Crescent Point recently announced an accretive acquisition of Kaybob Duvernay assets for $900 million (the “Acquisition”) that further enhances the Company’s balance sheet strength and sustainability, including its expected free cash flow generation. For more information on the Acquisition, which is expected to close in April 2021, please refer to the news release dated February 17, 2021.
KEY HIGHLIGHTS
- Achieved annual average production ahead of 2020 guidance with capital expenditures under budget.
- Reduced net debt by over $615 million in 2020, driven by an accretive disposition and excess cash flow generation.
- Enhanced sustainability by reducing costs throughout the organization and lowering the production decline rate.
- Increased proved plus probable net asset value per share, excluding changes in pricing, by approximately 13 percent.
- Released second annual sustainability report and established an emissions intensity reduction target of 30 percent by 2025.
- Disciplined 2021 budget expected to generate $375 to $600 million of excess cash flow at US$50/bbl to US$60/bbl WTI.
“Our success over this past year highlights our resiliency, discipline and flexibility,” said Craig Bryksa, President and CEO of Crescent Point. “As a result of the volatility in 2020, we acted swiftly, revising our capital program and operations, to enhance our financial flexibility and preserve the long-term value of our assets. Through our actions, over the last two years, we strengthened the Company and positioned ourselves to continue enhancing value for our stakeholders. Our recently announced acquisition of Kaybob Duvernay assets demonstrates this execution. These assets strengthen our expected free cash flow generation, leverage ratios and depth of high-quality inventory, within a transaction that is highly accretive on all financial metrics.”
FINANCIAL HIGHLIGHTS
- For the year ended December 31, 2020, the Company’s adjusted funds flow totaled $874.4 million, or $1.64 per share diluted. In the fourth quarter, adjusted funds flow totaled $220.2 million, or $0.41 per share diluted.
- For the year ended December 31, 2020, Crescent Point’s development capital expenditures, which included drilling and development, facilities and seismic, totaled $654.8 million, including $169.4 million spent during fourth quarter. As a result, the Company’s 2020 development capital expenditures were below its most recent annual guidance of $665 million.
- As at December 31, 2020, Crescent Point’s net debt was approximately $2.1 billion. Management successfully reduced the Company’s net debt by over $615 million in 2020, including approximately $40 million in fourth quarter. Crescent Point’s unutilized credit capacity is expected to total approximately $2.0 billion upon closing of the Acquisition in April 2021. The Company’s credit facilities are not due for renewal until October 2023.
- As part of its risk management program to protect against commodity price volatility, the Company maintains an active hedging portfolio. Crescent Point will have approximately 30 percent of its oil and liquids production, net of royalty interest, hedged through the remainder of 2021 upon closing of the Acquisition. These hedges primarily consist of swaps with an average price of over CDN$60/bbl. Crescent Point plans to remain disciplined in its approach to layering on additional protection in the context of commodity prices.
- As previously announced, the Company recorded a non-cash asset impairment charge of $3.6 billion ($2.7 billion after-tax) in first quarter 2020, primarily due to a significant decrease in the independent engineering price forecast. This resulted in Crescent Point incurring a net loss of $2.5 billion for the year ended December 31, 2020. Neither the Company’s adjusted funds flow, nor its credit capacity were impacted by this charge, which is reversible in future periods should there be indications of a change in value, including higher forecast commodity prices. Crescent Point’s adjusted net earnings for the year ended December 31, 2020 were $177.4 million.
- Subsequent to the quarter, the Company declared a quarterly cash dividend of $0.0025 per share payable on April 1, 2021.
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, Forward-Looking Statements and Reserves and Drilling Data sections of this press release, respectively. Further information breaking down the production information contained in this press release by product type can be found in the “Product Type Production Information” section of this press release. |
OPERATIONAL HIGHLIGHTS
- Annual average production in 2020 was 121,642 boe/d, slightly above Crescent Point’s production guidance of 121,000 boe/d. Average production during fourth quarter was 111,217 boe/d, reflecting the reduced capital budget announced earlier in the year.
- Throughout 2020, the Company continued to optimize its workflows and implement its operational technology (“OT”) platform across its Saskatchewan asset base. As previously announced, through these initiatives, Crescent Point removed approximately $60 million in budgeted operating expenses in 2020. The Company plans to continue the rollout of its OT platform in 2021.
- At year-end 2020, the Company had successfully reduced its average per well capital costs by over 10 percent, in-line with its previously announced expectation. This improvement highlights the benefits of Crescent Point’s significant operational experience, allowing for ongoing knowledge transfer and optimization within its asset portfolio. The Company’s 2021 budget does not include additional efficiencies that it plans to seek throughout the year.
- As part of Crescent Point’s decline mitigation program, the Company successfully converted over 130 producing wells to water injection wells in 2020. A similar level of conversions is planned for 2021. Crescent Point’s base decline rate at the start of 2021 improved by approximately five percent, compared to the prior year, and is expected to remain unchanged on a pro-forma basis at approximately 25 percent. The Company’s oil production currently under waterflood accounts for approximately 25 percent of its current total oil production, with a low decline rate of approximately five percent. Crescent Point plans to continue advancement of its waterflood program as only half of its currently planned injector conversions across its resource plays have been completed to-date. The Company also plans to pilot other enhanced oil recovery techniques to further enhance its long-term free cash flow generation and sustainability.
- As part of its continued commitment to strong environmental, social and governance (“ESG”) practices, the Company has set an emissions intensity reduction target of 30 percent by 2025, relative to its 2017 baseline. This target includes a 50 percent reduction in methane emissions. Crescent Point is currently on track to meet these targets. The Company also continues to allocate capital towards reducing its asset retirement obligations (“ARO”) to minimize its environmental footprint. Including funding expected to be received from government grants, Crescent Point plans to reduce its standing well count by approximately 10 percent in 2021. The recent Acquisition is expected to further enhance the Company’s ESG profile, with minimal ARO and a low emissions intensity associated with the Kaybob Duvernay assets.
RESERVES HIGHLIGHTS
“Our 2020 reserves highlight the continued improvements we have made to our cost structure, including lower future development capital and operating expenses, in addition to economic reserves additions through both our drilling and waterflood programs,” said Bryksa. “As a result of lower commodity prices during first quarter 2020, we prudently revised our budget and allocated our remaining capital primarily to low-risk, high-return drilling locations. Given the majority of these wells were previously booked as undrilled locations, new reserves additions were not as meaningful as in prior years. Nonetheless, we positively impacted our net asset value in 2020 through our relentless focus on costs and debt reduction and through our disciplined disposition strategy. We look forward to developing the Kaybob Duvernay assets to further enhance shareholder value, including potential reserves additions given the significant undeveloped land included in the Acquisition.”
- The Company’s Proved plus Probable (“2P”) net asset value (“NAV”) was $8.53 per share at year-end 2020, based on independent engineering pricing, excluding land and seismic. This NAV forecast assumes an average WTI price of approximately US$51/bbl in the first five years. Excluding the changes in year-over-year pricing, the Company increased its 2P NAV per share by approximately 13 percent.
- Crescent Point’s 2P reserves at year-end 2020 totaled 665.3 million boe (“MMboe”). The Company’s Proved (“1P”) and Proved Developed Producing (“PDP”) reserves totaled 410.9 MMboe and 262.8 MMboe, respectively. Year-end 2020 reserves decreased in comparison to the prior year primarily due to economic factors, resulting from a lower independent engineering pricing forecast, which reduced 2P reserves by 35.2 MMboe, 1P reserves by 39.4 MMboe and PDP reserves by 19.3 MMboe.
- Crescent Point’s 2P reserve life index (“RLI”), excluding the recently announced Acquisition, increased to approximately 16.6 years, up from approximately 14.3 years in the prior year.
- The Company’s 2P reserves continued to benefit from its waterflood activities, which contributed approximately 4.9 MMboe of reserves additions in 2020. Approximately 30 percent, or 193.7 MMboe, of Crescent Point’s 2P reserves were under the influence of secondary waterflood recovery at year-end 2020.
- The Company’s 2P future development capital (“FDC”) decreased by approximately $925 million, or 18 percent, primarily driven by a reduction in its per well capital costs and drilling of previously booked wells.
Additional information on the Company’s 2020 reserves is provided in its Annual Information Form (“AIF”) for the year-ended December 31, 2020. Crescent Point’s 2P reserves from the Acquisition are 107.4 MMboe, which included only 36 booked locations in comparison to approximately 200 net internally identified locations.
OUTLOOK
Crescent Point’s 2020 results demonstrated management’s resiliency, discipline and flexibility. Despite a challenging year for the industry, the Company successfully and meaningfully enhanced its balance sheet and sustainability.
Crescent Point expects to further enhance the business throughout 2021 through the continued rollout of its OT platform, ongoing drilling and completions optimization, decline mitigation programs and effective risk mitigation strategies.
In addition to the expected accretion from the Acquisition, management will also identify opportunities to further enhance returns by successfully integrating the Kaybob Duvernay assets and by seeking to deliver additional related cost efficiencies. Crescent Point has a proven track record of material success in realizing such efficiencies over the years, including in resource plays with comparable well costs and development programs, such as in North Dakota and its previously owned Uinta Basin asset.
The Company expects to generate significant excess cash flow in the current price environment, given its high-netback asset base, which is expected to further improve following the closing of the Acquisition. The Company is now expected to generate approximately $375 million to $600 million of excess cash flow in 2021, assuming an average WTI price of US$50/bbl to US$60/bbl for the year.
Management will remain disciplined in its allocation of excess cash flow, which will initially be directed to further net debt reduction, and will evaluate the return of additional capital to shareholders in the context of its capital allocation framework and leverage targets.
Summary of Reserves
The Company’s reserves were independently evaluated by GLJ Limited. (“GLJ”) and Sproule Associates Limited (“Sproule”) as at December 31, 2020 and were aggregated by GLJ. The reserves evaluation and reporting was conducted in accordance with the definitions, standards and procedures contained in the COGEH and National Instrument 51-101 Standards for Disclosure of Oil and Gas Activities (“NI 51-101”).
As at December 31, 2020 (1) (2) (3) (4)
Tight Oil |
Light and Medium Oil |
Heavy Oil |
Natural Gas Liquids |
|||||
Reserves Category |
Gross |
Net |
Gross |
Net |
Gross |
Net |
Gross |
Net |
Proved Developed Producing |
120,863 |
111,506 |
59,759 |
54,006 |
21,458 |
17,922 |
37,010 |
33,897 |
Proved Developed Non-Producing |
6,209 |
5,290 |
1,453 |
1,346 |
2,058 |
1,816 |
1,649 |
1,376 |
Proved Undeveloped |
79,190 |
70,701 |
22,242 |
20,589 |
1,420 |
1,229 |
19,422 |
17,244 |
Total Proved |
206,262 |
187,497 |
83,454 |
75,941 |
24,935 |
20,966 |
58,082 |
52,517 |
Total Probable |
136,923 |
124,744 |
53,678 |
48,998 |
6,665 |
5,355 |
33,832 |
30,689 |
Total Proved plus Probable |
343,185 |
312,241 |
137,131 |
124,939 |
31,600 |
26,321 |
91,914 |
83,206 |
Shale Gas |
Natural Gas |
Total |
||||
Reserves Category |
Gross |
Net |
Gross |
Net |
Gross |
Net |
Proved Developed Producing |
101,526 |
92,300 |
40,591 |
38,530 |
262,775 |
239,136 |
Proved Developed Non-Producing |
4,339 |
3,659 |
1,227 |
1,014 |
12,297 |
10,607 |
Proved Undeveloped |
70,873 |
61,510 |
10,224 |
9,408 |
135,790 |
121,582 |
Total Proved |
176,738 |
157,469 |
52,042 |
48,952 |
410,862 |
371,325 |
Total Probable |
110,880 |
99,166 |
29,381 |
27,312 |
254,476 |
230,865 |
Total Proved plus Probable |
287,618 |
256,635 |
81,423 |
76,264 |
665,338 |
602,190 |
(1) |
Based on Sproule’s December 31, 2020, escalated price forecast. |
(2) |
“Gross Reserves” are the total Company’s working-interest share before the deduction of any royalties and without including any royalty interest of the Company. |
(3) |
“Net Reserves” are the total Company’s interest share after deducting royalties and including any royalty interest. |
(4) |
Numbers may not add due to rounding. |
Summary of Before Tax Net Present Values
As at December 31, 2020 (1) (2)
Before Tax Net Present Value ($ millions) |
||||||
Discount Rate |
||||||
Price Deck |
Reserves Category |
Gross Reserves |
0% |
5% |
10% |
15% |
Sproule Forecast |
Proved Developed Producing |
262,775 |
4,795 |
4,017 |
3,358 |
2,884 |
Proved and Probable Developed Producing |
361,172 |
7,867 |
5,770 |
4,509 |
3,718 |
|
Total Proved |
410,862 |
6,644 |
5,195 |
4,115 |
3,367 |
|
Total Proved plus Probable |
665,338 |
13,464 |
9,189 |
6,731 |
5,223 |
(1) |
Sproule Forecast based on Sproule’s December 31, 2020, escalated price forecast. |
(2) |
Numbers may not add due to rounding. |
RESERVES RECONCILIATION
Gross Reserves (1) (2) (3) (4)
Tight Oil |
Light and Medium Oil |
Heavy Oil |
|||||||
Factors |
Proved |
Probable |
Proved |
Proved |
Probable |
Proved |
Proved |
Probable |
Proved |
December 31, 2019 |
235,043 |
150,052 |
385,094 |
100,947 |
58,348 |
159,295 |
27,799 |
6,894 |
34,693 |
Extensions and Improved Recovery |
5,722 |
4,054 |
9,776 |
1,693 |
(946) |
747 |
– |
– |
– |
Technical Revisions |
4,936 |
(18,289) |
(13,354) |
4,402 |
(4,687) |
(285) |
21 |
73 |
94 |
Acquisitions |
126 |
78 |
204 |
30 |
7 |
37 |
– |
– |
– |
Dispositions |
(83) |
(26) |
(109) |
(1,848) |
(1,454) |
(3,303) |
– |
– |
– |
Economic Factors |
(13,629) |
1,055 |
(12,574) |
(14,142) |
2,410 |
(11,732) |
(1,283) |
(301) |
(1,584) |
Production |
(25,853) |
– |
(25,853) |
(7,628) |
– |
(7,628) |
(1,603) |
– |
(1,603) |
December 31, 2020 |
206,262 |
136,923 |
343,185 |
83,454 |
53,678 |
137,131 |
24,935 |
6,665 |
31,600 |
Natural Gas Liquids |
Shale Gas |
Natural Gas |
|||||||
Factors |
Proved |
Probable |
Proved |
Proved |
Probable |
Proved |
Proved |
Probable |
Proved |
December 31, 2019 |
63,062 |
33,315 |
96,377 |
179,325 |
103,163 |
282,488 |
72,086 |
33,640 |
105,726 |
Extensions and Improved Recovery |
994 |
253 |
1,247 |
2,969 |
1,827 |
4,796 |
631 |
(106) |
526 |
Technical Revisions |
5,187 |
(413) |
4,774 |
23,892 |
2,904 |
26,796 |
4,398 |
(1,270) |
3,128 |
Acquisitions |
19 |
10 |
29 |
54 |
28 |
82 |
– |
– |
– |
Dispositions |
(105) |
(63) |
(168) |
(76) |
(23) |
(99) |
(1,972) |
(2,153) |
(4,125) |
Economic Factors |
(5,754) |
730 |
(5,023) |
(9,785) |
2,981 |
(6,804) |
(18,058) |
(730) |
(18,788) |
Production |
(5,322) |
– |
(5,322) |
(19,642) |
– |
(19,642) |
(5,044) |
– |
(5,044) |
December 31, 2020 |
58,082 |
33,832 |
91,914 |
176,738 |
110,880 |
287,618 |
52,042 |
29,381 |
81,423 |
Total Oil Equivalent |
|||
Factors |
Proved |
Probable |
Proved |
December 31, 2019 |
468,753 |
271,409 |
740,161 |
Extensions and Improved Recovery |
9,010 |
3,648 |
12,657 |
Technical Revisions |
19,261 |
(23,043) |
(3,782) |
Acquisitions |
184 |
100 |
284 |
Dispositions |
(2,377) |
(1,906) |
(4,283) |
Economic Factors |
(39,447) |
4,269 |
(35,178) |
Production |
(44,521) |
– |
(44,521) |
December 31, 2020 |
410,862 |
254,476 |
665,338 |
(1) |
Based on Sproule’s December 31, 2020, escalated price forecast. |
(2) |
“Gross Reserves” are the total Company’s working-interest share before the deduction of any royalties and without including any royalty interest of the Company. |
(3) |
Numbers may not add due to rounding. |
Finding and Development Costs
The Company’s F&D costs and recycle ratios for year-end 2020 may not be meaningful or comparable to prior year results due to a number of factors, including both a significantly lower commodity price forecast, which impacted economic revisions, and a significant reduction in FDC relative to total capital expenditures.
2020 Totals |
Change in |
Total |
|
Capital ($ millions) (1) |
|||
Total Proved plus Probable |
658 |
(908) |
(250) |
Total Proved |
658 |
(876) |
(218) |
Proved Developed Producing |
658 |
(3) |
655 |
Reserves Additions (Mboe) (2) |
|||
Total Proved plus Probable |
(26,303) |
– |
(26,303) |
Total Proved |
(11,177) |
– |
(11,177) |
Proved Developed Producing |
4,173 |
– |
4,173 |
(1) |
The capital expenditures include the announced purchase price of corporate acquisitions rather than the amounts allocated to property, plant and equipment for accounting purposes. The capital expenditures also exclude capitalized administration costs and transaction costs. |
(2) |
Gross Company interest reserves are used in this calculation (working interest reserves, before deduction of any royalties and without including any royalty interests of the Company). |
Excluding changes in FDC |
Including changes in FDC |
|||||
($/boe, except recycle ratios) |
($/boe, except recycle ratios) |
|||||
2020 |
2019 |
3 Years Ended |
2020 |
2019 |
3 Years Ended |
|
F&D Cost (1) |
||||||
Total Proved plus Probable |
($25.03) |
($118.27) |
$67.00 |
$9.49 |
($100.09) |
$56.09 |
Total Proved |
($58.91) |
$158.85 |
$49.23 |
$19.50 |
$151.57 |
$40.50 |
Proved Developed Producing |
$157.78 |
$47.32 |
$34.92 |
$157.06 |
$47.03 |
$34.33 |
Recycle Ratio (2) |
||||||
Total Proved plus Probable |
(0.7) |
(0.3) |
0.5 |
1.9 |
(0.3) |
0.5 |
Total Proved |
(0.3) |
0.2 |
0.6 |
0.9 |
0.2 |
0.7 |
Proved Developed Producing |
0.1 |
0.7 |
0.9 |
0.1 |
0.7 |
0.9 |
(1) |
F&D is calculated by dividing the identified capital expenditures by the applicable reserves additions. F&D can include or exclude changes to future development capital costs. |
(2) |
Recycle Ratio is calculated as operating netback before hedging divided by F&D costs. Based on a 2020 operating netback of $18.24 per boe, a 2019 operating netback of $33.81 per boe and a three-year weighted average operating netback of $30.36 per boe. |
Future Development Capital
At year-end 2020, FDC for 2P reserves totaled $4.2 billion, compared to $5.1 billion at year-end 2019. The Company’s FDC decreased by approximately $925 million, primarily driven by lower per well capital costs and drilling of previously booked wells.
Company Annual Capital Expenditures ($ millions) |
||||||
Canada |
U.S. |
Total |
||||
Year |
Total |
Total |
Total |
Total |
Total |
Total |
2020 |
292 |
350 |
19 |
38 |
311 |
388 |
2021 |
478 |
571 |
71 |
71 |
549 |
643 |
2022 |
431 |
628 |
207 |
208 |
638 |
836 |
2023 |
351 |
663 |
206 |
206 |
557 |
869 |
2024 |
197 |
570 |
266 |
268 |
463 |
838 |
2025 |
18 |
342 |
– |
141 |
18 |
483 |
2026 |
3 |
89 |
– |
– |
3 |
89 |
2027 |
1 |
2 |
– |
– |
1 |
2 |
2028 |
2 |
2 |
– |
– |
2 |
2 |
2029 |
1 |
1 |
– |
– |
1 |
1 |
2030 |
1 |
1 |
– |
– |
1 |
1 |
2031 |
2 |
1 |
– |
– |
2 |
1 |
Subtotal (1) |
1,777 |
3,221 |
770 |
933 |
2,547 |
4,154 |
Remainder |
12 |
16 |
– |
– |
12 |
16 |
Total (1) |
1,789 |
3,237 |
770 |
933 |
2,559 |
4,170 |
10% Discounted |
1,434 |
2,432 |
564 |
668 |
1,999 |
3,100 |
(1) |
Numbers may not add due to rounding. |
CONFERENCE CALL DETAILS
Crescent Point management will host a conference call on Wednesday, February 24, 2021 at 10:00 a.m. MT (12:00 p.m. ET) to discuss the Company’s results and outlook. A slide deck will accompany the conference call and can be found on Crescent Point’s home page.
Participants can listen to this event online via webcast. Alternatively, the conference call can be accessed by dialing 1–888–390–0605.
The webcast will be archived for replay and can be accessed on Crescent Point’s conference calls and webcasts webpage under the invest tab. The replay will be available approximately one hour following completion of the call.
Shareholders and investors can also find the Company’s most recent investor presentation on Crescent Point’s website.
2021 GUIDANCE
The Company’s guidance for 2021 is as follows:
Total Annual Average Production (boe/d) (1) |
132,000 – 136,000 |
Capital Expenditures |
|
Development capital expenditures ($ million) |
$575 – $625 |
Capitalized G&A ($ millions) |
$35 |
Total ($ million) (2) |
$610 – $660 |
Other Information for 2021 Guidance |
|
Reclamation activities ($ million) (3) |
$15 |
Capital lease payments ($ million) |
$20 |
Annual operating expenses |
$625 – $645 million |
Royalties |
11.5% – 12.5% |
1) |
Total annual average production (boe/d) is comprised of 87% Oil & NGLs and 13% Natural Gas |
2) |
Land expenditures and net property acquisitions and dispositions are not included. Development capital expenditures spend is allocated as follows: 87% drilling & development and 13% facilities & seismic |
3) |
Reflects Crescent Point’s portion of its expected total budget |
The Company’s audited financial statements and management’s discussion and analysis for the year ended December 31, 2020, will be available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml and on Crescent Point’s website at www.crescentpointenergy.com.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended December 31 |
Year ended December 31 |
|||
(Cdn$ millions except per share and per boe amounts) |
2020 |
2019 |
2020 |
2019 |
Financial |
||||
Cash flow from operating activities |
245.1 |
396.5 |
860.5 |
1,742.9 |
Adjusted funds flow from operations (1) |
220.2 |
418.4 |
874.4 |
1,825.4 |
Per share (1) (2) |
0.41 |
0.78 |
1.64 |
3.34 |
Net income (loss) |
(51.2) |
(932.1) |
(2,519.9) |
(1,033.3) |
Per share (2) |
(0.10) |
(1.73) |
(4.76) |
(1.89) |
Adjusted net earnings from operations (1) |
85.6 |
49.9 |
177.4 |
386.8 |
Per share (1) (2) |
0.16 |
0.09 |
0.33 |
0.71 |
Dividends declared |
1.4 |
5.4 |
9.4 |
22.0 |
Per share (2) |
0.0025 |
0.0100 |
0.0175 |
0.0400 |
Net debt (1) |
2,149.2 |
2,765.3 |
2,149.2 |
2,765.3 |
Net debt to adjusted funds flow from operations (1) (3) |
2.5 |
1.5 |
2.5 |
1.5 |
Weighted average shares outstanding |
||||
Basic |
530.0 |
537.4 |
529.3 |
545.7 |
Diluted |
534.4 |
538.7 |
531.8 |
546.0 |
Operating |
||||
Average daily production |
||||
Crude oil (bbls/d) |
87,512 |
111,394 |
95,859 |
126,219 |
NGLs (bbls/d) |
13,033 |
21,406 |
14,542 |
20,746 |
Natural gas (mcf/d) |
64,033 |
74,347 |
67,447 |
91,592 |
Total (boe/d) |
111,217 |
145,191 |
121,642 |
162,230 |
Average selling prices (4) |
||||
Crude oil ($/bbl) |
49.40 |
65.27 |
43.50 |
67.14 |
NGLs ($/bbl) |
24.96 |
19.02 |
17.19 |
19.94 |
Natural gas ($/mcf) |
3.42 |
3.35 |
3.02 |
2.75 |
Total ($/boe) |
43.76 |
54.60 |
38.01 |
56.34 |
Netback ($/boe) |
||||
Oil and gas sales |
43.76 |
54.60 |
38.01 |
56.34 |
Royalties |
(5.65) |
(7.79) |
(4.88) |
(8.15) |
Operating expenses |
(13.30) |
(11.24) |
(12.62) |
(12.29) |
Transportation expenses |
(2.29) |
(2.12) |
(2.27) |
(2.09) |
Operating netback (1) |
22.52 |
33.45 |
18.24 |
33.81 |
Realized gain (loss) on derivatives |
4.03 |
1.71 |
5.52 |
0.73 |
Other (5) |
(5.03) |
(3.84) |
(4.12) |
(3.72) |
Adjusted funds flow from operations netback (1) |
21.52 |
31.32 |
19.64 |
30.82 |
Capital Expenditures |
||||
Capital acquisitions (dispositions), net (6) |
1.1 |
(663.8) |
(506.8) |
(924.1) |
Development capital expenditures |
||||
Drilling and development |
152.3 |
312.7 |
586.5 |
1,155.9 |
Facilities and seismic |
17.1 |
30.7 |
68.3 |
96.2 |
Total |
169.4 |
343.4 |
654.8 |
1,252.1 |
Land expenditures |
0.8 |
5.2 |
3.6 |
15.5 |
(1) |
Adjusted funds flow from operations, adjusted funds flow from operations per share, adjusted net earnings from operations, adjusted net earnings from operations per share, net debt, net debt to adjusted funds flow from operations, operating netback and adjusted 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 adjusted funds flow from operations is calculated as the period end net debt divided by the sum of adjusted funds flow from operations for the trailing four quarters. |
(4) |
The average selling prices reported are before realized derivatives and transportation. |
(5) |
Other includes net purchased products, general and administrative expenses, interest on long-term debt, foreign exchange, cash-settled share-based compensation and certain cash items and excludes transaction costs, foreign exchange on US dollar long-term debt and certain non-cash items. |
(6) |
Capital 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 “adjusted funds flow”, “adjusted funds flow from operations”, “funds flow”, “adjusted funds flow from operations per share – diluted”, “adjusted net earnings from operations”, “adjusted net earnings from operations per share – diluted”, “free cash flow”, “excess cash flow”, “net debt”, “net debt to adjusted funds flow from operations”, “netback”, “operating netback” and “adjusted 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.
Adjusted funds flow and funds flow are 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 funded by the Company. Adjusted funds flow from operations per share – diluted is calculated as adjusted 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 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. Excess cash flow is defined as adjusted funds flow from operations less capital expenditures, payments on lease liability, asset retirement obligations, dividends and other cash items (excluding net acquisitions and dispositions). Management utilizes excess cash flow as a key measure to assess the ability of the Company to finance dividends, potential share repurchases, debt repayments and returns-based growth.
The following table reconciles cash flow from operating activities to adjusted funds flow from operations:
Three months ended December 31 |
Year Ended December 31 |
|||
($ millions) |
2020 |
2019 |
2020 |
2019 |
Cash flow from operating activities |
245.1 |
396.5 |
860.5 |
1,742.9 |
Changes in non-cash working capital |
(29.0) |
6.6 |
(6.2) |
47.5 |
Transaction costs |
— |
2.1 |
5.4 |
6.3 |
Decommissioning expenditures (1) |
4.1 |
13.2 |
14.7 |
28.7 |
Adjusted funds flow from operations |
220.2 |
418.4 |
874.4 |
1,825.4 |
(1) |
Excludes amounts received from government subsidy programs. |
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, 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 December 31 |
Year ended December 31 |
|||
($ millions) |
2020 |
2019 |
2020 |
2019 |
Net income (loss) |
(51.2) |
(932.1) |
(2,519.9) |
(1,033.3) |
Amortization of E&E undeveloped land |
13.9 |
21.3 |
71.9 |
129.1 |
Impairment |
— |
1,216.5 |
3,557.8 |
1,466.4 |
Unrealized derivative losses |
185.5 |
153.9 |
112.5 |
269.6 |
Unrealized foreign exchange gain on translation of hedged US dollar long-term debt |
(86.2) |
(52.5) |
(62.1) |
(207.7) |
Unrealized (gain) loss on long-term investments |
(0.9) |
0.5 |
4.2 |
2.0 |
Net (gain) loss on capital dispositions |
(8.5) |
(0.1) |
(316.4) |
199.2 |
Deferred tax relating to adjustments |
33.0 |
(357.6) |
(670.6) |
(438.5) |
Adjusted net earnings from operations |
85.6 |
49.9 |
177.4 |
386.8 |
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). Management utilizes free cash flow as a key measure to assess the ability of the Company to finance dividends, potential share repurchases, debt repayments and returns-based growth.
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.
The following table reconciles long-term debt to net debt:
($ millions) |
2020 |
2019 |
Long-term debt (1) |
2,259.6 |
2,905.1 |
Accounts payable and accrued liabilities |
311.6 |
479.4 |
Long-term compensation liability (2) |
16.3 |
13.1 |
Cash |
(8.8) |
(56.9) |
Accounts receivable |
(200.5) |
(295.9) |
Prepaids and deposits |
(22.7) |
(6.9) |
Long-term investments |
(2.5) |
(6.7) |
Excludes: |
||
Unrealized foreign exchange on translation of hedged US dollar long-term debt |
(203.8) |
(265.9) |
Net debt |
2,149.2 |
2,765.3 |
(1) |
Includes current portion of long-term debt. |
(2) |
Includes current portion of long-term compensation liability and is net of equity derivative contracts. |
Net debt to adjusted funds flow from operations is calculated as the period end net debt divided by the sum of adjusted funds flow from operations for the trailing four quarters. The ratio of net debt to adjusted 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. Adjusted funds flow netback is equivalent to adjusted funds flow from operations netback. Adjusted 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, cash-settled share-based compensation and certain cash items, excluding transaction costs, foreign exchange on US dollar long-term debt and certain non-cash items. Cash flow netback is equivalent to adjusted funds flow from operations netback. Operating netback and adjusted 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. Netback calculations are 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.