Michael Furrow

Michael Furrow requested clarification on the implied Permian oil rate for Q4, which appeared significantly higher than Q3, despite zero turning lines, asking if any M&A or other transactions contributed to this step-up.

Answer

CFO Brandi Kendall clarified that there were no additional transactions. She explained that the base business outperformed production expectations in Q4, carrying good momentum into 2026. However, she noted that Vital did not bring on any new wells since early October, which is translating into a relatively flat oil production cadence for 2026.

Michael Furrow asked if the acquisition hurdle rates for Crescent Royalties, such as five-year payback periods and a 2x multiple on invested capital, would remain consistent with legacy Crescent's targets, despite it being a different business model. He also sought clarification on the implied Q4 Permian oil rate of nearly 70,000 barrels a day, which represented a significant step up from Q3, especially with zero turning lines disclosed for Q4, asking if there were any undisclosed transactions or moving pieces.

Answer

EVP of Investments Clay Rynd confirmed that the acquisition hurdle rates for Crescent Royalties would remain consistent, focusing on cash flow orientation, a 2x multiple of money, and NAV/free cash flow per share accretion. CFO Brandi Kendall clarified that there were no additional transactions. She stated that the base business outperformed production expectations in Q4, carrying good momentum into 2026, but noted that Vital did not bring on any new wells since early October, leading to a declining trend that translates to a relatively flat oil production cadence for 2026.

Michael Furrow of Pickering Energy Partners questioned the justification for acquiring more mineral assets when the existing portfolio's value is not reflected in the stock price. He also asked how the company balances share buybacks with its long-term leverage reduction targets.

Answer

EVP of Investments Clay Rynd defended the minerals acquisition as a highly accretive, value-driven opportunity consistent with their strategy, acknowledging they are focused on unlocking the portfolio's value for investors. CFO Brandi Kendall added that capital allocation prioritizes the balance sheet and dividend, with Q2's split of free cash flow (80% to debt paydown, 20% to equity returns) serving as a good framework for how they balance competing priorities.

Michael Furrow asked about the slight uptick in operating costs, specifically lease operating expense (LOE), in the quarter. He requested quantification of the impact from higher fuel gas use and asked if this was a seasonal trend to anticipate in Q4.

Answer

Executive Brandi Kendall explained that LOE is typically highest in Q1 due to winter weather and the use of produced gas as fuel, and the results were in line with expectations. She stated that for the next quarter, LOE should align with the midpoint of the company's guidance range of $12.25 to $13.25 per Boe.

Michael Furrow asked about capital flexibility, specifically whether the company would pivot back to liquids if gas prices fall below the $3 guidance assumption. He also requested more color on the 2025 Uinta program's allocation to non-Uteland Butte zones and their comparative economics.

Answer

CFO Brandi Kendall reiterated that capital allocation is always directed to the highest-returning opportunities, and the 2025 plan reflects the attractiveness of gas assets at current prices, but flexibility remains key. EVP & COO Clay Rynd indicated a similar program mix in the Uinta for 2025 as in 2024, with early results showing comparable economics across the different intervals. CEO David Rockecharlie added that while results are encouraging, investors should expect a wider range of outcomes during this delineation phase.

Michael Furrow asked if the reduction in the Eagle Ford rig count was due to efficiency gains or a structural change, and questioned the rationale for share buybacks given the stated priority of debt reduction.

Answer

David Rockecharlie, an executive, attributed the lower rig count to a combination of Crescent's less capital-intensive business plan and improved operational efficiency. Brandi Kendall, an executive, addressed the buyback, stating that while the balance sheet and dividend remain priorities, the buyback is a useful tool to deploy when the stock is disconnected from intrinsic value and will remain relatively small for now.

Michael Furrow inquired about BKV's confidence level in signing a quality PPA, given the company's willingness to develop a Temple III plant if underpinned by an offtake agreement, and whether this indicates an improved outlook for the PPA market. He also asked about the Upper Barnett Appraisal program, specifically its ultimate goals, the higher break-even costs compared to the Lower Barnett, and the planned well count for testing this year.

Answer

CEO Chris Kalnin confirmed increased confidence, stating that Temple III would add resiliency and be co-located with data center infrastructure, with its development contingent on commercial arrangements for capital return, reflecting the accelerating optimism in Texas's data center infrastructure. President of Upstream Eric Jacobsen explained that for the Upper Barnett Appraisal, they plan to test one, possibly two wells this year. While current break-evens are slightly higher, BKV aims to apply learnings from the Lower Barnett to reduce costs and expects to delineate and confirm 100 wells, with results anticipated by mid-year or the second half of the year.

Michael Furrow asked if the company's willingness to develop a Temple III plant, contingent on an offtake agreement, indicates improved confidence in signing quality PPAs and the potential for Temple III. He also inquired about the Upper Barnett Appraisal program, specifically its ultimate goals, the well count planned for the year, and how breakeven costs compare to the Lower Barnett.

Answer

Chris Kalnin, CEO, confirmed that confidence has improved, citing supportive regulatory views on large load applications (SB6) and accelerating data center infrastructure development in Texas. He stated Temple III would add resiliency, fit existing infrastructure, and be backed by commercial arrangements. Eric Jacobsen, President of Upstream, confirmed plans to test one (possibly two) Upper Barnett wells this year. He acknowledged current breakevens are slightly higher but expects to apply learnings from the Lower Barnett (e.g., lower DNC costs, enhanced completions) to improve economics and delineate 100 wells.

Michael Furrow from Pickering Energy Partners questioned the decision to use the highly capable West Vela rig for the Sunspear repair, asking why it was the best option over potentially less expensive alternatives, and inquired about the estimated repair time.

Answer

President and CEO Paul Goodfellow clarified that the West Vela was chosen for its proven high-performance team and operational excellence, minimizing risk and representing the best value-against-risk decision. He estimated the repair would take approximately 30 days once the rig is mobilized to the location.

Michael Furrow asked if a widening bid-ask spread in the current macro environment is challenging M&A and driving the focus on buybacks. He also inquired about the future plans and contract status for the West Vela drillship after it completes the Daenerys well.

Answer

President and CEO Paul Goodfellow responded that growth opportunities are not just about M&A but also about the cost of developing the full suite of organic projects. EVP and CFO Sergio Maiworm explained that the West Vela contract runs through the Daenerys well, after which it has no further contracts. He noted the current market could present a good opportunity to lock in favorable rates for the rig.

Michael Furrow sought to understand the allocation for long-lead equipment for Monument and Ewing Bank 953 within the 2025 CapEx budget. He also asked for the rationale behind using the West Vela rig for the Katmai West #2 completion instead of the previously mentioned Conqueror rig.

Answer

Interim Co-President and CFO Sergio Maiworm explained that long-lead equipment costs are included in the U.S. drilling and completions budget but are not a significant portion of it for 2025. He clarified the decision to use the West Vela for all operations was driven by a delay in the Conqueror rig's arrival, which resulted in capital savings by running only one rig.

Michael Furrow of Pickering Energy Partners asked if CRC would be prepared to repurchase more shares to support an orderly exit from large shareholders and questioned the reason for lower-than-expected production taxes in the quarter.

Answer

President & CEO Francisco Leon affirmed that CRC stands ready to repurchase shares due to the perceived value in the stock. EVP & CFO Clio Crespy explained that the low production tax figure was a one-time 'catch up' adjustment from a previous accrual that was higher than the actual rate.

Michael Furrow inquired about the impact of R&D capitalization on long-term cash taxes under the new tax bill and asked whether the 50 net completion guidance for the Uinta was a firm target or could be exceeded.

Answer

EVP & CFO A. Wade Pursell confirmed that the accelerated deduction of R&D expenses is a key, recurring driver of their lower cash tax outlook. EVP & COO Beth McDonald indicated that the completion cadence is normalizing as the frac fleet's pace aligns with the rig pace after an initial acceleration, suggesting the target is the current plan.

Michael Furrow asked if the drop in oil prices has altered the relative returns between assets, potentially shifting capital to South Texas, and inquired about the performance of the acquired Uinta assets versus initial expectations.

Answer

President and CEO Herb Vogel explained that a more dramatic commodity price change would be needed to alter the current capital program. He and COO Beth McDonald both stated that the Uinta assets have exceeded expectations, with learnings from 2025 being integrated into an optimized SM-designed pad for 2026.