CALGARY, Nov. 14, 2019 /CNW/ - Crescent Point Energy Corp.
("Crescent Point" or the "Company") (TSX and NYSE: CPG) is pleased
to announce that it has entered into a definitive agreement (the
"Agreement") to sell certain associated gas infrastructure assets
(the "Assets") in Saskatchewan to
Steel Reef Infrastructure Corp. ("Steel Reef" or the "Purchaser")
for total cash consideration of $500
million.
"Through the sale of these gas infrastructure assets, we will
unlock value for our shareholders and further strengthen our
financial position. We have now entered into agreements to sell, or
have sold, in aggregate approximately $1.45
billion of assets in 2019," said Craig Bryksa, President and CEO of Crescent
Point. "This sale is also aligned with our strategy, as it allows
us to further focus on our core competencies to strengthen our
corporate returns."
DISPOSITION METRICS AND TERMS
Through the sale of the Assets, Crescent Point will monetize
nine natural gas gathering and processing facilities and two gas
sales pipelines currently in operation within Saskatchewan. These gas processing facilities
and associated sales gas lines have a total throughput capacity of
more than 90 MMcf/d. The Assets do not include any oil-related
infrastructure.
Under the terms of the Agreement, the Company will enter into
certain long-term take-or-pay commitments with Steel Reef in
exchange for Steel Reef granting Crescent Point processing rights
at the facilities. The expected annual cash flow to the Purchaser
is estimated at approximately $47
million, excluding cash flow from third parties. Steel Reef,
an established midstream company with other gas processing assets
in Saskatchewan and a strong track
record of environmental, health and safety performance, will
operate the Assets.
As part of the Agreement, Steel Reef has committed to fund an
upcoming 12 MMcf/d expansion of one of the gas processing
facilities, reducing the need for capital that would otherwise be
required by Crescent Point. Steel Reef's cost to construct this
expansion is estimated to be approximately $30 million, which will be in addition to the
purchase price of $500 million. This
facility expansion is expected to begin in 2020 and be completed
within approximately 12 to 18 months following closing of the Asset
sale. The expansion is expected to further enhance sales volumes
while also reducing the facility's emissions intensity.
RBC Capital Markets acted as exclusive financial advisor to the
Company on this sale. GMP FirstEnergy represented Crescent Point as
its strategic advisor. The transaction is expected to close in
first quarter 2020, subject to customary closing conditions and
regulatory approvals.
Crescent Point is also pleased to report that it continues to
advance negotiations for third party development of a new sales oil
pipeline. This pipeline is expected to enhance the Company's market
access and realized pricing for its southeast Saskatchewan oil production. Management
expects that the new sales oil pipeline will take approximately 12
months to construct and bring in service, once an agreement is
finalized.
USE OF PROCEEDS AND BALANCE SHEET STRENGTH
Crescent Point's disciplined capital allocation is centered on
returns with a priority on continued balance sheet strength.
Upon closing of the sale of the Assets, the Company expects that
its net debt will be reduced from approximately $2.8 billion at year-end 2019 to approximately
$2.3 billion while also reducing
Crescent Point's net debt to adjusted funds flow ratio by
approximately 0.3 times. The Company continues to retain
significant liquidity and unutilized credit capacity with no
material near-term debt maturities.
Crescent Point currently expects to allocate approximately
$50 million of proceeds from this
disposition for additional share repurchases subsequent to closing
and subject to market conditions. Given the anticipated timing for
closing of the sale of the Assets in first quarter 2020, the
Company's 2019 budget continues to assume a total of approximately
$125 million of share repurchases.
Crescent Point continues to be active in achieving this 2019 target
and has repurchased, for cancellation, approximately 16.3 million
shares year-to-date 2019 for total consideration of approximately
$83 million, up to and including
November 13, 2019.
Crescent Point is a leading North American light oil producer,
driven to enhance shareholder returns by cost-effectively
developing a focused asset base in a responsible and sustainable
manner.
All financial figures
are approximate and in Canadian dollars unless otherwise noted.
This press release contains forward-looking information and
references to non-GAAP financial measures. Significant related
assumptions and risk factors, and reconciliations are described
under the Non-GAAP Financial Measures and the Forward-Looking
Statements and Other Matters sections of this press release,
respectively.
|
Non-GAAP Financial Measures
Throughout this press release, the Company uses the terms
"adjusted funds flow", "net debt", and "net debt to adjusted funds
flow ratio". These terms do not have any standardized meaning as
prescribed by IFRS and, therefore, may not be comparable with the
calculation of similar measures presented by other issuers.
Adjusted funds flow is equivalent to adjusted funds flow from
operations. Adjusted funds flow from operations is calculated based
on cash flow from operating activities before changes in non-cash
working capital, transaction costs and decommissioning
expenditures. Transaction costs are excluded as they vary based on
the Company's acquisition and disposition activity and to ensure
that this metric is more comparable between periods.
Decommissioning expenditures are discretionary and are excluded as
they may vary based on the stage of Company's assets and operating
areas. Management utilizes adjusted funds flow from operations as a
key measure to assess the ability of the Company to finance
dividends, operating activities, capital expenditures and debt
repayments. Adjusted funds flow from operations as presented is not
intended to represent cash flow from operating activities, net
earnings or other measures of financial performance calculated in
accordance with IFRS.
The following table reconciles cash flow from operating
activities to adjusted funds flow from operations:
|
|
|
|
Three months ended
September 30
|
Nine months ended
September 30
|
($
millions)
|
2019
|
2018
(1)
|
2019
|
2018
(1)
|
Cash flow from
operating activities
|
402.2
|
474.1
|
1,346.4
|
1,388.9
|
Changes in non-cash
working capital
|
(21.8)
|
(6.2)
|
40.9
|
(9.3)
|
Transaction
costs
|
3.1
|
1.4
|
4.2
|
4.3
|
Decommissioning
expenditures
|
5.7
|
5.4
|
15.5
|
20.0
|
Adjusted funds flow
from operations
|
389.2
|
474.7
|
1,407.0
|
1,403.9
|
|
(1) On initial
adoption of IFRS 16, the Company elected to use the modified
retrospective approach; therefore, comparative information has not
been restated. Refer to the Changes in Accounting Policies
section in the Company's MD&A for the period ended September
30, 2019.
|
Net debt is calculated as long-term debt plus accounts payable
and accrued liabilities and other current and long-term
liabilities, excluding current decommissioning and lease
liabilities, less cash, accounts receivable, prepaids and deposits
and long-term investments, excluding the unrealized foreign
exchange on translation of US dollar long-term debt. Management
utilizes net debt as a key measure to assess the liquidity of the
Company.
The following table reconciles long-term debt to net
debt:
|
|
|
($
millions)
|
September 30,
2019
|
September 30,
2018
|
Long-term debt
(1)
|
3,578.2
|
4,156.2
|
Accounts payable and
accrued liabilities
|
525.8
|
653.2
|
Dividends
payable
|
—
|
16.8
|
Other current and
long-term liabilities (2)
|
50.9
|
18.1
|
Cash
|
(122.9)
|
(65.5)
|
Accounts
receivable
|
(336.7)
|
(455.7)
|
Prepaids and
deposits
|
(9.8)
|
(7.0)
|
Long-term
investments
|
(7.1)
|
(20.0)
|
Excludes:
|
|
|
Unrealized foreign
exchange on translation of hedged US dollar long-term
debt
|
(318.4)
|
(289.2)
|
Net debt
|
3,360.0
|
4,006.9
|
|
(1) Includes current
portion of long-term debt.
|
(2) Excludes current
decommissioning and lease liabilities.
|
Net debt to adjusted funds flow ratio is calculated as the
period end net debt divided by the sum of adjusted funds flow from
operations for the trailing four quarters. The ratio of net debt to
adjusted funds flow from operations is used by management to
measure the Company's overall debt position and to measure the
strength of the Company's balance sheet. Crescent Point monitors
this ratio and uses this as a key measure in making decisions
regarding financing, capital spending and dividend levels.
Management believes the presentation of the Non-GAAP measures
above provide useful information to investors and shareholders as
the measures provide increased transparency and the ability to
better analyze performance against prior periods on a comparable
basis.
Forward-Looking Statements
Any "financial outlook" or "future oriented financial
information" in this press release, as defined by applicable
securities legislation has been approved by management of Crescent
Point. Such financial outlook or future oriented financial
information is provided for the purpose of providing information
about management's current expectations and plans relating to the
future. Readers are cautioned that reliance on such information may
not be appropriate for other purposes.
Certain statements contained in this press release constitute
"forward-looking statements" within the meaning of section 27A of
the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934 and "forward-looking information" for the
purposes of Canadian securities regulation (collectively,
"forward-looking statements"). The Company has tried to identify
such forward-looking statements by use of such words as "could",
"should", "can", "anticipate", "expect", "believe", "will", "may",
"intend", "projected", "sustain", "continues", "strategy",
"potential", "projects", "grow", "take advantage", "estimate",
"well-positioned" and other similar expressions, but these words
are not the exclusive means of identifying such statements.
In particular, this press release contains forward-looking
statements pertaining, among other things, to the following:
Crescent Point's intention to further focus on our core
competencies to strengthen our corporate returns; reductions of
capital expenditures in 2020; timing of facility expansion and
related benefits; timing of the Asset sale closing; negotiations
for, benefits from and in service timing of a sales oil pipeline;
disciplined capital allocation (and its components); expected net
debt and net debt to funds flow ratio following closing of the sale
of the Assets; allocation of the proceeds from the sale of the
Assets; expected annual cash flow to the Purchaser; and the
Company's share repurchase program.
All forward-looking statements are based on Crescent Point's
beliefs and assumptions based on information available at the time
the assumption was made. Crescent Point believes that the
expectations reflected in these forward-looking statements are
reasonable but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements
included in this report should not be unduly relied upon. By their
nature, such forward-looking statements are subject to a number of
risks, uncertainties and assumptions, which could cause actual
results or other expectations to differ materially from those
anticipated, expressed or implied by such statements, including
those material risks discussed in the Company's Annual Information
Form for the year ended December 31,
2018 under "Risk Factors", our Management's Discussion and
Analysis for the year ended December 31,
2018, under the headings "Risk Factors" and "Forward-Looking
Information" and for the quarter ended September 30, 2019 under "Derivatives",
"Liquidity and Capital Resources", "Changes in Accounting Policy"
and "Outlook". The material assumptions are disclosed in the
Management's Discussion and Analysis for the year ended
December 31, 2018, under the headings
"Capital Expenditures", "Liquidity and Capital Resources",
"Critical Accounting Estimates", "Risk Factors", "Changes in
Accounting Policies" and "Outlook" and are disclosed in the
Management's Discussion and Analysis for the quarter ended
September 30, 2019 under the headings
"Derivatives", "Liquidity and Capital Resources", "Changes in
Accounting Policy" and "Outlook". In addition, risk factors
include: transaction execution risk; risk related to contracting
parties; financial risk of marketing reserves at an acceptable
price given market conditions; volatility in market prices for oil
and natural gas; delays in business operations, pipeline
restrictions, blowouts; the risk of carrying out operations with
minimal environmental impact; industry conditions, including
changes in laws and regulations and the adoption of new
environmental laws and regulations and changes in how they are
interpreted and enforced; risks and uncertainties related to all
oil and gas interests and operations on tribal lands; uncertainties
associated with estimating oil and natural gas reserves; economic
risk of finding and producing reserves at a reasonable cost;
uncertainties associated with partner plans and approvals;
operational matters related to non-operated properties; increased
competition for, among other things, capital, acquisitions of
reserves and undeveloped lands; competition for and availability of
qualified personnel or management; incorrect assessments of the
value of acquisitions and exploration and development programs;
unexpected geological, technical, drilling, construction and
processing problems; availability of insurance; fluctuations in
foreign exchange and interest rates; stock market volatility;
failure to realize the anticipated benefits of acquisitions and
dispositions; general economic, market and business conditions;
uncertainties associated with regulatory approvals; uncertainty of
government policy changes; uncertainties associated with credit
facilities and counterparty credit risk; and changes in income tax
laws, tax laws, crown royalty rates and incentive programs relating
to the oil and gas industry; and other factors, many of which are
outside the control of Crescent Point. The impact of any one risk,
uncertainty or factor on a particular forward-looking statement is
not determinable with certainty as these are interdependent and
Crescent Point's future course of action depends on management's
assessment of all information available at the relevant time.
Additional information on these and other factors that could
affect Crescent Point's operations or financial results are
included in Crescent Point's reports on file with Canadian and U.S.
securities regulatory authorities. Readers are cautioned not to
place undue reliance on this forward-looking information, which is
given as of the date it is expressed herein or otherwise. Crescent
Point undertakes no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, unless required to do so pursuant to
applicable law. All subsequent forward-looking statements, whether
written or oral, attributable to Crescent Point or persons acting
on the Company's behalf are expressly qualified in their entirety
by these cautionary statements.
FOR MORE INFORMATION ON CRESCENT POINT ENERGY, PLEASE
CONTACT:
Brad Borggard, Senior Vice
President, Corporate Planning and Capital Markets, or
Shant Madian, Vice President,
Investor Relations and Corporate Communications
Telephone: (403) 693-0020 Toll-free (US and Canada): 888-693-0020 Fax: (403)
693-0070
Address: Crescent Point Energy Corp. Suite 2000, 585 - 8th Avenue
S.W. Calgary AB T2P 1G1
www.crescentpointenergy.com
Crescent Point shares are traded on the Toronto Stock Exchange
and New York Stock Exchange under the symbol CPG.
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SOURCE Crescent Point Energy Corp.