01—Abstract
Summary
Summary of the 10-K filed February 24, 2022. Cited figures are marked; the original filing is the authoritative source.
Centennial Resource Development, Inc. is an independent oil and natural gas company focused on crude oil and associated liquids-rich natural gas in the Delaware Basin of the Permian Basin, with approximately 73,675 net acres as of December 31, 2021, 97%a of which it operates.
Total proved reserves were 305,204 MBoe at year-end 2021 (53% proved developed), up from 298,902 MBoe in 2020, with a standardized measure of discounted future net cash flows of $3.40 billionb and pre-tax PV 10% of $3.88 billion. Net production was 22,243 MBoe in 2021 versus 24,581 MBoe in 2020, while oil and gas sales rose to $1.03 billion from $580.5 million, driven by higher realized prices. Net income attributable to Class A Common Stock was $138.2 million, compared with a net loss of $682.8 million in 2020, which included a $591.8 million proved property impairment.
The company funded its 2021 capital expenditures entirely from operating cash flow, generating $525.6 millionc of operating cash flow, and reduced its credit facility borrowings to $25.0 million at year-end. Long-term debt, net, was $825.6 million. Subsequent to year-end, in February 2022, the company closed a new five-year revolving credit facility with $750 million of elected commitments and a $1.15 billion borrowing base, and its board authorized a stock repurchase program of up to $350 million running through April 1, 2024.
The 2022 capital budget is projected at $365 million to $425 milliond, to be funded from cash flows from operations. Key risks disclosed include commodity price volatility, the concentration of all proved reserves in the Delaware Basin, a high proportion of proved undeveloped reserves (47%), significant customer concentration (BP America accounted for 50% of 2021 net revenues), and a pending lawsuit from a transportation provider related to Winter Storm Uri with a reasonably possible loss range of zero to $7.6 million. Riverstone beneficially owns approximately 31% of voting common stock.
02—Key points
Key Highlights
- Oil and gas sales of $1,029.9 million in 2021, up 77% from $580.5 million in 2020, reflecting higher realized prices.
- Net income attributable to Class A Common Stock of $138.2 million in 2021, versus a net loss of $682.8 million in 2020 that included a $591.8 million proved property impairment.
- Total proved reserves of 305,204 MBoe at December 31, 2021, with 53% proved developed; pre-tax PV 10% of $3,877.5 million.
- Net production declined 10% to 22,243 MBoe, with oil production down 11% to 11,701 MBbls.
- Operating cash flow of $525.6 million funded 2021 capital expenditures of $321.5 million entirely internally; credit facility borrowings reduced to $25.0 million.
- Post-year-end: new $750 million elected-commitment revolving credit facility (borrowing base $1.15 billion, maturing February 2027) and a $350 million stock repurchase program through April 1, 2024.
- 2022 capital budget of $365 million to $425 million with two rigs planned; all proved reserves are located in the Delaware Basin.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 24, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $1.03B$580.46M | +77.4% |
| Operating Expenses | $699.42M$1.36B | −48.6% |
| Operating Income | $370.62M-$780.12M | +147.5% |
| Interest Expense | $61.29M$69.19M | −11.4% |
| Net Income | $138.18M-$685.20M | +120.2% |
| EPS (Basic) | $0.49$-2.46 | +119.9% |
| EPS (Diluted) | $0.46$-2.46 | +118.7% |
| Shares Outstanding (Basic) | 280.87M277.37M | +1.3% |
| Shares Outstanding (Diluted) | 310.17M277.37M | +11.8% |
05—Questions
Frequently Asked Questions
How did the company's financial performance change in 2021 compared with 2020?
Oil and gas sales rose 77% to $1,029.9 million, and net income attributable to Class A Common Stock was $138.2 million, compared with a net loss of $682.8 million in 2020. The 2020 loss reflected a $591.8 million proved property impairment and a $143.4 million gain on debt extinguishment, while 2021 results included a $33.9 million net gain on sale of long-lived assets and $148.8 million in net losses on derivative instruments.
How much debt does the company carry and what is its liquidity position?
As of December 31, 2021, long-term debt, net, was $825.6 million, including $25.0 million drawn on the credit facility and $815.8 million of principal in senior notes. Available borrowing capacity was $669.2 million after $5.8 million of letters of credit. In February 2022 the company closed a new five-year facility with $750 million of elected commitments and a $1.15 billion borrowing base.
What is the company's plan for shareholder returns?
In February 2022 the board authorized a repurchase program of up to $350 million of Class A common stock, running through April 1, 2024, to be funded from cash on hand and operating cash flows. The company has not paid cash dividends on its common stock and does not anticipate declaring dividends in the near future.
What are the main risks to the company's reserves and production?
Key risks include volatile oil, natural gas and NGL prices; reserves that are entirely in the Delaware Basin; 47% of proved reserves classified as proved undeveloped, which must be drilled within five years of booking; reliance on a small number of purchasers, with BP America at 50% of 2021 net revenues; and third-party transportation constraints. The company also faces a lawsuit from a transportation provider over Winter Storm Uri capacity charges, with a reasonably possible loss of zero to $7.6 million.
How much capital does the company expect to spend in 2022 and how will it be funded?
The company expects a 2022 capex budget of $365 million to $425 million, of which $350 million to $400 million is for drilling, completion and facilities. It operated a two-rig program in 2021, plans two rigs throughout 2022, and expects to fund the entire budget from cash flows from operations given anticipated production, current prices and existing hedge positions.
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