CALGARY, AB – Crescent Point Energy Corp. (“Crescent Point” or the “Company”) (TSX: CPG) (NYSE: CPG) is pleased to announce it has entered into an agreement to acquire additional Kaybob Duvernay assets and is increasing its base dividend.
KEY HIGHLIGHTS
- Kaybob Duvernay acquisition adds 130 net locations and increases drilling inventory in the play to over 20 years.
- Increasing first quarter 2023 base dividend by 25 percent to $0.10 per share, or $0.40 per share annually.
- Excess cash flow of $1.25 billion expected in 2023, at US$80 WTI, based on annual production of 138,000 to 142,000 boe/d.
- Significant return of capital to shareholders including 50 percent of discretionary excess cash flow, in addition to base dividend.
- Renewed and extended credit facilities with a new maturity date of November 2026.
KAYBOB DUVERNAY ACQUISITION AND OPERATIONS UPDATE
Crescent Point has entered into a purchase and sale agreement to acquire certain Kaybob Duvernay assets from Paramount Resources Ltd. for cash consideration of $375 million (the “Assets”). These Assets are adjacent to Crescent Point’s existing land base and further enhance the Company’s scale, high-return drilling inventory and development opportunities within the basin. This acquisition will be funded through existing credit facilities and is expected to close during January 2023.
The Assets include approximately 130 net drilling locations across nearly 65,000 net acres of crown land (90% average working interest) with no expiries. The acquired Assets currently produce over 4,000 boe/d (50% liquids) and include a gas plant, associated pipelines, water infrastructure and seismic data.
“We continue to generate strong full cycle returns from our Kaybob Duvernay assets, which are top quartile within our overall portfolio,” said Craig Bryksa, President and CEO of Crescent Point. “Through this acquisition, we are increasing our drilling inventory in the play to over 20 years, based on current production. In addition, our land position will increase to approximately 400,000 net acres. We are also adding base production with an estimated net present value of approximately $200 million at current strip commodity prices. The acquisition includes an attractive ESG profile, consistent with our existing Kaybob Duvernay assets, including low emissions intensity and minimal asset retirement obligations.”
Crescent Point plans to grow its Kaybob Duvernay asset from approximately 35,000 boe/d in 2022 to over 55,000 boe/d within its five-year plan. The significant inventory depth this asset provides also underpins the Company’s 10-year plan. Crescent Point’s disciplined development program includes adding a second rig in the Kaybob Duvernay in 2024.
Crescent Point is currently drilling its seventh pad in the play and expects to bring its sixth fully operated pad on-stream in early 2023. The Company’s fourth and fifth fully operated multi-well pads were recently brought on-stream and are generating strong initial production (“IP”) results that are in-line with, or ahead of, its internal type wells. Average IP rates for the fourth and fifth pads are approximately 785 boe/d per well (IP90) (75% liquids) and approximately 950 boe/d per well (IP30) (65% liquids), respectively.
The Company has also successfully lowered drilling days to between 11 to 13 days per well on its recent pads, a reduction of over 40 percent since entering the play. Crescent Point continues to seek opportunities to further enhance returns and overall recoveries through additional efficiencies and optimization of its drilling and completions design.
BASE DIVIDEND INCREASE AND UPDATED 2023 GUIDANCE
Given the Company’s strong operational results in 2022, its continued success in improving its financial position and the additional excess cash flow it expects to generate from the Assets, the Board of Directors has approved and declared a 25 percent increase to the quarterly base dividend to $0.10 per share, or $0.40 per share annually, up from $0.32 per share previously. This increased base dividend is payable on April 3, 2023 to shareholders of record at the close of business on March 15, 2023.
Crescent Point’s 2023 annual average production guidance is now 138,000 to 142,000 boe/d, an increase of 4,000 boe/d, with development capital expenditures unchanged at $1.0 to $1.1 billion. The Company now expects to generate approximately $1.25 billion of excess cash flow at US$80/bbl WTI. This budget, including the base dividend, is fully funded at US$50/bbl WTI.
Crescent Point continues to return 50 percent of its discretionary excess cash flow to its shareholders, in addition to its base dividend. Under this framework, the Company expects to return over $700 million directly to shareholders in 2023, based on current guidance at US$80/bbl WTI. These returns are further supplemented with per-share growth and debt reduction. Crescent Point remains active on its normal course issuer bid and has repurchased over 6.2 million shares during fourth quarter 2022 to-date for approximately $65 million.
RENEWAL OF CREDIT FACILITIES
During fourth quarter 2022, Crescent Point successfully renewed and extended its unsecured, covenant-based credit facilities with a maturity date of November 2026. The size of the Company’s credit facilities is currently $2.36 billion, which is expected to remain primarily undrawn upon closing of the announced acquisition.
PRELIMINARY 2023 GUIDANCE
| Prior | Revised | |
| Total Annual Average Production (boe/d) (1) | 134,000 – 138,000 | 138,000 – 142,000 |
| Capital Expenditures | ||
| Development capital expenditures ($ million) | $1,000 – $1,100 | $1,000 – $1,100 |
| Capitalized administration ($ million) | $40 | $40 |
| Total ($ million) (2) | $1,040 – $1,140 | $1,040 – $1,140 |
| Other Information for 2023 Guidance | ||
| Reclamation activities ($ million) (3) | $40 | $40 |
| Capital lease payments ($ million) | $20 | $20 |
| Annual operating expenses ($/boe) | $14.25 – $15.25 | $14.25 – $15.25 |
| Royalties | 13.75% – 14.25% | 13.75% – 14.25% |
| 1) | The revised total annual average production (boe/d) is comprised of approximately 80% Oil & NGLs and 20% Natural Gas |
| 2) | Land expenditures and net property acquisitions and dispositions are not included. Revised development capital expenditures spend is allocated on an approximate basis as follows: 90% drilling & development and 10% facilities & seismic |
| 3) | Reflects Crescent Point’s portion of its expected total budget |
RETURN OF CAPITAL OUTLOOK
| Base Dividend | |
| Fourth quarter 2022 base dividend per share | $0.08 |
| First quarter 2023 base dividend per share | $0.10 |
| Additional Return of Capital | |
| % of discretionary excess cash flow (1) (2) | 50 % |
| 1) | Discretionary excess cash flow is calculated as excess cash flow less base dividends |
| 2) | This % is part of a framework that targets to return up to 50% of discretionary excess cash flow to shareholders |
Specified Financial Measures
Throughout this press release, the Company uses the terms “excess cash flow” and “discretionary excess cash flow”. 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. For information on the composition of these measures and how the Company uses these measures, refer to the Specified Financial Measures section of the Company’s MD&A for the period ended September 30, 2022, which section is incorporated herein by reference, and available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar. There are no significant differences in the calculations between historical and forward-looking specified financial measures.
The most directly comparable financial measure for excess cash flow and discretionary excess cash flow disclosed in the Company’s primary financial statements is cash flow from operating activities, which, for the three and nine months ended September 30, 2022, was $647.0 million and $1.60 billion, respectively. For the three and nine months ended September 30, 2022, excess cash flow was $233.7 million and $900.8 million, respectively. Discretionary excess cash flow for the three and nine months ended September 30, 2022 was $188.8 million and $819.0 million, respectively.
Excess cash flow and discretionary excess cash flow for 2023 are forward-looking non-GAAP measures and are calculated consistently with the measures disclosed in the Company’s MD&A. Refer to the Specified Financial Measures section of the Company’s MD&A for the period ended September 30, 2022.
Notice to US Readers
The oil and natural gas reserves contained in this press release have generally been prepared in accordance with Canadian disclosure standards, which are not comparable in all respects of United States or other foreign disclosure standards. For example, the United States Securities and Exchange Commission (the “SEC”) generally permits oil and gas issuers, in their filings with the SEC, to disclose only proved reserves (as defined in SEC rules) but permits the optional disclosure of “probable reserves” and “possible reserves” (each as defined in SEC rules). Canadian securities laws require oil and gas issuers, in their filings with Canadian securities regulators, to disclose not only proved reserves (which are defined differently from the SEC rules) but also probable reserves and permits optional disclosure of “possible reserves”, each as defined in NI 51-101. Accordingly, “proved reserves”, “probable reserves” and “possible reserves” disclosed in this news release may not be comparable to US standards, and in this news release, Crescent Point has disclosed reserves designated as “proved plus probable reserves”. Probable reserves are higher-risk and are generally believed to be less likely to be accurately estimated or recovered than proved reserves. “Possible reserves” are higher risk than “probable reserves” and are generally believed to be less likely to be accurately estimated or recovered than “probable reserves”. In addition, under Canadian disclosure requirements and industry practice, reserves and production are reported using gross volumes, which are volumes prior to deduction of royalties and similar payments. The SEC rules require reserves and production to be presented using net volumes, after deduction of applicable royalties and similar payments. Moreover, Crescent Point has determined and disclosed estimated future net revenue from its reserves using forecast prices and costs, whereas the SEC rules require that reserves be estimated using a 12-month average price, calculated as the arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period. Consequently, Crescent Point’s reserve estimates and production volumes in this news release may not be comparable to those made by companies using United States reporting and disclosure standards. Further, the SEC rules are based on unescalated costs and forecasts. All amounts in the news release are stated in Canadian dollars unless otherwise specified.
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