Transcript • Feb. 26, 2026 4:00 PM • Crescent Energy Company (CRGY)
Transcript
Feb. 26, 2026 4:00 PM
Crescent Energy Company (CRGY)
Clay: side, clear focus on two times multiple money and very clear focus on NAV per share and free cash flow per share accretion. So what we are excited about on the business is we've been able to build it the way we built it with those as kind of our core focus. And that is the opportunities that we see going forward.
Michael: all right that's great appreciate the color there um as a follow-up i was hoping for some clarification on one of your slides in the deck um slide 11 here so by our math it looks like the applied oil rate for the fourth quarter in the permian was nearly 70 000 barrels a day uh represent a pretty meaningful step up in the free key level of like 61 000. uh and even more impressive that you're disclosing zero turning lines in the fourth quarter so uh are there moving pieces here in terms of what was disclosed or Maybe some M&A or other transactions that occur. Just trying to square that circle. Thanks.
Brandi: Hey, Michael. So no additional transactions. I would say that our base business outperformed production expectations in the fourth quarter. So I think we're carrying forward good momentum into 2026. I will also flag, though, that Vital did not bring on any new wells since early October. So that business was in decline, and that ultimately is what's translating into a pretty flat oil production cadence for 2026. All right.
Michael: Thank you. That's helpful. I'll turn it back.
Operator: The next question is from Philip Youngworth from BMO. Please go ahead.
Philip Youngworth: Yeah, thanks. And congrats on the successful vital integration and increase in synergies. On the well costs, I know these numbers aren't always apples to apples across companies, but I think you're at 700 per foot in the Midland, 875 in the Delaware. I know there's a lot of tough competitors in these basins, but it does feel like there's a nice gap you could reduce. I know we're just getting started, but just wondering how much runway do you see to lower incoming well costs beyond what's being underwritten currently in the assets until?
Joey: Good morning, Philip. Thanks for the question. Yeah, we're going to be working the DMC piece of it diligently. We do see some great opportunity for improvement. We've already seen some, even in the short time that we've had things moving forward. The other part of it that I always like to encourage people or point out to people is just the value of slowing down. The fact that we've slowed down, get the opportunity to catch our breath, understand from the pass learnings from vital and apply the things that we're going to do going forward. You know, just a slower pace gives us a better opportunity for higher capital efficiency and reducing costs. So we're very bullish on our opportunity to reduce well costs in the Permian.
Philip Youngworth: Okay. And slowing down is actually going to be my follow-up here. On the base decline, Vital used to give us a year-end figure for oil and BOEs. Last year it was 42% for oil and 36% for BOEs. So I'm guessing this is a lot lower today, but any sense on where the Permian base decline is now or by year-end 26? And just to confirm an earlier comment, can we imply that? Permian oil production is also going to trend flat through the year, similar to total company.
Brandi: Hey Philip, this is Brandy. I think similar to my prior comment, I would expect relatively flat oil volumes both in the Eagleford and in the Permian throughout the course of 2026.
Philip Youngworth: Okay, great. Anything on the base decline?
Brandi: Yeah, on a corporate level, we did pick up post the merger pro forma for divestitures. We're in the high 20s across the base, the broader business. But expect to kind of get back to our corporate target of 25% or below over the next 12 to 18 months.
John Abbott: Great, thank you.
Operator: The next question is from Jared Giroux from Stevens. Please go ahead.
Jared Giroux: Hey, good morning, guys. Congrats on a strong quarter, and thanks for taking my questions. My first question is around synergies from the vital acquisition. In your release, you stated that Crescent had already hit 40 million plus in synergies from the deal, and it's causing you to double your annual target to about 190 million. I was just hoping you could give a little color on what savings you've already seen and what you expect to get to the 190 million.
Brandi: Thanks. Hey, Jared. It's Brandi. I'll start, and then I'll turn it over to Joey. So with respect to the 40 million that has been captured to date, I would say largely overhead, duplicative public company expenses, as well as cost of capital synergies. Of the 100% increase, on synergies i would say 50 of that is ops related and then the remaining 50 is additional overhead uh incremental marketing synergies and then additional opportunities to further drive down cost of capital and jared i'll uh you know one of the things since i've been here at crescent that's been incredibly impressive you know this is going back in history
Joey: their 16th asset that they've acquired since going public and have a very good tried and true playbook on integration. I've been incredibly impressed at how efficiently we've been able to integrate these assets. The team integrations and operational performance are exceeding our expectations, just some color on some things specifically. You know, going forward, we'll be increasing the number of wells per pad, which will allow us to implement simulfrac. We're also increasing lateral links by doing land trades, so we'll be able to increase our capital efficiency there. The supply chain opportunities are starting to come to us now that we're a company of scale, you know, combining services and contracts. You know, some specific examples, you know, combining contracts on generators, compression, chemicals, tubulars, And as I was explaining to Charles, you know, just don't underestimate the value of slowing down. Slowing down gives us better operational planning, which drives better execution. Also on the LOE side, huge opportunity on the artificial lift side with our cash flow focus. free cash flow focus. We're focusing on long-term value versus short time rates, so that affects ESP sizing and how we do the timing of artificial list swaps. The list is pretty long. All of these opportunities will be feathering in over 2026, but we're pretty excited and looking forward to getting through 2026 and capturing all these synergies.
Jared Giroux: That's great. Thank you for the color on that. And then just my second question. With the earnings release, you announced an upsized and extended share repurchase authorization to $400 million. So just kind of curious how Crescent prioritizes shareholder return between the base dividend, shareholder returns, and debt reduction in 2026. Thank you.
Brandi: Hi, Jared. It's Brandi. So I would say no change to key cap allocation priorities. The balance sheet and the base dividend are top We're prioritizing deleveraging while also retaining the flexibility. We kind of talked about all of the above return of capital program. But again, I think in the immediate term, it's all about balance sheet. The increase in the buyback, though, does allow us to be opportunistic. It allows us to move the needle with the authorization program if the stock is significantly dislocated.
Jared Giroux: Thanks for taking my question.
Operator: The next question is from Jonathan Mardini from KeyBank Capital Markets. Please go ahead.
Jonathan Mardini: Good morning. Thank you for taking our questions. Just given the capacity or the ability for minerals companies to run at higher leverage ratios, does the latest spotlighting of Crescent Royalties change the way you think about leverage over time or would you target that one and a half times ratio at the minerals level? How we should think about leverage on a consolidated basis trending through this year?
Brandi: Good question. I would say no fundamental change as how we think about leverage across the broader business long-term target continues to be One time, we do believe that we were pretty conservative financing these latest minerals acquisitions. We expect to be below one and a half times by year end. And then there's clearly just significant asset coverage, just given where this asset class trades relative to that leverage target.
Jonathan Mardini: OK, appreciate the details. Moving to upstream, on your Eagleford Asset slide, you show laterals in your central and southern regions increasing by about 2,000 feet compared to 2025. Can you just talk about what's driving this expected step up and maybe how we should expect this to impact DNC cost per foot in 2026?
Clay: Jonathan, this is Clay. I'm happy to start and then I'll turn to Joey. You know, I think part of that is As we've talked about, our ability to kind of build scale in the Eagleford has given us a huge opportunity to continue to drive capital efficiency by extending laterals, asset swap, joint ventures, you know, just blocking and tackling in terms of putting the position together and giving ourselves the best shot at capital efficiency. But in terms of Joey, also a pun.
Joey: Yeah, Jonathan, obviously one of the simplest ways to become more efficient is to drill longer laterals. So it's really as simple as that. But I also point to the fact that we're increasing the pad sizes as well, which allows us to increase the percentage of simulfrac. We'll be up to 70% of our pads in South Texas region will be on simulfrac. So those two things combined really push our capital efficiency higher and higher. So it's all good things happening.
Jonathan Mardini: Okay, I appreciate the context. I'll leave it there.
Operator: The next question is from John Abbott from Wolf Research. Please go ahead.
John Abbott: Hey, good morning and thank you for taking our questions. I'll just jump to the Uinta for a moment here. I mean, part of your program this year is sort of delineating the other zones in that area. When you think about that asset, how do you think about the optionality of the Uinta at this point in time? That is not as significant a part of your portfolio as in the past.
David Rock: Hey, John, it's David. Great question. I'd say a couple of things. Just to hit optionality immediately and succinctly, entirely HVP. entirely in our control how we want to handle it. So that's just a fantastic asset to have. It's obviously intentional on our part as well as part of our strategy. So we feel really good about two things in that area. We can deliver really strong returns in a call to normalize the oil market. We're making great returns there and face Butte now. And then just the resource potential there is incredible. You know, we've seen our offset operators continue to expand that opportunity. We entered there at below PDP value, so we feel great about what I'll call just methodically going through the opportunity and expanding that over time. And as Joey said, the ability operationally to just go at the pace you want to go just provides tremendous optionality. We think of it as more or less a one-rig area for us, and just slow and steady continued expansion of the opportunity is what we expect.
John Abbott: I appreciate it. And then the follow-up question is really on maintenance capex and long-term oil. You know, based off your current plans, I guess you could exit the year with one rig maybe in the Permian. You know, let's say maintenance capex long-term, I was talking to Brandy about last night, is 1.3 to 1.4 billion long-term, well, maybe about 130,000 barrels per day. I guess my question is, if we do see a more constructive environment, you know, in the second half of this year, and as we sort of look out to 2027-28, could you decide to plateau at a higher level? Or is one rig in the Permian really where you want to be, or could you Or could you decide, hey, if we have a more constructive environment, let's just be a little bit higher than 130 long-term?
David Rock: Yeah, hey, John, it's David again. I'm happy to take that. Long story short is we feel really good about what I'll call running the business at a target reinvestment rate, and we've done that all the time. Our key goal is returns and free cash flow. So yes, back to your topic of optionality, we've got the ability to do more everywhere, which means not that we're going to do more everywhere, but we can allocate our development activity to the best return. So if oil development is higher returning, you will see us allocating more capital towards oil and vice versa. As you've seen the gas market strengthen, we've had more allocation there. So I think it'll be purely a function of rate of return. And then we actually have oil opportunity in the Eagleford and the Uinta and the Permian. So I think we could do it anywhere. But yes, you're correctly pointing out that we've got good optionality in the Permian.
John Abbott: Appreciate it. Thank you very much for taking our questions. Thanks, Sean.
Operator: The next question is from Lloyd Byron from Jefferies. Please go ahead.
Lloyd Byron: Hey. Good morning, David, Brandy team. Congrats on all the progress. Can I just go back and get a couple of clarifications? I don't know if it was Joey that was talking about costs, but another way to kind of ask it, is there an optimal scale for you guys going forward? I'm just thinking about in the Permian or the Uinta, you've done such a good job in Eagleford with scale.
David Rock: This is David. I'll give you a sort of simple response and then give you maybe a little more context strategically. What we're seeing is that we've got the skill we need to continue to drive value within the current business around operations. We see tremendous upside in continuing to drive efficiencies across these assets. And in particular, as you know, the newest assets in the company are some recent, call it 12 to 18 months ago, Eagleford acquisitions and then the entry into the Permian. So we feel like we've got plenty of scale there to continue to drive value. However, we think this industry through cycle presents significant opportunity for our business strategy to grow through acquisition opportunistically. And so we also see significant scale potential beyond what we already have, in particular in the Eagle Fruit and the Permian. And so I think that's what we're looking for. But those acquisitions are all going to stand on their own, and they're going to be because we think the value is right, because we think we're ready to do them, and we see an ability to do what we do, which is buy assets and make them better. I think we would tell you we've got the scale we need today. to drive significant value on our existing footprint.
Lloyd Byron: Okay. That makes sense. And then let me come back to you, Linda, a little bit. And I know it's a nice steady growth going forward, but are there any bottlenecks at this point, takeaway, rail, permitting? Could you grow it faster if you wanted to, I guess, is my question.
Brandi: Okay, Lloyd, I'll start. So we could grow it faster if we wanted. I think we've always thought about this asset as kind of a one rig asset. But the basin has really transformed over the last couple of years given rail, given kind of de-bottlenecking on the gas side of things. So I would say no constraints from an oil or gas midstream perspective.
Lloyd Byron: Okay. That makes sense. Thank you.
Operator: Thanks a lot. There are no further questions at this time. I would like to turn the floor back over to David Rock Charlie for closing comments.
David Rock: Perfect. Thank you all again. We really appreciate, again, the opportunity every quarter to share how we're doing and hopefully to key takeaways all came through, which is base business, high performing with a lot of momentum. We completely transformed the portfolio last year into a much more focused and scaled business. And again, we think the company has a tremendous amount of catalysts, both on the existing assets, but also one of the things we really are highlighting this quarter is the opportunity in our minerals business in that segment. So we'll continue to keep you updated as we move forward. And again, thank you for the support.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
