Crescent Energy Company

Good morning, and thank you for joining Crescent's first quarter conference call. Our prepared remarks today will come from our CEO, David Rocacharli, and CFO, Brandy Kendall. Todd Faulk, Chief Accounting Officer, and Ben Connor and Clay Rind, both Executive Vice Presidents, are also here today and available during our Q&A session. Today's call may contain projections and other forward-looking statements within the meaning of the federal security laws. These statements are subject to risks and uncertainties, including commodity price volatility, global geopolitical 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 disclosures. We disclaim any obligation to update any forward-looking statements after today's call. In addition, today's discussion may include disclosures regarding non-GAAP financial measures, For reconciliation of these historical non-GAAP financial measures to the most directly comparable GAAP measure, please reference our 10Q and earnings press release available on our website. With that, I will turn it over to David.

Great. Thanks, Emily. Good morning, and thank you for joining us today as we close out another solid quarter. We continue to generate significant EBITDA and operating cash flow through our maintenance level development program, allowing us to prioritize returning cash to shareholders and maintaining a strong balance sheet. Our base business is performing well, and we are highly encouraged with how our team continues to find innovative ways to safely reduce costs and maximize the value of our development program. Before jumping into the first quarter results, let me spend a few minutes on our recently announced bolt-on acquisition. Last week, we announced an accretive acquisition of operatorship and incremental working interest in our existing non-operated Western Eagleford assets from Mesquite Energy for $600 million. We acquired the original non-operated interest in the Western Eagleford over six years ago, so we know the assets incredibly well. We have a long history in the Eagleford, and we are pleased to increase our ownership and bring our operating skills to these assets. Today, the assets represent approximately 75,000 largely continuous net acres, primarily in Demet and Webb counties, with current net production of 20,000 barrels of oil equivalent per day, roughly 70% of which is liquids. Proforma will own an approximately 50% interest in the assets, adding an incremental 35% working interest to our existing 15% non-operated interest. The acquisition cements our position as a leading consolidator in the Eagleford and is consistent with the proven acquire and exploit strategy that we've been executing for the past decade. And on a standalone basis, the Eagleford acquisition checks all of our investment criteria, fitting our strategy financially, operationally, and strategically. We believe the $600 million purchase price represents an attractive value, adding more than $700 million PDP PB10 at $70 oil and 350 gas, and approximately 250 gross or 150 net operated lower Eagle Fruit locations with significant upside from the Austin Chalk and upper Eagle Fruit. The transaction is highly accretive to key metrics, including operating cash flow, free cash flow, and net asset value per share. Through the transaction, we will maintain balance sheet strength and our investment grade credit metrics, while remaining below our publicly stated maximum leverage guidance of 1.5 times. Operationally, the Mesquite assets add meaningful, high return, lower Eagle Ford inventory at the current development pace. Over the last six years, as an active non-operated partner, we've developed a deep knowledge about the asset base, evaluated over 250 lower Eagle Ford well proposals, and consistently shared our operational insights with the operator. The high quality of the resource base is evident in recent well performance, which was achieved using the latest approaches to drilling, completions, and well spacing. Such recent performance is both significantly improved and quite competitive with Eagleford development base and wide. We would also highlight the recent encouraging results from the Austin Shock Formation, both on the acquired assets and closely offset, suggest significant upside on our anchorage. However, we did not ascribe any value to this resource in our underwriting of the assets. Lastly, and importantly, is the strategic fit. We will benefit from increased scale in the Eagle Ford and expect to find new and valuable synergies with our existing operations. Following the transaction, Crescent will hold over 200,000 net acres in the Eagleford and operate approximately 90% of our pro forma Eagleford position. Notably, the assets add scale in a complementary way, adding 20,000 BOE per day of production with an expected next 12-month decline of 17%, further improving our peer-leading decline rate. We believe the acquired assets enhance our existing portfolio and view this transaction as an excellent example of our acquire and exploit strategy, adding scale, long life reserves, and proven inventory in an area where we have existing operations and a competitive advantage. Over the last year, we've evaluated many acquisition opportunities, particularly in the Eagleford, but we've remained patient given the heightened commodity price environment. Ultimately, we focused on strengthening our base business during that period of time, reducing our leverage to one times post the Uintah acquisition, maintaining substantial liquidity, and continuing to core up our portfolio through a number of small asset domestic use. Relative to other opportunities we've seen, We believe this transaction fits us best due to the combination of significant low-decline production and cash flow, meaningful proven inventory, and the deep operational insights our team brought to the table. We also like the attractive purchase price at this point in the commodity price cycle. Across the broader A&B market, we expect it to be an active year and are focused in areas where we can add meaningful scale. with an emphasis on our existing footprint across Texas and the Rockies. Going forward, we are well positioned as an acquirer of assets, particularly in the Eagleford, which remains the most fragmented of the major basins across the lower 48 states. With its relatively low base declines, well-delineated development, attractive realizations, and balanced commodity mix, further growth in the Eagle Ford complements our business well, and we envision it will continue to play a key role in our acquisition strategy. But as always, we'll evaluate all future opportunities through our returns-driven framework first. As a reminder, our attractive existing business with a low decline rate and large inventory of economic drilling locations ensures we will continue to be disciplined with our capital as a flexible operator and patient acquirer. As Brandy will cover in more detail, the base business continues to perform well, which allows us the flexibility to focus on returning capital to shareholders, preserving balance sheet strength, and pursuing attractive investment opportunities. From there, we can capture synergies and enhance operations as we continue to scale and transform our business. all in a way that drives value to our shareholders. With that, I will turn the call over to Brandi to cover our first quarter financial results. Brandi?

Thanks, David. For the quarter, we outperformed expectations on both production and EBITDA and saw continued operational efficiencies across our business. We announced a first quarter cash dividend of $0.12 per share in line with our strategy to distribute 10% of EBITDA to our shareholders. framed around our guidance price stack of $70 oil and $3.50 gas. For the quarter, we produced 137 MBOE per day and generated $232 million of adjusted EBITDA. Production in the quarter was slightly impacted by minor downtime related to winter weather. On revenue, our gas differentials outperformed this quarter due to exceptionally high West Coast gas realization, with Crescent realizing 150% of benchmark prices. Our elevated price realizations reflect the benefits of our exposure to different end markets. Our operating expenses were also impacted by higher cost residue gas related to increased natural gas prices. However, these higher costs were more than offset by higher realized prices. Adjusted operating expenses, including production and other taxes, averaged $16.57 per BOE for the quarter, which is above our initial guidance range. Adjusting for these commodity-linked costs Crescent's adjusted operating expense for BOE was in line with expectations, and we anticipate our beginning of year cost guidance to remain intact. We invested $202 million in the first quarter, drilling 15 and bringing online 18 gross operated wells across the Uinta and Eagleford. Due to operational efficiency, this reflects a higher level of activity during the first quarter than our initial expectations. Taking into consideration the accelerated activity at the end of the quarter, we still expect to remain within our full year 2023 capital and production guidance. More broadly, we're continuing to see inflation moderate as more stable commodity prices have decreased service cost pressures, but have not experienced a material decrease in cost from levels incurred over the last six months. We continue to offset the higher cost environments with longer laterals, decreased cycle times, and continual improvements in completion efficiencies. We expect strong returns from our development program and continue to operate one rig in both the Eagleford and Uinta basins. Switching over to the balance sheet. Our balance sheet remains strong with net LTM leverage of 1.0 times in line with our stated long-term leverage target. We were well positioned in the first quarter given our focus on existing operations and debt reduction during last year's period of higher commodity prices as well as our February high yield offering to term out a portion of our RBL debt. With over 1.1 billion in liquidity, we were prepared for the change in the market environment, which allowed us to pursue the recently announced Western Eagle for transactions. Also in line with our acquisition risk management strategy, we executed additional hedge volumes for the balance of 2023 and full year 24 in connection with the transaction to protect our expected returns on investment capital and maintain a strong balance sheet. Assuming a mid-year close at the Western Eagle Ford acquisition and approximately 20 MBOE per day of current production, we are roughly 60% hedged for the remainder of 2023. With that, I'll turn the call back over to David.