Quarterly / Earnings Reports | Second Quarter (2Q) Update | Financial Results | Capital Markets | Drilling Activity | 2020 Guidance

Crescent Point Energy Second Quarter 2020 Results

Share Print Bookmark    |    Thursday,July 30,2020

Crescent Point Energy Corp. reported its Q2 2020 results.

Highlights:

• Capital expenditures trending to lower end of guidance due to expected well cost savings of over 10 percent in 2020.
• Enhanced financial flexibility with continued net debt reduction now totaling over $450 million year-to-date.
• Released second annual sustainability report and established an emissions intensity reduction target of 30 percent by 2025.
• Appointed Myron Stadnyk to the Board who brings significant business and industry experience.

Craig Bryksa, President and CEO of Crescent Point, said: "Our priorities during the current commodity price cycle remain on maintaining a strong financial position and enhancing our sustainability. Our continued net debt reduction during second quarter, despite significantly weak commodity prices, highlights our deep netback asset base, risk management, discipline and a relentless focus on costs. We expect to generate excess cash flow during the second half of 2020, based on our guidance at current strip prices, further strengthening our financial position."

Financial Highlights

• Adjusted funds flow totaled $109.0 million during second quarter 2020, or $0.21 per share diluted.
• For the quarter ended June 30, 2020, Crescent Point's development capital expenditures totaled $72.0 million. This spending reflects normal seasonality related to spring break-up and management's proactive decision to curtail spending given the commodity price environment. Capital expenditures incurred during second quarter were made primarily to complete projects initiated in the prior quarter. The majority of Crescent Point's remaining 2020 program, which is primarily weighted to fourth quarter, remains flexible and discretionary.
• Net debt as at June 30, 2020 equated to approximately $2.3 billion and reflects over $450 million of net debt reduction in the first half of 2020. Cash and unutilized credit capacity was over $2.4 billion as at June 30, 2020. The Company has no material near-term senior note debt maturities and its credit facilities do not mature until October 2023.
• As part of its risk management program to protect against commodity price volatility, the Company has currently hedged, on average, over 65 percent of its oil and liquids production, net of royalty interest, through the remainder of 2020. Crescent Point recently optimized and restructured some its portfolio of second half 2020 hedges to provide additional downside protection. The Company also has hedges extending into the following year. Crescent Point will remain disciplined in its approach to layering on additional hedges, in the context of commodity prices, to further protect its funds flow.
• Subsequent to the quarter, the Company declared a quarterly cash dividend of $0.0025 per share payable on October 1, 2020.

Ops Highlights

• The Company's average production in second quarter 2020 was 120,842 boe/d, which includes the impact from production shut-ins announced during the quarter and lower overall activity. This production was comprised of over 90 percent oil and liquids.
• During the quarter, the Company voluntarily shut-in approximately 25,000 boe/d of higher-cost production, as previously announced. These shut-in volumes, which are primarily located outside the Company's key focus areas, also include curtailed production to allow for a more efficient and cost effective process when restoring production. Crescent Point continues to seek additional stability in commodity prices and overall market conditions before finalizing its reactivation plans to restore certain shut-in volumes.
• As a result of its ongoing successful cost initiatives, Crescent Point now expects its average per well capital costs to improve by over 10 percent by year-end 2020, compared to its original 2020 budget. This improvement includes internal efficiencies through reduced drilling days, improved frac optimization and increased pad drilling efficiencies.
• The Company continues to enhance its cost structure throughout the organization, including through the continued adoption of digital technologies. As previously announced, these initiatives have supported an approximately seven percent sustainable improvement in its operating expenses in 2020, or over 15 percent since the beginning of 2019.
• During second quarter, Crescent Point released its annual sustainability report highlighting its emissions intensity reduction target of 30 percent by 2025. This target is expected to be achieved primarily through an over 50 percent reduction in methane emissions. The report also highlights the Company's continued commitment to delivering improved safety, a positive social impact on its stakeholders and strong governance, including Board diversity and environmental, social & governance ("ESG") oversight.

Outlook

The proactive measures the Company has taken year-to-date continue to demonstrate the disciplined and flexible approach management is taking to preserve a strong financial position and enhance long-term sustainability. As a result, Crescent Point is now in a position to meet or exceed its current annual average production guidance of 110,000 to 114,000 boe/d with development capital expenditures toward the lower end of its guidance range of $650 to $700 million in 2020.

As a result of the Company's ongoing improvements to its cost structure, Crescent Point expects to generate additional excess cash flow during the balance of the year, based on guidance at current strip prices, while also building further downside protection through its hedging activities. The Company's allocation of excess cash flow will continue to prioritize further net debt reduction.

Crescent Point retains flexibility in its overall program and will adjust its capital expenditures if necessary. The Company is also actively monitoring commodity prices and market conditions, in order to determine when to restore previously announced shut-in volumes, and will communicate such plans, including any upward revision to its annual production guidance, when warranted.

The Company has initiated its formal budgeting process for 2021 with a continued focus on returns, balance sheet strength and sustainability. Crescent Point expects to significantly decrease its capital requirements to sustain production due to the Company's successful cost initiatives in 2020, the expected moderation in its production decline rate and through lower overall activity. As a result, Crescent Point expects to improve its ability to generate excess cash flow in a low price environment.

Crescent Point remains in a strong financial position with significant liquidity of over $2.4 billion and no material near-term debt maturities. Management continues to prioritize additional balance sheet strength with its excess cash flow generation, given the volatility in commodity prices.

Board Update

Crescent Point is pleased to appoint and welcome Myron Stadnyk to the Board, effective July 30, 2020. The Board has gone through significant changes over the past few years as part of its commitment to full Board renewal, enhanced diversity and strong governance. With Mr. Stadnyk's addition, the Board is now comprised of 10 members, including nine independent directors.

"We are pleased to have Myron join Crescent Point's board," said Barbara Munroe, Chair of the Board. "Myron brings over 35 years of business and industry experience, strong leadership skills and deep governance expertise that will provide a valuable contribution to all stakeholders. On behalf of the board, we look forward to working with him."

Mr. Stadnyk is the former President & CEO of ARC Resources Ltd. ("ARC"), who also served as its COO prior to that role and worked with a major oil and gas company in both domestic and international operations prior to joining ARC. During his tenure at ARC over the past 20 years, he contributed to building a safe, profitable and sustainable business. Mr. Stadnyk is currently on the boards of PraireSky Royalty Ltd. and Shock Trauma Air Rescue Society ("STARS") and was previously a Governor of the Canadian Association of Petroleum Producers ("CAPP"). Mr. Stadnyk holds a Bachelor of Science in Mechanical Engineering from the University of Saskatchewan, is a graduate of the Harvard Business School Advanced Management Program and is a member of Association of Professional Engineers and Geoscientists of Alberta ("APEGA").

2020 Guidance

The Company's guidance for 2020 is as follows: