Crescent Energy Rises After Divestiture Program Tops $900 Million
Asset sales aimed at reducing debt and streamlining its portfolio attract positive notice from credit rating agencies as the company sharpens its focus on core assets.
Shares of Crescent Energy (NYSE: CRGY) climbed Tuesday after the company announced its program of non-core asset sales has generated more than $900 million in signed agreements so far this year, a strategic move designed to fortify its balance sheet and concentrate operations on its most profitable regions.
The Houston-based oil and gas producer saw its stock rise 3.7% to $9.70 in Tuesday trading. The rally followed an update on its divestiture plan, which represents a significant overhaul of its portfolio and a substantial sum relative to its $2.38 billion market capitalization.
The latest transaction in this program was the sale of its non-operated assets in Colorado's DJ Basin for $90 million in cash. Proceeds from this and other sales are being used to pay down borrowings on the company's revolving credit facility, directly addressing leverage and enhancing financial flexibility.
"This marks our sixth accretive asset sale year to date," said David Rockecharlie, Chief Executive Officer of Crescent, in a statement. "Our successful non-core divestiture program enhances our business and underscores our ability to navigate a volatile market and capture attractive value for our investors."
The divestitures are central to Crescent's strategy to streamline its business, reduce operational costs, and sharpen its focus on core, high-margin assets located primarily in the Eagle Ford, Permian, and Uinta basins. The company has stated that this portfolio optimization is expected to improve adjusted operating costs by approximately 10%.
This debt-reduction strategy has earned external validation. Just this week, Fitch Ratings assigned a 'BB-' rating and a "Positive Rating Outlook" to Crescent's proposed senior unsecured notes, a move the credit agency supported by the company's deleveraging plans following the asset sales and a pending acquisition of assets from Vital Energy.
Analysts have a consensus price target of $14.18 on Crescent Energy, suggesting considerable upside from its current level. While Piper Sandler recently adjusted its rating to "Overweight" from a previous, more bullish stance, its $13 price target still reflects confidence in the company's direction following the strategic shifts.
By shedding non-essential assets, Crescent is doubling down on its most productive fields, a common strategy among energy producers aiming to boost efficiency and resilience. With the announced transactions expected to close by the end of the year, investors will be watching closely to see how the leaner, more focused company deploys its capital and navigates the energy landscape in the coming year.