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Crescent Point Announces Corporate Update


CALGARY – Crescent Point Energy Corp. (“Crescent Point” or the “Company”) (TSX and NYSE: CPG) is taking additional action to further enhance the Company’s long-term sustainability through additional cost reductions, and is including a revised 2020 outlook.

KEY HIGHLIGHTS

  • Lowering 2020 capital expenditures guidance by $75 million, or 10 percent, with no associated impact to production.
  • Maintaining flexibility to further reduce capital expenditures, if necessary.
  • Enhancing sustainability by reducing 2020 operating expenses by $140 million.
  • Reduced salaries for executive team and Board of Directors.
  • Lowering annual production guidance by 15 percent, primarily due to the voluntary shut-in of higher cost production.
  • Retains significant liquidity of over $2.5 billion, with no material near-term debt maturities.

“We have taken, and continue to take, meaningful action to enhance our long-term sustainability during this period of low commodity prices,” said Craig Bryksa, President and CEO of Crescent Point. “We have further lowered our cost structure and also elected to shut-in production that is currently uneconomic to further enhance our cash flow. We are continuously monitoring the commodity price environment and will make further adjustments throughout the year, if necessary.”

REVISED 2020 CAPITAL EXPENDITURES AND ADDITIONAL COST REDUCTIONS

Crescent Point’s capital expenditures for 2020 are now forecast to be approximately $650 to $700 million, or $75 million below its recently revised guidance of $700 to $800 million, based on the mid-point of the range. This capital reduction, which has no associated impact to production, is a combination of internal efficiencies and operational outperformance resulting in lower expenditures during the balance of the year.

Since the release of its original 2020 budget, the Company has lowered its capital expenditures guidance by over 40 percent and retains the ability to further reduce expenditures later in the year, if necessary. Approximately half of Crescent Point’s revised annual budget is expected to occur subsequent to first quarter. Due to a shift in the scheduled timing of its planned capital program, approximately 65 percent of the Company’s remaining 2020 budget is expected during fourth quarter. The majority of these expenditures are discretionary and dependent on commodity prices. Management continues to work on realizing additional efficiencies and intends to balance annual cash outflows, including capital expenditures, with inflows.

Crescent Point forecasts that its operating expenses for the current fiscal year will be approximately $140 million, or approximately 20 percent, below its initial 2020 expectations. Approximately $50 million of this reduction is sustainable and is expected to be driven by internal initiatives with the remaining reduction achieved through lower activity levels and cost savings from shut-in production. Since the beginning of 2019, Crescent Point has permanently removed approximately $120 million, or over 15 percent, of its annual operating expenses due to its enhanced and ongoing focus on new workflow improvements and the adoption of digital technologies.

In light of the current environment, the President and CEO’s current base salary will be reduced by 15 percent with the remaining members of the executive team taking a 10 percent reduction to current base salaries. The cash component of the Board of Directors retainer will also be reduced by 15 percent.

REVISED 2020 PRODUCTION GUIDANCE

The Company’s annual average production is now forecast to be 110,000 to 114,000 boe/d for 2020. This represents a reduction of 20,000 boe/d, or approximately 15 percent, from Crescent Point’s prior annual average guidance of 130,000 to 134,000 boe/d, based on the mid-point of the range. This revision is largely due to the shut-in of higher cost production, as well as the Company’s decision to shift capital to the latter part of the year with flexibility to further reduce capital, if necessary.

In aggregate, Crescent Point is voluntarily shutting-in approximately 25,000 boe/d of its current production, of which approximately 70 percent is oil. This production is primarily located outside of the Company’s key focus areas and carries costs above the corporate average. As a result of these shut-ins, and at current prices, Crescent Point expects to achieve cost savings in excess of the potential revenue.

The Company expects to restore production from shut-in wells, with minimal impact to long-term production, when warranted. Management continues to evaluate market conditions, including market access constraints and the potential for involuntary shut-ins.

All financial figures are approximate and in Canadian dollars unless otherwise noted. This press release contains forward-looking information. Significant related assumptions and risk factors, and reconciliations are described under the Forward-Looking Statements section of this press release, respectively.

 

FINANCIAL LIQUIDITY

The Company retains significant liquidity with over $2.5 billion of cash and unutilized capacity on its credit facilities. Crescent Point does not have any material near-term debt maturities, with its next set of senior notes due in second quarter 2021 for a total of approximately $185 million.

HEDGING

The Company has over 65 percent of its revised oil production guidance hedged for the remainder of the year. Crescent Point recently layered additional hedges for second and third quarter 2020 in order to help protect against any further weakness in near-term commodity prices. The Company forecasts hedging gains of approximately $330 million in 2020 based on current strip prices.

COVID-19

In response to the continued uncertainty pertaining to the global pandemic of COVID-19, Crescent Point has taken strict measures to protect the health and safety of all stakeholders including its employees, community members and vendor partners. The Company has instituted physical distancing protocols within its field operations, advanced digital technology throughout the organization and seamlessly adopted a work from home policy for employees whose work can be performed remotely. Crescent Point has a long history of operational excellence with a motivated staff that continues to exceed expectations despite having to adapt to a new challenging environment. Management is continually monitoring the health and safety of its employees with no positive cases of COVID within the Company.

2020 BUDGET AND GUIDANCE SUMMARY


Total annual average production (boe/d)

Prior

130,000 – 134,000

91%

Revised

110,000 – 114,000

90%

% Oil and NGLs

Development capital expenditures ($ millions) (1)

$700 – $800

91%

9%

$650 – $700

91%

9%

Drilling and development (%)
Facilities and seismic (%)

(1)

Development capital expenditures excludes approximately $80 million of capitalized G&A, land acquisitions, capital leases and reclamation activities. 



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