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Is Crescent Energy's Royalty Business Its Next Big Growth Engine?
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Key Takeaways
Crescent Energy's royalty portfolio generates revenues without drilling capital or operating expenses.
The planned Devon deal could lift Crescent Energy's annualized royalty EBITDA to about $250 million.
A potential Crescent Royalties IPO aims to establish a public market and ease future capital-market access.
Crescent Energy Company (CRGY - Free Report) is strengthening its long-term growth prospects through its Crescent Royalties business, which holds mineral and royalty interests across major U.S. oil and gas basins. Unlike traditional exploration and production operations, these interests generate revenues from hydrocarbon production without requiring additional drilling capital or operating expenditures. This capital-light structure supports attractive margins, enhances cash flow generation and provides an additional source of earnings diversification.
Crescent Energy’s royalties portfolio is primarily concentrated in the Eagle Ford, with exposure to the Permian, Appalachian and Denver-Julesburg basins. The planned acquisition of Devon Energy’s Eagle Ford assets is expected to significantly expand this business, bringing pro forma annualized EBITDA to approximately $250 million and royalty production to nearly 15,000 barrels of oil equivalent per day. Moreover, the proportion of royalties EBITDA attributable to Crescent-operated assets is expected to increase from approximately 10% to 40%, providing greater visibility into future drilling activity, production growth and cash flow generation.
Crescent Energy has also confidentially submitted a draft registration statement for a potential initial public offering of Crescent Royalties. The proposed listing aims to establish a public market for the subsidiary’s shares and facilitate future capital-market access. Management believes strategic opportunities involving this highly cash-generative business can enhance shareholder value and strengthen its credit profile. Overall, the royalties platform offers Crescent Energy a compelling avenue for capital-efficient growth, financial flexibility and long-term value creation.
How Does Crescent Energy Compare With Peers?
Several other companies own and acquire mineral and royalty interests in oil-weighted basins where operators bear the expenses associated with exploration, development and production, and the royalty holders receive royalty income without funding the capital expenditures required to drill and complete wells.
Viper Energy, Inc. (VNOM - Free Report) operates a high-margin oil and natural gas royalty business, primarily concentrated in the Permian Basin. Unlike traditional producers, Viper Energy earns royalty income without bearing drilling, completion or lease operating expenses, supporting strong free cash flow generation. Its extensive mineral portfolio spans approximately 98,098 net royalty acres, benefiting from development activities undertaken by Diamondback Energy and third-party operators. Recent acquisitions, including McElroy Ranch and Riverbend, have strengthened its acreage position and future production potential. Viper Energy's capital-light business model, expanding royalty portfolio and exposure to continued Permian development support sustainable cash flow growth and shareholder returns.
Texas Pacific Land Corporation (TPL - Free Report) generates high-margin royalty revenues from oil and gas production without bearing drilling or development costs. With approximately 224,000 net royalty acres in the Permian Basin, Texas Pacific Land benefits from increasing upstream activity. Rising rig counts, record drilling permits and improving natural gas realizations strengthen its growth prospects. Additionally, Texas Pacific Land's unhedged royalty portfolio provides direct exposure to favorable commodity prices. Its produced water royalty business offers another growth avenue, supported by increasing water volumes and disposal requirements. Overall, sustained Permian development and expanding royalty interests position TPL for long-term cash flow growth.
The Zacks Rundown on Crescent Energy
Shares of Crescent Energy have gained 22.5% in a year compared with the Oil/Energy sector’s growth of 21.3%.
Image Source: Zacks Investment Research
From a valuation perspective — in terms of the forward 12-month Price/Sales (P/S F12M) ratio — Crescent Energy is trading at a discount compared with the industry average, making it attractive for investors as more upside is still left in the stock.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate implies 35% year-over-year growth in Crescent Energy’s 2026 earnings per share. In other words, investors are paying up for CRGY at a point when the fundamentals of the company are expected to accelerate.
View the Zacks #1 Rank List
Image: Bigstock
Is Crescent Energy's Royalty Business Its Next Big Growth Engine?
Key Takeaways
Crescent Energy Company (CRGY - Free Report) is strengthening its long-term growth prospects through its Crescent Royalties business, which holds mineral and royalty interests across major U.S. oil and gas basins. Unlike traditional exploration and production operations, these interests generate revenues from hydrocarbon production without requiring additional drilling capital or operating expenditures. This capital-light structure supports attractive margins, enhances cash flow generation and provides an additional source of earnings diversification.
Crescent Energy’s royalties portfolio is primarily concentrated in the Eagle Ford, with exposure to the Permian, Appalachian and Denver-Julesburg basins. The planned acquisition of Devon Energy’s Eagle Ford assets is expected to significantly expand this business, bringing pro forma annualized EBITDA to approximately $250 million and royalty production to nearly 15,000 barrels of oil equivalent per day. Moreover, the proportion of royalties EBITDA attributable to Crescent-operated assets is expected to increase from approximately 10% to 40%, providing greater visibility into future drilling activity, production growth and cash flow generation.
Crescent Energy has also confidentially submitted a draft registration statement for a potential initial public offering of Crescent Royalties. The proposed listing aims to establish a public market for the subsidiary’s shares and facilitate future capital-market access. Management believes strategic opportunities involving this highly cash-generative business can enhance shareholder value and strengthen its credit profile. Overall, the royalties platform offers Crescent Energy a compelling avenue for capital-efficient growth, financial flexibility and long-term value creation.
How Does Crescent Energy Compare With Peers?
Several other companies own and acquire mineral and royalty interests in oil-weighted basins where operators bear the expenses associated with exploration, development and production, and the royalty holders receive royalty income without funding the capital expenditures required to drill and complete wells.
Viper Energy, Inc. (VNOM - Free Report) operates a high-margin oil and natural gas royalty business, primarily concentrated in the Permian Basin. Unlike traditional producers, Viper Energy earns royalty income without bearing drilling, completion or lease operating expenses, supporting strong free cash flow generation. Its extensive mineral portfolio spans approximately 98,098 net royalty acres, benefiting from development activities undertaken by Diamondback Energy and third-party operators. Recent acquisitions, including McElroy Ranch and Riverbend, have strengthened its acreage position and future production potential. Viper Energy's capital-light business model, expanding royalty portfolio and exposure to continued Permian development support sustainable cash flow growth and shareholder returns.
Texas Pacific Land Corporation (TPL - Free Report) generates high-margin royalty revenues from oil and gas production without bearing drilling or development costs. With approximately 224,000 net royalty acres in the Permian Basin, Texas Pacific Land benefits from increasing upstream activity. Rising rig counts, record drilling permits and improving natural gas realizations strengthen its growth prospects. Additionally, Texas Pacific Land's unhedged royalty portfolio provides direct exposure to favorable commodity prices. Its produced water royalty business offers another growth avenue, supported by increasing water volumes and disposal requirements. Overall, sustained Permian development and expanding royalty interests position TPL for long-term cash flow growth.
The Zacks Rundown on Crescent Energy
Shares of Crescent Energy have gained 22.5% in a year compared with the Oil/Energy sector’s growth of 21.3%.
Image Source: Zacks Investment Research
From a valuation perspective — in terms of the forward 12-month Price/Sales (P/S F12M) ratio — Crescent Energy is trading at a discount compared with the industry average, making it attractive for investors as more upside is still left in the stock.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate implies 35% year-over-year growth in Crescent Energy’s 2026 earnings per share. In other words, investors are paying up for CRGY at a point when the fundamentals of the company are expected to accelerate.
Image Source: Zacks Investment Research
CRGY stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.