CRGY

[cmm3rd]

Now trading at a five year low ($9.30). Mr. Market obviously has a different valuation model than does EPG. Hopefully Mr. Market is wrong.

[dan_s]

Crescent Energy's operating cash flow was $6.09/share in 2024 and based on my model operating cash flow will be $6.42/share in 2025.
> TipRanks' consensus CFPS forecast is $7.07/share.
> Based on the midpoint of the Company's guidance, production will be up 28.9% year over year in 2025.
> Free cash flow should be close to $700 million ($3.50 per share)
> The Company's production mix is 42% natural gas, 17.5% NGLs and 40.5% crude oil.

There is no such thing as Mr. Market. There are just investors trading based on FEAR of Tariffs and FEAR of "Drill Baby Drill".

Think of FEAR based selloffs as buying opportunities.

[cmm3rd]

Those are impressive numbers at a pps of $9.30. Per the company's March presentation, they have had a two year, $150 million buyback authorization in place since 3/4/24, with $36 million of it used at an avg price of $10.14. Hopefully they used it today and will keep using it at these prices.

[Petroleum economist]

cmm,

Crescent Energy paid out $ 358 M cash for Silverbow in 2024 and the $ 830 M for Ridgemar in January 2025. As a consequence, the balance sheet in 2025 is weakish and does not allow share buybacks.

The $ 0.12 quarterly dividend is all Crecent Energy can afford on shareholder returns in 2025. I would be amazed if they bought back any shares yesterday.

Share buybacks can restart in 2026.

[mrbill]

Thanks Harry, any comments on their hedging?

[Petroleum economist]

Bill,

Hedging
Crescent has bought for 2025 both oil and gas hedges in the form of swaps and collars. Details are:
• 2025 oil swaps: 13 million bbl @ $ 70.30-70.455/bbl = 34% of oil production
• 2025 oil collars: 5.7 million bbl with bottoms $ % 62.09-6.59/bbl = 15% of oil production.
• 2025 gas swaps: 60.5 bcf @ $ 3.70-4.21/MM Btu = 25% of gas production
• 2025 gas swaps: 74 bcf with bottoms @ $ 3.06-4.18/MM Btu = 31% of gas production.
2026 swaps and collars are lower, at roughly 25% of the 2025 levels.

The hedges provide a reasonable guaranteed income for 2025, but far less for 2026.

Reserves
After the merger with Silverbow in 2024 the Crescent 2024 proven reserves increased to 709 M BoE. My guess is that the 2025 Ridgemar acquisition added another 58 M BoE. The combined 767 M BoE reserves are equivalent to 8.1 years of 2025 production.

The Crescent RRR over the period 2019-2024 was a poor -0.59. This means that Crescent de-booked more reserves than they produced. The 2024 RRR was also negative (-0.33).

The Silverbow 2019-2023 RRR was better (+0.73), but also less than 1.0.
Based on the combined reserves and the RRR I assume that Crescent production will peak at 260 K BoE/d in 2025 and then start a gradual decline to 243 K BoE/d in 2029.

Crescent production profile 2025.jpg (33.22 KiB) Viewed 5465 times

[mrbill]

Harry, thanks for the detailed study on CRGY. It "diverges" from Dan's recent comments so I am a little puzzled.
Any chance rising natgas prices will help CRGY? Is their Utah Uinta acquisition a positive now or in the future?
The current share price is currently beat down but does that make it a "Warren Buffett mark down", good for later upside? I am privileged to have your analysis and Dan's in this "fog of war".

[Petroleum economist]

Bill, I do not assume that better gas prices will provide Crescent with a major upside.
The gas share of the 2024 fluids was approx. 41%. The gas content of the 2024 reserves was 37%.
The gas share will fall in 2025 as Ridgemar contains 72% liquids.

I do not know if Ridgemar was a good acquisition. I would need more details. We have not seen a quarterly result with Ridgemar included.

Crescent paid $ 905 M for Ridgemar with 20.2 K BoE/d of production. This normalizes as 905/20.2 = $ 44.8 M/1 K BoE/d.
The 44.8 ratio is pretty much industry average. Therefore, I assume the acquisition will work well at $ 70/bbl. At lower oil prices paybacks will require longer.

The Crescent balance sheet after the Ridgemar acquisition is rather weak, so low oil prices (sa $ 60/bbl) may put pressure on 2025 and 2026 shareholder returns.

[mrbill]

Anyone care to comment on the stock transition in the news today? Is it good or bad for CRGY?

[ChuckGeb]

See today’s Doomberg “As the Pieces Lie’ to see the real intrinsic value of Crescent, that being significant gas reserves. My hope is that Crescent pauses its business model of growth thru acquisition to focus on the obvious best acquisition opportunity, that being its own stock. They have put together some strategically prime properties and they should focus for the foreseeable future on optimizing its development along with its share price.

[dan_s]

TipRanks: "In the last 3 months, 8 ranked analysts set 12-month price targets for CRGY. The average price target among the analysts is $17.29."

"In a report released today, Neal Dingmann from Truist Financial maintained a Buy rating on Crescent Energy Company Class A (CRGY). The company’s shares closed yesterday at $7.29. < On 2/28/2025 Neal's price target was $21.00 for CRGY.
According to TipRanks, Dingmann is an analyst with an average return of -3.8% and a 40.42% success rate. Dingmann covers the Energy sector, focusing on stocks such as Vital Energy, Diamondback, and Viper Energy.
Crescent Energy Company Class A has an analyst consensus of Strong Buy, with a price target consensus of $17.75, representing a 143.48% upside. In a report released on April 3, Stephens also maintained a Buy rating on the stock with a $15.00 price target."
-----------------
The Company's conversion of all Class B shares to Class A has no impact on my valuation, because my valuation has always been based on annualize Adjusted Operating Cash Flow per share based on A+B shares.

If you download my macro driven forecast/valuation model to Excel and change the WTI oil price to $60/bbl and the HH natural gas price to $3.50/mcf for all the next 7 quarters (Q2 2025 through Q4 2026) it changes my valuation of CRGY to $18.38. < Based on just 3.5 X CFPS, which is low multiple for a company of this size and quality of Running Room in South Texas. < I do not believe that oil and gas prices will stay this low once the political noise of the Tariff War ends.

Since CRGY has so much of this year's production hedged, they have free cash flow locked in.

[dan_s]

PS:
In 2024 Crescent Energy produced 201,003 Boepd with a mix of 41.5% natural gas, 40.7% crude oil and 17.8% NGLs.
In 2024 their average realized prices (net of cash settlements on their hedges) were $2.34/mcf for natural gas, $67.35/bbl of oil, and $24.56/bbl for NGLs.
In 2024 Crescent Energy generated $1,272.8 million of Adjusted Operating Cash Flow ($6.09/share base on A+B shares)

The Company's 2025 production guidance is 254,000 to 264,000 Boepd with a mix of 42.0% natural gas, 40.5% oil and 17.5% NGLs.
Even if WTI averages $60/bbl for Q2 through Q4, Crescent Point's average realized oil price will be over $59/bbl.
The Company's realized natural gas is sure to be higher than it was in 2024 and NGL prices should also be slightly higher.

Even if I assume that WTI will average $60 and HH Ngas will average $3.50 for the rest of the year, CRGY should still generate over $5.00 CFPS and be free cash flow positive. Operating Cash Flow will actually be higher year-over-year.

All of the forecast/valuation models that I provide are macro driven, so you can easily change the commodity price assumptions at the bottom to see how they impact revenues, net income and operating cash flow.

PPS: CRGY is a perfect example of why you need to focus on operating cash flow and learn to ignore Net Income. BTW during periods of falling oil and gas prices CRGY will be reporting big mark-to-market gains on its hedges.