EX-99.3 8 d321354dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENT

Defined terms included below shall have the same meaning as terms defined and included within the proxy statement/prospectus (File No. 333-258157), dated November 3, 2021 (the “Proxy Statement/Prospectus”).

On December 7, 2021 (the “Closing Date”), Crescent Energy Company (“Crescent” or the “Company”), Contango, Independence, OpCo and certain entities formed by the Company (C Merger Sub and L Merger Sub) completed the transactions contemplated by the Transaction Agreement dated June 7, 2021 pursuant to which, (1) OpCo was recapitalized such that after giving effect to such recapitalization, all of the equity interest in OpCo consisting of 127,536,463 OpCo Units (the “OpCo Recapitalization”), Independence distributed all of the OpCo Units held by it, and all of the shares of Crescent Class B Common Stock held by it to the members of Independence in accordance with its organizational documents (the “Distribution”), and immediately following the Distribution, Independence merged with and into OpCo with OpCo surviving (the “Independence Merger”), (2) immediately following the Independence Merger, C Merger Sub merged with and into Contango, with Contango surviving the merger as a direct wholly owned corporate subsidiary of the Company (the “Contango Merger”), (3) as a result of the Contango Merger, each outstanding share of Contango Common Stock was converted into the right to receive a number of shares of Crescent Class A Common Stock equal to the Exchange Ratio, (4) immediately following the Contango Merger, Contango merged with and into L Merger Sub, with L Merger Sub surviving the merger as a direct wholly owned limited liability company subsidiary of the Company (the “LLC Merger”), (5) immediately following the LLC Merger, the Company contributed 100% of the equity interests in L Merger Sub to OpCo in exchange for certain Opco Units (the “Contribution”), and (6) immediately following the Contribution, OpCo contributed L Merger Sub to Energy Finance. Each of these transactions contemplated by the Transaction Agreement and completed on the Closing Date is collectively referred to hereafter as the “Merger Transactions.” Subject to the terms and conditions within the Transaction Agreement, holders of eligible shares of Contango Common Stock received 0.20 shares of Crescent Class A common stock in exchange for each share of Contango Common Stock held.

The following unaudited pro forma condensed combined financial statement (the “pro forma financial statement”) has been prepared from the respective historical consolidated financial statements of Crescent for the year ended December 31, 2021 and Contango for the period from January 1, 2021 through December 6, 2021, adjusted to give effect to the Merger Transactions. Additionally, the pro forma financial statement includes adjustments associated with the April 2021 Exchange, the Noncontrolling Interest Carve-out, the DJ Basin Acquisition, the acquisition of certain operated producing oil and natural gas properties predominately located in the Central Basin Platform in Texas and New Mexico (the “Central Basin Platform Acquisition”), the Independence Refinancing, and the February 2022 issuance of an additional $200.0 million in aggregate principal of our 7.250% senior notes due 2026 and the use of proceeds therefrom to repay amounts outstanding under our New Credit Agreement (the “Crescent Refinancing” and together with the April 2021 Exchange, the Noncontrolling Interest Carve-out, the DJ Basin Acquisition, the Central Basin Platform Acquisition, and the Independence Refinancing, the “Crescent Transactions”). Further, Contango completed the Mid-Con Acquisition, the Grizzly Acquisition, and the Wind River Basin Acquisition (collectively, the “Contango Transactions”) during the period presented.

The unaudited pro forma condensed combined statement of operations (the “pro forma statement of operations”) for the year ended December 31, 2021 gives effect to each of the Merger Transactions, the Crescent Transactions and the Contango Transactions (together with the Merger Transactions and the Crescent Transactions, the “Pro Forma Transactions”) as if they had been consummated on January 1, 2021.

The following pro forma financial statement is based on, and should be read in conjunction with the Company’s historical audited combined and consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K.

The accompanying pro forma financial statement was derived by making certain transaction accounting adjustments to the historical financial statements noted above. The adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual impact of the Pro Forma Transactions may differ from the adjustments made to the pro forma financial statement. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects for the periods presented as if the Pro Forma Transactions had been consummated earlier, and that all adjustments necessary to present fairly the pro forma financial statement have been made.

A final determination of the fair value of Contango’s assets and liabilities will be based on the actual assets and liabilities of Contango that existed as of the Closing Date and will be finalized before the end of the measurement period. The pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma financial statement presented below. Any increases or decreases in the fair value of assets acquired and liabilities assumed upon completion of the final valuations will result in adjustments to the pro forma statements of operations. The final purchase price allocation may be materially different than that reflected in the pro forma purchase price allocation presented herein.

The pro forma financial statement and related notes are presented for illustrative purposes only and should not be relied upon as an indication of the financial condition or the operating results that the Company would have achieved if the Transaction Agreement had been entered into and the Pro Forma Transactions had taken place on the assumed dates. The pro forma financial statement does not reflect future events that may occur after the consummation of the Transactions, including, but not limited to, the anticipated realization of ongoing savings from potential operating efficiencies, asset dispositions, cost savings, or economies of scale that the Company may achieve with respect to the combined operations. As a result, future results may vary significantly from the results reflected in the pro forma financial statement and should not be relied on as an indication of the future results of the Company.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2021

(in thousands, except per share data)

 

     Crescent
(Historical)		     Crescent
Transaction
Adjustments		           Crescent As
Adjusted		     Contango1
(Historical)		     Contango2
(Historical)		     Contango
Transaction
Adjustments		           Contango As
Adjusted		     Reclassif-
ications		           Transaction
Adjustments		           Crescent
Pro Forma
Combined		        

Revenues:

                               

Oil

    $ 883,087     $ 22,527       (a )    $ 905,614     $ 149,246     $ 50,182     $ 6,982       (d )    $ 206,410     $ —         $ —         $ 1,112,024    

Natural gas

      354,298       715       (a )      355,013       55,556       45,179       95,043       (d )      195,778       —           —           550,791    

Natural gas liquids

      185,530       1,391       (a )      186,921       35,735       12,201       743       (d )      48,679       —           —           235,600    

Midstream and other

      54,062       (538 )      (a )      53,524       —         —         7,765       (d )      7,765       8,132       (e )      —           69,421    

Other revenue

      —         —           —         2,980       5,152       —           8,132       (8,132 )      (e )      —           —      
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

      

 

 

    

Total revenues

      1,476,977       24,095         1,501,072       243,517       112,714       110,533         466,764       —           —           1,967,836    
Expenses:                               

Operating expense

      596,334       5,751       (a )      602,085       108,901       40,760       43,720       (d )      193,381       —           —           795,466    

Depreciation, depletion and amortization

      312,787       4,823       (a )      317,610       30,391       7,633       8,608       (d )      46,632       —           51,918       (f )      416,160    

Impairment and abandonment of oil and natural gas properties

      —         —           —         712       49       —           761       —           —           761    

Exploration expense

      1,180       (3 )      (a )      1,177       458       25       1       (d )      484       —           —           1,661    

Midstream operating expense

      13,389       (132 )      (a )      13,257       —         2,098       —           2,098       —           —           15,355    

General and administrative expense

      78,342       (195 )      (a )      78,147       39,441       26,555       97       (d )      66,093       —           12,279       (g )      171,327    
                           14,808       (h )     

Gain on sale of assets

      (8,794 )      —           (8,794 )      —         —         —           —         (438 )      (e )      —           (9,232 )   
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

      

 

 

    

Total expenses

      993,238       10,244         1,003,482       179,903       77,120       52,426         309,449       (438 )        79,005         1,391,498    
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

      

 

 

    

Other income (expense):

                               

Interest expense

      (50,740 )      377       (a )      (64,405 )      (4,156 )      (4,753 )      (384 )      (d )      (9,293 )      —           —           (73,698 )   
       (14,042 )      (b )                         

Loss on derivatives

      (866,020 )      —           (866,020 )      (117,951 )      14,909       (1,597 )      (d )      (104,639 )      —           —           (970,659 )   

Income (loss) from equity method investments

      368       —           368       (1,897 )      —         —           (1,897 )      —           —           (1,529 )   

Gain from sale of assets

      —         —           —         461       (23 )      —           438       (438 )      (e )      —           —      

Gain on extinguishment of debt

      —         —           —         3,369       —         —           3,369       —           —           3,369    

Other income (expense)

      120       (5 )      (a )      115       3,714       2,097       —           5,811       —           —           5,926    
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

      

 

 

    

Total other income (expense)

      (916,272 )      (13,670 )        (929,942 )      (116,460 )      12,230       (1,981 )        (106,211 )      (438 )        —           (1,036,591 )   
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

      

 

 

    

Income (loss) before taxes

      (432,533 )      181         (432,352 )      (52,846 )      47,824       56,126         51,104       —           (79,005 )        (460,253 )   

Income tax benefit (expense)

      306       1       (a )      307       711       1       —           712       —           24,542       (i )      25,561    
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

      

 

 

    
Net income (loss)      (432,227 )      182         (432,045 )      (52,135 )      47,825       56,126         51,816       —           (54,463 )        (434,692 )   
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

      

 

 

    

Less: net (income) loss attributable to Predecessor

      339,168       —           339,168       —         —         —           —         —           (339,168 )      (j )      —      

Less: net (income) loss attributable to noncontrolling interests

      14,922       (8,716 )      (a )      3,570       —         —         —           —         —           —           3,570    
       (2,636 )      (c )                         

Less: net loss attributable to redeemable noncontrolling interests

      58,761       —           58,761       —         —         —           —         —           274,837       (k )      333,598    
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

      

 

 

    
Net loss attributable to Crescent Energy    $ (19,376 )    $ (11,170 )      $ (30,546 )    $ (52,135 )    $ 47,825     $ 56,126       $ 51,816     $ —         $ (118,794 )      $ (97,524 )   
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

      

 

 

    
Net Loss per Share:                               

Class A - basic and diluted

    $ (0.46 )                            $ (2.32 )      (l ) 

Class B - basic and diluted

    $ —                               $ —         (l ) 
Weighted Average Common Shares Outstanding                               

Class A - basic and diluted

      41,954                               41,954       (l ) 

Class B - basic and diluted

      127,536                               127,536       (l ) 

 

1 

Reflects the historical operations of Contango for the nine months ended September 30, 2021.

2 

Reflects the historical operations of Contango for the period from October 1, 2021 through December 6, 2021.

Notes to unaudited pro forma condensed combined financial statements

NOTE 1 – Basis of pro forma presentation

The pro forma financial statement has been derived from the historical financial statements of Crescent and Contango. The pro forma statements of operations for the year ended December 31, 2021 gives effect to the Pro Forma Transactions as if they had occurred on January 1, 2021.

The pro forma financial statement reflects pro forma adjustments that are based on available information and certain assumptions that management believes are reasonable. However, actual results may differ from those reflected in these statements. In management’s opinion, all adjustments known to date that are necessary to present fairly the pro forma information have been made. The pro forma financial statement does not purport to represent what the combined entity’s financial position or results of operations would have been if the Pro Forma Transactions had actually occurred on the dates indicated above, nor are they indicative of the Company’s future financial position or results of operations.

These pro forma financial statement should be read in conjunction with the Company’s historical financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K.

NOTE 2 – Purchase price allocation

The Merger Transactions was accounted for using the acquisition method of accounting for business combinations with the Company considered to be the accounting acquirer. The allocation of the purchase price for Contango was based upon management’s estimates of and assumptions related to the fair value of assets to be acquired and liabilities to be assumed as of the Closing Date using currently available information. Because the pro forma financial statement has been prepared based on estimates, the final purchase price allocation and the resulting effect on the Company’s financial position and results of operations may differ significantly from the pro forma amounts included in this exhibit to the Company’s Current Report on Form 8-K. The Company expects to finalize its allocation of the purchase price during the second half of 2022.

The determination of consideration transferred, fair value of assets acquired and liabilities recorded were as follows (in thousands, except exchange ratio, share, and per share data):

 

Consideration transferred:

   

Shares of Contango common stock outstanding

      199,136,676  

NYSE American Closing price per share on December 7, 2021

    $ 3.22  
  

 

 

  

Fair value of Contango common stock

      641,220  

Settlement of Restricted Stock Awards

      7,090  

Settlement of PSU Awards

      6,306  

Settlement of Company Stock Option Awards

      —    
  

 

 

  

Consideration transferred

    $ 654,616  
  

 

 

  

Fair value of assets acquired:

   

Cash and cash equivalents

    $ 14,202  

Accounts receivable, net

      145,727  

Prepaid and other current assets

      8,275  

Oil and natural gas properties - proved

   

Oil and natural gas properties - proved

      1,002,165  

Unproved properties

      —    

Field and other property and equipment

      6,955  

Goodwill

      76,564  

Other assets

      3,514  
  

 

 

  

Total assets acquired

      1,257,402  

Fair value of liabilities assumed:

   

Accounts payable and accrued liabilities

      (186,689 ) 

Derivative liabilities – current

      (44,002 ) 

Long-term debt

      (140,000 ) 

Deferred tax liability

      (83,250 ) 

Derivative liabilities – noncurrent

      (14,592 ) 

Asset retirement obligations

      (142,100 ) 

Other liabilities

      (7,200 ) 
  

 

 

  

Total liabilities assumed

      (617,833 ) 
  

 

 

  

Assets acquired and liabilities assumed

    $ 654,616  
  

 

 

  

Under the Transaction Agreement, Contango stockholders received 0.20 shares of Crescent Class A Common Stock for each share of Contango Common Stock issued and outstanding immediately prior to the Closing Date. This resulted in the Company issuing approximately 39.8 million shares of Crescent Class A Common Stock in exchange for 199.1 million outstanding shares of Contango Common Stock and 3.3 million shares of Crescent Class A Common Stock in settlement of Contango’s equity compensation awards, a portion of which was recognized as expense in the statement of operations for the Company. As Contango Common Stock were listed and actively traded on an exchange as of the Closing Date, the trading price of Contango Common Stock was used to estimate the fair value of consideration transferred.

NOTE 3 – Adjustments to the pro forma financial statement

The pro forma financial statement has been prepared to illustrate the effect of the Pro Forma Transactions and have been prepared for informational purposes only.

The following pro forma financial statement has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and allows for supplemental disclosure of the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management Adjustments”). Management has elected not to disclose Management Adjustments.

The pro forma provision for income taxes does not necessarily reflect the amounts that would have resulted had the combined company filed consolidated income tax returns during the periods presented.

The pro forma net loss per share amounts presented in the pro forma statements of operations are based upon the number of shares of Crescent Class A Common Stock and Crescent Class B Common Stock outstanding, assuming the Pro Forma Transactions occurred on January 1, 2021.

Pro forma statement of operations adjustments

The adjustments included in the pro forma statements of operations for the year ended December 31, 2021 are as follows:

Crescent Transaction Adjustments

 

(a)

Reflects the impact on the pro forma statements of operations reflect for acquisitions and divestitures during the period presented, including the Noncontrolling Interest Carve-out, the DJ Basin Acquisition, and the Central Basin Platform Acquisition, which are summarized below (in thousands):

 

     Year Ended December 31, 2021  

Crescent Acquisitions and Carve-out

    Noncontrolling
Interest Carve-Out		      DJ Basin
Acquisition		      Central Basin
Platform
Acquisition		      Total  

Oil and condensate sales

    $ (7,564 )     $ 1,770      $ 28,321      $ 22,527  

Natural gas sales

      (2,292 )       528        2,480        715  

Natural gas liquids sales

      (1,200 )       15        2,575        1,391  

Midstream and other

      (538 )       —          —          (538 ) 

Operating expense

      (5,827 )       418        11,160        5,751  

Depreciation, depletion and amortization

      (3,478 )       822        7,479        4,823  

Exploration expense

      (3 )       —          —          (3 ) 

Midstream operating expense

      (132 )       —          —          (132 ) 

General and administrative expense

      (195 )       —          —          (195 ) 

Interest expense

      377        —          —          377  

Other income (expense)

      (5 )       —          —          (5 ) 

Loss on derivatives

      10,302        —          —          10,302  

Income tax benefit (expense)

      1        —          —          1  
  

 

 

     

 

 

     

 

 

     

 

 

  

Net income (loss)

      8,716        1,073        14,737        24,526  

Less: net (income) loss attributable to noncontrolling interests

      (8,716 )       —          —          (8,716 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Net income (loss) attributable to Crescent Energy

    $ —        $ 1,073      $ 14,737      $ 15,810  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(b)

Reflects pro forma adjustments to interest expense related to the Independence Refinancing and the Crescent Refinancing. The proceeds received from the Crescent Refinancing in February 2022 were used to repay amounts outstanding under our New Credit Agreement, and as such, result in no net adjustment, on a pro forma basis, to our balance sheet as of December 31, 2021.

 

(c)

Reflects the impact on the pro forma statements of operations for the April 2021 Exchange.

Contango Transaction Adjustments

 

(d)

Reflects adjustments to the pro forma statements of operations for the Mid-Con Acquisition, Grizzly Acquisition, and Wind River Basin Acquisition consummated by Contango on January 21, 2021, February 1, 2021, and August 31, 2021, respectively, which are summarized below (in thousands):

 

     Year Ended December 31, 2021  

Contango Transaction Adjustments

    Mid-Con
Acquisition		      Grizzly
Acquisition		      Wind River
Basin
Acquisition		      Total  

Oil and condensate sales

    $ 2,554      $ 4,403      $ 25      $ 6,982  

Natural gas sales

      48        663        94,332        95,043  

Natural gas liquids sales

      —          743        —          743  

Midstream and other

      43        —          7,722        7,765  

Operating expense

      1,243        1,991        40,486        43,720  

Depreciation, depletion and amortization

      620        793        7,195        8,608  

Exploration expense

      —          —          1        1  

General and administrative expense

      97        —          —          97  

Interest expense

      (327 )       —          (57 )       (384 ) 

Gain (loss) on derivatives

      (1,597 )       —          —          (1,597 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Net income (loss)

    $ (1,239 )     $ 3,025      $ 54,340      $ 56,126  
  

 

 

     

 

 

     

 

 

     

 

 

  

Reclassifications

 

(e)

The following reclassifications were made to conform Contango’s financial statement presentation to the Company’s financial statement presentation:

 

  •  

The reclassification of $8.1 million of Contango’s other operating revenues to midstream and other; and

 

  •  

The reclassification of $0.4 million of Contango’s gain from sale of assets within other income (expense) to (gain) loss on sale of assets within operating expenses.

Transaction Adjustments

 

(f)

Reflects the pro forma depletion expense calculated in accordance with the successful efforts method of accounting for oil and gas properties, which was based on the preliminary purchase price allocation.

 

(g)

Reflects the impact of the Management Compensation pursuant to the Management Agreement executed by and between the Company and Manager entered into as of December 7, 2021.

 

(h)

Reflects the impact of the Incentive Compensation pursuant to the Management Agreement executed by and between the Company and Manager on December 6, 2021.

 

(i)

Reflects the income tax effect of the pro forma adjustments presented. The tax rate applied to the pro forma adjustments was the estimated combined statutory rate after the effect of noncontrolling interests of 6.0%, for the year ended December 31, 2021. The effective rate of the Company could be significantly different (either higher or lower) depending on post-Closing activities.

 

(j)

Reflects the elimination of net loss attributable to Predecessor for the period prior to the Merger Transactions as the Pro Forma Transactions are assumed to occur on January 1, 2021.

 

(k)

Reflects the impact of the issuance of Crescent Class A common stock and Class B common stock as a result of the Contango Merger and the Distribution, respectively, on the allocation of net loss attributable to redeemable noncontrolling interests and net loss attributable to the Company.

 

(l)

Reflects the impact of the recapitalization of the Company as a result of the Pro Forma Transactions on basic and diluted net loss per share.

The computation of the impact of the pro forma adjustments on the Company’s common stock outstanding and basic and diluted net loss per share of common stock is summarized below:

 

     Year Ended December 31, 2021  

Net loss per share (in thousands, except per share data)

    Crescent Pro
Forma
Combined		      Crescent
Class A		      Crescent
Class B		  

Numerator:

         

Pro forma net loss

    $ (434,692 )       

Less: Pro forma net loss attributable to noncontrolling interests

      3,570        

Less: Pro forma net loss attributable to redeemable noncontrolling interests

      333,598        
  

 

 

        

Pro forma net loss attributable to the Company

    $ (97,524 )     $ (97,524 )     $ —    
  

 

 

     

 

 

     

 

 

  

Denominator:

         

Pro forma weighted-average shares of common stock outstanding – basic and diluted

         41,954        127,536  

Pro forma net loss per share of common stock – basic and diluted

       $ (2.32 )     $ —    

NOTE 4 – Supplemental pro forma oil and natural gas reserves information

Oil and natural gas reserves

The following tables present the estimated pro forma combined net proved developed and undeveloped oil, natural gas, and NGLs reserves information as of December 31, 2021 for our consolidated operations, along with a summary of changes in quantities of net remaining proved reserves for the year ended December 31, 2021 for our consolidated operations. Immaterial amounts for proved developed oil, natural gas, and NGLs of our equity affiliates totaling 3.7 MMBoe as of December 31, 2021 have been omitted from presentation below. The estimates below are in certain instances presented on a “barrels of oil equivalent or “Boe” basis. To determine Boe in the following tables, natural gas is converted to a crude oil equivalent at the ratio of six Mcf of natural gas to one barrel of crude oil equivalent.

The following estimated pro forma oil and natural gas reserves information is not necessarily indicative of the results that might have occurred had the Pro Forma Transactions been completed on January 1, 2021 and is not intended to be a projection of future results. Crescent Transaction Adjustments reflect adjustments to oil and natural gas reserves information for the Noncontrolling Interest Carve-out, the DJ Basin Acquisition, and the Central Basin Platform Acquisition (together with the DJ Basin Acquisition, the “Crescent Acquisitions”). Specifically, (i) the Crescent Acquisitions result in positive reserve additions as of December 31, 2020, with an offsetting decrease to purchases of reserves in place during the year ended December 31, 2021 and (ii) the Noncontrolling Interest Carve-out results in negative adjustments as of December 31, 2020 to account for the reduction in reserves that occurred when certain non-controlling interests in our subsidiaries were redeemed in exchange for a proportionate interest in our subsidiaries’ oil and gas properties and associated reserves. In each case these transactions resulted in corresponding adjustments to the Standardized Measure as set forth in tables further below. Contango Transaction Adjustments reflect adjustments to oil and natural gas reserves information for the Mid-Con Acquisition, the Grizzly Acquisition, and the Wind River Basin Acquisition. Each of these adjustments are further discussed within Note 3 – Adjustments to the pro forma financial statement. Future results may vary significantly from the results reflected because of various factors, including those discussed in “Risk Factors” included in the Company’s Annual Report on Form 10-K.

 

     Oil and Condensate (MBbls)  
     Crescent
(Historical)		     Crescent Transaction Adjustments     Crescent As
Adjusted		     Contango
(Historical)		     Contango
Transaction
Adjustments		     Contango As
Adjusted		     Crescent Pro
Forma
Combined		  
           Noncontrolling
Interest
Carve-out		     Crescent
Acquisitions		                                

Proved Developed and Undeveloped Reserves as of:

                 

December 31, 2020

      167,190       (6,015 )      4,883       166,058       13,004       29,916       42,920       208,978  

Revisions of previous estimates

      9,147       —         —         9,147       1,990       —         1,990       11,137  

Extensions, discoveries, and other additions

      7,007       —         —         7,007       756       —         756       7,763  

Sales of reserves in place

      (6,333 )      5,866       —         (467 )      (387 )      —         (387 )      (854 ) 

Purchases of reserves in place

      46,386       —         (4,429 )      41,957       (12,329 )      (29,628 )      (41,957 )      —    

Production

      (13,237 )      149       (454 )      (13,542 )      (3,034 )      (288 )      (3,322 )      (16,864 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2021

      210,160       —         —         210,160       —         —         —         210,160  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Proved Developed Reserves as of:

                 

December 31, 2020

      92,024       (3,359 )      4,883       93,548       7,166       26,324       33,490       127,038  

December 31, 2021

      158,091       —         —         158,091       —         —         —         158,091  

Proved Undeveloped Reserves as of:

                 

December 31, 2020

      75,166       (2,656 )      —         72,510       5,838       3,592       9,430       81,940  

December 31, 2021

      52,069       —         —         52,069       —         —         —         52,069  

     Natural Gas (MMcf)  
     Crescent
(Historical)		     Crescent Transaction
Adjustments		     Crescent As
Adjusted		     Contango
(Historical)		     Contango
Transaction
Adjustments		     Contango As
Adjusted		     Crescent
Pro Forma
Combined		  
           Noncontrolling
Interest
Carve-out		     Crescent
Acquisitions		                                

Proved Developed and Undeveloped Reserves as of:

                 

December 31, 2020

      822,864       (27,679 )      16,765       811,950       84,482       370,462       454,944       1,266,894  

Revisions of previous estimates

      316,572       —         —         316,572       26,734       —         26,734       343,306  

Extensions, discoveries, and other additions

      17,247       —         —         17,247       458       —         458       17,705  

Sales of reserves in place

      (48,977 )      26,708       —         (22,269 )      (3,957 )      —         (3,957 )      (26,226 ) 

Purchases of reserves in place

      451,702       —         (15,782 )      435,920       (82,174 )      (353,746 )      (435,920 )      —    

Production

      (89,455 )      971       (983 )      (89,467 )      (25,543 )      (16,716 )      (42,259 )      (131,726 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2021

      1,469,953       —         —         1,469,953       —         —         —         1,469,953  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Proved Developed Reserves as of:

                 

December 31, 2020

      748,496       (26,491 )      16,765       738,770       82,788       370,462       453,250       1,192,020  

December 31, 2021

      1,404,570       —         —         1,404,570       —         —         —         1,404,570  

Proved Undeveloped Reserves as of:

                 

December 31, 2020

      74,368       (1,188 )      —         73,180       1,694       —         1,694       74,874  

December 31, 2021

      65,383       —         —         65,383       —         —         —         65,383  

 

     NGLs (MBbls)  
     Crescent
(Historical)		     Crescent Transaction Adjustments     Crescent As
Adjusted		     Contango
(Historical)		     Contango
Transaction
Adjustments		     Contango As
Adjusted		     Crescent Pro
Forma
Combined		  
           Noncontrolling
Interest
Carve-out		     Crescent
Acquisitions		                                

Proved Developed and Undeveloped Reserves as of:

                 

December 31, 2020

      55,324       (1,601 )      1,086       54,809       2,766       7,263       10,029       64,838  

Revisions of previous estimates

      16,480       —         —         16,480       2,566       —         2,566       19,046  

Extensions, discoveries, and other additions

      2,093       —         —         2,093       86       —         86       2,179  

Sales of reserves in place

      (3,265 )      1,542       —         (1,723 )      (249 )      —         (249 )      (1,972 ) 

Purchases of reserves in place

      11,960       —         (988 )      10,972       (3,709 )      (7,263 )      (10,972 )      —    

Production

      (6,099 )      59       (98 )      (6,138 )      (1,460 )      —         (1,460 )      (7,598 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2021

      76,493       —         —         76,493       —         —         —         76,493  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Proved Developed Reserves as of:

                 

December 31, 2020

      44,307       (1,368 )      1,086       44,025       2,207       6,704       8,911       52,936  

December 31, 2021

      66,402       —         —         66,402       —         —         —         66,402  

Proved Undeveloped Reserves as of:

                 

December 31, 2020

      11,017       (233 )      —         10,784       559       559       1,118       11,902  

December 31, 2021

      10,091       —         —         10,091       —         —         —         10,091  

     Total (Mboe)  
     Crescent
(Historical)		     Crescent Transaction Adjustments     Crescent As
Adjusted		     Contango
(Historical)		     Contango
Transaction
Adjustments		     Contango As
Adjusted		     Crescent Pro
Forma
Combined		  
           Noncontrolling
Interest
Carve-out		     Crescent
Acquisitions		                                

Proved Developed and Undeveloped Reserves as of:

                 

December 31, 2020

      359,658       (12,230 )      8,748       356,176       34,238       94,536       128,774       484,950  

Revisions of previous estimates

      78,389       —         —         78,389       9,012       —         9,012       87,401  

Extensions, discoveries, and other additions

      11,975       —         —         11,975       918       —         918       12,893  

Sales of reserves in place

      (17,762 )      11,860       —         (5,902 )      (1,295 )      —         (1,295 )      (7,197 ) 

Purchases of reserves in place

      133,630       —         (8,046 )      125,584       (34,121 )      (91,463 )      (125,584 )      —    

Production

      (34,245 )      370       (702 )      (34,577 )      (8,752 )      (3,073 )      (11,825 )      (46,402 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2021

      531,645       —         —         531,645       —         —         —         531,645  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Proved Developed Reserves as of:

                 

December 31, 2020

      261,079       (9,143 )      8,748       260,684       27,559       90,385       117,944       378,628  

December 31, 2021

      458,588       —         —         458,588       —         —         —         458,588  

Proved Undeveloped Reserves as of:

                 

December 31, 2020

      98,579       (3,087 )      —         95,492       6,679       4,151       10,830       106,322  

December 31, 2021

      73,057       —         —         73,057       —         —         —         73,057  

Standardized measure of discounted future net cash flows

The following tables present the estimated pro forma standardized measure of discounted future net cash flows (the “pro forma standardized measure”) at December 31, 2021. The pro forma standardized measure information set forth below gives effect to the Pro Forma Transactions as if they had been completed on January 1, 2021. Crescent Transaction Adjustments reflect adjustments to the standardized measure of discounted future net cash flows for the Noncontrolling Interest Carve-out and the Crescent Acquisitions. Contango Transaction Adjustments reflect adjustments to the standardized measure of discounted future net cash flows for the Mid-Con Acquisition, the Grizzly Acquisition, and the Wind River Basin Acquisition. Transaction Adjustments reflect adjustments related to the tax restructuring of the Company resulting from the Transactions. Each of these adjustments are further discussed within Note 3 – Adjustments to the pro forma financial statement. The disclosures below were determined by referencing the “Standardized Measure of Discounted Future Net Cash Flows” reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. An explanation of the underlying methodology applied, as required by SEC regulations, can be found within the historical financial statements. The calculations assume the continuation of existing economic, operating and contractual conditions at December 31, 2021. Immaterial amounts for the pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves of our equity affiliates totaling $23.2 million as of December 31, 2021 have been omitted from presentation below.

Therefore, the following estimated pro forma standardized measure is not necessarily indicative of the results that might have occurred had the Pro Forma Transactions been completed on January 1, 2021 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in “Risk Factors” included in the Company’s Annual Report on Form 10-K.

The pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves of our consolidated operations as of December 31, 2021 is as follows:

 

     (in thousands)  
     Crescent
(Historical)		     Crescent Transaction Adjustments      Crescent As
Adjusted		     Contango
(Historical)		      Contango
Transaction
Adjustments		      Contango As
Adjusted		      Crescent Pro
Forma
Combined		  
           Noncontrolling
Interest
Carve-out		      Crescent
Acquisitions		                                    

Future cash inflows

    $ 21,063,117     $ —        $ —        $ 21,063,117     $ —        $ —        $ —        $ 21,063,117  

Future production costs

      (10,194,648 )      —          —          (10,194,648 )      —          —          —          (10,194,648 ) 

Future development costs (1)

      (1,477,562 )      —          —          (1,477,562 )      —          —          —          (1,477,562 ) 

Future income taxes

      (352,136 )      —          —          (352,136 )      —          —          —          (352,136 ) 
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Future net cash flows

      9,038,771       —          —          9,038,771       —          —          —          9,038,771  

Annual discount of 10% for estimated timing

      (4,080,471 )      —          —          (4,080,471 )      —          —          —          (4,080,471 ) 
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Standardized measure of discounted future net cash flows as of December 31, 2021

    $ 4,958,300     $ —        $ —        $ 4,958,300     $ —        $ —        $ —        $ 4,958,300  
  

 

 

    

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

 

(1) 

Future development costs include future abandonment and salvage costs.

Changes in standardized measure

The changes in the pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves of our consolidated operations for the year ended December 31, 2021 are as follows:

 

     (in thousands)  
     Crescent
(Historical)		     Crescent Transaction
Adjustments		     Crescent
As
Adjusted		     Contango
(Historical)		     Contango
Transaction
Adjustments		     Contango
As
Adjusted		     Transaction
Adjustments		     Crescent
Pro Forma
Combined		  
           Noncontrolling
Interest
Carve-out		     Crescent
Acquisitions		                                      

Balance at December 31, 2020

    $ 1,327,860     $ (49,250 )    $ 101,377     $ 1,379,987     $ 115,586     $ 377,727     $ 493,313     $ (159,547 )    $ 1,713,753  

Net change in prices and production costs

      3,330,299       —         73,538       3,403,837       271,462       477,843       749,305       —         4,153,142  

Net change in future development costs

      117,333       —         —         117,333       (19,898 )      —         (19,898 )      —         97,435  

Sales and transfers of oil and natural gas produced, net of production expenses

      (872,521 )      5,229       (24,111 )      (891,403 )      (198,438 )      (59,048 )      (257,486 )      —         (1,148,889 ) 

Extensions, discoveries, additions and improved recovery, net of related costs

      162,657       —         —         162,657       27,928       —         27,928       —         190,585  

Purchases of reserves in place

      1,236,388       —         (153,955 )      1,082,433       (279,825 )      (802,608 )      (1,082,433 )      —         —    

Sales of reserves in place

      (84,095 )      44,021       —         (40,074 )      (12,930 )      —         (12,930 )      —         (53,004 ) 

Revisions of previous quantity estimates

      (295,234 )      —         —         (295,234 )      85,643       —         85,643       —         (209,591 ) 

Previously estimated development costs incurred

      95,879       —         —         95,879       —         —         —         —         95,879  

Net change in taxes

      (184,419 )      —         —         (184,419 )      10,790       —         10,790       174,464       835  

Accretion of discount

      124,153       —         10,138       134,291       11,811       38,599       50,410       (14,917 )      169,784  

Changes in timing and other

      —         —         (6,987 )      (6,987 )      (12,129 )      (32,513 )      (44,642 )      —         (51,629 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance at December 31, 2021

    $ 4,958,300     $ —       $ —       $ 4,958,300     $ —       $ —       $ —       $ —       $ 4,958,300