EX-99.2 3 d618809dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On July 3, 2023, Javelin EF L.P. (the “Purchaser”), a subsidiary of Crescent Energy Company (“Crescent” or the “Company”), consummated the acquisition contemplated by the Purchase and Sale Agreement (the “Western Eagle Ford Acquisition Agreement”), dated as of May 2, 2023, with Mesquite Comanche Holdings, LLC (“Comanche Holdings”) and SN EF Maverick, LLC (“SN EF Maverick,” and together with Comanche Holdings, the “Seller”), pursuant to which the Purchaser acquired from the Seller certain interests in oil and gas properties, rights and related assets in the Western Eagle Ford basin (the “July Western Eagle Ford Assets”) for aggregate cash consideration of $592.7 million, including capitalized transaction costs and certain final settlement statement adjustments (the “July Western Eagle Ford Acquisition”). The cash purchase price was funded by borrowings under the Revolving Credit Facility (the “Acquisition Borrowings”), which represented the purchase price, after purchase price adjustments less a $60.0 million deposit funded by borrowings under the Revolving Credit Facility made at signing on May 2, 2023 (the “Acquisition Deposit”).

The unaudited pro forma condensed combined statements of operations (the “pro forma statements of operations”) have been prepared from the historical consolidated financial statements of Crescent for the nine months ended September 30, 2023 and for the year ended December 31, 2022 and the statements of revenues and direct operating expenses of the July Western Eagle Ford Assets for the period from January 1, 2023 through July 2, 2023 and for the year ended December 31, 2022, adjusted to give effect to the July Western Eagle Ford Acquisition as if it had been consummated on January 1, 2022.

The following unaudited pro forma condensed combined financial statements (the “pro forma financial statements”) are based on, and should be read in conjunction with:

 

  •  

the historical unaudited consolidated financial statements of Crescent for the three and nine months ended September 30, 2023 included in the Company’s Quarterly Report on Form 10-Q and the historical audited combined and consolidated financial statements of Crescent for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K and

 

  •  

the statements of revenues and direct operating expenses of the July Western Eagle Ford Assets for the six months ended June 30, 2023 and for the year ended December 31, 2022 included as Exhibit 99.1 in the Company’s Current Report on Form 8-K/A dated September 6, 2023.

The pro forma financial statements were derived by making certain transaction accounting adjustments to the historical financial statements noted above. The adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual impact of the July Western Eagle Ford Acquisition may differ from the adjustments made to the pro forma financial statements. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects for the periods presented as if the July Western Eagle Ford Acquisition had been consummated earlier, and that all adjustments necessary to present fairly the pro forma financial statements have been made. The pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma financial statements presented below.

The pro forma financial statements and related notes are presented for illustrative purposes only and should not be relied upon as an indication of the financial condition or the operating results that the Company would have achieved if the Western Eagle Ford Acquisition Agreement had been entered into and the July Western Eagle Ford Acquisition had taken place on the assumed dates. The pro forma financial statements do not reflect future events that may occur after the consummation of the July Western Eagle Ford Acquisition, including, but not limited to, the anticipated realization of ongoing savings from potential operating efficiencies, asset dispositions, cost savings, or economies of scale that the Company may achieve with respect to the combined operations. As a result, future results may vary significantly from the results reflected in the pro forma financial statements and should not be relied on as an indication of the financial position or future results of the Company.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Nine Months Ended September 30, 2023

(in thousands, except per share data)

 

     Crescent
(Historical)		     July Western Eagle
Ford Assets
(Historical)		      Transaction
Adjustments		     Crescent Pro Forma
Combined		  

Revenues:

          

Oil

    $ 1,270,244     $ 109,588      $ —       $ 1,379,832  

Natural gas

      286,172       17,225        —         303,397  

Natural gas liquids

      131,098       23,144        —         154,242  

Midstream and other

      37,360       —          (6,717 )(a)      30,643  
  

 

 

    

 

 

     

 

 

    

 

 

  

Total revenues

      1,724,874       149,957        (6,717 )      1,868,114  

Expenses:

          

Lease operating expense

      364,796       28,654        —         393,450  

Workover expense

      47,402       —          —         47,402  

Asset operating expense

      65,206       —          —         65,206  

Gathering, transportation and marketing

      160,650       52,540        (6,717 )(a)      206,473  

Production and other taxes

      116,223       8,390        —         124,613  

Depreciation, depletion and amortization

      492,879       —          22,778 (b)      515,657  

Exploration expense

      1,541       —          —         1,541  

Midstream and other operating expense

      13,803       —          —         13,803  

General and administrative expense

      106,235       —          —         106,235  

Gain on sale of assets

      —         —          —         —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Total expenses

      1,368,735       89,584        16,061       1,474,380  
  

 

 

    

 

 

     

 

 

    

 

 

  

Income (loss) from operations

      356,139       60,373        (22,778 )      393,734  

Other income (expense):

          

Gain (loss) on derivatives

      (68,211 )      —          —         (68,211 ) 

Interest expense

      (102,648 )      —          (21,093 )(c)      (123,741 ) 

Other income (expense)

      1,206       —          —         1,206  

Income from equity affiliates

      396       —          —         396  
  

 

 

    

 

 

     

 

 

    

 

 

  

Total other income (expense)

      (169,257 )      —          (21,093 )      (190,350 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

Income before taxes

      186,882       60,373        (43,871 )      203,384  

Income tax expense

      (4,899 )      —          (1,077 )(d)      (5,976 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

Net income

      181,983       60,373        (44,948 )      197,408  

Less: net income attributable to noncontrolling interests

      (453 )      —          —         (453 ) 

Less: net income attributable to redeemable noncontrolling interests

      (169,455 )      —          (10,737 )(e)      (180,192 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

Net income attributable to Crescent Energy

    $ 12,075     $ 60,373      $ (55,685 )    $ 16,763  
  

 

 

    

 

 

     

 

 

    

 

 

  

Net income per share:

          

Class A common stock – basic

    $ 0.21          $ 0.29 (f) 

Class A common stock – diluted

    $ 0.21          $ 0.29 (f) 

Class B common stock – basic and diluted

    $ —            $ —    

Weighted average common shares outstanding:

          

Class A common stock – basic

      58,663            58,663  

Class A common stock – diluted

      59,142            59,142  

Class B common stock – basic and diluted

      109,244            109,244  

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2022

(in thousands, except per share data)

 

     Crescent
(Historical)		     July Western Eagle
Ford Assets
(Historical)		      Transaction
Adjustments		     Crescent Pro
Forma Combined		  

Revenues:

          

Oil

    $ 1,969,070     $ 273,827      $ —       $ 2,242,897  

Natural gas

      766,962       98,765        —         865,727  

Natural gas liquids

      268,192       80,964        —         349,156  

Midstream and other

      52,841       —          (14,426 )(a)      38,415  
  

 

 

    

 

 

     

 

 

    

 

 

  

Total revenues

      3,057,065       453,556        (14,426 )      3,496,195  

Expenses:

          

Lease operating expense

      438,753       46,411        —         485,164  

Workover expense

      66,864       —          —         66,864  

Asset operating expense

      78,709       —          —         78,709  

Gathering, transportation and marketing

      177,078       117,566        (14,426 )(a)      280,218  

Production and other taxes

      238,381       24,547        —         262,928  

Depreciation, depletion and amortization

      532,926       —          46,557 (b)      579,483  

Impairment expense

      142,902       —          —         142,902  

Exploration expense

      3,425       —          —         3,425  

Midstream and other operating expense

      13,513       —          —         13,513  

General and administrative expense

      84,990       —          —         84,990  

Gain on sale of assets

      (4,641 )      —          —         (4,641 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

Total expenses

      1,772,900       188,524        32,131       1,993,555  
  

 

 

    

 

 

     

 

 

    

 

 

  

Income (loss) from operations

      1,284,165       265,032        (46,557 )      1,502,640  

Other income (expense):

          

Gain (loss) on derivatives

      (676,902 )      —          —         (676,902 ) 

Interest expense

      (95,937 )      —          (27,350 )(c)      (123,287 ) 

Other income (expense)

      949       —          —         949  

Income from equity affiliates

      4,616       —          —         4,616  
  

 

 

    

 

 

     

 

 

    

 

 

  

Total other income (expense)

      (767,274 )      —          (27,350 )      (794,624 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

Income before taxes

      516,891       265,032        (73,907 )      708,016  

Income tax expense

      (36,291 )      —          (12,263 )(d)      (48,554 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

Net income

      480,600       265,032        (86,170 )      659,462  

Less: net income attributable to noncontrolling interests

      (2,669 )      —          —         (2,669 ) 

Less: net income attributable to redeemable noncontrolling interests

      (381,257 )      —          (141,436 )(e)      (522,693 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

Net income attributable to Crescent Energy

    $ 96,674     $ 265,032      $ (227,606 )    $ 134,100  
  

 

 

    

 

 

     

 

 

    

 

 

  

Net income per share:

          

Class A – basic

    $ 2.20          $ 3.06 (f) 

Class A – diluted

    $ 2.20          $ 3.06 (f) 

Class B – basic and diluted

    $ —            $ —    

Weighted average common shares outstanding:

          

Class A – basic

      43,865            43,865  

Class A – diluted

      44,112            44,112  

Class B – basic and diluted

      124,857            124,857  

Notes to unaudited pro forma condensed combined financial statements

NOTE 1 – Basis of pro forma presentation

The pro forma financial statements have been derived from the historical financial statements of Crescent and the statements of revenues and direct operating expenses for the July Western Eagle Ford Assets. The pro forma statements of operations for the nine months ended September 30, 2023 and for the year ended December 31, 2022 give effect to the July Western Eagle Ford Acquisition as if it occurred on January 1, 2022.

The statements of revenues and direct operating expenses for the July Western Eagle Ford Assets, which are being presented in accordance with Article 3-05 of Regulation S-X, represent abbreviated financial statements that include less information about the historical business associated with the July Western Eagle Ford Assets or about our current and future results as the owner of the July Western Eagle Ford Assets than full financial statements. For example, the statements of revenues and direct operating expenses do not include information about capital structure, interest expense, entity-level taxes, or depreciation, depletion and amortization and certain overhead recoveries allowed for under our joint operating agreements.

The pro forma financial statements reflect pro forma adjustments that are based on available information and certain assumptions that management believes are reasonable. However, actual results may differ from those reflected in these statements. In management’s opinion, all adjustments known to date that are necessary to fairly present the pro forma information have been made. The pro forma financial statements do not purport to represent what the combined entity’s results of operations would have been if the July Western Eagle Ford Acquisition had actually occurred on January 1, 2022, nor are they indicative of Crescent’s future results of operations.

These pro forma financial statements should be read in conjunction with Crescent’s historical financial statements for the three and nine months ended September 30, 2023 and for the year ended December 31, 2022 included in the Company’s Quarterly Report on Form 10-Q and Annual Report on Form 10-K, respectively.

NOTE 2 – Pro forma acquisition accounting

In July 2023, we consummated the acquisition contemplated by the Western Eagle Ford Acquisition Agreement, pursuant to which we acquired the July Western Eagle Ford Assets for aggregate consideration of $592.7 million, including capitalized transaction costs and certain final settlement statement adjustments. The Acquisition Borrowings were funded using Crescent’s Revolving Credit Facility. The July Western Eagle Ford Acquisition was accounted for as an asset acquisition. The pro forma purchase price allocation is as follows:

 

(in thousands)    July Western Eagle
Ford Acquisition		  

Cash consideration paid

    $ 587,346  

Transaction costs incurred

      5,389  
  

 

 

  

Purchase consideration

    $ 592,735  
  

 

 

  

Assets acquired and liabilities assumed:

   

Oil and natural gas properties – proved

    $ 589,869  

Oil and natural gas properties – unproved

      22,117  

Other current assets

      2,682  

Accrued liabilities

      (4,630 ) 

Minimum volume commitments

      (6,762 ) 

Asset retirement obligations

      (10,541 ) 
  

 

 

  

Net assets acquired

    $ 592,735  
  

 

 

  

NOTE 3 – Adjustments to the pro forma financial statements

The pro forma financial statements have been prepared to illustrate the effect of the July Western Eagle Ford Acquisition and have been prepared for informational purposes only.

The preceding pro forma financial statements have been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaced the previous pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and allows for supplemental disclosure of the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management Adjustments”). Management has elected not to disclose Management Adjustments.

Pro forma statements of operations adjustments

The adjustments included in the pro forma statements of operations for the nine months ended September 30, 2023 and for the year ended December 31, 2022 are as follows:

 

(a)

Reflects the elimination of intercompany transactions for gathering, transportation and marketing between Crescent and the July Western Eagle Ford Assets.

 

(b)

Reflects the pro forma depletion expense calculated in accordance with the successful efforts method of accounting for oil and gas properties totaling $22.8 million and $46.6 million for the nine months ended September 30, 2023 and for the year ended December 31, 2022, respectively.

 

(c)

Reflects the pro forma interest expense related to borrowings to fund the transaction purchase consideration of $21.1 million and $27.4 million for the nine months ended September 30, 2023 and for the year ended December 31, 2022, respectively.

 

(d)

Reflects the income tax effect of the pro forma adjustments presented. The tax rate applied to the pro forma adjustments was the estimated combined federal and state statutory rate, after the effect of noncontrolling interests, of 6.5% and 6.4% for the nine months ended September 30, 2023 and for the year ended December 31, 2022, respectively. The effective rate of the Company could be significantly different (either higher or lower) depending on a variety of factors.

 

(e)

Reflects the impact of the allocation of net income attributable to redeemable noncontrolling interests for the portion of Crescent Energy OpCo LLC not owned by Crescent.

 

(f)

Reflects the impact of the allocation of net income attributable to Crescent on the computation of basic and diluted net income (loss) per share.

Note that the above adjustments do not include amounts for certain overhead recoveries associated with the joint operating agreements that we expect to collect as operator of the July Western Eagle Ford Acquisition assets.

NOTE 4 – Supplemental pro forma oil and natural gas reserves information

Oil and natural gas reserves

The following tables present the estimated pro forma combined net proved developed and undeveloped oil, natural gas, and NGLs reserves information as of December 31, 2022 for our consolidated operations, along with a summary of changes in quantities of net remaining proved reserves for the year ended December 31, 2022 for our consolidated operations. Immaterial amounts for proved developed oil, natural gas, and NGL reserves of our equity affiliates totaling 3,665 MBoe as of December 31, 2021 have been omitted from presentation below. Our equity affiliates had no proved oil, natural gas, and NGL reserves as of December 31, 2022. The estimates below are in certain instances presented on a “barrels of oil equivalent or “Boe” basis. To determine Boe in the following tables, natural gas is converted to a crude oil equivalent at the ratio of six Mcf of natural gas to one barrel of crude oil equivalent.

The pro forma oil and natural gas reserves information is not necessarily indicative of the results that might have occurred had the July Western Eagle Ford Acquisition been completed on January 1, 2022 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in “Risk Factors” included in the Company’s Annual Report on Form 10-K.

 

     Oil and Condensate (MBbls)  
     Crescent
(Historical)		      July Western Eagle
Ford Assets
(Historical)		      Crescent Pro Forma
Combined		  

Proved Developed and Undeveloped Reserves as of:

         

December 31, 2021

      210,160        32,162        242,322  

Revisions of previous estimates

      (18,859 )       2,297        (16,562 ) 

Extensions, discoveries, and other additions

      37,208        889        38,097  

Sales of reserves in place

      (6,006 )       —          (6,006 ) 

Purchases of reserves in place

      42,444        —          42,444  

Production

      (21,865 )       (2,877 )       (24,742 ) 
  

 

 

     

 

 

     

 

 

  

December 31, 2022

      243,082        32,471        275,553  
  

 

 

     

 

 

     

 

 

  

Proved Developed Reserves as of:

         

December 31, 2021

      158,091        23,152        181,243  

December 31, 2022

      160,113        23,237        183,350  

Proved Undeveloped Reserves as of:

         

December 31, 2021

      52,069        9,010        61,079  

December 31, 2022

      82,969        9,234        92,203  

     Natural Gas (MMcf)  
     Crescent
(Historical)		      July Western Eagle
Ford Assets
(Historical)		      Crescent Pro Forma
Combined		  

Proved Developed and Undeveloped Reserves as of:

         

December 31, 2021

      1,469,953        174,155        1,644,108  

Revisions of previous estimates

      (14,815 )       19,544        4,729  

Extensions, discoveries, and other additions

      60,312        2,134        62,446  

Sales of reserves in place

      (19,365 )       —          (19,365 ) 

Purchases of reserves in place

      138,920        —          138,920  

Production

      (128,470 )       (15,208 )       (143,678 ) 
  

 

 

     

 

 

     

 

 

  

December 31, 2022

      1,506,535        180,625        1,687,160  
  

 

 

     

 

 

     

 

 

  

Proved Developed Reserves as of:

         

December 31, 2021

      1,404,570        137,758        1,542,328  

December 31, 2022

      1,398,770        146,228        1,544,998  

Proved Undeveloped Reserves as of:

         

December 31, 2021

      65,383        36,397        101,780  

December 31, 2022

      107,765        34,397        142,162  
     NGLs (MBbls)  
     Crescent
(Historical)		      July Western Eagle
Ford Assets
(Historical)		      Crescent Pro Forma
Combined		  

Proved Developed and Undeveloped Reserves as of:

         

December 31, 2021

      76,493        29,361        105,854  

Revisions of previous estimates

      4,167        848        5,015  

Extensions, discoveries, and other additions

      7,751        333        8,084  

Sales of reserves in place

      (2,680 )       —          (2,680 ) 

Production

      (7,110 )       (2,365 )       (9,475 ) 
  

 

 

     

 

 

     

 

 

  

December 31, 2022

      78,621        28,177        106,798  
  

 

 

     

 

 

     

 

 

  

Proved Developed Reserves as of:

         

December 31, 2021

      66,402        23,213        89,615  

December 31, 2022

      66,803        22,811        89,614  

Proved Undeveloped Reserves as of:

         

December 31, 2021

      10,091        6,148        16,239  

December 31, 2022

      11,818        5,366        17,184  
     Total (MBoe)  
     Crescent
(Historical)		      July Western Eagle
Ford Assets
(Historical)		      Crescent Pro Forma
Combined		  

Proved Developed and Undeveloped Reserves as of:

         

December 31, 2021

      531,645        90,549        622,194  

Revisions of previous estimates

      (17,158 )       6,401        (10,757 ) 

Extensions, discoveries, and other additions

      55,011        1,578        56,589  

Sales of reserves in place

      (11,915 )       —          (11,915 ) 

Purchases of reserves in place

      65,597        —          65,597  

Production

      (50,387 )       (7,776 )       (58,163 ) 
  

 

 

     

 

 

     

 

 

  

December 31, 2022

      572,793        90,752        663,545  
  

 

 

     

 

 

     

 

 

  

Proved Developed Reserves as of:

         

December 31, 2021

      458,588        69,325        527,913  

December 31, 2022

      460,046        70,419        530,465  

Proved Undeveloped Reserves as of:

         

December 31, 2021

      73,057        21,224        94,281  

December 31, 2022

      112,747        20,333        133,080  

Standardized measure of discounted future net cash flows

The following tables present the estimated pro forma standardized measure of discounted future net cash flows (the “pro forma standardized measure”) at December 31, 2022. The pro forma standardized measure information set forth below gives effect to the July Western Eagle Ford Acquisition as if it had been completed on January 1, 2022. Transaction Adjustments reflect adjustments related to the tax effects resulting from the July Western Eagle Ford Acquisition. An explanation of the underlying methodology applied, as required by SEC regulations, can be found within the historical financial statements included in the Company’s Annual Report on Form 10-K. The calculations assume the continuation of existing economic, operating and contractual conditions at December 31, 2022.

The pro forma standardized measure is not necessarily indicative of the results that might have occurred had the July Western Eagle Ford Acquisition been completed on January 1, 2022 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in “Risk Factors” included in the Company’s Annual Report on Form 10-K.

The pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves of our consolidated operations as of December 31, 2022 is as follows:

 

     (in thousands)  
     Crescent
(Historical)		      July Western Eagle
Ford Assets
(Historical)		      Transaction
Adjustments		      Crescent Pro Forma
Combined		  

Future cash inflows

    $ 33,628,495      $ 5,278,786      $ —        $ 38,907,281  

Future production costs

      (14,077,136 )       (2,360,128 )       —          (16,437,264 ) 

Future development costs (1)

      (2,380,931 )       (312,143 )       —          (2,693,074 ) 

Future income taxes

      (773,479 )       —          (122,955 )       (896,434 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Future net cash flows

      16,396,949        2,606,515        (122,955 )       18,880,509  

Annual discount of 10% for estimated timing

      (7,262,283 )       (1,446,203 )       68,221        (8,640,265 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Standardized measure of discounted future net cash flows as of December 31, 2022

    $ 9,134,666      $ 1,160,312      $ (54,734 )     $ 10,240,244  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(1)

Future development costs include future abandonment and salvage costs.

Changes in standardized measure

The changes in the pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves of our consolidated operations for the year ended December 31, 2022 are as follows:

 

     (in thousands)  
     Crescent
(Historical)		      July Western Eagle
Ford Assets
(Historical)		      Transaction
Adjustments		      Crescent Pro Forma
Combined		  

Balance at December 31, 2021

    $ 4,958,300      $ 665,847      $ (31,409 )     $ 5,592,738  

Net change in prices and production costs

      4,156,736        614,033        —          4,770,769  

Net change in future development costs

      (132,213 )       (40,923 )       —          (173,136 ) 

Sales and transfers of oil and natural gas produced, net of production expenses

      (2,083,147 )       (265,032 )       —          (2,348,179 ) 

Extensions, discoveries, additions and improved recovery, net of related costs

      1,105,549        24,501        —          1,130,050  

Purchases of reserves in place

      1,333,452        —          —          1,333,452  

Sales of reserves in place

      (118,253 )       —          —          (118,253 ) 

Revisions of previous quantity estimates

      (952,958 )       99,449        —          (853,509 ) 

Previously estimated development costs incurred

      488,934        —          —          488,934  

Net change in taxes

      (251,714 )       —          (20,184 )       (271,898 ) 

Accretion of discount

      575,440        67,000        (3,141 )       639,299  

Changes in timing and other

      54,540        (4,563 )       —          49,977  
  

 

 

     

 

 

     

 

 

     

 

 

  

Balance at December 31, 2022

    $ 9,134,666      $ 1,160,312      $ (54,734 )     $ 10,240,244