Crescent Point Energy Corp. (NYSE:CPG) Q4 2023 Earnings Call Transcript
Crescent Point Energy Corp. (NYSE:CPG) Q4 2023 Earnings Call Transcript February 29, 2024
Crescent Point Energy Corp. beats earnings expectations. Reported EPS is $1.68, expectations were $0.31. CPG isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, ladies and gentlemen. My name is Lester, and I will be your operator for Crescent Point Energy's Fourth Quarter 2023 Conference Call. This conference call is being recorded today and will be webcast along with a slide deck, which can be found on Crescent Point's website home page. The webcast may not be recorded or rebroadcast without the expressed consent of Crescent Point Energy. All amounts discussed today are in Canadian dollars with the exception of West Texas Intermediate or WTI, pricing, which is quoted in U.S. dollars. The complete financial statements and management's discussion and analysis for the period ending December 31, 2023 were announced this morning and are available on Crescent Point, SEDAR+, and EDGAR websites.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session for members of the investment community. [Operator Instructions] During the call, management may make projections or other forward-looking statements regarding future events or future financial performance. Actual performance, events, or results may differ materially. Additional information or factors that could affect Crescent Point's operation or financial results are included in Crescent Point's most recent annual information form, which may be accessed through Crescent Point, SEDAR+ or EDGAR websites, or by contacting Crescent Point Energy. Management also calls your attention to the forward-looking information and non-GAAP measures sections of the press release issued early today.
I will now turn the call over to Craig Bryksa, President and Chief Executive Officer of Crescent Point. Please go ahead, Mr. Bryksa.
Craig Bryksa: Thank you, operator. I'd like to welcome everyone to our fourth quarter 2023 conference call. With me today are Ken Lamont, our Chief Financial Officer; and Justin Foraie, our Vice President of Operations and Marketing. On today's call, I will first touch on a few of our key accomplishments in 2023 and will then provide some insight into our reserves and our 5-year outlook. Looking back at our Q4 results and our success through 2023, our most remarkable achievement has been how significantly we have transformed our portfolio and how it has materially strengthened Crescent Point's future outlook. These strategic steps were taken with purpose to secure premium drilling inventory depth in world-class basins. In doing so, we focused on acquiring oil and liquids weighted assets that provide synergies to our existing business and also enhance our long term excess cash flow generation and return to capital profile for our shareholders.
Through our efforts, we have built a portfolio that now has over 20 years of premium drilling inventory. We also control the largest land position in both the condensate rich Kaybob Duvernay play and the volatile oil window in the Alberta Montney. The portfolio we have built provides us with significant running room and growth potential in these plays coupled with our high netback, low decline assets in Saskatchewan. In Kaybob, we continue to be impressed by the strong oil production and the consistent repeatable success we've achieved since entering the play in 2021. Similar to Kaybob, our well productivity in the Alberta Montney has been remarkable. We have achieved IP30 results that continually rank in the top 10 oil and liquids wells in the Western Canadian Cemetery Basin.
In fact, 25 of the top 30 oil wells in the Alberta Montney over the past year are now owned by Crescent Point. We're incredibly excited about the addition of this new asset to our portfolio and eager to report back as we further develop this world class resource. With our successful portfolio transformation, our focus now turns to operational execution, enhancing our balance sheet strength and increasing our return of capital to our shareholders. In 2023, we generated $980 million of excess cash flow, $600 million of which was returned directly to our shareholders through dividends and share repurchases. We remain committed to returning 60% of our excess cash flow to our shareholders and are pleased to raise our base dividend once again to $0.115 per quarter or $0.46 per share on an annualized basis.
Even with this dividend increase, we maintain a very conservative budget that is fully funded at low commodity price of $55 per barrel WTI, assuming our current cost structure and capital expenditures guidance. The strength of our portfolio and our operational execution continue to generate significant value for our shareholders as demonstrated in our 2023 reserve metrics. Last year, we replaced over 900% of our 2023 production including strategic A&D on a 2P reserve basis. We replaced 150% of our 20 20 3 production organically, driven largely by increased reserves additions in our Kaybob Duvernay asset. By entering into the Alberta Montney, we added significant reserves in 2023, increasing our total corporate reserve life index to approximately 16 years.
When factoring in our organic additions and strategic A&D, I'm pleased to report that our 2P finding, development and acquisition costs in 2023 generated a very strong recycle ratio of 2.5x, including change in future development capital. It's also worth highlighting that approximately 60% of our premium locations in the Kaybob Duvernay and over 70% of our inventory in the Alberta Montney remain unbooked at year-end 2023, allowing for future reserve additions. Looking ahead, we're forecasting production of 198,000 to 206,000 BOE per day with development capital expenditures of $1.4 billion to $1.5 billion in 2024. Operationally, we will continue to focus on enhancing efficiencies and returns including drilling longer laterals in the Kaybob Duvernay and optimizing well design and inner well spacing in the Alberta Montney.
We have begun drilling on our recently acquired lands utilizing our new well design and look forward to sharing our results in the second half of 2024. In Saskatchewan, we will continue to advance our decline mitigation programs and our open hole multilateral development. We expect to generate significant excess cash flow of approximately $830 million under our 2024 budget, assuming a full year average WTI pricing of approximately $75 per barrel and AECO of $2.30 per Mcf. We continue to earmark 60% of our excess cash flow for shareholders with approximately $500 million expected to be delivered this year through a combination of dividends and share repurchases. Our significant excess cash flow generation and return of capital in 2024 is further complemented by our 5-year plan, which is set to deliver excess cash flow per share growth on a compounded annual basis of approximately 10% at $70 per barrel of WTI.
In aggregate, we expect to generate cumulative excess cash flow of $4.7 billion under our 5-year plan. We believe our plan provides shareholders with a compelling combination of high netback production, strong excess cash flow generation, a significant return of capital in addition to organic per share growth. In closing, I'd like to reiterate just how excited we are about our transformed portfolio. We have significantly enhanced our 5-year outlook and we're excited to further bolster our returns for each of our assets. I'd like to thank our shareholders for all their support and continued engagement as we transformed our business. We look forward to providing more details on our operational results and long-term development plan at our upcoming Investor Day on March 20.
I'd also like to thank our staff who continue to demonstrate our commitment to operational excellence with yet another safest year on record. We'll now open the call to questions from the investment community, followed by questions from the webcast. Operator, please open the line.
See also 13 Biggest 401(k) Mistakes to Avoid and 16 Best Mountain Towns for Retirement.
To continue reading the Q&A session, please click here.
