Crescent Energy Company (NYSE: CRGY) (“Crescent” or the
“Company”) today announced the signing of a definitive agreement to
acquire Eagle Ford assets from Ridgemar Energy for upfront
consideration of $905 million plus future oil price contingent
consideration, subject to customary purchase price adjustments. The
acquisition is directly offset Crescent’s core Central Eagle Ford
position and builds upon its significant acquisition activity in
the Eagle Ford over the past 18 months, totaling more than $4
billion of accretive M&A. The transaction, which has an
effective date of October 1, is expected to close in the first
quarter of 2025, subject to customary closing conditions.
Additional details have been posted on Crescent’s website at
www.crescentenergyco.com.
Highlights
- Complementary operations directly offset core position –
Adding significant and contiguous scale offset Crescent’s existing
footprint in Frio, Atascosa, La Salle and McMullen counties with
potential for meaningful operating efficiencies
- Attractive valuation and accretive to key financial
metrics – The transaction, valued at 2.7x EBITDA, is accretive
to Operating Cash Flow, Levered Free Cash Flow(1) and net asset
value, with strong expected cash-on-cash returns
- Strengthens the Crescent asset portfolio – Approximately
20 Mboe/d of high-margin, oil-weighted production and ~140 well
understood, high-return locations that immediately compete for
capital and extend Crescent’s low-risk inventory life
- Maintains strong balance sheet and Investment Grade credit
metrics – Leverage neutral-to-accretive transaction with
balanced consideration mix. Crescent’s net debt to trailing
12-month Adjusted EBITDAX ratio expected to be at or below the
Company’s publicly stated maximum leverage target of 1.5x(2)
“This transaction continues to highlight our ability to utilize
our investing and operating expertise to identify and acquire
high-quality assets, efficiently integrate them into our business
and drive additional value through improved operations. With
accelerated synergies captured from the integration of SilverBow
and our recent bolt-on acquisition, our full team is ready and
eager to add the Ridgemar assets to our core operating footprint in
the Eagle Ford,” said Crescent CEO David Rockecharlie. “These
assets contribute meaningful scale, enhance Crescent’s cash
margins, increase our oil-weighting and extend our low-risk
inventory life, all at an attractive and highly accretive
valuation. I remain confident in our ability to capitalize on our
strong momentum and continue our profitable growth trajectory
towards our investment grade ambitions.”
(1)
Non-GAAP financial measure. Please see
“Non-GAAP Measures” for a description of the applicable metric.
(2)
Crescent defines leverage as the ratio of
consolidated net debt to consolidated Adjusted EBITDAX
(non-GAAP).
Transaction
Consideration
The base upfront consideration of $905 million consists of up to
$100 million of equity issued to the seller and the remainder in
cash. The future oil price contingent consideration of up to $170
million consists of payments by Crescent to seller of (i) $15
million per quarter in 2026 and $12.5 million per quarter in 2027
for which the average quarterly WTI price is greater than or equal
to $70 per bbl; and (ii) an additional $15 million per quarter in
2026 for which the average quarterly WTI price is greater than or
equal to $75 per bbl.
Advisors
Jefferies LLC served as financial advisor to Crescent in
connection with the acquisition and Kirkland & Ellis LLP served
as legal counsel. RBC Capital Markets, LLC served as financial
advisor to Ridgemar Energy and Vinson & Elkins LLP served as
legal counsel.
About Crescent Energy
Crescent is a differentiated U.S. energy company committed to
delivering value for shareholders through a disciplined growth
through acquisition strategy and consistent return of capital. Our
long-life, balanced portfolio combines stable cash flows from
low-decline production with deep, high-quality development
inventory. Our activities are focused in Texas and the Rocky
Mountains. 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, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements are based on current expectations,
including with respect to the proposed transaction. The words and
phrases “should”, “could”, “may”, “will”, “believe”, “think”,
“plan”, “intend”, “expect”, “potential”, “possible”, “anticipate”,
“estimate”, “forecast”, “view”, “efforts”, “target”, “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 transaction in a timely manner or at all;
satisfaction of the conditions precedent to consummation of the
transaction; the integration of the assets acquired in the
transaction into the Company’s existing strategies and plans; 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, actions by the Organization of
the Petroleum Exporting Countries (“OPEC”) and non-OPEC oil
producing countries, 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 its forward-looking statements
based on new information, future events or otherwise.
Non-GAAP Measures
Crescent defines Levered Free Cash Flow as Adjusted EBITDAX less
interest expense, excluding non-cash amortization of deferred
financing costs, discounts, and premiums, loss from extinguishment
of debt, excluding non-cash write-off of deferred financing costs,
discounts, and premiums, realized loss on interest rate
derivatives, current income tax benefit (expense), tax-related
redeemable noncontrolling interest distributions made by OpCo and
development of oil and natural gas properties. Levered Free Cash
Flow does not take into account amounts incurred on
acquisitions.
Crescent defines Adjusted EBITDAX as net income (loss) before
interest expense, loss from extinguishment of debt, realized (gain)
loss on interest rate derivatives, income tax expense (benefit),
depreciation, depletion and amortization, exploration expense,
non-cash gain (loss) on derivatives, impairment expense, non-cash
equity-based compensation expense, (gain) loss on sale of assets,
other (income) expense, transaction and nonrecurring expenses and
early settlement of derivative contracts. Additionally, we further
subtract certain redeemable noncontrolling interest distributions
made by Crescent Energy OpCo LLC, our wholly owned subsidiary,
related to Manager Compensation to KKR Energy Assets Manager LLC,
our external manager, and settlement of acquired derivative
contracts.
We refer herein to the “EBITDA” of the target business used for
purposes of calculating certain illustrative valuation multiples.
Unless otherwise noted, such metrics represent unaudited lease
operating statement data for the six months ended June 30, 2024,
presented on an annualized basis. As used for purposes of such
disclosures, the term “EBITDA” refers to a measure of revenues less
certain operating expenses (i.e., revenues less production and
other taxes, lease operating expense, workover expense and
gathering, transportation and marketing costs). Such definitions
are used for purposes of the illustrative metrics referred to above
but do not reconcile to GAAP financial statements and differ in
certain respects from similarly named measures used by other
companies or that we have historically used in our earnings
releases and other public disclosures. See our other public
disclosures, including the information we file and furnish with the
SEC, for additional information regarding our historical measures
of Adjusted EBITDA.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241203057556/en/
For additional information, please reach out to
IR@crescentenergyco.com.
Crescent Energy (NYSE:CRGY)
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