- Accelerating shareholder returns by increasing quarterly dividend to $0.03 per share alongside continued net debt reduction.
- Preliminary 2022 outlook for production of 131,000 – 135,000 boe/d and development capital expenditures of $825 – $900 million.
- Expected excess cash flow generation of $625 – $875 million in 2022, after dividends, at US$65/bbl – US$75/bbl WTI.
- On track to attain optimal leverage target in 2022, based on expected excess cash flow generation at current commodity prices.
“Our continued execution and capital discipline has positioned us to begin returning additional capital to shareholders,” said Craig Bryksa, President and CEO of Crescent Point. “We are prioritizing debt reduction as part of our capital allocation framework including the establishment of a core dividend that is sustainable, provides flexibility and has the ability to grow over time. We are committed to a model that returns capital to shareholders while also generating returns through debt-adjusted per share growth.”
RETURN OF CAPITAL TO SHAREHOLDERS
Crescent Point’s Board of Directors has approved and declared a fourth quarter dividend increase to $0.03 per share to be paid on January 4, 2022 to shareholders of record on December 15, 2021. This equates to an annualized dividend of $0.12 per share, an increase of $0.11 per share from the current level. The Company’s upcoming third quarter dividend of $0.0025 per share is scheduled to be paid on October 1, 2021, as previously announced.
Over the past year Crescent Point has significantly improved its free cash flow profile through its strategic Kaybob Duvernay acquisition, ongoing cost improvements and decline mitigation programs. This execution alongside a disciplined returns-based capital program have positioned the Company to be able to support a higher dividend.
Crescent Point’s new dividend level equates to a modest payout ratio of approximately five percent of its expected 2022 adjusted funds flow assuming a conservative WTI price of US$50/bbl. This payout ratio provides dividend sustainability at lower commodity prices and allows the Company to continue prioritizing its balance sheet as it progresses toward its optimal leverage ratio at or below 1.0 times net debt to adjusted funds flow. Crescent Point is on track to attain its leverage target in 2022 based on the Company’s expected excess cash flow generation at forward strip commodity prices, including its current hedging position.
The Company will seek to return additional capital to shareholders over time in the context of its capital allocation framework and leverage targets.
PRELIMINARY 2022 OUTLOOK
Based on its initial budgeting process and the current outlook for commodity prices, Crescent Point is expecting to generate annual average production of 131,000 – 135,000 boe/d in 2022 based on development capital expenditures of $825 – $900 million. Consistent with its capital allocation framework, the Company’s annual budget will continue to include a portion of capital allocated to long-term projects, such as decline mitigation, and various environmental initiatives.
Crescent Point’s preliminary 2022 budget is expected to generate significant excess cash flow, after dividends, of approximately $625 – $875 million at US$65/bbl – US$75/bbl WTI. Crescent Point has approximately 30 percent of its oil and liquids production currently hedged for 2022 and will continue add further protection in the context of commodity prices.
The Company will retain flexibility in its overall capital allocation as it formalizes its budget, which is expected to be released prior to the end of the year. Additional details on Crescent Point’s 2022 program and other guidance information will be provided at that time.
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.
Non-GAAP Financial Measures
Throughout this press release, the Company uses the terms “adjusted funds flow”, “free cash flow”, “excess cash flow”, “net debt”, “net debt to adjusted funds flow” and “payout ratio”. 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. 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.
Free cash flow is defined as adjusted funds flow from operations less capital expenditures, payments on lease liability, decommissioning expenditures funded by the Company and other cash items (excluding net acquisitions and dispositions). Excess cash flow is calculated as free cash flow less dividends. Management utilizes free cash flow and 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.
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.
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.
Payout ratio is calculated on a percentage basis as dividends declared divided by adjusted funds flow from operations. Payout ratio is used by management to monitor the dividend policy and the amount of adjusted funds flow from operations retained by the Company for capital reinvestment.
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. For reconciliations of the non-GAAP measures present in this press release to their nearest applicable measure prescribed by IFRS, please refer to the Company’s MD&A for the period ended June 30, 2021, available at www.sedar.com.
All amounts in the news release are stated in Canadian dollars unless otherwise specified.