Calgary 鈥� Crescent Point Energy Corp. has sold nearly a billion dollars worth of assets so far this year, and it appears that sale of its natural gas infrastructure is next on the horizon, with completion of the sale expected in the fourth quarter of 2019.
Regarding additional sales on the horizon for its other properties in southeast Saskatchewan and southwest Manitoba up for sale, the press release said, 鈥淭he company will also continue to seek and evaluate the potential for additional asset disposition opportunities, where appropriate, to further optimize its asset portfolio.鈥�
The company executed approximately $950 million of dispositions year-to-date 2019.
Those were some of the details from the third quarter financial results the company reported on Oct. 31.
One of the financial analysts on the subsequent conference call asked about the value of those natural gas assets, as listed in the release, at $200 million. Chief financial officer Ken Lamont said was its 鈥渉istoric book value, that鈥檚 been depreciated obviously through time. That is not representative of the proceeds we鈥檇 be expecting on the transaction.鈥�
He attributed it to the accounting.
鈥淥bviously it鈥檚 a strong indication of the process as we鈥檝e moved the assets to 鈥榓ssets held for sale.鈥� We鈥檙e moving along in that process. Nothing has really changed our previous guidance to you on that disposition.鈥�
For the quarter ended September 30, 2019, Crescent Point's capital expenditures on drilling and development, facilities and seismic totaled $362.3 million, including $337.1 million spent on drilling and development to drill 133 (126.6 net) wells. President and CEO Craig Bryksa said the budget would be released early in the new year. It would look similar to this year, but there won鈥檛 be any real absolute growth.
In response to a question about its Flat Lake area, south of Torquay, Bryksa said, 鈥淎s Flat Lake goes, it鈥檚 been a steady, consistent program there this year. Very pleased with the results. More two-mile wells now than we had in the past, so things on that front look relatively good. That鈥檚 an area where we鈥檝e been able to see significant cost savings over the past year.鈥�
Bryksa pointed out they鈥檝e had a net 13 per cent cost reduction year over year in the area.
Operational highlights
Crescent Point's average production for third quarter was 155,708 boepd (barrels of oil equivalent per day), comprised of approximately 90 per cent oil and liquids, net of previously announced dispositions that closed during the quarter. Fourth quarter production will reflect the disposition of the company's Uinta Basin asset. The impact of this sale is expected to be partially offset by growth in the company's North Dakota resource play following the completion of several multi-well pads.
By continuing its focus on realizing operating efficiencies, Crescent Point said it achieved further cost savings during third quarter. As a result of internal workflow optimization and field automation over the past year, the company's operating expenses in 2019 are approximately seven per cent below its original budget, compared to approximately five percent previously. This improvement excludes any benefit expected to be realized from its recently announced asset dispositions. The company will continue to seek opportunities to optimize its cost structure, including by further focusing its asset base and increasing field automation.
Crescent Point has converted approximately 150 producing wells to water injection wells year-to-date and remains on track to convert a total of approximately 175 to 200 wells in 2019 as part of its decline mitigation program.
Outlook
The company's third quarter and year-to-date results continue to highlight management's focus on its key value drivers, including balance sheet strength, disciplined capital allocation and an improved cost structure, it said in a release. This has resulted in significant excess cash flow generation, increased efficiencies and expected net debt reduction of over $1.2 billion by year-end 2019, based on guidance at current strip prices.
Crescent Point's recent asset dispositions further enhance the company's cash flow netback, moderate its decline rate, reduce future decommissioning liabilities and lower the capital required to sustain its annual production as a percentage of cash flow.
Crescent Point's updated annual guidance range reflects continued operational execution and capital discipline with annual average production of 161,000 to 163,000 boepd and capital expenditures of $1.225 to $1.275 billion. This is a narrowing of the guidance range, which was previously targeting production of 160,000 to 164,000 boepd and capital expenditures of $1.2 to $1.3 billion.
Financials
It estimated net debt reduction of over $1.2 billion in 2019, driven by excess cash flow and asset dispositions. It extended the maturity date of covenant-based credit facilities to October 2023 with combined facilities totaling $3.0 billion and unutilized credit capacity expected to amount to approximately $2.0 billion at year-end 2019, excluding any further dispositions.
The company repurchased approximately 13.8 million shares year-to-date for total consideration of approximately $71 million.
Crescent Point said it continued to enhance cost structure by reducing operating expenses by approximately seven percent, excluding any benefit expected to be realized from recently announced asset dispositions.
Barbara Munroe has been appointed as Chair following Bob Heinemann鈥檚 retirement from the board.
鈥淥ur third quarter results continue to demonstrate our focus on balance sheet strength, cost efficiencies and capital discipline,鈥� said Bryksa, President and CEO of Crescent Point, in a release. 鈥淲e also remain committed to returning capital to shareholders through accretive share repurchases while maintaining a strong financial position. In addition, we continue to seek opportunities to further enhance our sustainability, including through cost reductions, decline mitigation and portfolio rationalization opportunities.鈥�
Adjusted funds flow totaled $389.2 million or $0.71 per share diluted during the third quarter, based on a 鈥渟trong operating netback鈥� of $30.93 per boe.
Crescent Point's net debt at the end of third quarter totaled approximately $3.4 billion, not accounting for the previously announced disposition of its Uinta Basin asset that closed subsequent to the quarter. Based on guidance at current strip prices and proceeds from this disposition, the company forecasts its net debt to be approximately $2.8 billion at year-end 2019.
Subsequent to the quarter, Crescent Point elected to reduce its covenant-based credit facilities from $3.6 billion to $3.0 billion and extend the maturity dates of these facilities from June 2021 to October 2023. The company's covenants under its bank credit facilities and senior guaranteed notes both remain unchanged. Crescent Point said it retains significant liquidity with no material near-term debt maturities. The company's unutilized credit capacity is expected to total approximately $2.0 billion at year-end 2019 based on guidance at current strip prices and continued execution of its share repurchase program, excluding any additional potential dispositions.
As at October 25, 2019, Crescent Point had, on average, approximately 49 per cent of its oil and liquids production, net of royalties, hedged for fourth quarter 2019 at a weighted average market value price of approximately CDN$79.00/bbl. The company also had, on average, over 35 percent of its oil and liquids production hedged for 2020 at approximately CDN$77.00/bbl.
Subsequent to the quarter, the company declared a quarterly cash dividend of $0.01 per share payable to shareholders on January 2, 2020.
Crescent Point reported an after-tax net loss of $301.7 million for third quarter 2019. This loss was primarily driven by after-tax charges totaling approximately $322.3 million related to the company's recently announced asset dispositions. Third quarter results also include approximately $7.0 million of severance costs, which related primarily to Crescent Point's recent Uinta Basin asset disposition.
