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Centennial Resource Development First Quarter 2022 Results

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   |    Friday,May 06,2022

Centennial Resource Development, Inc. announced first quarter 2022 financial and operational results.


  • Generated record free cash flow1 of $89 million
  • Fully repaid all borrowings under the credit facility
  • Delivered strong well results
  • Reduced leverage1 for the fourth consecutive quarter
  • Continued to drive operational efficiencies

Financial Results

For the first quarter, Centennial generated net cash from operating activities of $160.1 million and free cash flow of $88.8 million. The Company reported net income during the quarter of $15.8 million, or $0.05 per diluted share, compared to a net loss of $34.6 million, or $(0.12) per diluted share, in the prior year period.

Average daily crude oil production for the first quarter was 32,741 barrels of oil per day ("Bbls/d") compared to 28,239 Bbls/d in the prior year period. Total equivalent production during the quarter averaged 61,359 barrels of oil equivalent per day ("Boe/d") compared to 54,202 Boe/d in the prior year period.

Sean Smith, CEO, commented: "During the first quarter, Centennial generated strong well results across both the Northern and Southern Delaware Basin while continuing to drive additional operational efficiencies. This execution, coupled with supportive commodity prices, enabled us to achieve record free cash flow and reduce leverage during the quarter. We are well-positioned to deliver on our key 2022 objectives of generating strong production growth, further strengthening our balance sheet and initiating our share repurchase program."

First Quarter Operational Results

Through larger well packages and extended laterals, Centennial continues to efficiently develop its Delaware Basin acreage position. During the quarter, the Company completed eighteen wells through four separate developments, including two six-well developments. Located on the southern portion of the Company's Miramar acreage in Reeves County, Texas, the Powdered Donut State (average 93% working interest ("WI")) four-well development was drilled in the Third Bone Spring Sand (1), Wolfcamp A (1) and Wolfcamp C (2) intervals with average 9,800-foot laterals. The wells delivered an average 30-day initial production ("IP") rate of 2,411 Boe/d (42% oil) per well. Notably, the maximum IP-24 hour rate for the four-well pad was over 41 MMcf of natural gas.

In Lea County, New Mexico, the Chimichangas and Queso Blanco (average 75% WI) six-well development was drilled in the Second Bone Spring Sand interval with average 8,400-foot laterals. The wells delivered an average 30-day IP rate of 2,160 Boe/d (82% oil) per well and averaged 212 Bbls/d of oil per 1,000 foot of lateral per well.

Also in Lea County, the Pac-Man and Donkey Kong (average 93% WI) wells represent another six-well development, drilled using a stacked-staggered pattern in the upper and lower portions of the Second Bond Spring Sand interval with 8,500-foot average lateral lengths. The wells averaged 1,749 Boe/d, or 1,433 Bbls/d of oil, per well for the 30-day IP period.

"First quarter well performance highlights the quality of Centennial's portfolio across the Delaware Basin. The higher natural gas and NGL mix on our Texas asset provides enhanced economics at current prices. In New Mexico, our successful execution of larger scale development targeting the Bone Spring Sand interval continues to produce strong returns," said Smith. "As a result, we expect our average completed well during the quarter to pay-out in approximately four months, assuming strip pricing."

Smith continued, "Additionally, our field personnel have done an excellent job navigating the challenging oilfield service environment. We have experienced no operational delays or cost overruns year-to-date. Going forward, we will continue our focus on developing larger well packages and driving further efficiencies in an effort to partially offset future cost inflation."

Total capital expenditures ("capex") incurred for the quarter were $114.7 million, inclusive of $111.6 million in drilling, completion and facilities costs with an additional $3.1 million spent on infrastructure, land and other.

"Building on the efficiencies gained last year, our operations team increased completed stages per day by 14% compared to the prior quarter. As a result, we completed six more wells than anticipated during the quarter while still delivering capex in-line with our expectations," said Smith. "With over half of our first quarter completions brought online during March, we expect to generate significant oil production growth next quarter."

Capital Structure and Liquidity

During the first quarter, Centennial repaid all of the outstanding borrowings under its $750 million revolving credit facility and had $51 million in cash on its balance sheet at March 31, 2022. Total net debt and total debt at the end of the quarter were $765 million and $816 million, respectively. Net debt-to-LTM EBITDAX at March 31, 2022 was 1.1x compared to 1.4x at December 31, 2021.

Hedge Position Update

For the remaining three quarters of 2022, Centennial has a total of 12,489 Bbls/d of oil hedged, consisting of approximately 75% fixed price swaps with the remainder in costless collars. The Company has 15,500 Bbls/d of oil hedged for the second quarter of 2022 and 11,000 Bbls/d of oil hedged for the second half of 2022.

In recent months, Centennial has added to its 2023 crude oil hedge position. For the full year 2023, the Company has a total of 5,736 Bbls/d of oil hedged, consisting of approximately 70% costless collars. The Company currently has 3,992 Bbls/d of WTI oil collars in place with a weighted average floor and ceiling price of $73.13 per barrel and $85.67 per barrel, respectively. Also for 2023, the Company has 1,744 Bbls/d of WTI oil hedged at a fixed price of $73.26 per barrel.

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