Crescent Energy Co Q1 FY2025 earnings call

• Strong performance across asset base with all key metrics meeting or exceeding expectations.
• Generated free cash flow in excess of $240 million, annualized free cash flow yield ~45%.
• Remain flexible with capital allocation, committed to cash flow, risk management, and returns.
• Scaled low decline and HBP asset base provides optionality to allocate capital across oil and gas development.
• Successful closing of roughly $90 million of accretive asset sales in 2025, streamlining the portfolio.
• Successful integration of Ridgemar acquisition, adding high margin production and low risk inventory.
• Transitioned to a single class of common shares, simplifying the business and increasing investor accessibility.

Crescent Energy reported record production of 258,000 barrels of oil equivalent per day for the first quarter. Financial highlights include approximately $530 million of adjusted EBITDA and approximately $242 million in levered free cash flow. Capital expenditures for the quarter were $208 million. The company generated over $240 million in free cash flow, with an annualized free cash flow yield of approximately 45%. Revenue contribution from various segments wasn't explicitly broken down by percentage, but the focus was on strong performance across the asset base.

• Initial guidance remains in line, with a slightly increased focus on gas weighted development to optimize returns.
• Expect attractive returns on current capital program.
• Net leverage at 1.5 times, within publicly stated range of 1 to 1.5 times.
• $1.4 billion of liquidity with no near term maturities.
• Announced dividend of $0.12 per share and actively repurchasing shares, with year-to-date repurchases of ~$30 million.

• Commodity price volatility, which can impact financial performance.
• Global geopolitical conflict, creating uncertainty.
• Bid-ask spreads widening in A&D markets, affecting asset sales and acquisitions.
• LOE uptick in Q1 due to higher fuel use gas, though expected to be seasonal.

Q: Regarding capital allocation in the current commodity price environment, is Crescent sitting at the lower end of the oily targeted range and higher end of the gassy range, and what would push beyond those ranges?

A: David Rockecharlie states it's about returns, sitting with mixed inventory and moving to where returns are, and will continue to allocate capital within the framework while focusing on returns and free cash flow generation.

Q: About the JV for the single pad, any ongoing commitments?

A: Clay Rynd says the JV was set for the single pad with no ongoing capital commitments, and results from the JV are outperforming the broader basin.

Q: Will Crescent exceed asset sale targets if attractive bids for Merrill's assets are encountered?

A: Clay Rynd states yes, as Crescent views itself as value creators by buying and selling assets, and will pursue sales to create value for the business.

Q: Role of hedges in capital allocation decisions?

A: David Rockecharlie says hedges protect the balance sheet and capital, but are separate from the drill bit decision, and Crescent is focused on returns and free cash flow generation.

Q: Thoughts on the M&A market during volatility and Crescent's approach?

A: Clay Rynd says after volatility, the market pauses, but Crescent's investment-driven strategy and consistent approach allow it to move with conviction when opportunities arise, leveraging its advantage in the market.