Crescent Energy (NYSE:CRGY) reported third-quarter results that exceeded its internal market expectations for production, capital spending and levered free cash flow, while outlining further operational savings and its planned integration of Devon Energy’s Eagle Ford assets.
The company produced approximately 328,000 barrels of oil equivalent per day during the quarter, including about 134,000 barrels of oil per day. Adjusted EBITDAX totaled approximately $786 million, while levered free cash flow was $367 million, according to Chief Financial Officer Brandi Kendall.
Production was above expectations, while capital spending of approximately $326 million was 9% below expectations and levered free cash flow was 23% above expectations, Kendall said. Crescent ended the quarter with roughly $2 billion of liquidity and net leverage of approximately 1.5 times.
Permian synergies exceed original targets
Chief Executive Officer David Rockecharlie said Crescent’s operating model has continued to generate savings across its asset base, particularly in the Permian following its acquisition of Vital Energy assets. Since the company’s second-quarter update, Crescent captured an additional $105 million in annualized synergies, bringing total annualized synergies to approximately $295 million.
That figure is nearly three times the high end of Crescent’s original $90 million to $100 million target, Rockecharlie said. The company now expects total Permian synergies to exceed $300 million annually.
Crescent attributed the improvement to lower costs, operational execution and commercial outcomes. Kendall said $40 million of the incremental synergy capture came from renegotiating oil, gas and water contracts. Those benefits are expected to begin appearing in financial results in January 2027.
The company also cited lower drilling and completion costs across its core basins. Rockecharlie said Eagle Ford well costs have declined 25% since 2023, Uinta costs have fallen about 20% year over year, and Permian costs have declined 20% to 25% since Crescent assumed operations late last year.
He said a $1 million reduction in well costs can reduce oil breakevens by approximately $5 to $10 per barrel. Crescent said realized savings have doubled its inventory with breakevens below $50 per barrel and increased inventory below $60 per barrel by nearly 50%.
Chief Operating Officer Joey Hall said the company expects standalone Crescent well costs to continue declining in 2027 despite anticipated inflation in steel and diesel costs. Hall estimated industry inflation in those inputs at roughly 5% to 7%, but said Crescent sees additional efficiency opportunities through longer laterals, greater simul-frac use, electrification, supply-chain management and development changes on acquired assets.
Devon Eagle Ford acquisition remains central to strategy
Crescent is awaiting the closing of its announced acquisition of Devon Energy’s Eagle Ford assets. Rockecharlie described the transaction as an opportunity to add scale and Tier 1 inventory in a basin where Crescent already has substantial operating experience.
The acquired assets are expected to add more than 600 net locations on a 10,000-foot basis and make Crescent the second-largest operator in the Eagle Ford, according to the company. Crescent has identified $140 million of annual synergies from the transaction, including $100 million of drilling and completion synergies reflected in its forward capital framework.
Management said the acquisition will not alter Crescent’s general approach of maintaining a maintenance-to-low-growth development program and allocating capital based on returns. Rockecharlie said Crescent expects to initially maintain the current pace of activity on the Devon acreage, where there are a couple of rigs operating, before evaluating capital allocation following integration and stabilization.
Over time, he said the company could direct incremental capital from its legacy Eagle Ford position toward the newly acquired Eagle Ford assets, the Permian and the Uinta, depending on market conditions and operating results.
For the combined business, Crescent has outlined a $1.8 billion capital framework intended to sustain approximately 170,000 barrels per day of oil production. Kendall said that framework incorporates efficiencies on Crescent’s legacy assets as well as the expected drilling and completion synergies from the Devon acquisition.
Deleveraging and hedging priorities
Crescent completed approximately $1.15 billion in equity financing and arranged debt financing with an approximate 6% cost of capital to support the Eagle Ford acquisition. Kendall said the company expects about $1 billion of pro forma liquidity at closing.
Following the transaction, debt reduction will be Crescent’s primary use of free cash flow after payment of its fixed quarterly dividend of $0.12 per share. The company is targeting consolidated leverage of approximately 1.5 times by the end of 2027 and about one time by the end of 2028, on a pro forma basis.
The company has also increased commodity hedging to provide cash-flow visibility during the anticipated deleveraging period. Pro forma for the acquisition, Crescent said approximately 60% of oil production is hedged in the first half of 2027, about 50% is hedged in the second half of 2027, and about 20% is hedged in the first half of 2028.
Kendall said Crescent has completed the oil hedging program it planned for 2027 and has begun adding 2028 hedges, with roughly 20% of first-half 2028 production hedged at prices in the $75-per-barrel range or higher.
Royalties platform and base-production initiatives
The Devon transaction is also expected to expand Crescent Royalties, which Crescent said would have approximately $250 million of annualized EBITDAX on a pro forma basis. Approximately 40% of the royalties platform’s pro forma EBITDAX is expected to come from Crescent-operated assets, compared with about 10% currently.
Rockecharlie said Crescent is evaluating the best outcome for the royalties business over a 12- to 18-month period, with goals that could include making the asset’s value more visible and supporting credit metrics. However, he said the royalties business remains part of Crescent and that the company continues to manage its capital structure on a consolidated basis.
Separately, Hall said Crescent is focusing on improving operating costs and margins from existing wells. He said the company has more than 4,700 wells in the Eagle Ford and more than 4,000 wells in the Permian, creating opportunities to optimize artificial lift, chemicals, generators and other operating inputs. Crescent sees potential to improve its operating-cost position in both the Midland and Delaware portions of the Permian, as well as in the Eagle Ford.
Management said it expects to finish the year below the midpoint of its full-year capital guidance, while maintaining its expectation to exit the year at approximately 130,000 barrels per day of oil production on a standalone Crescent basis.
About Crescent Energy (NYSE:CRGY)
Crescent Energy Company is an independent energy company focused on the acquisition, development and operation of oil and natural gas properties in the United States. Its activities include exploration and production, well development, production optimization and management of mature and unconventional oil and gas assets.
The company’s portfolio is concentrated in onshore U.S. basins, including the Eagle Ford in South Texas and the Uinta Basin in Utah, along with other producing properties.
