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Crescent Point Announces 2019 Results and Reserves

Cision

CALGARY , March 5, 2020 /PRNewswire/ - Crescent Point Energy Corp. ("Crescent Point" or the "Company") (TSX and NYSE: CPG) is pleased to announce its operating and financial results for the year ended December 31, 2019 .

KEY HIGHLIGHTS

  • Successfully completed 2019 program on budget, demonstrating strong operational execution and capital discipline.

  • Reduced net debt by approximately $1.25 billion in 2019, or $1.75 billion including closing of infrastructure sale in January 2020 .

  • Realized over $170 million of annual internal cost efficiencies across the organization, including continued improvement in operating expenses during fourth quarter.

  • Increased Proved Developed Producing ("PDP") net asset value ("NAV") per share by over 20 percent from the prior year assuming flat US$55 /bbl WTI.

  • Reduced future asset retirement obligations ("ARO") by over $220 million in 2019 and continued to enhance environmental, social and governance ("ESG") practices, including the launch of its inaugural sustainability report.

  • Repurchased approximately five percent of public float, or $135 million of shares, since initiating normal course issuer bid ("NCIB") in first quarter 2019, including approximately $125 million during 2019.

  • Remain on track with 2020 guidance with a flexible budget that is fully funded at approximately US$46 /bbl WTI.


"Our 2019 results highlight the Company's focus on operating a high-return and sustainable portfolio of assets with a strong balance sheet," said Craig Bryksa , President and CEO of Crescent Point. "2019 was the first full year of our team's new strategic direction and involved significant realignment in many parts of our business. We substantially reduced our debt and cost structure while also returning a meaningful amount of capital to shareholders." 

FINANCIAL HIGHLIGHTS

  • For the year ended December 31, 2019 , the Company's adjusted funds flow totaled $1.83 billion , or $3.34 per share diluted. In fourth quarter, adjusted funds flow totaled $418.4 million , or $0.78 per share diluted.

  • For the year ended December 31, 2019 , Crescent Point's capital expenditures on drilling and development, facilities and seismic totaled $1.25 billion , including $343.4 million spent during fourth quarter. Capital expenditures in 2019 were at the mid-point of the Company's annual guidance range.

  • As at December 31, 2019 , the Company's net debt was approximately $2.8 billion with unutilized credit capacity of approximately $2.2 billion . Subsequent to the quarter, Crescent Point closed its previously announced sale of certain gas infrastructure assets for $500 million , further reducing its net debt and enhancing its unutilized credit capacity to approximately $2.7 billion .

  • As part of its risk management program to protect against commodity price volatility, the Company has currently hedged, on average, approximately 50 percent of its oil and liquids production, net of royalty interest, through 2020 at a weighted average price of over CDN$76 /bbl. Crescent Point's oil hedges extend through to first quarter 2021 at attractive prices.

  • For the year ended December 31, 2019 , the Company incurred a net loss of $1.03 billion , including a non-cash asset impairment charge of $1.21 billion ( $884.0 million after-tax) in fourth quarter 2019 primarily due to a decrease in the independent engineering price forecast. The impairment charge does not impact Crescent Point's adjusted funds flow or its credit capacity, and is reversible in future periods should there be any indicators that the value of the assets has increased.

  • Crescent Point reduced its future ARO by over $220 million , or approximately 18 percent since year-end 2018, primarily driven by dispositions of its non-core assets and ongoing reclamation activities. The Company continues to allocate capital towards ARO activities on an annual basis as it remains committed to strong ESG practices.

  • Since initiating the NCIB in first quarter 2019, the Company repurchased and canceled 26.2 million shares for total consideration of approximately $135 million , representing approximately five percent of its public float. The Toronto Stock Exchange has accepted Crescent Point's notice of the intention to renew the NCIB, which expired in first quarter 2020. Refer to the Company's press release issued on March 5, 2020 for further information.

  • Subsequent to the quarter, Crescent Point declared a quarterly cash dividend of $0.01 per share payable on April 1, 2020 .


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.


OPERATIONAL HIGHLIGHTS

  • Annual average production in 2019 was 162,230 boe/d, which was at the mid-point of the Company's guidance range and was comprised of approximately 91 percent oil and liquids. Average production during fourth quarter was 145,191 boe/d, reflecting the impact of asset dispositions executed during the quarter.

  • Crescent Point realized operating cost savings of approximately $70 million in 2019, excluding any impact from dispositions, demonstrating an increased focus on new workflow improvements and the continued adoption of digital technologies.

  • The Company's key focus areas continued to generate free cash flow in 2019, with significant contribution from the Viewfield and Shaunavon resource plays. These areas are also benefiting from Crescent Point's continued advancement of its decline mitigation programs, which included approximately 200 injector conversions in 2019. In Flat Lake, Crescent Point enhanced risk-adjusted returns within its Torquay program through two-mile horizontal development and capital cost reductions of approximately 15 percent. The Company's North Dakota operations also generated strong results in 2019 driven by successful multi-well pad development and optimization of completion techniques.


RESERVES AND NET ASSET VALUE HIGHLIGHTS

"Our 2019 reserves reflect a transformational year that included significant dispositions and a disciplined capital expenditures program which focused on returns and free cash flow generation versus step-out and exploration drilling to add new booked locations," said Bryksa. "Excluding dispositions and revisions, our proved plus probable reserves additions more than replaced our annual production and resulted in a recycle ratio of approximately two times driven by a strong operating netback of approximately $34 per boe."

  • The Company's Proved plus Probable ("2P") NAV was $16.82 per share at year-end 2019, based on independent engineering escalated pricing, or $10.57 per share based on a flat pricing assumption of US$55 /bbl WTI, both excluding land and seismic.

  • On a PDP basis, NAV per share increased by over 20 percent compared to the prior year based on flat US$55 /bbl WTI, excluding land and seismic, or approximately 12 percent incorporating changes to the Canadian Oil and Gas Evaluation Handbook ("COGEH") adopted in 2019 pertaining to future ARO.

  • Crescent Point achieved 2P reserves of 740.2 million boe ("MMboe") (91 percent oil and liquids), including a decrease of 177.5 MMboe associated with net dispositions. Total 2P reserves benefited from 54.2 MMboe of extensions and improved recovery, which were offset by 55.6 MMboe of technical revisions, primarily comprised of probable reserves revisions. The Company's 2P reserve life index ("RLI") is approximately 14.3 years.

  • Crescent Point's Future Development Capital ("FDC") decreased by over $1.9 billion on a 2P basis, primarily driven by dispositions of its non-core assets which accounted for approximately $1.7 billion of the reduction.

  • The Company's reserves evaluators continue to recognize reserves addition from Crescent Point's consistent waterflood program, marking the seventh consecutive addition with over 65 MMboe of cumulative additions since 2013.


Certain reserves metrics, including Finding and Development ("F&D") costs and recycle ratios, may not be meaningful or comparable year-over-year given significant changes executed in 2019, including non-core asset dispositions. Additional information on Crescent Point's 2019 reserves is provided in its Annual Information Form ("AIF") for the year-ended December 31, 2019 .

Before Tax Net Asset Value Per Share, Fully Diluted, as at December 31, 2019 at Flat Pricing of US$55 /bbl WTI



Reserves Category

NAV

Total Proved plus Probable (2P)

$10.57

Proved and Probable Developed Producing (P+PDP)

$6.15

Total Proved (1P)

$5.25

Proved Developed Producing (PDP)

$3.75

Land and Seismic

$1.33



(1)

NAV per share based on 533.4 million shares fully diluted and a 10% discount rate.

(2)

NAV does not include land and seismic and is less net debt of $2.77 billion as at December 31, 2019.

(3)

NAV per share includes approximately $0.45 per share of additional future ARO as recommended in COGEH's 2019 industry guidelines.


OUTLOOK

Crescent Point's successful execution in 2019 significantly enhanced its financial position and sustainability. The Company plans to build on this success in 2020 and will continue to focus on its key value drivers of disciplined capital allocation, cost efficiencies and balance sheet strength.

Throughout 2020, Crescent Point will continue to remain proactive in identifying new opportunities to realize additional cost efficiencies and further strengthen overall netbacks. This includes the continued adoption of digital technologies, further optimization of its drilling and completion techniques and rationalizing its asset portfolio, where appropriate. The Company also recently optimized its work space within its Calgary head office, reducing its annual office lease commitments starting in 2020.

Crescent Point's budget for 2020 is disciplined, returns-focused and flexible. Assuming the low-end of its capital expenditures guidance, the Company's program is fully funded at approximately US$46 /bbl WTI and is still forecast to generate excess cash flow at current strip prices. Crescent Point will remain disciplined in its capital allocation and plans to continue prioritizing further net debt reduction and accretive share repurchases given the current discounted share price.

The Company remains on track with its 2020 budget, which remains unchanged, with annual average production of 140,000 to 144,000 boe/d and capital expenditures of $1.10 to $1.20 billion .

Summary of Reserves

The Company's reserves were independently evaluated by GLJ Petroleum Consultants Ltd. ("GLJ") and Sproule Associates Limited ("Sproule") as at December 31, 2019 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, 2019 (1) (2) (3) (4)







Tight Oil
(Mbbls)

Light and Medium Oil
(Mbbls)

Heavy Oil
(Mbbls)

Natural Gas Liquids
(Mbbls)

Reserves Category

Gross

Net

Gross

Net

Gross

Net

Gross

Net

Proved Developed Producing

137,803

126,638

71,484

63,986

24,175

20,066

42,785

38,906

Proved Developed Non-Producing

1,318

1,213

1,341

1,246

1,979

1,731

618

570

Proved Undeveloped

95,922

85,679

28,122

26,013

1,645

1,419

19,659

17,566

Total Proved

235,043

213,531

100,947

91,245

27,799

23,216

63,062

57,042

Total Probable

150,052

135,767

58,348

52,860

6,894

5,508

33,315

30,195

Total Proved plus Probable

385,094

349,298

159,295

144,104

34,693

28,724

96,377

87,237







Shale Gas

(MMcf)

Natural Gas

(MMcf)

Total

(Mboe)

Reserves Category

Gross

Net

Gross

Net

Gross

Net

Proved Developed Producing

111,492

101,501

60,040

55,970

304,836

275,841

Proved Developed Non-Producing

1,219

1,062

1,297

1,073

5,675

5,116

Proved Undeveloped

66,614

59,038

10,750

9,743

158,242

142,141

Total Proved

179,325

161,601

72,086

66,787

468,753

423,098

Total Probable

103,163

93,005

33,640

31,003

271,409

244,998

Total Proved plus Probable

282,488

254,606

105,726

97,790

740,161

668,096



(1)

Based on Sproule's December 31, 2019, 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, 2019 (1) (2)








Before Tax Net Present Value ($ millions)




Discount Rate

Price Deck

Reserves Category

Gross Reserves
(Mboe)

0%

5%

10%

15%

Sproule Forecast

Proved Developed Producing

304,836

9,383

7,432

6,090

5,179

Proved and Probable Developed Producing

413,219

14,353

10,078

7,782

6,395

Total Proved

468,753

13,036

9,785

7,657

6,242

Total Proved plus Probable

740,161

24,273

16,082

11,787

9,223

US$55.00/bbl WTI Flat

Proved Developed Producing

297,180

6,862

5,603

4,710

4,079

Proved and Probable Developed Producing

403,451

10,061

7,484

5,989

5,034

Total Proved

428,126

8,765

6,838

5,512

4,591

Total Proved plus Probable

723,299

15,946

11,095

8,347

6,628



(1)

Sproule Forecast based on Sproule's December 31, 2019, escalated price forecast

(2)

Numbers may not add due to rounding


RESERVES RECONCILIATION
Gross Reserves   (1) (2) (3) (4)






Tight Oil

(Mbbls)

Light and Medium Oil

(Mbbls)

Heavy Oil

(Mbbls)

Factors

Proved

Probable

Proved
plus
Probable

Proved

Probable

Proved
plus
Probable

Proved

Probable

Proved
plus
Probable

December 31, 2018

325,347

209,486

534,833

127,424

71,959

199,383

29,015

7,903

36,918

Extensions and Improved Recovery

23,679

15,023

38,702

3,743

2,045

5,788

133

10

143

Technical Revisions

(18,852)

(21,977)

(40,828)

(648)

(5,637)

(6,285)

670

(951)

(281)

Acquisitions

379

...