Quarterly / Earnings Reports | Third Quarter (3Q) Update

Crescent Point Reports Q3 2019 Results

Share Print Bookmark    |    Thursday,October 31,2019

Crescent Point Energy Corp. reported its Q3 2019 results.

Highlights:

• Executed approximately $950 million of dispositions year-to-date 2019 and continue to work toward finalizing the monetization of certain gas infrastructure assets in Saskatchewan.
  
  
• Estimated net debt reduction of over $1.2 billion in 2019, driven by excess cash flow and asset dispositions.
  
  
• Repurchased approximately 13.8 million shares year-to-date for total consideration of approximately $71 million.
  
  
• Continued to enhance cost structure by reducing operating expenses by approximately seven percent, excluding any benefit expected to be realized from recently announced asset dispositions.
  
  
• Extended maturity date of covenant-based credit facilities to October 2023 with combined facilities totaling $3.0 billion and unutilized credit capacity expected to amount to approximately $2.0 billion at year-end 2019, excluding any further dispositions.
  
  
• Appointed Barbara Munroe as Chair following Bob Heinemann's retirement from the Board.

"Our third quarter results continue to demonstrate our focus on balance sheet strength, cost efficiencies and capital discipline," said Craig Bryksa, President and CEO of Crescent Point. "We also remain committed to returning capital to shareholders through accretive share repurchases while maintaining a strong financial position. In addition, we continue to seek opportunities to further enhance our sustainability, including through cost reductions, decline mitigation and portfolio rationalization opportunities."

Financials

• Adjusted funds flow totaled $389.2 million or $0.71 per share diluted during the third quarter, based on a strong operating netback of $30.93 per boe.
  
  
• For the quarter ended September 30, 2019, Crescent Point's capital expenditures on drilling and development, facilities and seismic totaled $362.3 million, including $337.1 million spent on drilling and development to drill 133 (126.6 net) wells.
  
  
• Crescent Point's net debt at the end of third quarter totaled approximately $3.4 billion, not accounting for the previously announced disposition of its Uinta Basin asset that closed subsequent to the quarter. Based on guidance at current strip prices and proceeds from this disposition, the Company forecasts its net debt to be approximately $2.8 billion at year-end 2019.
  
  
• Subsequent to the quarter, Crescent Point elected to reduce its covenant-based credit facilities from $3.6 billion to $3.0 billion and extend the maturity dates of these facilities from June 2021 to October 2023. The Company's covenants under its bank credit facilities and senior guaranteed notes both remain unchanged. Crescent Point retains significant liquidity with no material near-term debt maturities. The Company's unutilized credit capacity is expected to total approximately $2.0 billion at year-end 2019 based on guidance at current strip prices and continued execution of its share repurchase program, excluding any additional potential dispositions.
  
  
• As at October 25, 2019, Crescent Point had, on average, approximately 49 percent of its oil and liquids production, net of royalties, hedged for fourth quarter 2019 at a weighted average market value price of approximately CDN$79.00/bbl. The Company also had, on average, over 35 percent of its oil and liquids production hedged for 2020 at approximately CDN$77.00/bbl.
  
  
• Crescent Point repurchased approximately 2.4 million shares during third quarter for total consideration of $14.3 million. Since initiating its share repurchase program in first quarter 2019 up to and including October 30, 2019, the Company has repurchased, for cancellation, approximately 13.8 million shares for total consideration of approximately $71 million. Crescent Point's 2019 budget continues to assume a total of approximately $125 million of share repurchases, subject to the outlook for commodity prices.
  
  
• Subsequent to the quarter, the Company declared a quarterly cash dividend of $0.01 per share payable to shareholders on January 2, 2020.
  
  
• Crescent Point reported an after-tax net loss of $301.7 million for third quarter 2019. This loss was primarily driven by after-tax charges totaling approximately $322.3 million related to the Company's recently announced asset dispositions. Third quarter results also include approximately $7.0 million of severance costs, which related primarily to Crescent Point's recent Uinta Basin asset disposition.

Ops Highlights

• Crescent Point's average production for third quarter was 155,708 boe/d, comprised of approximately 90 percent oil and liquids, net of previously announced dispositions that closed during the quarter. Fourth quarter production will reflect the disposition of the Company's Uinta Basin asset. The impact of this sale is expected to be partially offset by growth in the Company's North Dakota resource play following the completion of several multi-well pads.
  
  
• By continuing its focus on realizing operating efficiencies, Crescent Point achieved further cost savings during third quarter. As a result of internal workflow optimization and field automation over the past year, the Company's operating expenses in 2019 are approximately seven percent below its original budget, compared to approximately five percent previously. This improvement excludes any benefit expected to be realized from its recently announced asset dispositions. The Company will continue to seek opportunities to optimize its cost structure, including by further focusing its asset base and increasing field automation.
  
  
• Crescent Point has converted approximately 150 producing wells to water injection wells year-to-date and remains on track to convert a total of approximately 175 to 200 wells in 2019 as part of its decline mitigation program.

Board Succession

Bob Heinemann has retired from the Company's Board of Directors (the "Board"), due to personal reasons. Barbara Munroe, a current independent director since 2016, has been appointed by the Board as its next Chair, effective October 31, 2019.

"On behalf of Crescent Point and its Board, I express our appreciation to Bob for his guidance, commitment and leadership during his tenure on the Board and most recently as our Chair," said Ms. Munroe. "I am excited to be moving into this new role and look forward to continued execution of the Company's strategy to drive shareholder value."

"It has been an honour and a privilege to serve as a director on Crescent Point's Board over the past six years and most recently as its Chair," said Mr. Heinemann. "The team has made tremendous improvements to the business over the past year and I am confident in the Company's strategy, leadership team and its people. Barbara's appointment as Chair, effective immediately, will provide for a seamless transition."

Crescent Point's Board will now be comprised of nine members, including eight independent directors. The Company plans to continue to enhance the diversity, skills and experiences of its Board over time through its well-established renewal process.

Outlook

The Company's third quarter and year-to-date results continue to highlight management's focus on its key value drivers, including balance sheet strength, disciplined capital allocation and an improved cost structure. This has resulted in significant excess cash flow generation, increased efficiencies and expected net debt reduction of over $1.2 billion by year-end 2019, based on guidance at current strip prices.

Crescent Point's recent asset dispositions further enhance the Company's cash flow netback, moderate its decline rate, reduce future decommissioning liabilities and lower the capital required to sustain its annual production as a percentage of cash flow. Crescent Point continues to work toward finalizing an agreement to monetize certain gas infrastructure assets in Saskatchewan during fourth quarter 2019, which is expected to further strengthen its financial position. The Company will also continue to seek and evaluate the potential for additional asset disposition opportunities, where appropriate, to further optimize its asset portfolio.

Crescent Point's updated annual guidance range reflects continued operational execution and capital discipline with annual average production of 161,000 to 163,000 boe/d and capital expenditures of $1.225 to $1.275 billion. This is a narrowing of the guidance range, which was previously targeting production of 160,000 to 164,000 boe/d and capital expenditures of $1.2 to $1.3 billion.

Crescent Point expects to announce its 2020 guidance and capital expenditures budget early in the new year. The Company's plans will continue to prioritize returns, balance sheet strength and free cash flow generation. Management will remain disciplined in allocating excess cash flow, including the continued return of capital to shareholders through an accretive share repurchase program.