Crescent Energy Company

These are materially enhancing the returns on our development program, where we are consistently earning in excess of two times cash on cash returns on a full cycle basis. Importantly, these capital efficiencies have not come at the expense of well performance. Across the Uinta in particular, our assets have materially outperformed our predecessors due to the higher completion intensity. where we've improved oil recoveries by approximately 25% since taking over. Complementing our high returning development program, our substantial long life producing reserve base consistently provides us with predictable performance. The cash flow stability of our low decline balanced production base is a tremendous value proposition relative to our peers. Our unique skill set, operating both conventional and shale assets, allows us to combine stable cash flows with attractive reinvestment opportunities. Today, we are the only U.S.-focused company generating more than 150,000 barrels of oil equivalent per day of production while running only a two to three rig maintenance program, which is a direct result of the lower capital intensity required to maintain production output at Crescent. This intentional portfolio construction, coupled with continuous outperformance on production and capital spend, drives this quarter's record free cash flow, as well as our expectations for substantial free cash flow looking ahead to 2024 and beyond. Now, turning to M&A. Since the second quarter, we have closed on two previously announced Eagleford acquisitions totaling $850 million. First, through our $600 million acquisition of operatorship of the Western Eagle position in July, and second, through the acquisition of incremental Western Eagleford working interest for $250 million in October. Together, the assets represent approximately 32,000 barrels of oil equivalent per day of liquids weighted net production with a low 16% decline rate and more than $1 billion of approved developed PV10 value. The two deals doubled our Eagleford production and inventory and quadrupled our legacy non-operated interest in the Western Eagleford to a current operated working interest of 63%. Furthermore, we now operate greater than 90% of our interest in the Eagleford, adding scale and operational control in a core region for Crescent. To simplify our M&A growth strategy, when evaluating opportunities, we have two key objectives. First, to buy assets we understand at attractive value, targeting cash on cash returns in excess of two times our money. and second, to make those assets better to drive incremental return to shareholders. Regarding this first objective, in our view, the entry prices of our recent acquisitions are highly compelling for three key reasons. First, it's nice to buy more of what you already own at a great price. We acquired over a billion dollars of approved, developed PV-10 value for $850 million during this summer's pullback in commodity prices. And these assets we know well through our six years as a non-operative partner. Second, the assets provide us with a significant backlog of high returning lower Eagleford inventory, as well as upper Eagleford and Austin Chalk upside. As outlined on page 10 of our investor deck, this is a compelling resource base, with the lower Eagle Fruit EURs on this asset having outperformed the Basin Average. That provides us the ability to compound our invested capital and earn in excess of two times our money on low-risk development. In many other recent industry transactions, buyers have had to ascribe material purchase price value to undeveloped resource, which is part of full cycle returns. And we think our disciplined and opportunistic approach to M&A gives us a leg up on full cycle economics. Third, the assets are highly complementary to our existing business. And we'll find production driving financial accretion and providing tangible operational synergies, which will deliver a return in excess of our underwriting expectations. Turning to the second M&A objective of our growth through acquisition strategy, we seek to bring improved operational execution to the assets we require. Following the closing of the Western Eagleford acquisition, we fully integrated the assets ahead of schedule and immediately began to realize synergies, starting with a 20% reduction in well costs relative to the previous operator. These cost savings are driven by the same improved cycle times and completions efficiencies driving down costs across our existing central Eagleford operations. The speed with which we have incorporated the assets into our portfolio and have improved on legacy well performance is a testament to both the quality of our people as well as the unique benefits of acquiring assets we know well. To summarize, the Western Eagleford acquisitions reflect our strategy in action, adding to our successful track record of buying assets at attractive value and making those assets better. Looking ahead, we will continue to execute on our growth strategy. We see a huge opportunity for continued accretive acquisitions and firmly believe we have the ability to become an investment-grade company over time. To us, that means adding size and scale with financial discipline. As we pursue our disciplined growth strategy, we anticipate we will be highly active in the M&A market over the next 12 to 24 months. We expect to be an active participant in the ongoing wave of consolidation in the sector, particularly across our core operating areas in Texas and the Rockies. Furthermore, we also believe that we are uniquely positioned to participate on the front and backside of the energy sector consolidation activity. Leveraging our broader investment and operational expertise to acquire attractive assets that may be less core to pro forma companies following large cap merger and acquisition activity. Now, before handing the call back over to Brandy, I'd like to discuss sustainability, an area that's core to our long-term business strategy. Yesterday, we published our annual sustainability report. We made substantial progress on our emissions last year, reducing our absolute scope one emissions to 27%. We monitor and evaluate all of our assets to identify opportunities for improvement, and our 2022 progress is primarily achieved through a carbon sequestration project in Wyoming and the replacement of pneumatic devices. In Wyoming, we are now capturing and sequestering carbon dioxide that was previously vented and selling those volumes to an unfavorable party to reduce and increase the cost of recovery. In addition to materially increasing emissions, the project represents our existing carbon capture footprint, and its current operations and capabilities to supply, capture, protect, and transport CO2 polymers. While still early, we continue to progress opportunities in our portfolio to increase cash flow from our carbon dioxide production business. Within our portfolio, we remain particularly focused on methane emissions and further improving our measurement capabilities. As one of the first U.S. companies to join the GMB 2.0 in early 2022, our measurement efforts have increased tremendously. Last year, we implemented biannual flyovers across nearly all of our assets, allowing us to both expedite and enhance our emissions measurement and detection capabilities. As a company focused on growth through acquisitions, that inherently means acquiring more emissions, but our organization-wide emphasis of proper stewardship ensures we will remain committed to reducing the emissions profile of the assets we own and acquire. With that, I'll turn the call over to Brandy to provide more detail on the quarter and our recent capital markets activity. Brandy?

As David mentioned, we achieved record production in cash flow this quarter, averaging 157 MBOE per day, generating $290 million of adjusted EBITDA and $160 million in levered free cash flow. Importantly, this quarter's results were only inclusive of the impact of the first of our two Western Eagleford acquisitions, the latter of which will be reflected in the fourth quarter. On capital, we spent $94 million, which will be our lightest quarter of the year due to the timing of Wells' turn to sales. During the quarter, we brought online 10 gross operated wells in the Eagleford, which are posting strong early time results and are expected to generate in excess of two times our capital invested at current commodity prices. In Q4, we expect both production and capital to increase, bringing our full year results near the midpoint of our capital guidance range, despite the increase in activity for the year. While we are still finalizing our outlook for 2024, as David mentioned, the capital efficiencies we've achieved to date sets us up well as we expect preliminary production of 155 to 160 MBE per day and consistent capital spend to this year, which equates to a two to three rate program. Maintaining capital spend at today's level, despite a 20% increase in year-over-year production, highlights that our business requires less reinvestment to maintain our current output, which is a testament to our capital efficiency as we've realized to date and the quality of our asset base. At these levels, we expect to generate substantial free cash flow for the remainder of 2023 into 2024 and beyond. As highlighted on pages 15 and 16 of our investor presentation, Crest's year-leading decline rate and capital efficiency results in significant free cash flow generation and a compelling valuation based on cash flow metrics. Our levered free cash flow over the next five years is greater than our current market cap, which is reflected in our approximate 25% free cash flow yield nearly 50% higher than our peers. With that free cash flow, we expect to maintain our rigorous commitment to cash flow priorities 1A and 1B, shareholder returns and the balance sheet, while continuing to grow the business opportunistically through free of acquisition. Alongside earnings, we announced a quarterly dividend payment of $0.12 per share, consistent with our publicly stated expectations for 2023, and generating an attractive 4% yield based on recent trading levels. From a balance sheet and capital markets perspective, we have had sustained success in raising capital to support our M&A strategy while maintaining our financial strength. We exited the quarter with leverage of 1.4 times and $1.1 billion of liquidity, both well within our targets. Performing for closing the first Western Eagleford acquisition, our bank syndicate reaffirmed our $2 billion borrowing base and $1.3 billion ECA. We feel great about where we sit from a balance sheet perspective and will continue to use excess free cash flow in the near term to reduce absolute leverage. In the capital markets, we successfully raised $600 million in debt and equity in the third quarter to finance the Western Eagleford acquisition. In September, we priced a $155 million primary equity offering, including the overall allotment. The offering represented Crescent's inaugural primary issuance and was extremely well received as we were able to upsize the transaction 10% strong investor demand. The offering demonstrated increased access to the capital markets for accretive transactions, with our stock trading up 8% to 9% in the days following, and the green shoe option exercised less than a week after the shares priced. In addition, we raised $450 million of incremental 2028 senior notes during the quarter across two separate transactions, further enhancing our liquidity profile and in line with our stated preference for longer duration capital in lieu of the bank market. The offerings continued our momentum in the bond market, and the strong demand is reflected in the benefits from our recent upgrade to a double B credit. In summary, we are pleased with our efforts to efficiently access the capital markets to facilitate accretive growth through M&A and advance our strategic goals. Finally, to provide a brief update on our hedging activity. In line with our strategy of preserving returns on capital, we layered on additional hedges along to the signing of the two recent acquisitions. As we look into 2024, we are less than 50% hedged through a mix of fixed swaps and callers. We continue to like our long-term commodity exposure, particularly given the low decline, long duration nature of production base. With that, I'll turn the call back over to David.

Thank you, Brady. There are three things we hope you take away from today's call. First, our third quarter performance was exceptional. Record production, record cash flow. We are demonstrating operational efficiencies that will make us stronger and more profitable in 2024 and beyond. Second, we have proven our ability to grow credo. We have captured high-value transactions and financed them in a fashion that maintains a strong balance sheet, highlighted by long-term capital, strong liquidity and credit metrics, rating agency upgrades, and inclusion in the BB bond. We've created scale, doubling our business in less than three years, and are well equipped to continue to do so. And lastly, we have a simple value proposition. We believe Crescent is the best risk-adjusted stock to own for long-term exposure to oil and gas prices. We have a lot of ambition and a lot of work ahead, but we are pleased with what we have accomplished to date, and we intend to continue to do exactly what we say we're going to do. With that, I'll open it up for Q&A. Operator?