Crescent Energy Company

Hello, everyone. Thank you for joining us and welcome to Crescent Energy second quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Reid Gallagher, Investor Relations. Reid, please go ahead.

Good morning, and thank you for joining Crescent's second quarter 2026 conference call. Today's prepared remarks will come from our CEO, David Rockecharlie, and our CFO, Brandi Kendall. Our chief operating officer and executive vice president of investments will also be available during Q&A. Today's call may contain projections and other forward-looking statements within the meaning of federal securities loans. These statements are subject to risks and uncertainties, including commodity price volatility, global geopolitical conflict, 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 have no obligation to update any forward-looking statements after today's call. In addition, today's discussion may include disclosure regarding non-GAAP financial measures. For reconciliations of historical non-GAAP financial measures to the most directly comparable GAAP measures, please reference our 10Q and earnings release available in the investor section of our website. With that, I'll hand it over to David.

Good morning and thank you for joining us. Crescent delivered another record quarter and I want to begin by thanking our talented colleagues across the company for the focus and execution that made these results possible. Our year-to-date results demonstrate continued positive momentum across Crescent. Higher production, structurally lower costs, and record free cash flow reinforce both the strength of the business today and the long-term value creation opportunity ahead. Our business is better than it has ever been before and recent commodity tailwinds only amplify our outperformance. As always, I want to begin with three key takeaways. First, consistent execution across the portfolio drove another quarter of outperformance and supports an enhanced full year outlook. Oil and total production were ahead of our full year plan and adjusted operating expense was significantly better than expectations. As a result, we are raising guidance for both total production and oil production and improving guidance for operating expense. Second, momentum continues to build in the Permian. Asset performance is improving, operational efficiencies are becoming increasingly visible, and synergy capture continues to exceed expectations. We are increasing our target range once again, to approximately $250 to $300 million, roughly three times our original synergy target at announcement. And third, our differentiated combination of operating and investing expertise delivered record quarterly free cash flow, providing meaningful flexibility to accelerate deleveraging and return capital to our investors. Let me now discuss the quarter in more detail. We produced approximately 335,000 barrels of oil equivalent per day during the quarter, including approximately 140,000 barrels of oil per day, and generated a record $418 million of levered free cash flow. Total production was approximately 2% above the midpoint of our original full year guidance. Oil production was approximately 4% above the midpoint, and adjusted operating expense was nearly 10% better than the midpoint. Without performance across production and operating costs, we are increasing our full year production guidance and improving operating expense guidance while maintaining our development capital range. In the Eagleford, steady efficiency gains continue to drive strong returns and consistent free cash flow. Base production and new well performance remain strong. supported by optimized work over and artificial lift programs and solid field execution. Well costs improved approximately 5% year over year and are now more than 25% below 2023 levels, further improving break evens and capital efficiency across the asset. In the Permian, early results demonstrate meaningful progress with significant upside still ahead. Following the acquisition in December, We completed the initial stabilization phase by integrating the organization, right-sizing capital intensity, and implementing our returns-focused operating approach. We are now firmly in the optimization phase, where the Crescent investing and operating model is translating into measurable improvements in costs, efficiency, and free cash flow. When we announced the Permian acquisition, We identified an initial annual synergy opportunity of $90 to $100 million. As we transition from integration to optimization, we continue to identify additional operational infrastructure and commercial opportunities. As a result, we have captured approximately $190 million of annualized synergies to date and are increasing our total target to $250 to $300 million. approximately three times our original target. On a 10-year PV10 basis, the updated synergy range represents approximately half of the original headline purchase price, underscoring the significant value we are creating through execution alone. The incremental synergy opportunity continues to come from three primary areas. First, operational optimization. We are improving field execution through better operational planning, work over strategy, vendor management, and standardized operating practices while reducing well costs by approximately 20 to 25% versus the prior operator and materially improving capital efficiency. Second, infrastructure optimization. We continue to improve operating costs through artificial lift and facilities optimization equipment rationalization, and proactive field surveillance, creating a structurally lower and more sustainable operating cost structure. And third, commercial optimization. We're improving marketing terms, takeaway costs, and equipment contracting by implementing a more holistic commercial strategy across the asset base and leveraging the full scale of the CRECIT platform. Our message today is straightforward. In the first six months following our Permian acquisition, Crescent is delivering better performance, lower costs, and more free cash flow. Importantly, the value captured to date does not include the significant commodity tailwinds relative to our underwriting or the additional upside in our reserve base, where we see potential for expanded economic inventory, improved recoveries, and future resource delineation. What we're seeing in the Permian reinforces that the Crescent investing and operating model is repeatable. We make assets better. Over many years and even more acquisitions, we have consistently increased performance, improved costs, and created meaningful long-term value for our shareholders. These results are consistent with what we said at announcement, that the Permian assets would look materially different under Crescent's ownership. Our track record in the Eagleford gives us confidence in the remaining opportunity, and we believe we're still in the early days of unlocking the full value of the assets. In the Uinta, we are applying the same proven operating playbook. Workover and artificial lift optimization are improving base production, while drilling and completion efficiencies are driving a step change in development costs. Drilling efficiency is up approximately 25% year over year. Completion efficiency has nearly doubled and development costs are down nearly 20% to below $800 per foot. As we built this company through acquisition, we've implemented the Crescent investing and operating model on all of our acquired assets and driven clear and significant operational improvement across our portfolio.