Quarterly / Earnings Reports | Second Quarter (2Q) Update

Crescent Point Talks Q2 2019 Results, Outlook

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Crescent Point Energy Corp. reported its Q2 2019 results - here are the highlights:

Key Highlights:

• Reduced net debt by over $450 million year-to-date 2019, primarily driven by excess cash flow and disciplined capital spending.
  
  
• Achieved cost improvements resulting in first half 2019 operating expenses approximately five percent below budget.
  
  
• Remain on track with annual guidance, which has been adjusted to reflect $60 million of non-core dispositions during the quarter.
  
  
• Continue to progress additional asset sales with select parties.
  
  
• Increased stakeholder communication with the release of Crescent Point's inaugural sustainability report, detailing its environmental, social and governance (ESG) practices, which can be found on the Company's website.

"Our second quarter results continue to demonstrate our focus on disciplined capital allocation, realizing cost efficiencies and strengthening our balance sheet," said Craig Bryksa, President and CEO of Crescent Point. "We expect to generate significant excess cash flow in 2019, allowing for net debt reduction and accretive share repurchases. We continue to target additional asset dispositions as part of our focused asset strategy, providing increased efficiencies and financial flexibility."

Operational Highlights

• Second quarter 2019 average production of 172,476 boe/d was comprised of approximately 90 percent oil and liquids and net of approximately 2,400 boe/d of non-core asset dispositions completed during the quarter. This compares to second quarter 2018 average production of 181,818 boe/d, reflecting asset dispositions and disciplined capital spending. Adjusted funds flow per share during this period increased slightly despite lower production and weaker oil prices.
  
  
• The Company's second half 2019 capital allocation within its development budget continues to be weighted to its three key focus areas in Saskatchewan. This program includes a combination of low-risk infill drilling, waterflood development and continued advancement of the successful two-mile horizontal program in the Flat Lake resource play. In the second half, Crescent Point's U.S. operations will continue to focus on cost-efficient multi-well pad development, with completion activity expected during late third quarter.
  
  
• The Company's increased focus on cost reduction initiatives has resulted in realized efficiencies within Crescent Point's controllable operating expenses. These improvements are in addition to the capital cost and general and administrative expense savings the Company achieved since late 2018. Crescent Point's operating expenses totaled approximately $400 million during the first half of 2019, approximately five percent or $20 million below its original first half 2019 budget.
  
  
• The Company's decline mitigation program continues to yield successful results in each of its key focus areas. During the first half of the year, Crescent Point converted approximately 100 producing wells to water injection wells and remains on track with its plan to convert a total of approximately 145 wells in 2019.
  
  
• During second quarter, the Company released its inaugural sustainability report, highlighting its 2018 ESG performance. These achievements include a reduction in emissions of 12 percent, expanded infrastructure in key operating areas for increased gas conservation, the development of internal carbon pricing tools and the installation of remote well site monitoring. The report also highlights Crescent Point's commitment to safety and diversity throughout the organization and engagement within the community.

Asset Sales

• Executed dispositions of approximately 2,400 boe/d of higher operating cost non-core assets during second quarter 2019 for cash proceeds of approximately $60 million.
  
  
• The Company's previously announced disposition processes for certain infrastructure assets and its conventional upstream assets in southeast Saskatchewan continue to advance, despite significant volatility in recent commodity prices. Crescent Point's infrastructure package, which is progressing to a second round of bids, includes associated gas processing capacity and sales lines with potential initial annual cash flow to a purchaser of approximately $50 million. The Company is also progressing the disposition of its southeast Saskatchewan conventional assets with select parties. These assets include a portfolio of several packages comprising approximately 20,000 boe/d of production.
  
  
• Crescent Point remains disciplined and flexible in its disposition process and will provide updates as required.

Outlook

The Company's second quarter results highlight the continued changes being implemented throughout the organization. To date, Crescent Point's transition plan has resulted in significant debt reduction, a more disciplined, return-focused capital allocation process and material cost efficiencies.

The Company's direction remains centered on a focused asset strategy with a strong balance sheet, allowing for increased efficiencies and financial flexibility. Crescent Point expects continued improvement in its overall efficiencies, corporate returns, financial position and debt-adjusted per share metrics as it continues to reduce the number of areas in which it operates.

The Company's key focus areas in Viewfield, Shaunavon and Flat Lake continue to provide attractive returns, scalability, free cash flow and reliable market access. These resource plays provide low-risk, high return development opportunities with strong operating netbacks that were approximately 10 percent higher, on average, compared to the corporate operating netback during second quarter. These plays currently generate approximately $450 million of annual cash flow in excess of capital expenditures at US$55.00/bbl WTI and benefit from waterflood programs that are expected to further enhance overall recoveries.

Management's capital allocation process remains centered on prioritizing returns versus production growth, net debt reduction and returning capital to shareholders. Crescent Point will continue to assess its allocation of excess cash flow as it continues to execute its transition plan and further strengthen its balance sheet.

The Company's revised 2019 budget, which reflects announced dispositions, is now expected to generate annual average production of 168,000 to 172,000 boe/d, with capital expenditures of $1.2 to $1.3 billion. Asset dispositions completed during second quarter did not impact capital expenditures guidance based on planned spending for those non-core assets during the remainder of the year. Crescent Point remains on track with its annual guidance and will continue to update shareholders as it executes its transition plan.

Financial Highlights

• Adjusted funds flow totaled $503.8 million or $0.92 per share diluted during the second quarter, based on a strong operating netback of $36.59 per boe.
  
  
• For the quarter ended June 30, 2019, Crescent Point's capital expenditures on drilling and development, facilities and seismic totaled $166.2 million, including $146.5 million on drilling and development to drill 52 (39.8 net) wells. The Company's second quarter activity reflects lower spending in comparison to the prior quarter due to seasonality within its Canadian operations relating to spring break-up. Second quarter capital expenditures were approximately $60 million below planned spending due to both wet weather conditions and management's discipline to operate in a more cost-efficient environment post break-up.
  
  
• Net debt as at June 30, 2019 equated to approximately $3.6 billion or 1.9 times trailing adjusted funds flow. Crescent Point reduced its net debt during the first half of the year by over $450 million, including the retirement of US$68.0 million and $7.0 million of senior guaranteed notes during second quarter. Cash and unutilized credit capacity as at June 30, 2019 was approximately $2.0 billion, with no material near-term senior note debt maturities.
  
  
• The Company continued to actively hedge oil production to further protect its returns and cash flow generation. As at July 19, 2019, Crescent Point had, on average, approximately 48 percent of its oil and liquids production, net of royalty interest, hedged for the second half of 2019, approximately 42 percent in the first half of 2020 and 25 percent in the second half of 2020.
  
  
• The Company's oil differential improved during second quarter to $7.92/bbl, allowing for realized oil prices to increase by over 10 percent in comparison to first quarter 2019.
  
  
• Crescent Point continued to return capital to shareholders through dividends and share repurchases. Subsequent to the quarter, the Company declared a quarterly cash dividend of $0.01 per share payable to shareholders on October 1, 2019.