Crescent Energy Q3 2024 Earnings Report

Crescent Energy EPS Results

• Actual EPS: $0.39
• Consensus EPS: $0.28
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: $0.35

Crescent Energy Revenue Results

• Actual Revenue: $744.87 million
• Expected Revenue: $793.88 million
• Beat/Miss: Missed by -$49.01 million
• YoY Revenue Growth: N/A

Crescent Energy Announcement Details

• Quarter: Q3 2024
• Date: 11/4/2024
• Time: After Market Closes
• Conference Call Date: Tuesday, November 5, 2024
• Conference Call Time: 11:00AM ET

Crescent Energy (NYSE:CRGY) Co. (NYSE: CRGY) is an independent exploration and production company focused on the acquisition, development and production of oil and natural gas resources in North America. Headquartered in Oklahoma City, the company’s core business activities include the identification and appraisal of prospective acreage, the design and execution of drilling and completion programs, and the ongoing operation and optimization of producing wells. Crescent Energy’s integrated approach emphasizes capital efficiency, reservoir quality and operational reliability to support sustainable cash flow generation over the commodity cycle.

Crescent Energy’s operations are concentrated in the Permian Basin, with a particular focus on the Delaware Basin’s stacked pay intervals. The company’s asset base includes both operated and non-operated working interests in conventional and unconventional formations, enabling it to pursue a balanced drilling program that leverages existing infrastructure. Crescent Energy employs advanced completion techniques and data-driven reservoir management to enhance recovery rates and drive down unit costs. Through targeted acquisitions and high-grading of acreage, the company aims to build a low-cost inventory of development opportunities and maintain steady production growth.

Crescent Energy completed its initial public offering in 2023, listing its shares on the New York Stock Exchange under the ticker CRGY. Since inception, the company has been governed by an experienced board of directors and supported by a management team with deep technical and commercial expertise in upstream oil and gas. Crescent Energy adheres to environmental, social and governance (ESG) principles, emphasizing safety, community engagement and prudent resource stewardship as it pursues long-term value creation for its shareholders.

Crescent Energy Q3 2024 Earnings Call Transcript

Key Takeaways

• Raised 2024 outlook for the third consecutive quarter, reaffirming production guidance while reducing capital spending and boosting free cash flow.
• SilverBow integration has delivered approximately $65 million of annualized synergies within months—hitting the low end of targets—and the total synergy expectation has been increased by over 20 percent.
• Record production of 219,000 BOE/d in Q3, driven by enhanced well productivity and operational efficiencies such as simul frac completions and horseshoe U-shaped wells that lowered well costs by about 10 percent.
• Strong financial position with net leverage at 1.5x, $1.5 billion of liquidity, roughly $430 million of adjusted EBITDA, and $160 million of levered free cash flow, alongside a $0.12/share dividend and share buybacks delivering a 5 percent yield.

Presentation

[Operator]

Greetings and welcome to the Crescent Energy third quarter 2024 conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require your operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Reid Gallagher, Investor Relations. Thank you. You may begin.

[Reid Gallagher, Head of Investor Relations at Crescent Energy Company]

Good morning, and thank you for joining Crescent's third quarter 2024 conference call. Prepared remarks today will come from our CEO, David Rockecharlie, and CFO, Brandi Kendall. Our CAO, Todd Falk, and our EVP of Investments, Clay Rynd, will also be available during Q&A. Today's call may contain projections and other forward-looking statements within the meaning of the federal securities laws. 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.

[Reid Gallagher, Head of Investor Relations at Crescent Energy Company]

For reconciliation of historical non-GAAP financial measures to the most directly comparable GAAP measure, please reference our 10-Q and earnings press release available under the Investor section on our website. With that, I will turn it over to David.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Good morning, and thank you for joining us. Yesterday, Crescent posted another solid quarter of financial and operating results. Before we get into the details, I want to begin with a few key points I hope you take away from this call. First, our team continues to execute on our proven and consistent strategy of growing profitably through acquisitions and driving operational efficiencies. Because of that, we have raised our outlook for the year for the third consecutive quarter, reaffirming our production guidance with more efficient capital spending and increased free cash flow. Second, our integration of the SilverBow business is yielding significant synergies even beyond our initial expectations. We've already realized approximately $65 million of annualized synergies or the low end of initial expectations within just a few months of closing.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

We have successfully integrated the people, the assets, and the best practices of both businesses ahead of schedule to drive incremental value. We increased our target for total synergies by more than 20% and are confident in our ability to execute from here. And finally, we see significant opportunity ahead. This has been an active year for us with the SilverBow acquisition and subsequent bolt-on to our core Central Eagle Ford footprint. But Crescent has never been better positioned. We've delivered profitable growth of both production and cash flow through disciplined investing and operations, and we have transformed the equity positioning of our business since becoming public. I am confident in our ability to capitalize on recent success and continue executing towards our goal of becoming an investment-grade company and delivering long-term value for our shareholders.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Following those quick highlights, I will now discuss the quarter in a bit more detail. We reported strong financial results this quarter with our advantaged low-decline production base generating significant free cash flow and our development program outperforming expectations. We had record production of 219,000 barrels of oil equivalent per day this quarter, with only two months of SilverBow contribution included in our numbers. The strong execution by our team has allowed us to yet again improve our outlook for the remainder of the year, with well-performance, synergy capture, and capital efficiencies allowing us to hit our production guidance with less capital, generating incremental free cash flow for our investors. In the Eagle Ford, we continue to build momentum as we drive improved capital costs and increased well-performance. Across our entire position, we are seeing a meaningful year-over-year uplift in well productivity on both an oil and total volume basis.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

This is a testament to the depth and quality of our inventory, with improving performance on our assets versus industry trends and in-basin and peers that have seen a natural degradation in performance. As we've acquired assets over time, a key part of our strategy is to improve operations through our ownership, and you are seeing the direct result of this with our recent well performance. On the capital side, we're seeing incremental savings versus the first half of the year, increasing returns and free cash flow. By combining the strength and expertise of our newly integrated organization of talented people, we've been able to drive further efficiencies across our program utilizing the latest available technology. For example, we are planning horseshoe U-shaped wells in select areas to unlock meaningful inventory where land considerations may not have allowed for traditional development.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

We've been able to bring Simul-frac completions to the SilverBow assets, meaningfully increasing efficiency and driving down development costs. We've also had great success to date working with our service providers to drive down costs alongside operating efficiencies, which combined has lowered well costs 10% relative to the first half of this year. While the capital savings on the acquired assets are encouraging, they represent only a fraction of the synergies we've already achieved from the SilverBow transaction. When we originally announced the acquisition, we put forward what we believed were significant and ambitious synergy targets, and we've been able to deliver far ahead of schedule. With approximately $65 million of annualized uplift realized to date across capital, overhead, operating costs, and interest expense, we've already hit our original target range.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

As we've spent more time with the assets under our control, we believe there is more opportunity than we originally anticipated, and we have increased our expected synergy range by more than 20%. On the integration front, our 2023 acquisitions in the Western Eagle Ford have also continued to drive strong free cash flow with a dramatic step change in well productivity versus the prior operator and approximately $70 million of annualized operational gains relative to our $850 million of combined purchase price. Through the hard work and dedication of our talented people, we've achieved all this in the first year under our operatorship by bringing industry best practices to the field, and we look forward to finding opportunities for further value across our scaled position in the basin.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

In the Uinta, we continue to see strong results from our development program, which to date has remained largely focused on the proven Uteland Butte formation. The Uinta is at an exciting stage of its evolution, and we are pleased to see incremental public activity and recognition of the impressive resource potential and advantaged economics in the basin. We entered the basin in 2022 through a transaction at a discount to PDP value, with any development potential generating incremental returns for our investors. While we remain focused on the most proven formations with our current development program, we have begun to allocate prudent capital to incremental horizons now that other operators have spent meaningful capital to delineate and further prove the impressive potential across the play.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

We've also been active seeking more creative and efficient pathways to de-risk the full upside across our position and recently entered into a small joint venture to test the easternmost extent of our acreage with no upfront capital required. While still early in our evaluation, our initial results have been encouraging, but we will continue to monitor the data both from our wells and from offset operators and be patient as we limit risk and capture the substantial resource upside across our assets. Our consistent ability to improve operations and generate meaningful synergies has given us further conviction on our growth through acquisition strategy, and we see a significant market opportunity ahead of us. SilverBow was the largest acquisition we have completed to date as a public company, and we have followed our proven acquisition and integration playbook with great results.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

And since we have had another successful closing and integration with our bolt-on in the Central Eagle Ford, the acquisition added incremental assets in a key operating area and represented a uniquely attractive opportunity with low-decline oil production, high-return inventory, and increased operating flexibility with minerals midstream and substantial surface ownership. We acquired the assets at a cost of capital more typically representative of operated working interest opportunities, but received the additional benefits of the minerals, surface, and midstream infrastructure, which we were pleased to add to our portfolio. We have a large pipeline of M&A opportunities ahead of us, but we will remain prudent in our underwriting. We screen 150-200 potential transactions a year and have executed zero to three each year consistently.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

We are focused on compounding significant capital over time at attractive rates of return, and we quickly pass on opportunities that don't meet our underwriting criteria. Despite recent volatility, the market remains active, and with our increased scale, strong operating and financial performance, and solid balance sheet, we are extremely well positioned for profitable growth and further value creation for our stakeholders over the remainder of 2024 and beyond. With that, I'll turn the call over to Brandi to provide more detail on the quarter.

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

Thanks, David. Crescent's results for the quarter build on our impressive performance over the first half of the year with approximately $430 million of Adjusted EBITDA and approximately $160 million in Levered Free Cash Flow. We had $211 million of capital expenditures during the quarter, better than forecast as the team continues to generate incremental savings in the field. We brought online 27 gross operated wells in the Eagle Ford and 10 gross operated wells in the Uinta, all of which are generating strong initial results. With recent commodity volatility, we are focused on maintaining both operational and financial flexibility and generating attractive returns across our development program. We optimized DNC activity on the SilverBow assets after taking over operatorship to target higher returning liquids-weighted development to take advantage of relative commodity pricing.

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

Turning to our outlook for the remainder of 2024, as David mentioned, we have enhanced our guidance for the third time this year and improved our second-half capital outlook to $425-455 million, a 10% improvement from the initial guidance provided at the closing of the SilverBow acquisition. This updated outlook reflects five months of SilverBow contribution and highlights the strength of our business and the impressive achievements of our operating team. Looking into 2025, we expect to remain flexible around activity levels and capital allocation if commodity volatility persists, focusing on cash flow generation and attractive returns on the capital we choose to invest. Our balance sheet remains strong coming out of the quarter with net leverage of 1.5x within our publicly stated range of 1-1.5x. We have $1.5 billion of liquidity with no near-term maturities.

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

We have also been actively evaluating portfolio optimization opportunities and have divested approximately $50 million of non-core assets this year, generating an attractive return for our investors and also accelerating debt repayment. While we are a growth-through-acquisition business, we bring an investor mindset to everything we do and are constantly evaluating our portfolio for potential divestitures to maximize value to our shareholders. Alongside earnings yesterday, we announced another dividend of $0.12 per share and further repurchases under our active buyback program, which is now 20% utilized year to date at a weighted average share price of $10.07. Together, our dividend and repurchases have equated to a peer-leading 5% annualized yield. We have dramatically transformed the equity positioning of our business since becoming public with a simplified and enhanced dividend framework and significantly increased flow and trading liquidity highlighted by our recent addition to the S&P 600 Index.

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

With that, I'll turn the call back over to David for closing remarks.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Thank you, Brandi. Before we wrap up, I want to reiterate a few key takeaways from this quarter. First, our business continues to generate impressive results and significant free cash flow. We've improved guidance for the third consecutive time this year, achieving our stated production targets with more efficient capital spend. Our advantaged asset profile has consistently exceeded expectations, and our operating team continues to find more and more efficiencies to maximize cash flow for our investors from both newly acquired and legacy assets. Second, application of our proven integration process on the SilverBow business has generated value beyond initial expectations. We've combined the strongest talent from both organizations to enhance operations across the business. We are ahead of schedule on synergy capture, achieving our initial target within just a few months of closing, and we've increased our total synergy expectation by more than 20%.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Finding ways to capture value beyond our acquisition underwriting is a demonstrated strength of our platform. And lastly, we see significant opportunity ahead of us to continue on our profitable growth trajectory. We said last quarter that we are just getting started, and that remains true today. We built this business with ambitious goals, and despite our recent successes, we remain focused on operational execution, profitable growth, and long-term value creation for our shareholders. We have the unique combination of operating and investing expertise required to execute on our growth through acquisition strategy, and we will continue to do exactly what we've said we are going to do. We believe Crescent offers a uniquely compelling value proposition in our sector, and we are determined to prove it. With that, I'll open it up for Q&A. Operator.

[Operator]

Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one at this time. One moment while we pull up our first question. Our first question comes from Neal Dingman with Truist Securities. Please proceed.

[Neal Dingmann, Managing Director at Truist]

Morning, all. Nice quarter. Guys, my first question is just on your upcoming quarter regional focus. I'm wondering specifically, could you all speak to your ability right now when you're looking at the Eagle Ford, your ability to sort of target the liquids-rich over gas development, and just wondering how quickly you could switch to more gas when the prices dictate?

[Clay Rynd, EVP of Investments at Crescent Energy Company]

Hey, Neil. It's Clay. Yeah, certainly one of the benefits of the SilverBow acquisition was continuing to have optionality from a commodity mix perspective. Given the market environment today, you've seen our development be focused on the more liquids-weighted portfolio. I'd say we have plenty of flexibility kind of to think through optionality around the portfolio as we see changes in commodity prices. You heard in the prepared remarks, Brandi highlight a focus on flexibility for us. Given the acreage footprint we've created with largely held by production leases, we think we have a ton of flexibility and a key focus for us.

[Neal Dingmann, Managing Director at Truist]

No, that makes sense, and then just a second question on your capital efficiency. Specifically, notable upside that you're seeing from Simul-frac and other types of improvements. I'm just wondering, what would you all consider sort of your current overall development plan now that you've added the SilverBow and other acreage, and I'm just wondering, is there still some low-hanging fruit in the near term to benefit returns?

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Yeah. Hey, it's David, and if you don't mind, I'll change to basketball. It's my more favorite sport, but long story short, I think we still see a lot to do. All that being said, the team's working hard and delivering real value, so we're early days in getting the benefits of the integration, and I think we've got plenty more to do, but we're pretty pleased with where we are. We have made a lot of progress.

[Neal Dingmann, Managing Director at Truist]

Thank you all.

[Operator]

The next question comes from Tim Rezvan with KeyBanc Capital Markets. Please proceed.

[Tim Rezvan, Managing Director at KeyBanc Capital Markets]

Good morning, folks, and thank you for taking my questions. I'd like to start on the Uinta JV you summarized and prepared comments in the presentation. I was wondering if you could share any more specificity on maybe is this testing the eastern extent of known zones? Are there delineations of other areas, maybe the duration of this JV, and maybe kind of what the amount of wells that's been established that'll be drilled? Any context you can fill in would be helpful. Thank you.

[Clay Rynd, EVP of Investments at Crescent Energy Company]

Hey, Tim. It's Clay. Yeah. So I think you have it. Testing the eastern extension, we think it's important as we think about our capital allocation framework. We're trying to allocate capital to places that we feel very confident in the returns, but we also recognize the resource potential in the Uinta and are excited about it. So we've been focused on the ability to kind of bring forward that opportunity set while allocating capital consistent with our framework. And so this JV, I think, is a great example of that, of kind of bringing capital forward to allow us to accelerate delineation. The focus is small near-term, three wells, but focused on secondary intervals in that eastern extension.

[Clay Rynd, EVP of Investments at Crescent Energy Company]

But we do think there's further opportunity to use kind of our capital allocation framework with our creativity to bring forward opportunities around further delineation on a resource position that we are excited about.

[Tim Rezvan, Managing Director at KeyBanc Capital Markets]

Okay. I appreciate that. And then I guess, could that be expanded if the three wells leads to promising results or just a one-time?

[Clay Rynd, EVP of Investments at Crescent Energy Company]

I think there's definitely further opportunity to bring capital and delineation forward to the extent we're excited about it.

[Tim Rezvan, Managing Director at KeyBanc Capital Markets]

Okay. I appreciate that. And then as my follow-up, I'm not sure if this is for David or Brandi. You did mention some asset sales this year. Are there any formal processes in place, or do you have some sort of minimum threshold that you'd like to get to, or are you just sort of letting the market know you're open to getting calls from buyers? Just curious about the thoughts on asset sales.

[Clay Rynd, EVP of Investments at Crescent Energy Company]

Hey, Tim. It's Clay again. I think all of the above. Certainly, we receive inbounds around the portfolio, and we're a willing taker of those inbounds and thinking through whether the market's putting value on assets at a level above where we can value them or create value go forward. At the same time, we're always kind of thinking through the portfolio and where we may see an opportunity to, whether that's market an asset or reach out to logical counterparties where they could kind of bring a value forward to us. So I think it's a kind of across-the-board approach. Nothing I would highlight today outside of that. We've kind of continued to have a methodical approach around it where we've seen the ability to kind of monetize things.

[Clay Rynd, EVP of Investments at Crescent Energy Company]

We certainly have a volatile market today, but I'd expect to see us continue to have that methodical approach to managing the portfolio.

[Tim Rezvan, Managing Director at KeyBanc Capital Markets]

Okay. Thank you for the comments.

[Operator]

The next question comes from Oliver Huang with TPH & Co. Please proceed.

[Oliver Huang, Director of E&P Research at TPH & Co.]

Good morning, David, Brandi, and team. Congrats on a solid quarter, and thanks for taking my questions. Just wanted to start out on maintenance CapEx, any sort of color that you're able to kind of provide with respect to where maintenance type of CapEx levels might now sit when contemplating the cost reductions that are flowing through the back half of the year outlook pro forma for SilverBow?

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

Hey, Oliver. It's Brandi. So I'll start just with respect to, we don't expect to provide formal 2025 guidance until February alongside Q4 earnings. But at a high level, we view pro forma maintenance levels for the business post the SilverBow transaction is still that 240,000-250,000 barrels of oil equivalent per day on that plus or minus $1 billion of capital. So yes, I would say we're excited about the operational efficiencies that we've seen to date, our ability to continue to drive down DNC costs, and would expect to factor that into our formal 2025 plan, but no change at a high level to the soft guide that I've previously shared.

[Oliver Huang, Director of E&P Research at TPH & Co.]

Perfect, and maybe just on a follow-up to the Uinta, was hoping that you all might be able to provide some color on how initial results on the Uteland Buttes have tracked relative to expectations given a historically B-dominant program, and also when we're kind of thinking about primary versus secondary zones, given the mix that we've seen year to date in that 75-25 ballpark, is this considered a fairly optimal mix for capital allocation in the basin when we're kind of thinking about the next year or two?

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Hey, it's David. I'll start, which is I think it is the right way to think about it for Crescent's business plan. So as you know, we're much more focused on maintaining low decline, capital efficiency, strong free cash flow. We haven't been chasing any exploration or significant production growth as a strategy. So I think it's fairly standard and to be expected from us that we're going to be highly concentrated on the proven areas where we've got a lot of inventory when you look across both the Uinta and the Eagle Ford. But at the same time, we think we hold tremendous resource potential. So we are watching. We are investing some of our own capital, and then we also try to find capital-efficient ways to do that.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

So that's maybe the simplest way to kind of highlight what you're seeing is just continued execution of what I would call a different and disciplined business strategy from us.

[Oliver Huang, Director of E&P Research at TPH & Co.]

Perfect. Thanks for the time.

[Operator]

The next question comes from Michael Scialla with Stephens. Please proceed.

[Michael Scialla, Managing Director at Stephens]

Morning, everybody. David, you mentioned the large pipeline of M&A opportunities in front of you. Just want to get an idea of when you're looking at future acquisitions, how you're thinking about oil markets versus gas markets longer term. Does that change your view on where you've been focusing in the Eagle Ford, or do you continue to focus on the wet gas and oil windows versus the dry gas areas?

[Clay Rynd, EVP of Investments at Crescent Energy Company]

Hey, Michael. It's Clay. Listen, I think we're, as you've seen us through the course of this year, I think we're willing to invest across both oil and gas. But I think for us, it's all about what the opportunity set is. We do have a robust pipeline. I think the bar is very high today. We're excited about the execution on the acquisitions we completed and the integration. So we think there's a lot ahead of us, but the bar is high. I'd just say if you look at the broader A&D markets, there's just been more transactions in oil than in gas. Gas with the Contango and the curve has been a harder place for the market to transact. So I think you'll see us look at both commodities across the Eagle Ford.

[Clay Rynd, EVP of Investments at Crescent Energy Company]

But I do think realistically, just given where the markets are, you'd probably expect there to be more transactions in oil as a broad market. And we'll just see where the opportunities lie for us and our ability to execute.

[Michael Scialla, Managing Director at Stephens]

Sounds good, and I wanted to ask about the Central Eagle Ford acquisition you did here recently. Any obvious changes you expect to make drilling or completion-wise design there, and I guess what kind of savings you expect maybe relative to what you're seeing with the SilverBow assets, and any thoughts on the development plans there for the remainder of the year? Is that a 2025 development opportunity?

[Clay Rynd, EVP of Investments at Crescent Energy Company]

Hey, yeah. Actually, that asset was unique for us. We highlighted it in the prepared remarks, but the ability to kind of acquire an asset in the Eagle Ford that we thought was development-ready but also had a low-decline production base, I think that was driven by the historical nature of the operator who had been a kind of prudent developer of the asset. Certainly, I think you're going to see us execute on the same types of DNC savings that we're seeing across the broader business. So being able to bring what we think is really kind of leading DNC execution to that asset is a huge benefit to us.

[Clay Rynd, EVP of Investments at Crescent Energy Company]

We also think the asset is well set up, just offset our existing Central Eagle Ford acreage for near-term development. So I would expect to see us kind of develop that asset, portions of that asset in 2025 and beyond.

[Clay Rynd, EVP of Investments at Crescent Energy Company]

Really excited about that Contango acquisition.

[Michael Scialla, Managing Director at Stephens]

Very good. Thank you.

[Operator]

The next question comes from John Freeman with Raymond James. Please proceed.

[John Freeman, Managing Director at Raymond James]

Good morning. Nice quarter. The first topic, you all have obviously done a great job of accelerating the synergy capture and driving the efficiency gains. The other aspect you all have historically done really well on is the well outperformance post-acquisitions. I know it's still relatively early since you've gotten your hands on the SilverBow assets, but if there's anything that you're seeing from the way that SilverBow is completing the wells that you all have identified that would provide opportunities like you all have seen on some of your prior acquisitions, proppant intensity, well spacing, just anything that's kind of jumped out at you all as potential opportunities to improve well performance.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Yeah. Hey, John. It's David. Great question. I'd say that we've intentionally been very strong about how pleased we are with the integration opportunities around synergies. That is an area where we would expect the overall portfolio to benefit from things that they were doing versus we were doing. I think the great thing, though, is I wouldn't highlight this as the number one area where there was any significant underperformance. Actually, both companies had a history of making acquisitions and improving the outcome. So I think we will be better together, but we're certainly able to talk about the immediate synergies around DNC costs and implementation. And longer term, I think we've said this on prior calls, we would expect to get the benefit of improved performance on new drilling and then secondarily improved performance on production optimization.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Together, the two companies have a huge production base now that overlaps pretty well, and I think as we're continuing to optimize, we just have more to apply it over and generate significantly more value.

[John Freeman, Managing Director at Raymond James]

Got it. And then my follow-up, I believe Legacy Crescent was doing about 50% Simul-frac, and obviously SilverBow wasn't doing any. I know that you all are finalized on 2025 plans, but just kind of rough numbers, is there a reasonable target that you all would sort of think for a percentage of combined company activity in the Eagle Ford that would be Simul-frac next year?

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Yeah. I wouldn't provide any direct guidance on that now. I would just tell you that in general, it's a land exercise as much as a development exercise. So we're working through all those types of things now, but we clearly see significant benefit from Simul-frac. So I think what you can assume is we'll continue wanting to drive that percentage higher. But as of now, we're still in what I would call planning and flexibility phase, looking forward into next year.

[John Freeman, Managing Director at Raymond James]

Got it. Thanks, David.

[Operator]

The next question comes from Arun Jayaram with J.P. Morgan. Please proceed.

[Arun Jayaram, Research Analyst at JPMorgan]

Yeah. Good morning. Your 3Q cost structure kind of came in below the low end of your $13-14 per BOE second-half outlook. Any puts and takes on the cost structure going forward because it was almost $0.50 below the low end of the range?

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

Hey, Arun. It's Brandi. So we're really pleased with the performance today. As you noted, $12.57 below the low end of the guidance range that we published alongside the announcement. I would say a couple of things just from an outperformance perspective, clear example. So we've optimized our chemical program across a number of assets. We've been able to accelerate some synergies with respect to the SilverBow acquisition. We've optimized the field both from an organizational and a route perspective. So again, really happy with what we've been able to pull forward from an operating cost standpoint. Going forward, I'd guide you to where we printed Q3 to kind of 14, sorry, Q3 to $13 per BOE. There's some of the costs in our cost structure that are indexed to oil and gas prices.

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

So we'll bounce around a little bit quarter-to-quarter, but think that's a good range.

[Arun Jayaram, Research Analyst at JPMorgan]

Okay. That's helpful. I was wondering if you could help us just for our modeling, provide a bridge to your thoughts on fourth-quarter oil volumes, just given a full quarter from SilverBow and the impact from the Central Eagle Ford position. I think you printed 86,000 barrels a day in 3Q. I was wondering if you could help us think about what that could look like in 4Q.

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

Yeah. So just from an oil cut standpoint on Q3, 39% of our production was oil. I think it will be in a similar zip code for the fourth quarter. We also reaffirmed production guidance. So if you just take the midpoint of that range, you're in the kind of low to mid-250s overall. That's what I'd go with from a model standpoint.

[Arun Jayaram, Research Analyst at JPMorgan]

Just 39% of that. It's a good number for 4Q?

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

Yeah. That's right.

[Arun Jayaram, Research Analyst at JPMorgan]

Okay. Thanks a lot, Brandi.

[Operator]

Next question comes from John Abbott with Wolfe Research. Please proceed.

[John Abbott, VP of E&P Research at Wolfe Research]

Good morning, and thank you for taking our questions. First question is really sort of a strategy question. So you've increased size and scale through acquisitions. You've significantly increased your scale in the Eagle Ford. You've talked about a potential pipeline of other opportunities in front of you. How do you think about future acquisitions and maintaining your underlying decline rate? I mean, in the past, you've brought in conventional assets, but are those still important as you sort of increase size and scale? So how do you think about that balance of increasing new acquisitions and then your underlying decline rate?

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Yeah. Hey, John. It's David. And great question. And as a reminder, which you hit on, we do believe we have a strong skill set in both conventional and unconventional. So definitely has been a history of the company. What I would say, though, is overall, we focus on decline rate no matter the asset. And as I mentioned earlier in the call and on prior calls, we do just have a different approach to the business than others. And so, for example, if you look back at the history of acquisitions, including SilverBow, some have been acquisitions of assets that were already low decline, whether they were the Eagle Ford acquisition we made last year in the Western Eagle Ford or prior conventional assets a few years ago. We also make acquisitions of assets that are on much higher decline.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

What we do is work to bring that into our business plan and style of operating. So the SilverBow business plan prior to the acquisition was more of a growth-oriented business, higher production growth, higher reinvestment rate, lower free cash flow, and therefore a higher decline rate. So long story short, we would expect to bring those assets into our business plan, and the overall business will still maintain a lower decline rate that we'll settle out to over the next, call it, 6 to 12 months. So I think that's a fundamental strategy, whether we're buying high decline or low decline, to make sure that the company's attributes and portfolio decline rate stays in our targeted zip code.

[John Abbott, VP of E&P Research at Wolfe Research]

I appreciate it. And then a quick follow-up for me. It was already mentioned earlier about the optionality going between gas and oil in the Eagle Ford. So I guess the question right there, David, is when you sort of think about that gas optionality, is it a price? Is it an oil-to-gas ratio? How do you think about when you possibly might add additional activity towards the dry gas acreage in Webb County? What would you have to see? As I say, is it a price or is it an oil-to-gas ratio? How do you think about that?

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Yeah. So fundamentally, everything, as you know, at this company is driven on returns on capital. So we need to see two times our money or better and the ability to get our capital back in an appropriate timeframe in acquisitions. That's five years or less and even shorter. So I would just say it's all capital return-driven. But as you know, there are a number of different levers that have to be working the right way to make that happen. So in a low-gas price environment, no matter how good you are, it's unlikely that you'll generate the returns you want. So you're not allocating capital there. In a higher-priced environment, that can create that opportunity, but there also can be inflation or other things going on. So we feel really good when we look across the portfolio. We have really high-quality inventory.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

And given the ability to move rigs pretty efficiently, that we're able to respond to both price signals but also capital input costs and well-performance to make that happen. But long story short, return on capital is the driver.

[John Abbott, VP of E&P Research at Wolfe Research]

Appreciate it. Thank you very much for taking our questions.

[Operator]

The next question comes from Michael Ferrell with Pickering Energy Partners. Please proceed.

[Michael Farrell, CEO at Resmed]

Good morning. Thanks for taking my questions and congratulations on closing the SilverBow deal. Look, I appreciate all the detail on the improved drilling speeds and completion efficiencies that are translating to lower DNC costs. I noticed that the company's moved from running three to four rigs in the Eagle Ford down to three. So is this an output of improved cycle times, allowing for the same number of turn-in-lines but with fewer rigs, or should we view this as more of a structural activity change?

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Yeah. It's a great question and another chance just to highlight both performance but also business plan, so if you look back at the history of the acquisitions we've made with higher decline rates, the prior operators typically had more rigs running than we have. So there's no change as a result of anything specific to this acquisition, but it's just a general trend with us. We're lower capital-intensive operators, but I'd also say that we're gaining two things. We are, I'll call it, faster and more efficient drilling than the typical peers we would acquire, and that is the case here, and secondly, we've got really important and meaningful acreage overlap that also allowed us to be more effective as a combined company. I'll call it to deliver similar types of activity with less equipment and less moves required around the basin.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

So a combination of both business plan and operating performance making that happen, but I'd say consistent with how we've looked at all of our prior acquisitions as well.

[Michael Farrell, CEO at Resmed]

Great. That's helpful. So I'd like to ask about the $7 million in share buybacks in the quarter. Small amount, but a little bit of a surprise given the near-term priority for debt reduction. So I was wondering if you could talk a little bit about sort of what goes into that decision to opportunistically repurchase shares and how the company balances that decision with debt reduction.

[Brandi Kendall, CFO and Member of Board of Directors at Crescent Energy Company]

Hey, Michael. Good question. It's Brandi. So I would say no change fundamentally with respect to our capital allocation priorities being the balance sheet and the fixed dividend. I would say we like having the buyback as a tool to buy the stock, right, when it's disconnected from intrinsic value. We've bought back, as you mentioned, $7 million in this quarter at $12.68. To date, we've bought back $30 million at $10.07. So again, it's a nice tool for us to have. But again, it will be relatively smaller for the time being, again, just given our cap allocation priorities.

[Michael Farrell, CEO at Resmed]

All right. Thank you very much. I'll turn it back.

[Operator]

The next question comes from Tarek Hamid with JPMorgan. Please proceed.

[Navin Athwal, Executive Director at JPMorgan]

Hi. Good morning. This is Navin for Tarek. Just a quick question on how you think about capital allocation between the Eagle Ford and the Uinta in the current environment.

[Clay Rynd, EVP of Investments at Crescent Energy Company]

Yeah. I think you've seen where we've been focused. Clearly, as you've heard on the call, you've heard both sides, right? We're very excited about what we've been able to execute on in the Eagle Ford. We're seeing the benefits of scale and the synergies we've been able to create with the acquisition activity we've had there over the last couple of years. We remain excited about the Uinta and the resource potential. I think we'll be prudent in terms of how we operate there, how we kind of allocate capital, and use other tools to continue to delineate that position. So I think kind of more of the same for us from a capital allocation perspective, no real change versus what you've seen over the last year.

[Navin Athwal, Executive Director at JPMorgan]

Got it. Thank you.

[Clay Rynd, EVP of Investments at Crescent Energy Company]

Thank you.

[Operator]

Thank you. At this time, I would like to turn the floor back to Mr. David Rockecharlie for closing comments.

[David Rockecharlie, CEO and Member of Board of Directors at Crescent Energy Company]

Great. Thanks again. I'd like to just say thank you to all the great employees we have that have been doing a fantastic job on integration and delivering great results, and thanks to the investors as well who continue to trust us and engage, so we look forward to keeping in touch, and we'll talk to you next quarter.

[Operator]

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Participants

Executives

• David Rockecharlie, CEO and Member of Board of Directors
• Brandi Kendall, CFO and Member of Board of Directors
• Reid Gallagher, Head of Investor Relations
• Clay Rynd, EVP of Investments

Analysts

• Neal Dingmann, Managing Director at Truist
• Oliver Huang, Director of E&P Research at TPH & Co.
• Navin Athwal, Executive Director at JPMorgan
• Michael Farrell, CEO at Resmed
• Tim Rezvan, Managing Director at KeyBanc Capital Markets
• Michael Scialla, Managing Director at Stephens
• John Abbott, VP of E&P Research at Wolfe Research
• John Freeman, Managing Director at Raymond James
• Arun Jayaram, Research Analyst at JPMorgan