | |
| Accretion of discount | 1,070,766 | | | 496,401 | | | 166,143 | | | 662,544 | | | 51,451 | | | 1,784,761 | |
| Changes in timing and other | 62,774 | | | 53,531 | | | 97,601 | | | 151,132 | | | — | | | 213,906 | |
Balance at December 31, 2023 | $ | 5,289,182 | | | $ | 2,319,442 | | | $ | — | | | $ | 2,319,442 | | | $ | 154,510 | | | $ | 7,763,134 | |
