Crescent Energy Co

Previous wording

Management's Discussion and Analysis of Financial Condition and Results of Operations 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 the Combined and Consolidated Financial Statements and related Notes included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report and also with "Part I., Item 1A. Risk Factors" of this Annual Report. 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 years ended December 31, 2023 and 2022. Refer to our 2022 Annual Report filed March 7, 2023 for discussion and analysis of the changes in results of operations between the years ended December 31, 2022 and 2021. 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 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 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 the Consolidated Financial Statements and related Notes included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report and also with "Part I., Item 1A. Risk Factors" of this Annual Report. 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 years ended December 31, 2024 and 2023. Refer to our 2023 Annual Report filed March 4, 2024 for discussion and analysis of the changes in results of operations between the years ended December 31, 2023 and 2022. 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 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.

Previous wording

We are 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 low-risk, 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. Our Class A Common Stock trades on the NYSE under the symbol “CRGY.”

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 in the Middle East, supply chain constraints and rising interest rates and costs of capital. Furthermore, the United States experienced a significant inflationary environment in 2022 that, along with international geopolitical risks, has contributed to concerns of a potential recession that has caused oil and gas prices to retreat from their earlier highs in 2022 and has created further volatility. In 2023, OPEC announced production cuts to reduce the global oil supply. 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 Lebanon and Yemen), supply chain constraints, elevated interest rates and costs of capital and political and regulatory uncertainties, including any proposed tariffs. Furthermore, the United States has experienced, and may continue 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 the United States in 2025 that has created further volatility. In December 2024, OPEC announced an extension of its production cuts of approximately 2.2 million barrels per day through the end of March 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. These 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, and 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 and our operations—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."

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 through 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. The U.S. Federal Reserve made cuts to benchmark interest rates in 2024 and it is currently anticipated that it will make additional cuts; however, there is no guarantee that such additional cuts will occur. 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."

Previous wording

In August 2022, the IRA 2022 was signed into law. The IRA 2022 contains hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions. These incentives could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could decrease demand for the oil and gas we produce and consequently materially and adversely affect our business and results of operations. In addition, the IRA 2022 imposes a federal fee on the emission of greenhouse gases through a methane emissions charge, including onshore petroleum and natural gas production. The methane emissions charge is expected to be collected in 2025 based on calendar year 2024 emissions and the fee is based on certain thresholds established in the IRA 2022. The methane emissions charge could increase our operating costs and adversely affect our business and results of operations. See "Part I., Item 1A. Risk Factors" for additional information. Finally, the IRA 2022 includes a new corporate alternative minimum tax of 15% on the adjusted financial statement income ("AFSI") of corporations with average AFSI exceeding $1.0 billion over a three-year period. We do not believe that the corporate alternative minimum tax will have a material impact on our near-term taxes.

Current wording

In August 2022, the Inflation Reduction Act of 2022 (“IRA 2022”) was signed into law. The IRA 2022 contains hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions. These incentives could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could decrease demand for the oil and gas we produce and consequently materially and adversely affect our business and results of operations. In addition, the IRA 2022 imposes a federal fee on the emission of greenhouse gases through a methane emissions charge, including onshore petroleum and natural gas production. The methane emissions charge is expected to be collected in 2025 based on calendar year 2024 emissions and the fee is based on certain thresholds established in the IRA 2022. The methane emissions charge could increase our operating costs and adversely affect our business and results of operations. See Part II, Item 1A. Risk Factors for additional information. The IRA 2022 also imposes a 1% U.S. federal excise tax on certain repurchases of stock by publicly traded U.S. corporations, such as Crescent, after December 31, 2022.

Previous wording

During 2023, an affiliate of KKR redeemed approximately 30.6 million OpCo Units in the aggregate (and we cancelled a corresponding number of shares of Class B Common Stock) for an equivalent number of shares of Class A Common Stock (the "2023 Class A Conversions"). Approximately 27.6 million of those shares of Class A Common Stock were distributed to certain of its legacy investors in privately-managed funds and accounts. The remaining 3.0 million shares of Class A Common Stock were sold at a price per share of $10.90, pursuant to Rule 144, through a broker-dealer. We did not receive any proceeds or incur any material expenses associated with the Class A Conversions.

Current wording

During 2023, an affiliate of KKR exercised its redemption right with respect to approximately 30.6 million OpCo Units, and such OpCo Units were exchanged for an equivalent number of shares of Class A Common Stock and a corresponding number of shares of Class B Common Stock were cancelled (the "2023 Class A Redemption"). Approximately 27.6 million of those shares of Class A Common Stock were subsequently distributed to certain of its legacy investors in privately-managed funds and accounts. The remaining 3.0 million shares of Class A Common Stock were subsequently sold by affiliates of KKR at a price per share of $10.90, pursuant to Rule 144, through a broker-dealer. We did not receive any proceeds or incur any material expenses associated with the 2023 Class A Redemption.

Previous wording

In September 2023, we conducted an underwritten public offering of 12.7 million shares of Class A Common Stock at a price to the public of $12.25 per share (not including underwriter discounts and commissions). This included 1.7 million shares of Class A Common Stock that were issued upon the underwriters exercise of their 30-day option to purchase additional shares to cover over-allotments pursuant to the related underwriting agreement. We received net proceeds of $145.7 million from the Equity Issuance, after deducting underwriting fees and expenses.

Current wording

In September 2023, we conducted an underwritten public offering of 12.7 million shares of Class A Common Stock at a price to the public of $12.25 per share (not including underwriter discounts and commissions). This included 1.7 million shares of Class A Common Stock that were issued upon the underwriters exercise of their 30-day option to purchase additional shares to cover over-allotments pursuant to the related underwriting agreement. We received net proceeds of $145.7 million from the Equity Issuance (the "2023 Equity Issuance," and together with the 2024 Equity Issuance, the "Equity Issuances"), after deducting underwriting fees and expenses.

Previous wording

We seek to strategically improve assets we own and acquire to deliver enhanced financial returns, operations and stewardship. We believe that being a responsible operator will produce better outcome, creating a net benefit for society and the environment, while delivering attractive returns for our investors. We view exceptional sustainability performance as an opportunity to differentiate Crescent from its peers, mitigate risks and strengthen operational performance as well as benefit our stakeholders and the communities in which we operate.

Current wording

We seek to strategically improve assets we own and acquire to deliver enhanced financial returns, operations and stewardship. We believe that being a responsible operator will produce better outcomes, creating a net benefit for society and the environment, while delivering attractive returns for our investors. We view exceptional sustainability performance as an opportunity to differentiate Crescent from its peers, mitigate risks and strengthen operational performance as well as benefit our stakeholders and the communities in which we operate.

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 exports 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. However, please note that the contents of this Sustainability Report, and other materials on our website, are not incorporated into this Annual Report by reference.

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, 2023 and 2024 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 exports across key sustainability topics, to advise management and our Board of Directors on sustainability-related issues. See additional materials on our website at www.crescentenergyco.com/sustainability. However, please note that the contents and other materials on our website in general, are not intended or deemed to be incorporated into this Annual Report by reference.

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 - $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 primarily 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 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, 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 2025 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, 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 4% or less of our total revenues for each of the years ended December 31, 2023, 2022 and 2021.

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 5% or less of our total revenues for each of the years ended December 31, 2024, 2023 and 2022.

Previous wording

Total sales volume increased 4,146 MBoe during the year ended December 31, 2023 compared to 2022. The increase is primarily due to our Western Eagle Ford Acquisitions and our Uinta Transaction.

Current wording

Total sales volume increased 19,104 MBoe during the year ended December 31, 2024 compared to 2023. The increase is primarily due to the SilverBow Merger and our Western Eagle Ford Acquisitions, which closed in the second half of 2023.

Previous wording

The oil and natural gas industry is cyclical and commodity prices can be highly volatile. In recent years, commodity prices have been subject to significant fluctuations, impacted by the COVID-19 pandemic and recovery, Russia’s invasion of Ukraine and the associated sanctions imposed on Russia, the Israel-Hamas conflict, actions taken by OPEC, inflation and increased U.S.

Current wording

The oil and natural gas industry is cyclical and commodity prices can be highly volatile. In recent years, commodity prices have been subject to significant fluctuations, either as a result of the COVID-19 pandemic and recovery, Russia’s invasion of Ukraine and the associated sanctions imposed on Russia, the Israel-Hamas conflict and the broader conflict in the Middle East, actions taken by OPEC, sustained elevated inflation and increased U.S. drilling activity or otherwise. Uncertainty persists regarding OPEC’s actions, increased U.S. drilling, proposed tariffs, inflation and the armed conflicts in Ukraine and the Middle East. Additionally, market concern regarding the health of the global banking sector and any resultant recessionary effects contributed, among other factors, to increased volatility in the price for oil and natural gas.

Previous wording

(1)For the years ended December 31, 2023 and 2022, the realized price excludes $61.5 million and $49.9 million impact from the settlement of acquired derivative contracts, respectively. For the year ended December 31, 2021, the realized price excludes the impact of the settlement of certain of our outstanding derivative oil commodity contracts associated with calendar years 2022 and 2023 for $198.7 million in June 2021.

Current wording

(1)The realized price presented above does not include $60.8 million received from the settlement of acquired oil, gas and NGL derivative contracts for the year ended December 31, 2024. For the years ended December 31, 2023 and 2022, the realized price presented above does not include $61.5 million and $49.9 million paid for the settlement of acquired oil derivative contracts, respectively.

Previous wording

Oil revenue. Oil revenue decreased $218.1 million, or 11%, in 2023 compared to 2022. This decrease was driven by lower realized oil prices that resulted in a decrease of $436.2 million (a decline of 20% per Bbl) and partially offset by a $218.1 million increase from higher sales volumes (7 MBbl/d, or 12%). The increase in sales volumes was primarily driven by our Western Eagle Ford Acquisitions and our Uinta Transaction.

Current wording

Oil revenue. Oil revenue increased $379.5 million, or 22%, in 2024 compared to 2023. This increase was driven by a $407.9 million increase from higher sales volumes (15 MBbl/d, or 22%), partially offset by lower realized oil prices that resulted in a decrease of $28.4 million (a decline of 1% per Bbl). The increase in sales volumes was primarily driven the SilverBow Merger and our Western Eagle Ford Acquisitions, which closed in the second half of 2023. The decrease in realized oil prices was due to lower index prices, which was partially offset by price realizations.

Previous wording

Natural gas revenue. Natural gas revenue decreased $395.9 million, or 52%, in 2023 compared to 2022. This decrease was driven by lower realized natural gas prices that resulted in a decrease of $408.8 million (a decline of 52% per Mcf) and a $12.9 million increase from higher sales volumes (6 MMcf/d, or 2%). The increase in sales volumes was primarily due to our Western Eagle Ford Acquisitions and our Uinta Transaction but these increases were partially offset by natural decline and downtime at a natural gas processing plant in 2023.

Current wording

Natural gas revenue. Natural gas revenue decreased $21.2 million, or 6%, in 2024 compared to 2023. This decrease was driven by lower realized natural gas prices that resulted in a decrease of $170.6 million (a decline of 33% per Mcf), partially offset by a $149.4 million increase from higher sales volumes (143 MMcf/d, or 40%). The increase in sales volumes was primarily due to the SilverBow Merger and our Western Eagle Ford Acquisitions, which closed in the second half of 2023. The decrease in realized natural gas prices was due to lower index prices and associated realizations.

Previous wording

Midstream and other revenue. Midstream and other revenue increased $14.9 million, or 28%, in 2023 compared to 2022, due to additional oil blending revenue in 2023.

Current wording

Midstream and other revenue. Midstream and other revenue increased $66.0 million, or 97%, in 2024 compared to 2023, due to higher oil blending revenues in 2024.

Previous wording

Operating expense. Total operating expense increased $65.0 million, or 6%, in 2023 compared to 2022, driven primarily by the following factors:

Current wording

Operating expense. Total operating expense increased $199.7 million, or 19%, in 2024 compared to 2023, driven primarily by the following factors:

Previous wording

(i)Lease and asset operating expenses increased $64.5 million, or 12%, in 2023 compared to 2022. Additionally, lease and asset operating expense per Boe increased $0.40 per Boe from $10.27 per Boe to $10.67 per Boe. This $64.5 million increase was driven primarily by (i) higher production from our Western Eagle Ford Acquisitions and our Uinta Transaction and (ii) higher-cost residue gas purchases related to increased natural gas prices in the west coast pricing market. Higher cost residue gas was more than offset by higher realized pricing.

Current wording

(i)Lease and asset operating expenses increased $50.1 million, or 9%, in 2024 compared to 2023. Additionally, lease and asset operating expense per Boe decreased $2.09 per Boe from $10.67 per Boe to $8.58 per Boe. This $50.1 million increase was driven primarily by higher production from the SilverBow Merger and Western Eagle Ford Acquisitions, which closed in the second half of 2023, partially offset by cost reduction measures on our other assets. The additional costs from our acquisitions was more than offset on a per Boe basis with the additional volumes and cost reduction measures.

Previous wording

(ii)Gathering, transportation and marketing expense increased $58.1 million, or 33%, in 2023 compared to 2022. Additionally, gathering, transportation and marketing expense per Boe increased $0.80 per Boe from $3.51 per Boe to $4.31 per Boe. This increase was driven primarily by our Western Eagle Ford Acquisitions and our Uinta Transaction.

Current wording

(ii)Gathering, transportation and marketing expense increased $77.8 million, or 33%, in 2024 compared to 2023. However, gathering, transportation and marketing expense per Boe decreased $0.06 per Boe from $4.31 per Boe to $4.25 per Boe. This increase in expense was driven primarily by the SilverBow Merger and our Western Eagle Ford Acquisitions, which closed in the second half of 2023, but was more than offset by the additional volumes from these acquisitions.

Previous wording

(iii)Production and other taxes decreased $75.4 million, or 32%, in 2023 compared to 2022 and decreased $1.74 per Boe, or 37%, to $2.99 per Boe. This decrease was driven primarily by lower oil and natural gas revenues, which decreased the tax base upon which our production and other taxes are calculated.

Current wording

(iii)Production and other taxes decreased $0.3 million, or 0%, in 2024 compared to 2023 and decreased $0.78 per Boe, or 26%, to $2.21 per Boe. This decrease was driven primarily by lower effective tax rates and increased gathering, transportation and marketing expense, which decreased the tax base upon which our production and other taxes are calculated.

Previous wording

(iv)Workover expense decreased $8.4 million in 2023 compared to 2022, and decreased $0.26 per Boe from $1.33 per Boe to $1.07 per Boe. This decrease was primarily caused by lower commodity price related activity.

Current wording

(iv)Workover expense increased $1.9 million in 2024 compared to 2023, and decreased $0.25 per Boe from $1.07 per Boe to $0.82 per Boe. This increase was primarily caused by the SilverBow Merger.

Previous wording

(v)Midstream operating expense increased $26.3 million, or 195%, in 2023 compared to 2022, 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 operating expense increased $70.3 million, or 177%, in 2024 compared to 2023, primarily due to increased crude oil blending expense. The additional crude oil blending expense was more than offset by additional oil blending revenue included as part of our Midstream and other revenue.

Previous wording

Depreciation, depletion and amortization. Depreciation, depletion and amortization increased $142.9 million, or 27%, in 2023 compared to 2022, driven primarily by increased production from our Western Eagle Ford Acquisitions and Uinta Transaction and increased production from new well completions.

Current wording

Depreciation, depletion and amortization. Depreciation, depletion and amortization increased $273.7 million, or 41%, in 2024 compared to 2023, driven primarily by increased production from the SilverBow Merger and our Western Eagle Ford Acquisitions and an increased DD&A rate.

Previous wording

Impairment expense. During the years ended December 31, 2023 and 2022, we evaluated our Oil and natural gas properties, Goodwill and Investments in equity affiliates and determined that certain amounts were impaired. As a result of our evaluations, we recorded impairment charges totaling $153.5 million in 2023, including $149.6 million related to Oil and natural gas properties and $3.9 million related to Investments in equity affiliates, and $142.9 million in 2022, including $77.7 million related to Goodwill and $65.2 million related to Oil and natural gas properties.

Current wording

Impairment expense. During the years ended December 31, 2024 and 2023, we evaluated our Oil and natural gas properties and Investments in equity affiliates and determined that certain amounts were impaired. As a result of our evaluations, during the year ended December 31, 2024, we recorded an impairment expense of $161.5 million related to Oil and natural gas properties that were determined not to be recoverable. During the year ended December 31, 2023, we recorded an impairment expense of $153.5 million, including $149.6 million related to Oil and natural gas properties that were determined not to be recoverable and $3.9 million related to Investments in equity affiliates.

Previous wording

Other operating costs. Other operating costs include exploration expense and gain on sale of assets. Other operating costs increased by $10.5 million compared to 2022, primary driven by a $4.6 million lower gain on sale of assets recognized in 2023, and $5.9 million in higher exploration expenses.

Current wording

Other operating costs. Other operating costs include exploration expense and gain on sale of assets. Other operating costs decreased by $22.2 million compared to 2023, primary driven by a $29.4 million higher gain on sale of assets recognized in 2024, partially offset by $7.3 million in higher exploration expenses.

Previous wording

Interest expense. In 2023, we incurred interest expense of $145.8 million, as compared to $95.9 million in 2022, a 52% increase. The increase was primarily driven by higher average debt balances driven by the Western Eagle Ford Acquisitions and higher interest rates associated with the issuance of the 2028 Notes and our Revolving Credit Facility.

Current wording

Interest expense. In 2024, we incurred interest expense of $216.3 million, as compared to $145.8 million in 2023, a 48% increase. The increase was primarily driven by higher average debt balances driven by the SilverBow Merger and the Western Eagle Ford Acquisitions.

Previous wording

Our gain on commodity derivatives during 2023, changed by $843.9 million, or 125%, from a loss during 2022 primarily due to changes in commodity prices relative to our strike price.

Current wording

Gain (loss) on derivatives. We have entered into derivative contracts to manage our exposure to commodity price risks that impact our revenue. Our loss on commodity derivatives during 2024, changed by $281.3 million, or 168%, from a gain during 2023 primarily due to changes in commodity prices relative to our strike price.

Previous wording

For the years ended December 31, 2023 and 2022 we recognized income tax expense of $23.2 million and $36.3 million, respectively, for an effective tax rate of 6.7% and 7.0%, 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. Our effective tax rate decreased in 2023 due to additional permanent items and an increased valuation allowance in 2022 offset by the increase to our ownership of OpCo in 2023.

Current wording

Income tax benefit (expense). For the years ended December 31, 2024 and 2023 we recognized income tax benefit of $31.1 million and $23.2 million, respectively, for an effective tax rate of 18.4% and 6.7%, respectively. Our effective tax rate is typically 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. Our effective tax rate increased in 2024 primarily due to our increased ownership of OpCo in 2024 and a corresponding decrease in the amount of income attributed to our noncontrolling and redeemable noncontrolling interests.

Previous wording

The following tables present reconciliations of Adjusted EBITDAX (non-GAAP) and Levered Free Cash Flow (non-GAAP) to net income (loss), and Levered Free Cash Flow (non-GAAP) to Net cash provided by operating activities, the most directly comparable financial measures calculated in accordance with GAAP:

Current wording

The following tables present reconciliations of Adjusted EBITDAX (non-GAAP) and Levered Free Cash Flow (non-GAAP) to net income (loss), and Levered Free Cash Flow (non-GAAP) to Net cash provided by operating activities, the most directly comparable financial measures, respectively, calculated in accordance with GAAP:

Previous wording

(1)Transaction and nonrecurring expenses of $22.6 million during the year ended December 31, 2023 were primarily related to the Western Eagle Ford Acquisitions and the Merger Transactions. Transaction and nonrecurring expenses of $34.1 million for the year ended December 31, 2022 were primarily related to (i) legal, consulting, transition service agreement costs, related restructuring of acquired derivative contracts and other fees incurred for the Uinta Transaction and Merger Transactions, (ii) severance costs subsequent to the Merger Transactions, (iii) merger integration costs and (iv) acquisition and debt transaction related costs.

Current wording

(2)Transaction and nonrecurring expenses of $82.5 million during the year ended December 31, 2024 were primarily related to the SilverBow Merger, capital markets transactions and integration expenses. Transaction and nonrecurring expenses of $22.6 million for the year ended December 31, 2023 were primarily related to the Western Eagle Ford Acquisitions and system integration expenses.

Previous wording

Adjusted EBITDAX decreased by $144.5 million or 12% in 2023, compared to 2022, driven primarily by lower realized prices, partially offset by additional production and Adjusted EBITDAX generated by the Western Eagle Ford Acquisitions and the Uinta Transaction.

Current wording

Adjusted EBITDAX (non-GAAP) increased by $575.6 million or 56% in 2024, compared to 2023, driven primarily by additional production generated by the SilverBow Merger and our Western Eagle Ford Acquisitions, which closed in the second half of 2023.

Previous wording

Based on our planned capital spending, our forecasted cash flows and projected levels of indebtedness, we expect to maintain compliance with the covenants under our debt agreements. Further, based on current market indications, we expect to meet in the ordinary course of business other contractual cash commitments to third parties pursuant to the various agreements subsequently described under the heading “Contractual obligations,”recognizing we may be required to meet such commitments even if our business plan assumptions were to change.

Current wording

In connection with the closing of the Ridgemar Acquisition in the first quarter of 2025, we paid in total $819 million in cash to former Ridgemar owners after customary purchase price adjustments. We funded the cash to close, less the initial deposit, with cash on hand and borrowings under our Revolving Credit Facility. Based on our planned capital spending, our forecasted cash flows and projected levels of indebtedness, we expect to maintain compliance with the covenants under our debt agreements. Further, based on current market indications, we expect to meet in the ordinary course of business other contractual cash commitments to third parties pursuant to the various agreements subsequently described under the heading “Contractual obligations,”recognizing we may be required to meet such commitments even if our business plan assumptions were to change.

Previous wording

Net cash provided by operating activities. Net cash provided by operating activities for the year ended December 31, 2023 decreased by $76.6 million, or 8%, compared to 2022, primarily due to lower realized pricing partially offset by working capital changes. In addition, net cash provided by operating activity for the year ended December 31, 2022, was impacted by a $52.0 million restructuring of certain oil commodity derivative contracts acquired in connection with the Uinta Transaction.

Current wording

Net cash provided by operating activities. Net cash provided by operating activities for the year ended December 31, 2024 increased by $287.3 million, or 31%, compared to 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 year ended December 31, 2023 increased by $274.5 million, or 24%, compared to 2022. Our Acquisitions of oil and gas properties of $849.3 million in 2023 was driven primarily by our Western Eagle Ford Acquisitions while the 2022 acquisitions of $626.6 million was driven by the Uinta Transaction. Our cash expenditures related to the Development of oil and natural gas properties decreased by $11.4 million, and we had $64.3 million lower proceeds from the sale of oil and natural gas properties.

Current wording

Net cash used in investing activities. Net cash used in investing activities for the year ended December 31, 2024 decreased by $200.5 million, or 14%, compared to 2023. Our Acquisitions of oil and gas properties on the consolidated statements of cash flows of $558.6 million in 2024 was driven primarily by the SilverBow Merger, the Central Eagle Ford Acquisition and Eagle Ford Minerals Acquisition, while the 2023 acquisitions of $849.3 million was driven by our Western Eagle Ford Acquisitions. Our cash expenditures related to the Development of oil and natural gas properties on the consolidated statements of cash flows increased by $104.3 million, and we had $25.8 million higher proceeds from the sale of oil and natural gas properties.

Previous wording

We may, at our option, redeem all or a portion of the 2028 Notes at any time on or after February 15, 2025 at certain redemption prices. We may also redeem up to 40% of the aggregate principal amount of the 2028 Notes before February 15, 2025 with an amount of cash not greater than the net proceeds that we raise in certain equity offerings at a redemption price equal to 109.250% of the principal amount of the 2028 Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding the redemption date. In addition, prior to February 15, 2025, we may redeem some or all of the 2028 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

On February 1, 2023, we issued $400.0 million aggregate principal amount of the Original 2028 Notes at par. In July 2023 we issued an additional $300.0 million aggregate principal amount of the July 2028 Notes at 98.000% of par, in September 2023 we issued an additional $150.0 million aggregate principal amount of the September 2028 Notes at 101.125% of par, and in December 2023 we issued an additional $150.0 million aggregate principal amount of the December 2028 Notes at 102.125% of par. These four issuances ofthe 2028 Notes aretreated as a single series of securities under the indenture governing the Original 2028 Notes, will vote together as a single class, and have substantially identical terms, other than the issue date and the issue price. The 2028 Notes interest is payable on February 15 and August 15 of each year and mature on February 15, 2028.

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

On May 6, 2021, we issued $500.0 million aggregate principal amount of senior notes due 2026 at par (the "Original 2026 Notes"). In February 2022, we issued an additional $200.0 million aggregate principal amount of our senior notes due 2026 at 101% of par (the "Additional 2026 Notes" and, together with the Original 2026 Notes, the "2026 Notes"). Both issuances of the 2026 Notes are treated as a single series and vote together as a single class, and have identical terms and conditions, other than the issue date, the issue price and the first interest payment. The 2026 Notes bear interest at an annual rate of 7.250%, which is payable on May 1 and November 1 of each year and mature on May 1, 2026.

Current wording

All issuances of the 2028 Notes are treated as a single series of securities under the indenture governing the 2028 Notes, will vote together as a single class, and have substantially identical terms, other than the issue date, the issue price, and the first interest payment date.

Previous wording

The Senior Notes are our senior unsecured obligations and the Senior Notes and the related guarantees rank equally in right of payment with the borrowings under the 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 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.

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 Senior Notes and the related guarantees 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.