CALGARY, Sept. 3, 2019 /CNW/ - Crescent Point Energy Corp.
("Crescent Point" or the "Company") (TSX and NYSE: CPG) is pleased
to announce that it has entered into definitive agreements with
select parties to sell its Uinta Basin asset in its entirety and
certain southeast Saskatchewan
conventional assets for total cash consideration of approximately
$912 million.
KEY
HIGHLIGHTS
- Agreements to sell 27,000 boe/d of upstream assets for
approximately 4.7 times cash flow.
- Net debt expected to improve to approximately $2.75 billion at year-end 2019, down from
$4.40 billion prior to the changes in
senior management in 2018. Transactions strengthen balance sheet
and lower pro-forma net debt to adjusted funds flow ratio by
approximately 0.4 times.
- Accretive to debt-adjusted funds flow per share by
approximately 11 percent, while also improving the corporate
operating netback by approximately five percent, lowering the
capital required to sustain annual production and enhancing the
Company's financial flexibility.
- Increases Crescent Point's ability to continue executing its
share repurchase program, with approximately $100 million of incremental share repurchases
budgeted for the remainder of 2019, based on guidance at current
strip prices.
- Continue to advance disciplined disposition program, including
the monetization of certain infrastructure assets.
"Since we established our transition plan in September 2018, we have meaningfully improved the
sustainability of our business model by revising our capital
allocation process, lowering our cost structure and strengthening
our balance sheet," said Craig Bryksa, President and CEO of
Crescent Point. "The sale of the Uinta Basin and certain
conventional assets is accretive for our shareholders and aligned
with the key criteria we established for our asset portfolio. These
transactions are a considerable step forward in our ongoing plan to
focus our asset base."
UINTA BASIN ASSET DISPOSITION
During first quarter 2019, Crescent Point initiated a sales
process for its Uinta Basin asset. This process has resulted in the
successful execution of a purchase and sale agreement to sell the
entirety of the Company's Uinta Basin position to a private
operator for total cash consideration of approximately $700 million (US$525
million), before closing adjustments.
Crescent Point's Uinta Basin asset includes approximately 350
net sections of undeveloped land, 123.1 million boe ("MMboe") of
Proved Plus Probable ("2P") reserves and 29.5 MMboe of Proved
Developed Producing ("PDP") reserves. These reserves are based on
the Company's independent engineers' evaluation and price forecast
as at December 31, 2018.
Based on the above expectations and approximately 20,000 boe/d
(75% crude oil and 85% total liquids) of forecast production in
2020, before royalties, the transaction metrics are approximately
as follows:
- 4.8 times cash flow at current strip prices, based on an
operating netback of $20.05 per
boe;
- $35,000 per producing boe;
- $16.75 per 2P boe, including
future development capital ("FDC") of approximately $1.36 billion, as assessed by independent
engineers; and
- $1,300 per acre of undeveloped
land or $3,100 per acre of
undeveloped land with recognized drilling locations, net of PDP
reserves value of $404 million using
independent reserves at current strip pricing.
Crescent Point expects to generate improved corporate returns
and a stronger operating netback from lower royalties and reduced
expenses as a result of this disposition. The capital expenditures
required to sustain the Company's annual production are also
expected to improve due to a shallowing of the corporate decline
rate.
BMO Capital Markets and CIBC Capital Markets acted as Crescent
Point's financial advisors on this transaction and each provided a
fairness opinion to the Board of Directors, subject to the
assumptions, qualifications and limitations contained therein.
Tudor, Pickering, Holt & Co. represented the Company as its
strategic advisor. The sale is expected to be completed in
October 2019, subject to the
satisfaction of normal closing conditions and the receipt of
regulatory approvals.
SOUTHEAST SASKATCHEWAN
CONVENTIONAL ASSET DISPOSITION
The conventional assets being sold include approximately 7,000
boe/d of current production (70% crude oil and 85% total liquids)
and 49.2 MMboe of 2P reserves. These reserves are based on the
Company's independent engineers' evaluation and price forecast as
at December 31, 2018.
These conventional assets operate with a higher operating cost
structure and generate an operating netback that is approximately
30 percent below Crescent Point's corporate average. Additionally,
the future decommissioning liabilities associated with these
non-core assets are higher than those associated with the Company's
key focus areas.
The transaction metrics are approximately as follows:
- 4.5 times 2020 cash flow at current strip prices, based on an
operating netback of $18.55 per
boe;
- $30,000 per producing boe;
and
- $9.80 per 2P boe, including FDC
of approximately $270 million, as
assessed by independent engineers.
National Bank Financial Inc. and Scotiabank acted as Crescent
Point's financial advisors for these transactions. The agreements
are expected to close late third quarter 2019, subject to the
satisfaction of typical closing conditions and regulatory
approvals.
TRANSITION PLAN AND ONGOING PORTFOLIO OPTIMIZATION
In September 2018, new management
established a transition plan centered on its key value drivers of
disciplined capital allocation, cost efficiencies and balance sheet
improvement. The Company has successfully shifted its corporate
strategy and capital allocation process, realigned its focus on
generating stronger returns, realized cost improvements throughout
the organization and materially enhanced its financial
flexibility.
Including today's announcement, Crescent Point has now executed
a total of over $1.3 billion in asset
dispositions since the change in senior management and
approximately $975 million of asset
dispositions in 2019 alone.
The Company continues to pursue additional asset sales,
including the balance of its southeast Saskatchewan conventional assets, and the
monetization of its Saskatchewan
gas infrastructure assets, the process for which continues to
progress. The Company will remain disciplined and flexible as it
seeks to create additional value for its shareholders.
UPDATED 2019 GUIDANCE
Crescent Point's revised guidance for 2019 incorporates the
announced asset dispositions and includes annual average production
of 160,000 to 164,000 boe/d. The Company's capital expenditures of
$1.2 to $1.3
billion remains unchanged based on the planned spending
profile for the disposed assets during the remainder of the year,
as previously budgeted.
Crescent Point expects to conclude its 2019 capital expenditures
budget for its Uinta Basin asset during September 2019. This program includes the
fracture stimulation and completion of a number of previously
drilled two-mile horizontal wells as part of the Company's
multi-well pad development program. Crescent Point expects these
eight (seven net) two-mile horizontal wells to be brought on-stream
prior to the transaction closing in late third quarter, resulting
in forecast production of over 22,000 boe/d from the asset at
closing.
The Company's original 2019 budget allocated approximately
$150 million in total to its Uinta
Basin asset in comparison to approximately $200 million of estimated capital required to
sustain annual production of approximately 20,000 boe/d in 2020.
The southeast Saskatchewan
conventional assets being sold would require estimated capital of
approximately $25 million to sustain
annual production of approximately 7,000 boe/d in 2020. As a result
of these dispositions, the required capital expenditures to sustain
annual production, as a percentage of Crescent Point's cash flow,
is expected to improve.
The Company's revised 2019 guidance also incorporates the impact
of converting additional producing wells to waterflood injectors as
part of its commitment to decline mitigation. Crescent Point is now
targeting approximately 175 to 200 injection well conversions in
2019 compared to its original budget of approximately 145
conversions.
The Company does not expect to incur any cash taxes resulting
from the announced asset dispositions.
BALANCE SHEET AND SHARE REPURCHASE PROGRAM
As a result of its significant disposition program to date and
enhanced free cash flow generation in 2019, Crescent Point's net
debt and leverage ratios continue to improve. Based on strip prices
and the announced dispositions, total net debt is expected to be
reduced to approximately $2.75
billion at year-end 2019, resulting in a pro-forma net debt
to adjusted funds flow ratio that is lower by approximately 0.4
times.
The Company is in a strong position to continue executing its
share repurchase program in 2019 and currently budgets
approximately $125 million for
accretive share repurchases during the year, based on guidance at
current strip prices. This implies approximately $100 million of incremental share repurchases
during the remainder of 2019. Management will continually assess
its allocation of excess cash flow, including additional share
repurchases, as it further strengthens its balance sheet.
The Company's current share price continues to trade at a
significant discount compared to the fundamental underlying value
of its common shares. The announced asset dispositions are expected
to be accretive by over 20 percent on a PDP basis to the Company's
net asset value per share, excluding land and seismic, based on
current strip commodity prices. As a result of these transactions,
Crescent Point expects to realize an after-tax loss on the sale, or
impairment, within its third quarter 2019 financial results that
equates to less than three percent of the value of its total net
property, plant and equipment as at June 30,
2019.
HEDGING
Based on the announced dispositions, Crescent Point expects
approximately 49 percent of its oil and liquids production, net of
royalty interest, to be hedged upon closing in fourth quarter and
approximately 35 percent in 2020. The Company will remain
disciplined in its approach to layering on additional hedges,
taking into account commodity prices and its ongoing asset
disposition program.
CONFERENCE CALL DETAILS
Crescent Point management will host a conference call on
Tuesday, September 3, 2019, at
11:00 a.m. MDT (1:00 p.m. EDT) to discuss the Company's asset
dispositions and outlook.
Participants can listen to this event online at:
https://event.on24.com/wcc/r/2038229/4E7B63991413CE3D8761994554595E5C. Alternatively,
the conference call can be accessed by dialing 1-888-390-0605.
The webcast will be archived for replay approximately one hour
following completion of the call and can be accessed on Crescent
Point's website on the conference calls and webcasts page.
2019 BUDGET AND GUIDANCE SUMMARY
Total average annual
production (boe/d)
% Oil and
NGLs
|
Prior
168,000 to
172,000
91%
|
Revised
160,000 to
164,000
91%
|
Total Capital
expenditures ($ millions) (1)
Drilling and
development (%)
Facilities and seismic
(%)
|
$1,200 to
$1,300
90%
10%
|
$1,200 to
$1,300
90%
10%
|
(1)
|
Capital expenditures
excludes any potential net property and land acquisitions and
approximately $35 million of capitalized G&A.
|
Crescent Point is a leading North American light oil producer,
driven to enhance shareholder returns by cost-effectively
developing a focused asset base in a responsible and sustainable
manner.
All financial figures
are approximate and in Canadian dollars unless otherwise noted.
This press release contains forward-looking information and
references to non-GAAP financial measures. Significant related
assumptions and risk factors, and reconciliations are described
under the Non-GAAP Financial Measures and Forward-Looking
Statements sections of this press release, respectively.
|
Non-GAAP Financial Measures
Throughout this press release, the Company uses the terms
"adjusted funds flow", "net debt", "net debt to adjusted funds
flow", "free cash flow", "excess cash flow" and "operating
netback". These terms do not have any standardized meaning as
prescribed by IFRS and, therefore, may not be comparable with the
calculation of similar measures presented by other issuers.
Adjusted funds flow is equivalent to adjusted funds flow from
operations. Adjusted funds flow from operations is calculated based
on cash flow from operating activities before changes in non-cash
working capital, transaction costs and decommissioning
expenditures. Transaction costs are excluded as they vary based on
the Company's acquisition and disposition activity and to ensure
that this metric is more comparable between periods.
Decommissioning expenditures are discretionary and are excluded as
they may vary based on the stage of Company's assets and operating
areas. Management utilizes adjusted funds flow from operations as a
key measure to assess the ability of the Company to finance
dividends, operating activities, capital expenditures and debt
repayments. Adjusted funds flow from operations as presented is not
intended to represent cash flow from operating activities, net
earnings or other measures of financial performance calculated in
accordance with IFRS.
Net debt is calculated as long-term debt plus accounts payable
and accrued liabilities and long-term compensation liability, less
cash, accounts receivable, prepaids and deposits and long-term
investments, excluding the unrealized foreign exchange on
translation of US dollar long-term debt. Management utilizes net
debt as a key measure to assess the liquidity of the Company.
Net debt to adjusted fund flow is calculated as the period end
net debt divided by the sum of adjusted funds flow for the trailing
four quarters. The ratio of net debt to adjusted funds flow is used
by management to measure the Company's overall debt position and to
measure the strength of the Company's balance sheet. Crescent Point
monitors this ratio and uses this as a key measure in making
decisions regarding financing, capital spending and dividend
levels.
Free cash flow is calculated as adjusted funds flow from
operations less capital expenditures, payments on lease liability,
asset retirement obligations and other cash items (excluding net
acquisitions and dispositions). Excess cash flow is calculated as
free cash flow less dividends. Management utilizes free cash flow
and excess cash flow as key measures to assess the ability of the
Company to finance dividends, potential share repurchases, debt
repayments and returns-based growth.
Operating netback is calculated on a per boe basis as oil and
gas sales, less royalties, operating and transportation expenses.
Operating netback is a common metric used in the oil and gas
industry and is used by management to measure operating results on
a per boe basis to better analyze performance against prior periods
on a comparable basis. Readers are cautioned that reliance on such
information may not be appropriate for other purposes.
Management believes the presentation of the Non-GAAP measures
above provide useful information to investors and shareholders as
the measures provide increased transparency and the ability to
better analyze performance against prior periods on a comparable
basis.
Notice to US Readers
The oil and natural gas reserves contained in this press release
have generally been prepared in accordance with Canadian disclosure
standards, which are not comparable in all respects of United States or other foreign disclosure
standards. For example, the United States Securities and Exchange
Commission (the "SEC") generally permits oil and gas issuers, in
their filings with the SEC, to disclose only proved reserves (as
defined in SEC rules), but permits the optional disclosure of
"probable reserves" and "possible reserves" (each as defined in SEC
rules). Canadian securities laws require oil and gas issuers, in
their filings with Canadian securities regulators, to disclose not
only proved reserves (which are defined differently from the SEC
rules) but also probable reserves and permits optional disclosure
of "possible reserves", each as defined in NI 51-101. Accordingly,
"proved reserves", "probable reserves" and "possible reserves"
disclosed in this news release may not be comparable to US
standards, and in this news release, Crescent Point has disclosed
reserves designated as "proved plus probable reserves". Probable
reserves are higher-risk and are generally believed to be less
likely to be accurately estimated or recovered than proved
reserves. "Possible reserves" are higher risk than "probable
reserves" and are generally believed to be less likely to be
accurately estimated or recovered than "probable reserves". In
addition, under Canadian disclosure requirements and industry
practice, reserves and production are reported using gross volumes,
which are volumes prior to deduction of royalties and similar
payments. The SEC rules require reserves and production to be
presented using net volumes, after deduction of applicable
royalties and similar payments. Moreover, Crescent Point has
determined and disclosed estimated future net revenue from its
reserves using forecast prices and costs, whereas the SEC rules
require that reserves be estimated using a 12-month average price,
calculated as the arithmetic average of the first-day-of-the-month
price for each month within the 12-month period prior to the end of
the reporting period. Consequently, Crescent Point's reserve
estimates and production volumes in this news release may not be
comparable to those made by companies using United States reporting and disclosure
standards. Further, the SEC rules are based on unescalated costs
and forecasts. All amounts in the news release are stated in
Canadian dollars unless otherwise specified.
Forward-Looking Statements and Other Matters
Any "financial outlook" or "future oriented financial
information" in this press release, as defined by applicable
securities legislation has been approved by management of Crescent
Point. Such financial outlook or future oriented financial
information is provided for the purpose of providing information
about management's current expectations and plans relating to the
future. Readers are cautioned that reliance on such information may
not be appropriate for other purposes.
Certain statements contained in this press release constitute
"forward-looking statements" within the meaning of section 27A of
the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934 and "forward-looking information" for the
purposes of Canadian securities regulation (collectively,
"forward-looking statements"). The Company has tried to identify
such forward-looking statements by use of such words as "could",
"should", "can", "anticipate", "expect", "believe", "will", "may",
"intend", "projected", "sustain", "continues", "strategy",
"potential", "projects", "grow", "take advantage", "estimate",
"well-positioned" and other similar expressions, but these words
are not the exclusive means of identifying such statements.
In particular, this press release contains forward-looking
statements pertaining, among other things, to the following: the
agreement to sell the Uinta Basin asset and the non-core
Saskatchewan assets (the "Sale")
and the expected proceeds therefrom; the expected cash flow
multiple, debt-adjusted per share accretion and adjusted funds flow
accretion associated with the Sale; the expected impact of the Sale
on net debt at year-end 2019; the expectation that the Sale will
further enhance the Company's financial flexibility and ability to
continue to execute its share buyback program; the Sale lowering
the Company's capital requirements and improving netback; the
Company continuing to advance its disciplined disposition program,
including the monetization of certain infrastructure assets; the
reserves associated with the assets being sold; future
decommissioning liabilities; the expected 2020 production
associated with the assets being sold; the expected metrics
associated with the Sale, including the cash flow multiple at
current strip prices, operating netback, the price per producing
boe, the price per 2P boe, and the price per acre for both
undeveloped and developed land, and the key assumptions used to
estimate such metrics; the expectation that the Sale will be
accretive to PDP, excluding land and seismic at strip commodity
prices; the expectation that the Company will realize an after-tax
loss on sale, or impairment, within its third quarter 2019
financial results that equates to less than three percent of its
total net property, plant and equipment as at June 30, 2019 the expectation that the Sale will
not result in any cash taxes being due; the expectation that the
Sale will result in the Company generating improved corporate
returns, operating netback and enhanced sustainability due to lower
royalties and reduced expenses; the expectation that the Company's
capital expenditures requirement to sustain annual production will
improve following the Sale as a result of a shallowing of the
Company's decline rate; the focus of the transition plan the
expected closing date for the Sale; management's plan to remain
disciplined and flexible as it seeks to create additional value for
its shareholders and its pursuit of additional asset sales;
the Company's revised annual average production and capital
expenditures expectations for 2019; the Company's expectation that
its 2019 capital expenditures budget for the assets being sold will
be completed during September 2019
and the key components of the budget; the Company's expected timing
to bring certain Utah wells
on-stream and the expected production from the Utah Basin asset; the expectation that the
Company's ratio of required annual capital expenditures to sustain
annual production as a percentage of cash flow will improve
following the Sale; the Company's target for injection well
conversions in 2019; the Company's expectation that it will not
incur any cash tax from the Sale; the Company's expected year-end
2019 net debt to adjusted funds flow ratio; the Company's 2019
budget for share repurchases based on guidance at current strip
prices and the Company's plan to continually assess its allocation
of excess cash flow as it further strengthens its balance sheet;
the Company's hedging expectations for the fourth quarter of 2019
and 2020 along with the Company's plan to remain disciplined in its
approach to layering on additional hedges and the Company's 2019
budget and guidance summary including production and capital
expenditures.
Statements relating to "reserves" are also deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated and that
the reserves can be profitably produced in the future. Actual
reserve values may be greater than or less than the estimates
provided herein.
Unless otherwise noted, reserves referenced herein are given as
at December 31, 2018. Also, estimates
of reserves and future net revenue for individual properties may
not reflect the same confidence level as estimates and future net
revenue for all properties due to the effect of aggregation. All
required reserve information for the Company is contained in its
Annual Information Form for the year ended December 31, 2018, which is accessible at
www.sedar.com.
With respect to disclosure contained herein regarding resources
other than reserves, there is uncertainty that it will be
commercially viable to produce any portion of the resources and
there is significant uncertainty regarding the ultimate
recoverability of such resources.
All forward-looking statements are based on Crescent Point's
beliefs and assumptions based on information available at the time
the assumption was made. Crescent Point believes that the
expectations reflected in these forward-looking statements are
reasonable but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements
included in this press release should not be unduly relied upon. By
their nature, such forward-looking statements are subject to a
number of risks, uncertainties and assumptions, which could cause
actual results or other expectations to differ materially from
those anticipated, expressed or implied by such statements,
including those material risks discussed in the Company's Annual
Information Form for the year ended December
31, 2018 under "Risk Factors", our Management's Discussion
and Analysis for the year ended December 31,
2018, under the headings "Risk Factors" and "Forward-Looking
Information" and for the quarter ended June
30, 2019 under "Derivatives", "Liquidity and Capital
Resources", "Changes in Accounting Policy" and "Outlook". The
material assumptions are disclosed in the Management's Discussion
and Analysis for the year ended December 31,
2018, under the headings "Capital Expenditures", "Liquidity
and Capital Resources", "Critical Accounting Estimates", "Risk
Factors", "Changes in Accounting Policies" and "Outlook" and are
disclosed in the Management's Discussion and Analysis for the
quarter ended June 30, 2019 under the
headings "Derivatives", "Liquidity and Capital Resources", "Changes
in Accounting Policy" and "Outlook". In addition, risk factors
include: regulatory authority approval risk for the Sale; the risk
that the Sale fails to close, or that it closes on terms other than
those expected; the benefits of the Sale failing to materialize as
expected; financial risk of marketing reserves at an acceptable
price given market conditions; volatility in market prices for oil
and natural gas; delays in business operations, pipeline
restrictions, blowouts; the risk of carrying out operations with
minimal environmental impact; industry conditions, including
changes in laws and regulations and the adoption of new
environmental laws and regulations and changes in how they are
interpreted and enforced; risks and uncertainties related to all
oil and gas interests and operations on tribal lands; uncertainties
associated with estimating oil and natural gas reserves; economic
risk of finding and producing reserves at a reasonable cost;
uncertainties associated with partner plans and approvals;
operational matters related to non-operated properties; increased
competition for, among other things, capital, acquisitions of
reserves and undeveloped lands; competition for and availability of
qualified personnel or management; incorrect assessments of the
value of acquisitions and exploration and development programs;
unexpected geological, technical, drilling, construction and
processing problems; availability of insurance; fluctuations in
foreign exchange and interest rates; stock market volatility;
failure to realize the anticipated benefits of acquisitions and
dispositions; general economic, market and business conditions;
uncertainties associated with regulatory approvals; uncertainty of
government policy changes; uncertainties associated with credit
facilities and counterparty credit risk; and changes in income tax
laws, tax laws, crown royalty rates and incentive programs relating
to the oil and gas industry; and other factors, many of which are
outside the control of Crescent Point. The impact of any one risk,
uncertainty or factor on a particular forward-looking statement is
not determinable with certainty as these are interdependent and
Crescent Point's future course of action depends on management's
assessment of all information available at the relevant time.
Additional information on these and other factors that could
affect Crescent Point's operations or financial results are
included in Crescent Point's reports on file with Canadian and U.S.
securities regulatory authorities. Readers are cautioned not to
place undue reliance on this forward-looking information, which is
given as of the date it is expressed herein or otherwise. Crescent
Point undertakes no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, unless required to do so pursuant to
applicable law. All subsequent forward-looking statements, whether
written or oral, attributable to Crescent Point or persons acting
on the Company's behalf are expressly qualified in their entirety
by these cautionary statements.
FOR MORE INFORMATION ON CRESCENT POINT ENERGY, PLEASE
CONTACT:
Brad Borggard, Senior
Vice President, Corporate Planning and Capital Markets, or
Shant Madian, Vice
President, Investor Relations and Corporate Communications
Telephone: (403) 693-0020 Toll-free (US and Canada): 888-693-0020 Fax: (403)
693-0070
Address: Crescent Point Energy Corp. Suite 2000, 585 - 8th Avenue
S.W. Calgary AB T2P 1G1
www.crescentpointenergy.com
Crescent Point shares are traded on the Toronto Stock Exchange
and New York Stock Exchange under the symbol CPG.
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SOURCE Crescent Point Energy Corp.