Crescent Energy Company (CRGY) is a differentiated U.S. energy company committed to delivering value for shareholders through a disciplined growth through acquisition strategy and consistent return of capital. The company's long-life, balanced portfolio combines stable cash flows from low-decline production with deep, high-quality development inventory, primarily focused in Texas and the Rocky Mountain region.

Business Overview

Crescent Energy Company was formed in 2021 through a business combination, structured as an Up-C with Crescent Energy Company as the public holding company and Crescent Energy OpCo LLC as the operating subsidiary. The company was created through the combination of Independence Energy and certain assets from KKR, establishing initial positions in key oil and gas basins, including the Eagle Ford and Uinta.

Following its formation, Crescent Energy quickly began executing its strategy of disciplined growth through accretive acquisitions. In 2022, the company expanded its presence in the Eagle Ford basin through additional asset acquisitions, solidifying its position as a leading operator in the region. That same year, Crescent entered the Uinta basin, gaining a foothold in an emerging play with significant resource potential.

The company's most transformative event occurred in 2024 with the acquisition of SilverBow Resources. This deal more than doubled Crescent's core Eagle Ford position, elevating it to a top three producer in the basin. The integration of SilverBow's assets and operations became a major focus for the company, as Crescent worked to capture significant synergies and optimize the combined portfolio.

Throughout its history, Crescent Energy has successfully navigated challenges common to the oil and gas industry, such as commodity price volatility and cost inflation. The company has demonstrated resilience by maintaining a disciplined approach to capital allocation and operational excellence, adapting its strategy as needed to deliver value for shareholders.

Financials

As of the latest 10-Q filing in November 2024, Crescent Energy reported total assets of $9.25 billion, with proved reserves of 1.98 billion barrels of oil equivalent (Boe) and a production rate of 183,000 Boed.

For the three months ended September 30, 2024, Crescent Energy reported revenue of $875,289,000 and a net loss of $118,039,000. The company generated operating cash flow of $384,434,000 and free cash flow of $384,434,000 during this period.

Crescent's primary source of revenue comes from the sale of its oil, natural gas, and natural gas liquids (NGLs) production. For the three months ended September 30, 2024, oil revenue accounted for 77% of total revenues, natural gas revenue accounted for 11%, and NGL revenue accounted for 12%. The company's net sales volumes during the quarter were 7.93 MBbls of oil, 50.94 MMcf of natural gas, and 3.71 MBbls of NGLs, with total production of 20.12 MBoe.

Compared to the prior year period, oil revenue increased by 9% driven by a 19% increase in sales volumes, partially offset by a 9% decrease in realized oil prices. Natural gas revenue increased by 9% due to a 54% increase in sales volumes, but this was partially offset by a 29% decrease in realized natural gas prices. NGL revenue increased by 59%, with a 63% increase in sales volumes and a 2% decrease in realized NGL prices.

For the three months ended September 30, 2024, the company reported Adjusted EBITDAX of $430.44 million, an increase of 49% compared to the prior year period. This was primarily driven by the higher production volumes from the company's recent acquisitions. Levered Free Cash Flow was $157.69 million, relatively flat compared to the prior year period, as the increase in Adjusted EBITDAX was offset by higher capital expenditures and interest expense.

Liquidity

The company's financial position remains strong, with $136.15 million in cash, $3.23 billion in long-term debt, and a net leverage ratio of 1.4x. Crescent has a $2.6 billion revolving credit facility, with $572,300,000 outstanding and $21,490,000 in letters of credit issued as of September 30, 2024.

Operational Excellence and Synergy Capture

A key driver of Crescent Energy's success has been the company's ability to optimize operations and capture synergies from its acquisitions. The management team's deep experience in the Eagle Ford Shale has allowed Crescent to identify and realize significant cost savings and production enhancements across its growing asset base.

For example, in the fourth quarter of 2024, Crescent completed its first "U-turn" wells on its legacy acreage in the Eagle Ford. These advanced well designs generated significant cost savings relative to standard shorter laterals, while maintaining production in line with traditional development. The company plans to expand the use of these optimization techniques as part of its 2025 development program.

Additionally, Crescent's largest acquisition in 2024, the SilverBow Merger, has continued to outperform expectations. The company has realized annual synergies in excess of $100 million, at the top end of its recently increased target range. Management has indicated that there is still further opportunity for optimization and value creation across the combined asset base.

Balanced and Flexible Capital Allocation

Crescent Energy's 2025 operational plan reflects the company's disciplined and flexible approach to capital allocation. The plan calls for the deployment of 4-5 drilling rigs, primarily focused on the Eagle Ford Shale, with a balanced allocation between oil-weighted and gas-weighted development.

This flexibility allows Crescent to capitalize on the current strength in natural gas prices, while maintaining exposure to oil prices through its liquids-rich inventory. The company's 2025 production guidance of 254,000 to 264,000 Boed and capital expenditure budget of $925 million to $1.025 billion are expected to generate significant free cash flow, supporting Crescent's ongoing return of capital to shareholders.

Crescent's return of capital framework includes a quarterly dividend of $0.12 per share, as well as an active share repurchase program. In 2024, the company utilized 20% of its $150 million buyback authorization, repurchasing shares at an average price of $10. Management has indicated that the buyback will remain an opportunistic tool in 2025, complementing the base dividend.

Environmental, Social, and Governance (ESG) Initiatives

Crescent Energy is committed to being a responsible operator and industry leader in environmental stewardship. The company is a member of the Oil & Gas Methane Partnership 2.0 Initiative, receiving Gold Standard pathway ratings in 2022 and 2023 for its credible plan to more accurately measure and reduce methane emissions.

Additionally, Crescent has established a Sustainability Advisory Council, comprised of leading experts across key sustainability topics, to advise management and the Board of Directors on ESG-related issues. The company's latest Sustainability Report, released in November 2023, outlines its progress and commitments in areas such as emissions reduction, water management, and community engagement.

Crescent's focus on operational excellence, capital discipline, and sustainable practices has positioned the company as a differentiated player in the domestic energy landscape. As the company continues to execute on its growth strategy and return of capital initiatives, investors may find Crescent Energy's unique value proposition increasingly attractive.

Risks and Challenges

As with any energy company, Crescent Energy is exposed to the inherent volatility of commodity prices, which can significantly impact the company's financial performance and cash flow generation. To mitigate this risk, Crescent has an active hedging program in place, with approximately 67% of its 2025 oil production and 47% of its natural gas production currently hedged.

Additionally, the company faces operational risks associated with its drilling and completion activities, as well as potential regulatory and environmental challenges. Crescent's management team has demonstrated its ability to navigate these obstacles, but investors should be aware of the potential for unexpected events to affect the company's operations and financial results.

Outlook and Conclusion

Crescent Energy's impressive 2024 performance and strategic acquisitions have set the stage for continued success in 2025 and beyond. The company's flexible capital allocation strategy, focused on maximizing free cash flow and returns, positions it well to navigate the dynamic energy landscape.

With a strengthened asset base, enhanced scale, and a solid balance sheet, Crescent Energy appears poised to deliver sustainable value for its shareholders through a combination of disciplined growth, consistent returns, and responsible operational practices. As the company continues to execute on its strategic priorities, investors may find Crescent Energy's unique investment proposition increasingly compelling.

Crescent Energy exceeded expectations across both production and capital in Q4 2024, generating approximately $260 million of free cash flow, which was well above Wall Street expectations. The company met or exceeded its latest guidance across all key metrics in 2024. For 2025, Crescent expects to deliver strong performance across the business and surpass current Wall Street estimates at like-for-like commodity prices. The company's balance sheet targets include maintaining net leverage within their publicly stated range of 1 to 1.5 times.

Crescent Energy Company's operations are focused solely in the United States, with no international sales reported. The company has been active in executing its growth through acquisition strategy, completing the SilverBow Merger in July 2024, which added significant oil and gas assets in Texas. Crescent also acquired a portfolio of oil and natural gas mineral interests in the Eagle Ford Basin in February 2024 and completed two acquisitions in the Western Eagle Ford area in 2023. During the three months ended September 30, 2024, Crescent sold non-core assets for $29.7 million in aggregate cash proceeds and recorded a $19.4 million gain on the sale of these assets.