CALGARY, Jan. 14, 2020 /CNW/ - Crescent Point Energy Corp.
("Crescent Point" or the "Company") (TSX and NYSE: CPG) is pleased
to announce its 2020 budget.
KEY HIGHLIGHTS
- Expect to generate approximately $200
million to $350 million of
excess cash flow in 2020 at US$55/bbl
to US$60/bbl WTI, allowing for
continued net debt reduction and accretive share repurchases.
- Disciplined and returns focused budget centered in key focus
areas and fully funded at less than US$50/bbl WTI.
- Annual average production guidance of 140,000 to 144,000
boe/d.
- Capital expenditures of $1.10 to
$1.20 billion, primarily comprised of
sustaining capital.
- Advancing field automation and implementing a new supply chain
pre-qualification process as part of continued focus on
environmental, social and governance ("ESG") practices.
"We successfully completed our 2019 program on budget while also
significantly strengthening our balance sheet through excess cash
flow generation and accretive dispositions," said Craig Bryksa, President and CEO of Crescent
Point. "Our plans for 2020 will continue to focus on returns,
capital discipline, cost saving initiatives and generating excess
cash flow to further enhance shareholder value. We will also
continue to seek opportunities to further optimize our portfolio,
where appropriate, as part of our strategy to focus our asset
base."
2020 PRODUCTION AND CAPITAL EXPENDITURES
BUDGET
Crescent Point's 2020 capital expenditures budget of
$1.10 to $1.20
billion is primarily comprised of sustaining capital and is
expected to generate annual average production of 140,000 to
144,000 boe/d. This production range is unchanged from the prior
year after incorporating approximately 30,000 boe/d of dispositions
executed in 2019.
Over 80 percent of the 2020 capital expenditures budget is
allocated to four plays including the Company's key focus areas and
its North Dakota resource play.
Crescent Point's key focus areas in the Viewfield, Shaunavon and Flat Lake resource plays account
for approximately 60 percent of the allocation, up from
approximately 55 percent in 2019. These areas currently generate
strong netbacks, attractive risk-adjusted returns, excess cash
flow, and the opportunity to further enhance overall sustainability
through additional cost efficiencies and decline mitigation
programs. The Company's North
Dakota resource play also delivered strong operational
performance and efficiencies in 2019, resulting in consistent
capital expenditures in 2020.
Within Crescent Point's 2020 budget, approximately seven percent
of its capital expenditures is prudently allocated to long-term
development projects, including decline mitigation programs such as
waterflood. The Company plans to convert approximately 120
producing wells to water injection wells in 2020.
EXCESS CASH FLOW, BALANCE SHEET AND SHARE
REPURCHASES
Crescent Point expects to generate approximately
$200 million to $350 million of excess cash flow at US$55/bbl to US$60/bbl WTI, which it plans to allocate to
continued net debt reduction and accretive share repurchases. The
Company's budget will be flexible in the event of lower commodity
prices and is fully funded at oil prices of less than US$50/bbl WTI.
Management continues to believe a strong balance sheet is
essential in a cyclical commodity business, and will remain
disciplined in its capital allocation, with approximately 70 to 80
percent of its 2020 excess cash flow planned to be allocated to net
debt reduction. The remaining 20 to 30 percent will be directed to
share repurchases, subject to returns and market conditions, in
addition to $50 million of share
repurchases from expected proceeds of the recently announced
infrastructure asset monetization, which is on track to close in
first quarter 2020.
Since implementing its normal course issuer bid ("NCIB") in
first quarter 2019, Crescent Point has repurchased, for
cancellation, approximately 25.3 million shares for approximately
$130 million, up to and including
January, 9, 2020, representing approximately five percent of its
public float. The Company intends to renew its NCIB in first
quarter 2020.
As part of its risk management program to protect against
commodity price volatility, Crescent Point has currently hedged
approximately 50 percent of its oil and liquids production for
2020. The Company plans to continue to layer additional hedges,
when appropriate, to further protect its cash flow.
Crescent Point does not have any material near-term senior note
debt maturities and retains significant liquidity on its
covenant-based, unsecured credit facilities which are not due for
renewal until October 2023.
NETBACK IMPROVEMENT AND COST EFFICIENCIES
Crescent
Point was proactive in identifying and realizing internal cost
efficiencies throughout the organization in 2019, including capital
costs, operating, and general and administrative expenses. The
Company adopted digital technologies within its key focus areas
throughout the year, which enhanced new workflow changes to realize
reductions to its operating cost structure and benefits to its
health and safety, and asset integrity programs.
These sustainable cost savings are in addition to benefits
Crescent Point realized through dispositions executed in 2019 that
further enhanced its overall netbacks and sustainability. As a
result of these initiatives, the Company's expected 2020 adjusted
funds flow netback has improved by approximately seven percent,
including the impact of its recent infrastructure monetization, at
a constant WTI price of US$55/bbl.
Crescent Point will continue to seek opportunities to further
enhance its competitive position in 2020 through additional
portfolio optimization, cost efficiencies and new market access
opportunities.
2020 BUDGET AND GUIDANCE SUMMARY
|
|
Total annual average
production (boe/d)
|
140,000 -
144,000
|
% Oil and
NGLs
|
91%
|
Capital expenditures
($ millions) (1)
|
$1,100 to
$1,200
|
Drilling and
development (%)
|
90%
|
Facilities and seismic
(%)
|
10%
|
Net wells drilled
(mid-point of guidance range)
|
~450
|
Adjusted funds flow
netback ($/boe) (2) (3)
|
~$28
|
|
|
1
|
Capital expenditures
exclude any potential net property and land acquisitions and
approximately $32 million of capitalized G&A.
|
2
|
Adjusted funds flow
netback as presented does not have any standardized meaning
prescribed by International Financial Reporting Standards ("IFRS")
and, therefore, may not be comparable with the calculation of
similar measures presented by other entities.
|
3
|
Adjusted funds flow
netback based on US$55/bbl WTI, $0.75 US/CAD, MSW differential of
-US$7/bbl and WCS differential of -US$19/bbl for 2020.
|
Non-GAAP Financial Measures
Throughout this press
release, the Company uses the terms "adjusted funds flow netback",
"netback", "excess cash flow", and "net debt". 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 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.
Operating netback is calculated on a per boe basis as oil and
gas sales, less royalties, operating and transportation expenses.
Adjusted funds flow netback and netback is equivalent to adjusted
funds flow from operations netback. Adjusted funds flow from
operations netback is calculated on a per boe basis as operating
netback less net purchased products, realized derivative gains and
losses, general and administrative expenses, interest on long-term
debt, foreign exchange, cash-settled share-based compensation and
certain cash items, excluding transaction costs, foreign exchange
on US dollar long-term debt and certain non-cash items. Operating
netback and adjusted funds flow from operations netback are common
metrics used in the oil and gas industry and are used by management
to measure operating results on a per boe basis to better analyze
performance against prior periods on a comparable basis. Adjusted
funds flow from operations netback does not have any standardized
meaning and should not be used to make comparisons.
Free cash flow is calculated as adjusted funds flow from
operations less capital expenditures, payments on lease liability,
asset retirement obligations and other cash items (excluding net
acquisitions and dispositions). Excess cash flow is calculated as
free cash flow less dividends. Management utilizes free cash flow
and excess cash flow as key measures to assess the ability of the
Company to finance dividends, potential share repurchases, debt
repayments and returns-based growth.
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.
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: 2020
excess cash flow generation at US$55/bbl to US$60/bbl WTI and the actions and allocations the
Company expects to undertake and make because of this level of
excess cash flow; a disciplined and returns focused budget centered
in key focus areas that is fully funded at less than US$50/bbl WTI; annual production guidance;
capital expenditures budget and its composition; advancing field
automation; implementing a new supply chain pre-qualification
process; the continued focus on ESG practices; 2020 plans and their
focus items; seeking opportunities to further optimize the
Company's portfolio, as part of the strategy to focus the Company's
asset base; the Company's key focus areas generating strong
netbacks, attractive risk-adjusted returns, excess cash flow, and
the opportunity to further enhance overall sustainability through
additional cost efficiencies and decline mitigation programs; plans
to convert producing wells to water injection wells; 2020 capital
budget allocations; 2020 budget flexibility and full funding at oil
prices of less than US$50/bbl WTI;
disciplined capital allocation and the expected proportion of 2020
excess cash flow allocated to net debt reduction and share
repurchases; the expected amount of 2020 share repurchases; the
renewal of the Company's NCIB; the Company layering additional
hedges and the benefits thereof; 2020 adjusted funds flow netback
improvement; 2020 budget and guidance summary; average annual
average production and composition; capital expenditures and
composition; net wells drilled; and adjusted funds flow
netback.
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 herein and 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: 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.