Crescent Point Energy (CPG-T) Aug 12, '15 is pleased to announce its operating and financial results for the quarter ended June 30, 2015. The Company also announces that its unaudited financial statements and management's discussion and analysis for the quarter ended June 30, 2015, 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 June 30 | | Six months ended June 30 | | | (Cdn$000s except shares, per share and per boe amounts) | 2015 | | 2014 | | % Change | | 2015 | | 2014 | | % Change | | | Financial | | | | | | | | | | | | | | Funds flow from operations (1) | 524,260 | | 636,688 | | (18 | ) | 957,764 | | 1,216,784 | | (21 | ) | | | Per share (1) (2) | 1.14 | | 1.55 | | (26 | ) | 2.11 | | 3.01 | | (30 | ) | | Net income (loss) | (240,448 | ) | 98,586 | | (344 | ) | (286,512 | ) | 129,476 | | (321 | ) | | | Per share (2) | (0.53 | ) | 0.24 | | (321 | ) | (0.63 | ) | 0.32 | | (297 | ) | | Adjusted net earnings from operations (1) | 40,378 | | 174,580 | | (77 | ) | 68,649 | | 380,654 | | (82 | ) | | | Per share (1) (2) | 0.09 | | 0.43 | | (79 | ) | 0.15 | | 0.94 | | (84 | ) | | Adjusted dividends (1) | 325,132 | | 286,128 | | 14 | | 637,752 | | 564,404 | | 13 | | | | Per share (1)(2) | 0.69 | | 0.69 | | - | | 1.38 | | 1.38 | | - | | | Payout ratio (%) (1) (3) | 62 | | 45 | | 17 | | 67 | | 46 | | 21 | | | | Per share (%) (1) (2) (3) | 61 | | 45 | | 16 | | 65 | | 46 | | 19 | | | Net debt (1) | 3,976,906 | | 2,836,829 | | 40 | | 3,976,906 | | 2,836,829 | | 40 | | | Net debt to funds flow from operations (1) (4) | 1.9 | | 1.2 | | 58 | | 1.9 | | 1.2 | | 58 | | | Capital acquisitions (net) (5) | 1,477,891 | | 1,566,487 | | (6 | ) | 1,493,471 | | 1,599,773 | | (7 | ) | | Development capital expenditures (6) | 329,264 | | 271,537 | | 21 | | 886,044 | | 841,964 | | 5 | | | Decommissioning and environmental expenditures (6) | 4,368 | | 4,282 | | 2 | | 14,235 | | 17,676 | | (19 | ) | | Weighted average shares outstanding (mm) | | | | | | | | | | | | | | | Basic | 456.9 | | 407.5 | | 12 | | 453.0 | | 402.2 | | 13 | | | | Diluted | 459.4 | | 410.1 | | 12 | | 454.9 | | 404.8 | | 12 | | | Operating | | | | | | | | | | | | | | Average daily production | | | | | | | | | | | | | | | Crude oil and NGLs (bbls/d) | 137,742 | | 125,344 | | 10 | | 138,886 | | 122,183 | | 14 | | | | Natural gas (mcf/d) | 83,366 | | 72,143 | | 16 | | 83,118 | | 70,858 | | 17 | | | | Total (boe/d) | 151,636 | | 137,368 | | 10 | | 152,739 | | 133,993 | | 14 | | | Average selling prices (7) | | | | | | | | | | | | | | | Crude oil and NGLs ($/bbl) | 60.09 | | 97.52 | | (38 | ) | 53.44 | | 95.19 | | (44 | ) | | | Natural gas ($/mcf) | 3.02 | | 5.42 | | (44 | ) | 3.08 | | 5.59 | | (45 | ) | | | Total ($/boe) | 56.25 | | 91.83 | | (39 | ) | 50.27 | | 89.76 | | (44 | ) | | Netback ($/boe) | | | | | | | | | | | | | | | Oil and gas sales | 56.25 | | 91.83 | | (39 | ) | 50.27 | | 89.76 | | (44 | ) | | | Royalties | (8.60 | ) | (16.19 | ) | (47 | ) | (7.85 | ) | (15.80 | ) | (50 | ) | | | Operating expenses | (11.76 | ) | (12.63 | ) | (7 | ) | (11.82 | ) | (12.59 | ) | (6 | ) | | | Transportation | (2.33 | ) | (2.46 | ) | (5 | ) | (2.34 | ) | (2.31 | ) | 1 | | | | Netback prior to realized derivatives | 33.56 | | 60.55 | | (45 | ) | 28.26 | | 59.06 | | (52 | ) | | | Realized gain (loss) on derivatives | 8.18 | | (5.80 | ) | (241 | ) | 10.10 | | (5.32 | ) | (290 | ) | | Netback (1) | 41.74 | | 54.75 | | (24 | ) | 38.36 | | 53.74 | | (29 | ) |
| (1) | Funds flow from operations, adjusted net earnings from operations, adjusted dividends, payout ratio, net debt, net debt to funds flow from operations and netback as presented do 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. | | (2) | The per share amounts (with the exception of adjusted dividends per share) are the per share - diluted amounts. | | (3) | Payout ratio is calculated as adjusted dividends divided by funds flow from operations. | | (4) | Net debt to funds flow from operations is calculated as the period end net debt divided by the sum of funds flow from operations for the trailing four quarters. | | (5) | Capital acquisitions represent total consideration for the transactions, including long-term debt and working capital assumed, and exclude transaction costs. | | (6) | Decommissioning and environmental expenditures includes environmental emission reduction expenditures, which are also included in development capital expenditures in the table above. | | (7) | The average selling prices reported are before realized derivatives and transportation. |
This news 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 news release, respectively.
SECOND QUARTER 2015 HIGHLIGHTS
In second quarter 2015, Crescent Point continued to execute its integrated business strategy of maximizing shareholder return with long-term growth plus dividend income through acquiring, exploiting and developing high-quality, long-life, light and medium oil and natural gas properties.
Crescent Point achieved average production of 151,636 boe/d in the quarter, which was weighted 91 percent to light and medium crude oil and liquids. This represents an increase of 10 percent, or more than 14,000 boe/d, over second quarter 2014. Production volumes were higher than expected due in part to a better than expected spring break-up in southern Saskatchewan.
During the quarter, the Company spent $270.7 million on drilling and development activities, drilling 185 (142.6 net) wells with a 100 percent success rate. Crescent Point also spent $58.6 million on land, seismic and facilities, for total development capital expenditures of $329.3 million. The Company was able to shift drilling capital into second quarter from the second half of 2015 due to a shorter than expected spring break-up in southern Saskatchewan, which is expected to positively impact third quarter 2015 production levels.
Crescent Point generated funds flow from operations of $524.3 million ($1.14 per share - diluted) in second quarter 2015. Funds flow from operations declined 18 percent from second quarter 2014 due to a 39 percent decline in the Company's average selling price per boe over the same period.
Second quarter netbacks of $41.74 per boe were strong relative to average selling prices of $56.25 per boe, partly due to the Company's hedging program, which contributed $8.18 per boe of realized gains on derivatives during the quarter. Excluding realized gains on derivatives, netbacks were $33.56 per boe.
Crescent Point maintained consistent monthly dividends of $0.23 per share, totaling $0.69 per share for the quarter. This is unchanged from $0.69 per share paid in second quarter 2014.
The Company lowered its overall cost structure and has realized capital savings of approximately 20 percent or more in several of its plays, through a combination of service cost reductions and increased operational efficiencies. The Company expects to realize further cost savings and efficiencies in this current low oil price environment, which it expects to further improve well economics on a long-term basis.
Crescent Point continued to advance its emerging-growth resource plays. In the Uinta Basin, the Company advanced its horizontal drilling program, while lowering costs and improving efficiencies. During the second quarter, the Company successfully reduced the drilling time on horizontal wells from 24 days to 16 days. In Flat Lake, Crescent Point extended the play's boundary through several step-out wells, adding additional upside potential in the area.
On June 30, 2015, Crescent Point completed the acquisition (the "Legacy Acquisition") of all of the issued and outstanding shares of Legacy Oil + Gas Inc. ("Legacy"), a publicly traded, light oil-weighted producer, for total consideration of approximately $1.48 billion. The Legacy Acquisition adds low decline production of 20,000 boe/d and 102.7 million boe of proved plus probable ("2P") reserves, as assigned by Crescent Point's independent engineers. The Legacy Acquisition is expected to be accretive on a debt-adjusted basis to the Company's production per share by approximately five to nine percent in 2016. This accretion is based on 2016 production of 20,000 to 25,000 boe/d and 2016 capital expenditures for the assets acquired of between $150 million and $250 million.
Also during the quarter, Crescent Point successfully closed a bought deal financing and the associated partial over-allotment option exercise for aggregate gross proceeds of approximately $660.1 million. Net proceeds from the bought deal financing were used to reduce the indebtedness assumed and transaction costs incurred in connection with the Legacy Acquisition.
During the quarter, the Company closed a private placement of long-term debt in the form of senior guaranteed notes to a group of institutional investors to increase its near-term liquidity. The notes issued pursuant to the placement are unsecured and rank equally with Crescent Point's obligations under its bank facilities. In total, US$250.0 million and CDN$65.0 million was raised through three separate series of notes at fixed coupon rates ranging from 3.94 percent to 4.18 percent and maturities of 10 to 12 years. Proceeds from the placement were used to reduce the Company's outstanding bank line during the quarter.
Crescent Point retains a significant amount of liquidity and financial flexibility, with no material near-term debt maturities and a credit facility with unutilized credit capacity of approximately $1.7 billion as at June 30, 2015, pro-forma the repayment of the debt assumed in the Legacy Acquisition.
Subsequent to the quarter, on July 2, 2015, Crescent Point announced the strategic consolidation acquisition of Coral Hill Energy Ltd. ("Coral Hill") (the "Coral Hill Acquisition"), a privately held Swan Hills Beaverhill Lake light oil-weighted producer with approximately 3,200 boe/d of productive capacity and 17.6 million boe of 2P reserves, as assigned by Crescent Point's independent engineers. The acquisition of Coral Hill is expected to enhance the long-term strategic value and flexibility of the Company's Swan Hills assets by providing full operatorship, control over pace of development and an increased position in the core of the play. Total consideration is estimated to be approximately $258 million, including the Coral Hill shares already owned by Crescent Point, and will include a combination of Crescent Point shares and assumed debt. The acquisition is expected to close on or about August 14, 2015.
REDUCED 2015 CAPITAL EXPENDITURES WITH UNCHANGED PRODUCTION GUIDANCE, REDUCED DIVIDEND AND SUSPENSION OF DIVIDEND REINVESTMENT PLANS
Since its inception, Crescent Point's business strategy has been based on three core principles: a strong balance sheet, a high-quality reserve base with significant upside and a proven management team. These principles have enabled the Company to execute a long-term total return strategy of delivering per share growth and dividend income without taking on debt at the expense of its shareholders.
Crescent Point's conservative strategy and per share growth over the past several years, combined with healthy commodity prices, had the Company on track to finance its growth and dividend model within a total payout ratio of 100 percent in the context of its five-year cash flow models. However, with the significant decline in spot and forward curve oil prices since the end of June and a risk that this low price environment may be lower for a longer period of time, the Company has decided to reduce its dividend to not build debt.
The Board of Directors has approved a monthly dividend of $0.10 per share, effective with the August dividend that is payable in cash on September 15, 2015. In addition, effective with the August dividend, the Company is suspending its existing Share Dividend Plan ("SDP") and Dividend Reinvestment Plan ("DRIP"). As of September 15, 2015, shareholders that were enrolled in the SDP or DRIP will receive the regular monthly cash dividend of $0.10 per share.
The Board of Directors has also approved a $100 million reduction in the Company's 2015 capital expenditures guidance, which primarily reflects both a reduction in drilling related capital and the benefit of the Company's cost saving initiatives. The 2015 capital expenditures budget is now $1.45 billion and average 2015 production guidance remains unchanged at 163,500 boe/d.
Crescent Point maintains a strong balance sheet with net debt to funds flow from operations of 1.9 times at the end of second quarter and significant unutilized credit capacity of $1.7 billion.
"This is the right decision," said Scott Saxberg, president and CEO of Crescent Point. "Reducing our dividend, lowering our capital expenditures and suspending our dividend reinvestment plans protects our balance sheet in this extremely low commodity price environment. It highlights our goal of internally funding our business model and not increasing debt or issuing equity to fund future growth."
Prior to the recent steep decline in oil prices, the Company was comfortable with the sustainability of its dividend level given the macro environment and the outlook for commodity prices at the time. Recently however, the macro environment and the outlook for commodity prices both have worsened considerably. Commodity prices have dropped significantly and oil price differentials have widened, and there is a concern that the low pricing environment may be more sustained. In particular, since late June:
Spot oil prices have declined by approximately Cdn$17/bbl, or 22 percent;
Forward curve oil prices in 2016 and 2017 have declined by approximately Cdn$11/bbl and Cdn$8/bbl, or 15 percent and 10 percent, respectively, limiting the ability to lock in attractive future selling prices;
Netbacks have been further eroded by a Cdn$8/bbl widening of spot heavy oil differentials in western Canada and a Cdn$4/bbl widening of light oil differentials in southeast Saskatchewan;
Natural gas liquids ("NGLs") prices have declined considerably and natural gas prices remain depressed; and
The significant drop in spot oil prices and wider differentials are negatively impacting the Company's realized oil prices by more than Cdn$15/bbl, or approximately 24 percent, for the second half of 2015.
Crescent Point entered the commodity downturn with a strong balance sheet and a significant 2015 and 2016 hedge position for both crude oil and natural gas. This allowed the Company to maintain its dividend while executing its business plan and implementing cost reductions across its asset base. However, the severity of the decline in oil prices over the past six weeks and the rapid worsening in the outlook for crude oil prices pose significant risk to the strength of the Company's balance sheet. After careful analysis and weighing the risks associated with potentially increasing its debt position, Crescent Point believes that lowering the dividend is the right decision and will allow the Company to protect its balance sheet as well as to improve its ability to allocate capital to its top-tier asset base.
"We have had another excellent quarter operationally and are on track to meet or exceed our targets," said Saxberg. "This further highlights the high-quality nature of our company and our assets, as well as our ability to lower costs and drive positive economic results in a low price environment."
The Company maintains a strategic asset base with low-risk waterflood potential and over 12 years of drilling inventory, or approximately 7,460 internally identified drilling locations, focused in low-risk, high-return plays with significant upside. Of the internally identified drilling locations, 2,391 net are proved and 934 net are probable, as independently evaluated by GLJ Petroleum Consultants Ltd. and Sproule Associates Limited. These drilling locations exclude the inventory acquired, or to be acquired, through the Coral Hill Acquisition and the Legacy Acquisition.
"We believe suspending our dividend reinvestment plans and lowering our dividend in this environment will maximize value for our shareholders over the long-term," said Saxberg. "As commodity prices improve, we will have greater flexibility to improve our balance sheet, increase our per share growth, increase our dividend or internally fund future acquisition opportunities."
OPERATIONS REVIEW
Second Quarter Operations Summary
Crescent Point achieved second quarter daily average production of 151,636 boe/d, representing an increase of 10 percent, or more than 14,000 boe/d, over second quarter 2014. The Company's production performance during the quarter was driven by its successful development program, its ongoing waterflood success and strong results from its cemented liner completion techniques.
Drilling Results
The following table summarizes Crescent Point's drilling results for the three and six months ended June 30, 2015:
| Three months ended June 30, 2015 | Gas | Oil | D&A | Service | Standing | Total | Net | % Success | | Southeast Saskatchewan & Manitoba | - | 80 | - | 1 | - | 81 | 51.5 | 100 | | Southwest Saskatchewan | - | 22 | - | - | - | 22 | 22.0 | 100 | | Alberta and West Central SK | 2 | 49 | - | - | - | 51 | 48.6 | 100 | | United States (1) | - | 31 | - | - | - | 31 | 20.5 | 100 | | Total | 2 | 182 | - | 1 | - | 185 | 142.6 | 100 | | | | Six months ended June 30, 2015 | Gas | Oil | D&A | Service | Standing | Total | Net | % Success | | Southeast Saskatchewan and Manitoba | - | 229 | - | 1 | - | 230 | 185.5 | 100 | | Southwest Saskatchewan | - | 60 | - | - | - | 60 | 60.0 | 100 | | Alberta and West Central SK | 2 | 76 | - | - | - | 78 | 74.9 | 100 | | United States (1) | - | 60 | - | - | - | 60 | 38.7 | 100 | | Total | 2 | 425 | - | 1 | - | 428 | 359.1 | 100 |
| (1) | The net well count is subject to final working interest determination. |
Southeast Saskatchewan and Manitoba
In second quarter, Crescent Point successfully executed its capital program in southeast Saskatchewan and Manitoba. The Company's core resource plays continue to be strong drivers of Crescent Point's production growth and free cash flow.
During second quarter, Crescent Point drilled 35 (32.9 net) oil wells in the Viewfield Bakken resource play. The Company's efforts to refine its completion techniques and to expand its waterflood program support its strategy of optimizing returns and free cash flow in the Viewfield Bakken play. During the first half of 2015, the Company successfully converted 11 producing wells to water injection wells, with a total of 30 planned for the year. Crescent Point continues to advance its waterflood program and is currently working on unitizing its second of four units in the play. Based on results to date, the Company estimates it has reduced decline rates by up to 10 percent in waterflood-affected areas in the Viewfield Bakken resource play, compared to areas not under waterflood.
The Company is encouraged by its new closeable sliding sleeve technology, which was utilized on 22 net wells in the quarter and is currently being deployed in all cemented liner completions in the play. Since 2014, Crescent Point has successfully lowered drilling and completion costs in the Viewfield Bakken by 22 percent and continues to seek service cost reductions and to improve overall efficiencies.
The Company is pleased with drilling results to date in the Torquay play at Flat Lake, having drilled 9 (9.0 net) oil wells during the quarter, including 2 (2.0 net) step-out wells. In 2015, Crescent Point has drilled a total of 7 (7.0 net) step-out wells in the play, extending the boundary of the play. The Company continues to modify and experiment with varying fracture-stimulation techniques, which have the potential to further increase the economics of wells drilled in the play.
The Midale unconventional light oil resource play is a highly economic, large oil-in-place pool with a low recovery factor to date and is in the early stages of horizontal well development. Crescent Point significantly increased its position in this play with the Legacy Acquisition. The Midale unconventional play generates attractive rates of return with payback periods that are within the top quartile of the Company's inventory. Crescent Point's strategic infrastructure in the Midale area allows the Company to realize the associated gas and NGLs produced from the play. In the first half of 2015, Crescent Point and Legacy drilled 15 (15.0 net) oil wells in the Midale play. Crescent Point has plans to drill 22 (21.0 net) oil wells in the second half of 2015. The Company has more than 400 internally identified drilling locations in the play, of which 38 net are booked as probable locations and 67 net are booked as proved locations. The Company is excited about the opportunity to improve upon the recent success in this area through continued cost improvements and the application of new technology.
Southwest Saskatchewan
Crescent Point continued to expand and optimize its waterflood program in the Shaunavon resource play during second quarter, with a total of 52 water injection wells operating in the play. During the first half of 2015, Crescent Point converted 11 producing wells to water injection wells, which represents approximately 30 percent of planned conversions for 2015. Based on results to date, the Company estimates it has reduced decline rates by more than 10 percent in waterflood-affected areas in the play, compared to areas not under waterflood.
During second quarter, the Company drilled 22 (22.0 net) oil wells in the Shaunavon resource play. The new closeable sliding sleeve technology was successfully deployed during the drilling and completion of all wells in the area and will be deployed in all future cemented liner completions in the Shaunavon play. Since 2014, the Company has decreased drilling and completion costs in the play by approximately 22 percent.
Alberta and West Central Saskatchewan
During the quarter, the Company continued its drilling program in the Dodsland area of the Saskatchewan Viking resource play, drilling 48 (47.5 net) oil wells and achieving a 100 percent success rate. Crescent Point is pleased with production results to date, as wells have been coming on production at, or better than, internally forecasted rates. Crescent Point has begun to implement its sliding sleeve technology in the Viking play, and continues to refine its completion technology. Since 2014, the Company has decreased drilling and completion costs in the Saskatchewan Viking play by approximately 24 percent.
Crescent Point expanded the waterflood program in the Swan Hills Beaverhill Lake play in second quarter 2015, with a total of five water injection wells currently in operation, including its own operated well and four non-operated injection wells currently operated by Coral Hill. The Company continues to see a strong waterflood response and is encouraged with results to date. Crescent Point plans to advance its waterflood program in the Swan Hills Beaverhill Lake play during the second half of 2015, after integrating the assets to be acquired as part of the Coral Hill Acquisition.
United States
During second quarter, the Company participated in the drilling of 25 (16.4 net) oil wells in the Uinta Basin, achieving a 100 percent success rate.
The Company remains excited about future opportunity in the Uinta Basin, which is a multi-zone, stacked play in the early stages of horizontal development. During 2014, the Company drilled two horizontal wells targeting the Uteland Butte and Douglas Creek zones, followed by four additional horizontal wells during 2015 targeting the Wasatch, Douglas Creek, Black Shale and Castle Peak zones. The Company is encouraged with drilling results to date. During the quarter, the Company successfully reduced drilling time on its second Douglas Creek horizontal well from 24 days to 16 days, reducing drilling and completion costs. Since 2014, the Company has decreased drilling and completion costs in the Uinta Basin by approximately 20 percent. The Company continues to seek additional efficiencies as it advances the play.
The Company is in the initial stages of interpreting data from its operated 3-D seismic program, covering approximately 140 square miles, primarily in the Randlett area. The data gathered will assist the Company to identify prospective locations for future horizontal and vertical drilling, and will help with the overall development of its operated lands.
During second quarter, the Company also participated in the drilling of 6 (4.1 net) oil wells in North Dakota, targeting both the Bakken and Three Forks formations. The Company is encouraged with results to date in both formations and is making significant progress in lowering overall drilling and completion costs.
ACQUISITIONS
On June 30, 2015, Crescent Point announced the closing of the Legacy Acquisition for total consideration of approximately $1.48 billion. The acquisition adds low-decline forecast production of 20,000 boe/d and 102.7 million boe of 2P reserves, as assigned by Crescent Point's independent engineers. The Legacy Acquisition is expected to generate production per share accretion on a debt-adjusted basis of approximately five to nine percent in 2016. This accretion is based on expected 2016 production of 20,000 to 25,000 boe/d and 2016 capital expenditures for the assets of between $150 million and $250 million, but excludes any additional synergies as a result of the Legacy Acquisition or efficiencies Crescent Point may achieve through cost reductions. The Legacy Assets include approximately 1,000 net sections of land, of which approximately 525 net sections are located in the Company's core area of southeast Saskatchewan and the new highly economic unconventional Midale light oil resource play.
Subsequent to the quarter, on July 2, 2015, Crescent Point announced the Coral Hill Acquisition. The acquisition adds approximately 3,200 boe/d of productive capacity and 17.6 million boe of 2P reserves, as assigned by Crescent Point's independent engineers. Crescent Point already owns 7.2 million shares of Coral Hill (approximately 8.7 percent of Coral Hill's outstanding shares), and will issue approximately 4.28 million Crescent Point common shares to acquire the remaining Coral Hill shares. The acquisition is expected to enhance the long-term strategic value and future flexibility of the Company's Swan Hills assets by providing full operatorship, control over pace of development and an increased position in the core of the play. The Coral Hill Acquisition is expected to close on or about August 14, 2015.
Also subsequent to the quarter, Crescent Point filed its first short form base shelf prospectus (the "Prospectus"), a common practice for inter-listed companies of the Company's size. Crescent Point does not have any immediate plans to offer securities under the Prospectus.
OUTLOOK
Crescent Point continues to execute its integrated business strategy of maximizing shareholder return with long-term growth plus dividend income through acquiring, exploiting and developing high-quality, long-life, light and medium oil and natural gas properties.
In the first half of the year, Crescent Point increased its financial flexibility, lowered overall costs, improved capital efficiencies and allocated capital to its low-risk, high-return development opportunities while advancing its earlier-stage resource plays. Crescent Point also made two strategic acquisitions, Legacy and Coral Hill, to strengthen its asset base and financial position.
For the second half of 2015, the Company will integrate its recent acquisitions while also seeking additional cost reductions and operational efficiencies, which are expected to further enhance well economics. The Company is focused on allocating capital across its asset base in a disciplined manner and on advancing the development of its waterflood programs, which are expected to generate increased recoveries.
"We have a large inventory of low-risk, top tier-return drilling locations across our asset base with attractive payback periods. Our acquisitions of Legacy and Coral Hill, along with the advancement of our Torquay and Uinta Basin resource plays, extend the depth of our inventory and increase our long-term growth profile," said Saxberg. "Reducing our dividend and maintaining a strong balance sheet during this low commodity price environment will put us in a strong position to fund our growth plus dividend strategy over time and grow overall value for our shareholders."
Crescent Point continues to bolster its hedge book when forward price levels warrant. As at August 5, 2015, the Company had hedged 54 percent of its oil production, net of royalty interest, for the remainder of 2015 at a weighted average price of approximately CDN$88.00/bbl and 32 percent for 2016 at a weighted average price of approximately CDN$83.00/bbl. The Company's oil and gas hedge books, which provide added flexibility, extend into 2018 at attractive prices.
Crescent Point remains committed to maintaining a strong financial position while continuing to maximize shareholder return through its total return strategy of long-term growth plus dividend income. The Company is flexible and remains well positioned to execute on its total return strategy due to its conservative business approach, high-quality inventory base and its commitment to advancing its technology and waterflood programs.
CONFERENCE CALL DETAILS
Crescent Point management will host a conference call on Thursday, August 13, 2015, at 10:00 a.m. MT (12:00 p.m. ET), to discuss the results and outlook for the Company.
Participants can access the conference call by dialing 866-225-0198 or 416-340-2216. Alternatively, to listen to this event online, please enter http://www.gowebcasting.com/6623 in your web browser.
For those unable to participate in the conference call at the scheduled time, it will be archived for replay. You can access the replay by dialing 800-408-3053 or 905-694-9451 and entering the passcode 1340760. The replay will be available approximately one hour following completion of the call. The webcast will be archived on Crescent Point's website at www.crescentpointenergy.com.
2015 GUIDANCE
The Company's revised guidance for 2015 is as follows and assumes the successful completion of the Coral Hill Acquisition on or about August 14, 2015:
Production |
Prior |
Revised | | | Oil and NGL (bbls/d) | 149,750 | 149,750 | | | Natural gas (mcf/d) | 82,500 | 82,500 | | Total (boe/d) | 163,500 | 163,500 | | | Capital expenditures (1) | | | | | Drilling and completions ($000) | 1,335,000 | 1,237,000 | | | Facilities, land and seismic ($000) | 215,000 | 213,000 | | Total ($000) | 1,550,000 | 1,450,000 |
| (1) | The projection of capital expenditures excludes acquisitions, which are separately considered and evaluated. |
ON BEHALF OF THE BOARD OF DIRECTORS
Scott Saxberg, President and Chief Executive Officer
August 12, 2015
Reserves Data
Statements relating to "reserves" are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future. There are numerous uncertainties inherent in estimating quantities of crude oil, natural gas and NGL reserves and the future cash flows attributed to such reserves. The reserve information set forth above are estimates only. In general, estimates of economically recoverable crude oil, natural gas and NGL reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability of oil and natural gas, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially. For these reasons, estimates of the economically recoverable crude oil, NGL and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves prepared by different engineers, or by the same engineers at different times, may vary. Crescent Point's and Coral Hill's actual production, revenues, taxes and development and operating expenditures with respect to its reserves will vary from estimates thereof and such variations could be material.
Non-GAAP Financial Measures
Throughout this press release, the Company uses the terms "funds flow from operations", "funds flow from operations per share - diluted", "adjusted net earnings from operations", "adjusted net earnings from operations per share - diluted", "adjusted dividends", "adjusted dividends per share", "net debt", "net debt to funds flow from operations", "netback", "payout ratio" and "payout ratio per share - diluted". 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.
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. Funds flow from operations per share - diluted is calculated as funds flow from operations divided by the number of weighted average diluted shares outstanding. Management utilizes 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. 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 funds flow from operations:
| | Three months ended June 30 | | Six months ended June 30 | | | ($000s) | 2015 | 2014 | | % Change | | 2015 | 2014 | | % Change | | | Cash flow from operating activities | 491,636 | 646,485 | | (24 | ) | 890,345 | 1,220,621 | | (27 | ) | | Changes in non-cash working capital | 21,388 | (23,627 | ) | (191 | ) | 50,313 | (31,117 | ) | (262 | ) | | Transaction costs | 8,755 | 9,681 | | (10 | ) | 9,698 | 9,970 | | (3 | ) | | Decommissioning expenditures | 2,481 | 4,149 | | (40 | ) | 7,408 | 17,310 | | (57 | ) | | Funds flow from operations | 524,260 | 636,688 | | (18 | ) | 957,764 | 1,216,784 | | (21 | ) |
Adjusted net earnings from operations is calculated based on net income before amortization of exploration and evaluation ("E&E") undeveloped land, impairment to property, plant and equipment ("PP&E"), unrealized derivative gains or losses, unrealized foreign exchange gain or loss on translation of US dollar senior guaranteed notes, 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 company has previously referred to adjusted net earnings from operations as "operating income".
The following table reconciles net income to adjusted net earnings from operations:
| | Three months ended June 30 | | Six months ended June 30 | | | ($000s) | 2015 | | 2014 | | % Change | | 2015 | | 2014 | | % Change | | | Net income (loss) | (240,448 | ) | 98,586 | | (344 | ) | (286,512 | ) | 129,476 | | (321 | ) | | Amortization of E&E undeveloped land | 47,517 | | 69,194 | | (31 | ) | 94,754 | | 135,631 | | (30 | ) | | Unrealized derivative losses | 359,155 | | 81,597 | | 340 | | 312,539 | | 217,781 | | 44 | | | Unrealized foreign exchange (gain) loss on translation of US dollar senior guaranteed notes | (31,001 | ) | (38,947 | ) | (20 | ) | 99,699 | | 1,994 | | 4,900 | | | Unrealized (gain) loss on long-term investments | 13,160 | | (5,277 | ) | (349 | ) | (10,537 | ) | (8,895 | ) | 18 | | | Gain on capital acquisitions | (6,259 | ) | - | | - | | (6,259 | ) | - | - | | | Deferred tax relating to adjustments | (101,746 | ) | (30,573 | ) | 233 | | (135,035 | ) | (95,333 | ) | 42 | | | Adjusted net earnings from operations | 40,378 | | 174,580 | | (77 | ) | 68,649 | | 380,654 | | (82 | ) |
Adjusted dividends and adjusted dividends per share are calculated as dividends declared to shareholders less the fair value of the discount on the market value of Crescent Point common shares issued pursuant to the Company's Premium Dividend™ and Dividend Reinvestment Plan ("DRIP") and the Share Dividend Plan ("SDP"). Management utilizes adjusted dividends to present the value of dividends declared to shareholders if settled completely in cash.
The following table reconciles dividends declared to shareholders or declared to adjusted dividends:
| | Three months ended June 30 | Six months ended June 30 | | ($000s) | 2015 | | 2014 | % Change | 2015 | | 2014 | % Change | | Dividends declared to shareholders | 330,445 | | 286,128 | 15 | 647,913 | | 564,404 | 15 | | Fair value of discount on market value of shares issued pursuant to DRIP and SDP | (5,313 | ) | - | - | (10,161 | ) | - | - | | Adjusted dividends | 325,132 | | 286,128 | 14 | 637,752 | | 564,404 | 13 |
Net debt is calculated as long-term debt plus accounts payable and accrued liabilities and dividends payable, less cash, accounts receivable, prepaids and deposits and long-term investments, excluding the equity settled component of dividends payable and unrealized foreign exchange on translation of US dollar senior guaranteed notes. Management utilizes net debt as a key measure to assess the liquidity of the Company.
Net debt to funds flow from operations is calculated as the period end net debt divided by the sum of funds flow from operations for the trailing four quarters. The ratio of net debt to 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.
The following table reconciles long-term debt to net debt:
| ($000s) | June 30, 2015 | | June 30, 2014 | | % Change | | | Long-term debt (1) | 3,985,084 | | 2,682,601 | | 49 | | | Accounts payable and accrued liabilities | 671,016 | | 721,396 | | (7 | ) | | Dividends payable | 115,927 | | 96,781 | | 20 | | | Cash | (20,625 | ) | (30,030 | ) | (31 | ) | | Accounts receivable | (383,707 | ) | (445,894 | ) | (14 | ) | | Prepaids and deposits | (7,782 | ) | (9,665 | ) | (19 | ) | | Long-term investments | (61,676 | ) | (83,124 | ) | (26 | ) | | Excludes: | | | | | | | | | Equity settled component of dividends payable | (36,586 | ) | (29,532 | ) | 24 | | | | Unrealized foreign exchange on translation of US dollar senior guaranteed notes | (284,745 | ) | (65,164 | ) | 337 | | | Net debt | 3,976,906 | | 2,836,829 | | 40 | |
| (1) | Includes current portion of long-term debt. |
Netback is calculated on a per boe basis as oil and gas sales, less royalties, operating and transportation expenses and realized derivative gains and losses. Netback is used by management to measure operating results on a per boe basis to better analyze performance against prior periods on a comparable basis.
Payout ratio and payout ratio per share - diluted are calculated on a percentage basis as adjusted dividends divided by funds flow from operations. Payout ratio is used by management to monitor the dividend policy and the amount of funds flow from operations retained by the Company for capital reinvestment.
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.
Crescent Point Energy Corp.
Greg Tisdale
Chief Financial Officer
(403) 693-0070
(403) 693-0020 or Toll-free (Canada & US): 888-693-0020
Crescent Point Energy Corp.
Trent Stangl
Vice President, Marketing and Investor Relations
(403) 693-0070
(403) 693-0020 of Toll free (Canada & US): 888-693-0020
Crescent Point Energy Corp.
Suite 2000, 585 - 8th Avenue S.W.
Calgary, Alberta T2P 1G1
www.crescentpointenergy.com |
