Centennial Resource Development, Inc. announced the establishment of a share repurchase program. It also released its 2021 financial and operational results and 2022 operational plans.
Centennial Resources Development’s results
Firstly, the independent oil and natural gas company, generated a record free cash flow of $85 million in the fourth quarter. Also, over $200 million for the whole year.
Secondly, Centennial Resources Development closed the previously announced non-core asset in Reeves County for $101 million; repaid $180 million in borrowings during the fourth quarter, and reduced leverage metrics.
Thirdly, the company delivered three of the top ten wells in its history; increased daily crude oil production by 3% compared to the prior quarter. Moreover, it entered into a new $750 million, five-year revolving credit facility.
“2021 was an excellent year for Centennial. We generated over $200 million in free cash flow, allowing us to significantly pay down debt and reduce leverage during the year,” said Sean R. Smith, Chief Executive Officer. “Using current strip pricing, we expect strong free cash flow and further debt reduction during 2022, while also delivering solid oil production growth. Given our enhanced financial and operational position, we are excited to begin returning capital to our shareholders in the coming quarters.”
Stock Purchase Program
Centennial announced a $350 million stock repurchase program. This program has authorization for two years and represents approximately 15% of the company’s current market capitalization. Upon achieving a net debt-to-LTM EBITDAX2 ratio of roughly 1.0x or lower, Centennial plans to begin repurchasing shares.
“I am pleased to announce our first step in returning capital to shareholders through a disciplined share buyback program, which we believe will drive value creation in today’s environment,” said Smith. “The program is supported by a robust two-year outlook, during which we expect to generate over $775 million in free cash flow at current strip prices and deliver average crude oil production growth of over 10%.”
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2022 operational plans and targets
During this year, Centennial plans to continue operating its current two-drilling program. With this program, there is an estimation to generate over $400 million in free cash flow at current strip prices. Given operational efficiencies realized to date, the company expects to deliver crude oil production growth of 10% to 15%.
In addition, the estimated total capital budget of the fiscal year is approximately $365 million to $424 million. The growth expectation for the total DC/F costs are from $350 million to $400 million.
Finally, Centennial anticipated that approximately 80% of its completions will be in Lea County, New Mexico. Due to the reduced cycle times, the company expects its gross number of operated spuds and completions to increase 4% and 19%, respectively, compared to the prior year.
