“Our second quarter results demonstrate our continued focus on maximizing excess cash flow generation through our strong capital discipline and successful operational execution”, said Craig Bryksa, President and CEO of Crescent Point. “We also closed two strategic transactions during the quarter, further enhancing our asset portfolio and long-term sustainability. The seamless integration of the Kaybob Duvernay assets and the constructive commodity price environment have set us up for a strong second half of the year and into 2022. We expect to generate significant excess cash flow in the current commodity price environment, allowing for further net debt reduction and return of capital to shareholders.”
The Company’s second quarter results highlight management’s continued strong execution and capital discipline.
Crescent Point’s recent strategic acquisition and disposition activities are expected to deliver meaningful improvements to the business by enhancing the Company’s free cash flow generation and deleveraging profile, improving its cost structure, increasing overall scalability and reducing future decommissioning liabilities.
Crescent Point is upwardly revising its 2021 annual average production guidance to be 130,000 to 134,000 boe/d, up from its prior range of 128,000 to 132,000 boe/d. This increase reflects the Company’s continued operational outperformance in addition to the reactivation of higher cost production that was previously shut-in during a lower commodity price environment. Crescent Point is also narrowing its 2021 development capital expenditures guidance, within its prior range, to approximately $600 to $625 million.
As Crescent Point’s balance sheet continues to strengthen toward its leverage targets, the Company will evaluate the return of additional capital to shareholders, including its current dividend, in the context of its capital allocation framework.
The Company’s unaudited financial statements and management’s discussion and analysis for the period ended June 30, 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.
[expand title=”Advisories & Contact”]Non-GAAP Financial Measures
Throughout this press release, the Company uses the terms “adjusted funds flow”, “adjusted funds flow from operations”, “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 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 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, decommissioning expenditures funded by the Company, 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 June 30
|
Six months ended June 30
|
($ millions)
|
2021
|
2020
|
2021
|
2020
|
Cash flow from operating activities
|
285.5
|
66.6
|
589.2
|
395.9
|
Changes in non-cash working capital
|
88.4
|
41.1
|
41.2
|
8.0
|
Transaction costs
|
11.7
|
0.6
|
11.8
|
5.3
|
Decommissioning expenditures (1)
|
2.2
|
0.7
|
8.3
|
9.3
|
Adjusted funds flow from operations
|
387.8
|
109.0
|
650.5
|
418.5
|
(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 reversal, 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)
|
2021
|
2020
|
2021
|
2020
|
Net income (loss)
|
2,143.3
|
(145.1)
|
2,165.0
|
(2,469.2)
|
Amortization of E&E undeveloped land
|
13.3
|
19.6
|
27.1
|
41.3
|
Impairment (impairment reversal)
|
(2,514.4)
|
—
|
(2,514.4)
|
3,557.8
|
Unrealized derivative (gains) losses
|
143.6
|
229.2
|
225.3
|
(189.3)
|
Unrealized foreign exchange (gain) loss on translation of
|
|
|
|
|
hedged US dollar long-term debt
|
(37.9)
|
(74.1)
|
(49.8)
|
61.8
|
Unrealized (gain) loss on long-term investments
|
(3.9)
|
(1.2)
|
(6.1)
|
4.3
|
Net (gain) loss on capital dispositions
|
(73.8)
|
(0.8)
|
(56.5)
|
(308.3)
|
Deferred tax relating to adjustments
|
447.4
|
(55.5)
|
422.1
|
(677.6)
|
Adjusted net earnings from operations
|
117.6
|
(27.9)
|
212.7
|
20.8
|
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 net of equity derivative contracts, 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, 2021
|
June 30, 2020
|
Long-term debt (1)
|
2,462.1
|
2,597.6
|
Accounts payable and accrued liabilities
|
340.8
|
270.3
|
Long-term compensation liability (2)
|
25.3
|
5.9
|
Cash
|
(4.4)
|
(27.6)
|
Accounts receivable
|
(308.1)
|
(183.7)
|
Prepaids and deposits
|
(28.9)
|
(23.7)
|
Long-term investments
|
(8.6)
|
(2.5)
|
Excludes:
|
|
|
Unrealized foreign exchange on translation of hedged US dollar long-term debt
|
(154.0)
|
(327.7)
|
Net debt
|
2,324.2
|
2,308.6
|
(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 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.
Forward-Looking Statements
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: benefits of acquisitions and dispositions; a strong second half of 2021 and into 2022; generating significant excess cash flow in the current commodity price environment, allowing for further net debt reduction and return of capital to shareholders; extent and benefits of hedging portfolio; Kaybob Duvernay production timing, conservative development plan with a focus on full-cycle returns; and leveraging expertise to optimize efficiencies in the play; water injection well conversion plans; enhanced oil recovery techniques and benefits thereof; increased target for scope 1 emissions intensity reduction to 50 percent by 2025, including a 70 percent reduction in absolute methane emissions, relative to a 2017 baseline; reducing inactive well inventory by 30 percent over the next 10 years, excluding the impact of the previously announced disposition and including the planned safe retirement of approximately 400 wells in 2021; progressing the development of freshwater use targets, which are anticipated to be released later this year; allocating three to five percent of the annual maintenance capital budget to environmental stewardship moving forward; 2021 annual average production guidance; 2021 capital expenditures guidance including development capital expenditures and capitalized G&A; 2021 reclamation activities; capital lease payments, annual operation expenses and royalties; development capital expenditures guidance; generating excess cash flow of approximately $675 to $775 million in 2021 at US$65/bbl to US$75/bbl WTI for the remainder of 2021; the Company’s improved excess cash flow outlook is expected to accelerate its deleveraging process, increasing its ability to further enhance shareholder value; reestablishing a core dividend; and additional forms of returning capital to shareholders, including potential share repurchases, in the context of its returns-based capital allocation framework.
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, 2020. 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, 2020, and in its material change report dated February 26, 2021, which are 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 report 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, 2020 under “Risk Factors” and our Management’s Discussion and Analysis for the year ended December 31, 2020, and for the quarter ended June 30, 2021, under the headings “Risk Factors” and “Forward-Looking Information”. The material assumptions are disclosed in the Management’s Discussion and Analysis for the three months ended June 30, 2021, under the headings “Overview”, “Commodity Derivatives”, “Liquidity and Capital Resources”, and “Guidance” (as updated herein). In addition, risk factors include: financial risk of marketing reserves at an acceptable price given market conditions; volatility in market prices for oil and natural gas, decisions or actions of OPEC and non-OPEC countries in respect of supplies of oil and gas; delays in business operations or delivery of services due to pipeline restrictions, rail blockades, outbreaks, blowouts and business closures and social distancing measures mandated by public health authorities in response to COVID-19; uncertainty regarding the benefits and costs of acquisitions and dispositions; the risk of carrying out operations with minimal environmental impact; industry conditions including changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; uncertainties associated with estimating oil and natural gas reserves; risks and uncertainties related to oil and gas interests and operations on Indigenous lands; 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 and likelihood of acquisitions and dispositions, and exploration and development programs; unexpected geological, technical, drilling, construction, processing and transportation problems; availability of insurance; fluctuations in foreign exchange and interest rates; stock market volatility; general economic, market and business conditions, including uncertainty in the demand for oil and gas and economic activity in general as a result of the COVID-19 pandemic; uncertainties associated with regulatory approvals; uncertainty of government policy changes; the impact of the implementation of the Canada-United States Mexico Agreement; uncertainties associated with credit facilities and counterparty credit risk; cybersecurity risks; changes in income tax laws, tax laws, crown royalty rates and incentive programs relating to the oil and gas industry; the wide-ranging impacts of the COVID-19 pandemic, including on demand, health and supply chain; and other factors, many of which are outside the control of the Company. 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.
Product Type Production Information
The Company’s aggregate average production for the three and six months ended June 30, 2021 and June 30, 2020 and the references to “natural gas” and “crude oil”, reported in this Press Release consist of the following product types, as defined in NI 51-101 and using a conversion ratio of 6 Mcf : 1 Bbl where applicable:
|
Three months ended June 30
|
Six months ended June 30
|
|
2021
|
2020
|
2021
|
2020
|
Light & Medium Crude Oil (bbl/d)
|
20,181
|
18,952
|
20,482
|
21,863
|
Heavy Crude Oil (bbl/d)
|
4,269
|
4,269
|
4,193
|
4,511
|
Tight Oil (bbl/d)
|
65,595
|
71,679
|
67,972
|
77,041
|
Total Crude Oil (bbl/d)
|
90,045
|
94,900
|
92,647
|
103,415
|
|
|
|
|
|
NGLs (bbl/d)
|
36,007
|
14,210
|
24,725
|
15,851
|
|
|
|
|
|
Shale Gas (Mcf/d)
|
125,830
|
57,254
|
89,618
|
55,569
|
Conventional Natural Gas (Mcf/d)
|
9,701
|
13,137
|
10,709
|
15,352
|
Total Natural Gas (Mcf/d)
|
135,531
|
70,391
|
100,327
|
70,921
|
Total (boe/d)
|
148,641
|
120,842
|
134,093
|
131,086
|
Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf : 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of oil, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
NI 51-101 includes condensate within the natural gas liquids (NGLs) product type. The Company has disclosed condensate as combined with crude oil and separately from other natural gas liquids in this press release since the price of condensate as compared to other natural gas liquids is currently significantly higher and the Company believes that this crude oil and condensate presentation provides a more accurate description of its operations and results therefrom.
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.