Crescent Energy Co

Previous wording

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial condition, results of operations, liquidity and certain other factors that may affect the Company's operating results. The following discussion and analysis should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 ("Annual Report"), as well as our unaudited condensed consolidated financial statements for the three months ended March 31, 2024 and 2023. The following information updates the discussion of our financial condition provided in our previous filings, and analyzes the changes in the results of operations between the three months ended March 31, 2024 and 2023. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, commodity price volatility, capital requirements and uncertainty of obtaining additional funding on terms acceptable to the Company, realized oil, natural gas and NGL prices, the timing and amount of future production of oil, natural gas and NGLs, shortages of equipment, supplies, services and qualified personnel, as well as those factors discussed below and elsewhere in this Quarterly Report and in our Annual Report, particularly under “Risk Factors” and “Cautionary Statement Regarding Forward Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

Current wording

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial condition, results of operations, liquidity and certain other factors that may affect the Company's operating results. The following discussion and analysis should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 ("Annual Report"), our Quarterly Report on Form 10-Q for the period ended March 31, 2024, as well as our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023. The following information updates the discussion of our financial condition provided in our previous filings, and analyzes the changes in the results of operations between the three and six months ended June 30, 2024 and 2023. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, commodity price volatility, capital requirements and uncertainty of obtaining additional funding on terms acceptable to the Company, realized oil, natural gas and NGL prices, the timing and amount of future production of oil, natural gas and NGLs, shortages of equipment, supplies, services and qualified personnel, the integration of operations following and actual results of the SilverBow Merger (as defined below), as well as those factors discussed below and elsewhere in this Quarterly Report and in our Annual Report, particularly under “Risk Factors” and “Cautionary Statement Regarding Forward Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law. Unless otherwise stated or the context otherwise indicates, all references to “we,” “us,” “our,” "Crescent" and the “Company” or similar expressions refer to Crescent Energy Company and its subsidiaries.

Previous wording

Crescent is a differentiated U.S. energy company committed to delivering value for shareholders through a disciplined growth through acquisition strategy and consistent return of capital. Our portfolio of low-decline, cash-flow oriented assets comprises both mid-cycle unconventional and conventional assets with a long reserve life and deep inventory of high-return development locations in the Eagle Ford and Uinta basins.

Current wording

Crescent is a differentiated U.S. energy company committed to delivering value for shareholders through a disciplined growth through acquisition strategy and consistent return of capital. Our long-life, balanced portfolio combines stable cash flows from low-decline production with deep, high-quality development inventory. Our activities are focused in Texas and the Rocky Mountain region.

Previous wording

During the last several years, prices of crude oil, natural gas and NGLs have experienced periodic downturns and sustained volatility, impacted by the COVID-19 pandemic and recovery, Russia’s invasion of Ukraine and the related sanctions imposed on Russia, Hamas' attack against Israel and the ensuing conflict and escalation of tensions in the Middle East (including with Iran), supply chain constraints and elevated interest rates and costs of capital. Furthermore, the United States continued to experience a significant inflationary environment, which began in 2022, that, along with international geopolitical risks, has contributed to concerns of a potential recession in 2024 that has created further volatility. In March 2024, OPEC announced an extension of its production cuts of around 2.2 million barrels per day. The actions of OPEC with respect to oil production levels and announcements of potential changes in such levels, including agreement on and compliance with production cuts, may result in further volatility in commodity prices and the oil and natural gas industry generally. Such volatility may lead to a more difficult investing and planning environment for us and our customers. While we use derivative instruments to partially mitigate the impact of commodity price volatility, our revenues and operating results depend significantly upon the prevailing prices for oil and natural gas.

Current wording

During the last several years, prices of crude oil, natural gas and NGLs have experienced periodic downturns and sustained volatility, impacted by the COVID-19 pandemic and recovery, Russia’s invasion of Ukraine and the related sanctions imposed on Russia, Hamas' attack against Israel and the ensuing conflict and escalation of tensions in the Middle East (including with Iran), supply chain constraints and elevated interest rates and costs of capital. Furthermore, the United States continued to experience a significant inflationary environment, which began in 2022 that, along with international geopolitical risks, has contributed to concerns of a potential recession in 2024 that has created further volatility. In June 2024, OPEC announced an extension of its production cuts through December 2025. The actions of OPEC with respect to oil production levels and announcements of potential changes in such levels, including agreement on and compliance with production cuts, may result in further volatility in commodity prices and the oil and natural gas industry generally. Such volatility may lead to a more difficult investing and planning environment for us and our customers. While we use derivative instruments to partially mitigate the impact of commodity price volatility, our revenues and operating results depend significantly upon the prevailing prices for oil and natural gas.

Previous wording

Due to the cyclical nature of the oil and gas industry, fluctuating demand for oilfield goods and services can put pressure on the pricing structure within our industry. As commodity prices rise, the cost of oilfield goods and services generally also increase, while during periods of commodity price declines, oilfield costs typically lag and do not adjust downward as fast as oil prices do. The U.S. inflation rate began increasing in 2021, peaked in the middle of 2022 and began to gradually decline in the second half of 2022 and into 2023 and has remained relatively stable in the first quarter of 2024. Inflationary pressures have resulted in and may result in additional increases to the costs of our oilfield goods, services and personnel, which in turn cause our capital expenditures and operating costs to rise. Sustained levels of high inflation have likewise caused the U.S. Federal Reserve and other central banks to increase interest rates in 2022 and through 2023 and, although the financial health of the oil and gas industry has shown improvement as compared to prior periods, to the extent elevated inflation remains, we may experience further cost increases for our operations, including oilfield services, labor costs and equipment if our drilling activity increases. Higher oil and natural gas prices may cause the costs of materials and services to continue to rise. We cannot predict any future trends in the rate of inflation and a significant increase in inflation, to the extent we are unable to recover higher costs through higher oil and natural gas prices and revenues, would negatively impact our business, financial condition and results of operations. See Part I, Item 1A. Risk Factors—"Risks related to the oil and natural gas industry—Continuing or worsening inflationary issues and associated changes in monetary policy have resulted in and may result in additional increases to the cost of our goods, services and personnel, which in turn cause our capital expenditures and operating costs to rise" in our Annual Report.

Current wording

Due to the cyclical nature of the oil and gas industry, fluctuating demand for oilfield goods and services can put pressure on the pricing structure within our industry. As commodity prices rise, the cost of oilfield goods and services generally also increase, while during periods of commodity price declines, oilfield costs typically lag and do not adjust downward as fast as oil prices do. The U.S. inflation rate began increasing in 2021, peaked in the middle of 2022 and began to gradually decline in the second half of 2022 and into 2023 and has remained relatively stable in the first half of 2024. Inflationary pressures have resulted in and may result in additional increases to the costs of our oilfield goods, services and personnel, which in turn cause our capital expenditures and operating costs to rise. Sustained levels of high inflation have likewise caused the U.S. Federal Reserve and other central banks to increase interest rates in 2022 continuing through 2023 and, although the financial health of the oil and gas industry has shown improvement as compared to prior periods, to the extent elevated inflation remains, we may experience further cost increases for our operations, including oilfield services, labor costs and equipment. Higher oil and natural gas prices may cause the costs of materials and services to continue to rise. We cannot predict any future trends in the rate of inflation and a significant increase in inflation, to the extent we are unable to recover higher costs through higher oil and natural gas prices and revenues, would negatively impact our business, financial condition and results of operations. See Part I, Item 1A. Risk Factors—"Risks related to the oil and natural gas industry—Continuing or worsening inflationary issues and associated changes in monetary policy have resulted in and may result in additional increases to the cost of our goods, services and personnel, which in turn cause our capital expenditures and operating costs to rise" in our Annual Report.

Previous wording

In March 2024, 16.1 million OpCo Units were acquired from Independence Energy Aggregator L.P., and we cancelled a corresponding number of shares of Class B Common Stock (the "March 2024 Redemption"). Of the total OpCo Units acquired, 13.8 million were acquired for shares of Class A Common Stock, which were subsequently sold in an underwritten public offering at a price to the public of $10.50 per share, or a net price of $9.87 per share after deducting the underwriters' discounts and commissions, from which we did not receive any proceeds, nor incur any material expenses with respect to such acquisition. In connection with the underwritten public offering, we repurchased 2.3 million OpCo Units from Independence Energy Aggregator L.P. for $22.7 million in cash and we cancelled a corresponding number of shares of Class B Common Stock (the "March 2024 Repurchase," together with the March 2024 Redemption, the "March 2024 Equity Transactions").

Current wording

In March 2024, 16.1 million OpCo Units were acquired from Independence Energy Aggregator L.P. and we cancelled a corresponding number of shares of Class B Common Stock (the "March 2024 Redemption"). Of the total OpCo Units acquired, 13.8 million were acquired for shares of Class A Common Stock, which were subsequently sold in an underwritten public offering at a price to the public of $10.50 per share, or a net price of $9.87 per share after deducting the underwriters' discounts and commissions, from which we did not receive any proceeds, nor incur any material expenses with respect to such acquisition. In connection with the underwritten public offering, we repurchased 2.3 million OpCo Units from Independence Energy Aggregator L.P. for 22.7 million in cash and we cancelled a corresponding number of shares of Class B Common Stock (the "March 2024 Repurchase," together with the March 2024 Redemption, the "March 2024 Equity Transactions").

Previous wording

As a result of the March 2024 Equity Transactions and the April 2024 Class A Conversion, the total number of shares of our Class A Common Stock increased by 19.8 million shares and the total number of shares of our Class B Common Stock decreased by 22.1 million shares. During the three months ended March 31, 2024, Redeemable noncontrolling interests decreased by $341.7 million while APIC increased by $319.0 million as a result of the March 2024 Equity Transactions to reflect the new ownership of OpCo as of March 31, 2024.

Current wording

As a result of the April 2024 Class A Conversion and the March 2024 Equity Transactions (the "2024 Equity Transactions"), the total number of shares of our Class A Common Stock increased by 19.8 million shares and the total number of shares of our Class B Common Stock decreased by 22.1 million shares. Redeemable noncontrolling interests decreased by $470.7 million while APIC increased by $448.0 million as a result of the 2024 Equity Transactions to reflect the new ownership of OpCo as of June 30, 2024.

Previous wording

In March 2024, we issued $700.0 million aggregate principal amount of 7.625% senior notes due 2032 (the "2032 Notes") at par (the “2032 Notes Offering”). The 2032 Notes bear interest at an annual rate of 7.625%, which is payable on April 1 and October 1 of each year, and mature on April 1, 2032. The proceeds from the 2032 Notes Offering were approximately $686.2 million, after deducting the initial purchasers' discount and offering expenses. We used the net proceeds and additional borrowing under our Revolving Credit Facility to finance the consideration of the Tender Offer and Redemption (each term as defined below) of all of the aggregate principal amount of the 2026 Notes outstanding for $714.8 million after including extinguishment costs, as discussed further below.

Current wording

In March 2024, we issued $700.0 million aggregate principal amount of 7.625% senior notes due 2032 (the "2032 Notes") at par (the “2032 Notes Offering”). The proceeds from the 2032 Notes Offering were approximately $686.2 million, after deducting the initial purchasers' discount and offering expenses. We used the net proceeds and additional borrowing under our Revolving Credit Facility to finance the consideration of the Tender Offer and Redemption (each term as defined below) of all of the aggregate principal amount of the 2026 Notes outstanding for $714.8 million after including extinguishment costs, as discussed further below.

Previous wording

We are members of the Oil & Gas Methane Partnership 2.0 Initiative, or OGMP 2.0, and received Gold Standard pathway ratings in 2022 and 2023 for our credible plan to more accurately measure our methane emissions. OGMP 2.0 is the United Nations Environment Programme's flagship oil and gas reporting and mitigation program and the leading industry standard for methane emissions reporting. We also established a Sustainability Advisory Council, an outside council comprising leading experts across key sustainability topics, to advise management and our Board of Directors on sustainability-related issues. In November 2023, we released our third Sustainability Report which is available on Crescent’s website at https://www.crescentenergyco.com/#sustainability.

Current wording

We are members of the Oil & Gas Methane Partnership 2.0 Initiative, or OGMP 2.0, and received Gold Standard pathway ratings in 2022 and 2023 for our credible plan to more accurately measure our methane emissions. OGMP 2.0 is the United Nations Environment Programme's flagship oil and gas reporting and mitigation program and the leading industry standard for methane emissions reporting. We also established a Sustainability Advisory Council, an outside council comprising leading experts across key sustainability topics, to advise management and our Board of Directors on sustainability-related issues. In November 2023, we released our third Sustainability Report which is available on Crescent’s website at https://www.crescentenergyco.com/#sustainability. The sustainability-related information found and/or provided in the Company’s sustainability reports or on the Company’s website in general is not intended or deemed to be incorporated by reference in this Quarterly Report.

Previous wording

Our development program is designed to prioritize the generation of attractive risk-adjusted returns and meaningful free cash flow and is inherently flexible, with the ability to modify our capital program as necessary to react to the current market environment.

Current wording

Our development program, which consists of expenditures for drilling, completion and recompletion activities, is designed to prioritize the generation of attractive risk-adjusted returns and meaningful free cash flow and is inherently flexible, with the ability to modify our capital program as necessary to react to the current market environment.

Previous wording

We expect to incur approximately $550 million to $625 million, excluding acquisitions, for our 2024 capital program. The majority of our program is allocated to D&C, which approximately 90% is allocated to our operated assets in the Eagle Ford and Uinta basins. We expect to fund our 2024 capital program through cash flow from operations. Due to the flexible nature of our capital program and the fact that the majority of our acreage is held by production, we could choose to defer a portion or all of these planned capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated prices for oil, natural gas and NGLs and resulting well economics, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other interest owners.

Current wording

We expect to fund our 2024 capital program, excluding acquisitions, through cash flow from operations. Due to the flexible nature of our capital program and the fact that the majority of our acreage is held by production, we could choose to defer a portion or all of these planned capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated prices for oil, natural gas and NGLs and resulting well economics, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other interest owners.

Previous wording

In addition, revenue from our midstream assets is supported by commercial agreements that have established minimum volume commitments. These midstream revenues comprise the majority of our midstream and other revenue. Midstream and other revenue accounts for 6% or less of our total revenues for the three months ended March 31, 2024 and 2023.

Current wording

In addition, revenue from our midstream assets is supported by commercial agreements that have established minimum volume commitments. These midstream revenues comprise the majority of our midstream and other revenue. Midstream and other revenue accounts for 6% or less of our total revenues for the three and six months ended June 30, 2024 and 2023.

Previous wording

Total sales volume increased 2,798 MBoe during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily due to our Western Eagle Ford Acquisitions.

Current wording

Total sales volume increased 2,326 MBoe and increased 5,124 MBoe during the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023. The increases for the three and six months ended June 30, 2024 are primarily due to our Western Eagle Ford Acquisitions.

Previous wording

(1) Does not include the $18.6 million impact from the settlement of acquired derivative contracts in the first quarter of 2023.

Current wording

(1)Does not include the $16.3 million or $35.0 million impact from the settlement of acquired derivative contracts for the three and six months ended June 30, 2023, respectively.

Previous wording

NGL revenue. NGL revenue increased $24.4 million, or 57%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This was driven primarily by higher realized NGL prices that resulted in an increase of $3.1 million (an increase of 5% per Bbl) and a $21.3 million increase in sales volume (9 MBbls/d, or 47%). The increase in sales volumes is primarily driven by our Western Eagle Ford Acquisitions.

Current wording

NGL revenue. NGL revenue increased $33.1 million, or 98%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023. This was driven primarily by a $19.0 million increase in sales volume (11 MBbls/d, or 58%) and higher realized NGL prices that resulted in an increase of $14.1 million (an increase of 27% per Bbl). The increase in sales volumes is primarily driven by our Western Eagle Ford Acquisitions.

Previous wording

Midstream and other revenue. Midstream and other revenue increased $23.4 million, or 177%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, driven primarily by higher oil blending revenues in 2024.

Current wording

Midstream and other revenue. Midstream and other revenue increased $22.3 million, or 169%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, driven primarily by higher oil blending revenues in 2024.

Previous wording

Operating expense. Operating expense increased $32.3 million, or 12%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, driven primarily by the following factors:

Current wording

Operating expense. Operating expense increased $67.9 million, or 30%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, driven primarily by the following factors:

Previous wording

(ii)Gathering, transportation and marketing expense increased $22.2 million, or 47%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, and increased $0.75 per Boe, or 19% to $4.61 per Boe. This increase was driven primarily by our Western Eagle Ford Acquisitions.

Current wording

(ii)Gathering, transportation and marketing expense increased $14.3 million, or 28%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and increased $0.33 per Boe, or 8%, to $4.40 per Boe. The increase was driven primarily by our Western Eagle Ford Acquisitions.

Previous wording

(v)Midstream operating expense increased $24.0 million, or 634%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to increased crude oil blending expense. The additional crude oil blending expense is more than offset by additional oil blending revenue included as part of our Midstream and other revenue.

Current wording

(v)Midstream and other operating expense increased $28.0 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to increased crude oil blending expense. The additional crude oil blending expense is more than offset by additional oil blending revenue included as part of our Midstream and other revenue.

Previous wording

Depreciation, depletion and amortization. In the three months ended March 31, 2024, depreciation, depletion and amortization increased $30.1 million, or 21%, compared to the three months ended March 31, 2023, driven primarily by increased production from our Western Eagle Ford Acquisitions.

Current wording

Depreciation, depletion and amortization. In the three months ended June 30, 2024, depreciation, depletion and amortization increased $52.5 million, or 33%, compared to the three months ended June 30, 2023, driven primarily by increased production from our Western Eagle Ford Acquisitions.

Previous wording

In the three months ended March 31, 2024, we incurred interest expense of $42.7 million, as compared to $29.3 million in the three months ended March 31, 2023, a 46% increase. This increase was driven primarily by higher average debt balances driven by the Western Eagle Ford Acquisitions and higher interest rates associated with the issuance of the 2028 Notes (as defined below) and our Revolving Credit Facility.

Current wording

In the three months ended June 30, 2024, we incurred interest expense of $42.4 million, as compared to $31.1 million in the three months ended June 30, 2023, a 36% increase. This increase was driven primarily by higher average debt balances driven by the Western Eagle Ford Acquisitions and higher interest rates associated with the issuance of the 2028 Notes, the 2032 Notes and 2033 Notes (as defined below).

Previous wording

Our loss on commodity derivatives during the three months ended March 31, 2024 increased by $255.9 million, or 170%, from a comparable gain during the three months ended March 31, 2023 primarily due to changes in commodity prices relative to our strike price.

Current wording

We have entered into derivative contracts to manage our exposure to commodity price risks that impact our revenues. Our gain on commodity derivatives during the three months ended June 30, 2024 decreased by $29.5 million, or 88%, from a comparable gain during the three months ended June 30, 2023 primarily due to changes in commodity prices relative to our strike price.

Previous wording

March 31, 2024 and March 31, 2023 we recognized income tax benefit of $4.2 million and expense of $16.4 million, respectively, for an effective tax rate of 11.5% and 6.0%, respectively. Our effective tax rate is lower than the U.S. federal statutory income tax rate of 21% primarily due to effects of removing income and losses related to our noncontrolling interests and redeemable noncontrolling interests.

Current wording

We are a corporation that is subject to U.S. federal and state income taxes on our allocable share of any taxable income from OpCo. OpCo is a partnership and is generally not subject to U.S. federal and certain state taxes. For the three months ended June 30, 2024 and June 30, 2023, we recognized income tax expense of $11.5 million and $9.2 million, respectively, for an effective tax rate of 14.1% and 13.8%, respectively. Our effective tax rate is lower than the U.S. federal statutory income tax rate of 21% primarily due to effects of removing income and losses related to our noncontrolling interests and redeemable noncontrolling interests.

Previous wording

Adjusted EBITDAX (non-GAAP) increased by $81.3 million, or 35%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily driven by higher realized oil price and additional production generated by the Western Eagle Ford Acquisitions.

Current wording

Adjusted EBITDAX (non-GAAP) increased by $95.1 million, or 42%, in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily driven by higher realized oil prices and additional production generated by the Western Eagle Ford Acquisitions.

Previous wording

Levered Free Cash Flow (non-GAAP) increased by $64.6 million, or 4,314%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by our increased Adjusted EBITDAX and $8.4 million of decreased capital expenditures.

Current wording

Levered Free Cash Flow (non-GAAP) increased by $100.9 million, or 220%, in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily driven by our increased Adjusted EBITDAX and $28.0 million of decreased capital expenditures.

Previous wording

Oil revenue. Oil revenue increased $101.6 million, or 27%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This was driven by a $75.8 million increase in sales volume (11 MBbls/d or 19%) and higher realized oil prices that resulted in an increase of $25.8 million (an increase of 6% per Bbl). The increase in sales volumes is primarily driven by our Western Eagle Ford Acquisitions, while the increase in realized prices is primarily due to improved oil realizations.

Current wording

Oil revenue. Oil revenue increased $207.9 million, or 27%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. This was driven by a $129.0 million increase in sales volume (10 MBbls/d or 16%) and higher realized oil prices that resulted in an increase of $78.9 million (an increase of 9% per Bbl). The increase in sales volumes is primarily driven by our Western Eagle Ford Acquisitions, while the increase in realized prices is due to improved oil realizations and higher index prices.

Previous wording

Natural gas revenue. Natural gas revenue decreased $82.1 million, or 51% in the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This was driven by lower natural gas prices that resulted in a decrease of $108.6 million (a decrease of 58% per Mcf), partially offset by a $26.5 million increase in sales volume (52 MMcf/d, or 15%). In addition to decreased commodity prices, during the first quarter of 2023, our access to west coast natural gas pricing markets enabled us to realize a significant premium to Henry Hub for a portion of our natural gas volumes; however, west coast market pricing was normalized during the first quarter of 2024, and we did not realize the same pricing premium. The increase in sales volumes is primarily due to our Western Eagle Ford Acquisitions.

Current wording

Natural gas revenue. Natural gas revenue decreased $82.9 million, or 39% in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. This was driven by lower natural gas prices that resulted in a decrease of $112.2 million (a decrease of 46% per Mcf), partially offset by a $29.3 million increase in sales volume (45 MMcf/d, or 13%). The increase in sales volumes was primarily due to our Western Eagle Ford Acquisitions while the decrease in realized prices is due to lower gas realizations and lower index prices.

Previous wording

(i)Lease and asset operating expense increased $8.9 million, or 6%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, and decreased $1.72 per Boe, or 14% to $10.74 per Boe. This $8.9 million increase was driven primarily by higher production from our Western Eagle Ford Acquisitions, partially offset by lower cost residue gas purchases in the first quarter of 2024. During the first quarter of 2023, we experienced higher cost residue gas purchases related to increased natural gas prices in the west coast pricing market. This higher cost residue gas was more than offset by higher realized pricing during the period.

Current wording

(i)Lease and asset operating expense increased $29.3 million, or 10%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and decreased $0.95 per Boe, or 8%, to $10.36 per Boe. This $29.3 million increase was driven primarily by higher production from our Western Eagle Ford Acquisitions, partially offset by lower cost residue gas purchases in the first quarter of 2024. During the first quarter of 2023, we experienced higher cost residue gas purchases related to increased natural gas prices in the west coast pricing market. This higher cost residue gas was more than offset by higher realized pricing during the period.

Previous wording

(iii)Production and other taxes decreased $22.4 million, or 41%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, and decreased $2.31 per Boe, or 52%, to $2.16 per Boe. This decrease was driven primarily by the lower natural gas revenues and increased gathering, transportation and marketing expense, which decreased the tax base upon which our production and other taxes are calculated.

Current wording

(iii)Production and other taxes decreased $16.2 million, or 20%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023 and decreased $1.08 per Boe, or 34%, to $2.12 per Boe. This decrease was driven primarily by lower natural gas revenues and increased gathering, transportation and marketing expense, which decreased the tax base on which a portion of our production and other taxes are calculated.

Previous wording

(iv)Workover expense decreased $0.3 million, or 2%, in the three months ended March 31, 2024, compared to the three months ended March 31, 2023, and decreased $0.20 per Boe, or 20%, to $0.82 per Boe. This decrease was primarily caused by lower commodity price related activity.

Current wording

(iv)Workover expense decreased $1.4 million, or 4%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and decreased $0.26 per Boe, or 21%, to $0.99 per Boe. This decrease was primarily caused by lower natural gas prices and related reduced activity.

Previous wording

General and administrative expense. General and administrative expense ("G&A") increased $21.5 million, or 101%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily driven by (i) an increase in non-cash equity-based compensation expense of $20.6 million (includes additional catch up expense of $14.1 million due to change in estimate) and (ii) $0.7 million lower transaction and nonrecurring related expenses, offset by higher recurring G&A including higher expense payable under the Management Agreement with KKR Energy Assets Manager LLC, which is the pro-rata portion of the Manager Compensation borne by us. The increase in Manager Compensation and our non-cash equity-based compensation expense is due to an increase in public ownership of Class A Common Stock as a result of (i) our equity issuance in 2023 that increased public shares outstanding and also increased the annual Manager Compensation by $2.2 million to $55.5 million annually, and (ii) share redemptions for our Class A Common Stock completed in the first quarter of 2024 and throughout 2023, which does not increase the overall Manager Compensation, but does increase the portion of Manager Compensation borne by us. While only the portion of the Manager Compensation borne by us impacts our consolidated statements of operations, we include the full Manager Compensation in the calculation of Adjusted EBITDAX and Levered Free Cash Flow (the difference between the Manager Compensation and the amount presented in G&A is represented by “Certain-redeemable noncontrolling interest distributions made by OpCo related to Manager Compensation”).

Current wording

General and administrative expense. G&A expense increased $27.5 million, or 44%, for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily driven by (i) an increase in non-cash equity-based compensation expense of $15.3 million (2024 and 2023 include additional catch up expense of $21.1 million and $18.0 million due to changes in estimates) and (ii) $5.9 million higher transaction and nonrecurring related expenses and higher recurring G&A including higher expense payable under the Management Agreement with KKR Energy Assets Manager LLC, which is the pro-rata portion of the Manager Compensation borne by us. The increase in Manager Compensation and our non-cash equity-based compensation expense is due to an increase in public ownership of Class A Common Stock as a result of (i) our equity issuance in 2023 that increased public shares outstanding and also increased the annual Manager Compensation by $2.2 million to $55.5 million annually, and (ii) share redemptions for our Class A Common Stock completed in the first quarter of 2024 and throughout 2023, which does not increase the overall Manager Compensation, but does increase the portion of Manager Compensation borne by us. While only the portion of Manager Compensation borne by us impacts our consolidated statements of operations, we include the full Manager Compensation in the calculation of Adjusted EBITDAX and Levered Free Cash Flow (the difference between the Manager Compensation and the amount presented in G&A is represented by “Certain-redeemable noncontrolling interest distributions made by OpCo related to Manager Compensation”).

Previous wording

During the three months ended March 31, 2024, we incurred a loss on the extinguishment of our 2026 Notes of $22.6 million related to the $14.8 million premium and interest paid for the Tender Offer and Redemption of the 2026 Notes and $7.8 million related to the write-off of outstanding deferred finance costs related to the 2026 Notes.

Current wording

During the six months ended June 30, 2024, we incurred a loss on the extinguishment of our 2026 Notes of $22.6 million related to the $14.8 million premium and interest paid for the Tender Offer and Redemption of the 2026 Notes and $7.8 million related to the write-off of outstanding deferred finance costs related to the 2026 Notes.

Previous wording

We are a corporation that is subject to U.S. federal and state income taxes on our allocable share of any taxable income from OpCo. OpCo is a partnership and is generally not subject to U.S. federal and certain state taxes. For the three months ended

Current wording

We are a corporation that is subject to U.S. federal and state income taxes on our allocable share of any taxable income from OpCo. OpCo is a partnership and is generally not subject to U.S. federal and certain state taxes. For the six months ended June 30, 2024 and June 30, 2023, we recognized income tax expense of $7.3 million and expense of $25.5 million, respectively, for an effective tax rate of 16.2% and 7.5%, respectively. Our effective tax rate is lower than the U.S. federal statutory income tax rate of 21% primarily due to effects of removing income and losses related to our noncontrolling interests and redeemable noncontrolling interests.

Previous wording

Net cash provided by operating activities. Net cash provided by operating activities for the three months ended March 31, 2024 decreased by $56.3 million, or 23%, compared to the three months ended March 31, 2023 primarily due to working capital changes.

Current wording

Net cash provided by operating activities. Net cash provided by operating activities for the six months ended June 30, 2024 increased by $47.1 million, or 11%, compared to the six months ended June 30, 2023 primarily due to higher net income after adjusting for non-cash items, partially offset by working capital changes.

Previous wording

Net cash used in investing activities. Net cash used in investing activities for the three months ended March 31, 2024 decreased by $37.7 million, or 19%, compared to the three months ended March 31, 2023, primarily due to a $53.7 million reduction in our cash development capital expenditures, partially offset by $8.2 million of additional acquisitions of oil and natural gas properties in 2024.

Current wording

Net cash used in investing activities. Net cash used in investing activities for the six months ended June 30, 2024 decreased by $88.4 million, or 24%, compared to the six months ended June 30, 2023, primarily due to $94.7 million reduction in our cash development capital expenditures, partially offset by $4.5 million of additional acquisitions of oil and natural gas properties in 2024.

Previous wording

Net cash (used in) provided by financing activities. Net cash used in financing activities for the three months ended March 31, 2024 was $23.9 million, primarily a result of the repurchase of OpCo Units and our distributions, partially offset by net cash received in our debt transactions and Revolving Credit Facility borrowings. Net cash used in financing activities for the three months ended March 31, 2023, was $43.7 million, driven by $29.7 million in distributions to redeemable noncontrolling interests and $8.2 million in dividends to holders of our Class A Common Stock.

Current wording

Net cash provided by financing activities. Net cash provided by financing activities for the six months ended June 30, 2024 was $594.5 million, primarily a result of net cash received in our debt transactions, partially offset by the repurchase of OpCo Units, our redeemable noncontrolling interests distributions and our Class A Common Stock dividend. Net cash provided by financing activities for the six months ended June 30, 2023 was $12.0 million, driven by net cash received in our debt transactions, offset by distributions to redeemable noncontrolling interests and our Class A Common Stock dividends.

Previous wording

In March 2024, we issued $700.0 million aggregate principal amount of the 2032 Notes at par. The 2032 Notes bear interest at an annual rate of 7.625%, which is payable on April 1 and October 1 of each year, and mature on April 1, 2032. The proceeds from the 2032 Notes Offering were approximately $686.2 million, after deducting the initial purchasers' discount and offering expenses. We used the net proceeds and additional borrowing under our Revolving Credit Facility to finance the consideration of the Tender Offer and Redemption of all of the aggregate principal amount of the 2026 Notes outstanding for $714.8 million after including extinguishment costs, as discussed further below.

Current wording

In March 2024, we issued $700.0 million aggregate principal amount of 7.625% senior notes due 2032 (the "2032 Notes") at par (the “2032 Notes Offering”). The proceeds from the 2032 Notes Offering were approximately $686.2 million, after deducting the initial purchasers' discount and offering expenses. We used the net proceeds and additional borrowing under our Revolving Credit Facility to finance the consideration of the Tender Offer and Redemption (each term as defined below) of all of the aggregate principal amount of the 2026 Notes outstanding for $714.8 million after including extinguishment costs, as discussed further below.

Previous wording

We may, at our option, redeem all or a portion of the 2032 Notes at any time on or after April 1, 2027 at certain redemption prices. We may also redeem up to 40% of the aggregate principal amount of the 2032 Notes before April 1, 2027 with an amount of cash not greater than the net proceeds that we raise in certain equity offerings at a redemption price equal to 107.625% of the principal amount of the 2032 Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding the redemption date. In addition, prior to April 1, 2027, we may redeem some or all of the 2032 Notes at a price equal to 100% of the principal amount thereof, plus a “make-whole” premium, plus accrued and unpaid interest, if any, to, but excluding the redemption date.

Current wording

The 2032 Notes bear interest at an annual rate of 7.625%, which is payable on April 1 and October 1 of each year, and mature on April 1, 2032. We may, at our option, redeem all or a portion of the 2032 Notes at any time on or after April 1, 2027 at certain redemption prices. We may also redeem up to 40% of the aggregate principal amount of the 2032 Notes before April 1, 2027 with an amount of cash not greater than the net proceeds that we raise in certain equity offerings at a redemption price equal to 107.625% of the principal amount of the 2032 Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding the redemption date. In addition, prior to April 1, 2027, we may redeem some or all of the 2032 Notes at a price equal to 100% of the principal amount thereof, plus a “make-whole” premium, plus accrued and unpaid interest, if any, to, but excluding the redemption date.

Previous wording

In February 2023, we issued $400.0 million aggregate principal amount of 9.250% senior notes due 2028 (the "2028 Notes"). In July 2023, we issued an additional $300.0 million aggregate principal amount of 2028 Notes at 98.000% of par. In September 2023, we issued an additional $150.0 million aggregate principal amount of 2028 Notes at 101.125% of par. In December 2023, we issued an additional $150.0 million aggregate principal amount of 2028 Notes at 102.125% of par. The aggregate proceeds from the offerings of the 2028 Notes were $977.4 million, after adjusting for discounts, premiums and offering expenses, but excluding accrued interest payable by purchasers of the 2028 Notes. We used the aggregate proceeds to repay a portion of our outstanding balance under our Revolving Credit Facility (as defined herein) and to fund a portion of the Western Eagle Ford Acquisitions.

Current wording

In February 2023, we issued $400.0 million aggregate principal amount of 9.250% senior notes due 2028 (the "2028 Notes") at par. In July 2023, we issued an additional $300.0 million, aggregate principal amount of 2028 Notes at 98.000% of par. In September 2023, we issued an additional $150.0 million aggregate principal amount of 2028 Notes at 101.125% of par. In December 2023, we issued an additional $150.0 million aggregate principal amount of 2028 Notes at 102.125% of par. The aggregate proceeds from the offerings of the 2028 Notes were $977.4 million, after adjusting for discounts, premiums and offering expenses, but excluding accrued interest payable by purchasers of the 2028 Notes. We used the aggregate net proceeds to repay a portion of our outstanding balance under our Revolving Credit Facility (as defined herein) and to fund a portion of the Western Eagle Ford Acquisitions.

Previous wording

At December 31, 2023 we had $700.0 million outstanding aggregate principal amount of 7.250% senior notes due 2026 (the "2026 Notes") that were subject to the indenture dated May 6, 2021, as supplemented to the date hereof, between us and our trustee (the "2021 Indenture"). In March 2024, pursuant to a cash tender offer (the "Tender Offer") and redemption of any remaining 2026 Notes following the Tender Offer (the "Redemption"), we extinguished all of our 2026 Notes. After the Tender Offer and the Redemption, the 2021 Indenture was satisfied and discharged on March 26, 2024, and we have no further obligations under the 2021 Indenture at March 31, 2024. We repurchased all of the 2026 Notes at a blended price of 101.857% of par and thus incurred a Loss on the extinguishment of debt of$22.6 million, including the write-off of our remaining deferred financing costs.

Current wording

At December 31, 2023 we had $700.0 million outstanding aggregate principal amount of 7.250% senior notes due 2026 (the "2026 Notes") that were subject to the indenture dated May 6, 2021, as supplemented to the date hereof, between us and our trustee (the "2021 Indenture"). In March 2024, pursuant to a cash tender offer (the "Tender Offer") and redemption of any remaining 2026 Notes following the Tender Offer (the "Redemption"), we extinguished all of our 2026 Notes. After the Tender Offer and the Redemption, the 2021 Indenture was satisfied and discharged on March 26, 2024, and we have no further obligations under the 2021 Indenture at March 31, 2024. We repurchased all of the 2026 Notes at a blended price of 101.857% of par and thus incurred a Loss on the extinguishment of debt of $22.6 million, including the write-off of our remaining deferred financing costs.

Previous wording

After the completion of the Tender Offer and Redemption, the 2028 Notes and 2032 Notes (collectively, the "Senior Notes") are our senior unsecured obligations, and the notes and the guarantees issued in connection with the issuance of the Senior Notes rank equally in right of payment with the borrowings under the Revolving Credit Facility and all other future senior indebtedness and senior to any future subordinated indebtedness. The Senior Notes are guaranteed on a senior unsecured basis by each of our existing and future subsidiaries that guarantee the Revolving Credit Facility. The Senior Notes and the guarantees are effectively subordinated to all of our secured indebtedness (including all borrowings and other obligations under the Revolving Credit Facility) to the extent of the value of the collateral securing such indebtedness, and structurally subordinated in right of payment to all existing and future indebtedness and other liabilities (including trade payables) of any future subsidiaries that do not guarantee the Senior Notes. Under each of the indentures governing the Senior Notes, Crescent Finance may issue additional notes that will be treated as a single series and vote together as a single class and have substantially identical terms and conditions.

Current wording

After the completion of the Tender Offer and Redemption, the 2028 Notes, the 2032 Notes and 2033 Notes (collectively, the "Senior Notes") are our senior unsecured obligations and the notes and the guarantees issued in connection with the issuance of the Senior Notes rank equally in right of payment with the borrowings under our Revolving Credit Facility and any of our other future senior indebtedness and senior to any of our future subordinated indebtedness. The Senior Notes are guaranteed on a senior unsecured basis by each of our existing and future subsidiaries that will guarantee our Revolving Credit Facility. The Senior Notes and the guarantees are effectively subordinated to all of our secured indebtedness (including all borrowings and other obligations under our Revolving Credit Facility) to the extent of the value of the collateral securing such indebtedness and structurally subordinated in right of payment to all existing and future indebtedness and other liabilities (including trade payables) of any future subsidiaries that do not guarantee the Senior Notes. Under each of the indentures governing the Senior Notes, Crescent Finance may issue additional notes that will be treated as a single series and vote together as a single class and have substantially identical terms and conditions.