CRESCENT ENERGY COMPANY Item 2.02. Results of Operations and Financial Condition.
OnJanuary 25, 2023 , in connection with the Notes Offering (as defined below),Crescent Energy Company (NYSE: CRGY) ("CRGY" or "our," "us," or "we") provided certain updated disclosures to potential investors, the relevant excerpts of which are set forth below.
Certain preliminary data for Q4 2022
As of the date of this current report, we have not finalized our financial and operational results for the year endedDecember 31, 2022 . However, based on preliminary information, we estimate that, for the year endedDecember 31, 2022 , our production ranged from 137 to 139 thousand barrels of oil equivalent per day ("MBoe/d"). This preliminary estimate is derived from our internal records and is based on the most current information available to management. This estimate is preliminary and inherently uncertain. Our normal reporting processes with respect to the foregoing preliminary estimate have not been fully completed. Our independent auditors have not completed an audit or review of such preliminary estimate or of any other data as of, or for a period ended,December 31, 2022 included in this Current Report. During the course of our and our auditors' review on this preliminary estimate and any other such data, we could identify items that would require us to make adjustments and that could affect our final results. Any such adjustments could be material. This preliminary estimate should not be viewed as indicative of our financial condition or results as of or for any future period. Actual results could differ from the estimates, trends and expectations discussed herein, and such differences could be material.
In addition, the information contained in Item 8.01 of this Current Report is incorporated into this Item 2.02 by reference.
The information in this Item 2.02 shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act.
Item 7.01. Regulation FD Disclosure.
OnJanuary 25, 2023 ,Crescent Energy Finance LLC ("CE Finance"), a subsidiary of CRGY, issued a news release announcing that, subject to market conditions, CE Finance intends to offer (the "Notes Offering") for sale in a private placement pursuant to Rule 144A and Regulation S under the Securities Act, to eligible purchasers$400 million aggregate principal amount of Senior Notes due 2028. A copy of the news release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
In addition, the information contained in Item 2.02 and Item 8.01 of this Current Report is incorporated into this Item 7.01 by reference.
The information contained in this Item 7.01, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing under the Securities Act, or the Exchange Act.
Item 8.01 Other Events.
OnJanuary 25, 2023 , in connection with the Notes Offering, CRGY provided certain updated disclosures to potential investors, the relevant excerpts of which are set forth below in substantially the form in which they were provided in the Notes Offering. ****** 2
-------------------------------------------------------------------------------- Our free cash flow-focused portfolio includes a balanced set of oil and natural gas assets in proven onshoreU.S. basins with substantial existing production, a low decline rate and an acreage position that is 96% held by production. ****** Based on forecasts used in our reserve report, our provided developed producing ("PDP") reserves as ofDecember 31, 2022 have estimated average five-year and ten-year annual decline rates of approximately 13% and 10%, respectively, and an estimated 2023 PDP decline rate of 22%. The relatively higher decline rate in 2023 is due primarily to the high initial production profiles of certain more recently drilled PDP wells acquired in the Uinta Acquisition (as defined below), which we expect to decrease over time as wellbore pressure gradually declines and stabilizes. As a result of this overall low decline profile, we require relatively minimal capital expenditures to maintain our production and cash flows. Our properties located in the Eagle Ford, the Rockies and Barnett represent approximately 84% of our proved reserves as ofDecember 31, 2022 , and provide us with diversification from both a regional location and commodity price perspective, which provides us certain downside protection as it relates to commodity-specific pressures, isolated infrastructure constraints or severe weather events. The table below illustrates the aggregate reserve volumes and weighted average decline profiles associated with our proved assets as ofDecember 31, 2022 . Net Proved % Oil & Net PD Operating Area Reserves (1) Liquids (1) Reserves (1) (MMBoe) (MMBoe) Eagle Ford 147 81 % 79 Rockies 222 53 % 192 Barnett 111 20 % 111 Other (2) 94 67 % 78 Total 573 56 % 460
(1) Our reserves were determined using average first-day-of-the-month prices for
the prior 12 months in accordance with guidance from the
volumes, the average West Texas Intermediate ("WTI") posted price of
per barrel as of
quality, local conditions, gathering, transportation fees and distance from
market. For natural gas volumes, the average Henry Hub Index spot price of
was similarly adjusted for items such as quality, local conditions,
gathering, transportation fees and distance from market. All prices are held
constant throughout the lives of the properties. The average adjusted product
prices over the remaining lives of the properties are
oil,
of NGLs.
(2) Includes working interest properties located in Mid-Con,
as well as diversified mineral and royalty interests.
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As of
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As of December 31, 2022 , our derivative portfolio had an aggregate notional
value of approximately $1.4 billion . We determine the fair value of our oil and
natural gas commodity derivatives using valuation techniques that utilize market
quotes and pricing analysis. Inputs include publicly available prices and
forward price curves generated from a compilation of data gathered from third
parties.
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The following table details our net volume positions by commodity as ofDecember 31, 2022 . Weighted Production Period Volumes Average Fair Value (in thousands) (in thousands) Crude oil swaps (Bbls): WTI 2023 9,710$ 60.00 $ (180,441 ) 2024 5,721 63.82 (54,455 ) Brent 2023 527 52.52 (15,690 ) 2024 276 68.65 (2,536 ) Crude oil collars - WTI (Bbls): 2023 1,155 48.68- 57.87 (24,467 ) Natural gas swaps (MMBtu): 2023 62,248 2.73 (92,657 ) 2024 9,604 4.14 (1,139 ) NGL swaps (Bbls): 2023 1,379 40.80 15,710 Crude oil basis swaps (Bbls): 2023 2,461 1.15 23 Natural gas basis swaps (MMBtu): 2023 8,202 (0.43 ) 980 Calendar Month Average roll swaps (Bbls): 2023 2,736 0.05 (896 ) Natural gas collars (MMBtu): 2023 550 2.63- 3.01 (659 ) 2024 18,300 3.38- 4.56 (5,607 ) Total$ (361,834 ) ******
Summary reserve data based on SEC Pricing
The following table provides our historical reserves, the pre-tax undiscounted
present value of such reserves ("PV-0") and the pre-tax present value of such
reserves discounted at ten percent ("PV-10") as of December 31, 2022 , in each
case prepared in accordance with SEC Pricing. SEC Pricing means the price per
barrel ("Bbl") for oil or per MMBtu for natural gas as calculated from the
unweighted arithmetic average first day of the month prices for the prior 12
months, as adjusted by lease for quality, transportation fees, geographical
differentials, marketing bonuses or deductions and other factors affecting the
price received at the wellhead. The reserve estimates presented in the tables
below are based primarily on a reserve report prepared by Ryder Scott Company,
LP ("Ryder Scott"). In preparing its report, Ryder Scott evaluated properties
representing approximately 97% of our PV-10 and 98% of our total proved reserves
as of December 31, 2022 . Our internal technical staff evaluated the remaining
properties.
As of
December 31,
2022 (1)
Net Proved Reserves:
Oil (MBbls) 243,082
Natural gas (MMcf) 1,506,535
NGLs (MBbls) 78,621
Total Proved Reserves (MBoe) 572,793
PV-0 (millions) (2) $ 17,170
PV-10 (millions) (2) $ 9,602
Net Proved Developed Reserves:
Oil (MBbls) 160,113
Natural gas (MMcf) 1,398,770
NGLs (MBbls) 66,803
Total Proved Developed Reserves (MBoe) 460,046
PV-0 (millions) (2) $ 12,330
PV-10 (millions) (2) $ 7,132
Net Proved Undeveloped Reserves:
Oil (MBbls) 82,969
Natural gas (MMcf) 107,765
NGLs (MBbls) 11,818
Total Proved Undeveloped Reserves (MBoe) 112,747
PV-0 (millions) (2) $ 4,840
PV-10 (millions) (2) $ 2,470
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(1) Our reserves, PV-0 and PV-10 were determined using SEC Pricing. For oil and
NGL volumes, the average WTI posted price of
conditions, gathering, transportation fees and distance from market. For
natural gas volumes, the average Henry Hub Index spot price of
MMBtu as of
quality, local conditions, gathering, transportation fees and distance from
market. All prices are held constant throughout the lives of the properties.
The average adjusted product prices over the remaining lives of the
properties are
approximately
of the net proved PV-10 shown above, and approximately
million,
shown above, relate to properties in the Eagle Ford, Rockies, Barnett and
other operating areas, respectively.
(2) Present value (discounted at PV-0 and PV-10) is not a financial measure
calculated in accordance with GAAP because it does not include the effects of
income taxes on future net revenues. Neither PV-0 nor PV-10 represent an
estimate of the fair market value of our oil and natural gas properties. Our
PV-0 measurement does not provide a discount rate to estimated future cash
flows. PV-0 therefore does not reflect the risk associated with future cash
flow projections like PV-10 does. PV-0 should therefore only be evaluated in
connection with an evaluation of our PV-10 of discounted future net cash
flows. We believe that the presentation of PV-0 and PV-10 is relevant and
useful to our investors about the future net cash flows of our reserves in
the absence of a comparable measure such as standardized measure. We and
others in our industry use PV-0 and PV-10 as a measure to compare the
relative size and value of proved reserves held by companies without regard
to the specific tax characteristics of such entities. Investors should be
cautioned that neither of PV-0 and PV-10 represent an estimate of the fair
market value of our proved reserves. The most directly comparable GAAP
financial measure is standardized measure of discounted future net cash
flows. Our standardized measure includes the effects of income taxes on
future net revenues; however, neither such income tax effects nor such
standardized measure is presented in this Current Report on Form 8-K, ascertain tax estimates necessary for purposes of calculating such measures are
unavailable to management as of the date hereof and a reconciliation thereto
would not be available without unreasonable efforts.
Summary reserve data based on NYMEX pricing
The following table provides our historical reserves, PV-0 and PV-10 as ofDecember 31, 2022 using NYMEX pricing. We have included this reserve sensitivity in order to provide an additional method of presentation of the fair value of our assets and the cash flows that we expect to generate from those assets based on the market's forward-looking pricing expectations as ofDecember 31, 2022 . The historical 12-month pricing average does not reflect the oil and natural gas futures. We believe that the use of forward prices provides investors with additional useful information about our reserves, as the forward prices are based on the market's forward-looking expectations of oil and natural gas prices as of a certain date, although we caution investors that this information should be viewed as a helpful alternative, not a substitute, for the data presented . . .
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. Exhibit Description 23.1 Consent ofRyder Scott Company, LP . 99.1 Press Release, datedJanuary 25, 2023 . 99.2 Report ofRyder Scott Company, LP . 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). 6
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