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Crescent Energy Reports 2021 Financial and Operational Results

March 9, 2022

Company Declares Fourth Quarter 2021 Cash Dividend of $0.12 per Share

HOUSTON–(BUSINESS WIRE)–$CRGY–Crescent Energy Company (NYSE: CRGY) today announced actual and pro forma financial and operational results for 2021 and declared a quarterly cash dividend of $0.12 per share, payable on March 31, 2022, to holders of record on March 18, 2022. Crescent plans to host a conference call and webcast to discuss these results, as well as its 2022 outlook at 10 a.m. CT, Thursday, March 10. Complete details are available within this release.

Pro forma 2021 financial and operational results are related to the business combination (the “Contango Merger”) between Independence Energy LLC (“Independence”) and Contango Oil & Gas Company (“Contango”) to form Crescent Energy Company (“Crescent” or “the Company”). Actual 2021 financial and operational results include legacy results of Independence, Crescent’s financial reporting predecessor, from January 1 through December 6, 2021 and 25 days of Crescent results beginning December 7, 2021.

2021 Pro Forma Highlights

Successfully integrated Independence and Contango to form Crescent, a differentiated energy company
Closed three transactions in the second half of 2021, including two asset acquisitions totaling approximately $140 million and the transformational Contango Merger
Scaled business with strong 2021 cash flow and substantial year-end reserves:

Select Results	2021 Pro Forma
Total Revenues (GAAP)	$1,968 MM
Net Loss (GAAP)⁽¹⁾	$(435) MM
Adj. EBITDAX (non-GAAP)⁽²⁾	$682 MM
Levered Free Cash Flow (“Levered FCF”) (non-GAAP)⁽²⁾	$384 MM
Unhedged Adj. EBITDAX (non-GAAP)⁽²⁾	$1,055 MM
Net Debt / Adj. EBITDAX⁽²⁾	1.3x
Net Debt / Unhedged Adj. EBITDAX⁽²⁾	0.9x
Total Proved Standardized Measure⁽³⁾	$5.0 Bn
Total Proved PV-10⁽²⁾⁽³⁾	$5.2 Bn
Proved Developed PV-10⁽²⁾⁽³⁾	$4.3 Bn

Uinta Basin Acquisition and 2022 Outlook:

Pending $815 million acquisition of high-margin oil assets in the Uinta Basin, expected to close in 1H’22
- Deal consistent with strategy to acquire high-value and accretive cash flowing assets while maintaining financial strength
Scales Crescent’s production base in the Rockies region and adds multi-year inventory of proven, high-return development locations
Increased Adj. EBITDAX⁽²⁾ guidance to $1.1-$1.2 billion with $375-$475 million of Levered FCF⁽²⁾
Expect to pay a $0.17 / share quarterly dividend⁽⁴⁾, post close of Uinta transaction, based on 10% of 2022E Adjusted EBITDAX⁽²⁾ guidance
Transaction maintains strong balance sheet with expected post close net leverage ratio of 1.4x⁽⁵⁾

Crescent CEO David Rockecharlie said, “2021 was a transformational year for Crescent – we generated significant free cash flow, continued to scale our business, maintained our strong balance sheet and began trading in December as a public company. Although we have a new name and ticker symbol, our business strategy is well established and has been executed consistently over the last decade. The recently announced Uinta acquisition adds significant cash flow and resource upside from high return oil assets in a proven basin at a very attractive entry price. We enter 2022 with strong momentum and a differentiated strategy that is well positioned to create value for our shareholders.”

Please refer to the Company’s Current Report on Form 8-K which can be found at the SEC’s website at www.sec.gov, for additional details and information regarding the historical financial results of Crescent and Contango and the assumptions made in preparing the pro forma financial statements derived therefrom that are summarized herein.

Q4 Dividend

Crescent’s Board of Directors approved a quarterly cash dividend of $0.12 per share for the fourth quarter of 2021, or $0.48 per share on an annualized basis. The quarterly dividend is payable on March 31, 2022 to shareholders of record as of the close of business on March 18, 2022.

Commitment to ESG

Crescent continues to advance its sustainability initiatives and has achieved the following milestones since closing the Contango Merger in December 2021:

Issued its inaugural ESG report in December 2021, with updated disclosures planned for mid-2022
- Reported key ESG performance metrics according to the Value Reporting Foundation’s SASB Standard for Oil & Gas – Exploration & Production
- Established Crescent’s ESG priorities as climate change, environmental, health and safety, water management, community engagement and diversity, equity and inclusion
Formed an ESG Advisory Council to advise management and the Board on ESG-related topics
Joined the Oil & Gas Methane Partnership (OGMP) 2.0 initiative to enhance reporting of methane emissions

Operational Update

Crescent produced 116 net MBoe/d for the month of December 2021 on an actual basis. During 2021, Crescent invested approximately $230 million of pro forma development capital to bring online 95 gross (20 net) wells in the Eagle Ford, DJ and Permian basins. Total pro forma operating expense for the year totaled $17.47 per Boe, with pro forma operating expense, excluding production taxes, of $14.53 per Boe.

In 2022, Crescent expects to bring online 32-38 gross operated wells in the Eagle Ford with greater than 90% average working interest. Crescent plans to operate two rigs in the Uinta Basin for the remainder of the year, subject to closing of the transaction.

Financial Position

As of December 31, 2021, the Company had principal amount of indebtedness of $1.0 billion and net debt of approximately $915 million. In February 2022, Crescent issued an additional $200 million aggregate principal amount of its existing senior unsecured notes (the “Tack-On Offering”) and used the net proceeds to repay amounts outstanding on its credit facility (“Crescent Credit Facility”).

As of December 31, 2021, on a pro forma basis for the Tack-On Offering, Crescent had $700 million of senior unsecured notes and $345 million of outstanding borrowings on the Crescent Credit Facility. Pro forma for the Tack-On Offering, Crescent exited the year with a net debt to 2021 Pro Forma Adjusted EBITDAX⁽²⁾ ratio of 1.3x and a net debt to 2021 Pro Forma Unhedged Adjusted EBITDAX⁽²⁾ ratio of 0.9x.

Upon the closing of the Contango Merger in December, the Company’s borrowing base increased to $1.3 billion with an elected commitment of $700 million. Total liquidity as of December 31, 2021 on a pro forma basis for the Tack-On Offering was $463 million, including outstanding letters of credit of $21 million and cash and cash equivalents of $129 million.

Crescent’s lenders authorized an increase of the Company’s elected commitment amount under the existing revolving credit facility to $1.3 billion from $700 million, contingent upon the closing of the Uinta transaction.

2022 Guidance: Standalone and Pro Forma for the Uinta Acquisition

Initial 2022E guidance is below, on both a standalone basis and combined basis for the pending Uinta Basin acquisition assuming nine months of contribution from the acquisition. Estimates are based on $75/Bbl NYMEX WTI and $3.75/MMBtu Henry Hub pricing:

	CRGY Standalone Full Year 2022	Pro Forma CRGY (Nine Months of Uinta Acquisition)	Annualized Pro Forma Mid-Point⁽⁶⁾
EBITDAX and Levered Free Cash Flow
Adjusted EBITDAX (non-GAAP)⁽²⁾	$800 – $850 MM	$1,100 – $1,200 MM	$1,260 MM
Unhedged Adj. EBITDAX (non-GAAP)⁽²⁾	$1,100 – $1,150 MM	$1,400 – $1,500 MM	$1,560 MM
Levered Free Cash Flow (non-GAAP)⁽²⁾	$325 – $375 MM	$375 – $475 MM	$450 MM
Production⁽⁷⁾	114 – 124 MBoe/d	134 – 148 MBoe/d	*148 Mboe/d*
% Oil / % Liquids	~40% / ~55%	~45% / ~58%
Capital (Excl. Potential Acquisitions)	$375 – $425 MM	$600 – $700 MM
Per Unit Expenses
Operating Expense⁽⁸⁾	$17.25 – $18.25 / Boe	$15.50 – $16.50 / Boe
Adj. Cash G&A (Incl. Management Comp)⁽²⁾	$1.60 – $1.80 / Boe	$1.45 – $1.55 / Boe
Implied 2022 Quarterly Dividend⁽⁴⁾	$0.12 / Share	$0.17 / Share
Outstanding Share Count (Class A & B)	169.5 MM	169.5 MM
Net Debt / LTM Adj. EBITDAX⁽²⁾⁽⁵⁾	1.3x	1.4x
Pro Forma Net Debt	$915	$1,625
Proved Developed PV-10 at SEC Pricing⁽³⁾	$4.3 Bn	$5.1 Bn⁽⁹⁾

Note: All amounts are approximations based on currently available information and estimates and are subject to change based on events and circumstances after the date hereof. Please see “Cautionary Statement Regarding Forward-Looking Information.”

Risk Management – Current Commodity Hedging

Crescent is approximately 60% hedged in 2022 at the midpoint of its production guidance range on a pro forma basis for the Uinta acquisition. The following table details the Company’s open commodity derivative contracts as of February 28, 2022.

	WTI		Brent		Natural Gas		NGLs
	Volume (MBbl)	Avg Price ($/Bbl)	Volume (MBbl)	Avg Price ($/Bbl)	Volume (BBtu)	Avg Price $/MMBtu	Volume (MBbl)	Avg Price $/Bbl
Q1’22	2,862	$61.67	123	$56.35	22,534	$2.79	914	$17.20
Q2’22	2,714	$61.59	125	$56.35	21,690	$2.77	873	$17.13
Q3’22	2,690	$61.15	126	$56.36	20,634	$2.76	610	$29.87
Q4’22	2,534	$60.78	126	$56.36	20,180	$2.78	587	$29.74
FY’23	7,932	$59.20	527	$52.52	57,278	$2.54	—	—
FY’24	5,537	$63.45	217	$65.31	9,604	$3.30	—	—

Note: Includes hedges from January 1, 2022 through December 31, 2024. Included in the figures above are minor Henry Hub collar positions totaling 510 BBtu, 550 BBtu, and 9,150 BBtu in Q1 2022, 2023 and 2024, respectively. For the same periods, these collars have a weighted average floor price of $3.00 / MMBtu, $2.63 / MMBtu and $3.00 / MMBtu, respectively and a weighted average ceiling price of $3.41 / MMBtu, $3.01 / MMBtu and $3.87 / MMBtu, respectively. Weighted average price for collar positions in the table above calculated using February 28, 2022 strip pricing.

Full Year 2021 Conference Call Information

Crescent plans to host a conference call to discuss full-year 2021 financial and operating results as well as its 2022 outlook. Details are below. A webcast replay will be available on the website following the call. In connection with the call, Crescent has provided information in an earnings presentation on its website, www.crescentenergyco.com, regarding its full-year 2021 financial and operating results.

Date: Thursday, March 10, 2022

Time: 10 a.m. CT (11 a.m. ET)

Conference Dial-In: 877-407-0989 / 201-389-0921 (Domestic / International)

Webcast Link: https://ir.crescentenergyco.com/events-presentations/

(1)		Includes $391 million of unrealized derivative losses and $199 million of expense related to an early settlement of certain outstanding derivative oil commodity contracts for open positions associated with calendar years 2022 and 2023. Subsequent to the settlement, the Company entered into new commodity derivative contracts at prevailing market prices.
(2)		Non-GAAP financial measure. Please see “Reconciliation of Non-GAAP Measures” for discussion and reconciliations of such measures to their most directly comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”).
(3)		Standardized measure, PV-10 and proved developed reserve estimates based on SEC methodology, including pricing of $66.56 per Bbl for WTI oil and $3.60 per MMBtu for Henry Hub natural gas.
(4)		Dividends are subject to approval by the Board of Directors (the “Board”) and applicable law.
(5)		Calculated with estimated LTM Adjusted EBITDAX⁽²⁾ as of March 31, 2022.
(6)		Annualized pro forma mid-point includes annualized cash flows from the acquisition.
(7)		In addition to its production, the Company projects generating $45-$50 million of Midstream and other revenue.
(8)		Includes costs that are indexed to commodity prices, including production taxes and certain other input costs, such as CO₂ purchase costs related to CO₂ flood asset in Wyoming. These commodity indexed operating expenses are based on $75/Bbl WTI and $3.75/MMBtu Henry Hub pricing, move in tandem with oil commodity prices and are partially offset by changes in our price realizations. Midstream operating expense reflected in Operating Expense.
(9)		$5.1 Bn of combined proved reserves includes (i) $4.3 Bn of Crescent standalone PV-10 based on reports prepared or audited by the Company’s third party reserve engineers in accordance with applicable rules and guidelines of the SEC and (ii) ~$0.8 Bn of PV-10 contribution from the pending Uinta transaction based upon internal management estimates.

About Crescent Energy Company

Crescent is a well-capitalized, U.S. independent energy company with a portfolio of assets in key proven basins across the lower 48 states and substantial cash flow supported by a predictable base of production. Crescent’s core leadership team is a group of experienced investment, financial and industry professionals who continue to execute on the strategy management has employed since 2011. The Company’s mission is to invest in energy assets and deliver better returns, operations and stewardship. For additional information, please visit www.crescentenergyco.com.

Cautionary Statement Regarding Forward-Looking Information

This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on current expectations, including with respect to the Uinta Acquisition. The words and phrases “should”, “could”, “may”, “will”, “believe”, “plan”, “intend”, “expect”, “potential”, “possible”, “anticipate”, “estimate”, “forecast”, “view”, “efforts”, “goal” and similar expressions identify forward-looking statements and express the Company’s expectations about future events. All statements, other than statements of historical facts, included in this communication that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the Company’s control. Such risks and uncertainties include, but are not limited to, the ability of the parties to consummate the Uinta Acquisition in a timely manner or at all; satisfaction of the conditions precedent to consummation of the transaction, including the ability to secure required consents and regulatory approvals in a timely manner or at all; the possibility of litigation (including related to the transaction itself),weather, political, economic and market conditions, including a decline in the price and market demand for natural gas, natural gas liquids and crude oil, the impact of pandemics such as COVID-19, actions by the Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC oil producing countries, the impact of armed conflict, including in Ukraine, the timing and success of business development efforts, and other uncertainties. Consequently, actual future results could differ materially from expectations. The Company assumes no duty to update or revise their respective forward-looking statements based on new information, future events or otherwise.

The transactions and outlook announced today is based on information currently available to the Company, depends on certain estimates and assumptions and is subject to change.

Historical Financial Information

As discussed above, Independence is the “predecessor” of Crescent for financial reporting purposes. As a result, unless otherwise indicated, the historical financial and operating data presented in this release for the period from January 1, 2021 through the closing of the Contango Merger on December 7, 2021 are those of Independence on a consolidated basis. The historical financial and operating data presented in this release as of December 31, 2021 and for the period from the closing of the Contango Merger through December 31, 2021 are those of Crescent. The historical information has been presented for informational purposes only and is not necessarily indicative of Crescent’s future financial position or results of operations.

Selected Unaudited Pro Forma Condensed Combined Financial Information

The following selected unaudited pro forma condensed combined financial information of Crescent (the “selected pro forma information”) is based on the historical financial statements of Independence, as its predecessor, for the period from January 1, 2021 through December 6, 2021 and Crescent from December 7, 2021 through December 31, 2021. Under the acquisition method of accounting, Contango’s assets acquired and liabilities assumed by Crescent will be recorded at their fair values measured as of the acquisition date. The excess, if any, of the purchase price over the estimated fair values of Contango’s assets acquired and liabilities assumed will be recorded as goodwill.

The selected pro forma information has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial statements of Crescent included in the Current Report on Form 8-K, which can be found at the SEC’s website at www.sec.gov and the accompanying notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements have been prepared from, and should be read in conjunction with, the historical consolidated financial statements of Independence and Contango and the accompanying notes thereto, each of which were also included on such Current Report on Form 8-K or the Current Report on Form 8-K/A filed on December 17, 2021, adjusted to give effect to the transactions discussed therein (the “Pro Forma Transactions”).

The selected pro forma information has been presented for informational purposes only and is not necessarily indicative of what Crescent’s actual financial position or results of operations would have been had the Pro Forma Transactions been completed as of the dates indicated. In addition, the selected pro forma information does not purport to project the future financial position or operating results of the post-combination business.

Crescent Income Statement
	Actual						Pro Forma Combined
(in thousands, except per share data)	For the year ended December 31, 2021			For the year ended December 31, 2020			For the year ended December 31, 2021
Revenues:
Oil	$	883,087		$	491,780		$	1,112,024
Natural gas		354,298			149,317			550,791
Natural gas liquids		185,530			69,902			235,600
Midstream and other		54,062			43,222			69,421
Total revenues		1,476,977			754,221			1,967,836
Expenses:
Lease operating expense		243,501			202,180			—
Workover expense		10,842			6,385			—
Asset operating expense		45,940			39,023			—
Gathering, transportation and marketing		187,059			173,122			—
Production and other taxes		108,992			61,124			—
Operating expense		—			—			795,466
Depreciation, depletion and amortization		312,787			372,300			416,160
Impairment of oil and natural gas properties		—			247,215			761
Exploration expense		1,180			486			1,661
Midstream operating expense		13,389			9,472			15,355
General and administrative expense		78,342			16,542			171,327
Gain on sale of assets		(8,794	)		—			(9,232	)
Total expenses		993,238			1,127,849			1,391,498
Income (loss) from operations		483,739			(373,628	)		576,338
Other income (expense):
Interest expense		(50,740	)		(38,107	)		(73,698	)
Other income (expense)		120			341			5,926
Income from equity method investments		368			—			(1,529	)
Gain on extinguishment of debt		—			—			3,369
Gain (loss) on derivatives		(866,020	)		195,284			(970,659	)
Total other income (expense)		(916,272	)		157,518			(1,036,591	)
Income (loss) before taxes		(432,533	)		(216,110	)		(460,253	)
Income tax benefit (expense)		306			(14	)		25,561
Net income (loss)		(432,227	)		(216,124	)		(434,692	)
Less: net (income) loss attributable to Predecessor		339,168			118,649			—
Less: net (income) loss attributable to noncontrolling interests		14,922			97,475			3,570
Less: net loss attributable to redeemable noncontrolling interests		58,761			—			333,598
Net loss attributable to Crescent Energy	$	(19,376	)	$	—		$	(97,524	)
Net Loss per Share:
Class A common stock – basic and diluted	$	(0.46	)				$	(2.32	)
Class B common stock – basic and diluted	$	—					$	—
Weighted Average Shares Outstanding:
Class A common stock – basic and diluted		41,954						41,954
Class B common stock – basic and diluted		127,536						127,536

Crescent Balance Sheet
	Actual
	December 31, 2021			December 31, 2020
	(in thousands, except share and unit data)
ASSETS
Current assets:
Cash and cash equivalents	$	128,578		$	36,861
Accounts receivable, net		321,855			111,821
Accounts receivable – affiliates		20,341			—
Derivative assets – current		—			30,926
Drilling advances		200			38,892
Prepaid and other current assets		8,644			1,948
Total current assets		479,618			220,448
Property, plant and equipment:
Oil and natural gas properties at cost, successful efforts method
Proved		6,043,602			4,910,059
Unproved		308,721			288,459
Oil and natural gas properties at cost, successful efforts method		6,352,323			5,198,518
Field and other property and equipment, at cost		144,318			138,371
Total property, plant and equipment		6,496,641			5,336,889
Less: accumulated depreciation, depletion, amortization and impairment		(1,941,528	)		(1,694,742	)
Property, plant and equipment, net		4,555,113			3,642,147
Goodwill		76,564			—
Derivative assets – noncurrent		579			22,352
Investment in equity affiliates		15,415			—
Other assets		30,173			22,422
TOTAL ASSETS	$	5,157,462		$	3,907,369


LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	337,881		$	80,688
Accounts payable – affiliates		8,675			9,019
Derivative liabilities – current		253,525			26,392
Financing lease obligations – current		1,606			—
Other current liabilities		14,438			4,572
Total current liabilities		616,125			120,671
Long-term debt		1,030,406			751,075
Derivative liabilities – noncurrent		133,471			23,958
Asset retirement obligations		258,102			106,403
Deferred tax liability		82,537			—
Financing lease obligations – noncurrent		3,512			—
Other liabilities		13,652			12,102
Total liabilities		2,137,805			1,014,209
Commitments and contingencies
Redeemable noncontrolling interests		2,325,013			—
Equity:
Members’ equity – Class A units, no units and 1,220,421 units outstanding as of December 31, 2021 and 2020, respectively		—			2,716,892
Class A common stock, $0.0001 par value; 1,000,000,000 shares authorized and 43,105,376 shares issued and 41,954,385 shares outstanding as of December 31, 2021; no shares issued and outstanding as of December 31, 2020		4			—
Class B common stock, $0.0001 par value; 500,000,000 shares authorized and 127,536,463 shares issued and outstanding as of December 31, 2021; no shares issued and outstanding as of December 31, 2020		13			—
Preferred stock, $0.0001 par value; 500,000,000 shares authorized and 1,000 Series I preferred shares issued and outstanding as of December 31, 2021; no shares issued and outstanding as of December 31, 2020		—			—
Treasury stock, at cost; 1,150,991 shares of Class A common stock as of December 31, 2021 and no shares of Class A Common Stock as of December 31, 2020		(18,448	)		—
Additional paid-in capital		720,016			—
Accumulated deficit		(19,376	)		—
Noncontrolling interests		12,435			176,268
Total equity		694,644			2,893,160
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	5,157,462		$	3,907,369