CALGARY, ALBERTA–(Marketwired – Dec. 7, 2016) – Crescent Point Energy Corp. (“Crescent Point” or the “Company”) (TSX:CPG)(NYSE:CPG) is pleased to announce a $1.45 billion capital expenditures budget for 2017. This budget is expected to generate a 2017 exit production rate of approximately 183,000 boe/d, or exit to exit growth of approximately 16,000 boe/d. This represents production growth of approximately 10 percent on both an absolute and per share basis.
“We’ve had a very successful 2016 operationally and are ahead of our budgeted December exit production of approximately 167,000 boe/d,” said Scott Saxberg, president and CEO of Crescent Point. “We also increased our drilling inventory this year by approximately 1,000 new internally identified drilling locations, which was supported by our new play development program. This more than replaces our 2016 drilling program and provides us with over 12 years of drilling inventory to continue our long-term growth.”
Crescent Point’s active fourth quarter 2016 capital program is expected to result in first quarter 2017 production of more than 170,000 boe/d. This represents growth of approximately six percent, or 12 percent on an annualized basis, over third quarter 2016.
For 2017, approximately $1.29 billion, or 89 percent of the budget, has been allocated to drilling and development activities, including the drilling of approximately 670 net wells. The remaining $160 million, or 11 percent of the budget, has been allocated to infrastructure and seismic investments across its core areas. Crescent Point also plans to continue investing in long-term growth objectives, including its new play development, to further build on the Company’s success during 2016.
Based on Crescent Point’s current monthly dividend of $0.03 per share and aforementioned capital expenditure plans, the Company expects a total payout ratio of 100 percent in 2017 at a WTI price of US$52.00/bbl.
2017 BUDGET AND GUIDANCE SUMMARY
|Exit production (boe/d)||183,000|
|Oil and NGLs (bbls/d)||153,000|
|Natural gas (mcf/d)||114,000|
|Total average annual production (boe/d)||172,000|
|Capital expenditures ($ millions)|
|Drilling and development ($ millions)||$1,290|
|Facilities and seismic ($ millions)||$160|
|Total capital expenditures, before net land and property acquisitions ($ millions)||$1,450|
|Annual decline rate (%)||28%|
|Drilling capital efficiencies ($ per flowing boe) (1)||~$21,000|
|Funds flow from operations netback based on US$52.00/bbl WTI and $0.75 US/CAD ($/boe) (1)||~$26.50|
|Total payout ratio based on US$52.00/bbl WTI and $0.75 US/CAD (%) (1) (2)||100%|
|Net debt to funds flow from operations (1) (3)||2.2x|
|Q4 annualized net debt to funds flow from operations (1) (4)||2.0x|
|(1) Funds flow from operations netback, total payout ratio, drilling capital efficiencies, net debt, net debt to funds flow from operations, and Q4 annualized net debt to funds flow from operations as presented do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and, therefore, may not be comparable with the calculation of similar measures presented by other entities.|
|(2) Total payout ratio is calculated on a percentage basis as capital expenditures and dividends paid or declared divided by funds flow from operations.|
|(3) Net debt to funds flow from operations is calculated as the period end net debt divided by the sum of funds flow from operations for the trailing four quarters.|
|(4) Q4 annualized net debt to funds flow from operations is calculated as the period end net debt divided by Q4 annualized funds flow from operations.|
Within its three core resource areas of the Williston Basin, southwest Saskatchewan and the Uinta Basin, Crescent Point expects to generate strong production growth during 2017.
For the Williston Basin, the Company has allocated approximately 51 percent of its 2017 capital expenditures budget. This is expected to result in exit production growth of approximately five percent in 2017. The Williston Basin represents the Company’s largest producing area and is currently producing approximately 102,500 boe/d.
For southwest Saskatchewan, which includes the Shaunavon and Viking resource plays, Crescent Point has allocated approximately 25 percent of its capital expenditures budget, resulting in exit production growth of approximately 10 percent in 2017. Southwest Saskatchewan represents the Company’s second largest producing area and is currently producing approximately 39,000 boe/d.
For the Uinta Basin, Crescent Point has allocated approximately 18 percent of its 2017 capital expenditures budget, up from approximately eight percent in 2016. Based on recent strong drilling results, the Company plans to be considerably more active in this core area during the upcoming year. Crescent Point is currently producing approximately 12,500 boe/d in the basin and expects exit production growth of approximately 50 percent in 2017. The Company plans to drill approximately 25 net horizontal wells in 2017, up from approximately nine net wells in 2016, and will target the continued expansion and delineation of this multi-zone resource play.
Crescent Point’s waterflood programs will continue to be a key focus in 2017. The Company plans to increase the efficiency of its programs by continuing to test and implement its newest technology breakthroughs. This includes expanding on the recent success of its multiple-stage segregated strings pilot program. Crescent Point’s initial pilot resulted in increased water injectivity and a doubling of production in offset wells after approximately six months.
“In the second half of 2016, we began testing our new multiple-stage segregated strings technology to optimize our waterflood programs,” said Saxberg. “Our pilot program demonstrated strong results with improved efficiencies in water injectivity and production rates. We plan to further increase testing and implementation of this technology during 2017, which has the potential to positively impact our waterflood results with less production being taken off-line during the process.”
As commodity prices rebound, Crescent Point also sees the potential to generate funds flow from operations in excess of its initial 2017 budget of $1.45 billion and dividends of approximately $200 million. The Company estimates increased funds flow from operations of approximately $50 million for every US$1.00/bbl WTI, providing flexibility for increased production growth.
Crescent Point continues to remain active on its hedging program, which provides increased stability to the Company’s funds flow from operations and planned growth objectives. Since second quarter 2016, the Company added approximately 13,500 bbl/d of oil hedges for 2017. As at December 5, 2016, the Company has 29 percent of its oil production, net of royalty interest, hedged for 2017 at a weighted average market value price of approximately CDN$72/bbl. The Company also has 29 percent of its natural gas production hedged for 2017 through the fourth quarter of 2019 at CDN$2.91 per GJ.
Crescent Point remains committed to maintaining a strong financial position and will be flexible in its capital program in order to maximize shareholder return through its total return strategy of long-term growth plus dividend income.
The Company retains significant financial flexibility and liquidity with no material near-term debt maturities and approximately $1.9 billion of unutilized credit capacity on its covenant-based, unsecured credit facility, as at September 30, 2016.
“We’ve had an excellent 2016 and remain ahead of our production guidance,” said Saxberg. “Our strong execution resulted in new locations within our estimated corporate drilling inventory, as well as a new, highly economic horizontal play discovery in the Uinta Basin. We are excited to follow up on this success during 2017.”
NON-GAAP FINANCIAL MEASURES
Throughout this press release, the Company uses the terms “total payout ratio”, “drilling capital efficiencies”, “funds flow from operations”, “funds flow from operations netback”, “net debt”, “net debt to funds flow from operations”, and “Q4 annualized net debt to funds flow from operations”. 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.
Total payout ratio is calculated on a percentage basis as capital expenditures and dividends paid or declared divided by funds flow from operations. Total payout ratio is used by management to monitor the Company’s capital reinvestment and dividend policy, as a percentage of the amount of funds flow from operations.
Drilling capital efficiencies is calculated as the capital expenditures required to replace a barrel equivalent (boe) of oil and gas production. Management utilizes drilling capital efficiencies as a key measure to assess the economic viability of a particular well.
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. Funds flow from operations netback is calculated on a per boe basis as funds flow from operations divided by total production. Management utilizes 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. 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 dividends payable, less cash, accounts receivable, prepaids and deposits and long-term investments, excluding the unrealized foreign exchange on translation of hedged US dollar long-term debt. Management utilizes net debt as a key measure to assess the liquidity of the Company.
Net debt to funds flow from operations is calculated as the period end net debt divided by the sum of funds flow from operations for the trailing four quarters. Q4 annualized net debt to funds flow from operations is calculated as the period end net debt divided by the Q4 annualized funds flow from operations. The ratio of net debt to funds flow from operations 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.
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.