CALGARY, Alberta, July 26, 2018 (GLOBE NEWSWIRE) — Crescent Point Energy Corp. (“Crescent Point” or the “Company”) (TSX:CPG) (NYSE:CPG) is pleased to announce its operating and financial results for the quarter ended June 30, 2018.
KEY HIGHLIGHTS
- Reduced net debt in the quarter by over $390 million, driven by funds flow from operations in excess of capital expenditures and proceeds from recently announced dispositions of approximately $280 million.
- Renewed unsecured, covenant-based credit facilities totaling $3.6 billion, with maturity date extension to 2021.
- Appointed new senior leadership team and streamlined executive structure with fewer members.
- Reviewing strategy with a focus on balance sheet improvement, disciplined capital allocation and cost reductions.
FINANCIAL HIGHLIGHTS
- Funds flow from operations totaled $500.3 million, or $0.91 per share diluted, based on an operating netback of $40.74 per boe. Funds flow from operations was partially impacted by $13.5 million of incremental severance costs.
- Total capital expenditures during second quarter was $313.6 million. The Company spent $238.6 million on drilling and development activities, drilling 54 (36.0 net) wells, $62.6 million on facilities and seismic and $12.4 million on land.
- During second quarter, Crescent Point closed previously announced dispositions of certain assets for total proceeds of approximately $280 million. Production from these assets was approximately 4,800 boe/d.
- The Company successfully renewed its covenant-based, unsecured credit facilities totaling $3.6 billion, with a maturity date extension to June 10, 2021. As previously announced, Crescent Point closed a private placement of senior guaranteed notes, ranging in maturities of five to seven years, with fixed Canadian dollar coupon rates of 3.58 percent to 3.98 percent. Proceeds were used to repay a portion of the outstanding bank debt and other senior guaranteed notes. As at June 30, 2018, cash and unutilized credit capacity was approximately $1.5 billion, with no material near-term debt maturities.
- As at July 20, 2018, the Company had, on average, over 40 percent of its oil and liquids production, net of royalty interest, hedged through 2018 and 2019, at a weighted average market value price of approximately CDN$77.00/bbl.
OPERATIONAL HIGHLIGHTS
- Second quarter production averaged 181,818 boe/d, comprised of approximately 90 percent oil and liquids.
- Operating activity within Crescent Point’s Canadian assets was limited during the quarter due to normal seasonality related to spring break-up. Since early July, drilling activity has resumed within the Company’s Canadian operations.
- Crescent Point’s U.S. operations continued to advance during second quarter. This included horizontal development in the Uinta Basin and North Dakota across multiple zones.
- In the East Shale Duvernay, the Company completed its first half 2018 drilling program with encouraging initial well results. Crescent Point will continue to monitor well performance before increasing the amount of capital allocated to this early-stage resource play.
Summary of Drilling Results
The following table summarizes the Company’s drilling results for the three months ended June 30, 2018:
| Three months ended June 30, 2018 | Total | Net |
| Williston Basin (1) | 37 | 27.0 |
| Southwest Saskatchewan | 1 | 0.1 |
| Uinta Basin (1) | 15 | 7.9 |
| Other | 1 | 1.0 |
| Total | 54 | 36.0 |
(1) The net well count is subject to final working interest determination.
LEADERSHIP UPDATE
- The Board of Directors (“Board”) continues its formal review process with respect to the appointment of Crescent Point’s President and Chief Executive Officer (“CEO”). This process is being conducted with the assistance of a leading executive search firm, which is considering both internal and external candidates. The Board looks forward to finalizing and communicating its decision in due course.
- Craig Bryksa, interim President and CEO, and his new senior leadership team are assessing and optimizing the Company’s future strategic direction. This team includes Ken Lamont, Chief Financial Officer, Ryan Gritzfeldt, Chief Operating Officer, Derek Christie, Senior Vice President, Exploration, and Brad Borggard, Senior Vice President, Corporate Planning and Capital Markets.
- Crescent Point’s new team is taking a refreshed approach as it conducts an ongoing comprehensive review of its asset base, business strategy and organizational structure. In this transition period, the team has identified and acted on certain near-term opportunities, including allocating proceeds from recent dispositions to reduce net debt, streamlining the executive structure with fewer members and rescheduling its capital investment plans.
- The Company recently appointed Scott Tuttle as Senior Vice President, Human Resources and Corporate Services. Mr. Tuttle joined Crescent Point from Repsol SA, where he served as Corporate Director, People and Organization, and prior to that, as Vice President and Head of Global Human Resources at Talisman Inc. Mr. Tuttle has over 25 years of human resources experience, primarily in the energy sector.
OUTLOOK
Crescent Point’s new team is focused on a transition plan that includes revising and prioritizing the Company’s strategy based on key value drivers, including balance sheet improvement, disciplined capital allocation and cost reductions.
This team is currently reviewing its asset base and business strategy with respect to these key value drivers. The Company has also begun streamlining its organizational structure and is exploring areas for improvement within each level of the organization. Following this review process, Crescent Point expects to identify value enhancing opportunities, including future asset dispositions, the optimization of its capital program and a reduced cost structure.
During the initial stages of its review, the new team rescheduled its capital investment plans for the remainder of 2018. As such, a portion of the capital expenditures previously planned for third quarter 2018 has been moved to later in the year. This rescheduling allows for more consistent levels of activity into 2019 without requiring capital expenditures to be increased in 2018. This decision also provides cost, staffing, logistics and safe operations benefits to the Company. Going forward, Crescent Point intends to allocate capital in a manner designed to achieve consistent activity levels.
As a result of this rescheduled capital program, production volumes that were previously budgeted to come on stream earlier in the second half of 2018 are now expected to come on line later in the year or in first quarter 2019, thereby affecting the 2018 annual average production. In addition, the Company has elected to shut in approximately 1,000 boe/d of uneconomic production as it focuses on returns versus volume growth. As a result of these two changes, Crescent Point is adjusting its 2018 annual average production guidance by approximately two percent to 177,000 boe/d from 181,000 boe/d. The Company reaffirms its annual capital expenditures guidance at $1.775 billion and remains committed to aligning its cash outflows with inflows.
“I am very excited about the future of our company and believe we have the right assets and skill set to deliver improved results,” said Bryksa. “Our new team is focused on building a revised strategy that prioritizes our key value drivers, which are expected to result in improved returns, free cash flow generation and debt adjusted per share metrics.”
Crescent Point recognizes the importance of providing clarity on its strategy. Given the team’s deep understanding and knowledge of the business and its assets, the Company will communicate its plans in a timely manner.
CONFERENCE CALL DETAILS
The Company’s management will host a conference call on Thursday, July 26, 2018 at 10:00 a.m. MT (12:00 p.m. ET), to discuss Crescent Point’s results and outlook.
Participants can listen to this event online by entering https://edge.media-server.com/m6/p/psen4mwq in a web browser. Alternately, the conference can be accessed by dialing 844-231-0101 or 216-562-0389 and entering the following passcode: 1195289. For those unable to participate in the conference call at the scheduled time, the webcast will be archived for replay and can be accessed on the Company’s website at www.crescentpointenergy.com. The replay will be available approximately one hour following completion of the call.
2018 GUIDANCE
Crescent Point’s guidance for 2018 is as follows:
| Total average annual production (boe/d) % Oil and NGLs |
Prior 181,000 90 |
% | Revised 177,000 90 |
% |
| Capital expenditures (1) Drilling and development ($ millions) Facilities and seismic ($ millions) |
$1,595 $180 |
$1,595 $180 |
||
| Total capital expenditures, before net land and property acquisitions ($ millions) | $1,775 | $1,775 |
(1) The projection of capital expenditures excludes property and land acquisitions, which are separately considered and evaluated.
ON BEHALF OF THE BOARD OF DIRECTORS
Craig Bryksa
Interim President and Chief Executive Officer
July 26, 2018
The Company’s unaudited financial statements and management’s discussion and analysis for the quarter ended June 30, 2018, are available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml and on Crescent Point’s website at www.crescentpointenergy.com.
All financial figures are approximate and in Canadian dollars unless otherwise noted. This press release contains forward-looking information and references to non-GAAP financial measures. Significant related assumptions and risk factors, and reconciliations are described under the Non-GAAP Financial Measures and Forward-Looking Statements sections of this press release, respectively.
FINANCIAL AND OPERATING HIGHLIGHTS
| Three months ended June 30 | Six months ended June 30 | |||||||||
| (Cdn$ millions except per share and per boe amounts) | 2018 | 2017 | 2018 | 2017 | ||||||
| Financial | ||||||||||
| Cash flow from operating activities | 452.8 | 415.9 | 914.8 | 832.1 | ||||||
| Funds flow from operations (1) | 500.3 | 418.0 | 929.2 | 845.1 | ||||||
| Per share (1) (2) | 0.91 | 0.77 | 1.69 | 1.55 | ||||||
| Net income (loss) | (166.2 | ) | 83.6 | (256.9 | ) | 203.0 | ||||
| Per share (2) | (0.30 | ) | 0.15 | (0.47 | ) | 0.37 | ||||
| Adjusted net earnings from operations (1) | 102.7 | 39.5 | 166.1 | 101.4 | ||||||
| Per share (1) (2) | 0.19 | 0.07 | 0.30 | 0.19 | ||||||
| Dividends declared | 49.7 | 49.4 | 99.3 | 98.8 | ||||||
| Per share (2) | 0.09 | 0.09 | 0.18 | 0.18 | ||||||
| Payout ratio (%) (1) | 10 | 12 | 11 | 12 | ||||||
| Net debt (1) | 4,015.7 | 3,966.7 | 4,015.7 | 3,966.7 | ||||||
| Net debt to funds flow from operations (1) (3) | 2.2 | 2.4 | 2.2 | 2.4 | ||||||
| Climate change initiatives and asset retirement (4) | 4.7 | 8.2 | 15.0 | 17.5 | ||||||
| Weighted average shares outstanding | ||||||||||
| Basic | 549.3 | 544.9 | 548.2 | 544.7 | ||||||
| Diluted | 551.0 | 546.1 | 549.9 | 546.5 | ||||||
| Operating | ||||||||||
| Average daily production | ||||||||||
| Crude oil (bbls/d) | 145,532 | 140,878 | 143,434 | 140,095 | ||||||
| NGLs (bbls/d) | 17,934 | 17,658 | 18,352 | 17,361 | ||||||
| Natural gas (mcf/d) | 110,110 | 102,471 | 110,046 | 102,133 | ||||||
| Total (boe/d) | 181,818 | 175,615 | 180,127 | 174,478 | ||||||
| Average selling prices (5) | ||||||||||
| Crude oil ($/bbl) | 76.31 | 58.09 | 71.83 | 58.56 | ||||||
| NGLs ($/bbl) | 35.04 | 25.27 | 34.36 | 25.22 | ||||||
| Natural gas ($/mcf) | 1.62 | 3.05 | 2.02 | 3.05 | ||||||
| Total ($/boe) | 65.52 | 50.92 | 61.93 | 51.32 | ||||||
| Netbacks ($/boe) | ||||||||||
| Oil and gas sales | 65.52 | 50.92 | 61.93 | 51.32 | ||||||
| Royalties | (9.35 | ) | (7.59 | ) | (9.09 | ) | (7.44 | ) | ||
| Operating expenses | (13.16 | ) | (12.85 | ) | (13.05 | ) | (12.38 | ) | ||
| Transportation expenses | (2.27 | ) | (2.19 | ) | (2.13 | ) | (2.15 | ) | ||
| Operating netback (1) | 40.74 | 28.29 | 37.66 | 29.35 | ||||||
| Realized gain (loss) on derivatives | (5.31 | ) | 1.45 | (3.79 | ) | 1.08 | ||||
| Other (6) | (5.19 | ) | (3.58 | ) | (5.37 | ) | (3.67 | ) | ||
| Funds flow from operations netback (1) | 30.24 | 26.16 | 28.50 | 26.76 | ||||||
| Capital Expenditures | ||||||||||
| Capital acquisitions (dispositions), net (7) | (267.6 | ) | 33.0 | (276.6 | ) | 170.5 | ||||
| Development capital expenditures (4) | ||||||||||
| Drilling and development | 238.6 | 230.2 | 891.4 | 695.7 | ||||||
| Facilities and seismic | 62.6 | 34.1 | 131.8 | 87.9 | ||||||
| Land | 12.4 | 30.3 | 23.4 | 43.1 | ||||||
| Total | 313.6 | 294.6 | 1,046.6 | 826.7 | ||||||
(1) Funds flow from operations, funds flow from operations per share, adjusted net earnings from operations, adjusted net earnings from operations per share, payout ratio, net debt, net debt to funds flow from operations, operating netback and funds flow from operations netback as presented do not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures presented by other entities.
(2) The per share amounts (with the exception of dividends per share) are the per share – diluted amounts.
(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) Climate change initiatives and asset retirement includes environmental emission reduction expenditures, which are also included in development capital expenditures in the table above.
(5) The average selling prices reported are before realized derivatives and transportation.
(6) Other includes net purchased products, general and administrative expenses, interest on long-term debt, foreign exchange and cash-settled share-based compensation and excludes transaction costs, foreign exchange on US dollar long-term debt and certain non-cash items.
(7) Capital acquisitions (dispositions), net represent total consideration for the transactions, including long-term debt and working capital assumed, and exclude transaction costs.
Non-GAAP Financial Measures
Throughout this press release, the Company uses the terms “funds flow from operations”, “funds flow from operations per share – diluted”, “adjusted net earnings from operations”, “adjusted net earnings from operations per share – diluted”, “payout ratio”, “net debt”, “net debt to funds flow from operations”, “operating netback” and “funds flow from operations 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.
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 per share – diluted is calculated as funds flow from operations divided by the number of weighted average diluted shares outstanding. 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 excluded as the Company has a voluntary reclamation fund to fund decommissioning costs. 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.
The following table reconciles cash flow from operating activities to funds flow from operations:
| Three months ended June 30 | Six months ended June 30 | |||||||||||
| ($ millions) | 2018 | 2017 | 2018 | 2017 | ||||||||
| Cash flow from operating activities | 452.8 | 415.9 | 914.8 | 832.1 | ||||||||
| Changes in non-cash working capital | 41.0 | (3.3 | ) | (3.1 | ) | (1.7 | ) | |||||
| Transaction costs | 2.2 | 2.2 | 2.9 | 2.7 | ||||||||
| Decommissioning expenditures | 4.3 | 3.2 | 14.6 | 12.0 | ||||||||
| Funds flow from operations | 500.3 | 418.0 | 929.2 | 845.1 | ||||||||
Adjusted net earnings from operations is calculated based on net income before amortization of exploration and evaluation (“E&E”) undeveloped land, impairment or impairment recoveries on property, plant and equipment (“PP&E”), unrealized derivative gains or losses, unrealized foreign exchange gain or loss on translation of hedged US dollar long-term debt, unrealized gains or losses on long-term investments, gains or losses on the sale of long-term investments and gains or losses on capital acquisitions and dispositions. Adjusted net earnings from operations per share – diluted is calculated as adjusted net earnings from operations divided by the number of weighted average diluted shares outstanding. Management utilizes adjusted net earnings from operations to present a measure of financial performance that is more comparable between periods. Adjusted net earnings from operations as presented is not intended to represent net earnings or other measures of financial performance calculated in accordance with IFRS.
The following table reconciles net income to adjusted net earnings from operations:
| Three months ended June 30 | Six months ended June 30 | |||||||||||
| ($ millions) | 2018 | 2017 | 2018 | 2017 | ||||||||
| Net income (loss) | (166.2 | ) | 83.6 | (256.9 | ) | 203.0 | ||||||
| Amortization of E&E undeveloped land | 39.5 | 34.8 | 78.3 | 65.8 | ||||||||
| Unrealized derivative (gains) losses | 234.3 | 14.7 | 269.3 | (74.4 | ) | |||||||
| Unrealized foreign exchange (gain) loss on translation of hedged US dollar long-term debt | 8.7 | (111.2 | ) | 132.7 | (134.1 | ) | ||||||
| Unrealized (gain) loss on long-term investments | (5.5 | ) | 3.4 | 6.3 | 6.6 | |||||||
| Gain on sale of long-term investments | (4.5 | ) | — | (4.5 | ) | — | ||||||
| Net loss on capital dispositions | 71.5 | — | 70.6 | — | ||||||||
| Deferred tax relating to adjustments | (75.1 | ) | 14.2 | (129.7 | ) | 34.5 | ||||||
| Adjusted net earnings from operations | 102.7 | 39.5 | 166.1 | 101.4 | ||||||||
Payout ratio is calculated on a percentage basis as dividends declared divided by funds flow from operations. Payout ratio is used by management to monitor the dividend policy and the amount of funds flow from operations retained by the Company for capital reinvestment.
Net debt is calculated as long-term debt plus accounts payable and accrued liabilities, dividends payable 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.
The following table reconciles long-term debt to net debt:
| ($ millions) | June 30, 2018 | June 30, 2017 | ||||
| Long-term debt (1) | 4,277.4 | 4,081.6 | ||||
| Accounts payable and accrued liabilities | 605.6 | 539.2 | ||||
| Dividends payable | 16.9 | 16.6 | ||||
| Long-term compensation liability (2) | 21.3 | 3.3 | ||||
| Cash | (9.0 | ) | (55.6 | ) | ||
| Accounts receivable | (409.7 | ) | (294.5 | ) | ||
| Prepaids and deposits | (7.6 | ) | (8.2 | ) | ||
| Long-term investments | (127.1 | ) | (29.2 | ) | ||
| Excludes: | ||||||
| Unrealized foreign exchange on translation of US dollar long-term debt | (352.1 | ) | (286.5 | ) | ||
| Net debt | 4,015.7 | 3,966.7 | ||||
(1) Includes current portion of long-term debt.
(2) Includes current portion of long-term compensation liability.
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. 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.
Operating netback is calculated on a per boe basis as oil and gas sales, less royalties, operating and transportation expenses. Funds flow from operations netback is calculated on a per boe basis as operating netback less net purchased products, realized derivative gains and losses, general and administrative expenses, interest on long-term debt, foreign exchange and cash-settled share-based compensation, excluding transaction costs, foreign exchange on US dollar long-term debt and certain non-cash items. Operating netback and funds flow from operations netback are common metrics used in the oil and gas industry and are used by management to measure operating results on a per boe basis to better analyze performance against prior periods on a comparable basis. The calculation of operating netback and funds flow from operations netback is shown in the Financial and Operating Highlights section in this press release.
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.