Crescent Energy Company (NYSE: CRGY) — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; it does not provide a clear standalone 2022 fourth-quarter results summary. Unless noted otherwise, amounts are in U.S. dollars.
Business context
Crescent is a U.S. oil and gas exploration and production company with assets across the Eagle Ford, Rockies, Barnett and other basins. Its strategy emphasizes cash flow, low-decline production, disciplined reinvestment and active commodity hedging. At year-end, 96% of acreage was held by production. The March 2022 Uinta acquisition expanded the portfolio.
Key financial and operating metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $3.057 billion | $1.477 billion |
| Income from operations | $1.284 billion | $483.7 million |
| Consolidated net income (loss) | $480.6 million | $(432.2) million |
| Net income (loss) attributable to Crescent | $96.7 million | $(19.4) million |
| Class A EPS | $2.20 | $(0.46) |
| Net cash from operating activities | $1.012 billion | $233.1 million |
| Adjusted EBITDAX (non-GAAP) | $1.217 billion | $520.1 million |
| Levered free cash flow (non-GAAP) | $484.0 million | $276.7 million |
Production averaged 138 thousand Boe per day, up from 94 thousand, and total sales volume rose 47% to 50.4 million Boe. Revenue growth reflected both higher realized prices and increased volumes from acquisitions. Realized prices before derivatives rose to $90.06 per barrel of oil, $5.97 per Mcf of natural gas and $37.72 per barrel of NGLs. Operating costs per Boe also increased: total production costs were $19.84 per Boe versus $17.41 in 2021.
Development spending was $624.9 million; cash spent on acquisitions of oil and gas properties was $626.6 million, primarily related to Uinta. Cash and cash equivalents were zero at year-end; cash and restricted cash totaled $15.3 million, including restricted funds.
Debt, liquidity and reserves
Year-end long-term debt carrying value was $1.248 billion, compared with $1.030 billion in 2021. Debt included $700 million of 7.25% senior notes due 2026 and $559.4 million drawn on the revolving credit facility. The revolver had $730.8 million of available borrowings, a $2.0 billion borrowing base and a $1.3 billion elected commitment; its year-end weighted-average rate was 6.98%. Debt is secured under the revolver and subject to financial covenants and borrowing-base redeterminations.
Proved reserves were 572.8 million Boe, up from 531.6 million, and approximately 56% were liquids. The filing reports $9.6 billion of proved-reserve PV-10 and a $9.1 billion standardized measure. These reserve valuations use SEC trailing-average prices and are not estimates of market value.
Material changes and unusual items
- Revenue increased 107% and Adjusted EBITDAX increased 134% year over year, supported by higher prices, acquisitions and production growth. Comparability is affected by acquisitions and the company’s 2021 formation/reorganization.
- The Uinta transaction closed in March 2022; total purchase price after adjustments was $632.4 million. Crescent also sold non-core Permian properties for approximately $80 million in December.
- Derivative loss was $676.9 million in the income statement; cash realized derivative losses were $779.3 million. The difference reflects unrealized gains and other derivative accounting effects. Hedging reduced realized prices relative to unhedged prices.
- Crescent recorded $142.9 million of impairment expense: $77.7 million for goodwill and $65.2 million for oil and gas properties. Goodwill was written down to zero.
- Interest expense rose to $95.9 million from $50.7 million, reflecting higher average debt and interest rates. Production taxes and operating costs also increased.
- In February 2023, Crescent issued $400 million of 9.25% senior notes due 2028 and used net proceeds to repay part of its revolver balance.
Outlook, risks and contingencies
Management expects 2023 capital spending of approximately $575–$650 million, excluding acquisitions, primarily for drilling and completion activity, and expects to fund it from operating cash flow. The program is flexible and may be reduced or deferred depending on prices, returns, costs, equipment, infrastructure, permits and partner participation. The filing does not provide a clear production or earnings guidance range.
The Board approved a $0.17 per-share quarterly dividend for the fourth quarter of 2022, payable in March 2023. Future dividends remain subject to Board approval, cash flows, financial condition and debt restrictions. Management expected covenant compliance for the foreseeable future.
Key risks include oil, gas and NGL price volatility; inflation and service-cost increases; debt and borrowing-base changes; reserve-estimation uncertainty; acquisition integration and Uinta midstream constraints; derivative losses and counterparty risk; transportation and water availability; and environmental, climate and methane regulation. The Inflation Reduction Act introduces a methane emissions charge beginning in 2024 for covered sources. The company also relies on KKR’s Manager under a paid management agreement and has a controlled-company governance structure.
Management reported no legal proceedings expected to have a material adverse effect. A New Mexico regulatory matter was resolved by a stipulated order: a $0.1 million civil penalty plus $500 per day for each late or missing C-115 report from May 1, 2022 through April 30, 2023. The filing also identifies plugging and abandonment obligations and transportation commitments; it reports $365.6 million of asset retirement obligations at year-end.
Important facts for investors to verify
- Reconcile consolidated net income of $480.6 million with the $96.7 million attributable to Crescent, given substantial redeemable noncontrolling interests and Crescent’s approximately 29% ownership of OpCo at year-end.
- Assess hedge volumes, settlement prices, future hedge coverage and cash-flow exposure; distinguish realized cash settlements from GAAP derivative gains and losses.
- Confirm the 2023 capital plan, production performance and Uinta integration progress, including midstream takeaway capacity and cost inflation.
- Review debt maturities, the 2023 note refinancing, revolver availability, borrowing-base redeterminations, covenants and interest-rate exposure.
- Evaluate reserve sensitivity to commodity-price and cost assumptions, PUD development requirements, impairment risks and asset retirement obligations.
- Consider potential dilution and governance implications from OpCo unit exchanges, registered resales, KKR’s management and incentive arrangements, and the controlling preferred stockholder.