Initiation of Coverage Crescent Energy: If You Build In The Permian, Returns Will Come; Initiate At Buy

Research evidence excerpt

Initiation of Coverage Crescent Energy: If You Build In The Permian, Returns Will Come; Initiate At Buy

In the near-term, CRGY will focus on developing the more proven formations, with a

greater tilt to the Delaware over the Midland. Mgmt. does see potential inventory upside

through delineation, with the Woodford bench in the Midland one formation being

appraised by the industry CRGY is evaluating. However, we expect that CRGY places

more of its near-term focus on its acreage's proven parts, with less focus on delineating

new or unbooked portions of its footprint. We show the breakdown between CRGY's

estimated locations by asset in Figure 2, and the potential total upside locations for

each area, as estimated by industry third-parties, with more upside in the Midland.

Figure 2: CRGY's Estimated Permian Locations By Asset

ted P

ima

Est

Asset

By s

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RGY

C

ermian L ocation

Source: Company Reports

While the Permian remains a competitive A&D market, we expect that CRGY looks to

build more Permian scale, with it already highlighting an interest in acreage trades to

further block up its position. CRGY is interested in both undeveloped or producing

assets, with its primary determinant for M&A being returns-driven, and meeting its

hurdle for a deal. As of 1Q26, CRGY had added ~100k incremental lateral feet in the

play, through trades and land optimization. We see CRGY as having less relative interest

in the NM Northern Delaware vs. other regions, given high recent transaction prices.

Beyond optimizing rig levels, CRGY has made impressive progress integrating VTLE and

extracting savings. At the time of the acquisition, CRGY projected that it would achieve

$90-$100mm of estimated annual synergies from the purchase over the next twelve

months.