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Crescent Point Announces 2019 Results and Reserves


CALGARY – Crescent Point Energy Corp. (“Crescent Point” or the “Company”) (TSX and NYSE: CPG) is pleased to announce its operating and financial results for the year ended December 31, 2019.

KEY HIGHLIGHTS

  • Successfully completed 2019 program on budget, demonstrating strong operational execution and capital discipline.
  • Reduced net debt by approximately $1.25 billion in 2019, or $1.75 billion including closing of infrastructure sale in January 2020.
  • Realized over $170 million of annual internal cost efficiencies across the organization, including continued improvement in operating expenses during fourth quarter.
  • Increased Proved Developed Producing (“PDP”) net asset value (“NAV”) per share by over 20 percent from the prior year assuming flat US$55/bbl WTI.
  • Reduced future asset retirement obligations (“ARO”) by over $220 million in 2019 and continued to enhance environmental, social and governance (“ESG”) practices, including the launch of its inaugural sustainability report.
  • Repurchased approximately five percent of public float, or $135 million of shares, since initiating normal course issuer bid (“NCIB”) in first quarter 2019, including approximately $125 million during 2019.
  • Remain on track with 2020 guidance with a flexible budget that is fully funded at approximately US$46/bbl WTI.

“Our 2019 results highlight the Company’s focus on operating a high-return and sustainable portfolio of assets with a strong balance sheet,” said Craig Bryksa, President and CEO of Crescent Point. “2019 was the first full year of our team’s new strategic direction and involved significant realignment in many parts of our business. We substantially reduced our debt and cost structure while also returning a meaningful amount of capital to shareholders.”

FINANCIAL HIGHLIGHTS

  • For the year ended December 31, 2019, the Company’s adjusted funds flow totaled $1.83 billion, or $3.34 per share diluted. In fourth quarter, adjusted funds flow totaled $418.4 million, or $0.78 per share diluted.
  • For the year ended December 31, 2019, Crescent Point’s capital expenditures on drilling and development, facilities and seismic totaled $1.25 billion, including $343.4 million spent during fourth quarter. Capital expenditures in 2019 were at the mid-point of the Company’s annual guidance range.
  • As at December 31, 2019, the Company’s net debt was approximately $2.8 billion with unutilized credit capacity of approximately $2.2 billion. Subsequent to the quarter, Crescent Point closed its previously announced sale of certain gas infrastructure assets for $500 million, further reducing its net debt and enhancing its unutilized credit capacity to approximately $2.7 billion.
  • As part of its risk management program to protect against commodity price volatility, the Company has currently hedged, on average, approximately 50 percent of its oil and liquids production, net of royalty interest, through 2020 at a weighted average price of over CDN$76/bbl. Crescent Point’s oil hedges extend through to first quarter 2021 at attractive prices.
  • For the year ended December 31, 2019, the Company incurred a net loss of $1.03 billion, including a non-cash asset impairment charge of $1.21 billion ($884.0 million after-tax) in fourth quarter 2019 primarily due to a decrease in the independent engineering price forecast. The impairment charge does not impact Crescent Point’s adjusted funds flow or its credit capacity, and is reversible in future periods should there be any indicators that the value of the assets has increased.
  • Crescent Point reduced its future ARO by over $220 million, or approximately 18 percent since year-end 2018, primarily driven by dispositions of its non-core assets and ongoing reclamation activities. The Company continues to allocate capital towards ARO activities on an annual basis as it remains committed to strong ESG practices.
  • Since initiating the NCIB in first quarter 2019, the Company repurchased and canceled 26.2 million shares for total consideration of approximately $135 million, representing approximately five percent of its public float. The Toronto Stock Exchange has accepted Crescent Point’s notice of the intention to renew the NCIB, which expired in first quarter 2020. Refer to the Company’s press release issued on March 5, 2020 for further information.
  • Subsequent to the quarter, Crescent Point declared a quarterly cash dividend of $0.01 per share payable on April 1, 2020.

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.

OPERATIONAL HIGHLIGHTS

  • Annual average production in 2019 was 162,230 boe/d, which was at the mid-point of the Company’s guidance range and was comprised of approximately 91 percent oil and liquids. Average production during fourth quarter was 145,191 boe/d, reflecting the impact of asset dispositions executed during the quarter.
  • Crescent Point realized operating cost savings of approximately $70 million in 2019, excluding any impact from dispositions, demonstrating an increased focus on new workflow improvements and the continued adoption of digital technologies.
  • The Company’s key focus areas continued to generate free cash flow in 2019, with significant contribution from the Viewfield and Shaunavon resource plays. These areas are also benefiting from Crescent Point’s continued advancement of its decline mitigation programs, which included approximately 200 injector conversions in 2019. In Flat Lake, Crescent Point enhanced risk-adjusted returns within its Torquay program through two-mile horizontal development and capital cost reductions of approximately 15 percent. The Company’s North Dakota operations also generated strong results in 2019 driven by successful multi-well pad development and optimization of completion techniques.

RESERVES AND NET ASSET VALUE HIGHLIGHTS

“Our 2019 reserves reflect a transformational year that included significant dispositions and a disciplined capital expenditures program which focused on returns and free cash flow generation versus step-out and exploration drilling to add new booked locations,” said Bryksa. “Excluding dispositions and revisions, our proved plus probable reserves additions more than replaced our annual production and resulted in a recycle ratio of approximately two times driven by a strong operating netback of approximately $34 per boe.”

  • The Company’s Proved plus Probable (“2P”) NAV was $16.82 per share at year-end 2019, based on independent engineering escalated pricing, or $10.57 per share based on a flat pricing assumption of US$55/bbl WTI, both excluding land and seismic.
  • On a PDP basis, NAV per share increased by over 20 percent compared to the prior year based on flat US$55/bbl WTI, excluding land and seismic, or approximately 12 percent incorporating changes to the Canadian Oil and Gas Evaluation Handbook (“COGEH”) adopted in 2019 pertaining to future ARO.
  • Crescent Point achieved 2P reserves of 740.2 million boe (“MMboe”) (91 percent oil and liquids), including a decrease of 177.5 MMboe associated with net dispositions. Total 2P reserves benefited from 54.2 MMboe of extensions and improved recovery, which were offset by 55.6 MMboe of technical revisions, primarily comprised of probable reserves revisions. The Company’s 2P reserve life index (“RLI”) is approximately 14.3 years.
  • Crescent Point’s Future Development Capital (“FDC”) decreased by over $1.9 billion on a 2P basis, primarily driven by dispositions of its non-core assets which accounted for approximately $1.7 billion of the reduction.
  • The Company’s reserves evaluators continue to recognize reserves addition from Crescent Point’s consistent waterflood program, marking the seventh consecutive addition with over 65 MMboe of cumulative additions since 2013.

Certain reserves metrics, including Finding and Development (“F&D”) costs and recycle ratios, may not be meaningful or comparable year-over-year given significant changes executed in 2019, including non-core asset dispositions. Additional information on Crescent Point’s 2019 reserves is provided in its Annual Information Form (“AIF”) for the year-ended December 31, 2019.

Before Tax Net Asset Value Per Share, Fully Diluted, as at December 31, 2019 at Flat Pricing of US$55/bbl WTI

Reserves Category

NAV

Total Proved plus Probable (2P)

$10.57

Proved and Probable Developed Producing (P+PDP)

$6.15

Total Proved (1P)

$5.25

Proved Developed Producing (PDP)

$3.75

Land and Seismic

$1.33

(1)

NAV per share based on 533.4 million shares fully diluted and a 10% discount rate.

(2)

NAV does not include land and seismic and is less net debt of $2.77 billion as at December 31, 2019.

(3)

NAV per share includes approximately $0.45 per share of additional future ARO as recommended in COGEH’s 2019 industry guidelines.

OUTLOOK

Crescent Point’s successful execution in 2019 significantly enhanced its financial position and sustainability. The Company plans to build on this success in 2020 and will continue to focus on its key value drivers of disciplined capital allocation, cost efficiencies and balance sheet strength.

Throughout 2020, Crescent Point will continue to remain proactive in identifying new opportunities to realize additional cost efficiencies and further strengthen overall netbacks. This includes the continued adoption of digital technologies, further optimization of its drilling and completion techniques and rationalizing its asset portfolio, where appropriate. The Company also recently optimized its work space within its Calgary head office, reducing its annual office lease commitments starting in 2020.

Crescent Point’s budget for 2020 is disciplined, returns-focused and flexible. Assuming the low-end of its capital expenditures guidance, the Company’s program is fully funded at approximately US$46/bbl WTI and is still forecast to generate excess cash flow at current strip prices. Crescent Point will remain disciplined in its capital allocation and plans to continue prioritizing further net debt reduction and accretive share repurchases given the current discounted share price.

The Company remains on track with its 2020 budget, which remains unchanged, with annual average production of 140,000 to 144,000 boe/d and capital expenditures of $1.10 to $1.20 billion.

Summary of Reserves

The Company’s reserves were independently evaluated by GLJ Petroleum Consultants Ltd. (“GLJ”) and Sproule Associates Limited (“Sproule”) as at December 31, 2019 and were aggregated by GLJ. The reserves evaluation and reporting was conducted in accordance with the definitions, standards and procedures contained in the COGEH and National Instrument 51-101 Standards for Disclosure of Oil and Gas Activities (“NI 51-101”).

As at December 31, 2019 (1) (2) (3) (4)

Tight Oil
(Mbbls)

Light and Medium Oil
(Mbbls)

Heavy Oil
(Mbbls)

Natural Gas Liquids
(Mbbls)

Reserves Category

Gross

Net

Gross

Net

Gross

Net

Gross

Net

Proved Developed Producing

137,803

126,638

71,484

63,986

24,175

20,066

42,785

38,906

Proved Developed Non-Producing

1,318

1,213

1,341

1,246

1,979

1,731

618

570

Proved Undeveloped

95,922

85,679

28,122

26,013

1,645

1,419

19,659

17,566

Total Proved

235,043

213,531

100,947

91,245

27,799

23,216

63,062

57,042

Total Probable

150,052

135,767

58,348

52,860

6,894

5,508

33,315

30,195

Total Proved plus Probable

385,094

349,298

159,295

144,104

34,693

28,724

96,377

87,237

Shale Gas

(MMcf)

Natural Gas

(MMcf)

Total

(Mboe)

Reserves Category

Gross

Net

Gross

Net

Gross

Net

Proved Developed Producing

111,492

101,501

60,040

55,970

304,836

275,841

Proved Developed Non-Producing

1,219

1,062

1,297

1,073

5,675

5,116

Proved Undeveloped

66,614

59,038

10,750

9,743

158,242

142,141

Total Proved

179,325

161,601

72,086

66,787

468,753

423,098

Total Probable

103,163

93,005

33,640

31,003

271,409

244,998

Total Proved plus Probable

282,488

254,606

105,726

97,790

740,161

668,096

(1)

Based on Sproule’s December 31, 2019, escalated price forecast.

(2)

“Gross Reserves” are the total Company’s working-interest share before the deduction of any royalties and without including any royalty interest of the Company.

(3)

“Net Reserves” are the total Company’s interest share after deducting royalties and including any royalty interest.

(4)

Numbers may not add due to rounding.

Summary of Before Tax Net Present Values
As at December 31, 2019 (1) (2)

Before Tax Net Present Value ($ millions)

Discount Rate

Price Deck

Reserves Category

Gross Reserves
(Mboe)

0%

5%

10%

15%

Sproule Forecast

Proved Developed Producing

304,836

9,383

7,432

6,090

5,179

Proved and Probable Developed Producing

413,219

14,353

10,078

7,782

6,395

Total Proved

468,753

13,036

9,785

7,657

6,242

Total Proved plus Probable

740,161

24,273

16,082

11,787

9,223

US$55.00/bbl WTI Flat

Proved Developed Producing

297,180

6,862

5,603

4,710

4,079

Proved and Probable Developed Producing

403,451

10,061

7,484

5,989

5,034

Total Proved

428,126

8,765

6,838

5,512

4,591

Total Proved plus Probable

723,299

15,946

11,095

8,347

6,628

(1)

Sproule Forecast based on Sproule’s December 31, 2019, escalated price forecast

(2)

Numbers may not add due to rounding

RESERVES RECONCILIATION
Gross Reserves (1) (2) (3) (4)

Tight Oil

(Mbbls)

Light and Medium Oil

(Mbbls)

Heavy Oil

(Mbbls)

Factors

Proved

Probable

Proved
plus
Probable

Proved

Probable

Proved
plus
Probable

Proved

Probable

Proved
plus
Probable

December 31, 2018

325,347

209,486

534,833

127,424

71,959

199,383

29,015

7,903

36,918

Extensions and Improved Recovery

23,679

15,023

38,702

3,743

2,045

5,788

133

10

143

Technical Revisions

(18,852)

(21,977)

(40,828)

(648)

(5,637)

(6,285)

670

(951)

(281)

Acquisitions

379

266

644

2,403

590

2,993

Dispositions

(60,061)

(51,101)

(111,162)

(18,884)

(9,986)

(28,871)

Economic Factors

(2,098)

(1,646)

(3,743)

(2,107)

(622)

(2,729)

(285)

(69)

(354)

Production

(33,352)

(33,352)

(10,984)

(10,984)

(1,733)

(1,733)

December 31, 2019

235,043

150,052

385,094

100,947

58,348

159,295

27,799

6,894

34,693

Natural Gas Liquids

(Mbbls)

Shale Gas

(MMcf)

Natural Gas

(MMcf)

Factors

Proved

Probable

Proved
plus
Probable

Proved

Probable

Proved
plus
Probable

Proved

Probable

Proved
plus
Probable

December 31, 2018

75,800

42,302

118,102

286,515

178,677

465,193

85,264

39,955

125,219

Extensions and Improved Recovery

3,398

1,968

5,366

14,707

9,734

24,440

572

442

1,014

Technical Revisions

(217)

(4,733)

(4,950)

(686)

(12,250)

(12,936)

(2,104)

(4,344)

(6,448)

Acquisitions

74

60

134

216

168

384

1

1

1

Dispositions

(7,656)

(5,699)

(13,355)

(94,570)

(71,813)

(166,383)

(546)

(1,032)

(1,578)

Economic Factors

(765)

(583)

(1,348)

(668)

(1,354)

(2,021)

(3,858)

(1,382)

(5,240)

Production

(7,573)

(7,573)

(26,188)

(26,188)

(7,243)

(7,243)

December 31, 2019

63,062

33,315

96,377

179,325

103,163

282,488

72,086

33,640

105,726

Total Oil Equivalent

(Mboe)

Factors

Proved

Probable

Proved

plus

Probable

December 31, 2018

619,549

368,089

987,638

Extensions and Improved Recovery

33,500

20,742

54,242

Technical Revisions

(19,512)

(36,063)

(55,574)

Acquisitions

2,892

944

3,836

Dispositions

(102,454)

(78,927)

(181,381)

Economic Factors

(6,009)

(3,376)

(9,385)

Production

(59,214)

(59,214)

December 31, 2019

468,753

271,409

740,161

(1)

Based on Sproule’s December 31, 2019, escalated price forecast.

(2)

“Gross Reserves” are the total Company’s working-interest share before the deduction of any royalties and without including any royalty interest of the Company

(3)

Extensions and Improved Recovery includes Discoveries.

(4)

Numbers may not add due to rounding.

Finding and Development Costs
The Company’s F&D costs and recycle ratios may not be meaningful or comparable year-over-year given significant changes executed in 2019.

2019 Totals

Change in
FDC

Total

Capital ($ millions) (1)

Total Proved plus Probable

1,268

(195)

1,073

Total Proved

1,268

(58)

1,209

Proved Developed Producing

1,268

(8)

1,260

Reserves Additions (Mboe) (2)

Total Proved plus Probable

(10,718)

(10,718)

Total Proved

7,980

7,980

Proved Developed Producing

26,789

26,789

(1)

The capital expenditures include the announced purchase price of corporate acquisitions rather than the amounts allocated to property, plant and equipment for accounting purposes. The capital expenditures also exclude capitalized administration costs and transaction costs.

(2)

Gross Company interest reserves are used in this calculation (working interest reserves, before deduction of any royalties and without including any royalty interests of the Company).

Excluding changes in FDC

Including changes in FDC

($/boe, except recycle ratios)

($/boe, except recycle ratios)

2019

2018

3 Years Ended
Dec. 31, 2019
(Weighted Avg.)

2019

2018

3 Years Ended
Dec. 31, 2019
(Weighted Avg.)

F&D Cost (1)

Total Proved plus Probable

($118.27)

$19.20

$27.08

($100.09)

$24.64

$30.47

Total Proved

$158.85

$22.61

$27.95

$151.57

$26.18

$30.63

Proved Developed Producing

$47.32

$23.64

$25.10

$47.03

$22.94

$24.87

F&D Recycle Ratio (2)

Total Proved plus Probable

(0.3)

1.9

1.2

(0.3)

1.4

1.1

Total Proved

0.2

1.6

1.2

0.2

1.4

1.1

Proved Developed Producing

0.7

1.5

1.3

0.7

1.5

1.3

(1)

F&D is calculated by dividing the identified capital expenditures by the applicable reserves additions. F&D can include or exclude changes to future development capital costs.

(2)

Recycle Ratio is calculated as operating netback before hedging divided by F&D costs. Based on a 2019 netback of $33.81 per boe, a 2018 netback of $35.52 per boe and a three-year weighted average netback of $32.90 per boe.

Future Development Capital
At year-end 2019, FDC for 2P reserves totaled $5.1 billion, compared to $7.0 billion at year-end 2018. The Company’s FDC decreased by $1.9 billion, primarily driven by dispositions of its non-core assets which accounted for $1.7 billion of the reduction.

Company Annual Capital Expenditures ($ millions)

Canada

U.S.

Total

Year

Total
Proved

Total
Proved
+ Probable

Total
Proved

Total
Proved
+ Probable

Total
Proved

Total
Proved
+ Probable

2020

614

698

184

237

798

935

2021

621

841

287

339

907

1,180

2022

613

871

217

268

831

1,139

2023

398

781

157

185

555

966

2024

116

366

203

203

319

569

2025

5

70

5

70

2026

3

49

3

49

2027

2

60

2

60

2028

7

47

7

47

2029

3

59

3

59

2030

1

2

1

2

2031

1

2

1

2

 Subtotal (1)

2,383

3,845

1,048

1,232

3,431

5,077

Remainder

10

17

10

17

 Total (1)

2,393

3,862

1,048

1,232

3,441

5,094

10% Discounted

1,986

3,031

839

995

2,825

4,025

(1)

Numbers may not add due to rounding

CONFERENCE CALL DETAILS
Crescent Point management will host a conference call on Thursday, March 5, 2020 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 via webcast. 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 conference calls and webcasts webpage under the invest tab. 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.

2020 GUIDANCE
The Company’s guidance for 2020 is as follows:

Total annual average production (boe/d)

140,000 – 144,000

% Oil and NGLs

91%

Development capital expenditures ($ millions) (1)

$1,100 to $1,200

Drilling and development (%)

90%

Facilities and seismic (%)

10%

(1)

Development capital expenditures excludes any potential net property and land acquisitions and approximately $32 million of capitalized G&A

The Company’s audited financial statements and management’s discussion and analysis for the year ended December 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.

FINANCIAL AND OPERATING HIGHLIGHTS

Three months ended December 31

Year ended December 31

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

2019

2018

2019

2018

Financial

Cash flow from operating activities

396.5

359.1

1,742.9

1,748.0

Adjusted funds flow from operations (1)

418.4

337.3

1,825.4

1,741.2

Per share (1) (2)

0.78

0.61

3.34

3.16

Net income (loss)

(932.1)

(2,390.5)

(1,033.3)

(2,616.9)

Per share (2)

(1.73)

(4.35)

(1.89)

(4.77)

Adjusted net earnings (loss) from operations (1)

49.9

(16.3)

386.8

234.6

Per share (1) (2)

0.09

(0.03)

0.71

0.43

Dividends declared

5.4

49.4

22.0

198.5

Per share (2)

0.01

0.09

0.04

0.36

Net debt (1)

2,765.3

4,011.3

2,765.3

4,011.3

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

1.5

2.3

1.5

2.3

Weighted average shares outstanding

Basic

537.4

550.2

545.7

549.1

Diluted

538.7

550.2

546.0

550.2

Operating

Average daily production

Crude oil (bbls/d)

111,394

140,281

126,219

140,298

NGLs (bbls/d)

21,406

20,210

20,746

19,805

Natural gas (mcf/d)

74,347

106,236

91,592

108,376

Total (boe/d)

145,191

178,198

162,230

178,166

Average selling prices (4)

Crude oil ($/bbl)

65.27

54.38

67.14

69.43

NGLs ($/bbl)

19.02

32.76

19.94

33.66

Natural gas ($/mcf)

3.35

2.95

2.75

2.25

Total ($/boe)

54.60

48.28

56.34

59.78

Netback ($/boe)

Oil and gas sales

54.60

48.28

56.34

59.78

Royalties

(7.79)

(7.61)

(8.15)

(9.11)

Operating expenses

(11.24)

(12.86)

(12.29)

(13.13)

Transportation expenses

(2.12)

(2.06)

(2.09)

(2.02)

Operating netback (1)

33.45

25.75

33.81

35.52

Realized gain (loss) on derivatives

1.71

(1.34)

0.73

(4.00)

Other (5)

(3.84)

(3.84)

(3.72)

(4.75)

Adjusted funds flow from operations netback (1)

31.32

20.57

30.82

26.77

Capital Expenditures

Capital dispositions, net (6)

(663.8)

(42.5)

(924.1)

(340.5)

Development capital expenditures

Drilling and development

312.7

278.4

1,155.9

1,536.2

Facilities and seismic

30.7

23.9

96.2

200.4

Total

343.4

302.3

1,252.1

1,736.6

Land expenditures

5.2

4.9

15.5

33.2

(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, cash-settled share-based compensation and certain cash items 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”, “adjusted funds flow from operations”, “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”, “netback”, “operating netback” and “adjusted funds flow from operations 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 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 December 31

Year ended December 31

($ millions)

2019

2018 (1)

2019

2018 (1)

Cash flow from operating activities

396.5

359.1

1,742.9

1,748.0

Changes in non-cash working capital

6.6

(27.9)

47.5

(37.2)

Transaction costs

2.1

0.8

6.3

5.1

Decommissioning expenditures

13.2

5.3

28.7

25.3

Adjusted funds flow from operations

418.4

337.3

1,825.4

1,741.2

(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 year ended December 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, 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, gains or losses on the sale of 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 December 31

Year ended December 31

($ millions)

2019

2018 (1)

2019

2018 (1)

Net income (loss)

(932.1)

(2,390.5)

(1,033.3)

(2,616.9)

Amortization of E&E undeveloped land

21.3

39.0

129.1

157.2

Impairment

1,216.5

3,690.7

1,466.4

3,705.9

Unrealized derivative (gains) losses

153.9

(737.9)

269.6

(439.4)

Unrealized foreign exchange (gain) loss on translation of

hedged US dollar long-term debt

(52.5)

184.4

(207.7)

254.2

Unrealized loss on long-term investments

0.5

3.8

2.0

16.2

(Gain) loss on sale of long-term investments

1.0

(0.7)

Net (gain) loss on capital dispositions

(0.1)

28.3

199.2

129.1

Deferred tax relating to adjustments

(357.6)

(835.1)

(438.5)

(971.0)

Adjusted net earnings (loss) from operations

49.9

(16.3)

386.8

234.6

(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 year ended December 31, 2019.

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 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)

2019

2018

Long-term debt (1)

2,905.1

4,276.7

Accounts payable and accrued liabilities

479.4

549.4

Long-term compensation liability (2)

13.1

10.0

Cash

(56.9)

(15.3)

Accounts receivable

(295.9)

(322.6)

Prepaids and deposits

(6.9)

(4.6)

Long-term investments

(6.7)

(8.7)

Excludes:

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

(265.9)

(473.6)

Net debt

2,765.3

4,011.3

(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 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. Cash flow netback is equivalent to adjusted funds flow from operations netback.  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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