We are now focused on optimization and have seen impressive early results, with $120 million in synergies captured to date, already exceeding our original target. To provide a few examples, we have improved the operational planning around our development program, efficiently increasing wells per pad and adding roughly 100 thousand incremental lateral feet to our 2026 plan through offset acreage trades and land optimization. We have accelerated cycle times and are currently ahead of our 2026 development plan, and we are already having success reducing well costs. From rebidding service contracts to changing fuel usage and facility design, we have achieved over 500 thousand dollars of savings per well versus the prior operator. These are not one-off wins.

They reflect Crescent Energy Company’s operating model and our track record of buying assets and making them better. Importantly, we still see meaningful upside from here. In the Uinta, we have had strong execution, with well costs down roughly 20% year-over-year as we implement the same proven approach you have seen from us in the Eagle Ford. Implementing simul-frac, increasing efficiency, and extending laterals are just a few of the tools we have brought to the basin to optimize the capital program and increase well returns. Activity this year remains focused on our core Utelem Butte development.

Additionally, after strong results in additional formations across the basin and on our acreage, we are investing more capital toward the prudent delineation of our broader resource opportunity. With our meaningful cost improvements and the tremendous stacked resource potential across our position, we see significant opportunity for value creation ahead of us in the Uinta. Our minerals and royalties business has shown similar strong performance. Our portfolio of world-class resource and high-margin cash flow provides valuable exposure to cost-free organic growth, and at current prices, we expect the portfolio to generate approximately $200 million of EBITDA this year, representing a meaningful increase versus our original guidance.

Across the portfolio, the results are clear: we are executing well, improving our assets, and generating strong returns and significant cash flow. Our unique combination of investing and operating skills delivered this quarter, and Crescent Energy Company is better positioned than ever before to continue delivering impressive results and long-term value for investors. With that, I will turn the call over to Brandi.

Brandi Kendall:Thanks, David. Crescent Energy Company delivered another quarter of strong financial results, generating approximately $690 million of adjusted EBITDA and approximately $192 million of levered free cash flow. These results reflect both strong execution and a portfolio built to generate outsized free cash flow. During the quarter, we also improved our cost of capital through an opportunistic refinancing. We reduced interest expense, extended maturities, and further strengthened the balance sheet, all of which support higher free cash flow going forward. Our capital allocation framework remains consistent and disciplined. First, the dividend. We declared a $0.12 per share dividend for the quarter, continuing our long history of returning cash to shareholders. Second, we remain committed to maintaining a strong balance sheet.

We ended the quarter with approximately $2 billion of liquidity, no near-term debt maturities, and a clear pathway to lower absolute leverage over time. Third, our free cash flow provides significant flexibility. At current prices, we expect to generate approximately $1 billion of levered free cash flow in 2026, which gives us the ability to reduce debt, fund accretive M&A, and repurchase shares when appropriate. Our focus remains on long-term per-share value creation, and our scale, cash flow profile, and balance sheet strength give us multiple ways to achieve that. With that, I will turn the call back to David.

David C. Rockecharlie:Thanks, Brandi. Before we open the call for Q&A, I want to reiterate our key messages. First, our base business continues to outperform. We exceeded expectations on production, delivered strong financial results, and continued to improve the efficiency of our operations. Second, our Permian integration is ahead of plan. We have already exceeded our initial synergy target and see further upside ahead. Third, our differentiated combination of investing and operating expertise continues to deliver strong returns and significant free cash flow. Not long ago, Crescent Energy Company was a new public company producing just over 100 thousand barrels of oil equivalent per day.

Since then, we have driven profitable growth, significant free cash flow, and meaningful operating efficiencies to create a top-10 U.S. independent oil and gas producer delivering impressive results like you have seen today. Our strategy remains consistent, and with more scale, more focus, and more opportunity than ever before, we believe Crescent Energy Company has never been better positioned to deliver impressive performance and long-term value in the months and years ahead. We will now open the call for questions.

Operator:Thank you. Ladies and gentlemen, we will now begin the question and answer session. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Ladies and gentlemen, we will wait for a moment while we poll for questions. We take the first question from the line of Neal Dingmann from William Blair. Please go ahead.

Neal Dingmann:Morning. Nice quarter. David, my first question is just on your operational efficiency, specifically, how much upside are you already seeing on the Vital assets? It seems like you are already very quickly seeing some upside there. Would love to hear color.

Joey:Hey, Neal. I will take that one. We have really hit the ground running. The way I like to describe how we have attacked this is taking our integration capabilities and moving from a defensive position to an offensive position as quickly as we can. I really like the way slide seven frames it. We wanted to stabilize as quickly as we could. Slowing down the activity helps. I liken it to how they talk about football: slowing the game down helped us immensely. We have quickly moved into the optimization process.

Some of the first things we did were rebidding our services, which was incredibly timely because we had some 100% diesel fleets operating and we were able through the bidding process to find some dynamic gas blending fleets, DGB fleets. If I were to talk about one lever that would be the biggest one we have really hit to reduce our cost, it is displacing 55% to 75% of the diesel, particularly in light of diesel costs currently and also with the gas prices that we are getting in the Permian.

It was a huge win, and you can see the impact of that on slide 12, which I really like as well, being able to get a $25 per foot reduction. That was a big one. Things coming down the pipe are the same playbook: larger pads, implementing simul-frac. The previous operator had done maybe one or two pads towards the end, and we are doing as many pads as we can. I think we are going to be approaching 50% of our wells this year with simul-frac. Then doing the things that we do: reducing cycle time, right-sizing artificial lift, reducing facility sizes.

The opportunities are plentiful, and I am really proud of how well the team has hit the ground running.

Neal Dingmann:Great. And then secondly, wondering, we saw Diamondback boost activity. Just wondering what it would take for you all to do something similar, maybe a rig or two.

David C. Rockecharlie:Hey, Neal. I will just start by taking a quick step back and reiterating why we talk so much about investing and operating. Deployment of capital is investing. We are very pleased with the M&A that has taken place over the last three years. That is dollars in the ground in a $60 oil price environment. In today’s environment, we think we should be grabbing as much cash flow as we can for the benefit of investors. We do not see increasing rig activity into a higher price environment. We see producing barrels at really high margin and returning cash to the balance sheet and investors.

Operator:Thank you. We take the next question from the line of Zach Parham from JPMorgan. Please go ahead.

Zach Parham:Yes, thanks for taking my question. First, just wanted to ask in the Permian: Waha spot today is around negative $4. Futures indicate that it gets quite a bit better later this year with new pipes coming online. I think Vital had quite a bit of Waha exposure, so I am assuming that is still the case with your Permian asset. How do you factor that into your operations? Do you think about holding back the timing of some turn-in-lines or shutting in some higher GOR wells in the basin with where Waha is today?

Brandi Kendall:Hey, Zach. I would say as we sit here today, we are very well hedged from a Waha standpoint over the next 24 months in the mid-$2s. We feel like we have a lot of protection there.

Zach Parham:Okay, thanks. And then, David, maybe just following up on one thing you said in your prepared remarks, talking about the delineation of broader resource opportunity in the Uinta. Could you unpack that a little bit more? What other zones do you plan to test in the near term? What is the timeline there? Just curious for some more color.

Clay Rynd:Hey. It is Clay. As we mentioned in the remarks, early in the year we have been focused on the Butte. As we get into the back half of the year, you will see us continue to drill with confidence but take passive delineation opportunities. We mentioned a JV we had on the northeastern side of our acreage that we felt really good about and continue to lean into that. Thinking about where we are focused, you can see more of the same as you think about the upper Cube. You see activity in the upper Cube across the play and the results we have seen early on our asset that we are really excited about.

More to come, but we are excited about the opportunity set for us.

Operator:We take the next question from the line of John Freeman from Raymond James. Please go ahead.

John Freeman:Good morning. Thanks. When I look at the nice 1Q beat, and even though I know you all have not officially changed your full-year production guidance, given the strong first quarter beat and the extra footage that you all are adding, it seems likely that you are going to do better than that original guide. When I break down the drivers of this outperformance between the faster cycle times that you mentioned in the Permian and the base outperformance, which I assume is your waves of this optimized workover program, is there any way you can flesh that out between how much of the 1Q upside was driven by the base outperformance relative to the improved cycle times?

Brandi Kendall:Hi, John. I would say it is roughly 50/50: better cycle times in the Permian and then optimizing the base.

John Freeman:Perfect. And then just the follow-up for me: as you have continued to provide more details about Crescent Energy Company Royalties the last few quarters and continue to build out that business, when you look at the leverage on Crest Royalties—obviously with Crescent Energy Company E&P you have stated leverage targets. I know royalties right now is about 1.9 times. Is that sort of the right zip code for that type of business? Is there any sort of targets that we should be thinking about with that business, similar to how we think about the E&P?

Brandi Kendall:Hey, John. I will take this. We would expect to be 1.5 times or below on the minerals business as we exit the year. The asset base, as we flagged in the materials at today’s commodity prices, is generating close to $200 million of free cash flow. So that free cash flow will go to the balance sheet there. Similar zip code as we think about the working-interest business from a leverage perspective.

John Freeman:Got it. Thanks. Nice quarter.

Operator:Thank you. We take the next question from the line of Michael Furrow from Pickering Energy Partners. Please go ahead.

Michael Webb Furrow:Hey, good morning. Thanks for taking our questions. Wanted to touch on the improved cycle times again and what they could mean for the overall broader business. The efficiency gains are clearly positive, especially at current oil prices, but one caveat is that accelerated activity could put some pressure on the corporate decline rate. That said, it looks like the base production appears to be performing well. Can you walk us through some of the key drivers behind the base business outperformance and how you are thinking about further optimizing that decline rate from here?

David C. Rockecharlie:Yes. I will just start with: better performance is better performance. We feel great about how things are going. To your point, getting some barrels sooner is not going to fundamentally change decline rate. We really focus on that as a business, as you know. We feel very comfortable with our capital discipline and our ability to maintain the production base where we want it. I will turn it to Joey to give some perspective on further outlook, but the punch line for me is that we have been able to integrate the business faster and make change sooner, and that is just getting us more value sooner.

Joey:Michael, I get your question that whenever you get faster on things, you have the opportunity to bring more activity in and how that impacts capital. The other thing I would point to is significant reduction we are demonstrating on our well costs. A lot of this increased activity we are paying for. We have indicated even on the West Texas asset a 500 thousand dollar per well reduction in well cost. That will go a long way toward adding a little bit of activity. The other things we have talked about—through acreage trades, adding 100 thousand extra feet, not leaving stranded resource, all those things.

At the end of the day, I like the way David said it: efficiency gains are definitely a positive, and then we just balance how the rest of the year plays out by doing everything we can to keep our well costs down.

Michael Webb Furrow:Thanks for that. As a follow-up, I want to piggyback off the same subject, the improved cycle times and efficiency gains. You previously mentioned that maximizing cash flows is the objective. Looking later in the year, in the event that operations continue at this pace and the company is faced with a decision on whether to reach or extend the planned number of wells or capital for the year, do you think you will maintain this operational cadence and efficiencies by seeing both production and CapEx higher, or will activity and spending be the governor here?

David C. Rockecharlie:Short answer is that our focus on the corporate targets of decline rate, reinvestment rate, and returns is always going to drive everything. As you also know, given the new assets we brought in, we have guided to the ability to move up or down one rig throughout the year across the whole portfolio. Long story short, the activity levels and the business plan are generally already baked in, and a higher price environment just means more cash flow. I do not think you will see us change fundamentally anything as it relates to that, given the flexibility we have already got at the margin.

Brandi Kendall:Michael, maybe what I would add: no formal change to production or capital guidance for the full year. But given performance to date, and to David’s point, given where commodity prices are, we would expect to be between the mid and the high point on both production and capital.

Michael Webb Furrow:Alright. Thank you. That is clear. Appreciate your time.

Operator:We take the next question from the line of Oliver Huang from TPH. Please go ahead.

Oliver Huang:Good morning, all, and thanks for taking our questions. Just wanted to start out on the synergy side. Great to see you all exceeding the initial target already. As we look forward, could you provide a composition of what remains to be achieved to hit the updated target from last quarter? Just trying to get some better insight to the line of sight there.

Brandi Kendall:Hey, Oliver. What we have captured to date is largely overhead, cost of capital, and starting to bring forward the operational synergies. What is left for us: I think there is additional room for us to improve cost of capital. I will let Joey talk about what we are focused on from an ops standpoint, and there are also opportunities to further optimize our marketing efforts—not just in the Permian, but across our portfolio.

Joey:Good morning, Oliver. We have already talked about some of the capital opportunities we have identified, particularly with DGB fleets and reducing our diesel usage. Same points on larger pads, longer laterals, increasing our capital efficiency. A specific example of the way that we are looking at things differently—focusing on value versus chasing volumes—artificial lift is a perfect example. Rather than put in the largest ESP that we can to chase a high volume, we would have deference to putting in an appropriately sized ESP that will last longer, maybe all the way up till its next conversion.

You eliminate a workover and a change-out of an ESP that could cost as much as 250 thousand dollars, and you are not chasing those peak volumes. The other thing it allows you to do because you are not chasing those peak volumes is reduce your facility size, again reducing CapEx. We have identified the number of failures that we can eliminate that reduces our workover activity significantly, because we had seen a tendency to work over some of the wells multiple times, and we are focused on how we can get rid of those capital workovers. We are doing everything we can to attack LOE as well, and the opportunities there are plentiful.

We are looking forward to continuing the pace we started at the beginning and continuing that through the year.

Oliver Huang:Okay. Awesome. That is helpful color. Maybe for a second question, to stick with the Permian: could you remind us when we might expect to see the first start-to-finish Crescent Energy Company–designed well, given all the progress on the integration front? And just trying to get a sense for how much of this is being reflected in the well-cost slides with respect to the large pad sizes, longer laterals, simul-frac usage.

Joey:I would say it is going to be a bit of a journey. Obviously, we inherited a drill schedule. We have had the opportunity to make some modifications, but on the front end it has been primarily what we can do operationally to reduce the cost of what we have. The increased pad size and longer laterals are things that are going to start to play out in the latter part of the year and into early next year. That is encouraging because we have had so much early success just hitting our operational efficiencies and reducing costs through some pretty simple changes.

It keeps me optimistic that some of these other things that are going to be coming with time are going to keep the journey going. It will take a little time for us to have our development plan fully implemented toward the end of the year into next year.

Brandi Kendall:And maybe just to add, we think there is outperformance to the 500 thousand dollar reduction in well cost that we have captured.

Operator:We take the next question from the line of Phil Jungwirth from BMO Capital Markets. Please go ahead.

Ajay Bhukshani:Hey, this is Ajay Bhukshani on for Phil. Great quarter, and thanks for taking our question. I know it is early with the integration, and although you have already achieved quite a bit, can you talk about your initial assessment around Vital inventory in terms of low-risk versus total locations? How close are you to having Crescent Energy Company’s view of total inventory, and how are you viewing upside to Permian low-risk locations and moving more wells to this category?

Clay Rynd:It is Clay. As you just heard from Joey, we are really excited about where we are today. The focus on operational execution and the ability to put points on the board is real. We continue to be excited about the overall inventory opportunity. You heard in David’s prepared remarks our excitement about the acquisition overall and where we sit today. We have a lot ahead of us. It will be an ongoing evolution, but looking at where we sat when we announced the acquisition, we are more encouraged on all fronts, including the inventory side.

Ajay Bhukshani:Great, thanks. For my next one, how has the stronger commodity environment changed, if at all, how you approach the A&D market with Crescent Energy Company Royalties? I bet you got those two deals off before the run-up. If you could also touch on how you are viewing A&D for Crescent Energy Company E&P in this market as well, that would be great. Thanks.

Clay Rynd:You mentioned it. We are really excited about what we accomplished across the business. Over the last couple of years, into a very different macro environment, we were able to meaningfully scale the business accretively. The opportunity set—obviously with the royalties business, with the scale Permian entry, and meaningfully scaling our Eagle Ford business where we are the third-largest producer today. When we think about go-forward, the opportunity set that we see internally for the business has never been greater. We have a ton of value-creation opportunity under our control. Looking at the A&D market, there has been a lot of volatility on the commodity side.

You have not seen an oil-weighted transaction get announced since the start of the conflict in mid to late February. We continue to be disciplined evaluators of assets, and you would expect us to continue that in this market environment. That includes both across the base E&P business and the royalty asset. With the portfolio we have built, we have never been in a better position of strength, but we will be disciplined acquirers and disciplined evaluators, and we are really excited about the opportunities that we control today.

Operator:We take the next question from the line of John Abbott from Wolfe Research. Please go ahead.

John Abbott:Hey, good morning, and thank you for taking our questions. Question is really early thoughts on 2027. Brandi has already mentioned that for 2026 you will likely be in the upper half—mid to upper half—of CapEx and production guidance. If we continue to have strong commodity prices, looking to 2027, what are the early puts and takes as we think about next year? Do you get to the 25% decline rate? Do you change potentially the number of Permian rigs? Joey just talked about 50% simul-frac this year in the Permian—maybe that could go higher. What are the early puts and takes as we think about 2027?

David C. Rockecharlie:Hey, John. Great question. Without getting into too much detail too early, I think you know us well enough to know that we are going to continue to do more of the same and do it better. Very steady focus on production levels—we talk about maintaining flat to very modest growth through the drill bit. We expect to continue to drive performance both on the production and D&C side, but also on the cost side. We love to continue to generate significant free cash flow following all the core principles: decline rate, reinvestment rate, return on our capital, and strong free cash flow benefiting investors.

Call it more of the same in 2027 and, hopefully, a very stable and continually improving business.

John Abbott:And the next question is for Brandi. Brandi, there was a $140 million working capital draw during the quarter. Is it correct to assume that reverses over the course of the year? Additionally, how are you thinking about cash taxes if higher commodity prices persist?

Brandi Kendall:Great questions, John. Working capital—I would expect that to unwind next quarter, and I would say it is largely related to the A&D transaction that we closed at the end of the fourth quarter. From a cash tax standpoint, specifically with respect to 2026, we have significant tax assets to offset any expected taxable income. Over the longer term, we would expect to become a cash taxpayer in an $80+ WTI environment.

Operator:We take the next question from the line of Hanwen Chang from Wells Fargo. Please go ahead.

Hanwen Chang:Could you walk through your current oil marketing exposure—specifically the split between MEH-linked barrels versus WTI-based pricing? And how much of the oil volumes are exposed to spot pricing?

Brandi Kendall:Hey, Hanwen. I think your question is coming from our strong oil realizations this quarter. We printed 99% of WTI. That is a function of the fact that we sell a lot of our South Texas crude based off of MEH, which is technically a waterborne crude, and given what is happening in the Middle East, that is pricing at an incremental premium to how MEH has normally traded. I would say roughly 70% to 75% of our crude across the business prices off of MEH.

Hanwen Chang:Thanks. Given your MEH exposure, how should we think about the second quarter versus the first quarter? Are you seeing potential for further upside, or is 1Q closer to a high point?

Brandi Kendall:With respect to Q2 oil realizations, it is probably in the zip code where Q1 printed.

Operator:We take the next question from the line of Charles Meade from Johnson Rice and Company. Please go ahead.

Charles Arthur Meade:Yes, good morning, David, to you and the whole Crescent Energy Company team. I wanted to ask a question about your CapEx flexibility—specifically reallocating CapEx within the current capital budget to more oily assets. It seems like an obvious place would be moving up-dip in the Eagle Ford, but I think there is also an opportunity in the Permian once the big pipelines come online and gas is not so negative anymore. For example, some of the stuff you have further west in Pecos—once gas goes positive, maybe there is an opportunity to bring on some oil volumes out there. Could you talk about where you see those opportunities and how likely you are to act on them?

David C. Rockecharlie:Great question. I will start with a really simple answer: yes. Your commentary is music to our ears. We pride ourselves on having flexibility within the portfolio. It is one of the really valuable, distinctive things about Crescent Energy Company’s assets that we have put together. Long story short, we have been able to manage that over the last few years, and this year is much the same—meaning we are today about 90%+ allocated to liquids-oriented drilling and will continue to monitor opportunities for the best returns across the portfolio. As you said, we have multiple places where we can allocate more or less capital to liquids and to gas.

We are really just looking for the best returns and the best efficiency. We feel great about the program we have today, but we continue to have flexibility to do exactly what you outlined, and I like how you said it. We will stay focused on that.

Operator:Ladies and gentlemen, as there are no further questions from the participants, I will now hand the conference over to David C. Rockecharlie for his closing comments.

David C. Rockecharlie:Great. As I said at the beginning of the call, I would like to thank again all the investors who have trusted us, all the colleagues here at Crescent Energy Company who have helped build this company into what it is today and who are going to help us take it forward, continue to improve every day, and everyone else who has been along for the ride with us. We think the best days are ahead for us. We have a lot of work to do. We appreciate all the questions on this morning’s call.

We are going to get back to work and look forward to having a very strong series of updates, as I said in the beginning, over the coming months and years as we continue to build Crescent Energy Company into an outstanding business.

Operator:Ladies and gentlemen, the conference of Crescent Energy Company has now concluded. Thank you for your participation. You may now disconnect your lines.

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Crescent Energy (CRGY) Q1 2026 Earnings Transcript was originally published by The Motley Fool