CALGARY, AB – 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 March 31, 2021.
KEY HIGHLIGHTS
- Reduced net debt by over $135 million in first quarter, driven by continued excess cash flow generation.
- Successfully closed accretive acquisition of Kaybob Duvernay assets, further enhancing free cash flow profile.
- Expect to generate significant excess cash flow of approximately $525 to $650 million in 2021 at US$55/bbl to US$65/bbl WTI.
- Increased target for emissions intensity reduction to 50 percent by 2025, demonstrating strong environmental stewardship.
“Our first quarter results continued to demonstrate our strong operational execution”, said Craig Bryksa, President and CEO of Crescent Point. “Against the backdrop of a rising oil price environment, we have remained disciplined and focused on enhancing balance sheet strength and the sustainability of our business. The Kaybob Duvernay assets strengthen our expected free cash flow outlook, accelerate our deleveraging profile and improve our environmental performance, positioning our company to create significant value for our shareholders in 2021 and beyond.”
FINANCIAL HIGHLIGHTS
- Adjusted funds flow totaled $262.7 million during first quarter 2021, or $0.49 per share diluted, driven by a strong operating netback of $35.06 per boe.
- For the quarter ended March 31, 2021, the Company’s development capital expenditures, which included drilling and development, facilities and seismic costs, totaled $119.2 million.
- Net debt as at March 31, 2021 equated to approximately $2.0 billion, reflecting $135.8 million of net debt reduction in the quarter or over $750 million since the beginning of 2020. Subsequent to the quarter, on April 1, 2021, Crescent Point closed its acquisition of Kaybob Duvernay assets, which included a net cash payment of approximately $670 million funded through the Company’s credit facilities. Crescent Point retains significant liquidity with no material near-term senior note maturities. 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 currently has over 40 percent of its oil and liquids production, net of royalty interest, hedged through the remainder of 2021. These hedges primarily consist of swaps with an average price of approximately CDN$65/bbl. The Company plans to remain disciplined in its approach to layering on additional protection in the context of commodity prices.
- Subsequent to first quarter, the Company declared a quarterly cash dividend of $0.0025 per share payable on July 2, 2021.
OPERATIONAL HIGHLIGHTS
- Crescent Point’s average production in first quarter 2021 was 119,384 boe/d, comprised of over 90 percent oil and liquids.
- The Company plans to continue advancing its southeast and southwest Saskatchewan assets through a 2021 development program focused on a combination of low-risk, high-return infill drilling and waterflood development. Crescent Point also expects to continue advancing its North Dakota resource play by focusing on maximizing efficiencies through multi-well pad development. These assets are expected to continue to generate significant excess cash flow in the current commodity price environment.
- During second quarter 2020, the Company established an emissions intensity reduction target of 30 percent by 2025, relative to its 2017 baseline. Crescent Point is currently on track to exceed this target as a result of its proactive development planning, enhanced gas conservation efforts and success reducing flaring. Consequently, the Company has substantially increased its target for emissions intensity reduction to 50 percent by 2025. This target is expected to be achieved through a number of internal initiatives, including significantly reducing the Company’s methane emissions. Crescent Point expects to release its third annual sustainability report in 2021, which will highlight the Company’s continued commitment to strong environmental, social and governance (“ESG”) practices and will include additional environmental targets.
- As part of its continued focus on decline mitigation, the Company successfully converted approximately 30 producing wells to water injection in first quarter 2021. Crescent Point expects to convert a total of over 135 wells in 2021 as part of its waterflood program. In addition, the Company successfully advanced its plans to pilot other enhanced oil recovery techniques during the quarter. These activities are expected to continue to moderate Crescent Point’s decline rate, enhancing long-term free cash flow generation and sustainability. The Company’s base decline rate in 2021 is expected to be approximately 25 percent.
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. |
KAYBOB DUVERNAY HIGHLIGHTS
- Subsequent to first quarter 2021, Crescent Point successfully closed the previously announced accretive acquisition of Kaybob Duvernay assets in Alberta purchased from Shell Canada Energy (“Shell”). This strategic transaction is expected to enhance the Company’s free cash flow profile, inventory depth and includes key infrastructure that is expected to lower future capital requirements.
- During first quarter 2021, Shell completed and brought onstream a number of previously drilled wells. Crescent Point now has over 30 days of production data for 10 of these wells, which flowed at an average 30-day initial production (“IP30”) rate of approximately 800 boe/d per well (79% condensate, 6% NGL and 15% shale gas).
- The Company plans to drill approximately 10 wells in Kaybob Duvernay through the remainder of 2021. Crescent Point will seek to leverage its significant expertise in horizontal multi-well pad development and field technology to optimize efficiencies.
- The Company plans to maximize free cash flow generation from the Kaybob Duvernay assets by targeting a sustainable decline rate with an annual production base of approximately 30,000 boe/d. Crescent Point expects the assets to generate approximately $185 to $255 million of net operating income in excess of capital expenditures at US$55/bbl to US$65/bbl WTI. This assumes approximately $180 million of annual capital expenditures based on the current cost structure of the assets.
OUTLOOK
The Company delivered strong first quarter results and is currently on track to meet or exceed its current annual average production guidance of 132,000 to 136,000 boe/d, while keeping development capital expenditures within the previously announced guidance range of $575 to $625 million in 2021.
The addition of the Kaybob Duvernay assets to Crescent Point’s portfolio is expected to improve the Company’s debt-adjusted per share metrics, cash flow netback and further accelerates its net debt reduction.
Through the remainder of 2021, the Company will target further improvements to the business through the continued rollout of its operational technology (“OT”) platform, ongoing drilling and completions optimization, decline mitigation programs and by identifying additional opportunities to enhance efficiencies. Crescent Point will also continue to evaluate opportunities to further optimize its asset portfolio through strategic acquisitions and dispositions in the context of its key priorities of balance sheet strength and sustainability.
The Company is expected to generate significant excess cash flow of approximately $525 to $650 million in 2021 at US$55/bbl to US$65/bbl WTI for the remainder of the year, providing an increased opportunity to further enhance shareholder value. Crescent Point plans to initially prioritize additional net debt reduction in its excess cash flow allocation. The Company’s net debt to adjusted funds flow is expected to improve to 1.9x to 1.5x by year-end 2021 at US$55/bbl to US$65/bbl WTI for the remainder of the year. Crescent Point expects to generate significant excess cash flow and recognize further improvement in its leverage profile in 2022, assuming a similar commodity price range.
The Company will also evaluate the return of additional capital to shareholders in the context of its capital allocation framework, leverage targets and adjusted funds flow generation.
ANNUAL GENERAL MEETING
Crescent Point’s 2021 Annual General Meeting (“AGM”) will be held on May 20, 2021. Due to the ongoing COVID-19 pandemic, the Company is proceeding with the AGM solely by virtual means as previously announced. For more information, please review the press release dated April 20, 2021.
CONFERENCE CALL DETAILS
Crescent Point management will hold a conference call on Wednesday, May 12, 2021 at 10:00 a.m. MT (12:00 p.m. ET) to discuss the Company’s results and outlook. A slide deck will accompany the conference call and can be found on Crescent Point’s website.
Participants can listen to this event online. Alternatively, the conference call can be accessed by dialing 1–888–390–0605.
The webcast will be archived for replay and can be accessed on Crescent Point’s website. The replay will be available approximately one hour following completion of the call.
Shareholders and investors can also find the Company’s most recent investor presentation on Crescent Point’s website.
2021 GUIDANCE
The Company’s guidance for 2021 is as follows:
Total Annual Average Production (boe/d) (1) |
132,000 – 136,000 |
Capital Expenditures |
|
Development capital expenditures ($ million) |
$575 – $625 |
Capitalized G&A ($ million) |
$35 |
Total ($ million) (2) |
$610 – $660 |
Other Information for 2021 Guidance |
|
Reclamation activities ($ million) (3) |
$15 |
Capital lease payments ($ million) |
$20 |
Annual operating expenses |
$625 – $645 million |
Royalties |
11.5% – 12.5% |
1) |
Total annual average production (boe/d) is comprised of 87% Oil & NGLs and 13% Natural Gas |
2) |
Land expenditures and net property acquisitions and dispositions are not included. Development capital expenditures spend is allocated as follows: 87% drilling & development and 13% facilities & seismic |
3) |
Reflects Crescent Point’s portion of its expected total budget |
The Company’s unaudited financial statements and management’s discussion and analysis for the quarter ended March 31, 2021, will be available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml and on Crescent Point’s website at www.crescentpointenergy.com.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended March 31 |
||
(Cdn$ millions except per share and per boe amounts) |
2021 |
2020 |
Financial |
||
Cash flow from operating activities |
303.7 |
329.3 |
Adjusted funds flow from operations (1) |
262.7 |
309.5 |
Per share (1) (2) |
0.49 |
0.59 |
Net income (loss) |
21.7 |
(2,324.1) |
Per share (2) |
0.04 |
(4.40) |
Adjusted net earnings from operations (1) |
95.1 |
48.7 |
Per share (1) (2) |
0.18 |
0.09 |
Dividends declared |
1.3 |
5.3 |
Per share (2) |
0.0025 |
0.0100 |
Net debt (1) |
2,013.4 |
2,327.9 |
Net debt to adjusted funds flow from operations (1) (3) |
2.4 |
1.4 |
Weighted average shares outstanding |
||
Basic |
530.4 |
528.3 |
Diluted |
536.6 |
528.3 |
Operating |
||
Average daily production |
||
Crude oil (bbls/d) |
95,276 |
111,928 |
NGLs (bbls/d) |
13,319 |
17,493 |
Natural gas (mcf/d) |
64,732 |
71,451 |
Total (boe/d) |
119,384 |
141,330 |
Average selling prices (4) |
||
Crude oil ($/bbl) |
65.17 |
49.21 |
NGLs ($/bbl) |
37.70 |
17.28 |
Natural gas ($/mcf) |
4.50 |
3.03 |
Total ($/boe) |
58.65 |
42.64 |
Netback ($/boe) |
||
Oil and gas sales |
58.65 |
42.64 |
Royalties |
(7.98) |
(5.68) |
Operating expenses |
(13.27) |
(12.31) |
Transportation expenses |
(2.34) |
(2.24) |
Operating netback (1) |
35.06 |
22.41 |
Realized gain (loss) on derivatives |
(5.55) |
4.38 |
Other (5) |
(5.06) |
(2.73) |
Adjusted funds flow from operations netback (1) |
24.45 |
24.06 |
Capital Expenditures |
||
Capital dispositions, net (6) |
(7.2) |
(505.5) |
Development capital expenditures |
||
Drilling and development |
105.6 |
293.6 |
Facilities and seismic |
13.6 |
26.5 |
Total |
119.2 |
320.1 |
Land expenditures |
0.9 |
0.8 |
(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 commodity 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, the Company’s share of 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 March 31 |
|||||
($ millions) |
2021 |
2020 |
|||
Cash flow from operating activities |
303.7 |
329.3 |
|||
Changes in non-cash working capital |
(47.2) |
(33.1) |
|||
Transaction costs |
0.1 |
4.7 |
|||
Decommissioning expenditures (1) |
6.1 |
8.6 |
|||
Adjusted funds flow from operations |
262.7 |
309.5 |
(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 March 31 |
|||||
($ millions) |
2021 |
2020 |
|||
Net income (loss) |
21.7 |
(2,324.1) |
|||
Amortization of E&E undeveloped land |
13.8 |
21.7 |
|||
Impairment |
— |
3,557.8 |
|||
Unrealized derivative (gains) losses |
81.7 |
(418.5) |
|||
Unrealized foreign exchange (gain) loss on translation of hedged US dollar long-term debt |
(11.9) |
135.9 |
|||
Unrealized (gain) loss on long-term investments |
(2.2) |
5.5 |
|||
Net (gain) loss on capital dispositions |
17.3 |
(307.5) |
|||
Deferred tax relating to adjustments |
(25.3) |
(622.1) |
|||
Adjusted net earnings from operations |
95.1 |
48.7 |
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 net of equity derivative contracts, less cash, accounts receivable, prepaids and deposits, including deposit on acquisition, 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) |
March 31, 2021 |
March 31, 2020 |
||
Long-term debt (1) |
2,149.4 |
2,539.2 |
||
Accounts payable and accrued liabilities |
369.0 |
418.2 |
||
Long-term compensation liability (2) |
32.8 |
2.4 |
||
Cash |
(24.0) |
(19.6) |
||
Accounts receivable |
(251.2) |
(196.7) |
||
Prepaids and deposits (3) |
(66.0) |
(12.6) |
||
Long-term investments |
(4.7) |
(1.2) |
||
Excludes: |
||||
Unrealized foreign exchange on translation of hedged US dollar long-term debt |
(191.9) |
(401.8) |
||
Net debt |
2,013.4 |
2,327.9 |
(1) |
Includes current portion of long-term debt. |
(2) |
Includes current portion of long-term compensation liability and is net of equity derivative contracts. |
(3) |
Includes deposit on acquisition. |
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 between prior periods on a comparable basis. Netback calculations are shown in the Financial and Operating Highlights section in this press release. Oil and gas metrics such as operating netback and netback do not have standardized meaning and as such may not be reliable, and should not be used to make comparisons.
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.
All amounts in the news release are stated in Canadian dollars unless otherwise specified.