CALGARY, AB, Oct. 26, 2022 /PRNewswire/ – 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 September 30, 2022, its formal 2023 budget, a quarterly dividend and a special dividend, while also updating its five-year outlook.
KEY HIGHLIGHTS
- Generated $233.7 million of excess cash flow in third quarter, driven by the Company’s high netback asset base.
- Returning 50 percent of discretionary excess flow, in addition to the base dividend, to shareholders for third quarter 2022.
- Repurchased 8.2 million shares in third quarter and 3.0 million shares to-date in October 2022.
- Declared a special dividend of $0.035 per share, based on third quarter results, and a quarterly dividend of $0.08 per share.
- Disciplined 2023 guidance expected to generate $1.1 to $1.5 billion of excess cash flow at US$75/bbl to US$85/bbl WTI.
- Achieved another strong IP30 rate of 900 boe/d per well on a recent pad and acquired 80 net sections in Kaybob Duvernay.
- Received recognition of the Company’s improved ESG practices through MSCI’s upgraded rating of “AA”.
“We are returning a meaningful amount of capital back to our shareholders for third quarter as a result of our strong financial and operational performance”, said Craig Bryksa, President and CEO of Crescent Point. “In addition, we bolstered our resource base through a land acquisition during the quarter while also advancing other operational initiatives to further enhance our long-term sustainability. Our 2023 and five-year outlook are expected to generate significant excess cash flow and returns for shareholders, further building on our continued execution.”
FINANCIAL HIGHLIGHTS
- Adjusted funds flow totaled $576.5 million during third quarter 2022, or $1.02 per share diluted, driven by a strong operating netback of $59.28 per boe.
- For the quarter ended September 30, 2022, development capital expenditures, which included drilling and development, facilities and seismic costs, totaled $308.5 million.
- The Company’s excess cash flow in third quarter 2022 totaled $233.7 million.
- Crescent Point’s net debt as at September 30, 2022 was $1.2 billion, reflecting a reduction of approximately $270 million in the quarter. The Company reduced its net debt with proceeds received from the disposition of certain non-core assets, as previously announced, and continued excess cash flow generation.
- Crescent Point reported net income of $466.4 million, or $0.82 per share diluted, for the quarter ended September 30, 2022.
RETURN OF CAPITAL HIGHLIGHTS
- Discretionary excess cash flow, or excess cash flow less base dividends, totaled $188.8 million during third quarter 2022, of which approximately 50 percent is being returned to shareholders through share repurchases and a special dividend.
- Total return of capital to shareholders for third quarter 2022, including the base dividend, is $139.4 million.
- The Company remains active on its normal course issuer bid (“NCIB”) and repurchased 8.2 million shares in third quarter 2022 for approximately $75 million. Crescent Point has also repurchased 3.0 million shares to date in October 2022 for approximately $29 million as part of its return of capital to shareholders during fourth quarter 2022.
- The Company’s Board of Directors has declared a special cash dividend, based on third quarter 2022 results, of $0.035 per share payable on November 14, 2022, to shareholders of record as of the close of business on November 4, 2022.
- Subsequent to the quarter, Crescent Point’s Board also declared a quarterly cash base dividend of $0.08 per share payable on January 3, 2023 to shareholders of record on December 15, 2022.
OPERATIONAL HIGHLIGHTS
- Average production for the quarter ended September 30, 2022 was 133,019 boe/d, comprised of over 80 percent oil and liquids.
- Crescent Point continues to generate strong operational results in its Kaybob Duvernay play, resulting in attractive asset level returns. The Company recently brought on stream its third fully operated multi-well pad achieving an average 30-day initial production (“IP30”) rate of approximately 900 boe/d per well (81% condensate, 5% NGL and 14% shale gas), which is expected to payout in approximately six months from the initial on-stream date at current commodity prices.
- During third quarter, Crescent Point acquired additional lands in the Kaybob Duvernay for cash consideration of approximately $87 million. This acquisition included approximately 80 net sections of crown land with a 100 percent working interest, further expanding the Company’s drilling inventory in the play. Given its significant running room in the Kaybob Duvernay, Crescent Point expects to increase the proportion of capital it allocates to this high-return asset within its five-year plan. As a result, production in this area is expected to grow in a disciplined manner from approximately 35,000 boe/d in 2022 to over 50,000 boe/d by 2027, subject to commodity prices.
- In its southeast and southwest Saskatchewan operations, Crescent Point continued to advance its decline mitigation projects during third quarter to further enhance long-term sustainability. This included secondary recovery waterflood programs and the initiation of a polymer flood, a tertiary form of recovery, within a unit in the Company’s Shaunavon play in southwest Saskatchewan.
- During third quarter 2022, Crescent Point successfully drilled its first multi-lateral, open-hole horizontal well in its Viewfield Bakken play in southeast Saskatchewan with strong performance to-date (see the well on Petro Ninja here). The Company is currently drilling a subsequent multi-lateral, open-hole horizontal well in the play. This innovation in well design removes the need for fracture stimulation and has the potential to expand the number of economic locations currently identified in the area.
- Crescent Point’s continued commitment to strong environmental, social and governance (“ESG”) practices was recently recognized by Morgan Stanley Capital International (“MSCI”) Inc. which increased its rating to “AA”. This is the second consecutive year the Company has received an increase in its ESG Ratings assessment from MSCI Inc.
2022 GUIDANCE
- The Company’s 2022 development capital expenditures guidance has been slightly increased to $950 million, from $875 to $900 million previously. This increase reflects a higher inflationary cost environment and Crescent Point’s decision to maintain an active drilling rig in its Kaybob Duvernay and North Dakota plays where the Company is currently ahead of schedule on its 2022 drilling program. Crescent Point remains on track to meet its 2022 annual average production guidance, which is now at the mid-point of its prior range of 130,000 to 134,000 boe/d.
2023 GUIDANCE
- Crescent Point plans to generate annual average production of 134,000 to 138,000 boe/d in 2023. Based on development capital expenditures of $1.0 to $1.1 billion, the Company expects to generate approximately $1.1 to $1.5 billion of excess cash flow at US$75/bbl to US$85/bbl WTI. The Company’s 2023 budget, including its base dividend, is fully funded at less than US$50/bbl WTI. Crescent Point expects to achieve this annual production guidance with spending toward the lower end of its budget based on projected costs in the current commodity price environment.
- Crescent Point’s allocation of its 2023 budget is centered around risk-adjusted returns and remains focused within its four major operating areas. In the Kaybob Duvernay and North Dakota resource plays, the Company plans to operate a one rig drilling program with a focus on realizing additional efficiencies. Crescent Point’s Kaybob Duvernay budget is also expected to include a step-out drilling program to identify new potential drilling locations. In southeast and southwest Saskatchewan, the Company plans to continue to focus on low risk, high-return development, advancement of its decline mitigation programs and further expansion of the economic boundaries within these assets.
- Consistent with its capital allocation framework, the Company plans to allocate approximately 15 percent of its 2023 budget to long-term projects to enhance its sustainability. Such projects include the continued advancement of various decline mitigation programs, such as waterflood and polymer floods, and environmental initiatives designed to reduce Crescent Point’s emissions and inactive well inventory.
OUTLOOK
Crescent Point continues to demonstrate strong operational and financial execution, while taking a disciplined approach to capital allocation and maintaining its commitment to returning a meaningful amount of capital back to shareholders.
The Company expects to generate significant excess cash flow of approximately $1.1 to $1.5 billion, based on its 2023 guidance at US$75/bbl to US$85/bbl WTI, allowing for significant returns to shareholders, including an expected further improvement in its leverage ratio to less than 0.3 times net debt to adjusted funds flow.
Approximately 15 percent of the Company’s total production is currently hedged in 2023, including over 20 percent in first half of the year. Crescent Point will remain disciplined in its hedging strategy in the context of market conditions.
In conjunction with its 2023 budget, the Company has updated its five-year outlook, which is expected to generate approximately $5.0 to $6.0 billion of cumulative after-tax excess cash flow from 2023 to 2027, at US$75/bbl to US$85/bbl WTI. Crescent Point’s five-year plan assumes annual average production increasing to approximately 145,000 boe/d by 2027, subject to commodity prices. This plan remains disciplined with a continued focus on returns and long-term sustainability.
Crescent Point remains in a strong financial position and is focused on creating long-term value for shareholders through a combination of returning capital and continually enhancing the sustainability of the business on a per-share basis.
CONFERENCE CALL DETAILS
Crescent Point management will hold a conference call on Wednesday, October 26, 2022 at 10:00 a.m. MT (12:00 p.m. ET) to discuss the Company’s results and outlook. A slide deck will accompany the conference call and can be found on Crescent Point’s website.
Participants can listen to this event online. Alternatively, the conference call can be accessed by dialing 1‑888‑390‑0605.
The webcast will be archived for replay and can be accessed online at Crescent Point’s conference calls and webcasts page. The replay will be available approximately one hour following completion of the call.
Shareholders and investors can also find the Company’s most recent investor presentation on Crescent Point’s website.
2022 GUIDANCE
Prior | Revised | |
Total Annual Average Production (boe/d) (1) | 130,000 – 134,000 | 132,000 |
Capital Expenditures | ||
Development capital expenditures ($ millions) | $875 – $900 | $950 |
Capitalized administration ($ millions) | $40 | $45 |
Total ($ millions) (2) | $915 – $940 | $995 |
Other Information for 2022 Guidance | ||
Reclamation activities ($ millions) (3) | $20 | $20 |
Capital lease payments ($ millions) | $20 | $20 |
Annual operating expenses ($/boe) | $13.75 – $14.25 | $14.75 |
1) | Total annual average production (boe/d) is comprised of approximately 80% Oil, Condensate & NGLs and 20% Natural Gas | |
2) | Land expenditures and net property acquisitions and dispositions are not included. Development capital expenditures spend is allocated on an approximate basis as follows: 90% drilling & development and 10% facilities & seismic |
|
3) | Reflects Crescent Point’s portion of its expected total budget |
2023 GUIDANCE
Total Annual Average Production (boe/d) (1) | 134,000 – 138,000 |
Capital Expenditures | |
Development capital expenditures ($ millions) | $1,000 – $1,100 |
Capitalized administration ($ millions) | $40 |
Total ($ millions) (2) | $1,040 – $1,140 |
Other Information for 2023 Guidance | |
Reclamation activities ($ millions) (3) | $40 |
Capital lease payments ($ millions) | $20 |
1) | Total annual average production (boe/d) is comprised of approximately 80% Oil, Condensate & NGLs and 20% Natural Gas | |
2) | Land expenditures and net property acquisitions and dispositions are not included. Development capital expenditures spend is allocated on an approximate basis as follows: 90% drilling & development and 10% facilities & seismic |
|
3) | Reflects Crescent Point’s portion of its expected total budget |
RETURN OF CAPITAL OUTLOOK
Base Dividend | |
Current quarterly base dividend per share | $0.08 |
Additional Return of Capital | |
% of discretionary excess cash flow (1)(2) | 50 % |
1) | Discretionary excess cash flow is calculated as excess cash flow less base dividends | |
2) | This % is part of a framework that targets to return up to 50% of discretionary excess cash flow to shareholders |
The Company’s unaudited financial statements and management’s discussion and analysis for the quarter ended September 30, 2022, will be available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com, on EDGAR at www.sec.gov/edgar and on Crescent Point’s website at www.crescentpointenergy.com
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended September 30 | Nine months ended September 30 | |||
(Cdn$ millions except per share and per boe amounts) | 2022 | 2021 | 2022 | 2021 |
Financial | ||||
Cash flow from operating activities | 647.0 | 414.2 | 1,602.7 | 1,003.4 |
Adjusted funds flow from operations (1) | 576.5 | 393.9 | 1,709.6 | 1,044.4 |
Per share (1) (2) | 1.02 | 0.67 | 2.97 | 1.83 |
Net income | 466.4 | 77.5 | 1,981.5 | 2,242.5 |
Per share (2) | 0.82 | 0.13 | 3.44 | 3.93 |
Adjusted net earnings from operations (1) | 242.9 | 142.6 | 755.9 | 355.3 |
Per share (1) (2) | 0.43 | 0.24 | 1.31 | 0.62 |
Dividends declared | 44.9 | 19.0 | 81.8 | 21.8 |
Per share (2) | 0.0800 | 0.0325 | 0.1450 | 0.0375 |
Net debt (1) | 1,198.3 | 2,138.8 | 1,198.3 | 2,138.8 |
Net debt to adjusted funds flow from operations (1) (3) | 0.6 | 1.7 | 0.6 | 1.7 |
Weighted average shares outstanding | ||||
Basic | 563.6 | 582.0 | 570.6 | 564.9 |
Diluted | 567.4 | 587.1 | 575.2 | 570.7 |
Operating | ||||
Average daily production | ||||
Crude oil and condensate (bbls/d) | 91,762 | 92,206 | 91,989 | 98,298 |
NGLs (bbls/d) | 17,198 | 18,176 | 16,793 | 16,719 |
Natural gas (mcf/d) | 144,356 | 130,823 | 137,277 | 110,604 |
Total (boe/d) | 133,019 | 132,186 | 131,662 | 133,451 |
Average selling prices (4) | ||||
Crude oil and condensate ($/bbl) | 111.46 | 82.45 | 119.81 | 74.54 |
NGLs ($/bbl) | 43.83 | 45.24 | 47.33 | 40.12 |
Natural gas ($/mcf) | 6.55 | 4.29 | 6.69 | 4.07 |
Total ($/boe) | 89.66 | 67.99 | 96.72 | 63.30 |
Netback ($/boe) | ||||
Oil and gas sales | 89.66 | 67.99 | 96.72 | 63.30 |
Royalties | (12.33) | (8.35) | (13.08) | (8.07) |
Operating expenses | (15.12) | (12.97) | (14.86) | (12.93) |
Transportation expenses | (2.93) | (2.52) | (2.83) | (2.41) |
Operating netback (1) | 59.28 | 44.15 | 65.95 | 39.89 |
Realized loss on commodity derivatives | (9.82) | (7.26) | (15.20) | (6.74) |
Other (5) | (2.35) | (4.50) | (3.19) | (4.48) |
Adjusted funds flow from operations netback (1) | 47.11 | 32.39 | 47.56 | 28.67 |
Capital Expenditures | ||||
Capital acquisitions (6) | 88.2 | 0.9 | 89.4 | 937.2 |
Capital dispositions (6) | (244.1) | (3.8) | (284.8) | (98.9) |
Development capital expenditures | ||||
Drilling and development | 280.8 | 161.3 | 651.8 | 324.8 |
Facilities and seismic | 27.7 | 25.8 | 57.9 | 69.9 |
Total | 308.5 | 187.1 | 709.7 | 394.7 |
Land expenditures | 5.7 | 1.2 | 15.0 | 4.1 |
(1) | Specified financial measure that does not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section for further information. |
|
(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 acquisitions and dispositions represent total consideration for the transactions, including long-term debt and working capital assumed, and exclude transaction costs. |
Specified Financial Measures
Throughout this press release, the Company uses the terms “adjusted funds flow” (equivalent to “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”, “excess cash flow”, “discretionary excess cash flow”, “net debt”, “net debt to adjusted funds flow” (equivalent to “net debt to adjusted funds flow from operations” and “leverage ratio”), “total operating netback”, “total netback”, “operating netback”, “netback”, “adjusted funds flow from operations netback” and “adjusted working capital (surplus) deficiency”. 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. For information on the composition of these measures and how the Company uses these measures, refer to the Specified Financial Measures section of the Company’s MD&A for the period ended September 30, 2022, which section is incorporated herein by reference, and available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.
Adjusted funds flow from operations netback is a non-GAAP financial ratio and is calculated as adjusted funds flow from operations divided by total production. Adjusted funds flow from operations netback is a common metric used in the oil and gas industry and is used to measure operating results on a per boe basis.
The following table reconciles oil and gas sales to total operating netback, total netback and adjusted funds flow from operations netback:
Three months ended September 30 | Nine months ended September 30 | |||||||||||
($ millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||
Oil and gas sales | 1,097.3 | 826.7 | 33 | 3,476.5 | 2,306.1 | 51 | ||||||
Royalties | (150.9) | (101.5) | 49 | (470.0) | (294.0) | 60 | ||||||
Operating expenses | (185.0) | (157.7) | 17 | (534.2) | (471.1) | 13 | ||||||
Transportation expenses | (35.9) | (30.6) | 17 | (101.7) | (87.9) | 16 | ||||||
Total operating netback | 725.5 | 536.9 | 35 | 2,370.6 | 1,453.1 | 63 | ||||||
Realized loss on commodity derivatives | (120.2) | (88.2) | 36 | (546.2) | (245.6) | 122 | ||||||
Total netback | 605.3 | 448.7 | 35 | 1,824.4 | 1,207.5 | 51 | ||||||
Other (1) | (28.8) | (54.8) | (47) | (114.8) | (163.1) | (30) | ||||||
Total adjusted funds flow from operations netback | 576.5 | 393.9 | 46 | 1,709.6 | 1,044.4 | 64 |
(1) | 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. |
The following table reconciles cash flow from operating activities to adjusted funds flow from operations, excess cash flow and discretionary excess cash flow:
Three months ended September 30 | Nine months ended September 30 | |||||||||||
($ millions) | 2022 | 2021 (1) | % Change | 2022 | 2021 (1) | % Change | ||||||
Cash flow from operating activities | 647.0 | 414.2 | 56 | 1,602.7 | 1,003.4 | 60 | ||||||
Changes in non-cash working capital | (79.3) | (23.7) | 235 | 86.8 | 17.5 | 396 | ||||||
Transaction costs | 2.9 | 0.4 | 625 | 3.3 | 12.2 | (73) | ||||||
Decommissioning expenditures (2) | 5.9 | 3.0 | 97 | 16.8 | 11.3 | 49 | ||||||
Adjusted funds flow from operations | 576.5 | 393.9 | 46 | 1,709.6 | 1,044.4 | 64 | ||||||
Capital expenditures | (324.2) | (198.1) | 64 | (762.5) | (433.2) | 76 | ||||||
Payments on lease liability | (5.1) | (5.4) | (6) | (15.3) | (15.6) | (2) | ||||||
Decommissioning expenditures | (5.9) | (3.0) | 97 | (16.8) | (11.3) | 49 | ||||||
Other items (3) | (7.6) | 14.1 | (154) | (14.2) | 21.7 | (165) | ||||||
Excess cash flow | 233.7 | 201.5 | 16 | 900.8 | 606.0 | 49 | ||||||
Dividends (4) | (44.9) | (19.0) | 136 | (81.8) | (21.8) | 275 | ||||||
Discretionary excess cash flow | 188.8 | 182.5 | 3 | 819.0 | 584.2 | 40 |
(1) | Comparative period revised to reflect current year presentation. | |
(2) | Excludes amounts received from government subsidy programs. | |
(3) | Other items include, but are not limited to, unrealized gains and losses on equity derivative contracts and transaction costs. Other items exclude net acquisitions and dispositions. | |
(4) | Dividends is equivalent to base dividends as there were no special dividends declared in the three and nine months ended September 30, 2022 and September 30, 2021. |
Adjusted funds flow from operations per share – diluted is a supplementary financial measure and is calculated as adjusted funds flow from operations divided by the number of weighted average diluted shares outstanding. It is used as a key measure to assess the ability of the Company to finance dividends, operating activities, capital expenditures and debt repayments.
The following table reconciles adjusted working capital (surplus) deficiency:
($ millions) | September 30, 2022 | December 31, 2021 | % Change | |||
Accounts payable and accrued liabilities | 503.8 | 450.7 | 12 | |||
Dividends payable | 44.9 | 43.5 | 3 | |||
Long-term compensation liability (1) | 45.9 | 42.6 | 8 | |||
Cash | (225.5) | (13.5) | 1,570 | |||
Accounts receivable | (400.0) | (314.3) | 27 | |||
Prepaids and deposits | (17.0) | (7.4) | 130 | |||
Adjusted working capital (surplus) deficiency | (47.9) | 201.6 | (124) |
(1) | Includes current portion of long-term compensation liability and is net of equity derivative contracts. |
The following table reconciles long-term debt to net debt:
($ millions) | September 30, 2022 | December 31, 2021 | % Change | |||
Long-term debt (1) | 1,456.8 | 1,970.2 | (26) | |||
Adjusted working capital (surplus) deficiency | (47.9) | 201.6 | (124) | |||
Unrealized foreign exchange on translation of US dollar long-term debt | (210.6) | (166.8) | 26 | |||
Net debt | 1,198.3 | 2,005.0 | (40) |
(1) | Includes current portion of long-term debt. |
The following table reconciles net income to adjusted net earnings from operations:
Three months ended September 30 | Nine months ended September 30 | |||||||||||
($ millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||
Net income | 466.4 | 77.5 | 502 | 1,981.5 | 2,242.5 | (12) | ||||||
Amortization of E&E undeveloped land | 1.2 | 14.3 | (92) | 12.4 | 41.4 | (70) | ||||||
Impairment reversal | — | — | — | (1,484.9) | (2,514.4) | (41) | ||||||
Unrealized derivative (gains) losses | (349.5) | 3.2 | (11,022) | (117.3) | 228.5 | (151) | ||||||
Unrealized foreign exchange (gain) loss on translation of hedged US dollar long-term debt | 76.9 | 25.9 | 197 | 43.8 | (23.9) | (283) | ||||||
Unrealized (gain) loss on long-term investments | — | 3.0 | (100) | — | (3.1) | (100) | ||||||
Gain on sale of long-term investments | — | (7.0) | (100) | — | (7.0) | (100) | ||||||
Gain on capital dispositions | (23.3) | (1.9) | 1,126 | (26.1) | (58.4) | (55) | ||||||
Deferred tax adjustments | 71.2 | 27.6 | 158 | 346.5 | 449.7 | (23) | ||||||
Adjusted net earnings from operations | 242.9 | 142.6 | 70 | 755.9 | 355.3 | 113 |
Excess cash flow forecasted for 2022 and 2023 are forward-looking non-GAAP measures and are calculated consistently with the measures disclosed in the Company’s MD&A. Refer to the Specified Financial Measures section of the Company’s MD&A for the period ended September 30, 2022.
Management believes the presentation of the specified financial 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.