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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to

Commission file number 001-41132


Crescent Energy Company
(Exact name of registrant as specified in its charter)


Delaware
87-1133610
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
600 Travis Street, Suite 7200
Houston, Texas 77002
(713) 337-4600
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, par value $0.0001CRGYNew York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No

As of October 31, 2022, there were approximately 48,282,163 and 118,645,323 shares of the registrant's Class A and Class B common stock outstanding, respectively.




Table of Contents

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits

1


GLOSSARY

The following are abbreviations and definitions of certain terms used in this document, which are commonly used in the oil and natural gas industry:

barrel or Bbl — One stock tank barrel, or 42 United States gallons liquid volume.
Boe — One barrel of oil equivalent determined using the ratio of six Mcf of natural gas to one barrel of crude oil or condensate.
Boe/d — Barrels of oil equivalent per day.
Brent the reference price paid in U.S. dollars for a barrel of light sweet crude oil produced from the Brent field in the UK sector of the North Sea.
Btu — British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water one degree Fahrenheit.
Henry Hub — Henry Hub is the major exchange for pricing natural gas futures on the New York Mercantile Exchange. It is frequently referred to as the Henry Hub index.
MBbls — One thousand Bbls or other liquid hydrocarbons.
MBbl/d — One thousand Bbls or other liquid hydrocarbons per day.
MBoe — One thousand Boe.
MBoe/d — One thousand Boe per day.
Mcf — One thousand cubic feet of natural gas.
Mcf/d — One thousand Mcf per day.
MMBoe — One million Boe.
MMBtu — One million Btus.
MMcf — One million Mcf.
MMcf/d — One million Mcf per day.
NYMEX — The New York Mercantile Exchange.
Proved developed reserves — Proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well or through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.
Proved reserves — Proved reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
Proved undeveloped reserves — Proved undeveloped reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. The U.S. Securities and Exchange Commission (the “SEC”) provides a complete definition of undeveloped oil and gas reserves in Rule 4-10(a)(31) of Regulation S-K.
Working interest — The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and a share of production.
WTI — A light crude oil produced in the United States with an American Petroleum Institute gravity of approximately 38-40 and sulfur content of approximately 0.3%.

2


Cautionary Statement Regarding Forward-Looking Statements

The information in this Quarterly Report on Form 10-Q (this "Quarterly Report") contains or incorporates by reference information that includes or is based upon "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical facts, included herein concerning, among other things, planned capital expenditures, increases in oil, natural gas and natural gas liquids (“NGL”) production, the number of anticipated wells to be drilled or completed after the date hereof, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, among others:

commodity price volatility;
our business strategy;
the length, scope, and severity of the ongoing coronavirus disease 2019 (“COVID-19”) pandemic, including the effects of related public health concerns and the impact of continued actions taken by governmental authorities and other third parties in response to the pandemic and its impact on commodity prices, supply and demand considerations, and storage capacity;
our ability to identify and select possible acquisition and disposition opportunities;
capital requirements and uncertainty of obtaining additional funding on terms acceptable to us;
risks and restrictions related to our debt agreements and the level of our indebtedness;
our reliance on KKR Energy Assets Manager LLC as our external manager;
our hedging strategy and results;
realized oil, natural gas and NGL prices;
political and economic conditions and events in foreign oil, natural gas and NGL producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, the armed conflict in Ukraine and associated economic sanctions on Russia, conditions in South America, Central America and China and acts of terrorism or sabotage;
general economic conditions, including the impact of continued inflation and associated changes in monetary policy;
timing and amount of our future production of oil, natural gas and NGLs;
a decline in oil, natural gas and NGL production, and the impact of general economic conditions on the demand for oil, natural gas and NGLs and the availability of capital;
unsuccessful drilling and completion (“D&C”) activities and the possibility of resulting write downs;
our ability to meet our proposed drilling schedule and to successfully drill wells that produce oil, natural gas and NGLs in commercially viable quantities;
shortages of equipment, supplies, services and qualified personnel and increased costs for such equipment, supplies, services and personnel;
adverse variations from estimates of reserves, production, prices and expenditure requirements, and our inability to replace our reserves through exploration and development activities;
incorrect estimates associated with properties we acquire relating to estimated proved reserves, the presence or recoverability of estimated oil, natural gas and NGL reserves and the actual future production rates and associated costs of such acquired properties;
hazardous, risky drilling operations, including those associated with the employment of horizontal drilling techniques, and adverse weather and environmental conditions;
limited control over non-operated properties;
title defects to our properties and inability to retain our leases;
our ability to successfully develop our large inventory of undeveloped acreage;
our ability to retain key members of our senior management and key technical employees;
risks relating to managing our growth, particularly in connection with the integration of significant acquisitions;
impact of environmental, occupational health and safety, and other governmental regulations, and of current or pending legislation, including as a result of the recent change in presidential administrations;
federal and state regulations and laws;
our ability to predict and manage the effects of actions of the Organization of the Petroleum Exporting Countries (“OPEC”) and agreements to set and maintain production levels;
changes in tax laws;
effects of competition; and
3


seasonal weather conditions.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties incident to the development, production, gathering and sale of oil, natural gas and NGLs, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability and cost of drilling and production equipment and services, project construction delays, environmental risks, drilling and other operating risks, lack of availability or capacity of midstream gathering and transportation infrastructure, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks described under “Risk Factors” in this Quarterly Report, in "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021 ("Annual Report") and our reports and registration statements filed from time to time with the SEC.

Reserve engineering is a process of estimating underground accumulations of hydrocarbons that cannot be measured in an exact way. The accuracy of any reserve estimates depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development program. Accordingly, reserve estimates may differ significantly from the quantities of oil, natural gas and NGLs that are ultimately recovered.

Should one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.
4


Part I – Financial Information
Item 1. Financial Statements 
CRESCENT ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)
September 30, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$22,478 $128,578 
Accounts receivable, net518,531 321,855 
Accounts receivable – affiliates1,532 20,341 
Derivative assets - current7,120  
Drilling advances10,220 200 
Prepaid and other current assets20,595 8,644 
Total current assets580,476 479,618 
Property, plant and equipment:
Oil and natural gas properties at cost, successful efforts method
Proved7,299,737 6,043,602 
Unproved331,294 308,721 
Oil and natural gas properties at cost, successful efforts method7,631,031 6,352,323 
Field and other property and equipment, at cost177,181 144,318 
Total property, plant and equipment7,808,212 6,496,641 
Less: accumulated depreciation, depletion, amortization and impairment(2,300,795)(1,941,528)
Property, plant and equipment, net5,507,417 4,555,113 
Goodwill76,826 76,564 
Derivative assets – noncurrent 579 
Investment in equity affiliates14,509 15,415 
Other assets50,366 30,173 
TOTAL ASSETS$6,229,594 $5,157,462 
The accompanying notes to financial statements are an integral part of these condensed consolidated financial statements
5


CRESCENT ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)
September 30, 2022December 31, 2021
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities$596,115 $337,881 
Accounts payable – affiliates39,962 8,675 
Derivative liabilities – current384,038 253,525 
Financing lease obligations – current2,446 1,606 
Other current liabilities17,324 14,438 
Total current liabilities1,039,885 616,125 
Long-term debt1,372,334 1,030,406 
Derivative liabilities – noncurrent89,343 133,471 
Asset retirement obligations290,122 258,102 
Deferred tax liability141,643 82,537 
Financing lease obligations – noncurrent5,032 3,512 
Other liabilities22,253 13,652 
Total liabilities2,960,612 2,137,805 
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests2,419,993 2,325,013 
Equity:
Class A common stock, $0.0001 par value; 1,000,000,000 shares authorized, 49,433,154 and 43,105,376 shares issued, and 48,282,163 and 41,954,385 shares outstanding as of September 30, 2022 and December 31, 2021, respectively
5 4 
Class B common stock, $0.0001 par value; 500,000,000 shares authorized and 118,645,323 and 127,536,463 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
12 13 
Preferred stock, $0.0001 par value; 500,000,000 shares authorized and 1,000 Series I preferred shares issued and outstanding as of September 30, 2022 and December 31, 2021
  
Treasury stock, at cost; 1,150,991 shares of Class A common stock as of September 30, 2022 and December 31, 2021
(18,448)(18,448)
Additional paid-in capital801,978 720,016 
Retained earnings (accumulated deficit)61,375 (19,376)
Noncontrolling interests4,067 12,435 
Total equity848,989 694,644 
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY$6,229,594 $5,157,462 









The accompanying notes to financial statements are an integral part of these condensed consolidated financial statements
6


CRESCENT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenues:
Oil$550,823 $222,074 $1,525,899 $627,817 
Natural gas235,830 86,779 586,318 230,271 
Natural gas liquids64,810 47,322 219,853 121,613 
Midstream and other13,494 9,553 40,231 34,017 
Total revenues864,957 365,728 2,372,301 1,013,718 
Expenses:
Lease operating expense121,554 58,338 322,752 175,966 
Workover expense21,126 2,932 56,102 7,823 
Asset operating expense20,791 10,810 54,653 24,306 
Gathering, transportation and marketing44,757 44,634 131,271 136,056 
Production and other taxes71,511 28,090 183,491 80,276 
Depreciation, depletion and amortization145,008 73,025 375,600 233,122 
Exploration expense1,909 754 3,848 833 
Midstream operating expense3,550 2,518 9,972 8,848 
General and administrative expense17,311 11,024 59,489 33,775 
Gain on sale of assets(127)(1)(5,114)(9,418)
Total expenses447,390 232,124 1,192,064 691,587 
Income (loss) from operations417,567 133,604 1,180,237 322,131 
Other income (expense):
Gain (loss) on derivatives205,130 (282,222)(645,565)(885,032)
Interest expense(27,057)(12,984)(68,518)(37,810)
Other income (expense)(2,670)(48)(4,472)(54)
Income from equity affiliates834  4,086  
Total other income (expense)176,237 (295,254)(714,469)(922,896)
Income (loss) before taxes593,804 (161,650)465,768 (600,765)
Income tax benefit (expense)(38,455)(393)(34,528)(407)
Net income (loss)555,349 (162,043)431,240 (601,172)
Less: net (income) loss attributable to Predecessor 160,567  585,804 
Less: net (income) loss attributable to noncontrolling interests(904)1,476 (2,087)15,368 
Less: net (income) loss attributable to redeemable noncontrolling interests(436,084) (341,269) 
Net income (loss) attributable to Crescent Energy$118,361 $ $87,884 $ 
Net income (loss) per share:
Class A common stock – basic$2.74 $2.07 
Class A common stock – diluted$2.74 $2.07 
Class B common stock – basic and diluted$ $ 
Weighted average shares outstanding:
Class A common stock – basic43,197 42,377 
Class A common stock - diluted43,210 42,382 
Class B common stock – basic and diluted125,797 126,950 

The accompanying notes to financial statements are an integral part of these condensed consolidated financial statements
7







CRESCENT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(in thousands)
PredecessorCrescent Energy Company
Class A UnitsMembers'
Equity
Class A Common StockClass B Common StockSeries I Preferred StockTreasury StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Noncontrolling
Interest
Total
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at January 1, 20211,220 $2,716,892  $  $  $  $ $ $ $176,268 $2,893,160 
Net loss attributable to Predecessor— (155,629)— — — — — — — — — — (10,639)(166,268)
Contributions— 3,064 — — — — — — — — — — — 3,064 
Distributions— (9,448)— — — — — — — — — — (289)(9,737)
Equity-based compensation— — — — — — — — — — — — 1,568 1,568 
Balance at March 31, 20211,220 $2,554,879  $  $  $  $ $ $ $166,908 $2,721,787 
Net loss attributable to Predecessor— (269,608)— — — — — — — — — — (3,253)(272,861)
Contributions— 4,100 — — — — — — — — — — 35,461 39,561 
Distributions— (13,761)— — — — — — — — — — 11 (13,750)
Noncontrolling Interest Carve-out— — — — — — — — — — — — (121,872)(121,872)
Equity-based compensation— — — — — — — — — — — — 1,564 1,564 
April 2021 Exchange10 62,051 — — — — — — — — — — (62,051) 
Balance at June 30, 20211,230 $2,337,661  $  $  $  $ $ $ $16,768 $2,354,429 
Net loss attributable to Predecessor— (160,567)— — — — — — — — — — (1,476)(162,043)
Distributions— (11,838)— — — — — — — — — — (268)(12,106)
Equity-based compensation— — — — — — — — — — — — 57 57 
Repurchase of noncontrolling interest— — — — — — — — — — — — (1,414)(1,414)
Balance at September 30, 20211,230 $2,165,256  $  $  $  $ $ $ $13,667 $2,178,923 
The accompanying notes are an integral part of these condensed consolidated financial statements
8


CRESCENT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(in thousands)
PredecessorCrescent Energy Company
Class A UnitsMembers'
Equity
Class A Common StockClass B Common StockSeries I Preferred StockTreasury StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Noncontrolling
Interest
Total
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at January 1, 2022 $ 41,954 $4 127,536 $13 1 $ 1,151 $(18,448)$720,016 $(19,376)$12,435 $694,644 
Net income (loss)— — — — — — — — — — — (85,000)470 (84,530)
Contributions— — — — — — — — — — — — 1,533 1,533 
Distributions— — — — — — — — — — — — (645)(645)
Dividend to Class A common stock— — — — — — — — — — (5,035)— — (5,035)
Equity-based compensation— — — — — — — — — — 964 — (192)772 
Change in deferred taxes related to basis in OpCo (see Note 2)— — — — — — — — — — 20,216 — — 20,216 
Adjustment of redeemable noncontrolling interests to redemption amount (see Note 2)— — — — — — — — — — (194,980)— — (194,980)
Balance at March 31, 2022 $ 41,954 $4 127,536 $13 1 $ 1,151 $(18,448)$541,181 $(104,376)$13,601 $431,975 
Net income (loss)— — — — — — — — — — — 54,523 713 55,236 
Distributions— — — — — — — — — — — — (4,201)(4,201)
Repurchase of noncontrolling interest— — — — — — — — — — — — (4,060)(4,060)
Dividend to Class A common stock— — — — — — — — — — (7,133)— — (7,133)
Equity-based compensation— — — — — — — — — — 1,080 — (4)1,076 
Change in deferred taxes related to basis in OpCo (see Note 2)— — — — — — — — — — (46,567)— — (46,567)
Adjustment of redeemable noncontrolling interests to redemption amount (see Note 2)— — — — — — — — — — 194,980 — — 194,980 
Balance at June 30, 2022 $ 41,954 $4 127,536 $13 1 $ 1,151 $(18,448)$683,541 $(49,853)$6,049 $621,306 
The accompanying notes are an integral part of these condensed consolidated financial statements
9


CRESCENT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(in thousands)
PredecessorCrescent Energy Company
Class A UnitsMembers'
Equity
Class A Common StockClass B Common StockSeries I Preferred StockTreasury StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Noncontrolling
Interest
Total
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at June 30, 2022 $ 41,954 $4 127,536 $13 1 $ 1,151 $(18,448)$683,541 $(49,853)$6,049 $621,306 
Net income (loss)— — — — — — — — — — — 118,361 904 119,265 
Distributions— — — — — — — — — — — — (2,886)(2,886)
Dividend to Class A common stock— — — — — — — — — — — (7,133)— (7,133)
Equity-based compensation— — — — — — — — — — 2,246 —  2,246 
Change in deferred taxes related to basis differences associated with the Equity Transactions (see Note 2)— — — — — — — — — — (5,599)— — (5,599)
Change in equity associated with the Equity Transactions (see Note 1)— — 6,328 1 (8,891)(1)— — — — 121,790 — — 121,790 
Balance at September 30, 2022 $ 48,282 $5 118,645 $12 1 $ 1,151 $(18,448)$801,978 $61,375 $4,067 $848,989 



The accompanying notes are an integral part of these condensed consolidated financial statements
10


CRESCENT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended September 30,
20222021
Cash flows from operating activities:
Net income (loss)$431,240 $(601,172)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation, depletion and amortization375,600 233,122 
Deferred income tax expense (benefit)27,428  
(Gain) loss on derivatives645,565 885,032 
Net cash (paid) received on settlement of derivatives(654,377)(389,142)
Non-cash equity-based compensation expense26,306 14,054 
Amortization of debt issuance costs and discount6,431 6,809 
Gain on sale of oil and natural gas properties(5,114)(9,418)
Restructuring of acquired derivative contracts(51,994) 
Settlement of acquired derivative contracts(39,046) 
Other(6,941)3,256 
Changes in operating assets and liabilities:
Accounts receivable(189,512)(67,588)
Accounts receivable – affiliates18,809 (9,363)
Prepaid and other current assets