Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to Crescent Energy First Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Emily Newport, Senior Vice President of Finance and Investor Relations. you. Thank

begin. may You

Emily Newport

thank joining and conference first call. you morning, Crescent's for quarter Good

today our our Officer; come and prepared today Executive will Our remarks also are from and Rynd, Kendall. here Falk, Vice Presidents Conner available CFO, Todd CEO, session. Chief Ben Accounting during and and Clay both Q&A Brandi Rockecharlie; David

price statements call volatility, uncertainties, expressed the federal of may the within meaning and our conflicts, contain Today's geopolitical risks laws. global projections are These business statements including to and commodity other forward-looking subject securities strategies, results statements and forward-looking implied other cause our any may statements factors disclaim other any update after these that today's to obligation actual differ disclosures. to We call. from those in and or

include measures. may non-GAAP In addition, disclosures discussion financial regarding today's

to these directly and earnings For historical most measure, reference our measures on available financial non-GAAP website. our the please of press XX-Q GAAP comparable reconciliation release

over will to With turn that, it I David.

David Rockecharlie

Good and us Thanks, Great. for another we close joining as today morning, quarter. out Emily. solid thank you

We cash level flow to balance EBITDA and to us maintaining through and returning shareholders prioritize sheet. operating continue program, allowing maintenance a development our strong significant to generate cash

highly business costs value to well, performing base we with development program. safely and our continues of Our our how and team find are to is ways the innovative encouraged reduce maximize

in of $XXX Ford announced ago. interest original Before Western Mesquite Energy incremental jumping and nonoperated recently week, acquired assets few million. the acquisition. from bolt-on years over into our Western accretive X operatorship We the our the in first on Last acquisition quarter announced results, Ford a let me for Eagle working nonoperated minutes spend Eagle existing we interest an

assets the incredibly know we So well.

assets. barrels oil and pleased counties in in net roughly the of and ownership XX,XXX long is net Today, acres contiguous with current the equivalent increase of these primarily assets of our operating Eagle history day, our a skills approximately have XX% largely which represent we production to are XX,XXX Ford, and bring Dimmit to per We Webb liquids.

interest that the XX% And with The stand-alone the our incremental cements acquisition for existing working Pro the the checks XX% operationally forma nonoperated consolidator strategy interest. past our interest position adding the leading an in acquire-and-exploit Ford and assets acquisition Eagle of criteria approximately strategy executing decade. Eagle consistent own basis, will to as the in and an on fitting proven financially, we've been all strategically. a our investment our is XX% Ford

$X.XX to highly Through value PV-XX, $XXX Austin price adding the net attractive oil $XX transaction, balance metrics remaining believe and key operated will million approximately The significant times. below while with XXX Lower than our gross share. accretive XXX or strength maintain sheet at purchase an represents flow gas cash value, of million Upper we Eagle free per metrics, flow, from more stated cash asset Ford. Ford We upside and guidance and PDP of the $XXX including our and locations maximum transaction leverage Eagle Chalk is X.X net operating and the credit publicly investment-grade

meaningful development add Ford high assets return, Mesquite Eagle at the current the Operationally, pace. lower inventory

to shared as years quality well X high deep an The base, which development performance, the XXX lower improved over resource asset with operator. and basin-wide. last nonoperated partner and in the both latest base using completions performance and is evident well about Ford spacing. Eagle the was knowledge of quite Over drilling, we've Eagle Such the developed proposals approaches achieved is a the evaluated consistently with significantly competitive recent operational recent well active Ford insights our

the Austin on Chalk significant results acquired our recent both closely formation, encouraging the and upside We acreage. offset will also assets the on highlight from suggests

in did our value assets. any ascribe not resource this to of we However, underwriting the

fit. strategic the Lastly and is importantly

from will existing the find operations. scale Ford new with synergies We in our expect Eagle and and benefit valuable to increased

our of a the rate. Crescent long-life improving at existing adding operate where XXX,XXX area an excellent have scale We approximately of our BOE complementary Ford way XX%, day existing as and net in enhance portfolio over believe assets next example a scale, peer-leading view forma XX% expected the inventory assets the and acres of position. Eagle decline adding further in in will Eagle proven hold Ford and XX,XXX the reserves operations transaction, competitive and decline acquired advantage. production our an Notably, transaction per Following this strategy, our with XX-month we of acquire-and-exploit pro

acquisition us the heightened brought of many reducing on evaluated Ford, the times time, Ultimately, core cash number asset maintaining remained opportunities during this fits we've price we decline a environment. to continuing our Eagle through up but low the team meaningful year, best liquidity deep to business inventory and we've significant strengthening we of our last base the have the of our X to commodity insights post to to production and opportunities, particularly leverage the that in table. believe due acquisition, substantial given operational small Uinta Over portfolio combination period patient transaction proven divestitures. seen, we and our flow, Relative other focused the

point also price price the We attractive commodity in the this like purchase at cycle.

are be and meaningful our focused existing on can with it A&D market, active across to Rockies. areas scale year add the we in emphasis an where we broader the and footprint Across an expect Texas

base envision realizations Eagle through acquirer Ford, But of development, commodity future assets, fragmented in Going key And which our in growth well. forward, well-delineated positioned will across role the our remains business complements of attractive it as continue acquisition well the declines, low first. to as the further we the evaluate we'll most framework strategy. lower With particularly in states. a and XX major an baselines our all play relatively Ford Eagle returns-driven balanced always, the we are mix, opportunities its

disciplined we large and low rate with and patient ensures capital inventory operator As business acquirer. our flexible decline of as a a be drilling with existing economic locations attractive to reminder, continue our a will

to Brandi transform the on investment drives focus capture more can business we From base cover shareholders, As to enhance capital balance all business, the opportunities. attractive there, will to synergies continue well, we strength to scale us returning shareholders. operations a to pursuing and in that perform sheet and flexibility which detail, and continues our value as preserving allows way in our

the Brandi? that, will call results. to our cover first financial turn With I Brandi to over quarter

Brandi Kendall

Thanks, David.

per For to price shareholders, efficiencies our EBITDA our oil the at our business. we the of gas. We saw outperformed continued quarter strategy $X.XX operational to act on in line around and EBITDA first across both guidance quarter, with production bringing of $X.XX XX% and cash share, distribute dividend $XX our announced expectations and

EBITDAX. adjusted high quarter in For slightly the prices. Coast Crescent minor realizations due gas XXX differentials quarter, we exceptionally of was downtime generated revenue, gas to winter related quarter produced to the impacted outperformed per $XXX million day by and our in weather. with benchmark this MBoe Production of XXX% On West realizing

exposure Our reflect different benefits of markets. our elevated realizations end to price the

were increased operating Our also higher by residue impacted to expenses cost gas prices. natural gas related

higher costs higher realized prices. these offset than by were However, more

Taking and intact. per quarter, drilling efficiencies, expectations. the first in the We bringing Ford. than level to the commodity expect the outrated initial expectations, XX operational beginning accelerated operating into $XX.XX our at quarter and in remain the our growth still online initial of of was for our the we higher taxes Eagle year and cost production $XXX above which year to BOE during production across including the US line range. expenses, reflects within these XXXX averaged line guidance. expense for operating full we Due capital of guidance activity and remain with invested the wells first Adjusting BOE is XX guidance and end quarter, a per Crescent's to anticipate million this Adjusted other activity consideration costs, quarter, adjusted our

more inflation stable months. but we're cost in broadly, decreased a prices X costs incurred not commodity last levels service continuing have over to pressures the More decrease have see material as experienced from moderate,

continual offset times for in We environment completion higher decreased efficiencies. longer cost continue cycle laterals the to and improvements

to rig operate both X We expect from Basins. the in development Eagle program our and Ford strong returns Uinta continue

the Switching over to sheet. balance

sheet positioned last balance We times, to target. focus environment, debt stated Ford recently quarter announced a leverage our of as and given out Our leverage strong over February portion we in offering high-yield liquidity, line us defer post prices of higher remains transaction. in prepared well first RBL year's operations debt. X.X LTM the to period With reduction during well net $X.X the of for existing the long-term Eagle were as with in on the were which allowed Western our our our billion in with change commodity market

with invested connection for volumes strategy, XXXX maintain balance in 'XX on and expected a executed of line in our year risk our transaction hedge Also management and returns we with the balance sheet. to protect full acquisition additional strong capital the

and Ford XXXX. a Assuming per roughly remainder for midyear acquisition the day of of approximately hedged are Eagle crude production, of XX% we XX close the Western MBoe

the With turn over to back that, I'll David. call

David Rockecharlie

Great. Brandi. Thanks,

acquisition. through As price to as us Western for pursue Eagle in we box every M&A reiterate, with perform our elevated capital coupled well. the our the environment, opportunities, markets business Brandi the an accretive And such that And afforded our attractive year's checks investment and has Ford highlighted, base transaction opportunity. last the flexibility continues to business efforts patients commodity look performance to

valuation, We discount believe and were assets at acquired transaction the meaningful value is to we per opportunity immediately reinvestment an foremost, create investors. to strategy our First with key the metrics. a to value and PDP share industry. is at attractive good in are accretive assets Acquiring proven financial returns-driven a

Ford strategic, scale offsetting we was through that in operational Ford area highly our transaction Eagle increasing existing the control and well operations. our interest Second, an our enhancing Eagle know and

significant to reserves. complementary resource low-risk decline And and the to our with business maintaining development strategy, the the opportunities. Third, flow substantial while finally, and are Fourth, we stable and low for production inventory cash grow investment-grade potential credit and sheet metrics. balance assets portfolio with synergy continue investment assets expansion strong our adding at

transaction example experienced is create protecting the shareholder summary, value our sheet strategy a remaining value. to Crescent. of operational while investment We and focused and our great at In balance Eagle professionals the on utilized team of Ford

the With will open that, call we for questions. up

Operator

Our proceed. Donnes with Please from Instructions] Truist. question [Operator first is Bertrand

Bertrand Donnes

deal? wanted talk factor was maybe a deal how on the got higher acquisition. this about It's Or started went down? Crescent. a this to maybe legacy process that could Was the prices driving you Or before in content approach start you the than off just bit deal. Just gas liquids

Ben Conner

of as deal talked exposure and one gas XX% about we Yes, Ben. NGLs, It's both things the about, to we liquids. liquids, the liked is than greater this

an oil here. around favorable view as evaluate basis, certainly but asset macro think I a risk as overall return on So we just well every have NGLs.

in waiting this production excited environment. stable we're So a discount and that macro liquids about pretty at acquiring PDP has

factor, how certainly driving and we So about our one. the think risk influence view certainly wasn't this the informed but around it return

Bertrand Donnes

at was guess then other than that, acquired get drive that in part And activity I trying I is, rather the near more that term does in the asset Crescent? of legacy the to

Ben Conner

fair to near but We're rig running until and we be not asset to guidance continue our talking on current acquisition, position, say the closed this we'll currently we're going and on in existing term. the about both that operated activity a

Bertrand Donnes

And the then XX% ratio, the still payout ratio, second EBITDA. so haven't you adjusted of question changed it's my

are didn't next Just that prices of step Or of the will to move be imply level for change looking rest the are as announcement it? this commodity understand, wanted intra at is if year there likely year, next the does looking Or for quarter an May level? set? you this we dividend year

Brandi Kendall

Bertrand, Brandi. it's

So once set pricing. guidance our alongside to return year a capital framework as our reminder, we a intend on

roughly $XX $X.XX was announced just the we that million million, which per $XXX and that equated last So night. share to

to no perspective, Mesquite, from respect capital So of that early the change return we with Ben pay we throughout QX then would as year. provide guidance. just the mentioned, on in And updated at level framework, our but specifically closing. intend rest in out to intend to upon

Operator

with America. Our proceed. Bank of Please is next Abbott from question John

John Abbott

that? framework. this and that's policy, back shareholder for about And stay variable did to with reduce Energy. theme the when your your you do return to want about that think How Crescent you But the consistent go dividend, you the of is with right think I framework returns.

David Rockecharlie

John, if consensus. where reach investors a it's mind question. the on actually put strategic it's to good David, trying think topic I a I'd but don't still question thanks broader to you asked context. Crescent like it indulging specific while point, It's a to in and dividend, your energy the question a And clearly little for are me, around you

And to the as priority of discipline sheet investment is benefit us, is to flow And care taking our to of and investors. First, cash our dividend. know, allocation I'll reiterate one a you Crescent Crescent that of about paying and that capital for cash capital all means return investors. the balance number

track doing to record of have XX-year and and this, We of itself. strategy that a going we in aren't change

is specific your and assets. you've Crescent's generate one. question based However, good flow a cash And We on our us secondly, EBITDA. for think this existing on ability time going investing accretive investors. capital first, value we think dividends will things power both And based uniquely to value value It and variable. We custom optimizing specific continue cash that. appreciated created propositions is a policy percentage to our years acquisitions. do XX seen to But generating on back delivering be X disciplined investors on quarter, with our execute. variable through is then really things: over those additional the I approach of to by strategy again, this a ago, fully shareholders, to the of of the future and in current more dividend, as continue flow focus

But X% to a versus delivered yield industry. also say X% about that in of a we see the the year yield last peer-based it I'd variability that investors

and many only So cash of return capital recently substantially of return this kind our better of concept. peers embraced

of it's proposition. Crescent the great we piece piece, just mentioned. So as It a I is think a value

and focused remain hearing investors the And value continue really industry creation we're consensus on. approach with while to to We now. for with is reach going so this what starting are on are you us, from and certainly engaged

great investors, again And we continuing in the question we the think highlighting context disciplined for I also worth and it it's that the of think dividend think as an of deliver here. also value investing assets is of management and do to entire the the value proposition

for and we'll folks. But over from now see good the continue again, with to to And take time. sticking So we'll that commitment I think, the program. is there, cash feedback

John Abbott

second possibly is question, closes. provide going can guidance to can, I you then it? I not any for as full extent stand-alone Crescent on taxpayer color and taxes. perceive post realize a Brandi. for think you And The you're here able acquisition, speak the about cash when But acquisition the on yourself that to It's the that to potentially give cash you you're until if

Brandi Kendall

we $XX year at million the guided million guidance we to not so going of John, the were beginning a and $XXX based cash on be that price our material taxpayer.

full to our transaction We guided expect Mesquite we 'XX. So year our $X to $XX near million materially change taxes. of cash views the for do around payment to the in not term

expect in nothing we current on So in material this XXXX. and material prices year based would nothing

Operator

with Our Please Fargo. next question is Wells proceed. from Read Roger

Roger Read

Yes.

acquiring. and that you give just Just beyond you maybe given of some guidance ahead along above of a But the getting comments recognize what it. Is refracs? new combination expansion is as in lines little drilling -- think that to here of you're I we want a paying a our it the it's don't a pockets on of that for mean property not bit I resource factors? spaces own lot were to Is yet. don't asset tighter or about it, Is here? what you. missed you're

presume you I level what the of insight a good are. So pretty opportunities on have

Ben Conner

believe Eagle just Eagle -- but prospective refer but today of been the resource Upper over that accounts it's developed that it our But our we've expansion, Ford us, thought Austin didn't of years. proven for of this of the in the in Around this front really developed acreage, and handful Chalk that the the that's this to we beyond we do the last the Roger. acquisition. wells. in PDP is both actively PV. got that is Ford. Lower our regionally. inventory getting we when to a couple around around the we've of Lower developing on acquisition are kind area pay actively us that we position, expansion and in this Eagle on which existing But not And been Again, We resource where have relates capital only focus Ford think our acreage we've comment, front not I Yes, more business proven and mainly

we're that's about. So talking what

pretty it less of date, we'll we're think about proven about but of the the but is on I time, something be really excited basis our over to talk discipline, fast more kind be And follower is it. relative followed course versus strategy accelerate into a a to data that

that hopefully your So answers question.

Roger Read

after Yes, I deeper so. think close. we'll get I it into mean, you

better set comments of one and the the year. we I question is this this a prices, typically cash for But bid opening environment was about in get price year acquisitions up other curious, a together. to flows have, spreads The high high David, as tougher last I'm you your think

a, Now oil mid-cycle market. depressed we're a obviously in and more I gas market would describe,

So the or more as terms attractive opportunities forward? transaction you more the you at opportunities is me, look in the closed, front of -- or after this same the excuse get less or better going say, of it in you let's

David Rockecharlie

it's I David, of assessed well. give the how additional start, view to then you've as let question, some I'll call cyclicality the Strategically, color I'll and what Yes, I'll we and accurately market. you think though, your Clay

pay notable that know, some get we prices were have that high, time view of period to was was able As macro do sold. And we that it you attention were assets through I think we over a do cycle the what to. that just

been have So where in for we I environment. market And call fortunate excited bid-ask this feel find, to quickly year, this think us. the then at prepared look certainly works to you transact I'll we're able it, and to really

the also were you But what to broad macro know specifics that that I is do. let Clay hopefully, looking we're trying I'll think cover I for. really So perspective,

John Rynd

as year Yes. year, volume Roger, note, due pretty certainly, perspective. last the I slow pretty a from half into of the you slow transaction think QX prices high back

we in look forward still assets of prices, you there. is as So have little a pullback inventory that bit of

perspective. the of the as second So us. in over about market year, recent dampen pretty a lots this 'XX, think the M&A environment Certainly, the term. look we of out will we excited there's go-forward for in we're we're But immediate opportunity from half volatility probably things

framework and looking is pipeline our financial we're pretty find to be at full Our should going opportunities. within I expect to

Operator

is question Our proceed. JPMorgan. next from Hamid Tarek with Please

Tarek Hamid

on I'd gas on realizations about sort quarter quarter about of has line? thoughts just how that West? the talked love your in evolved that itself of know few little some kind about the a both of ask of the on but revenue how of it your for months the to the sort last I you sort and the line affected OpEx and bit,

Brandi Kendall

Brandi. it's Tarek,

think the due I roughly on So remarks, XXX% we weather XX% hit benchmark Rockies in of some realizing into of California, specifically in February, markets Northwest our this we right, us prices. extreme in prepared resulted the January in that gas sell but just to and

some of have some we We also that higher to that, of some our expenses purchase are to to linked given operations. know there commodity tied cost run fuel

that kind or BOE realizations incurred definitely nonrecurring for the positive flow the gas as quarter. net-net, roughly a directly of or million cost additional view I $X.XX that during incurred it in but did those So of result we $XX to and cash linked incremental still business,

Tarek Hamid

guys view Eagle know I looked viewing but those just slides and But acquisition, sort on they just Western of the how operators how in it offer you at differences terms guess assets a time, had Ford any well on you and the mentioned them you assets, of assets perspective can in this of little both I looking bit. time? effect, and of And kind some more are also those versus the over at you the how strategically, historical some

David Rockecharlie

was was drilled ago. high-quality David. Anadarko It put historical it's that that X,XXX the on very industry a I'll close tighter acreage Their almost development vision. really was was Tarek, thoughts. pursuing quick some give been on good. actually now. There's spacing, you the ago Yes. just have most which together many is This a wells much by years decade of to position

Anadarko's try in just tried history so to some note, and this on at And is really the there least highlight great there's that it, give important something divestiture. the it here point you've slides and to asset we were approaches is mentioned incremental indication following

non-op that a owner time. were during of period We

some very, sharing were active also in of call, We've been I to just that operate. noted remarks. what we've but that side, assets we us, on we where not As and other data from would the have evaluating decisions insights our non-op making put

significant on operations recently there's And improvement with performance would our time aligns asset so long short, and this to general. over approach story that been in we quite say

asset, it, we're about resource. be a ways so been, of as about I'll what call data, the talked you over I high-quality think the also of there's if existing It's indication at we you about earlier. a excited that And time the could with it stories And most great but resource a different operations and it. gives look number do think recent we really from that this to both can told we expand

Operator

reached back We of I our to over comments. the question-and-answer session. conference for would like closing David turn have to the end

David Rockecharlie

all you Thank Great. again.

always, value investors. focused We very creation on for our as are, heavily

perspective. from regular do look our lot of we've to to and lot we and to a continue got feel work you continuing to a basis. quarter up Another opportunity forward keep good deliver results on But and to a of date

thank very So much. you

Operator

conclude will This today's conference. you. Thank

disconnect your participation. you may this for at time. And thank You lines your

Crescent Energy (CRGY) 11 May 232023 Q1 Earnings call transcript