CRESCENT ENERGY COMPANY Item 2.02. Results of Operations and Financial Condition.
OnFebruary 7, 2022 , 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.
Preliminary Production Data for the Three Months Ended
As of the date of this current report, we have not finalized our financial and operational results for the three months or the year endedDecember 31, 2021 . However, based on preliminary information, we estimate that our December production ranged from 112 to 118 MBoe/d including Contango (as defined below) production after the close of the Merger Transactions (as defined below) onDecember 7, 2021 . This preliminary estimate is derived from our internal records and is based on the most current information available to management as to the outcome and timing of future events, including current planned capital expenditures, drilling activity, commodity prices and well results, as well as current expected unit costs for 2022. This preliminary estimate has not been audited or reviewed by our independent auditors nor have our independent auditors performed any procedures with respect to this information or expressed any opinion or any form of assurance on such information. This preliminary estimate is preliminary, unaudited and inherently uncertain. Our normal reporting processes with respect to the foregoing preliminary estimate have not been fully completed and our auditors have not completed an audit or review of such estimate. During the course of our and our auditors' review on this preliminary estimate, we could identify items that would require us to make adjustments and which 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.
OnFebruary 7, 2022 ,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$150 million aggregate principal amount of 7.250% Senior Notes due 2026. 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.
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--------------------------------------------------------------------------------Item 8.01 Other Events.
OnFebruary 7, 2022 , in connection with the Notes Offering (as defined below), CRGY provided certain updated disclosures to potential investors, the relevant excerpts of which are set forth below. ****** Our proved developed producing ("PDP") reserves as ofDecember 31, 2021 have estimated average five-year and ten-year annual decline rates of approximately 11% and 10%, respectively, and an estimated 2022 PDP decline rate of 17%, based on production type curves used in our reserve reports. As a result of this low decline profile, we require relatively minimal capital expenditures to maintain our production and cash flows. Our properties located in the Eagle Ford, Barnett and the Rockies represent approximately 78% of our PD reserves as ofDecember 31, 2021 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 leasehold acreage positions, reserve volumes and weighted average decline profiles associated with our proved assets as ofDecember 31, 2021 and our pro forma production for the nine months endedSeptember 30, 2021 . Net 9 Months Net Proved Net PD Ended Proved % Oil & Net PD Weighted Average PV PV 9/30/21 PF Net Acreage Reserves Liquids Reserves Annual PDP Decline(1) ($MM)(2) ($MM)(2) Production Operating Area (in thousands) (MMBoe) (MMBoe) Five Year Ten Year PV-10 PV-10 (MBoe/d) Eagle Ford 143 136 79 % 84 13 % 11 % 1,954 1,306 28 Rockies(3) 243 147 52 % 143 10 % 10 % 1,319 1,250 35 Barnett 133 129 16 % 129 6 % 6 % 605 605 23 Permian 107 54 69 % 37 15 % 12 % 594 458 10 Mid Con 365 40 67 % 40 11 % 10 % 413 411 12 Other(4) 37 25 71 % 25 17 % 12 % 274 274 8 Total 1,029 532 54 % 459 11 % 10 % 5,159 4,305 115
(1) Reflects the estimated average annual decline rates of our PDP reserves as of
ten-year period ending
type curves used in estimating our proved reserves.
(2) Reflects the net proved and net PD present values reflected in our proved
reserve estimates as of
prepared in accordance with
("GAAP"). Neither PV-10 or standardized measure represent an estimate of the
fair market value of our oil and natural gas properties. We believe that the
presentation of PV-10 is relevant and useful to our investors as supplemental
disclosure to the standardized measure of future net cash flows, or after tax
amount, because it presents the discounted future net cash flows attributable
to our reserves prior to taking into account future income taxes and our
current tax structure. We and others in the industry use PV-10 as measures 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 none of PV-10 and standardized measure
represent an estimate of the fair market value of our proved reserves.
The following table presents a reconciliation of our PV-0 and PV-10 to the GAAP financial measure of Standardized Measure.
SEC Pricing
As of December 31, 2021
PV-10 of proved reserves $ 5,158,824
Impact removal of 10% discount rate 4,232,083
PV-0 9,390,907
Future income taxes (352,136 )
Future net cash flows 9,038,771
Impact of 10% discount rate (4,080,471 )
Standardized Measure $ 4,958,300
(3) We have a contractual right to participate in 28,768 net acres in the DJ
basin through an agreement with a large operator and will be entitled to
receive our proportionate share of acreage in the future based on our
participation in proposed wells.
(4) Includes working interest properties located in
diversified minerals.
******
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We had leasehold interests in an aggregate 1,029 thousand net acres as of
******
As of December 31, 2021 , we owned mineral and royalty interests in 174 thousand
gross acres and an overriding royalty interest in 117 thousand gross acres, both
operated by large, well-capitalized oil and natural gas companies located
primarily in the Eagle Ford, Marcellus, Utica and the Rockies. These interests
entitle us to receive an average 5.4% royalty and 0.7% overriding royalty
interest on all production from such acreage with no additional future capital
or operating costs required.
******
The below table describes the net acreage, net PDP wells and proved reserve
amounts for each of our geographic areas as of
Geographic Area Net Acreage Net PDP Wells Proved Reserves
(in thousands) (MBoe)
Eagle Ford Shale 143 666 136,175
Barnett Shale 133 899 129,354
Mid Con 365 1,372 40,146
Rockies(1) 243 1,239 146,584
Permian Basin 107 1,112 54,056
Other Basins(2) 37 609 25,330
(1) We have a contractual right to participate in 28,768 net acres in the DJ
basin through an agreement with a large operator and will be entitled to
receive our proportionate share of acreage in the future based on our
participation in proposed wells.
(2) Includes working interest properties located in
diversified minerals.
Oil, natural gas and NGL data
The following table summarizes our estimated net proved reserves as of
As of December 31, 2021(1)
Net Proved Reserves:
Oil (MBbls) 210,160
Natural gas (MMcf) 1,469,953
NGLs (MBbls) 76,493
Total Proved Reserves (MBoe) 531,645
Standardized Measure (thousands)(2) 4,958,300
PV-0 (thousands)(2) $ 9,390,907
PV-10 (thousands)(2) $ 5,158,824
Net Proved Developed Reserves:
Oil (MBbls) 158,091
Natural gas (MMcf) 1,404,570
NGLs (MBbls) 66,402
Total Proved Developed Reserves (MBoe) 458,587
PV-0 (thousands)(2) $ 7,494,842
PV-10 (thousands)(2) $ 4,304,510
Net Proved Undeveloped Reserves:
Oil (MBbls) 52,069
Natural gas (MMcf) 65,383
NGLs (MBbls) 10,091
Total Proved Undeveloped Reserves (MBoe) 73,057
PV-0 (thousands)(2) $ 1,896,065
PV-10 (thousands)(2) $ 854,314
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(1) Our reserves and present values were determined using average
first-day-of-the-month prices for the prior 12 months in accordance with
guidance. For oil and NGL volumes, the average WTI posted price of
barrel as of
quality, local conditions, gathering, transportation fees and distance from
market. For natural gas volumes, the average
per 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 weighted by production over the remaining
lives of the properties are
natural gas and
(2) PV-0 and PV-10 are not financial measures calculated in accordance with GAAP
because they do not include the effects of income taxes on future net
revenues. Our standardized measure includes future obligations under the
expenses because, due to the status of CE Finance (as defined below) as a
flow through entity for
to federal income taxes, and accordingly the Standardized Measure of
estimated future cash flows attributable to CE Finance does not differ
materially from the associated PV-10. None of PV-0, PV-10 or standardized
measure represents an estimate of the fair market value of our oil and
natural gas properties. We believe that the presentation of PV-0 and PV-10 is
relevant and useful to our investors because it presents the discounted
future net cash flows attributable to our reserves prior to taking into
account future income taxes and our current tax structure. We and others in
the industry use PV-0 and PV-10 as measures to compare the relative size and
value of proved reserves held by companies without regard to the specific tax
characteristics of such entities.
******
As of
The following table summarizes our changes in PUDs for the year ended
Balance,December 31, 2020 98,579 . . .
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. Exhibit Description 23.1 Consent ofNetherland, Sewell & Associates, Inc. 23.2 Consent ofCawley, Gillespie & Associates, Inc. 23.3 Consent ofWilliam M. Cobb & Associates, Inc. 23.4 Consent ofHaas Petroleum Engineering Services, Inc. 99.1 Press Release, datedFebruary 7, 2022 . 99.2 Audit Letter ofNetherland, Sewell & Associates, Inc. 99.3 Report ofNetherland, Sewell & Associates, Inc. 99.4 Report ofCawley, Gillespie & Associates, Inc. 99.5 Report ofWilliam M. Cobb & Associates, Inc. 99.6 Report ofHaas Petroleum Engineering Services, Inc. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). 16
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