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Crescent Point Energy First Quarter 2021 Results

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   |    Wednesday,May 12,2021

Crescent Point Energy Corp. reported its Q1 2021 results.

Highlights:

• Reduced net debt by over $135 million in first quarter, driven by continued excess cash flow generation.
• Successfully closed accretive acquisition of Kaybob Duvernay assets, further enhancing free cash flow profile.
• Expect to generate significant excess cash flow of approximately $525 to $650 million in 2021 at US$55/bbl to US$65/bbl WTI.
• Increased target for emissions intensity reduction to 50 percent by 2025, demonstrating strong environmental stewardship.

Craig Bryksa, President and CEO of Crescent Point, said: "Our first quarter results continued to demonstrate our strong operational execution. Against the backdrop of a rising oil price environment, we have remained disciplined and focused on enhancing balance sheet strength and the sustainability of our business. The Kaybob Duvernay assets strengthen our expected free cash flow outlook, accelerate our deleveraging profile and improve our environmental performance, positioning our company to create significant value for our shareholders in 2021 and beyond."

Financial Highlights:

• Adjusted funds flow totaled $262.7 million during first quarter 2021, or $0.49 per share diluted, driven by a strong operating netback of $35.06 per boe.
• For the quarter ended March 31, 2021, the Company's development capital expenditures, which included drilling and development, facilities and seismic costs, totaled $119.2 million.
• Net debt as at March 31, 2021 equated to approximately $2.0 billion, reflecting $135.8 million of net debt reduction in the quarter or over $750 million since the beginning of 2020. Subsequent to the quarter, on April 1, 2021, Crescent Point closed its acquisition of Kaybob Duvernay assets, which included a net cash payment of approximately $670 million funded through the Company's credit facilities. Crescent Point retains significant liquidity with no material near-term senior note maturities. The Company's credit facilities are not due for renewal until October 2023.
• As part of its risk management program to protect against commodity price volatility, the Company maintains an active hedging portfolio. Crescent Point currently has over 40 percent of its oil and liquids production, net of royalty interest, hedged through the remainder of 2021. These hedges primarily consist of swaps with an average price of approximately CDN$65/bbl. The Company plans to remain disciplined in its approach to layering on additional protection in the context of commodity prices.
• Subsequent to first quarter, the Company declared a quarterly cash dividend of $0.0025 per share payable on July 2, 2021.

Ops Highlights:

• Crescent Point's average production in first quarter 2021 was 119,384 boe/d, comprised of over 90 percent oil and liquids.
• The Company plans to continue advancing its southeast and southwest Saskatchewan assets through a 2021 development program focused on a combination of low-risk, high-return infill drilling and waterflood development. Crescent Point also expects to continue advancing its North Dakota resource play by focusing on maximizing efficiencies through multi-well pad development. These assets are expected to continue to generate significant excess cash flow in the current commodity price environment.
• During second quarter 2020, the Company established an emissions intensity reduction target of 30 percent by 2025, relative to its 2017 baseline. Crescent Point is currently on track to exceed this target as a result of its proactive development planning, enhanced gas conservation efforts and success reducing flaring. Consequently, the Company has substantially increased its target for emissions intensity reduction to 50 percent by 2025. This target is expected to be achieved through a number of internal initiatives, including significantly reducing the Company's methane emissions. Crescent Point expects to release its third annual sustainability report in 2021, which will highlight the Company's continued commitment to strong environmental, social and governance ("ESG") practices and will include additional environmental targets.
• As part of its continued focus on decline mitigation, the Company successfully converted approximately 30 producing wells to water injection in first quarter 2021. Crescent Point expects to convert a total of over 135 wells in 2021 as part of its waterflood program. In addition, the Company successfully advanced its plans to pilot other enhanced oil recovery techniques during the quarter. These activities are expected to continue to moderate Crescent Point's decline rate, enhancing long-term free cash flow generation and sustainability. The Company's base decline rate in 2021 is expected to be approximately 25 percent.

Kaybob Duvernay Highlights:

• Subsequent to first quarter 2021, Crescent Point successfully closed the previously announced accretive acquisition of Kaybob Duvernay assets in Alberta purchased from Shell Canada Energy ("Shell"). This strategic transaction is expected to enhance the Company's free cash flow profile, inventory depth and includes key infrastructure that is expected to lower future capital requirements.
• During first quarter 2021, Shell completed and brought onstream a number of previously drilled wells. Crescent Point now has over 30 days of production data for 10 of these wells, which flowed at an average 30-day initial production ("IP30") rate of approximately 800 boe/d per well (79% condensate, 6% NGL and 15% shale gas).
• The Company plans to drill approximately 10 wells in Kaybob Duvernay through the remainder of 2021. Crescent Point will seek to leverage its significant expertise in horizontal multi-well pad development and field technology to optimize efficiencies.
• The Company plans to maximize free cash flow generation from the Kaybob Duvernay assets by targeting a sustainable decline rate with an annual production base of approximately 30,000 boe/d. Crescent Point expects the assets to generate approximately $185 to $255 million of net operating income in excess of capital expenditures at US$55/bbl to US$65/bbl WTI. This assumes approximately $180 million of annual capital expenditures based on the current cost structure of the assets.

Outlook

The Company delivered strong first quarter results and is currently on track to meet or exceed its current annual average production guidance of 132,000 to 136,000 boe/d, while keeping development capital expenditures within the previously announced guidance range of $575 to $625 million in 2021.

The addition of the Kaybob Duvernay assets to Crescent Point's portfolio is expected to improve the Company's debt-adjusted per share metrics, cash flow netback and further accelerates its net debt reduction.

Through the remainder of 2021, the Company will target further improvements to the business through the continued rollout of its operational technology ("OT") platform, ongoing drilling and completions optimization, decline mitigation programs and by identifying additional opportunities to enhance efficiencies. Crescent Point will also continue to evaluate opportunities to further optimize its asset portfolio through strategic acquisitions and dispositions in the context of its key priorities of balance sheet strength and sustainability.

The Company is expected to generate significant excess cash flow of approximately $525 to $650 million in 2021 at US$55/bbl to US$65/bbl WTI for the remainder of the year, providing an increased opportunity to further enhance shareholder value. Crescent Point plans to initially prioritize additional net debt reduction in its excess cash flow allocation. The Company's net debt to adjusted funds flow is expected to improve to 1.9x to 1.5x by year-end 2021 at US$55/bbl to US$65/bbl WTI for the remainder of the year. Crescent Point expects to generate significant excess cash flow and recognize further improvement in its leverage profile in 2022, assuming a similar commodity price range.

The Company will also evaluate the return of additional capital to shareholders in the context of its capital allocation framework, leverage targets and adjusted funds flow generation.

2021 Guidance

The Company's guidance for 2021 is as follows:

The Company's unaudited financial statements and management's discussion and analysis for the quarter ended March 31, 2021, will be available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at a href="https://c212.net/c/link/?t=0&l=en&o=3160330-1&h=159897710&u=http://www.sedar.com/&a=www.sedar.com" rel="nofollow" target="_blank">www.sedar.com, on EDGAR at a href="https://c212.net/c/link/?t=0&l=en&o=3160330-1&h=2941459122&u=http://www.sec.gov/edgar.shtml&a=www.sec" rel="nofollow" target="_blank">www.sec.gov/edgar.shtml and on Crescent Point's website at a href="https://c212.net/c/link/?t=0&l=en&o=3160330-1&h=2983803840&u=http://www.crescentpointenergy.com/&a=www.crescentpointenergy.com" rel="nofollow" target="_blank">www.crescentpointenergy.com.