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Crescent Point Announces Q1 2019 Results


CALGARYMay 9, 2019 /CNW/ – Crescent Point Energy Corp. (“Crescent Point” or the “Company”) (TSX and NYSE: CPG) is pleased to announce its operating and financial results for the quarter ended March 31, 2019.

KEY HIGHLIGHTS

  • Increased cash flow in 2019 based on return-focused capital allocation, lower costs, higher commodity prices and improved oil differentials. Expect to generate approximately $600 million of excess cash flow in 2019 based on guidance at current strip prices.
  • Annual production and capital expenditures guidance remains unchanged, demonstrating continued capital discipline.
  • Continued focus on net debt reduction and the execution of share repurchase program, with over $105 million of net debt reduction in the quarter and over 5.6 million shares repurchased year-to-date.
  • Enhancing sustainability in key focus areas by reducing costs and consistently developing waterflood programs.
  • Added John Dielwart and nominated James Craddock and Jennifer Koury as new independent directors of the board.

“We have had a great start to 2019 and now expect to generate approximately $600 million of excess cash flow this year,” said Craig Bryksa, President and CEO of Crescent Point. “By being disciplined in our capital allocation and focused on cost reductions, we have enhanced our financial flexibility. We plan to use the excess cash we generate this year to reduce net debt and repurchase additional shares under our normal course issuer bid. We are also pleased with our recent success in attracting new directors and board nominees with strong and diversified skill sets through our board’s deliberate and thoughtful renewal process.”

FINANCIAL HIGHLIGHTS

  • Adjusted funds flow totaled $514.0 million during first quarter 2019, or $0.93 per share diluted, based on a strong operating netback of $33.95 per boe. The Company’s operating netback within its key focus areas of Viewfield, Shaunavon and Flat Lake was approximately eight percent higher than the corporate average, highlighting the lower costs and premium oil pricing associated with these plays.
  • For the quarter ended March 31, 2019, Crescent Point’s capital expenditures on drilling and development, facilities and seismic totaled $380.2 million, down approximately 50 percent compared to $722.0 million in first quarter 2018. The Company’s first quarter 2019 program included $359.6 million spent on drilling and development to drill 188 (164.7 net) wells. The Company expects reduced spending in second quarter 2019 compared to first quarter, driven by normal seasonality related to spring break-up. Based on the mid-point of its 2019 guidance, Crescent Point expects that its total capital expenditures in the first half of the year will account for approximately 50 percent of its annual budget, highlighting new management’s shift toward a more consistent capital and drilling program.
  • Net debt as at March 31, 2019 equated to approximately $3.9 billion, or 2.1 times trailing adjusted funds flow. The Company reduced its net debt during first quarter by $105.8 million, net of share repurchases and dividends. Crescent Point expects to continue improving its financial flexibility in 2019 based on the significant excess cash flow to be generated within its budget at current strip prices and proceeds from potential asset dispositions. Cash and unutilized credit capacity as at March 31, 2019 was approximately $1.72 billion, with no material near-term senior note debt maturities.
  • Crescent Point continued to actively hedge oil production during the recent improvement in commodity prices, including new hedges extending to late 2019 and 2020. Management remains disciplined in its approach to layering on additional hedges, in the context of commodity prices, to further protect its funds flow and excess cash flow generation. As at May 3, 2019, Crescent Point had, on average, approximately 45 percent of its oil and liquids production, net of royalty interest, hedged through the remainder of 2019, approximately 35 percent in the first half of 2020 and 23 percent in the second half of 2020.
  • Subsequent to first quarter, the Company declared a quarterly cash dividend of $0.01 per share payable on July 2, 2019.
  • On January 1, 2019, Crescent Point, along with other reporting entities governed by International Financial Reporting Standards (“IFRS”), adopted IFRS 16 Leases. This new accounting standard requires companies to recognize most operating leases as liabilities on the balance sheet. The Company recorded a lease liability of approximately $224 million upon adoption of the standard. Crescent Point’s IFRS 16 Leases transition methodology does not require restatement of prior periods nor does it impact the Company’s debt covenants or credit available under its bank credit facilities.

DIFFERENTIALS AND MARKET ACCESS

  • Crescent Point’s first quarter oil differential improved by over 60 percent compared to fourth quarter 2018, to $8.36/bbl. Based on realized prices to date and the current forward curve, the Company expects its second quarter 2019 realized oil price to further increase by approximately 15 percent relative to first quarter 2019.
  • During first quarter 2019, the Company resolved a National Energy Board complaint and legal action through the negotiation and execution of a settlement agreement, as previously announced. The agreement included a cash settlement in favour of Crescent Point, which was paid during first quarter. The agreement also includes a revised pipeline tariff, effective second quarter 2019, that is expected to increase the Company’s netback for oil production transported on the Saskatchewan Pipeline System.

OPERATIONAL HIGHLIGHTS

  • Average production in first quarter 2019 was 175,955 boe/d, comprised of approximately 91 percent oil and liquids.
  • Crescent Point’s key focus areas continue to provide low-risk, high-return drilling opportunities, with each area expected to generate cash flows in excess of capital expenditures in 2019. Despite a stronger commodity price environment driving recent modest cost pressures on certain drilling and completion costs, the Company’s full-year capital expenditures budget remains unchanged due to Crescent Point’s successful and ongoing cost saving, optimization and supply chain initiatives. Management’s increased focus on improving costs and efficiencies is further highlighted in the Viewfield Bakken, an area the Company has been developing for over 12 years. Crescent Point has reduced completion costs in this play during 2019 by approximately eight percent compared to the trailing three-year average.
  • Due to existing market access in the Uinta Basin and risk-adjusted returns in the earlier-stage East Shale Duvernay play, Crescent Point continues to remain disciplined in allocating capital to these resource plays. In aggregate, these two areas account for approximately 15 percent of the Company’s 2019 capital expenditures budget, primarily weighted to the Uinta Basin.
  • As part of its focus on decline mitigation, Crescent Point converted approximately 75 producing wells to water injection wells in first quarter. The Company plans to convert a total of approximately 145 wells in 2019 across its key focus areas, up from 79 in 2018. In addition, subsequent to first quarter, Crescent Point fully unitized its fourth unit in the Viewfield Bakken resource play for waterflood development, with additional opportunities identified for future waterflood expansion. By consistently advancing its decline mitigation programs, the Company expects to add low cost reserves and enhance free cash flow generation while also reducing drilling requirements to sustain production.

OUTLOOK

Crescent Point continues to focus on its transition plan’s key value drivers, which include disciplined capital allocation, cost reductions and balance sheet improvement.

As the Company advances each of these initiatives, it expects to further improve overall capital efficiencies, corporate returns and debt-adjusted per share metrics. Crescent Point’s free cash flow generation has also improved, with approximately $600 million of excess cash flow expected to be generated in 2019, based on its guidance at current strip prices.

The Company remains disciplined in allocating capital and excess cash flow, prioritizing net debt reduction, accretive share repurchases and generating returns versus production growth. Crescent Point is on track with its 2019 budget, which remains unchanged, with expected annual average production of 170,000 to 174,000 boe/d and planned capital expenditures of $1.20 to $1.30 billion.

The Company initiated a process for asset dispositions during first quarter, which continues to progress. Crescent Point does not intend to disclose developments with respect to these processes unless the Board of Directors (the “Board”) has approved a specific transaction, or otherwise determines that disclosure is necessary or appropriate. The Company will remain disciplined and flexible as it seeks to focus its asset base and create value for its shareholders.

ANNUAL GENERAL MEETING

Crescent Point’s 2019 Annual General Meeting (“AGM”) will be held on June 14, 2019. As previously announced, the Company’s recent Board renewal process has included the appointment of Robert Heinemann as Chairman, the appointment of John Dielwart as a new independent director and the nominations of James Craddock and Jennifer Koury as additional independent directors. Following the upcoming AGM, Crescent Point will have undergone a complete Board renewal since 2014.

CONFERENCE CALL DETAILS

Crescent Point management will host a conference call on Thursday, May 9, 2019 at 10:00 a.m. MT (12:00 p.m. ET) to discuss the Company’s results and outlook. A slide deck will accompany the conference call and can be found on Crescent Point’s home page.

Participants can listen to this event online at https://event.on24.com/wcc/r/1972375/8A4F783AE28233E69CADC69991A619B2. Alternatively, the conference call can be accessed by dialing 1‑888‑390‑0605.

The webcast will be archived for replay and can be accessed on Crescent Point’s website at https://www.crescentpointenergy.com/invest/conference-calls-webcasts. The replay will be available approximately one hour following completion of the call.

Shareholders and investors can also find the Company’s most recent investor presentation on Crescent Point’s website.

2019 GUIDANCE

The Company’s guidance for 2019 is as follows:

Total annual average production (boe/d)

170,000 – 174,000

% Oil and NGLs

91%

Capital expenditures ($ millions) (1)

$1,200 to $1,300

Drilling and development (%)

90%

Facilities and seismic (%)

10%

(1)

Capital expenditures excludes any potential net property and land acquisitions and approximately $35 million of capitalized G&A.

The Company’s unaudited financial statements and management’s discussion and analysis for the quarter ended March 31, 2019, will be available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml and on Crescent Point’s website at www.crescentpointenergy.com.

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 Forward-Looking Statements sections of this press release, respectively.

 

FINANCIAL AND OPERATING HIGHLIGHTS

Three months ended March 31

(Cdn$ millions except per share and per boe amounts)

2019

2018

Financial

Cash flow from operating activities

416.8

462.0

Adjusted funds flow from operations (1)

514.0

428.9

Per share (1) (2)

0.93

0.78

Net income (loss)

1.9

(90.7)

Per share (2)

(0.17)

Adjusted net earnings from operations (1)

158.3

63.4

Per share (1) (2)

0.29

0.12

Dividends declared

5.6

49.6

Per share (2)

0.01

0.09

Net debt (1)

3,905.5

4,409.3

Net debt to adjusted funds flow from operations (1) (3)

2.1

2.5

Weighted average shares outstanding

Basic

550.3

547.1

Diluted

550.3

548.4

Operating

Average daily production

Crude oil (bbls/d)

139,911

141,312

NGLs (bbls/d)

20,097

18,775

Natural gas (mcf/d)

95,679

109,983

Total (boe/d)

175,955

178,418

Average selling prices (4)

Crude oil ($/bbl)

64.65

67.17

NGLs ($/bbl)

25.58

33.71

Natural gas ($/mcf)

3.72

2.42

Total ($/boe)

56.35

58.24

Netback ($/boe)

Oil and gas sales

56.35

58.24

Royalties

(7.53)

(8.82)

Operating expenses

(12.77)

(12.94)

Transportation expenses

(2.10)

(1.99)

Operating netback (1)

33.95

34.49

Realized gain (loss) on derivatives

0.73

(2.21)

Other (5)

(2.22)

(5.57)

Adjusted funds flow from operations netback (1)

32.46

26.71

Capital Expenditures

Capital dispositions, net (6)

(2.8)

(9.0)

Development capital expenditures

Drilling and development

359.6

652.8

Facilities and seismic

20.6

69.2

Land

4.0

11.0

Total

384.2

733.0

(1)

Adjusted funds flow from operations, adjusted funds flow from operations per share, adjusted net earnings from operations, adjusted net earnings from operations per share, net debt, net debt to adjusted funds flow from operations, operating netback and adjusted funds flow from operations netback as presented do not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures presented by other entities.

(2)

The per share amounts (with the exception of dividends per share) are the per share – diluted amounts.

(3)

Net debt to adjusted funds flow from operations is calculated as the period end net debt divided by the sum of adjusted funds flow from operations for the trailing four quarters.

(4)

The average selling prices reported are before realized derivatives and transportation.

(5)

Other includes net purchased products, general and administrative expenses, interest on long-term debt, foreign exchange and cash-settled share-based compensation and excludes transaction costs, foreign exchange on US dollar long-term debt and certain non-cash items.

(6)

Capital dispositions, net represent total consideration for the transactions, including long-term debt and working capital assumed, and exclude transaction costs.

Non-GAAP Financial Measures

Throughout this press release, the Company uses the terms “adjusted funds flow from operations”, “funds flow”, “adjusted funds flow from operations per share – diluted”, “adjusted net earnings from operations”, “adjusted net earnings from operations per share – diluted”, “free cash flow”, “excess cash flow”, “net debt”, “net debt to adjusted funds flow from operations” and “netback”. 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 and 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. Adjusted funds flow from operations per share – diluted is calculated as adjusted funds flow from operations divided by the number of weighted average diluted shares outstanding. 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 March 31

($ millions)

2019

2018 (1)

Cash flow from operating activities

416.8

462.0

Changes in non-cash working capital

91.0

(44.1)

Transaction costs

0.9

0.7

Decommissioning expenditures

5.3

10.3

Adjusted funds flow from operations

514.0

428.9

(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 March 31, 2019.

Adjusted net earnings from operations is calculated based on net income before amortization of exploration and evaluation (“E&E”) undeveloped land, impairment or impairment recoveries on property, plant and equipment (“PP&E”), unrealized derivative gains or losses, unrealized foreign exchange gain or loss on translation of hedged US dollar long-term debt, unrealized gains or losses on long-term investments and gains or losses on capital acquisitions and dispositions. Adjusted net earnings from operations per share – diluted is calculated as adjusted net earnings from operations divided by the number of weighted average diluted shares outstanding. Management utilizes adjusted net earnings from operations to present a measure of financial performance that is more comparable between periods. Adjusted net earnings from operations as presented is not intended to represent net earnings or other measures of financial performance calculated in accordance with IFRS.

The following table reconciles net income to adjusted net earnings from operations:

Three months ended March 31

($ millions)

2019

2018 (1)

Net income (loss)

1.9

(90.7)

Amortization of E&E undeveloped land

38.3

38.8

Impairment

8.5

Unrealized derivative losses

270.4

35.0

Unrealized foreign exchange (gain) loss on translation of hedged US dollar long-term debt

(96.7)

124.0

Unrealized loss on long-term investments

0.5

11.8

Gain on capital dispositions

(5.3)

(0.9)

Deferred tax relating to adjustments

(59.3)

(54.6)

Adjusted net earnings from operations

158.3

63.4

(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 March 31, 2019.

Free cash flow is calculated as adjusted funds flow less capital expenditures (excluding net acquisitions and dispositions). Excess cash flow is calculated as free cash flow less dividends and lease payments. Management utilizes excess cash flow and free 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 long-term compensation liability, 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)

March 31, 2019

March 31, 2018

Long-term debt (1)

4,142.6

4,412.9

Accounts payable and accrued liabilities

600.5

790.1

Long-term compensation liability (2)

4.9

29.4

Cash

(25.8)

(14.7)

Accounts receivable

(421.6)

(382.5)

Prepaids and deposits

(10.0)

(10.0)

Long-term investments

(8.2)

(72.5)

Excludes:

Unrealized foreign exchange on translation of hedged US dollar long-term debt

(376.9)

(343.4)

Net debt

3,905.5

4,409.3

(1) Includes current portion of long-term debt.

(2) Includes current portion of long-term compensation liability.

Net debt to adjusted funds flow from operations 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.

Operating netback is calculated on a per boe basis as oil and gas sales, less royalties, operating and transportation expenses. Adjusted funds flow 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 and cash-settled share-based compensation, 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. Netback calculations are shown in the Financial and Operating Highlights section in this press release.

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.



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