Q3 2023 Crescent Energy Co Earnings Call
Speaker 1: Ladies and gentlemen, good morning and welcome to the present energy third quarter 2023 awnings conference calls.
Ladies and gentlemen.
Good morning, and welcome to the present energy third quarter 2023 earnings Conference call.
Speaker 2: At this time all participants are in a listen only mode.
At this time all participants are in a listen only mode.
Speaker 3: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference
A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on the telephone keypad.
As a reminder, this conference is being recorded.
Speaker 4: It is now my pleasure to introduce your host, Emily Newport, SVP of Finance and IR. Please go ahead.
It's now my pleasure to introduce your host Emily Newport SVP of Finance and IR. Please go ahead.
Speaker 5: Good morning and thank you for joining Crescent Third Quarter Conference call. A prepared remarks today will come from our CEO David Rocketarly and CSO Brandy Kendall. Archief Accounting Officer Todd Falk and our Executive Vice President of Investment Clay Rand will also be available during the UNA session.
Good morning, and thank you for joining us.
Quite a conference call with prepared remarks today.
Yeah, David Rocket, Charlie and C N F N b.
Chief Accounting officer and Todd.
That you didn't buy back.
Next claim rate will also be available.
Yes.
Today's call may contain projections and other forward looking statements within the meaning of federal Securities laws.
Speaker 6: Today's call may contain projections and other forward-looking statements within the meaning of federal security laws. These statements are subject to risk and uncertainties, including commodity price volatility, global geoglodical conflicts, our business strategies, and other factors that may cause actual results to differ from those expressed or implied in these statements and our other Sahibqa PLNG-S
The statements are subject to risks and uncertainties.
Price volatility.
Oh complex, our business strategies and other factors that may cause actual results to differ from those expressed or implied in these statements.
I used to buy the shares.
Speaker 7: We have no obligation to update any forward-looking statements after today's call. In addition, today's discussion may include disclosure regarding non- GAAP financial measures for reconciliation of historical non- GAAP financial measures because the most directly comparable GAP measure, please reference our 10Q and earnings press release, which are available on our website. With that, I will turn it over to our CEO , David.
No obligation to update any forward looking statements after todays call.
Today's discussion May include disclosure of our non-GAAP financial measures for a reconciliation of historical non-GAAP financial measures to the most directly comparable GAAP measure. Please reference our 10-Q and earnings press release, which are available on our website.
That I will turn it over to our CEO David.
Speaker 8: Good morning, and thank you for joining us to discuss our third quarter results. Our message is simple and direct today. This was a record quarter for the business, both operationally and financial.
Good morning, and thank you for joining us to discuss our third quarter results. Our message is simple and direct Tonight.
This was a record quarter for the business, both operationally and financially.
Speaker 9: We are doing what we said we would do. Generating strong free cashflow, investing capital with discipline and great returns, delivering exceptional operating performance, including meaningful capital efficiencies and reductions in emissions, with a focus on continuous improvement of our operations, including stewardship in the environment and the communities in which we operate.
We are doing what we said we would do and.
Generating strong free cash flow.
Investing capital with discipline and great returns delivering.
Delivering exceptional operating performance, including meaningful capital efficiencies and reductions in emissions with a focus on continuous improvement of our operations, including stewardship of the environment and the communities in which we operate.
We're growing through accretive opportunistic acquisitions, including the successful integration of $850 million of total transactions this year and our core Eagle Ford operating area.
Speaker 10: We're growing through a creative, opportunistic acquisitions, including the successful integration of $850 million of total transactions this year, and our core Eagle for Operating Gears.
Speaker 11: We're maintaining our strong balance sheet and growing capital markets presence as we continue to scale the business significant.
We're maintaining our strong balance sheet and growing capital markets presence as we continue to scale the business significantly and we're consistently returning capital to our investors.
Speaker 12: and we're consistently returning capital to our invest.
Speaker 13: This quarter's record results solidify that we have the right strategy, the right assets, and the right execution in today's market environment to create significant long-term value for our shareholders. Today I plan to cover three P.I.
This quarter's record results solidify that we have the right strategy the right assets and the right execution in today's market environment to create significant long term value for our shareholders.
Today I plan to cover three key items in more detail.
Speaker 14: First, our operational performance, second, our compelling acquisitions, and third, our sustainability success.
First our operational performance second our compelling acquisitions and third our sustainability success.
Speaker 15: First, let's discuss operations where the business is outperforming.
First let's discuss operations, where the business is outperforming.
Speaker 16: We've realized substantial efficiencies on the drilling and completion side as improving cycle times and completion speed have improved well cost by 10%.
We've realized substantial efficiencies on the drilling and completion side.
Proving cycle times, and completion speeds have improved well costs by 10%.
Speaker 17: You will recall that we came into the year with a focus on flexibility, and this has worked strongly in our favor. As a reminder, we reduced our full year capital guidance last quarter, and with continued solid execution, not only are we able to deliver our original capital program at lower cost, but also our meaningful outperformance this year in drilling and completions has had a multiplier effect.
You will recall that we came into the year with a focus on flexibility and this has worked strongly in our favor.
As a reminder, we reduced our full year capital guidance last quarter and with continued solid execution not only are we able to deliver our original capital program at lower cost, but also are meaningful outperformance this year and drilling and completions has had a multiplier effect, we've been able to do more.
Speaker 18: We've been able to do more with less as we are able to accelerate some activity as our drilling returns have improved while still investing less overall capital issues.
On the glass as we are able to accelerate some activity as our drilling returns have improved while still investing less overall capital this year.
Speaker 19: These capital efficiencies are materially enhancing the returns on our development program, where we are consistently earning an excessive two-time cash-on-cash returns on a full cycle.
These capital efficiencies are materially enhancing the returns on our development program, where we are consistently earning in excess of two times cash on cash returns on a full cycle basis.
Speaker 20: Importantly, these capital efficiencies have not come at the expense of well-performing.
Importantly, these capital efficiencies have not come at the expense of well performance.
Speaker 21: across the Uinta in particular, our assets have materially outperformed our predecessors due to the higher completion intensity, where we've improved oil recoveries by approximately 25% since taking over property.
Cross the Uinta in particular, our assets have materially outperformed our predecessors due to the higher completion intensity, where we've improved oil recovery by approximately 25% since taking over operator ship.
Complementing our high returning development program are substantial long life, producing reserve base consistently provides us with predictable performance. The cashless stability of our low decline balanced production base has a tremendous value proposition relative to our peers, our unique skill set operating both conventional.
Speaker 22: Complimenting our high-returning development program, our substantial long-life producing reserve base consistently provide those with predictable performance.
Speaker 23: The cash flow stability of our low decline balance production base is a tremendous value proposition relative to our peers.
Speaker 24: Our unique Gilset operating book conventional and shale assets allows us to combine stable cash flows with attractive reinvestment opportunities.
And shale assets allows us to combine stable cash flows with attractive reinvestment opportunities today.
Speaker 25: Today, we are the only US-focused company generating more than 150,000 barrels of oil equivalent per day of production, while running only a 2-3 rig maintenance program.
Today, we are the only U S focused company generating more than 150000 barrels of oil equivalent per day of production, while running only a two to three rig maintenance program.
Speaker 26: which is a direct result of the lower capital intensity required to maintain production output at...
Which is a direct result of the lower capital intensity required to maintain production output at Crescent.
Speaker 27: This intentional portfolio construction, coupled with continuous outperformance on production and capital spend, drives this quarter's record free cash flow, as well as our expectations for substantial free cash flow looking ahead to 2024 and beyond.
This intentional portfolio construction, coupled with continuous outperformance on production and capital spend drives this quarter's record free cash flow as well as our expectations for substantial free cash flow looking ahead to 2024 and beyond.
Now turning to M&A.
Speaker 28: Since the second quarter, we have closed on two previously announced Eagleford acquisitions totaling $850 million. First, through our $600 million acquisition of Operation of the Western Eagleford position in July . And second, through the acquisition of incremental Western Eagleford working interest for $250 million in October .
Since the second quarter, we've closed on two previously announced Eagle Ford acquisitions totaling $850 million first through our $600 million acquisition of operator ship of the Western Eagle Ford position in July and second through the acquisition of incremental Western Eagle Ford working interest for $250 million.
October.
Speaker 29: Together, the assets represent approximately 32,000 barrels of oil equivalent per day of liquids weighted net production, with a low 16 percent decline rate and more than $1 billion approved developed PB-10 mandate.
Together the assets represent approximately 32000 barrels of oil equivalent per day of liquids weighted in that production with a low 16% decline rate and more than $1 billion proved developed PV 10 value.
Speaker 30: The two deals doubled our Eagleford production in inventory and quadrupled our legacy, not operated interest in the Western Eagleford to a current operated working interest of 63%.
The two deals doubled our Eagle Ford production and inventory and quadruple our legacy non operated interest in the Western Eagle Ford to our current operated working interest of 63%.
Speaker 31: Furthermore, we now operate greater than 90% of our interests in the Eagleford, adding scale and operational control in a core region for...
Furthermore, we now operate greater than 90% of our interest in Eagle Ford I think scale and operational control and a core region from Crescent.
Speaker 32: to simplify our M&A growth strategy when evaluating opportunities we have two key objectives.
To simplify our M&A growth strategy when evaluating opportunities we have two key objectives.
First, to buy assets we understand at attractive value, targeting cash on cash returns in excess of two times or less.
First to buy assets, we understand and attractive value targeting cash on cash returns in excess of two times our money.
And second, to make those assets better to drive incremental return to show.
And second to make those assets better to drive incremental return to shareholders.
Regarding this first objective, in our view, the entry prices of our recent acquisitions are highly compelling for three key reasons.
Regarding this first objective and argue the entry prices of our recent acquisitions are highly compelling for three key reasons.
First, it's nice to buy more of what you already own and a great price.
First its nice to buy more of what you already own at a great price.
We acquired over a billion dollars to prove developed PV 10 value for $850 million during this summer's pullback and come on in.
We acquired over $1 billion.
Developed PV 10 value for $850 million during this summer's pullback in commodity prices.
And these assets, we know well through our six years as a non-operated part.
And these assets, we know well through our six years as a non operated partner.
Second the assets provide us with a significant backlog, it's high returning lower Eagle Ford inventory as well as upper Eagle Ford and Austin Chalk upsides.
Second, the assets provide us with a significant backlog of high returning lower equal for inventory, as well as upper equal for an Austin shock upside.
As outlined on page 10 of our investor deck, this is a compelling resource.
As outlined on page 10 of our Investor deck. This is a compelling resource base with the lower Eagle Ford you ours on this asset having outperformed the base on average.
with the lower Eagle Fruit EURs on this asset having outperformed the base and average.
That provides us the ability to compound our invested capital and earn an excess of two times our money on low risk development.
That provides us the ability to compound our invested capital and earn in excess of two times, our money on low risk development.
In many other recent industry transactions, buyers have had to describe material purchase price value to undeveloped resource, which is part of full cycle retention.
And many other recent industry transactions buyers have had to ascribe material purchase price value to undeveloped resource, which is part of full cycle returns and we think our disciplined and opportunistic approach to M&A gives us a leg up on full cycle economics.
And we thank our discipline and opportunistic approach to M&A. Gives us a leg up on full cycle.
Third, the assets are highly complimentary to our existing business, adding load-of-climb production, driving financial accretion, and providing tangible operational centers.
Third the assets are highly complementary to our existing business and I think low decline production driving financial accretion and providing tangible operational synergies, which will deliver a return in excess of our underwriting expectations.
which will deliver a return in excess of our underwriting excess.
Turning to the second M&A objective of our growth through acquisition strategy, we seek to bring improved operational execution to the assets we require.
Turning to the second M&A objective of our growth through acquisition strategy, we seek to bring improved operational execution to the assets we acquire.
Following the closing of the Western Eagleford acquisition, we fully integrated the assets ahead of schedule and immediately began to realize synergies, starting with a 20% reduction in well costs relative to the previous operation.
Following the closing of the Western Eagle Ford acquisition, we fully integrated the assets ahead of schedule and immediately began to realize synergies starting with a 20% reduction in well costs relative to the previous operator.
These cost savings are driven by the same improved cycle times and completions efficiencies driving down costs across our existing central evil for operate.
These cost savings are driven by the same improved cycle times and completion efficiencies driving down costs across our existing central Eagle Ford operations.
The speed with which we have incorporated the assets into our portfolio and have improved on legacy well performance is a testament to both the quality of our people as well as the unique benefits of acquiring assets we know well.
The speed with which we have incorporated the assets into our portfolio and have improved our legacy well performance is a testament to both the quality of our people as well as the unique benefits of acquiring assets, we know well.
To summarize the western Eagle Ford acquisitions reflect our strategy and action, adding to our successful track record of buying assets on attractive value and making those assets better.
To summarize, the Western Eagleford acquisitions reflect our strategy in action, adding to our successful track record of buying assets at attractive value and making those assets and interestingly those bonds are Ä legititesMoroccanals.com
Looking ahead, we will continue to execute on our growth strategy. We see a huge opportunity for continue to creative acquisitions and firmly believe we have the ability to become an investment grade company over time.
Looking ahead, we will continue to execute on our growth strategy, we see a huge opportunity for continued accretive acquisitions and firmly believe we have the ability to become an investment grade company over time.
to us, that means adding size and scale with financial distance.
To us that means adding size and scale with financial discipline as.
As we pursue our discipline growth strategy, we anticipate we will be highly active in the M&A market over the next 12 to 24 months.
As we pursue our disciplined growth strategy, we anticipate we will be highly active in the M&A market over the next 12 to 24 months.
We expect to be an active participant in the ongoing wave of consolidation in the sector, particularly across the record operating areas in Texas and Iraq.
We expect to be an active participant in the ongoing wave of consolidation in the sector, particularly across our core operating areas in Texas and the Rockies.
Furthermore, we also believe that we are uniquely positioned to participate on the front and backside of the energy sector consolidation activity.
Furthermore, we also believe that we are uniquely positioned to participate on the front and back side of energy sector consolidation activity.
leveraging our broader investment and operational expertise to acquire attractive assets that may be less core to proform a company's following large-cap merger and acquisition.
Leveraging our broader investment and operational expertise to acquire attractive assets that may be less core to pro forma companies following large cap merger and acquisition activity.
Now, before handing the call back over to Brandy, I'd like to discuss sustainability, an area that's core to our long-term business strategy. Yesterday, we published our annual sustainability report. We made substantial progress on our climate initiatives last year, reducing our absolute scope on emissions by 27%.
Now before handing the call back over to Randy.
I'd like to discuss sustainability an area that's core to our long term business strategy yesterday, we published our annual sustainability report, we made substantial progress on our climate initiatives last year, reducing our absolute scope one emissions by 27%.
We monitor and evaluate all of our assets to identify opportunities for improvement. And our 2022 progress was primarily achieved through a carbon sequestration project in Wyoming and the replacement of pneumatic devices.
We monitor and evaluate all of our assets to identify opportunities for improvement and our 2022 progress was primarily achieved through a carbon sequestration project in Wyoming and the replacement of nomadic devices.
In Wyoming, we are now capturing and sequestering carbon dioxide that was previously vented and selling those volumes to an unrelated third party for use and enhanced oil recovery.
In Wyoming, we are now capturing and sequestering carbon dioxide that was previously visited and selling those volumes to an unrelated third party for use in enhanced oil recovery in.
In addition to materially reducing our emissions, the project supplements are existing carbon capture footprint with current operational capabilities to buy, sell, capture, inject, and transport CO2 molecules.
In addition to materially reducing our emissions the project's supplements our existing carbon capture footprint with current operational capabilities to buy sell capture inject and transport C O two molecules.
While still early, we continue to progress opportunities in our portfolio to increase cash flow from our carbon dioxide related
While still early we continue to progress opportunities in our portfolio to increase cash flow from our carbon dioxide related business.
Within our portfolio, we remain particularly focused on methane emissions and further improving our measurement capability.
Within our portfolio, we remain particularly focused on methane emissions and further improving our measurement capabilities.
As one of the first US companies to join OGMP 2.0 in early 2022, our measurement efforts have increased tremendous.
As one of the first U S companies to join O G. M. P to point out in early 2022, our measurement efforts have increased tremendously lash.
Last year, we implemented biannual flyovers across nearly all of our assets, allowing us to both expedite and enhance our emissions measurement and detection capability.
Last year, we implemented biannual fly hours across nearly all of our assets, allowing us to both expedite and enhance our emissions measurement and detection capabilities.
As a company focused on growth through acquisitions, that inherently means acquiring more emissions that our organization wide emphasis.
As a company focused on growth through acquisitions that inherently means acquiring more emissions that our organization wide emphasis on proper stewardship.
Proper stewardship ensures we will remain committed to reducing the emissions profile of the assets we own and acquire. With that, I'll turn the call over to Brandy to provide more detail on the quarter and our recent capital market activity.
Stuart ship insurers, we will remain committed to reducing the emissions profile of the assets, we own and acquire with that I'll turn the call over to Brandi to provide more detail on the quarter and our recent capital markets activity.
Randy.
As David mentioned, we achieved record production in cashflow this quarter, averaging 157 MBUE per day, generating $290 million of adjusted EBITDA, and 160 million in leverage free cashflow. Importantly, this quarter's results were only inclusive of the impact that the first of our two Western Eagle Ferd acquisition, the latter of which will be reflected in the fourth quarter.
As David mentioned, we achieved record production and cash flow this quarter, averaging 157, <unk> per day generating $290 million of adjusted EBITDA and $160 million and Barbara free Cashflow.
Importantly, this quarter's results were only inclusive of the impact that the first of our two western Eagle Ford acquisition, the latter of which will be reflected in the fourth quarter.
On capital, we spent $94 million, which will be our lightest quarter of the year due to timing of well turned to sale.
On capital, we spent $94 million, which will be our lightest quarter of the year due to timing of wells turned to sales.
During the quarter, we brought online 10 growth-operated wells in the E.C. Ferd, which are posting strong early-time results and are expected to generate in excess of two times our capital invested at current commodity prices.
During the quarter, we brought online 10 gross operated wells in the Eagle Ford, which are posting strong early time results and are expected to generate in excess of two times, our capital invested at current commodity prices.
Thank you for, we expect those production and capital to increase. Bringing our full year results near the midpoint of our capital guidance range, despite the increase in activity for the...
In Q4, we expect both production and capital to increase bringing our full year results near the mid point of our capital guidance range. Despite the increase in activity for the year.
While we are still finalizing our outlook for 2024, as David mentioned, the capital efficiency we've achieved to date sets us up well as we expect preliminary production of 155 to 160 and be we per day in consistent capital spend to this year, which equates to a two to three-row program.
While we are still finalizing our outlook for 'twenty 'twenty four as David mentioned, the capital efficiencies, we've achieved to date sets us up well as we expect preliminary production of 155 to 160 and daily per day, and consistent capital spend this year, which equates to a two to three rig program.
maintaining capital spend at today's level, despite a 20% increase in year-rear production, highlights that our business requires less reinvestment to maintain our current output, which is a testament to our capital efficiencies we've realized to date and the quality of our asset base.
Maintaining capital spend at today's level, despite a 20% increase in year over year production highlights that our business requires less reinvestment to maintain our current output, which is which is a testament to our capital efficiency, we've realized to date and the quality of our asset base.
At these levels, we expect to generate substantial free cash flow for the remainder of 2023 into 2024 and beyond.
At these levels, we expect to generate substantial free cash flow for the remainder of 2023 into 'twenty 'twenty four and beyond.
As highlighted on pages 15 and 16 of our investor presentation, Crescent's peer-releading decline rate and capital efficiency results in significant free cash flow generation and a compelling valuation based on cash flow metrics.
As highlighted on pages 15, and 16 of our Investor presentation Crescent peer leading decline rate and capital efficiency results in significant free cash flow generation and a compelling valuation based on cash flow metrics.
Our leopard free cash flow over the next five years is greater than our current market cap, which is reflected in our approximate 25% free cash flow yield nearly 50% higher than our peers.
Our levered free cash flow over the next five years is greater than our current market cap, which is reflected in our approximate 25% free cash flow yield nearly 50% higher than our peers.
With that free cash flow, we expect to maintain our rigorous commitment to cash flow priorities 1A and 1B. Shareholder returns in the balance sheet. While continuing to grow the business opportunistically through a creative acquisition.
With that free cash flow, we expect to maintain a rigorous commitment to cash flow priorities, one aide when b shareholder returns in the balance sheet, while continuing to grow the business opportunistically through accretive acquisition.
Alongside earnings, we announced a quarterly dividend payment of 12 cents per share, consistent with our publicly stated expectations for 2023, and generating an attractive 4% yield based on recent trading will.
Alongside earnings we announced a quarterly dividend payment of 12 cents per share consistent with our publicly stated expectations for 2023 and generating an attractive 4% yield based on recent trading levels.
From a balance sheet and capital markets perspective, we have had sustained success in raising capital to support our M&H strategy while maintaining our financial strength.
From a balance sheet and capital markets perspective, we have had sustained success raising capital to support our M&A strategy, while maintaining our financial strength.
We exit the corridor with leverage of 1.4 times and 1.1 billion of liquidity, both well within our targets. Performance for closing in the first Western Eagle for acquisition, our bank syndicate reaffirmed our $2 billion barring base and $1.3 billion ECA.
We exited the quarter with leverage of one four times and $1 1 billion of liquidity, both well within our target.
Pro forma for closing the first Western Eagle Ford acquisition, our bank Syndicate reaffirmed our $2 billion borrowing base and one $3 billion ECA.
We feel great about where we sit from a balance sheet perspective and we'll continue to use excess free cashflow in the near term to reduce absolute leverage.
We feel great about where we sit from a balance sheet perspective, and we'll continue to use excess free cash flow in the near term to reduce absolute leverage.
In the capital market, we successfully raised $600 million of debt inequity in the third quarter to finance a Western Eagle for Dachwiz.
And the capital markets, we successfully raised $600 million of debt and equity in the third quarter to finance the Western Eagle Ford acquisition.
In September , we priced a $155 million primary equity offering, including the overall on it.
In September we priced $155 million primary equity offering including the over allotment.
The offering represented presence in a rural primary issuance and was extremely well received. As we were able to resize the transaction 10%, due to strong investor demand.
The offering represented Crescent inaugural primary issuance and was extremely well received as we were able to upsize the transaction, 10% due to strong investor demand.
The offering demonstrated increased access to the capital markets for accretive transactions.
The offering demonstrated increased access to the capital markets for accretive transaction.
But I've stock trading up eight to nine percent in the days following and the green shoe option exercised less than a week after the shares price.
Our stock trading at eight 9% in the days following and the green shoe option exercised less than a week after the shares priced.
In addition, we raised $450 million dollars at incremental 2028 senior notes during the quarter across two separate transactions.
In addition, we raised $450 million of incremental 2028 senior notes during the quarter across two separate transaction.
Further enhancing our liquidity profile, and in line with our stated preference for longer duration capital in lieu of the bank market.
Further enhancing our liquidity profile and in line with our stated preference for longer duration capital in lieu of the bank market.
The offerings continued our momentum in the bond market, and the strong demand is reflective of the benefits from our recent upgrade to a double B credit.
The offerings continued our momentum in the bond market and the strong demand is reflective of the benefits from our recent upgrade to a double b credit.
In summary, we are pleased with our efforts to efficiently access the capital markets to facilitate accrued growth through M&A in advance our strategic goals.
In summary, we are pleased with our efforts to efficient efficiently access the capital markets to facilitate accretive growth through M&A and advance our strategic goals.
Finally, to provide a free update on our hedging activity. In line with our strategy for serving returns on capital, we are layered on additional hedges along to the signing of the two recent acquisitions.
Finally to provide a brief update on our hedging activity in line with our strategy preserving returns on capital.
We layered on additional hedges aren't at the signing of the two recent acquisitions as we look into 2024, we are less than 50% hedged through a mix of fixed swaps and collars. We continue to like our long term commodity exposure, particularly given the low decline long duration nature of our production base with that I'll turn the call back over to David.
as we look into 2024, we are less than 50% hedged through a mix of six swaps and collars. We continue to like our long-term commodity exposure, particularly given the low decline long duration nature of a production base. With that, I'll turn the call back over to data.
Thank you Brady there are three things we hope you take away from today's call first our third quarter performance was exceptional record production record cash flow, we are demonstrating operational efficiencies that will make us stronger and more profitable in 2024 and beyond.
Thank you, Brady. There are three things we hope you take away from today's call. First, our third quarter performance was exceptional. Record production, record cashflow. We are demonstrating operational efficiencies that will make us stronger and more profitable in 2024 and beyond.
Second, we have proven our ability to grow creatively. We have captured high-value transactions and financed them in a fashion that maintains a strong balance sheet highlighted by long-term capital, strong liquidity and credit metrics, rating agency upgrades and inclusion in the double B bond.
Second we have proven our ability to grow accretively, we've captured high value transactions and finance them in a fashion that maintains a strong balance sheet highlighted by long term capital.
Strong liquidity and credit metrics rating agency upgrades and inclusion in the double B Bond index.
We've created scale, doubling our business in less than three years, and are well equipped to continue to do so.
We've created scale doubling our business in less than three years and are well equipped to continue to do so and.
And lastly, we have a simple value proposition. We believe Crescent is the best risk-adjusted stock to own for long-term exposure to oil and gas.
And lastly, we have a simple value proposition. We believe crescent is the best risk adjusted stock to own for long term exposure to oil and gas prices.
We have a lot of ambition and a lot of work ahead, but we were pleased with what we've accomplished to date and we intend to continue to do exactly what we say we're going to do.
We have a lot of ambition and a lot of work ahead, but we are pleased with what we have accomplished today, and we intend to continue to do exactly what we say we're going to do.
With that, I'll open it up for Q&A. Up here. Up here.
With that I'll open it up for Q&A operator.
Operator.
Okay.
Thank you.
Ladies and gentlemen, we will now be conducting a question and answer session.
Ladies and gentlemen, we will now be conducting a question and answer session.
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Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Ladies and gentlemen, we will wait for a moment while we pull for questions.
Our first question is from Michael Schala with Stephen Singh. Please, please, go ahead.
Our first question is from Michael shallow with Stephens Inc. Please go ahead.
Yeah.
Good morning, everybody.
But it sounds like you have a lot of visibility on free cash flow over the next few years.
As you look at 'twenty 'twenty, four say absent any additional M&A is it fair to think that.
The vast majority of that goes to the balance sheet and then beyond 24, you can think about returning more cash to shareholders or are you thinking about it differently.
Yeah, Hey, thanks for the question it's David.
I would say number one, thanks for raising it. We're all about generating free cash flow. That's the investment proposition for the business. As you've probably heard us say, our number one cap allocation priority is return of capital to investors.
I would say number one thanks for raising it we're all about generating free cash flow you know that's the investment proposition for the business.
As you've probably heard us say, our number one capital allocation priority is return of capital to investors.
And as you said, that to us means taking care of the balance sheet. So certainly debt reduction and also paying a cash dividend. We're sticking with the capital framework we have today. So yeah, I guide you to sort of more of the same, just sticking with the same strategy and the free cash flow certainly take care of the debt, but we are committed to making sure we maintain a dividend strategy that's appropriate for the market and the investment.
And as you said that that to us means taking care of the balance sheet. So certainly debt reduction and also paying a cash dividend.
We're sticking with the capital framework, we have today. So yeah I'd guide you to sort of more of the same.
Just sticking with the same strategy and the free cash flow certainly.
Take care of the debt, but we are committed to.
Making sure we maintain a dividend strategy, that's appropriate for them for the market and the investors.
Yeah.
Okay. And then pretty impressive reduction in your EGLE4WALCOS, a immediate 20% reduction. There's any color you can add. I know you have a slide in your deck, talking about some of the improved efficiencies. It was any of that contractual or any major changes in well-designed tomatoes there.
Okay.
And then.
The impressive reduction to your Eagle Ford well costs.
Immediate 20% reduction there is there any color you can add I know you have a slide in.
In your deck talking about.
Some of the improved efficiencies was any of that contractual or any major changes in well design debate.
Yeah, I'd say that the the good news is.
Yeah, I'd see that the good news is that's pretty straightforward. We've been active in the Eagle Ferd for a long time. We think we're good at what we do. And this is a great example of taking over an asset we know well and just continuing to execute the way we were on our own assets. So we've seen improvement in our business this year and we were able to apply those improvements further to this acquisition. So I think...
That's pretty straightforward.
We've been active in the Eagle Ford for a long time, we think we're good at what we do.
And this is a great example of taking over an asset we know well and just continuing to execute the way we were on our own assets. So we've seen improvement in our business. This year and we were able to apply those improvements further to this acquisition. So I think.
operating really well, nothing specific other than just great execution, but also a really good example of what we're trying to do with the M&A strategy, which is get a great acquisition and value and then enhance that value by doing what we know how to do well. So nothing unusual there other than just doing a good job, frankly.
Operating really well nothing specific other than just great execution.
But also a really good example of what we're trying to do with the M&A strategy, which is get a great acquisition of value in that enhance that value our budget.
Baidu on what we know how to do well so nothing unusual there other than just doing a good job frankly.
Okay. Thank you David.
Sure.
Thank you.
Our next question is from Neil Dingman with Troubles Securities. Please go ahead.
Our next question is from Neal Dingmann with <unk> Securities. Please go ahead.
Morning, all next quarter, as you said, David. My first question is on your read investment rate. What I want to ask, it seems to me that your solid read investment rate often gets overlooked as it's driven by that low base decline and the efficiencies you don't talk about. I just want to, David, could you talk about your future expected read investment rate and how this will ultimately drive the production free cash flow and shareholder return?
Good morning, Nice quarter as you said David My first question is on your reinvestment rate and what I wanted to ask it seems to me that your solid reinvestment rate often gets overlooked is it's driven by that low base decline and efficiencies Youll talk about I'm. Just wondering David can you talk about sort of maybe your future expected reinvestment rate.
And how this will ultimately drive the production free cash flow and shareholder return.
Yeah, I'll start it and then if Brandy wants to add to it, I'll be great too. But really good question. I would say that generating free cash flow, maintaining a low reinvestment rate relative to peers is just a core to what we do. We've done it for 10 years. We've historically been in about a 40%.
Yeah.
I'll start it and then if Randy wants to add to it that'd be great too, but really good question I would say that <unk>.
<unk> free cash flow, maintaining a low reinvestment rate relative to peers is just core to what we do we've done it.
For 10 years, we've historically been in about a 40%.
of EBITDA, re-investment rate. It's ticked a little higher recently, mostly with what I would call the price run up for, you know, the last couple of years. And it gets masked by our hedge program.
Of EBITDA.
Reinvestment rate, it's ticked a little higher recently, mostly with the what I would call the price run up for.
Over the last couple of years and it gets masked by our hedge program as those hedges are rolling off a one I think more cash flow for investors.
As those hedges are rolling off, one, I think more cash flow for investors, but secondly, it puts the reinvestment rate more in contact. So we've still maintained a 40 to 50% reinvestment rate typically, but I would expect in a levelized world, we're going to outperform peers on that just by the nature of our strategy and commitment to it. And I think thinking about us in a 40 to 50% range is a reason.
But secondly, it puts the reinvestment rate more in context, so we still maintained a 40% to 50% reinvestment rate typically.
But I would expect in a in a level is world, we're going to outperform peers on that just by the nature of our strategy and commitment to it.
I think thinking about us in a 40% to 50% range is reasonable.
Okay.
Okay.
Brandon, good anything, not get test... Never question me, don't.
Brian next.
Next question, we don't.
Yeah, No I think David answered it well I mean that 20% decline rate that we have is it's purely netting that translates to a really capital efficient business. That's just much less intense relative to the broader market I know, we've talked about before now and we're running at 2%.
Yeah, I think David answered it well. I mean, that's 20%.
that we have is purely adding that translates to a really a capital and efficient business that's just much less intense relative to the broader markets. I know we've talked about before NEO. We're running a two to three-reg maintenance program and that's that's relative to roughly a hundred and fifty five hundred and sixty-day go forward basis, which I think is pretty unique relative to
The rig maintenance program and and that's it.
That's relative to you roughly 150 568, a go forward basis, which I think is pretty unique.
Relative to the broader market.
Yeah, I would agree and then just a quick second one on capital and then maybe another shot at capital allocation.
Yeah, I would agree. And then just a quick second one on capillan. I think maybe another shot of capillocation. They will appreciate that debt quarterly dividend focus and the leverage on debt and the quarterly dividend. I guess my question is, you think it makes any sense to try to buy back any shares given the sort of notably low valuation despite the limited flow on the shares.
I appreciate that that quarterly dividend focus and the leverage on that and in the quarterly dividend. I guess my question is do you think it makes any sense to try to back in to buy back any shares given that sort of notably low valuation you know despite the.
The limited float on the shares.
Yeah, good question. Happy to drill down a little more there. The fundamental response and all that brand to give you some more detail is we absolutely do consider what I would call share of my back as part of a solid return of capital program. As you know, we've still got.
Yeah. Good question happy to drill down a little more there are the fundamental response and I'll, let Randy give you. Some more detail is we absolutely do consider what I would call share buybacks as part of a song.
Solid return of capital program as you know, we've we've still got.
an up-piece structure with class B shares and so that's a place where we've historically
An up C structure with class B shares and so that's a place where we've historically.
done that, but I definitely would highlight that we do think of a dividend taking care of the balance sheet, you know, debt reduction and opportunistic buyback is something that is part of a well-rounded program, but brand you may want to just address the buyback will work directly. Yeah, and you know, I mean, we've been consistent with how we've talked about our capital market priority since we went public.
<unk> done that but.
Definitely we would highlight that we do think of dividend taking care of the balance sheet in a debt reduction and opportunistic buyback is something that is part of a well rounded program, but brandy you may want to just address that the buyback will more directly yeah, and you know I mean, we've been consistent with how we've talked about our capital market's priority.
We went public almost two years ago, now, which really was to increase our float and trading liquidity being one of those kind of key objectives. I think we've made a lot of progress with half the company not being float and trading liquidity at nearly 200% and but still are necessarily where we are where we want to be at from a liquidity standpoint.
almost years ago now, which really was to increase our flow and trading liquidity being one of those kind of key objectives. I think we've made a lot of progress with half the company now being floated trading liquidity up nearly 200%. But still are necessarily where we are, where we want to be. From a liquidity standpoint relative to peers, which likely makes a class A by back a little less actionable in the immediate term.
Relative to peers, which likely makes that class a buyback a little laugh actionable in the immediate term, we obviously can still buy back or class B private chairs, which we've done in the past and we would expect to do so in the Destocking, which accomplishes the same objective.
We obviously can still buy back or class B private shares, which was done in the past. And what I expect to do so in the future, which accomplishes the same objectives of reducing the total number of shares outstanding. Thank you.
And reducing the total number of shares outstanding.
Great details. Thank you all.
Thanks Neil.
Our next question is from Roger Reed with wealth follow please go ahead
Thank you. Our next question is from Roger.
Roger read with Wells Fargo. Please go ahead.
Yeah. Thanks, good morning.
Yeah, thanks. Good morning. Maybe follow up on your comments, David, and the opening on the ability to continue to do acquisitions. Maybe just give us an idea.
Maybe follow up on your comments David in the opening on the ability to continue to do acquisitions, maybe just give us an idea of what our what the market looks like out there I mean, something similar to what you've been doing a step out into a different area as a possibility and then as our addition to that.
of what what the market looks like out there. I mean, something similar to what you've been doing and step out into a different area as a possibility.
And then as a addition to that higher interest rates than what you've faced in the first couple years of this strategy, how does that factor in to how you think about?
At higher interest rates and what you faced in the first couple of years of this strategy how does that factor into how you think about funding transactions or are you seeing valuations adjust to a higher interest rate environment.
Funding transactions or you seeing valuations adjust to a higher interest rate in VAR.
Yeah, no great questions. And again, thanks for joining us, Roger. I'll start in Brandy and Clay are here with me as well and very actively involved in that part of the business and contribute after I finish.
Yeah, no great great questions and again, thanks for for joining us Roger.
I'll I'll start and Brandon and clay are here with me as well and very actively involved in that part of the business and can contribute after I finish.
A couple of things, we still see a very active market. It's consistently been a $50 to $100 billion of your market my whole career, and we still see that.
A couple of things, we still see a very active market. It's consistently been a 50 to 100 billion dollar a year market my whole career, and we still see that and frankly, our activity by others tends to create more activity and so one of the things. We did try to highlight this time is is large.
and frankly, activity by others tends to create more activity. And so one of the things we did try to highlight
This time is large cap consolidation. It's likely to be good for us.
GAAP consolidation is likely to be good for us.
We feel very good to think we have a good pipeline of the opportunities looking forward and we do like where the macro is as well.
We feel very good so I think we have a good pipeline of opportunities looking forward and we do like where the macro is as well.
Turning to operationally and your comments around portfolio and focus.
Turning to operationally in and your comments around portfolio and focus I think were very good and getting better our inner core areas and there's a lot still to do there. So I think you can assume we'll continue to do it we have shown we would do which is look to expand.
I think we're very good and getting better in our core areas and there's a lot still to do there. So I think you can assume we'll continue to do it. We have shown we would do, which is look to expand our core areas. We are value driven. And so if we are good at something, have the skills to do it and we can find great value, we certainly think that we have the broadest ability in the sector in terms of scope of what we look at.
Expand our core areas, we are value driven and so if we are good at something have the skills to do it and we can find.
Find great value, we certainly think that we have the broadest stability.
In the sector in terms of the scope of what we look at.
But I wouldn't take that as a hint that we're gonna get distracted. I think we like what we're doing. And then lastly, I'd say a couple of things on the financial markets. We believe as long as you're patient, that valuations, both on the equity and debt supply, will translate into the M&A market and they typically do relatively.
But I wouldn't take that as.
A hint that we're gonna get distracted I think we like what we're doing.
And then lastly, I'd say a couple of things on the financial markets.
We believe as long as your patient the valuations are both on the equity and debt side will translate into the M&A market and they typically do relatively.
swiftly. We're starting to see that happen. And I'd say one of the great things about the way we're positioned today, we've proven our ability to access the public markets, we've grown our presence there. And while the cost of debt has gone up.
Swiftly, we're starting to see that happen and I'd say one of the great things about the way we are positioned today, we've proven our ability to access the public markets. We've grown our presence there and while the cost of debt has gone up.
You know, we're a double B company now and we've been able to push our relative cost to capital down over the time period as a public company. So I think you should just expect that we're continuing to try to
You know, we're a double B company now and we've been able to push our relative cost of capital down over the time period as a public company. So I think you should just expect that we're continuing to try to do all of those things and the only reason we will transact just because we think it will create significant value enhancement for the shareholders.
do all of those things. And the only reason we will transact is because we think.
It will create significant value enhancement for the shareholders.
Great. Thank you. Thank you.
Oh, yes.
Thank you.
Our next question is from the line of John Abbott with Bank of America. Please go ahead. Hey, good morning.
Our next question is from the line of John <unk> with Bank of America. Please go ahead.
Hey, good morning, and thank you take care question.
Are there two questions or really about 2004?
Two questions are really about 2024.
So, in terms of your sort of production outlook.
So you know in terms of your sort of production outlook.
So, you know, based off your results during this quarter and for your 2023 guidance.
So you know based off your results during this quarter and two for your 2023 guidance.
You're pulling some activity in from 2024.
We're pulling activity some activity and from 2024.
And ready, you gave us a range of 155 to 160,000 BUE per day for 2024, just given the acceleration of activity into 2023. Why wouldn't we think that you shouldn't be at the high end of that production range?
Hey, Brian and you gave US a range of 155 to 160000 Boe per.
Per day for 2024, just given the acceleration of activity into 2023.
Why Wouldnt, we think that you shouldn't be at the high end of that production range.
Okay.
For 'twenty 'twenty four before into 2024.
before into 2024. I'm a lot of earnings out there. So yeah, so you have accelerated into 2023 and your guidance range for 2024 is 155 to 160,000 BUE per day, was the accelerated activity, why would she be at the high end of that production rate?
A lot of earnings out there so yeah.
We have accelerated activity into 2023 and your guidance range for 2024 is 155 to 160000 Boe per day.
Was the accelerated activity why wouldn't you be at the high end of that production range.
Hey, Janet it's Randy I think.
Hey, John , it's Brandy. So I think as David hit on, right, we've had great operational execution all year for mid-rolling and completion. Same point, I think that sets us up incredibly well as we look into 22.
Hi, It's David hit on right, we've had great operational execution, all year from a drilling and completion standpoint, I think that sets us up incredibly well.
As we look into 2024.
So I think we feel comfortable just given where we sit with our preliminary budget, that the 155 to 160 makes sense and relative to a capital program of roughly $600 million, which is in line with what we spent.
So I mean, I think we feel comfortable just given where we are with our preliminary budget at 155 to 160 <unk> makes sense.
And relative to you.
Our capital program up roughly $600 million, which is in line with what we spent this.
This year, despite the base production is higher. So I think that's still a fair range. I think if you end up somewhere in that range, that's good. But yeah, I think there's a chance that we could be at the top end of the range. But we'll look to provide more formal guidance in the next couple months.
This year and despite the eight production is is higher.
So I think that's still a fair range and it gives you end up somewhere in that range and that's good but yeah, I think theres a chance that we could.
<unk> be at the top end of that range, but I'll look to provide more formal guidance in the next couple of months and 24.
Maybe I'm reaching a little bit here for 2024. It looks like a PE. It looks like you're in potentially in a high point in terms of production and 4Q23. So any sort of color on the trajectory of production in 2024.
Okay.
We're reaching a little bit here, but for 2024.
Any.
It looks like okay, and it looks like you have and potentially at a high point in terms of production and for Q 'twenty three so any sort of color on the trajectory.
Duction in 2024.
Yeah, I would expect it to be relatively consistent, both from a production in capital standpoint over the course of next year, ultimately, it'll be impacted on when wells are coming online. But I think for now, if you modeled it fairly consistent throughout the year, I think that's a good assumption. All right, thank you very much.
Yeah, I would expect it to be relatively consistent both from a production and capital.
Standpoint over the course of next year ultimately they'll be impacted on when wells are coming online, but I think for now.
If you model that are fairly consistent throughout the year I think that's a good assumption.
Alright, Thank you very much for taking our questions.
Thanks, John.
Thank you. As for the question, the conference of present energy has now concluded. Thank you for your participation. You may now disconnect your line.
Thank you.
I saw that for the question.
The conference of present and then she has now concluded. Thank you for your participation you may now disconnect your lines.
Well,
Okay.
Okay.
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Okay.
Okay.
Hum.
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