Crescent Energy Company Q2 FY2026 earnings call

Core Company Performance & Takeaways

• Crescent delivered a record Q2 2026, with year-to-date results showing positive momentum across the portfolio, driven by consistent execution that outperformed original full-year guidance.
• Higher production, structurally lower costs, and record free cash flow reinforce the business's current strength and long-term value creation potential, amplified by recent commodity tailwinds.

Permian Acquisition Update

• Completed the initial integration and stabilization phase after the December 2025 acquisition, and is now firmly in the optimization phase, where the Crescent operating and investing model is delivering measurable improvements in costs, efficiency, and free cash flow.
• Synergies are being captured across three core areas:
  • Operational optimization: Improved field execution, better planning, vendor management, and standardized practices, cutting well costs 20-25% vs. the prior operator
  • Infrastructure optimization: Artificial lift and facilities upgrades, equipment rationalization, and proactive surveillance have created a structurally lower operating cost base
  • Commercial optimization: Improved marketing terms, lower takeaway costs, and better equipment contracting by leveraging the full scale of Crescent's platform
• The updated $250-$300 million annual synergy target equals approximately half of the original Permian purchase price on a 10-year PV10 basis, highlighting value created through execution alone.

Capital Allocation & Financial Position

• The company maintains a consistent capital allocation framework focused on long-term per share value creation:
  1. Dividend: Declared a 12 cents per share dividend for Q2 2026
  2. Balance sheet: Ended Q2 with approximately $2.2 billion in liquidity, no near-term debt maturities, and a 6-year weighted average maturity. The company redeemed the remaining $259 million of 2029 senior notes at par on July 31, reducing debt and annual interest expense, and advancing long-term leverage and investment grade objectives
  3. Excess free cash flow: Management expects over $1 billion in levered free cash flow for full year 2026 at current prices, providing flexibility for further deleveraging, accretive M&A, and opportunistic share repurchases

Operating Model & Long-Term Value

• Management emphasizes that the Crescent model of improving acquired asset performance and driving cost efficiencies is repeatable, proven across the Eagleford, Uinta, and now Permian assets.
• Across nearly 1 million net acres, management sees significant upside to expand economic inventory, increase recoveries, and lower break-evens, with the company still in the early stages of unlocking full asset value.

1. Eagleford: Steady efficiency gains continue to drive strong returns and consistent free cash flow. Base and new well performance remain solid, supported by optimized workover and artificial lift programs. Well costs improved 5% year-over-year, and are now more than 25% below 2023 levels, improving break-evens and capital efficiency for the asset. 2. Permian: After completing the initial stabilization phase following the December 2025 acquisition, the segment is now in the optimization phase. To date, $190 million in annualized synergies have been captured, with a new total synergy target of $250-$300 million (triple the original $90-$100 million target). Well costs have been reduced by 20-25% compared to the prior operator, with material improvements in capital efficiency. 3. Uinta: The same Crescent operating playbook is being applied. Workover and artificial lift optimization improved base production, while drilling and completion efficiencies drove large development cost cuts. Drilling efficiency is up 25% year-over-year, completion efficiency has nearly doubled, and development costs are down nearly 20% to below $800 per foot. 4. Minerals and Royalties: Produced approximately 13,000 barrels of oil equivalent per day in Q2 2026. The business provides high margin, capital-free exposure to organic development, and management expects the portfolio to generate approximately $200 million of EBITDA for full year 2026. On a consolidated basis, the company produced 335,000 barrels of oil equivalent per day (boepd) including 140,000 barrels of oil per day (bopd) in Q2 2026, generated $798 million in adjusted EBITDA and a record $418 million in levered free cash flow.

• Full year 2026 total production guidance: Raised to 327,000 to 335,000 boepd, up from the prior range, with Q2 production coming in 2% above the midpoint of original guidance; oil production was 4% above the original guidance midpoint.
• Adjusted operating expense guidance: Improved by 50 cents to $11 to $12 per boe, reflecting structural cost improvements across operations, procurement, and infrastructure; Q2 adjusted operating expense was nearly 10% better than the original guidance midpoint.
• Development capital guidance: Maintained unchanged at $1.325 billion to $1.425 billion, with management now expecting full-year capital spending to land at the midpoint of the range, reflecting realized capital efficiency gains.
• Permian synergy realization timeline: Management expects to capture the large majority of the new $250 to $300 million annual synergy target by the end of 2026, with remaining incremental upside flowing into 2027.
• 2027 production outlook: Management expects 2027 total production to see a slight decline compared to 2026, as the company resets capital intensity for the Permian assets, and expects oil volumes to exit 2026 at the expected longer-term maintenance level.
• Base decline target: The 2027 base decline target of 25% (down from the current 29%) remains on track.

• Management notes that all forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from projections, including: commodity price volatility, global geopolitical conflict, and execution risk associated with the company's business and acquisition integration strategies.
• No additional operational failures or unanticipated material risks were discussed during the call.

Q: What does the tripling of the Permian synergy target mean for free cash flow, and will benefits accrue to 2026 and 2027? / A: All synergies directly translate into better margins and higher free cash flow, with incremental savings already showing up in financial results. The company expects ongoing quarterly and long-term improvements, with the majority of the new $250-$300 million target realized by the end of 2026, and incremental upside to cash flow continuing into 2027. Beyond cost savings, synergies also unlock value from the underappreciated resource base of the acquired Permian assets.

Q: Given the IPO of a peer mineral business, what are your thoughts on strategic options for your own minerals portfolio? / A: Crescent owns a high-quality mineral portfolio expected to generate $200 million in 2026 EBITDA, and management is excited about its performance post recent acquisitions. The team is aware of the attractive valuation the public market has assigned to recent mineral transactions, and is focused on evaluating all options to maximize long-term and near-term value for Crescent shareholders, with no predetermined outcome at this stage.

Q: What is the current appetite for new E&P acquisitions, and how does the external opportunity set compare to internal upside? / A: Management is very satisfied with the assets the company has acquired in recent years, particularly the high momentum in the Permian. The company's acquisition strategy remains opportunistic and return-focused, and the bar for external transactions is currently high, as management sees far more differentiated value creation opportunity in improving the company's existing internal asset base.

Q: With a strong balance sheet and completed note redemption, what are your current free cash flow priorities? / A: There has been no fundamental change to the capital allocation framework: all sources of capital compete for deployment, including debt reduction, share repurchases, and drilling. In the near term, management expects to continue prioritizing rapid deleveraging with excess free cash flow, working toward the company's long-standing investment grade objective.