Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Crescent Energy Co (CRGY, Financial) reported a strong financial performance this quarter, surpassing consensus expectations on both EBITDA and free cash flow.
- The company achieved record production levels this quarter, with significant gains in well productivity and operational efficiencies.
- Crescent Energy Co (CRGY) has increased its full-year production guidance while maintaining the same level of capital expenditure, indicating efficient resource management.
- The company has successfully implemented a returns-driven M&A strategy, enhancing its portfolio through accretive acquisitions and strategic divestitures.
- Crescent Energy Co (CRGY) has improved its capital structure, successfully refinancing debt and enhancing shareholder value through dividends and share buybacks.
Negative Points
- The company faces risks related to commodity price volatility and geopolitical conflicts, which could impact future performance.
- Despite strong operational performance, the company's stock price may still be undervalued, indicating potential market skepticism.
- The complexity of managing increased scale and integrating acquisitions could pose challenges to maintaining operational efficiency.
- Crescent Energy Co (CRGY)'s reliance on the oil and gas sector exposes it to regulatory and environmental risks.
- The company's strategy heavily depends on the success of its M&A activities, which could be impacted by market conditions and competition for assets.
Q & A Highlights
Q: Good morning. Nice quarter. Dave, my first question for you or Brandi, just on capital allocation. Specifically, as you look at your stock price today, which to me seems still quite discounted versus what you see out there with potential legal further other deals. Do you all have a strong opinion of or you believe it makes more sense to lean or focus in maybe the remainder of the year?
A: David Rockecharlie, CEO: Yeah, hey, thanks for the question. I think the best thing is just to keep it simple. And as you know that's the first thing we do with the free cash flow from the businesses that's focused on the investors, which obviously is the balance sheet and the dividend. So I think we feel very good about the current positioning there. And then after that, it's really opportunistic.
Q: And then just secondly, on capital structure specifically now that you've simplified the balance sheet, I'm just wondering, will the shareholder return, just I guess, would that continue to be just a mix of the base div and [hobco] repurchases and regular stock repurchases, just a combination like we saw just as last quarter more of the same or should we think about that in the other way.
A: Brandi Kendall, CFO: Yeah. So just more of the same. So as a reminder, right, we enhanced our dividend framework last quarter, moved to the fixed dividend of $0.12 per share. And then as you mentioned, we'll opportunistically repurchase both Class A and Class B shares. When we came out with the buyback initially, it was directed towards the Class B shares. As David mentioned, we've made a lot of progress from an equity positioning standpoint and now view that the private investor overhang is gone so really, we'll look to use that opportunistically on both classes of shares going forward.
Q: We're looking at the revised guidance laid out for 2024 and volumes, just wondering if you all are able to walk through the moving pieces that constitute the 2,500 [BOE/D] per day that is being attributed to operational outperformance. Really just trying to understand how much of the uplift that has been seen in the new Q1 wells is rolling through for the new wells that are planned for the remainder of the year in this update? Any color there would be helpful.
A: Brandi Kendall, CFO: Oliver, good morning. It's Brandi. So as we highlighted in our prepared remarks, we increased the full year production guide by 2000 barrels a day net and 2,500 barrels a day if you adjust for the small divestiture. The drivers of the increase is really the same performance that we're seeing both out of the Western Eagle Ford as well as the result of the more intense completions in Utah. So we believe that the (technical difficulty) [free guidance] reflects the performance trends that we're currently seeing. So would point you towards the midpoint of the new guidance range for the time being.
Q: Good morning and congrats on a strong quarter. A couple of quick questions. I was hoping you could maybe give a little color on the production and capital cadence for the remainder of the year.
A: Brandi Kendall, CFO: Hey, Jared, it's Brandi. So I'll maybe start on the capital side. So similar to what we would have talked about in March alongside year-end earnings, we still expect to be front-half weighted to 60% of capital for the first half of the year and expect this to be our heaviest quarter of capital spend to date at the [$193 million]. From a production standpoint, we'd expect to be down at a low-single digits quarter over quarter, and then relatively flat (technical difficulty) updated midpoint. We do expect our oil production noted trend upwards over the course of the year just as we're bringing on our oil-weighted inventory.
Q: With the ongoing efficiency gain D&C activities you highlighted on slide 8 and 9, could you discuss the flexibility of your 2024 capital plan? Specifically, would you consider accelerating activity if targeted goals are achieved ahead of schedule? Thank you.
A: David Rockecharlie, CEO: Hey. It's David. Great question. I think maybe the best way I can answer that is just as a reminder, our view is that we want to manage the company based on returns on capital first and foremost. When we deploy capital, we want to make sure we're getting the returns we expect and our business plan is to maintain or slightly grow production through the drill bit and then really drive our outsized growth opportunistically through M&A. So in that context, the way we think about rising prices and the opportunity in our asset base, we would not look to accelerate activity into that. I think our basic guidance of a two to three rig business today is going to remain intact and that extra free cash flow will come to the benefit of investors in a rising price environment.
Q: Regarding the recent Eagle Ford mineral acquisition, could you elaborate on your appetite for investment in mineral or low-decline conventional assets? Thank you.
A: Clay Rynd, Executive Vice President, Investments: Hey, this is Clay. So I think we've been consistent on this. We look at everything in particular focused on our existing footprint. So I think as we think about the mineral acquisition, that was opportunistic value driven within our footprint in an area we know well and accretive. So it checked all the boxes for us from a investment opportunity perspective. Most importantly, financially a strong return opportunity. And then clearly, we've highlighted the low-decline conventional business as something that we think there's a core strength. And so that's an area where you would expect us to continue to look for opportunity go forward. And if we can find opportunities that fit our framework, expect us to add those where they make sense.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
