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What changed in Crescent Energy Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Crescent Energy Co's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+315 added−342 removedSource: 10-K (2024-03-04) vs 10-K (2023-03-07)

Top changes in Crescent Energy Co's 2023 10-K

315 paragraphs added · 342 removed · 255 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

131 edited+13 added−17 removed390 unchanged
Biggest changeFor example, in connection with our annual goodwill impairment test, we recorded impairment charges of $142.9 million, including $77.7 million related to Goodwill and $65.2 million related to Oil and natural gas properties that were determined to not be recoverable, for the year ended December 31, 2022.
Biggest changeFor example, 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, and during the year ended December 31, 2022, in connection with our annual goodwill impairment test, we recorded impairment charges of $142.9 million, including $77.7 million related to Goodwill and $65.2 million related to Oil and natural gas properties that were determined to not be recoverable.
Our access to transportation options can also be affected by U.S. federal and state regulation of oil and natural gas production and transportation, general economic conditions and changes in supply and demand.
Our access to transportation options can also be affected by U.S. federal and state regulation of oil and natural gas production and transportation, general economic conditions and changes in supply and demand.
Our only principal asset is our interest in OpCo; accordingly, we will depend on distributions from OpCo to pay taxes, make payments under the Management Agreement and cover our corporate and other overhead expenses. We are a holding company and have no material assets other than our ownership interest in OpCo.
Our only principal asset is our interest in OpCo; accordingly, we will depend on distributions and other payments from OpCo to pay taxes, make payments under the Management Agreement and cover our corporate and other overhead expenses. We are a holding company and have no material assets other than our ownership interest in OpCo.
To the extent OpCo has available cash and subject to the terms of any current or future indebtedness agreements, we intend to cause OpCo (i) to make pro rata cash distributions to holders of OpCo Units, including us, in an amount sufficient to allow us to pay our taxes and to make payments under the Management Agreement and (ii) to reimburse us for our corporate and other overhead expenses.
To the extent OpCo has available cash and subject to the terms of any current or future indebtedness agreements, we intend to cause OpCo (i) to make pro rata cash distributions to holders of OpCo Units, including us, in an amount sufficient to allow us to pay our taxes and to make payments under the Management Agreement and (ii) to make payments to us to reimburse us for our corporate and other overhead expenses.
Given its ownership of the our Non-Economic Series I Preferred Stock, the Preferred Stockholder would have to approve any potential acquisition of us.
Given its ownership of our Non-Economic Series I Preferred Stock, the Preferred Stockholder would have to approve any potential acquisition of us.
We believe that this provision, which is intended to provide that certain business opportunities are not subject to the “corporate opportunity” doctrine, is appropriate, as the Preferred Stockholder and its affiliates invest in a wide array of companies, including companies with businesses similar to us.
We believe that this provision, which is intended to provide that certain business opportunities are not subject to the “corporate opportunity” doctrine, is appropriate, as the Preferred Stockholder and its affiliates invest in a wide array of companies, including companies with businesses similar to us.
The cost of our drilling, completion and well operations may increase and/or our results of operations and cash flows from such operations may be impacted, as a result of a variety of factors, including: • unexpected drilling conditions; • title problems; • pressure or irregularities in formations; • equipment failures or accidents; • adverse weather conditions, such as winter storms, fires, flooding and hurricanes, and changes in weather patterns; 42 Table of Contents • compliance with, or changes in, environmental laws and regulations, including the IRA 2022, relating to air emissions, hydraulic fracturing and disposal of produced water, drilling fluids and other wastes, laws and regulations imposing conditions and restrictions on D&C operations and other laws and regulations, such as tax laws and regulations; • the availability and timely issuance of required governmental permits and licenses; and • the availability of, costs associated with and terms of contractual arrangements for properties, including mineral licenses and leases, pipelines, rail cars, crude oil hauling trucks and qualified drivers and related facilities and equipment to gather, process, compress, transport and market oil, natural gas, NGLs and related commodities.
The cost of our drilling, completion and well operations may increase and/or our results of operations and cash flows from such operations may be impacted, as a result of a variety of factors, including: • unexpected drilling conditions; • title problems; • pressure or irregularities in formations; 41 Table of Contents • equipment failures or accidents; • adverse weather conditions, such as winter storms, fires, flooding and hurricanes, and changes in weather patterns; • compliance with, or changes in, environmental laws and regulations, including the IRA 2022, relating to air emissions, hydraulic fracturing and disposal of produced water, drilling fluids and other wastes, laws and regulations imposing conditions and restrictions on D&C operations and other laws and regulations, such as tax laws and regulations; • the availability and timely issuance of required governmental permits and licenses; and • the availability of, costs associated with and terms of contractual arrangements for properties, including mineral licenses and leases, pipelines, rail cars, crude oil hauling trucks and qualified drivers and related facilities and equipment to gather, process, compress, transport and market oil, natural gas, NGLs and related commodities.
Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or its directors, officers, employees or agents.
Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
The amount of cash that our operating subsidiaries can distribute each quarter to their owners principally depends upon the amount of cash they generate from their operations, which will fluctuate from quarter to quarter based on, among other things: • the amount of oil and natural gas our operating subsidiaries produce from existing wells; • market prices of oil, natural gas and NGLs; • any restrictions on the payment of distributions contained in covenants in the Revolving Credit Facility; • our operating subsidiaries’ ability to fund their drilling and development plans; • the levels of investments in each of our operating subsidiaries, which may be limited and disparate; 62 Table of Contents • the levels of operating expenses, maintenance expenses and general and administrative expenses; • regulatory action affecting: (i) the supply of, or demand for, oil, natural gas, and NGLs, and (ii) operating costs and operating flexibility; • prevailing economic conditions; and • adverse weather conditions and natural disasters.
The amount of cash that our operating subsidiaries can distribute each quarter to their owners principally depends upon the amount of cash they generate from their operations, which will fluctuate from quarter to quarter based on, among other things: 61 Table of Contents • the amount of oil and natural gas our operating subsidiaries produce from existing wells; • market prices of oil, natural gas and NGLs; • any restrictions on the payment of distributions contained in covenants in the Revolving Credit Facility; • our operating subsidiaries’ ability to fund their drilling and development plans; • the levels of investments in each of our operating subsidiaries, which may be limited and disparate; • the levels of operating expenses, maintenance expenses and general and administrative expenses; • regulatory action affecting: (i) the supply of, or demand for, oil, natural gas, and NGLs, and (ii) operating costs and operating flexibility; • prevailing economic conditions; and • adverse weather conditions and natural disasters.
If proved reserves are not discovered with an exploratory well, the cost of drilling the well are expensed. The capitalized costs of our oil and natural gas properties, on a depletion pool basis, cannot exceed the estimated undiscounted future net cash flows of that depletion pool.
If proved reserves are not discovered with an exploratory well, the costs of drilling the well are expensed. The capitalized costs of our oil and natural gas properties, on a depletion pool basis, cannot exceed the estimated undiscounted future net cash flows of that depletion pool.
However, with the exception of the Manager, no other member of the KKR Group assumes any responsibility to render services to us or to consider our interests and our stakeholders in making any investment or other decisions. 44 Table of Contents Our certificate of incorporation contains a provision that, to the maximum extent permitted under the law of the State of Delaware, we renounce any interest or expectancy in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to our officers, directors, the Preferred Stockholder or any partner, manager, member, director, officer, stockholder, employee or agent or affiliate of any such holder.
However, with the exception of the Manager, no other member of the KKR Group assumes any responsibility to render services to us or to consider our interests and our stakeholders in making any investment or other decisions. 43 Table of Contents Our certificate of incorporation contains a provision that, to the maximum extent permitted under the law of the State of Delaware, we renounce any interest or expectancy in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to our officers, directors, the Preferred Stockholder or any partner, manager, member, director, officer, stockholder, employee or agent or affiliate of any such holder.
In addition, certain institutions have also undertaken anti-ESG initiatives focused around their view of the politicization of ESG issues. We could face increasing costs as we attempt to comply with and navigate further regulatory ESG-related focus and scrutiny.
In addition, certain institutions have also undertaken anti-ESG initiatives focused around their view of the politicization of ESG issues. We could face increasing costs as we attempt to comply with and navigate further regulatory sustainability-related focus and scrutiny.
Furthermore, the success and timing of development activities operated by our partners will depend on a number of factors that will be largely outside of our control, including: • the timing and amount of capital expenditures; • the operator’s expertise and financial resources; • the approval of other participants in drilling wells; • the selection of technology; and • the rate of production of reserves, if any. 48 Table of Contents This limited ability to exercise control over the operations and associated costs of some of our drilling locations could prevent the realization of targeted returns on capital in development or acquisition activities.
Furthermore, the success and timing of development activities operated by our partners will depend on a number of factors that will be largely outside of our control, including: • the timing and amount of capital expenditures; • the operator’s expertise and financial resources; • the approval of other participants in drilling wells; • the selection of technology; and • the rate of production of reserves, if any. 47 Table of Contents This limited ability to exercise control over the operations and associated costs of some of our drilling locations could prevent the realization of targeted returns on capital in development or acquisition activities.
Although no firm commitment or timeline to phase out or phase down all fossil fuels was made at COP27, there can be no guarantees that countries will not seek to implement such a phase out in the future.
Although no firm commitment or timeline to phase out or phase down all fossil fuels was made at COP27 or COP28, there can be no guarantees that countries will not seek to implement such a phase out in the future.
If additional capital is required, we may not be able to obtain debt and/or equity financing on terms favorable to us, or at all due to rising interest rates and associated policies of the Federal Reserve or otherwise, which could result in a curtailment of our operations relating to development of our prospects, which in turn could lead to a decline in our reserves, production and cash flows, and could adversely affect our business, results of operation, financial conditions and ability to make payments on our outstanding indebtedness.
If additional capital is required, we may not be able to obtain debt and/or equity financing on terms favorable to us, or at all due to elevated interest rates and associated policies of the Federal Reserve or otherwise, which could result in a curtailment of our operations relating to development of our prospects, which in turn could lead to a decline in our reserves, production and cash flows, and could adversely affect our business, results of operation, financial conditions and ability to make payments on our outstanding indebtedness.
The timing of both our production and our incurrence of expenses in connection with the development and production of, and investment in, our oil and natural gas properties will affect the timing and amount of actual future net revenues from proved reserves, and thus their actual present value.
The timing of both our production and expenses in connection with the development and production of, and investment in, our oil and natural gas properties will affect the timing and amount of actual future net revenues from proved reserves, and thus their actual present value.
Business and Properties—Legislative and regulatory environment.” 51 Table of Contents The classification of some of our gathering facilities, transportation pipelines, and purchase and sale transactions as FERC-jurisdictional or non-jurisdictional may be subject to change based on future determinations by FERC, the courts or Congress, in which case, our operating costs could increase and we could be subject to enforcement actions under the EP Act of 2005.
Business and Properties—Legislative and regulatory environment.” 50 Table of Contents The classification of some of our gathering facilities, transportation pipelines, and purchase and sale transactions as FERC-jurisdictional or non-jurisdictional may be subject to change based on future determinations by FERC, the courts or Congress, in which case, our operating costs could increase and we could be subject to enforcement actions under the EP Act of 2005.
Furthermore, public statements with respect to ESG matters, such as emissions reduction goals, other environmental targets, or other commitments addressing certain social issues, are becoming increasingly subject to heightened scrutiny from public and governmental authorities related to the risk of potential “greenwashing,” i.e., misleading information or false claims overstating potential ESG benefits.
Furthermore, public statements with respect to sustainability matters, such as emissions reduction goals, other environmental targets, or other commitments addressing certain social issues, are becoming increasingly subject to heightened scrutiny from public and governmental authorities related to the risk of potential “greenwashing,” i.e., misleading information or false claims overstating potential benefits.
For example, California, through CARB, has implemented a cap and trade program for GHG emissions that sets a statewide maximum limit on covered GHG emissions, and this cap declines annually to reach 40% below 1990 levels by 2030. Covered entities must either reduce their GHG emissions or purchase allowances to 55 Table of Contents account for such emissions.
For example, California, through CARB, has implemented a cap and trade program for GHG emissions that sets a statewide maximum limit on covered GHG emissions, and this cap declines annually to reach 40% below 1990 levels by 2030. Covered entities must either reduce their GHG emissions or purchase allowances to 54 Table of Contents account for such emissions.
For example, in September 2021 the TRC issued a notice to operators in the Midland area to reduce daily injection volumes following multiple earthquakes above a 3.5 magnitude over an 18 month period. The notice also 50 Table of Contents required disposal well operators to provide injection data to TRC staff to further analyze seismicity in the area.
For example, in September 2021 the TRC issued a notice to operators in the Midland area to reduce daily injection volumes following multiple earthquakes above a 3.5 magnitude over an 18 month period. The notice also 49 Table of Contents required disposal well operators to provide injection data to TRC staff to further analyze seismicity in the area.
Cyber security attacks in particular are becoming more sophisticated and include, but are not limited to, installation 66 Table of Contents of malicious software, attempts to gain unauthorized access to data and systems, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.
Cyber security attacks in particular are becoming more sophisticated and include, but are not limited to, installation of malicious software, attempts to gain unauthorized access to data and systems, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and 65 Table of Contents corruption of data.
Also, despite these aspirational goals and any other actions taken, we may receive pressure from investors, lenders, or other groups to adopt more aggressive climate or other ESG-related goals, but we cannot guarantee that we will be able to implement such goals because of potential costs or technical or operational obstacles.
Also, despite these aspirational goals and any other actions taken, we may receive pressure from investors, lenders, or other groups to adopt more aggressive climate or other sustainability-related goals, but we cannot guarantee that we will be able to implement such goals because of potential costs or technical or operational obstacles.
We may be unable to dispose of non-strategic assets on attractive terms and may be required to retain liabilities for certain matters. 67 Table of Contents We regularly review our asset base to assess the market value versus holding value of existing assets with a view to optimizing returns on deployed capital.
We may be unable to dispose of non-strategic assets on attractive terms and may be required to retain liabilities for certain matters. 66 Table of Contents We regularly review our asset base to assess the market value versus holding value of existing assets with a view to optimizing returns on deployed capital.
Increasing attention to climate change, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary ESG disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation, and negative impacts on our stock price and access to capital markets.
Increasing attention to climate change, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary sustainability disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation, and negative impacts on our stock price and access to capital markets.
If its drilling results are less than anticipated, the return on investment for a 47 Table of Contents particular project may not be as attractive as anticipated, and we could incur material write-downs of unevaluated properties and the value of undeveloped acreage could decline in the future.
If its drilling results are less than anticipated, the return on investment for a 46 Table of Contents particular project may not be as attractive as anticipated, and we could incur material write-downs of unevaluated properties and the value of undeveloped acreage could decline in the future.
Moreover, public interest in the protection of the environment has increased dramatically in recent years. The trend of more expansive and stringent environmental legislation and regulations applied to the oil and natural gas industry could continue, 54 Table of Contents resulting in increased costs of doing business and consequently affecting profitability.
Moreover, public interest in the protection of the environment has increased dramatically in recent years. The trend of more expansive and stringent environmental legislation and regulations applied to the oil and natural gas industry could continue, 53 Table of Contents resulting in increased costs of doing business and consequently affecting profitability.
FERC has implemented a simplified and generally applicable ratemaking methodology for interstate oil and NGL pipelines to fulfill the requirements of Title XVIII of the Energy Policy Act of 1992 comprised of an indexing system to 49 Table of Contents establish ceilings on interstate oil and NGL pipeline rates.
FERC has implemented a simplified and generally applicable ratemaking methodology for interstate oil and NGL pipelines to fulfill the requirements of Title XVIII of the Energy Policy Act of 1992 comprised of an indexing system to 48 Table of Contents establish ceilings on interstate oil and NGL pipeline rates.
As a result, we may face increased litigation risk from private parties and governmental authorities related to our ESG efforts. In addition, any alleged claims of greenwashing against us or others in our industry may lead to further negative sentiment and diversion of investments.
As a result, we may face increased litigation risk from private parties and governmental authorities related to our sustainability-related efforts. In addition, any alleged claims of greenwashing against us or others in our industry may lead to further negative sentiment and diversion of investments.
Our Certificate of Incorporation contains provisions stating that the Preferred Stockholder is under no obligation to consider the separate interests of the other 64 Table of Contents stockholders (including the tax consequences to such stockholders) in deciding whether or not to authorize us to take (or decline to authorize us to take) any action as well as provisions stating that the Preferred Stockholder shall not be liable to the other stockholders for damages or equitable relief for any losses, liabilities or benefits not derived by such stockholders in connection with such decisions.
Our Certificate of Incorporation contains provisions stating that the Preferred Stockholder is under no obligation to consider the separate interests of the other stockholders (including the tax consequences to such stockholders) in deciding whether or not to authorize us to take (or decline to authorize us to take) any action as well as provisions stating that the Preferred Stockholder shall not be liable to the other stockholders for damages or equitable relief for any losses, liabilities or benefits not derived by such stockholders in connection with such decisions.
Additionally, operational risks affecting the Manager, and our ability to work collaboratively with the Manager, including with respect to the allocation of corporate 43 Table of Contents opportunities and other conflicts of interest, may impact our business and have a material effect on our business, financial results and prospects.
Additionally, operational risks affecting the 42 Table of Contents Manager, and our ability to work collaboratively with the Manager, including with respect to the allocation of corporate opportunities and other conflicts of interest, may impact our business and have a material effect on our business, financial results and prospects.
Additionally, in November 2021, the Biden Administration released “The Long-Term Strategy of the United States: Pathways to Net-Zero Greenhouse Gas Emissions by 2050,” which establishes a roadmap to net zero emissions in the United States by 2050 through, among other things, improving energy efficiency; decarbonizing energy sources via electricity, hydrogen, and sustainable biofuels; and reducing non-CO2 GHG emissions, such as methane and nitrous oxide.
Additionally, in November 2021, the Biden Administration released “The Long-Term Strategy of the United States: Pathways to Net-Zero Greenhouse Gas Emissions by 2050,” which establishes a roadmap to net zero emissions in the United States by 2050 through, among other things, improving energy efficiency; decarbonizing energy sources via electricity, hydrogen, and sustainable biofuels; and reducing non-CO 2 GHG emissions, such as methane and nitrous oxide.
This legislation has not passed. Hydraulic fracturing (other than that using diesel) is currently generally exempt from regulation under the SDWA’s UIC program and is typically regulated by state oil and natural gas commissions or similar agencies. However, several federal agencies have asserted regulatory authority or pursued investigations over certain aspects of the process.
This legislation has not passed. 56 Table of Contents Hydraulic fracturing (other than that using diesel) is currently generally exempt from regulation under the SDWA’s UIC program and is typically regulated by state oil and natural gas commissions or similar agencies. However, several federal agencies have asserted regulatory authority or pursued investigations over certain aspects of the process.
Our inability to compete effectively with our competitors could have a material and adverse impact on our business activities, financial condition and results of operations. 46 Table of Contents Deficiencies of title to our leased interests could materially and adversely affect our financial condition.
Our inability to compete effectively with our competitors could have a material and adverse impact on our business activities, financial condition and results of operations. 45 Table of Contents Deficiencies of title to our leased interests could materially and adversely affect our financial condition.
To the extent we meet such targets, it may be achieved through various contractual arrangements, including the purchase of various credits or offsets that may be deemed to mitigate our ESG impact instead of actual changes in our ESG performance.
To the extent we meet such targets, it may be achieved through various contractual arrangements, including the purchase of various credits or offsets that may be deemed to mitigate our environmental impact instead of actual changes in our environmental performance.
We generally expect OpCo to fund such distributions out of available cash. When OpCo makes distributions, the holders of OpCo Units will be entitled to receive proportionate distributions based on their interests in OpCo at the time of such distribution.
We generally expect OpCo to fund such distributions and payments out of available cash. When OpCo makes distributions, the holders of OpCo Units will be entitled to receive proportionate distributions based on their interests in OpCo at the time of such distribution.
To the extent cash flow from operations is reduced and external sources of capital become limited, unavailable or on terms deemed unacceptable by us, our ability to make the necessary capital investment to maintain or expand our asset base of oil and natural gas reserves or to return capital to our investors would be impaired.
To the extent cash flow from 39 Table of Contents operations is reduced and external sources of capital become limited, unavailable or on terms deemed unacceptable by us, our ability to make the necessary capital investment to maintain or expand our asset base of oil and natural gas reserves or to return capital to our investors would be impaired.
It may be difficult to identify attractive acquisition opportunities and, even if such opportunities are identified, our debt agreements (including the indentures that govern the 2026 Notes (as defined herein) and the 2028 Notes (as defined herein) contain limitations on our ability to enter into certain transactions, which could limit our future growth.
It may be difficult to identify attractive acquisition opportunities and, even if such opportunities are identified, our debt agreements (including the indentures that govern the 2026 Notes (as defined herein) and the 2028 Notes (as defined herein; together with the 2026 Notes, the "Senior Notes")) contain limitations on our ability to enter into certain transactions, which could limit our future growth.
Moreover, if one or more of the analysts who cover us downgrades our Class A Common Stock or if our operating results do not meet their expectations, the trading price of our Class A Common Stock could decline. 61 Table of Contents Risks related to our financial condition Our hedging activities could result in financial losses or could reduce our net income.
Moreover, if one or more of the analysts who cover us downgrades our Class A Common Stock or if our operating results do not meet their expectations, the trading price of our Class A Common Stock could decline. Risks related to our financial condition Our hedging activities could result in financial losses or could reduce our net income.
Our cash flow from operations and access to capital are subject to a number of variables, including: • the amount of oil and natural gas we produce from existing wells; • the prices at which we sell our production; • take-away capacity; • the estimated quantities of our oil and natural gas reserves; and • our ability to acquire, locate and produce new reserves.
Our cash flow from operations and access to capital are subject to a number of variables, including: • the amount of oil and natural gas we produce from existing wells; • the prices at which we sell our production; • take-away capacity; • the estimated quantities of our oil and natural gas reserves; and 40 Table of Contents • our ability to acquire, locate and produce new reserves.
As a result, a substantial or extended decline in commodity prices, such as what occurred in early 2020, may materially and adversely affect our future business, financial 38 Table of Contents condition, results of operations, liquidity and ability to meet our financial commitments or cause us to delay our planned capital expenditures.
As a result, a substantial or extended decline in commodity prices, such as what occurred in early 2020, may materially and adversely affect our future business, financial condition, results of operations, liquidity and ability to meet our financial commitments or cause us to delay our planned capital expenditures.
The utilization of these techniques requires substantially greater capital expenditures as compared to the completion cost of a vertical well or a horizontal well utilizing less advanced techniques and therefore may result in fewer wells being completed or 40 Table of Contents recompleted in any given year.
The utilization of these techniques requires substantially greater capital expenditures as compared to the completion cost of a vertical well or a horizontal well utilizing less advanced techniques and therefore may result in fewer wells being completed or recompleted in any given year.
Borrowings under the Revolving Credit Facility bear interest at either a U.S. dollar alternative base rate (based on the prime rate, the federal funds effective rate or an adjusted SOFR(as defined below)), plus an applicable margin or SOFR, plus an applicable margin, at the election of the borrowers.
Borrowings under the Revolving Credit Facility bear interest at either a U.S. dollar alternative base rate (based on the prime rate, the federal funds effective rate or an adjusted SOFR(as defined below)), plus an applicable margin or SOFR, plus an applicable margin, at the 59 Table of Contents election of the borrowers.
In November 2021, the international community gathered again in Glasgow at the COP26, during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-CO2 GHGs.
In November 2021, the international community gathered again in Glasgow at the COP26, during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-CO 2 GHGs.
As of December 31, 2022, we have undrilled locations, including both PUD drilling locations and unproved drilling locations. These drilling locations represent a meaningful part of our future development strategy.
As of December 31, 2023, we have undrilled locations, including both PUD drilling locations and unproved drilling locations. These drilling locations represent a meaningful part of our future development strategy.
Any of 53 Table of Contents these consequences could have a material and adverse effect on our consolidated financial condition, results of operations or cash flows.
Any of 52 Table of Contents these consequences could have a material and adverse effect on our consolidated financial condition, results of operations or cash flows.
Additionally, to the extent ESG matters negatively impact our reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations. ESG matters may also impact our suppliers and customers, which may ultimately have adverse impacts on our operations.
Additionally, to the extent sustainability-related matters negatively impact our reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations. sustainability-related matters may also impact our suppliers and customers, which may ultimately have adverse impacts on our operations.
In addition to sales pursuant to such registration by selling stockholders, certain of our significant stockholders, including such selling stockholders, may distribute shares of our securities that they hold to their investors who themselves may then sell into the public market. Any sales of such securities may depress the price of our shares.
In addition to sales pursuant to such registration by selling stockholders, certain of our significant stockholders, including such selling stockholders, have distributed shares of our securities that they hold to their investors who themselves may then sell into the public market. Any sales of such securities may depress the price of our shares.
The development of our estimated PUD reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated PUD reserves may not be ultimately developed or produced. Recovery of PUDs requires significant capital expenditures and successful drilling operations. At December 31, 2022 approximately 112.7 MMBoe of our total estimated proved reserves were undeveloped.
The development of our estimated PUD reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated PUD reserves may not be ultimately developed or produced. Recovery of PUDs requires significant capital expenditures and successful drilling operations. At December 31, 2023, approximately 112.2 MMBoe of our total estimated proved reserves were undeveloped.
Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring and reporting on many ESG matters.
Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring and reporting on many sustainability-related matters.
We have consolidated our business over time through acquisitions, including through the Merger Transactions and the Uinta Transaction, and there are risks associated with integration of all of these assets, operations and our ability to manage those risks.
We have consolidated our business over time through acquisitions, including through the Merger Transactions, the Uinta Transaction, and the Western Eagle Ford Acquisitions and there are risks associated with integration of all of these assets, operations and our ability to manage those risks.
Wide fluctuations in oil, natural gas and NGL prices may result from relatively minor changes in the supply of or demand for oil, natural gas and NGL market uncertainty and other factors that are beyond our control, including: • worldwide and regional economic conditions, including rising interest rates and associated policies of the Federal Reserve, impacting the supply and demand for oil, natural gas and NGLs, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States; • changes in seasonal temperatures, including the number of heating degree days during winter months and cooling degree days during summer months; 37 Table of Contents • the level of oil, natural gas and NGL exploration, development and production; • the level of oil, natural gas and NGL inventories; • the level of U.S.
Wide fluctuations in oil, natural gas and NGL prices may result from relatively minor changes in the supply of or demand for oil, natural gas and NGL market uncertainty and other factors that are beyond our control, including: 36 Table of Contents • worldwide and regional economic conditions, including a global recession, elevated interest rates and associated policies of the Federal Reserve, impacting the supply and demand for oil, natural gas and NGLs, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States; • changes in seasonal temperatures, including the number of heating degree days during winter months and cooling degree days during summer months; • the level of oil, natural gas and NGL exploration, development and production; • the level of oil, natural gas and NGL inventories; • the level of U.S.
While oil, natural gas and NGL prices have returned to pre-pandemic levels, the continued impact of the COVID-19 pandemic and the associated global oil, natural gas and NGL demand may negatively affect the amount of cash available for capital expenditures and debt repayment, our ability to borrow money or raise additional capital and, as a result, could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.
While oil, natural gas and NGL prices have returned to pre-pandemic levels, global oil, natural gas and NGL demand may negatively affect the amount of cash available for capital expenditures and debt repayment, our ability to borrow money or raise additional capital and, as a result, could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.
Risks related to our governance structure We are a “controlled company” within the meaning of NYSE rules and, as a result, qualify for and rely on exemptions from certain corporate governance requirements.
Risks related to our governance structure 62 Table of Contents We are a “controlled company” within the meaning of NYSE rules and, as a result, qualify for and rely on exemptions from certain corporate governance requirements.
Under the Domenici-Barton Energy Policy Act of 2005 ("EPAct 2005"), FERC has civil penalty authority under the NGA and the NGPA to impose penalties for current violations of up to $1,496,035 per day (adjusted annually for inflation) for each violation and disgorgement of profits associated with any violation.
Under the Domenici-Barton Energy Policy Act of 2005 ("EPAct 2005"), FERC has civil penalty authority under the NGA and the NGPA to impose penalties for current violations of up to $1,544,521 per day (adjusted annually for inflation) for each violation and disgorgement of profits associated with any violation.
Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices 56 Table of Contents and some of them may elect not to provide funding for fossil fuel energy companies.
Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not to provide funding for fossil fuel energy companies.
The Biden Administration is also considering revisions to the leasing and permitting programs for oil and gas development on federal lands. For more information, see our regulatory disclosure in "Items 1 and 2. Business and Properties—Legislative and regulatory environment—Hydraulic fracturing.
The Biden Administration is also considering revisions to the leasing and permitting programs for oil and gas development on federal lands. For more information, see our regulatory disclosure in "Items 1 and 2. Business and Properties—Legislative and 55 Table of Contents regulatory environment—Hydraulic fracturing.
We may also announce participation in, or certification under, various third-party ESG frameworks in an attempt to improve our ESG profile, but such participation or certification may be costly and may not achieve the desired results. Additionally, while we may announce various voluntary ESG targets, such targets are aspirational.
We may also announce participation in, or certification under, various third-party sustainability or climate-related frameworks in an attempt to improve our sustainability profile, but such participation or certification may be costly and may not achieve the desired results. Additionally, while we may announce various voluntary climate or sustainability-related targets, such targets are aspirational.
Released in January 2023, the pilot exercise is designed to analyze the impact of both physical and transition risks related to climate change on specific assets of the banks' portfolio. Limitation of investments in and financings for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or development or production activities.
Taking place throughout 2023, the pilot exercise is designed to analyze the impact of both physical and transition risks related to climate change on specific assets of the banks' portfolio. Limitation of investments in and financings for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or development or production activities.
Accordingly, in the future we may make acquisitions of businesses, assets or properties that we expect to complement or expand our current assets. For example, Crescent Energy Company was created through the Merger Transactions and in March 2022, we acquired certain exploration and production assets in the state of Utah pursuant to the Uinta Transaction (as defined herein).
Accordingly, in the future we may make acquisitions of businesses, assets or properties that we expect to complement or expand our current assets. For example, Crescent Energy Company was created through the Merger Transactions in December 2021, and in March 2022, we acquired certain exploration and production assets in the state of Utah pursuant to the Uinta Transaction.
The reserve data included in our reserve reports assumes that substantial capital expenditures will be made to develop non-producing reserves. The calculation of our estimated net proved reserves as of December 31, 2022 assumes that we will spend $1.7 billion to develop our estimated PUDs.
The reserve data included in our reserve reports assumes that substantial capital expenditures will be made to develop non-producing reserves. The calculation of our estimated net proved reserves as of December 31, 2023 assumes that we will spend $1.8 billion to develop our estimated PUDs.
A reduction in the borrowing base under our Revolving Credit Facility as a result of periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations. Our primary sources of liquidity are borrowings under our Revolving Credit Facility and cash from operations.
A reduction in the borrowing base under our Revolving Credit Facility as a result of periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations. Our primary sources of liquidity are borrowings under our Revolving Credit Facility, cash from operations and proceeds from equity and debt offerings.
The EPAct 2005 also authorized FERC to impose civil penalties for violations of the ICA and FERC regulations thereunder, up to a maximum amount that is adjusted annual for inflation, which for 2023 equals $15,662 per day, per violation. Additional rules and legislation pertaining to those and other matters may be considered or adopted by FERC from time to time.
The EPAct 2005 also authorized FERC to impose civil penalties for violations of the ICA and FERC regulations thereunder, up to a maximum amount that is adjusted annual for inflation, which for 2024 equals $16,170 per day, per violation. Additional rules and legislation pertaining to those and other matters may be considered or adopted by FERC from time to time.
Additionally, the SEC published a proposed rule requiring climate-related disclosures from registrants, including data on Scope 1 and 2 GHG emissions and, in some cases, Scope 3 emissions, as well as any set climate-related targets and goals. A final rule is expected to be released in the second quarter of 2023.
Additionally, the SEC published a proposed rule requiring climate-related disclosures from registrants, including data on Scope 1 and 2 GHG emissions and, in some cases, Scope 3 emissions, as well as any set climate-related targets and goals. A final rule is expected to be released in 2024.
Subject to the satisfaction of vesting conditions, the expiration of lock-up agreements and the requirements of Rule 144, shares registered under the registration statement on Form S-8 have been made available for resale immediately in the public market without restriction.
Subject to the satisfaction of vesting conditions, the expiration of lock-up agreements and the requirements of Rule 144 under the Securities Act of 1933, as amended, shares registered under the registration statement on Form S-8 have been made available for resale immediately in the public market without restriction.
Moreover, while we may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures are based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated 58 Table of Contents therewith.
Moreover, while we may create and publish voluntary disclosures regarding sustainability-related matters from time to time, many of the statements in those voluntary disclosures are based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.
Our failure to comply with these or other laws and regulations administered by these agencies could subject us to criminal and civil penalties, as described in "Items 1 and 2.
Our failure to comply with these or other laws and regulations administered by these agencies could subject us to criminal and civil 51 Table of Contents penalties, as described in "Items 1 and 2.
Any failure to maintain effective internal controls, or difficulties encountered in implementing or improving internal controls, could harm our operating results or cause us to fail to meet our 60 Table of Contents reporting obligations.
Any failure to maintain effective internal controls, or difficulties encountered in implementing or improving internal controls, could harm our operating results or cause us to fail to meet our reporting obligations.
We have incurred significant additional indebtedness during recent periods. Our additional indebtedness may impair our ability to raise further capital, including to expand our business, pursue strategic investments, and take advantage of financing or other opportunities that we believe to be in the best interests of the Company and our shareholders.
Our additional indebtedness may impair our ability to raise further capital, including to expand our business, pursue strategic investments, and take advantage of financing or other opportunities that we believe to be in the best interests of the Company and our shareholders.
The unavailability or high cost of equipment, supplies, personnel and oilfield services, due to commodity price volatility or supply constraints as a result of the conflict in Ukraine, the COVID-19 pandemic, rising interest rates and associated policies of the Federal Reserve or otherwise could adversely affect our ability to execute development and exploitation plans on a timely basis and within budget, and consequently could materially and adversely affect our anticipated cash flow.
The unavailability or high cost of equipment, supplies, personnel and oilfield services, due to commodity price volatility or supply constraints as a result of the conflicts in Ukraine and the Middle East, elevated, interest rates and associated policies of the Federal Reserve or otherwise could adversely affect our ability to execute development and exploitation plans on a timely basis and within budget, and consequently could materially and adversely affect our anticipated cash flow.
The continuing or worsening impact of the COVID-19 pandemic or future outbreaks of disease may materially and adversely affect our business, operating and financial results and liquidity, due to governmental restrictions, associated repercussions and operational challenges to supply and demand for oil and natural gas and the economy generally.
The impact of future outbreaks of disease may materially and adversely affect our business, operating and financial results and liquidity, due to governmental restrictions, associated repercussions and operational challenges to supply and demand for oil and natural gas and the economy generally.
LNG exports; • prevailing prices, and expectations regarding future prices, on local price indexes in the areas in which we operate; • the proximity, capacity, cost and availability of gathering and transportation facilities; • localized and global supply and demand fundamentals and transportation availability; • the cost of exploring for, developing, producing and transporting reserves; • the spot price of LNG on world markets; • weather conditions and natural disasters; • technological advances affecting energy consumption; • the price and availability of alternative fuels, including the potential acceleration of the development of alternative fuels as a result of the IRA 2022 or otherwise; • speculative trading in oil and natural gas derivative contracts; • increased end-user conservation; • political and economic conditions, such as the conflict in Ukraine, in or affecting other producing regions or countries, including the Middle East, Africa, South America and Russia; • political and economic conditions in or affecting major LNG consumption regions or countries, particularly Asia and Europe; • the extraordinary market environment and effects, including any economic repercussions or operational challenges, of the COVID-19 pandemic, including any resultant decline in demand for oil, natural gas and NGLs; • actions of OPEC, including the ability and willingness of the members of OPEC and other exporting nations to agree to and maintain oil price and production controls, including the anticipated increases in supply from Russia and OPEC, particularly Saudi Arabia; • U.S. trade policies and their effect on U.S. oil and natural gas exports; • expectations about future commodity prices; • the possibility of terrorist or cyberattacks and the consequences of any such attacks; and • U.S. federal, state and local and non-U.S. governmental regulation and taxes.
LNG exports; • prevailing prices, and expectations regarding future prices, on local price indexes in the areas in which we operate; • the proximity, capacity, cost and availability of gathering and transportation facilities; • localized and global supply and demand fundamentals and transportation availability; • the cost of exploring for, developing, producing and transporting reserves; • the spot price of LNG on world markets; • weather conditions and natural disasters; • technological advances affecting energy consumption; • the price and availability of alternative fuels, including the potential acceleration of the development of alternative fuels as a result of the IRA 2022 or otherwise; • speculative trading in oil and natural gas derivative contracts; • increased end-user conservation; • political and economic conditions, such as the conflicts in Ukraine and the Middle East, in or affecting other producing regions or countries, including the Middle East, Africa, South America and Russia; • political and economic conditions in or affecting major LNG consumption regions or countries, particularly Asia and Europe; • political and economic conditions relating to the 2024 U.S. presidential election, including potential controversy and a potential change in presidential administration; • actions of OPEC, including the ability and willingness of the members of OPEC and other exporting nations to agree to and maintain oil price and production controls, including the anticipated increases in supply from Russia and OPEC, particularly Saudi Arabia; • U.S. trade policies and their effect on U.S. oil and natural gas exports; • expectations about future commodity prices; • the possibility of terrorist or cyberattacks and the consequences of any such attacks; and • U.S. federal, state and local governmental regulation and taxes.
In addition, conditions in the global capital markets have been volatile due to the conflict in Ukraine, the COVID-19 pandemic or otherwise, making terms for certain types of financing difficult to predict, and in certain cases, resulting in certain types of financing being unavailable.
In addition, conditions in the global capital markets have been volatile due to the conflicts in Ukraine, Israel and the Gaza Strip, the COVID-19 pandemic and recovery or otherwise, making terms for certain types of financing difficult to predict, and in certain cases, resulting in certain types of financing being unavailable.
We depend upon two significant purchasers for the sale of a substantial portion of our oil and natural gas production. The loss of these purchasers or other third parties on which we rely could, among other factors adversely affect our revenues.
We depend upon one significant purchaser for the sale of a substantial portion of our oil and natural gas production. The loss of this purchaser or other third parties on which we rely could, among other factors adversely affect our revenues.
The loss of these customers could materially and adversely affect our revenues and have a material and adverse effect on our financial condition and results of operations.
The loss of this customer could materially and adversely affect our revenues and have a material and adverse effect on our financial condition and results of operations.
For example, we had realized commodity derivative losses of $779.3 million in 2022; however, there can be no assurance that we will not realize additional future losses due to our hedging activities.
For example, we had realized commodity derivative losses of $153.7 million in 2023; however, there can be no assurance that we will not realize additional future losses due to our hedging activities.
Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—General and Administrative Expense" and NOTE 13 – Incentive Compensation Arrangements in the notes to our audited financial statements for the year ended December 31, 2022 included herein.
Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—General and Administrative Expense" and NOTE 13 – Equity-Based Compensation Awards in the notes to our audited financial statements for the year ended December 31, 2023 included herein.
The Revolving Credit Facility and the documents 41 Table of Contents governing our other indebtedness may restrict our ability to obtain new debt financing.
The Revolving Credit Facility and the documents governing our other indebtedness may restrict our ability to obtain new debt financing.
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. The U.S. inflation rate has been steadily increasing since 2021 and into 2023.
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. The U.S. inflation rate began increasing in 2021 and remained elevated throughout 2023.
Also, in December 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources, concluding that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources under certain limited circumstances.
Also, in December 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources, concluding that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources under certain limited circumstances. To date, EPA has taken no further action in response to the December 2016 report.
Furthermore, we filed a registration statement with the SEC on Form S-8 providing for the registration of 947,483 shares of our Class A Common Stock issued or reserved for issuance under the Equity Incentive Plan.
Furthermore, we filed registration statements with the SEC on Form S-8 providing for the registration of 3,672,404 shares of our Class A Common Stock issued or reserved for issuance under the Equity Incentive Plan.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Company maintains insurance coverage that is customary in the industry, although the Company is not fully insured against all environmental risks.
Biggest changeWe maintain insurance coverage that is customary in the industry, although we are not fully insured against all environmental risks.
These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution cleanup resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area.
These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution cleanup resulting from operations and subject the lessee to liability for pollution damages. In some instances, we may be directed to suspend or cease operations in the affected area.
Item 3. Legal Proceedings The Company may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business.
Item 3. Legal Proceedings We may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business.
The Company, as an owner and operator of oil and gas properties, is subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment.
As an owner and operator of oil and gas properties, we are subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment.
Removed
On February 14, 2022, the New Mexico Energy, Minerals and Natural Resources Department’s Oil Conservation Division (“OCD”) issued a Notice of Violation to Contango for failure to file form C-115 according to required deadlines and having too many inactive wells.
Removed
OCD proposed a civil penalty of $0.9 million, the plugging and abandonment of certain inactive wells, and the imposition of certain other restrictions on our operations.
Removed
The parties discussed a resolution to the matter and on November 16, 2022, the OCD entered into a Stipulated Final Order (the “Order”) with Contango pursuant to which we agreed to pay a civil penalty of $0.1 million, the OCD withdrew the allegation of exceeding the number of inactive wells permitted and Contango separately agreed to pay a penalty of $500 for each day for each late or missing C-115 report from May 1, 2022 to April 30, 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur future dividends depend on our level of earnings, financial requirements and other factors and will be subject to approval by our Board of Directors, applicable law and the terms of our existing debt documents, including the Revolving Credit Facility and the indentures governing the 2026 Notes (as defined below) and the 2028 Notes (as defined below; together with the 2026 Notes, the "Senior Notes").
Biggest changeOur future dividends depend on our level of earnings, financial requirements and other factors and will be subject to approval by our Board of Directors, applicable law and the terms of our existing debt documents, including the Revolving Credit Facility and the indentures governing the Senior Notes.
Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs. 10/1/2022 - 10/31/2022 — — — — 11/1/2022 - 11/30/2022 — — — — 12/1/2022 - 12/31/2022 — — — — Recent Sales of Unregistered Equity Securities We had no sales of unregistered equity securities during the period covered by this Annual Report that were not previously reported in a Current Report on Form 8-K or Quarterly Report on Form 10-Q.
Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs. 10/1/2023 - 10/31/2023 — — — — 11/1/2023 - 11/30/2023 — — — — 12/1/2023 - 12/31/2023 — — — — Recent Sales of Unregistered Equity Securities We had no sales of unregistered equity securities during the period covered by this Annual Report that were not previously reported in a Current Report on Form 8-K or Quarterly Report on Form 10-Q.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth information with respect to our repurchases of shares of Class A common stock during the quarter ended December 31, 2022.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth information with respect to our repurchases of shares of Class A common stock during the quarter ended December 31, 2023.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Class A Common Stock is listed and traded on the NYSE under the ticker symbol "CRGY." As of January 31, 2022, we had 101 Class A common stock shareholders of record and two Class B common stock shareholders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Class A Common Stock is listed and traded on the NYSE under the ticker symbol "CRGY." As of February 29, 2024, we had 171 Class A common stock shareholders of record and two Class B common stock shareholders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table presents a reconciliation of Adjusted EBITDAX (non-GAAP) and Levered Free Cash Flow (non-GAAP) to net income (loss), the most directly comparable financial measure calculated in accordance with GAAP: Year Ended December 31, 2022 2021 $ Change % Change (in thousands) Net income (loss) $ 480,600 $ (432,227) $ 912,827 NM* Adjustments to reconcile to Adjusted EBITDAX: Interest expense 95,937 50,740 Realized (gain) loss on interest rate derivatives — 7,373 Income tax expense (benefit) 36,291 (306) Depreciation, depletion and amortization 532,926 312,787 Exploration expense 3,425 1,180 Non-cash (gain) loss on derivatives (102,358) 330,368 Impairment expense 142,902 — Non-cash equity-based compensation expense 38,063 39,919 Gain on sale of assets (4,641) (8,794) Other (income) expense (949) (120) Certain redeemable noncontrolling interest distributions made by OpCo related to Manager Compensation (39,070) (2,706) Transaction and nonrecurring expenses (1) 34,051 23,149 Early settlement of derivative contracts (2) — 198,688 Adjusted EBITDAX (non-GAAP) $ 1,217,177 $ 520,051 $ 697,126 134 % Adjustments to reconcile to Levered Free Cash Flow: Interest expense, excluding non-cash deferred financing cost amortization (87,043) (40,551) Realized (gain) loss on interest rate derivatives — (7,373) Current income tax benefit (expense) (3,113) (629) Tax-related redeemable noncontrolling interest distributions made by OpCo (18,160) — Development of oil and natural gas properties (624,880) (194,828) Levered Free Cash Flow (non-GAAP) $ 483,981 $ 276,670 $ 207,311 75 % * NM = Not meaningful.
Biggest changeThe 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: Year Ended December 31, 2023 2022 $ Change % Change (in thousands) Net income (loss) $ 321,991 $ 480,600 $ (158,609) (33) % Adjustments to reconcile to Adjusted EBITDAX: Interest expense 145,807 95,937 Income tax expense (benefit) 23,227 36,291 Depreciation, depletion and amortization 675,782 532,926 Exploration expense 9,328 3,425 Non-cash (gain) loss on derivatives (320,714) (102,358) Impairment expense 153,495 142,902 Non-cash equity-based compensation expense 82,936 38,063 Gain on sale of assets — (4,641) Other (income) expense 282 (949) Certain redeemable noncontrolling interest distributions made by OpCo related to Manager Compensation (30,563) (39,070) Transaction and nonrecurring expenses (1) 22,632 34,051 Settlement of acquired derivative contracts (61,455) (49,929) Adjusted EBITDAX (non-GAAP) $ 1,022,748 $ 1,167,248 $ (144,500) (12) % Adjustments to reconcile to Levered Free Cash Flow: Interest expense, excluding non-cash deferred financing cost amortization (132,981) (87,043) Current income tax benefit (expense) (494) (3,113) Tax-related redeemable noncontrolling interest distributions made by OpCo (753) (18,160) Development of oil and natural gas properties (578,316) (624,880) Levered Free Cash Flow (non-GAAP) $ 310,204 $ 434,052 $ (123,848) (29 %) (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.
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." In August 2022, IRA 2022 was signed into law.
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." In August 2022, the IRA 2022 was signed into law.
Our development program is designed to prioritize the generation of meaningful free cash flow, attractive risk-adjusted returns and is inherently flexible, with the ability to scale our capital program as necessary to react to the existing market environment and ongoing asset performance. See “—Development program and capital budget” above for additional discussion of our capital program.
Our development program is designed to prioritize the generation of meaningful free cash flow and attractive risk-adjusted returns, and is inherently flexible, with the ability to scale our capital program as necessary to react to the existing market environment and ongoing asset performance. See “—Development program and capital budget” above for additional discussion of our capital program.
We believe Levered Free Cash Flow is a useful performance measure because it allows for an effective evaluation of our operating and financial performance and the ability of our operations to generate cash flow that is available to reduce leverage or distribute to our equity holders.
We believe Levered Free Cash Flow is a useful liquidity measure because it allows for an effective evaluation of our operating and financial performance and the ability of our operations to generate cash flow that is available to reduce leverage or distribute to our equity holders.
Adjusted EBITDAX (non-GAAP) and Levered Free Cash Flow (non-GAAP) Adjusted EBITDAX and Levered Free Cash Flow are supplemental non-GAAP financial measures used by our management to assess our operating results. See “ — Non-GAAP financial measures ” section below for their definitions and application.
Adjusted EBITDAX (non-GAAP) and Levered Free Cash Flow (non-GAAP) Adjusted EBITDAX and Levered Free Cash Flow are supplemental non-GAAP financial measures used by our management to assess our operating results and liquidity. See “ — Non-GAAP financial measures ” section below for their definitions and application.
Accordingly, reserve estimates often differ from the quantities of crude oil and natural gas that are ultimately recovered. We cannot predict the amounts or timing of future reserve revisions. When determining the December 31, 2022 proved reserves for each property, the benchmark prices issued by the SEC were adjusted using price differentials that account for property-specific quality and location differences.
Accordingly, reserve estimates often differ from the quantities of crude oil and natural gas that are ultimately recovered. We cannot predict the amounts or timing of future reserve revisions. When determining the December 31, 2023 proved reserves for each property, the benchmark prices issued by the SEC were adjusted using price differentials that account for property-specific quality and location differences.
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 are guaranteed on a senior unsecured basis by each of our existing and future subsidiaries that will guarantee the Revolving Credit Facility.
How we evaluate our operations We use a variety of financial and operational metrics to assess the performance of our oil, natural gas and NGL operations, including: • Production volumes sold; • Commodity prices and differentials; • Operating expenses; • Adjusted EBITDAX (non-GAAP); and • Levered Free Cash Flow (non-GAAP) Development program and capital budget 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.
How we evaluate our operations We use a variety of financial and operational metrics to assess the performance of our oil, natural gas and NGL operations, including: • Production volumes sold; • Commodity prices and differentials; • Operating expenses; • Adjusted EBITDAX (non-GAAP); and • Levered Free Cash Flow (non-GAAP) 72 Table of Contents Development program and capital budget 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.
Acquisitions, divestitures and related reorganization Acquisitions and related reorganization In March 2022, we consummated the acquisition contemplated by the Membership Interest Purchase Agreement dated February 15, 2022 (the “Purchase Agreement” and the transactions contemplated therein, the “Uinta Transaction”) between certain of our subsidiaries, including OpCo, and Verdun Oil Company II LLC, a Delaware limited liability company, pursuant to which we purchased all of the issued and outstanding membership interests of Uinta AssetCo, LLC, a Texas limited liability company that holds all development and production assets of, and certain obligations formerly held by EP Energy E&P Company, L.P. located in the State of Utah.
In March 2022, we consummated the acquisition contemplated by the Membership Interest Purchase Agreement dated February 15, 2022 (the “Purchase Agreement” and the transactions contemplated therein, the “Uinta Transaction”) between certain of our subsidiaries, including OpCo, and Verdun Oil Company II LLC, a Delaware limited liability company, pursuant to which we purchased all of the issued and outstanding membership interests of Uinta AssetCo, LLC, a Texas limited liability company that holds all development and production assets of, and certain obligations formerly held by EP Energy E&P Company, L.P. located in the State of Utah.
If the future average crude oil prices are below the average prices used to determine proved reserves at December 31, 2022, it could have an adverse effect on our estimates of proved reserve volumes and the value of our business.
If the future average crude oil prices are below the average prices used to determine proved reserves at December 31, 2023, it could have an adverse effect on our estimates of proved reserve volumes and the value of our business.
Our active derivative program allows us to preserve capital and protect margins and corporate returns through commodity cycles. For information regarding risks related to our derivative program, see "Part I., Item 1A. Risk Factors".
Our active derivative program allows us to protect margins and corporate returns through commodity cycles. For information regarding risks related to our derivative program, see "Part I., Item 1A. Risk Factors".
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. We may, at our option, redeem all or a portion of the 2026 Notes at any time on or after May 1, 2023 at certain redemption prices.
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. 80 Table of Contents We may, at our option, redeem all or a portion of the 2026 Notes at any time on or after May 1, 2023 at certain redemption prices.
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, 2022 and 2021.
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.
Risk Factors." Estimates of proved reserves are key components of our most significant financial estimates including the computation of depreciation, depletion and amortization ("DD&A") and impairment of proved oil and natural gas properties. Oil and natural gas properties Oil and natural gas producing activities are accounted for under the successful efforts method of accounting.
Risk Factors." Estimates of proved reserves are key components of our most significant financial estimates including the computation of depreciation, depletion and amortization ("DD&A") and impairment of proved oil and natural gas properties. 84 Table of Contents Oil and natural gas properties Oil and natural gas producing activities are accounted for under the successful efforts method of accounting.
The estimates of our reserves help to inform our expectation of future oil and natural gas production, which will likely vary from our actual production. • Future commodity prices, which are based on publicly available forward commodity prices for a period of time and then escalated at 2.5% thereafter.
The estimates of our reserves help to inform our expectation of future oil and natural gas production, which will likely vary from our actual production. • Future commodity prices, which are based on publicly available forward commodity prices for a period of time and then escalated thereafter.
Upon closing of the Uinta Transaction, we paid $621.3 million in cash consideration and transaction fees and assumed certain commodity derivatives. The Uinta Transaction was funded with cash on hand and borrowings under our Revolving Credit Facility (as defined below).
Upon closing of the Uinta Transaction, we paid $621.3 million in cash consideration and 71 Table of Contents transaction fees and assumed certain commodity derivatives. The Uinta Transaction was funded with cash on hand and borrowings under our Revolving Credit Facility (as defined below).
If the carrying amount exceeds the estimated 85 Table of Contents undiscounted cash flows, we will write-down the carrying amount of the oil and natural gas properties to fair value. The factors used to determine fair value include: • Estimates of oil and natural gas reserves and expected timing of production.
If the carrying amount exceeds the estimated undiscounted cash flows, we will write-down the carrying amount of the oil and natural gas properties to fair value. The factors used to determine fair value include: • Estimates of oil and natural gas reserves and expected timing of production.
Our commodity derivative program focuses on entering into forward commodity contracts when investment decisions regarding reinvestment in existing assets or new acquisitions are finalized, targeting economic hedges for a portion of expected production as well as adding incremental derivatives to our production base over time.
Our commodity derivative program focuses on entering into forward commodity contracts when investment decisions regarding reinvestment in existing assets or new acquisitions are finalized, targeting economic hedges for a portion of expected production generated by the capital investment as well as adding incremental derivatives to our production base over time.
Refer to our 2021 Annual Report filed March 10, 2022 for discussion and analysis of the changes in results of operations between the years ended December 31, 2021 and 2020. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance.
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.
During the years ended December 31, 2022, 2021, and 2020, we recognized DD&A expense of $532.9 million, $312.8 million, and $372.3 million, respectively. While revisions of previous reserve estimates have not historically been significant to the depreciation and depletion rates, any reduction in proved reserves, could result in an acceleration of future DD&A expense.
During the years ended December 31, 2023, 2022, and 2021, we recognized DD&A expense of $675.8 million, $532.9 million, and $312.8 million, respectively. While revisions of previous reserve estimates have not historically been significant to the depreciation and depletion rates, any reduction in proved reserves, could result in an acceleration of future DD&A expense.
Income taxes Prior to the Merger Transactions, we were organized as Delaware limited liability companies and Delaware limited partnerships and were treated as flow-through entities for U.S. federal income tax purposes. As a result, our tax provision for the years ended December 31, 2021 and 2020 were minimal.
Income taxes Prior to the Merger Transactions, we were organized as Delaware limited liability companies and Delaware limited partnerships and were treated as flow-through entities for U.S. federal income tax purposes. As a result, our tax provision for the year ended December 31, 2021 was minimal.
Cash expenditures for drilling, completion and recompletion activities are presented as " development of oil and natural gas properties" in investing activities on our combined and consolidated statements of cash flows. We expect to fund our 2023 capital program through cash flow from operations.
Cash expenditures for drilling, completion and recompletion activities are presented as " development of oil and natural gas properties" in investing activities on our combined and consolidated statements of cash flows. We expect to fund our 2024 capital program, excluding acquisitions through cash flow from operations.
We routinely assess potential uncertain tax positions and, if 86 Table of Contents required, establish accruals for such amounts. The accruals for deferred tax assets and liabilities, including deferred state income tax assets and liabilities, are subject to significant judgment and are reviewed and adjusted routinely based on changes in facts and circumstances.
We routinely assess potential uncertain tax positions and, if required, establish accruals for such amounts. The accruals for deferred tax assets and liabilities, including deferred state income tax assets and liabilities, are subject to significant judgment and are reviewed and adjusted routinely based on changes in facts and circumstances.
For a reconciliation of these non-GAAP measures to the nearest comparable GAAP measures, see “—Results of Operations—Adjusted EBITDAX (non-GAAP) and Levered Free Cash Flow (non-GAAP)” above. 87 Table of Contents
For a reconciliation of these non-GAAP measures to the nearest comparable GAAP measures, see “—Results of Operations—Adjusted EBITDAX (non-GAAP) and Levered Free Cash Flow (non-GAAP)” above.
Critical accounting estimates Our significant accounting policies are described in NOTE 2 – Summary of Significant Accounting Policies , in "Item 8. Financial Statements and Supplementary Data" of this Annual Report. The Company's combined and consolidated financial statements are prepared in accordance with GAAP.
Critical accounting estimates Our significant accounting policies are described in "Notes to Combined and Consolidated Financial Statements— NOTE 2 – Summary of Significant Accounting Policies " in "Part II., Item 8. Financial Statements and Supplementary Data" of this Annual Report. The Company's combined and consolidated financial statements are prepared in accordance with GAAP.
Levered Free Cash Flow is a supplemental non-GAAP performance measure that is used by our management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.
Levered Free Cash Flow is not a measure of liquidity as determined by GAAP. Levered Free Cash Flow is a supplemental non-GAAP liquidity measure that is used by our management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.
Levered Free Cash Flow should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP, of which such measure is the most comparable GAAP measure, or as an indicator of actual operating performance or investing activities.
Levered Free Cash Flow should not be considered as an alternative to, or more meaningful than, Net cash flow provided by operating activities as determined in accordance with GAAP, of which such measure is the most comparable GAAP measure, or as an indicator of actual liquidity, operating performance or investing activities.
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 each of the years ended December 31, 2022, 2021 and 2020.
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.
The following table illustrates our production revenue mix for each of the periods presented: Year Ended December 31, 2022 2021 2020 Oil 66 % 62 % 69 % Natural gas 25 % 25 % 21 % NGLs 9 % 13 % 10 % In addition, revenue from our midstream assets is supported by commercial agreements that have established minimum volume commitments.
The following table illustrates our production revenue mix for each of the periods presented: Year Ended December 31, 2023 2022 2021 Oil 76 % 66 % 62 % Natural gas 16 % 25 % 25 % NGLs 8 % 9 % 13 % In addition, revenue from our midstream assets is supported by commercial agreements that have established minimum volume commitments.
Dividends Our future dividends depend on our level of earnings, financial requirements and other factors and will be subject to approval by our Board of Directors, applicable law and the terms of our existing debt documents, including the indentures governing the Senior Notes.
Financial Statements and Supplementary Data" of this Annual Report Dividends Our future dividends depend on our level of earnings, financial requirements and other factors and will be subject to approval by our Board of Directors, applicable law and the terms of our existing debt documents, including the indentures governing the Senior Notes.
As of December 31, 2022, (i) unrecognized compensation cost related to unvested equity-classified profits interest awards was $67.5 million, and (ii) we carried $10.1 million in Other long term liabilities on the consolidated balance sheet and had unrecognized compensation of $3.7 million related to unvested liability-classified profits interest awards.
As of December 31, 2023, (i) unrecognized compensation cost related to unvested equity-classified profits interest awards was $63.1 million, and (ii) we carried $5.8 million in Other long term liabilities on the consolidated balance sheet and had unrecognized compensation of $3.8 million related to unvested liability-classified profits interest awards.
We paid cash dividends of $0.63 per share of our Class A Common Stock to shareholders during the year ended December 31, 2022.
We paid cash dividends of $0.53 per share of our Class A Common Stock to shareholders during the year ended December 31, 2023.
Furthermore, the United States has 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.
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.
We expect to incur approximately $575 million to $650 million, excluding acquisitions, for our 2023 capital program. The majority of our program is allocated to D&C, which approximately 85% is allocated to our operated assets primarily in the Eagle Ford and Uinta basins. We expect to fund our 2023 capital program through cash flow from operations.
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.
See “Notes to our Combined and Consolidated Financial Statements— NOTE 2 – Summary of Significant Accounting Policies ” in "Item 8. Financial Statements and Supplementary Data" of the Annual Report for further discussion of the accounting policies applicable to the successful efforts method of accounting.
See "Notes to Combined and Consolidated Financial Statements— NOTE 2 – Summary of Significant Accounting Policies " in "Part II., Item 8. Financial Statements and Supplementary Data" of this Annual Report for further discussion of the accounting policies applicable to the successful efforts method of accounting.
The applicable margin varies based upon our borrowing base utilization then in effect. The fee payable for the unused revolving commitments is 0.50% per year. Our weighted average interest rate on loan amounts outstanding as of December 31, 2022 was 6.98%. The borrowing base under the Revolving Credit Facility was $2.0 billion as of December 31, 2022.
The applicable margin varies based upon our borrowing base utilization then in effect. The fee payable for the unused revolving commitments is 0.50% per year. Our weighted average interest rate on loan amounts outstanding as of December 31, 2023 and 2022 was 9.75% and 6.98%, respectively.
The following table presents our cash balances and outstanding borrowings at the end of each period presented: At December 31, (in thousands) 2022 2021 Cash and cash equivalents $ — $ 128,578 Long-term debt 1,247,558 1,030,406 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.
The following table presents our cash balances and outstanding borrowings at the end of each period presented: At December 31, (in thousands) 2023 2022 Cash and cash equivalents $ 2,974 $ — Long-term debt 1,694,375 1,247,558 79 Table of Contents 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.
On March 7, 2023, the Board of Directors approved a quarterly cash dividend of $0.17 per share, or $0.68 per share on an annualized basis, to be paid to shareholders of our Class A Common Stock with respect to the fourth quarter of 2022.
On March 4, 2024, the Board of Directors approved a quarterly cash dividend of $0.12 per share, or $0.48 per share on an annualized basis, to be paid to shareholders of our Class A Common Stock with respect to the fourth quarter of 2023.
Although we consider our tax accruals adequate, material changes in these accruals may occur in the future, based on the impact of tax audits, changes in legislation and resolution of pending or future tax matters. Refer to NOTE 11 – Income Taxes in "Part II., Item 8. Financial Statements and Supplementary Data" of this Annual Report for more information.
Although we consider our tax accruals adequate, material changes in these accruals may occur in the future, based on the impact of tax audits, changes in legislation and resolution of pending or future tax matters. Refer to "Notes to Combined and Consolidated Financial Statements— NOTE 11 – Income Taxes " in "Part II., Item 8.
In February 2022, Crescent Finance 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").
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").
The Revolving Credit Facility matures on September 23, 2027. At December 31, 2022, we had $559.4 million of outstanding borrowings under the Revolving Credit Facility and $9.8 million in outstanding letters of credit. Our elected commitment amount was $1.3 billion, and we had $730.8 million of available borrowings under the Revolving Credit Facility as of December 31, 2022.
The Revolving Credit Facility matures on September 23, 2027. At December 31, 2023, we had $23.5 million of outstanding borrowings under the Revolving Credit Facility and $14.4 million in outstanding letters of credit, our elected commitment amount was $1.3 billion, and we had $1,262.1 million of available borrowings.
In addition, the IRA 2022 imposes a federal fee on the emission of GHGs through a methane emissions charge, including onshore petroleum and natural gas production. The methane emissions charge will start in calendar year 2024 and the fee is based on certain thresholds established in the IRA 2022.
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.
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.
The 2028 Notes interest is payable on February 15 and August 15 of each year and mature on February 15, 2028. 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 define Levered Free Cash Flow as Adjusted EBITDAX less interest expense, excluding non-cash deferred financing cost amortization, realized gain (loss) on interest rate derivatives, current income tax benefit (expense), tax-related redeemable noncontrolling interest distributions made by OpCo and development of oil and natural gas properties.
We define Levered Free Cash Flow as Adjusted EBITDAX less interest expense, excluding non-cash deferred financing cost amortization, current income tax benefit (expense), tax-related redeemable noncontrolling interest distributions made by OpCo and development of oil and natural gas properties. Levered Free Cash Flow does not take into account amounts incurred on acquisitions.
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 has been steadily increasing since 2021.
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 Revolving Credit Facility contains certain covenants that restrict the payment of cash dividends, certain borrowings, sales of assets, loans to others, investments, merger activity, commodity swap agreements, liens and other transactions without the adherence to certain financial covenants or the prior consent of our lenders.
Our domestic direct and indirect subsidiaries are required to be guarantors under the Revolving Credit Facility, subject to certain exceptions. 81 Table of Contents The Revolving Credit Facility contains certain covenants that restrict the payment of cash dividends, certain borrowings, sales of assets, loans to others, investments, merger activity, commodity swap agreements, liens and other transactions without the adherence to certain financial covenants or the prior consent of our lenders.
The following table presents the percentages of our production that was economically hedged through the use of derivative contracts: 74 Table of Contents Year Ended December 31, 2022 2021 2020 Oil 64 % 81 % 81 % Natural gas 66 % 83 % 76 % NGLs 46 % 67 % 60 % The following table sets forth the average NYMEX oil and natural gas prices and our average realized prices for the periods presented: Year Ended December 31, 2022 2021 2020 Oil (Bbl): Average NYMEX $ 94.23 $ 68.04 $ 39.40 Realized price (excluding derivative settlements) 90.06 66.71 37.45 Realized price (including derivative settlements) (1) 71.98 53.07 48.85 Natural Gas (Mcf): Average NYMEX $ 6.64 $ 3.91 $ 2.08 Realized price (excluding derivative settlements) 5.97 3.96 1.90 Realized price (including derivative settlements) 3.42 3.06 2.32 NGLs (Bbl): Realized price (excluding derivative settlements) $ 37.72 $ 30.42 $ 13.77 Realized price (including derivative settlements) 29.70 19.15 16.61 (1) 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.
The following table presents the percentages of our production that was economically hedged through the use of derivative contracts: Year Ended December 31, 2023 2022 2021 Oil 65 % 64 % 81 % Natural gas 57 % 66 % 83 % NGLs 16 % 46 % 67 % The following table sets forth the average NYMEX oil and natural gas prices and our average realized prices for the periods presented: Year Ended December 31, 2023 2022 2021 Oil (Bbl): Average NYMEX $ 77.62 $ 94.23 $ 68.04 Realized price (excluding derivative settlements) 72.09 90.06 66.71 Realized price (including derivative settlements) (1) 65.04 71.98 53.07 Natural Gas (Mcf): Average NYMEX $ 2.74 $ 6.64 $ 3.91 Realized price (excluding derivative settlements) 2.84 5.97 3.96 Realized price (including derivative settlements) 2.83 3.42 3.06 NGLs (Bbl): Realized price (excluding derivative settlements) $ 22.76 $ 37.72 $ 30.42 Realized price (including derivative settlements) 24.95 29.70 19.15 (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.
(3) Amounts include payments which will become due under long-term agreements to purchase goods and services used in the normal course of business to secure transportation of our oil and natural gas production to market, as well as, pipeline, processing and storage capacity.
Financial Statements and Supplementary Data" of this Annual Report for additional discussion of our asset retirement obligations. (4) Amounts include payments which will become due under long-term agreements to purchase goods and services used in the normal course of business to secure transportation of our oil and natural gas production to market, as well as, pipeline, processing and storage capacity.
If an event of default occurs and we are unable to cure such default, the lenders will be able to accelerate maturity and exercise other rights and remedies.
If an event of default occurs and we are unable to cure such default, the lenders will be able to accelerate maturity and exercise other rights and remedies. We expect to remain in compliance with these covenants for the foreseeable future.
Production volumes sold The following table presents historical sales volumes for our properties: Year Ended December 31, 2022 2021 2020 Oil (MBbls) 21,865 13,237 13,132 Natural gas (MMcf) 128,470 89,455 78,541 NGLs (MBbls) 7,110 6,099 5,078 Total (MBoe) 50,387 34,245 31,300 Daily average (MBoe/d) 138 94 86 Total sales volume increased 16,142 MBoe during the year ended December 31, 2022 compared to 2021.
Production volumes sold The following table presents historical sales volumes for our properties: Year Ended December 31, 2023 2022 2021 Oil (MBbls) 24,287 21,865 13,237 Natural gas (MMcf) 130,629 128,470 89,455 NGLs (MBbls) 8,475 7,110 6,099 Total (MBoe) 54,533 50,387 34,245 Daily average (MBoe/d) 149 138 94 Total sales volume increased 4,146 MBoe during the year ended December 31, 2023 compared to 2022.
These non-GAAP measures include the following: • Adjusted EBITDAX; and • Levered Free Cash Flow These are supplemental non-GAAP financial measures used by our management to assess our operating results and assist us make our investment decisions.
These are supplemental non-GAAP financial and liquidity measures used by our management to assess our operating results and assist us make our investment decisions.
Unfavorable adjustments to some of the above listed assumptions would likely be offset by favorable adjustments in other assumptions. For example, the impact of sustained reduced commodity prices would likely be partially offset by lower costs. We did not incur any impairment expense during the year ended December 31, 2021.
Unfavorable adjustments to some of the above listed assumptions would likely be offset by favorable adjustments in other assumptions. For example, the impact of sustained reduced commodity prices would likely be partially offset by lower costs.
Commodity prices and differentials Our results of operations depend upon many factors, particularly the price of commodities and our ability to market our production effectively. 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.
The increase is primarily due to our Western Eagle Ford Acquisitions and our Uinta Transaction. Commodity prices and differentials Our results of operations depend upon many factors, particularly the price of commodities and our ability to market our production effectively. The oil and natural gas industry is cyclical and commodity prices can be highly volatile.
Operating expense. Total operating expense increased $403.6 million, or 66%, in 2022 compared to 2021, driven primarily by the following factors: (i) Lease and asset operating expenses increased $228.0 million, or 79%, in 2022 compared to 2021. Additionally, lease and asset operating expense per Boe increased $1.82 per Boe from $8.45 per Boe to $10.27 per Boe.
Operating expense. Total operating expense increased $65.0 million, or 6%, in 2023 compared to 2022, driven primarily by the following factors: (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 increase was driven by higher realized natural gas prices that resulted in an increase of $258.2 million (an increase of 51% per Mcf) and a $154.5 million increase from higher sales volumes (107 MMcf/d, or 44%).
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%).
We expect to remain in compliance with these covenants for the foreseeable future. 82 Table of Contents Capital expenditures Our acquisition and development expenditures consist of acquisitions of proved and unproved property, expenditures associated with the development of our oil and natural gas properties and other asset additions.
Capital expenditures Our acquisition and development expenditures consist of acquisitions of proved and unproved property, expenditures associated with the development of our oil and natural gas properties and other asset additions.
Sources of revenues Our revenues are primarily derived from the sale of our oil, natural gas and NGL production and are influenced by production volumes and realized prices, excluding the effect of our commodity derivative contracts.
Sources of revenues Our revenues are primarily derived from the sale of our oil, natural gas and NGL production and are influenced by production volumes and realized prices, excluding the effect of our commodity derivative contracts. Pricing of commodities are subject to supply and demand as well as seasonal, political and other conditions that we generally cannot control.
Reserve engineering is a subjective process of estimating volumes of economically recoverable oil and natural gas that cannot be measured in an exact manner. Our crude oil and natural gas reserves are based on a combination of proved reserves and risk-weighted probable reserves and require significant judgment.
Crude oil, natural gas and NGL reserves One of the most significant estimates the Company makes is the estimate of proved crude oil, natural gas and NGL reserves. Reserve engineering is a subjective process of estimating volumes of economically recoverable oil and natural gas that cannot be measured in an exact manner.
Given the dynamic nature of these events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will persist. 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.
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.
In connection with each redetermination of the borrowing base, we must maintain mortgages on at least 85% of the PV-9 of the oil and gas properties that constitute borrowing base properties. Our domestic direct and indirect subsidiaries are required to be guarantors under the Revolving Credit Facility, subject to certain exceptions.
In connection with each redetermination of the borrowing base, we must maintain mortgages on at least 85% of the PV-9 of the oil and gas properties that constitute borrowing base properties.
Cash flows The following table summarizes our cash flows for the periods indicated: 80 Table of Contents Year Ended December 31, (in thousands) 2022 2021 2020 Net cash provided by operating activities $ 1,012,372 $ 233,147 $ 411,028 Net cash used in investing activities (1,124,344) (244,595) (124,940) Net cash (used in) provided by financing activities (7,841) 105,145 (272,089) Net cash provided by operating activities .
Cash flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 Net cash provided by operating activities $ 935,769 $ 1,012,372 Net cash used in investing activities (1,398,800) (1,124,344) Net cash (used in) provided by financing activities 456,456 (7,841) Net cash provided by operating activities .
This increase was partially offset by $16.0 million in lower transaction and nonrecurring expenses.
These increases were partially offset by $2.0 million in lower transaction and nonrecurring expenses.
The following table presents our total unrealized and realized gain (loss) on derivatives for the periods presented: Year Ended December 31, 2022 2021 $ Change % Change Gain (loss) on derivatives (in thousands) Gain (loss) on commodity derivatives $ (676,902) $ (865,994) $ 189,092 (22 %) Gain (loss) on interest rate derivatives — (26) 26 (100 %) Gain (loss) on derivatives $ (676,902) $ (866,020) $ 189,118 (22 %) Our loss on commodity derivatives in 2022, decreased $189.1 million, or 22%, compared to 2021 primarily due to changes in commodity prices relative to our strike price.
The following table presents our total unrealized and realized gain (loss) on derivatives for the periods presented: Year Ended December 31, 2023 2022 $ Change % Change Gain (loss) on derivatives (in thousands) Gain (loss) on commodity derivatives $ 166,980 $ (676,902) $ 843,882 (125 %) Gain (loss) on derivatives $ 166,980 $ (676,902) $ 843,882 (125 %) 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.
In 2022, we incurred interest expense of $95.9 million, as compared to $50.7 million in 2021, a 89% increase. The increase was primarily driven by higher interest rates associated with the issuance of the 2026 Notes and an increase in our weighted average debt outstanding during the period.
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.
During 2022, we determined that there was a triggering event requiring an evaluation of whether the carrying value of our oil and natural gas properties was recoverable as a result of our annual goodwill impairment test. Following an assessment of our oil and natural gas properties, we recorded impairment expense of $65.2 million during the year ended December 31, 2022.
During the years ended December 31, 2023 and 2022, we determined that there were triggering events requiring an evaluation of whether the carrying value of our oil and natural gas properties was recoverable.
General and administrative expense ("G&A") increased $6.6 million, or 8%, in 2022 compared to 2021, driven primarily by $14.3 million related to 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.
General and administrative expense ("G&A") increased $55.9 million, or 66%, in 2023 compared to 2022, driven primarily by (i) an increase in non-cash equity-based compensation expense of $44.9 million (includes additional catch up expense of $30.4 million due to change in estimate) and (ii) 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 table below presents our capital expenditures and related metrics that we use to evaluate our business for the periods presented: Year Ended December 31, (in thousands) 2022 2021 2020 Total development of oil and natural gas properties $ 624,880 $ 194,828 $ 110,126 Change in accruals and other non-cash adjustments (32,173) (39,221) 16,038 Cash used in development of oil and natural gas properties 592,707 155,607 126,164 Cash used in acquisition of oil and natural gas properties 626,620 115,076 — Non-cash acquisition of oil and natural gas properties — 647,579 454,599 Total expenditure on acquisition and development of oil and natural gas properties $ 1,219,327 $ 918,262 $ 580,763 Our development of oil and natural gas properties was higher during the year ended December 31, 2022, compared to the year ended December 31, 2021.
The table below presents our capital expenditures and related metrics that we use to evaluate our business for the periods presented: Year Ended December 31, (in thousands) 2023 2022 Total development of oil and natural gas properties $ 578,316 $ 624,880 Change in accruals and other non-cash adjustments 3,034 (32,173) Cash used in development of oil and natural gas properties 581,350 592,707 Cash used in acquisition of oil and natural gas properties 849,254 626,620 Non-cash acquisition of oil and natural gas properties — — Total expenditure on acquisition and development of oil and natural gas properties $ 1,430,604 $ 1,219,327 The decrease in our development of oil and natural gas properties costs in 2023 is primarily related to the timing of our operations.
The payment of quarterly cash dividends is subject to management’s evaluation of our financial condition, results of operations and cash flows in connection with such payments and approval by our Board of Directors. In light of current economic conditions, management will evaluate any future increases in cash dividend on a quarterly basis.
OpCo unitholders will also receive a distribution based on their pro rata ownership of OpCo Units. 83 Table of Contents The payment of quarterly cash dividends is subject to management’s evaluation of our financial condition, results of operations and cash flows in connection with such payments and approval by our Board of Directors.
This increase was driven primarily by higher oil and natural gas revenues, which increased the tax base upon which production and other taxes are calculated. (iv) Workover expense increased $56.0 million in 2022 compared to 2021, and increased $1.01 per Boe from $0.32 per Boe to $1.33 per Boe.
(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.
Results of operations: Year ended December 31, 2022 compared to year ended December 31, 2021 Revenues The following table provides the components of our revenues, respective average realized prices and net sales volumes for the periods indicated: 75 Table of Contents Year Ended December 31, 2022 2021 $ Change % Change Revenues (in thousands): Oil $ 1,969,070 $ 883,087 $ 1,085,983 123 % Natural gas 766,962 354,298 412,664 116 % Natural gas liquids 268,192 185,530 82,662 45 % Midstream and other 52,841 54,062 (1,221) (2 %) Total revenues $ 3,057,065 $ 1,476,977 $ 1,580,088 107 % Average realized prices, before effects of derivative settlements: Oil ($/Bbl) $ 90.06 $ 66.71 $ 23.35 35 % Natural gas ($/Mcf) $ 5.97 $ 3.96 $ 2.01 51 % NGLs ($/Bbl) $ 37.72 $ 30.42 $ 7.30 24 % Total ($/Boe) $ 59.62 $ 41.55 $ 18.07 43 % Net sales volumes: Oil (MBbls) 21,865 13,237 8,628 65 % Natural gas (MMcf) 128,470 89,455 39,015 44 % NGLs (MBbls) 7,110 6,099 1,011 17 % Total (MBoe) 50,387 34,245 16,142 47 % Average daily net sales volumes: Oil (MBbls/d) 60 36 24 67 % Natural gas (MMcf/d) 352 245 107 44 % NGLs (MBbls/d) 19 17 2 12 % Total (MBoe/d) 138 94 44 47 % Oil revenue .
Results of operations: Year ended December 31, 2023 compared to year ended December 31, 2022 Revenues The following table provides the components of our revenues, respective average realized prices and net sales volumes for the periods indicated: 74 Table of Contents Year Ended December 31, 2023 2022 $ Change % Change Revenues (in thousands): Oil $ 1,750,961 $ 1,969,070 $ (218,109) (11 %) Natural gas 371,066 766,962 (395,896) (52 %) Natural gas liquids 192,870 268,192 (75,322) (28 %) Midstream and other 67,705 52,841 14,864 28 % Total revenues $ 2,382,602 $ 3,057,065 $ (674,463) (22 %) Average realized prices, before effects of derivative settlements: Oil ($/Bbl) $ 72.09 $ 90.06 $ (17.97) (20 %) Natural gas ($/Mcf) $ 2.84 $ 5.97 $ (3.13) (52 %) NGLs ($/Bbl) $ 22.76 $ 37.72 $ (14.96) (40 %) Total ($/Boe) $ 42.45 $ 59.62 $ (17.17) (29 %) Net sales volumes: Oil (MBbls) 24,287 21,865 2,422 11 % Natural gas (MMcf) 130,629 128,470 2,159 2 % NGLs (MBbls) 8,475 7,110 1,365 19 % Total (MBoe) 54,533 50,387 4,146 8 % Average daily net sales volumes: Oil (MBbls/d) 67 60 7 12 % Natural gas (MMcf/d) 358 352 6 2 % NGLs (MBbls/d) 23 19 4 21 % Total (MBoe/d) 149 138 11 8 % Oil revenue .
This increase was driven by higher realized NGL prices that resulted in an increase of $51.9 million (an increase of 24% per Bbl) and a $30.8 million increase from higher sales volumes (2 MBbl/d, or 12%).
This decrease was driven by lower realized NGL prices that resulted in a decrease of $126.8 million (a decline of 40% per Bbl) and a $51.5 million increase from higher sales volumes (4 MBbl/d, or 21%). The increase in sales volumes was primarily driven by our Western Eagle Ford Acquisitions. Midstream and other revenue .
Net cash provided by operating activities for the year ended December 31, 2022 increased by $779.2 million, or 334%, compared to 2021, primarily due to higher Adjusted EBITDAX and the restructuring of certain derivative contracts in 2021, partially offset by the restructuring of certain oil commodity derivative contracts acquired in connection with the Uinta Transaction.
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. Net cash used in investing activities .
Oil revenue increased $1,086.0 million, or 123%, in 2022 compared to 2021. This increase was driven by higher realized oil prices that resulted in an increase of $510.4 million (an increase of 35% per Bbl) and a $575.6 million increase from higher sales volumes (24 MBbl/d, or 67%).
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%).
We believe that this stewardship, and our success, requires an alignment with the interests of our stakeholders including our employees, investors, customers, suppliers and society at large. 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.
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.
Midstream and other revenue decreased $1.2 million, or 2%, in 2022 compared to 2021, driven primarily by the production decline from some of our legacy asset areas. 76 Table of Contents Expenses The following table summarizes our expenses for the periods indicated and includes a presentation on a per Boe basis, as we use this information to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis: Year Ended December 31, 2022 2021 $ Change % Change Expenses (in thousands): Operating expense $ 1,013,298 $ 609,722 $ 403,576 66 % Depreciation, depletion and amortization 532,926 312,787 220,139 70 % Impairment expense 142,902 — 142,902 NM* General and administrative expense 84,990 78,342 6,648 8 % Other operating costs (1,216) (7,613) 6,397 (84 %) Total expenses $ 1,772,900 $ 993,238 $ 779,662 78 % Selected expenses per Boe: Operating expense, excluding production and other taxes $ 15.38 $ 14.62 $ 0.76 5 % Production and other taxes 4.73 3.18 1.55 49 % Depreciation, depletion and amortization 10.58 9.13 1.45 16 % * NM = Not meaningful.
Midstream and other revenue increased $14.9 million, or 28%, in 2023 compared to 2022, due to additional oil blending revenue in 2023. 75 Table of Contents Expenses The following table summarizes our expenses for the periods indicated and includes a presentation on a per Boe basis, as we use this information to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis: Year Ended December 31, 2023 2022 $ Change % Change Expenses (in thousands): Operating expense $ 1,078,339 $ 1,013,298 $ 65,041 6 % Depreciation, depletion and amortization 675,782 532,926 142,856 27 % Impairment expense 153,495 142,902 10,593 NM* General and administrative expense 140,918 84,990 55,928 66 % Other operating costs 9,328 (1,216) 10,544 (867 %) Total expenses $ 2,057,862 $ 1,772,900 $ 284,962 16 % Selected expenses per Boe: Operating expense $ 19.77 $ 20.11 $ (0.34) (2) % Depreciation, depletion and amortization 12.39 10.58 1.81 17 % * NM = Not meaningful.
New and revised accounting standards See “Notes to the combined and consolidated financial statements— NOTE 2-Summary of Significant Accounting Policies .” Non-GAAP financial measures Our “Management’s Discussion and Analysis of Financial Condition and Results of Operations ” includes financial measures that have not been calculated in accordance with U.S. GAAP.
Non-GAAP financial measures Our “Management’s Discussion and Analysis of Financial Condition and Results of Operations ” includes financial and liquidity measures that have not been calculated in accordance with U.S. GAAP. These non-GAAP measures include the following: • Adjusted EBITDAX; and • Levered Free Cash Flow.
Pricing of commodities are subject to 73 Table of Contents supply and demand as well as seasonal, political and other conditions that we generally cannot control. Our revenues may vary significantly from period to period as a result of changes in volumes of production sold or changes in commodity prices.
Our revenues may vary significantly from period to period as a result of changes in volumes of production sold or changes in commodity prices.
During the year ended December 31, 2022, we evaluated our Goodwill and Oil and natural gas properties and determined that certain amounts were impaired. We recorded impairment charges totaling $142.9 million as a result of our evaluations, including $77.7 million related to Goodwill and $65.2 million related to Oil and natural gas properties.
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. 76 Table of Contents General and administrative expense.
We believe that the presentation of these non-GAAP financial measures provides investors with greater transparency with respect to our results of operations, as well as liquidity and capital resources, and that these measures are useful for period-to-period comparison of results.
We believe that the presentation of these non-GAAP measures provides investors with greater transparency with respect to our results of operations, as well as liquidity and capital resources, and that these measures are useful for period-to-period comparison of results. 86 Table of Contents We define Adjusted EBITDAX as net income (loss) before interest expense, income tax expense (benefit), depreciation, depletion and amortization, exploration expense, non-cash gain (loss) on derivatives, impairment expense, non-cash equity-based compensation, (gain) loss on sale of assets, other (income) expense and transaction and nonrecurring expenses.
We used cash of $626.6 million in 2022 for the acquisition of oil and natural gas properties, primarily related to the Uinta Transaction, as compared to $115.1 million in 2021 which primarily related to the DJ Basin and Central Basin Acquisitions.
We used cash of $849.3 million in 2023 for the acquisitions of oil and natural gas properties, primarily related to Western Eagle Ford Acquisitions, as compared to $626.6 million in 2022, primarily related to the Uinta Transaction. See “Notes to Combined and Consolidated Financial Statements— NOTE 3 - Acquisitions and Divestitures in "Part II., Item 8.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTo reduce the impact of fluctuations in oil, natural gas and NGLs prices on our cash flows, we regularly enter into commodity derivative contracts with respect to certain of our oil, natural gas and NGL production through various transactions that limit the risks of fluctuations of future prices.
Biggest changeThe prices we receive for our production depend on many factors outside of our control, such as the strength of the global economy and global supply and demand for the commodities we produce. 87 Table of Contents To reduce the impact of fluctuations in oil, natural gas and NGLs prices on our cash flows, we regularly enter into commodity derivative contracts with respect to certain of our oil, natural gas and NGL production through various transactions that limit the risks of fluctuations of future prices.
Amounts not offset on the consolidated balance sheets represent positions that do not meet all of the conditions to be netted on such balance sheet, such as the legally enforceable right of offset or the execution of a master netting arrangement. See "Notes to the Combined and Consolidated Financial Statements, NOTE 5 – Derivatives" in "Part II., Item 8.
Amounts not offset on the consolidated balance sheets represent positions that do not meet all of the conditions to be netted on such balance sheet, such as the legally enforceable right of offset or the execution of a master netting arrangement. See "Notes to Combined and Consolidated Financial Statements, NOTE 5 – Derivatives " in "Part II., Item 8.
Inputs include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Based upon our open commodity derivative positions at December 31, 2022, a hypothetical 10% increase or decrease in the NYMEX WTI, Brent price, Henry Hub Index price, NGL prices and basis prices would change our net commodity derivative position.
Inputs include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Based upon our open commodity derivative positions at December 31, 2023, a hypothetical 10% increase or decrease in the NYMEX WTI, Brent price, Henry Hub Index price, NGL prices and basis prices would change our net commodity derivative position.
For the years ended December 31, 2022, 2021 and 2020, we had certain major customers that exceeded 10% of total revenues. See "Part I., Items 1 and 2.
For the years ended December 31, 2023, 2022 and 2021, we had certain major customers that exceeded 10% of total revenues. See "Part I., Items 1 and 2.
Business and Properties—Marketing and customers.” We do not believe the loss of any single 88 Table of Contents customer would materially impact its operating results because oil, natural gas and NGLs are fungible products with well-established markets and numerous purchasers.
Business and Properties—Marketing and customers.” We do not believe the loss of any single customer would materially impact its operating results because oil, natural gas and NGLs are fungible products with well-established markets and numerous purchasers.
If prices increased by 10%, our derivative position would change by approximately $165.5 million. If prices decreased by 10%, our derivative position would change by approximately $165.2 million. The hypothetical change in fair value could be a gain or a loss depending on whether commodity prices decrease or increase.
If prices increased by 10%, our derivative position would change by approximately $130.4 million. If prices decreased by 10%, our derivative position would change by approximately $124.7 million. The hypothetical change in fair value could be a gain or a loss depending on whether commodity prices decrease or increase.
As of December 31, 2022, our derivative portfolio had an aggregate notional value of approximately $1.4 billion, and the fair market value of our commodity derivative contracts was a net liability of $0.4 billion. We determine the fair value of our oil and natural gas commodity derivatives using valuation techniques that utilize market quotes and pricing analysis.
As of December 31, 2023, our derivative portfolio had an aggregate notional value of approximately $1.7 billion, and the fair market value of our commodity derivative contracts was a net asset of $20.3 million. We determine the fair value of our oil and natural gas commodity derivatives using valuation techniques that utilize market quotes and pricing analysis.
The creditworthiness of our counterparties is subject to periodic review. Interest rate risk At December 31, 2022, we had $559.4 million of variable rate debt outstanding.
The creditworthiness of our counterparties is subject to periodic review. Interest rate risk At December 31, 2023, we had $23.5 million of variable rate debt outstanding.
Assuming no change in the amount outstanding, the impact on interest expense of each 1% (or 100 basis point) increase or decrease in the average interest rate would result in an approximately $5.6 million increase or decrease in interest expense on our variable rate debt outstanding at December 31, 2022. 89 Table of Contents
Assuming no change in the amount outstanding, the impact on interest expense of each 1% (or 100 basis point) increase or decrease in the average interest rate would result in an approximately $0.2 million increase or decrease in interest expense per year on our variable rate debt outstanding at December 31, 2023. 88 Table of Contents
Removed
The prices we receive for our production depend on many factors outside of our control, such as the strength of the global economy and global supply and demand for the commodities we produce.

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