Crescent Energy Company (NYSE: CRGY) — 2023 Form 10-K
Business context and reporting period. This is the annual report for the fiscal year ended December 31, 2023, not a standalone fourth-quarter report. Crescent is a U.S. oil and gas producer with assets concentrated in the Eagle Ford and Rockies, and positions in the Uinta and other basins. It reported production of 149 thousand Boe per day, up 8% year over year, with growth largely reflecting the 2023 Western Eagle Ford acquisitions. The company is externally managed by a KKR affiliate and operates through OpCo.
Key financial results
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $2.383 billion | $3.057 billion | Down 22% |
| Operating income | $324.7 million | $1.284 billion | Down 75% |
| Net income, consolidated | $322.0 million | $480.6 million | Down 33% |
| Net income attributable to Crescent | $67.6 million | $96.7 million | Down 30% |
| Class A diluted EPS | $1.02 | $2.20 | Down 54% |
| Net cash from operating activities | $935.8 million | $1.012 billion | Down 8% |
| Adjusted EBITDAX (non-GAAP) | $1.023 billion | $1.167 billion | Down 12% |
| Levered free cash flow (non-GAAP) | $310.2 million | $434.1 million | Down 29% |
Oil and gas property development cash expenditures were $581.4 million; acquisitions used $849.3 million, primarily for Western Eagle Ford assets. Net cash used in investing activities was $1.399 billion. The reported operating margin was approximately 13.6% of revenue, compared with approximately 42.0% in 2022.
Average realized prices before derivative settlements fell: oil to $72.09 per barrel from $90.06, natural gas to $2.84 per Mcf from $5.97, and NGLs to $22.76 per barrel from $37.72. Sales volume rose 8% to 54.5 million Boe, partially offsetting price declines. The filing reports a $167.0 million gain on derivatives, while cash paid on derivative settlements was $153.7 million.
Debt, liquidity, reserves and capital returns
- At year-end, long-term debt carrying value was $1.694 billion; principal outstanding was approximately $1.724 billion, comprising $700 million of 7.25% notes due 2026, $1 billion of 9.25% notes due 2028, and $23.5 million drawn on the revolving facility. The notes carry high fixed coupons; the revolver’s year-end weighted average rate was 9.75%.
- The revolver had a $2.0 billion borrowing base and $1.3 billion elected commitment; after $23.5 million of borrowings and $14.4 million of letters of credit, reported available borrowings were $1.262 billion. Cash and cash equivalents were $3.0 million (cash, cash equivalents and restricted cash totaled $8.7 million).
- Proved reserves were 548.2 million Boe, approximately 64% liquids, down from 572.8 million Boe. Standardized measure fell to $5.289 billion from $9.135 billion; PV-10 was $5.566 billion versus $9.602 billion. These reserve values use SEC pricing assumptions and are not estimates of market value.
- The company paid $0.53 per Class A share in 2023. In March 2024, the board approved a $0.12-per-share quarterly dividend for the fourth quarter of 2023. It also authorized a discretionary $150 million share repurchase program with a two-year term; the program does not obligate repurchases.
Material changes, outlook and unusual items
- Revenue declined despite higher production, as lower commodity prices more than offset acquisition-related volume growth. Lower prices also drove a substantial reduction in reserve values and a downward revision of approximately 105.9 million Boe in proved reserves, primarily associated with price changes.
- 2023 included $153.5 million of impairment expense ($149.6 million on oil and gas properties and $3.9 million on an equity investment), versus $142.9 million in 2022. Certain Wyoming conventional assets had limited impairment cushion at year-end.
- General and administrative expense rose 66% to $140.9 million. Equity-based compensation was $82.9 million, including a $30.4 million catch-up expense from a change in estimate tied to the increase in Class A shares. Interest expense increased 52% to $145.8 million, reflecting higher debt balances and borrowing costs.
- Management expects 2024 capital spending of approximately $550–$625 million, excluding acquisitions, with about 90% of the development program allocated to operated assets, primarily Eagle Ford and Uinta. It expects to fund the program from operating cash flow and may defer spending depending on prices, returns, costs, permits and other conditions.
- Management expects compliance with debt covenants and ordinary-course contractual commitments under its current assumptions. Key risks include commodity-price volatility, acquisition integration, service and inflation costs, water and midstream constraints, environmental and methane regulation, and access to capital. The filing identifies $445.1 million of asset retirement obligations and $375.3 million of future transportation and gathering commitments; 2023 minimum-volume deficiency expense was $15.6 million.
- The company reported no known legal proceedings expected by management to have a material adverse effect. The financial statements received an unqualified audit opinion, and management and the auditor concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Track realized prices, hedging effects and production growth to assess whether acquisition-driven volume gains can offset weaker commodity pricing.
- Review debt maturities, the 9.25% 2028 notes, revolver availability and covenant headroom, including the effect of future borrowing-base redeterminations.
- Assess the sustainability of 2024 capital spending and dividends against operating cash flow, acquisition needs and leverage.
- Examine reserve revisions, development assumptions and impairment sensitivity, particularly for Wyoming conventional assets; SEC reserve valuations depend on prescribed pricing and cost assumptions.
- Evaluate KKR-related management fees and incentive awards, potential share dilution, and the company’s controlled-company governance structure.
- Monitor integration and operating performance of the Western Eagle Ford acquisitions, along with gathering, transportation, water-disposal and minimum-volume obligations.