Quarterly / Earnings Reports | First Quarter (1Q) Update

Crescent Point Details Q1 2019 Results

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   |    Thursday,May 09,2019

Crescent Point Energy Corp. reported its operating and financial results for the quarter ended March 31, 2019.

Highlights:

• Increased cash flow in 2019 based on return-focused capital allocation, lower costs, higher commodity prices and improved oil differentials. Expect to generate approximately $600 million of excess cash flow in 2019 based on guidance at current strip prices.
   
• Annual production and capital expenditures guidance remains unchanged, demonstrating continued capital discipline.
   
• Continued focus on net debt reduction and the execution of share repurchase program, with over $105 million of net debt reduction in the quarter and over 5.6 million shares repurchased year-to-date.
   
• Enhancing sustainability in key focus areas by reducing costs and consistently developing waterflood programs.
   
• Added John Dielwart and nominated James Craddock and Jennifer Koury as new independent directors of the board.

"We have had a great start to 2019 and now expect to generate approximately $600 million of excess cash flow this year," said Craig Bryksa, President and CEO of Crescent Point. "By being disciplined in our capital allocation and focused on cost reductions, we have enhanced our financial flexibility. We plan to use the excess cash we generate this year to reduce net debt and repurchase additional shares under our normal course issuer bid. We are also pleased with our recent success in attracting new directors and board nominees with strong and diversified skill sets through our board's deliberate and thoughtful renewal process."

Financial Highlights

• Adjusted funds flow totaled $514.0 million during first quarter 2019, or $0.93 per share diluted, based on a strong operating netback of $33.95 per boe. The Company's operating netback within its key focus areas of Viewfield, Shaunavon and Flat Lake was approximately eight percent higher than the corporate average, highlighting the lower costs and premium oil pricing associated with these plays.
   
• For the quarter ended March 31, 2019, Crescent Point's capital expenditures on drilling and development, facilities and seismic totaled $380.2 million, down approximately 50 percent compared to $722.0 million in first quarter 2018. The Company's first quarter 2019 program included $359.6 million spent on drilling and development to drill 188 (164.7 net) wells. The Company expects reduced spending in second quarter 2019 compared to first quarter, driven by normal seasonality related to spring break-up. Based on the mid-point of its 2019 guidance, Crescent Point expects that its total capital expenditures in the first half of the year will account for approximately 50 percent of its annual budget, highlighting new management's shift toward a more consistent capital and drilling program.
   
• Net debt as at March 31, 2019 equated to approximately $3.9 billion, or 2.1 times trailing adjusted funds flow. The Company reduced its net debt during first quarter by $105.8 million, net of share repurchases and dividends. Crescent Point expects to continue improving its financial flexibility in 2019 based on the significant excess cash flow to be generated within its budget at current strip prices and proceeds from potential asset dispositions. Cash and unutilized credit capacity as at March 31, 2019 was approximately $1.72 billion, with no material near-term senior note debt maturities.
   
• Crescent Point continued to actively hedge oil production during the recent improvement in commodity prices, including new hedges extending to late 2019 and 2020. Management remains disciplined in its approach to layering on additional hedges, in the context of commodity prices, to further protect its funds flow and excess cash flow generation. As at May 3, 2019, Crescent Point had, on average, approximately 45 percent of its oil and liquids production, net of royalty interest, hedged through the remainder of 2019, approximately 35 percent in the first half of 2020 and 23 percent in the second half of 2020.
   
• Subsequent to first quarter, the Company declared a quarterly cash dividend of $0.01 per share payable on July 2, 2019.
   
• On January 1, 2019, Crescent Point, along with other reporting entities governed by International Financial Reporting Standards ("IFRS"), adopted IFRS 16 Leases. This new accounting standard requires companies to recognize most operating leases as liabilities on the balance sheet. The Company recorded a lease liability of approximately $224 million upon adoption of the standard. Crescent Point's IFRS 16 Leases transition methodology does not require restatement of prior periods nor does it impact the Company's debt covenants or credit available under its bank credit facilities.

Differentials / Market Access

• Crescent Point's first quarter oil differential improved by over 60 percent compared to fourth quarter 2018, to $8.36/bbl. Based on realized prices to date and the current forward curve, the Company expects its second quarter 2019 realized oil price to further increase by approximately 15 percent relative to first quarter 2019.
   
• During first quarter 2019, the Company resolved a National Energy Board complaint and legal action through the negotiation and execution of a settlement agreement, as previously announced. The agreement included a cash settlement in favour of Crescent Point, which was paid during first quarter. The agreement also includes a revised pipeline tariff, effective second quarter 2019, that is expected to increase the Company's netback for oil production transported on the Saskatchewan Pipeline System.

Ops Highlights

• Average production in first quarter 2019 was 175,955 boe/d, comprised of approximately 91 percent oil and liquids.
   
• Crescent Point's key focus areas continue to provide low-risk, high-return drilling opportunities, with each area expected to generate cash flows in excess of capital expenditures in 2019. Despite a stronger commodity price environment driving recent modest cost pressures on certain drilling and completion costs, the Company's full-year capital expenditures budget remains unchanged due to Crescent Point's successful and ongoing cost saving, optimization and supply chain initiatives. Management's increased focus on improving costs and efficiencies is further highlighted in the Viewfield Bakken, an area the Company has been developing for over 12 years. Crescent Point has reduced completion costs in this play during 2019 by approximately eight percent compared to the trailing three-year average.
   
• Due to existing market access in the Uinta Basin and risk-adjusted returns in the earlier-stage East Shale Duvernay play, Crescent Point continues to remain disciplined in allocating capital to these resource plays. In aggregate, these two areas account for approximately 15 percent of the Company's 2019 capital expenditures budget, primarily weighted to the Uinta Basin.
   
• As part of its focus on decline mitigation, Crescent Point converted approximately 75 producing wells to water injection wells in first quarter. The Company plans to convert a total of approximately 145 wells in 2019 across its key focus areas, up from 79 in 2018. In addition, subsequent to first quarter, Crescent Point fully unitized its fourth unit in the Viewfield Bakken resource play for waterflood development, with additional opportunities identified for future waterflood expansion. By consistently advancing its decline mitigation programs, the Company expects to add low cost reserves and enhance free cash flow generation while also reducing drilling requirements to sustain production.

Outlook

Crescent Point continues to focus on its transition plan's key value drivers, which include disciplined capital allocation, cost reductions and balance sheet improvement.

As the Company advances each of these initiatives, it expects to further improve overall capital efficiencies, corporate returns and debt-adjusted per share metrics. Crescent Point's free cash flow generation has also improved, with approximately $600 million of excess cash flow expected to be generated in 2019, based on its guidance at current strip prices.

The Company remains disciplined in allocating capital and excess cash flow, prioritizing net debt reduction, accretive share repurchases and generating returns versus production growth. Crescent Point is on track with its 2019 budget, which remains unchanged, with expected annual average production of 170,000 to 174,000 boe/d and planned capital expenditures of $1.20 to $1.30 billion.

The Company initiated a process for asset dispositions during first quarter, which continues to progress. Crescent Point does not intend to disclose developments with respect to these processes unless the Board of Directors (the "Board") has approved a specific transaction, or otherwise determines that disclosure is necessary or appropriate. The Company will remain disciplined and flexible as it seeks to focus its asset base and create value for its shareholders.