Crescent Energy Co(CRGY) - 2024 Q1 - Quarterly Report

Glossary This section defines key terms and abbreviations used throughout the financial report - The glossary provides definitions for key terms commonly used in the oil and natural gas industry, such as barrel (Bbl), Boe (barrel of oil equivalent), Mcf (thousand cubic feet of natural gas), and various reserve classifications (proved, proved developed, proved undeveloped)[19][20] Cautionary Statement Regarding Forward-Looking Statements This section warns readers about the inherent uncertainties and risks associated with forward-looking statements in the report - The report contains forward-looking statements subject to risks and uncertainties inherent in the oil, natural gas, and NGL development, production, gathering, and sale[9][12][22] - Key risks include commodity price volatility, capital requirements, debt agreements, reliance on external management, hedging strategy results, geopolitical conditions (Middle East conflicts, Ukraine), general economic conditions (inflation, interest rates), and regulatory changes (IRA 2022, environmental regulations)[10][12][23] - Reserve estimates are inherently uncertain and may differ significantly from ultimately recovered quantities due to data quality, interpretation, and price/cost assumptions[24] Part I – Financial Information This section presents the unaudited condensed consolidated financial statements for Crescent Energy Company, including the balance sheets, statements of operations, statements of changes in equity, and cash flows, along with comprehensive notes providing detailed explanations and disclosures for the reported financial data Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Crescent Energy Company, including the balance sheets, statements of operations, statements of changes in equity, and cash flows, along with comprehensive notes providing detailed explanations and disclosures for the reported financial data Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheet Summary | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | |:----------------------------|:------------------------------|:---------------------------------| | Total Assets | $6,797,917 | $6,803,335 | | Total Liabilities | $3,254,958 | $3,167,617 | | Redeemable Noncontrolling Interests | $1,546,722 | $1,901,208 | | Total Equity | $1,996,237 | $1,734,510 | - Total assets slightly decreased from $6,803,335 thousand at December 31, 2023, to $6,797,917 thousand at March 31, 2024[26] - Total liabilities increased from $3,167,617 thousand to $3,254,958 thousand, while redeemable noncontrolling interests decreased significantly from $1,901,208 thousand to $1,546,722 thousand[34] - Total equity increased from $1,734,510 thousand to $1,996,237 thousand, reflecting changes from the 2024 Equity Transactions[34] Condensed Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations Summary | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:----------------------------|:----------------------------------|:----------------------------------| | Total Revenues | $657,473 | $590,137 | | Total Expenses | $523,453 | $439,569 | | Income (loss) from operations | $134,020 | $150,568 | | Total other income (expense) | $(170,593) | $121,403 | | Income (loss) before taxes | $(36,573) | $271,971 | | Net income (loss) | $(32,364) | $255,611 | | Net income (loss) attributable to Crescent Energy | $(24,168) | $59,794 | | Class A common stock – basic EPS | $(0.25) | $1.24 | - Total revenues increased by 11% YoY, from $590,137 thousand in Q1 2023 to $657,473 thousand in Q1 2024[31] - The company reported a net loss of $(32,364) thousand in Q1 2024, a significant decline from a net income of $255,611 thousand in Q1 2023, primarily due to a substantial loss on derivatives and increased interest expense[31] - Basic EPS for Class A common stock shifted from $1.24 in Q1 2023 to $(0.25) in Q1 2024[31] Condensed Consolidated Statements of Changes in Equity This section details the changes in the company's equity components, including stock transactions and net income attribution - The March 2024 Equity Transactions resulted in an increase of 13.8 million Class A Common Stock shares and a decrease of 16.1 million Class B Common Stock shares[36] - Redeemable noncontrolling interests decreased by $341.7 million, while Additional Paid-in Capital increased by $319.0 million due to the March 2024 Equity Transactions[33][36] Condensed Consolidated Statements of Changes in Equity Summary | Equity Component (in thousands) | Balance at Jan 1, 2024 | Net Income (Loss) | Distributions | Dividend to Class A | Equity-based Compensation | Change in Deferred Taxes | Change in Equity (2024 Equity Transactions) | Balance at Mar 31, 2024 | |:--------------------------------|:-----------------------|:------------------|:--------------|:--------------------|:--------------------------|:-------------------------|:--------------------------------------------|:------------------------| | Class A Common Stock Amount | $9 | — | — | — | — | — | $2 | $11 | | Class B Common Stock Amount | $9 | — | — | — | — | — | $(2) | $7 | | Additional Paid-in Capital | $1,626,501 | — | — | — | $14,556 | $(30,713) | $318,963 | $1,929,307 | | Retained Earnings | $95,447 | $(24,168) | — | $(12,649) | — | — | — | $58,630 | | Noncontrolling Interests | $29,687 | $3,499 | $(8,037) | — | $276 | — | — | $25,425 | Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Summary | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:----------------------------------|:----------------------------------|:----------------------------------| | Net cash provided by operating activities | $183,770 | $240,090 | | Net cash used in investing activities | $(157,461) | $(195,113) | | Net cash (used in) provided by financing activities | $(23,867) | $(43,672) | | Net change in cash, cash equivalents and restricted cash | $2,442 | $1,305 | - Net cash provided by operating activities decreased by $56.3 million (23%) YoY, from $240,090 thousand in Q1 2023 to $183,770 thousand in Q1 2024, primarily due to working capital changes[82][265] - Net cash used in investing activities decreased by $37.7 million (19%) YoY, from $(195,113) thousand to $(157,461) thousand, mainly due to a reduction in cash development capital expenditures[82][254] - Net cash used in financing activities decreased from $(43,672) thousand in Q1 2023 to $(23,867) thousand in Q1 2024, driven by debt transactions and Revolving Credit Facility borrowings, partially offset by OpCo Unit repurchases and distributions[82][255] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the reported financial data, clarifying accounting policies and significant transactions NOTE 1 – Organization and Basis of Presentation This note describes the company's corporate structure and the foundational principles used in preparing the financial statements - Crescent Energy Company is structured as an 'Up-C' holding company, with its sole material assets being units of Crescent Energy OpCo LLC ('OpCo')[85] - The March 2024 Equity Transactions involved the acquisition of 16.1 million OpCo Units, the cancellation of corresponding Class B Common Stock, and the issuance of 13.8 million Class A Common Stock shares, leading to a $341.7 million decrease in redeemable noncontrolling interests and a $319.0 million increase in Additional Paid-in Capital[73][87][102] - Redeemable noncontrolling interests are presented outside of permanent equity and recorded at the greater of carrying value or redemption amount, with changes recognized immediately[91][92] Redeemable Noncontrolling Interests Summary | Metric (in thousands) | Redeemable Noncontrolling Interests | |:----------------------|:------------------------------------| | Balance as of Dec 31, 2023 | $1,901,208 | | Net loss attributable | $(11,695) | | Distributions | $(88) | | Accrued OpCo distribution | $(5,627) | | Equity-based compensation | $12,950 | | Change associated with 2024 Equity Transactions | $(341,664) | | Balance as of Mar 31, 2024 | $1,546,722 | NOTE 2 – Summary of Significant Accounting Policies This note outlines the key accounting principles and estimation methods applied in the financial reporting - The preparation of financial statements requires management to make estimates and assumptions, particularly for fair value of acquired assets, oil and natural gas reserves, impairment, derivative valuation, and income taxes[89] Cash and Restricted Cash Summary | Cash and Restricted Cash (in thousands) | 2024 | 2023 | |:----------------------------------------|:-------|:-------| | Cash and cash equivalents | $5,321 | $2,930 | | Restricted cash – current | $261 | $8,631 | | Restricted cash – noncurrent | $5,589 | $5,048 | | Total cash, cash equivalents and restricted cash | $11,171 | $16,609 | NOTE 3 – Acquisitions and Divestitures This note details the company's recent acquisition and divestiture activities, including asset purchases and their financial impact - In February 2024, the company acquired a portfolio of oil and natural gas mineral interests in the Eagle Ford Basin for approximately $25.0 million cash[168] - In 2023, the company completed the July Western Eagle Ford Acquisition for $592.7 million and the October Western Eagle Ford Acquisition for $235.1 million, acquiring incremental working interests in existing assets[108][109] Acquired Assets Summary | Acquired Assets (in thousands) | Eagle Ford Minerals Acquisition (Mar 31, 2024) | July Western Eagle Ford Acquisition (Dec 31, 2023) | October Western Eagle Ford Acquisition (Dec 31, 2023) | |:-------------------------------|:-----------------------------------------------|:---------------------------------------------------|:----------------------------------------------------| | Cash consideration | $25,000 | $592,735 | $235,069 | | Oil and natural gas properties - proved | $12,865 | $595,025 | $239,573 | | Oil and natural gas properties - unproved | $12,135 | $22,310 | $9,819 | NOTE 4 – Derivatives This note explains the company's use of derivative contracts to manage commodity price volatility and their fair value - The company uses derivative contracts, including fixed price swaps and collars, to manage exposure to oil, natural gas, and NGL price volatility[110][111][119][155] Derivative Portfolio Summary | Derivative Type (as of Mar 31, 2024) | Volumes (in thousands) | Weighted Average Fixed Price | Fair Value (in thousands) | |:-------------------------------------|:-----------------------|:-----------------------------|:--------------------------| | Crude oil swaps – WTI (Bbls) | 8,065 | $68.24 | $(95,743) | | Crude oil collars – WTI (Bbls) | 5,244 | $63.16 – $81.71 | $(16,446) | | Natural gas swaps (MMBtu) | 30,860 | $3.69 | $39,487 | | Natural gas collars (MMBtu) | 13,750 | $3.38 – $4.56 | $14,133 | Gain (loss) on Derivatives | Gain (loss) on derivatives (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:------------------------------------------|:----------------------------------|:----------------------------------| | Realized gain (loss) on derivatives | $(22,806) | $(47,157) | | Unrealized gain (loss) on commodity hedges | $(82,796) | $197,467 | | Total Gain (loss) on derivatives | $(105,602) | $150,310 | NOTE 5 – Fair Value Measurements This note describes the methodologies and inputs used to determine the fair value of financial and non-financial assets and liabilities - Fair value measurements are classified into a three-level hierarchy based on the observability of inputs, with derivatives primarily using Level 2 inputs (quoted market prices for similar assets/liabilities or observable market data)[123][125][156] Fair Value Measurements (Level 2) | Fair Value (in thousands) | March 31, 2024 (Level 2) | December 31, 2023 (Level 2) | |:--------------------------|:-------------------------|:----------------------------| | Derivative assets | $89,039 | $116,406 | | Derivative liabilities | $(151,500) | $(96,070) | - Non-recurring fair value measurements, such as for oil and natural gas properties acquired through business combinations, use Level 3 inputs based on discounted cash flow models and market-based valuations[126][138] NOTE 6 – Accounts Payable and Accrued Liabilities This note provides a breakdown of the company's short-term financial obligations, including various payables and accrued expenses Accounts Payable and Accrued Liabilities Summary | Accounts Payable and Accrued Liabilities (in thousands) | March 31, 2024 | December 31, 2023 | |:--------------------------------------------------------|:---------------|:------------------| | Accounts payable | $138,478 | $125,010 | | Accrued lease and asset operating expense | $72,028 | $58,847 | | Accrued capital expenditures | $98,687 | $74,206 | | Accrued gathering, transportation and marketing expense | $38,366 | $56,088 | | Accrued revenue and royalties payable | $153,360 | $154,345 | | Accrued interest expense | $14,437 | $45,546 | | Total accounts payable and accrued liabilities | $574,633 | $613,543 | - Total accounts payable and accrued liabilities decreased from $613,543 thousand at December 31, 2023, to $574,633 thousand at March 31, 2024[142] NOTE 7 – Debt This note details the company's outstanding debt instruments, including senior notes and the revolving credit facility, and related transactions - In March 2024, the company issued $700.0 million aggregate principal amount of 7.625% Senior Notes due 2032 and used the proceeds to finance the tender offer and redemption of all outstanding 7.250% Senior Notes due 2026, incurring a $22.6 million loss on extinguishment of debt[131][157][234][266][269] - The Revolving Credit Facility's borrowing base was $2.0 billion at March 31, 2024, with $81.3 million outstanding borrowings and $21.6 million in letters of credit. Post-period, in April 2024, the borrowing base was reduced to $1.7 billion and the maturity date extended to April 10, 2029[166][190][274][285] - The company was in compliance with all covenants under the Revolving Credit Facility as of March 31, 2024[287] Debt Outstanding Summary | Debt Outstanding (in thousands) | March 31, 2024 | December 31, 2023 | |:--------------------------------|:---------------|:------------------| | Revolving Credit Facility | $81,300 | $23,500 | | 9.250% Senior Notes due 2028 | $1,000,000 | $1,000,000 | | 7.625% Senior Notes due 2032 | $700,000 | — | | 7.250% Senior Notes due 2026 | — | $700,000 | | Total long-term debt | $1,749,226 | $1,694,375 | NOTE 8 – Asset Retirement Obligations This note outlines the liabilities associated with the future dismantling and abandonment of oil and natural gas properties Asset Retirement Obligations (ARO) Liabilities Summary | ARO Liabilities (in thousands) | Three Months Ended March 31, 2024 | |:-------------------------------|:----------------------------------| | Balance at beginning of period | $445,060 | | Additions | $596 | | Retirements | $(3,111) | | Accretion expense | $7,729 | | Balance at end of period | $450,274 | | Noncurrent portion | $424,232 | NOTE 9 – Commitments and Contingencies This note discloses the company's contractual commitments and potential liabilities arising from legal proceedings or other events - The company is involved in legal proceedings in the normal course of business but is currently unaware of any that would have a material adverse effect on its financial position, results of operations, or cash flows[78][80][317] NOTE 10 – Equity-Based Compensation Awards This note describes the various equity-based compensation plans and their impact on the company's financial statements - Equity-based compensation awards include profits interests, RSUs, and PSUs, with vesting conditions based on service, performance, and market factors[86] - In April 2024, 116 thousand equity-classified LTIP RSUs were granted to directors, officers, and employees, vesting over one to three years[62] - The number of equity-classified Manager PSU target Class A Shares increased by 1.4 million due to the March 2024 Equity Transactions, resulting in an additional $14.1 million expense[63] Equity-based Compensation Expense | Equity-based Compensation Expense (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:-------------------------------------------------|:----------------------------------|:----------------------------------| | Liability-classified profits interest awards | $393 | $(212) | | Equity-classified profits interest awards | $276 | $1,553 | | Equity-classified LTIP RSU awards | $297 | $391 | | Equity-classified LTIP PSU awards | $159 | — | | Equity-classified Manager PSUs | $27,049 | $5,873 | | Total equity-based compensation expense (income) | $28,174 | $7,605 | NOTE 11 – Related Party Transactions This note details transactions and agreements with related parties, including management services and capital market fees - The company has a Management Agreement with KKR Energy Assets Manager LLC, which provides senior executive management and services for an annual fee of $55.5 million, increasing with OpCo ownership and equity issuances[49][50] - Incentive Compensation targets the Manager to receive 10% of outstanding Class A Common Stock based on performance, settled in five tranches over five years[51] - Fees paid to KKR Capital Markets LLC (KCM) for capital market transactions increased from $1,100 thousand in Q1 2023 to $1,838 thousand in Q1 2024[52] - Related party receivables from KKR Funds were $5.0 million and payables were $8.3 million as of March 31, 2024[60] NOTE 12 – Earnings Per Share This note explains the calculation of basic and diluted earnings per share for the company's common stock - The company uses the two-class method for EPS calculation, with Class A Common Stock entitled to dividends and Class B Common Stock having no dividend rights but receiving pro rata distributions from OpCo[187] Earnings Per Share Metrics | EPS Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:------------------------------------------|:----------------------------------|:----------------------------------| | Net income (loss) attributable to Crescent Energy - basic | $(24,168) | $59,794 | | Weighted-average Class A common stock outstanding – basic | 94,793,415 | 48,282,163 | | Class A common stock – basic EPS | $(0.25) | $1.24 | | Class A common stock – diluted EPS | $(0.25) | $1.24 | | Weighted-average Class B common stock outstanding – basic and diluted | 84,332,739 | 118,645,323 | - Diluted EPS for Class A common stock was $(0.25) in Q1 2024, compared to $1.24 in Q1 2023, with 0.9 million PSUs and 0.1 million RSUs excluded from the 2024 diluted EPS calculation as they were antidilutive[175][187] NOTE 13 – Subsequent Events This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On May 6, 2024, the Board approved a quarterly cash dividend of $0.12 per share ($0.48 annualized) for Class A Common Stock, payable June 7, 2024[75][177] - On April 1, 2024, 6.0 million OpCo Units were exchanged for Class A Common Stock (April 2024 Class A Conversion), increasing Class A shares by 6.0 million and decreasing Class B shares by 6.0 million[189] - On April 10, 2024, the Revolving Credit Facility was amended, reducing the borrowing base from $2.0 billion to $1.7 billion and extending the maturity date to April 10, 2029[190] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Crescent Energy Company's financial condition, results of operations, and liquidity for the three months ended March 31, 2024, compared to the same period in 2023, highlighting key business developments, market impacts, and financial performance metrics Business This section describes Crescent Energy's core business strategy, focusing on disciplined growth and its asset portfolio in key basins - Crescent Energy is a U.S. energy company focused on disciplined growth through acquisitions and consistent return of capital[179] - Its asset portfolio consists of low-decline, cash-flow oriented mid-cycle unconventional and conventional assets with long reserve life and high-return development locations in the Eagle Ford and Uinta basins[179] Geopolitical developments and economic environment This section discusses the impact of global geopolitical events and economic conditions on commodity prices and the company's operations - Commodity prices have experienced significant volatility due to the COVID-19 pandemic, Russia-Ukraine conflict, Israel-Hamas conflict, OPEC actions, supply chain constraints, and elevated interest rates[192][223] - The Inflation Reduction Act of 2022 (IRA 2022) could accelerate the transition away from fossil fuels, potentially decreasing demand for oil and gas, and imposes a methane emissions charge starting in 2025[181] - The SEC finalized rules for climate-related disclosures, which, if implemented, will require the company to incur compliance costs[194] - Sustained inflation has led to increased interest rates and higher costs for oilfield goods, services, and personnel, which could negatively impact financial results if not offset by higher commodity prices[203][204] Capital markets transactions This section outlines the company's recent equity and debt transactions in the capital markets - In March 2024, the company completed the March 2024 Equity Transactions, involving the acquisition of 16.1 million OpCo Units, cancellation of Class B Common Stock, and issuance of 13.8 million Class A Common Stock shares in a public offering[205] - In April 2024, 6.0 million OpCo Units were exchanged for Class A Common Stock (April 2024 Class A Conversion), further increasing Class A shares and decreasing Class B shares[189] - In March 2024, the company issued $700.0 million of 7.625% Senior Notes due 2032, using proceeds to finance the tender offer and redemption of all outstanding 2026 Notes[184] Acquisitions and divestitures This section details the company's recent asset acquisition and divestiture activities, including their financial impact - In February 2024, the company acquired oil and natural gas mineral interests in the Eagle Ford Basin for approximately $25.0 million, funded by Revolving Credit Facility borrowings[197] - In 2023, the company completed the July Western Eagle Ford Acquisition ($592.7 million) and the October Western Eagle Ford Acquisition ($235.1 million), acquiring incremental working interests in existing Western Eagle Ford assets[198][207] Stewardship This section highlights the company's commitment to environmental, social, and governance initiatives, including methane emissions management - The company is a member of the Oil & Gas Methane Partnership 2.0 Initiative (OGMP 2.0) and received Gold Standard pathway ratings in 2022 and 2023 for its methane emissions plan[199] - A Sustainability Advisory Council has been established to advise management and the Board on sustainability-related issues[199] How we evaluate our operations This section explains the key financial and operational metrics used by management to assess the company's performance and capital program - The company assesses performance using metrics such as production volumes, commodity prices, operating expenses, Adjusted EBITDAX (non-GAAP), and Levered Free Cash Flow (non-GAAP)[201][209][210] - The capital program is designed to prioritize attractive risk-adjusted returns and meaningful free cash flow, with inherent flexibility to adjust to market conditions[201][219] Sources of revenues This section describes the primary drivers of the company's revenue, including sales of oil, natural gas, and NGLs - Revenues are primarily derived from the sale of oil, natural gas, and NGL production, influenced by production volumes and realized prices[202] Revenue Mix by Commodity | Revenue Mix | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:------------|:----------------------------------|:----------------------------------| | Oil | 76% | 65% | | Natural gas | 13% | 28% | | NGLs | 11% | 7% | - Midstream and other revenue, supported by minimum volume commitments, accounted for 6% or less of total revenues in both periods[211] Production volumes sold This section provides data on the company's sales volumes for oil, natural gas, and NGLs over the reporting periods Production Sales Volumes | Sales Volumes | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:--------------|:----------------------------------|:----------------------------------| | Oil (MBbls) | 6,403 | 5,320 | | Natural gas (MMcf) | 36,704 | 31,550 | | NGLs (MBbls) | 2,568 | 1,712 | | Total (MBoe) | 15,088 | 12,290 | | Daily average (MBoe/d) | 166 | 137 | - Total sales volume increased by 2,798 MBoe (23%) in Q1 2024 compared to Q1 2023, primarily driven by the Western Eagle Ford Acquisitions[213] Commodity prices and differentials This section discusses the impact of commodity prices and hedging strategies on the company's realized revenues - The company uses derivative contracts to economically hedge a portion of estimated production to reduce the impact of commodity price fluctuations and protect cash flow[214] Commodity Hedging Percentage | Commodity Hedged | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:-----------------|:----------------------------------|:----------------------------------| | Oil | 63% | 62% | | Natural gas | 40% | 58% | | NGLs | —% | 41% | Average Commodity Prices | Average Prices | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:---------------|:----------------------------------|:----------------------------------| | Oil (Bbl): Average NYMEX | $76.96 | $76.13 | | Oil (Bbl): Realized price (excluding derivative settlements) | $74.01 | $69.99 | | Natural Gas (Mcf): Average NYMEX | $2.24 | $3.42 | | Natural Gas (Mcf): Realized price (excluding derivative settlements) | $2.18 | $5.14 | | NGLs (Bbl): Realized price (excluding derivative settlements) | $26.07 | $24.84 | Results of operations The company experienced an 11% increase in total revenues for the three months ended March 31, 2024, compared to the prior year, driven by higher oil and NGL revenues, but offset by a significant decrease in natural gas revenue. Total expenses increased by 19%, primarily due to higher operating and general and administrative expenses, leading to a net loss Revenues This section details the changes in revenue streams from oil, natural gas, NGLs, and midstream activities Revenue Breakdown by Commodity | Revenue (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | $ Change | % Change | |:-----------------------|:----------------------------------|:----------------------------------|:---------|:---------| | Oil | $473,894 | $372,336 | $101,558 | 27% | | Natural gas | $79,944 | $162,021 | $(82,077) | (51)% | | Natural gas liquids | $66,947 | $42,523 | $24,424 | 57% | | Midstream and other | $36,688 | $13,257 | $23,431 | 177% | | Total revenues | $657,473 | $590,137 | $67,336 | 11% | - Oil revenue increased by $101.6 million (27%) due to a 19% increase in sales volume from Western Eagle Ford Acquisitions and 6% higher realized prices[228] - Natural gas revenue decreased by $82.1 million (51%) primarily due to a 58% decrease in realized prices, partially offset by a 15% increase in sales volume[239] - NGL revenue increased by $24.4 million (57%) driven by higher realized prices (5% per Bbl) and increased sales volume (47%) from Western Eagle Ford Acquisitions[218][240] Expenses This section analyzes the changes in operating, depreciation, general and administrative, and interest expenses Expense Breakdown | Expense (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | $ Change | % Change | |:-----------------------|:----------------------------------|:----------------------------------|:---------|:---------| | Operating expense | $304,174 | $271,848 | $32,326 | 12% | | Depreciation, depletion and amortization | $176,564 | $146,483 | $30,081 | 21% | | General and administrative expense | $42,715 | $21,238 | $21,477 | 101% | | Total expenses | $523,453 | $439,569 | $83,884 | 19% | - General and administrative expense increased by $21.5 million (101%), primarily due to a $20.6 million increase in non-cash equity-based compensation expense and higher Manager Compensation[231][232] - Interest expense increased by $13.4 million (46%) to $42.7 million, driven by higher average debt balances from acquisitions and increased interest rates[233][245] - A loss on extinguishment of debt of $22.6 million was incurred in Q1 2024 due to the repurchase of 2026 Notes[234] - The company recognized an income tax benefit of $4.2 million in Q1 2024, compared to an expense of $16.4 million in Q1 2023, with an effective tax rate of 11.5% and 6.0% respectively[247][259] Adjusted EBITDAX (non-GAAP) and Levered Free Cash Flow (non-GAAP) This section presents and reconciles key non-GAAP financial measures used to evaluate the company's operational performance and liquidity Adjusted EBITDAX and Levered Free Cash Flow | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | $ Change | % Change | |:----------------------|:----------------------------------|:----------------------------------|:---------|:---------| | Adjusted EBITDAX | $313,323 | $231,979 | $81,344 | 35% | | Levered Free Cash Flow | $66,124 | $1,498 | $64,626 | 4,314% | - Adjusted EBITDAX increased by $81.3 million (35%) due to higher realized oil prices and increased production from Western Eagle Ford Acquisitions[262] - Levered Free Cash Flow increased significantly by $64.6 million (4,314%), driven by increased Adjusted EBITDAX and $8.4 million decreased capital expenditures[249] Liquidity and capital resources This section discusses the company's sources and uses of cash, including operating cash flow, debt, and capital expenditures - Primary liquidity sources include cash flow from operations, borrowings under the Revolving Credit Facility, and opportunistic capital market offerings[250] - Primary uses of capital are for dividends, debt repayment, development of existing assets, and acquisitions[250] Cash Flow Activities Summary | Cash Flow (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |:-------------------------|:----------------------------------|:----------------------------------| | Net cash provided by operating activities | $183,770 | $240,090 | | Net cash used in investing activities | $(157,461) | $(195,113) | | Net cash (used in) provided by financing activities | $(23,867) | $(43,672) | - Cash used in development of oil and natural gas properties decreased by $53.7 million in Q1 2024 compared to Q1 2023, while cash used in acquisitions increased by $8.2 million[254][276] - The company paid a quarterly cash dividend of $0.12 per share of Class A Common Stock on March 28, 2024[277] Critical accounting policies and estimates This section confirms the consistency of the company's significant accounting policies and estimates with prior disclosures - There have been no material changes to the company's significant accounting policies and critical accounting estimates as of March 31, 2024, as previously disclosed in the Annual Report[279] Non-GAAP financial measures This section defines and explains the company's non-GAAP financial measures, such as Adjusted EBITDAX and Levered Free Cash Flow - Adjusted EBITDAX is defined as net income (loss) before interest expense, loss from extinguishment of debt, income tax expense (benefit), depreciation, depletion and amortization, exploration expense, non-cash gain (loss) on derivatives, non-cash equity-based compensation, (gain) loss on sale of assets, other (income) expense and transaction and nonrecurring expenses, further adjusted for certain redeemable noncontrolling interest distributions and settlement of acquired derivative contracts[295] - Levered Free Cash Flow is defined as Adjusted EBITDAX less interest expense (excluding non-cash amortization), loss from extinguishment of debt (excluding non-cash write-off), current income tax benefit (expense), tax-related redeemable noncontrolling interest distributions, and development of oil and natural gas properties[296] - These non-GAAP measures are used by management and investors to assess operating results and liquidity, providing transparency and comparability, but should not be considered alternatives to GAAP measures[294][297][309] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details Crescent Energy Company's exposure to market risks, primarily commodity price volatility and interest rate risk, and outlines its strategies for managing these risks through derivative contracts and counterparty credit assessments - The company's major market risk exposure is the pricing received for its oil, natural gas, and NGL production, which is volatile and unpredictable[37][311] - To mitigate commodity price risk, the company regularly enters into commodity derivative contracts (swaps and collars) for a portion of its estimated production[324] - As of March 31, 2024, the derivative portfolio had an aggregate notional value of approximately $1.7 billion and a net liability fair market value of $62.5 million[300] - A hypothetical 10% increase in commodity prices would change the derivative position by approximately $130.2 million, while a 10% decrease would change it by approximately $114.0 million[301] - The company is exposed to interest rate risk on its variable rate debt. A 1% increase or decrease in the average interest rate would result in an approximately $0.2 million change in interest expense for Q1 2024[39][327] - Credit risk for derivative instruments is minimized by contracting only with creditworthy financial institutions, and counterparty creditworthiness is subject to periodic review[38][304] Item 4. Controls and Procedures This section confirms the effectiveness of Crescent Energy Company's disclosure controls and procedures as of March 31, 2024, based on evaluations by the Chief Executive Officer and Chief Financial Officer, and states that there have been no material changes in internal control over financial reporting - The company maintains Disclosure Controls designed to ensure timely and accurate reporting of information required under the Exchange Act[40][315] - The CEO and CFO concluded that the Disclosure Controls were effective as of March 31, 2024[41] - There has been no change in internal control over financial reporting during the three months ended March 31, 2024, that has materially affected or is reasonably likely to materially affect it[42] Part II – Other Information This section provides additional disclosures on legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings This section states that Crescent Energy Company is involved in routine litigation and claims but is currently unaware of any legal proceedings that would individually or in aggregate have a material adverse effect on its financial position, results of operations, or cash flows - The company is involved in litigation and claims arising in the normal course of business[317] - Management is currently unaware of any proceedings that will individually or in the aggregate have a material adverse effect on the company's financial position, results of operations, or cash flows[317] Item 1A. Risk Factors This section refers readers to the comprehensive discussion of risks applicable to Crescent Energy Company's business and the oil and gas industry, as detailed in its Annual Report on Form 10-K, emphasizing that the materialization of these risks could adversely affect the company's business, financial condition, or results of operations - Risks applicable to the company's business and the oil and gas industry are described in 'Item 1A. Risk Factors' in the Annual Report on Form 10-K for the year ended December 31, 2023[44] - If any of the described risks and uncertainties occur, the company's business, financial condition, or results of operations could be materially adversely affected[44] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details Crescent Energy Company's stock repurchase program, including the authorization limit, the repurchase of OpCo Units in March 2024, and the remaining value under the program, noting the applicability of the IRA 2022 excise tax - The Board of Directors authorized a $150.0 million stock repurchase program on March 4, 2024, with a two-year term, allowing repurchases of Class A Common Stock or OpCo Units[319] - As part of the March 2024 Repurchase, OpCo repurchased 2,300,000 OpCo Units for $22.7 million in cash ($9.87 per unit), leading to the cancellation of corresponding Class B Common Stock shares[318] - Following the March 2024 Repurchase, $127.3 million remains available under the stock repurchase program[318] - The 1% U.S. federal excise tax on stock repurchases under the IRA 2022 applies to repurchases of Class A Common Stock[319] Item 3. Defaults Upon Senior Securities This section explicitly states that Crescent Energy Company has not experienced any defaults upon its senior securities during the reported period - There were no defaults upon senior securities[320] Item 4. Mine Safety Disclosures This section indicates that the disclosure requirements for mine safety are not applicable to Crescent Energy Company's operations - This item is not applicable to the registrant[332] Item 5. Other Information This section reports that no director or officer of Crescent Energy Company adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended March 31, 2024 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2024[54] Item 6. Exhibits This section provides a comprehensive list of exhibits filed as part of the Quarterly Report on Form 10-Q, including various agreements, corporate documents, certifications, and XBRL interactive data files - The exhibits include purchase and sale agreements, amended and restated certificates of incorporation and by-laws, various supplemental indentures, and the Seventh Amendment to the credit agreement[46][335] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included[335] - XBRL Instance Document, Schema Document, Calculation Linkbase Document, Label Linkbase Document, Presentation Linkbase Document, Definition Linkbase Document, and Cover Page Interactive Data File are furnished[335]