“This strategic consolidation is an integral part of our overall portfolio transformation,” said
KEY HIGHLIGHTS
Transforms Company into a Montney and Kaybob Duvernay focused E&P with complementary long-cycle assets inSaskatchewan .- Adds approximately 800 net Montney drilling locations and increases estimated total corporate premium inventory to over 20 years.
- Accretive to 2024 metrics and enhances excess cash flow per share by over 15 percent, on average, throughout the five-year plan.
- Creates the seventh-largest Canadian E&P by production volume and largest land owner in the Alberta Montney’s volatile oil fairway.
- Plan to increase base dividend by 15 percent to
$0.46 per share on an annual basis, subject to closing of the Transaction. - Leverage ratio of 1.1 times net debt to adjusted funds flow expected at year-end 2024 at
US$80 /bbl WTI.
STRATEGIC RATIONALE
- Establishes Dominant Position in the Alberta Montney with 350,000
Net Acres of Contiguous Land Providing Synergies: The Transaction is accretive to Crescent Point’s portfolio and allows the Company to consolidate approximately 105,000 net acres of land with Montney rights, directly adjacent to its existingAlberta Montney position atGold Creek and Karr. The acquired assets are highly attractive with favourable royalty rates on Crown lands and include a high working interest rate of primarily 100 percent with limited expiry concerns. The acquired lands also have attractive geological characteristics with significant net pay, similar to Crescent Point’sGold Creek assets, and higher than normal pressure. The Company expects to be able to drive significant operational synergies across the combined asset base with respect to drilling and completion design, shared infrastructure, well-pad development continuity and supply chain management efficiencies. A detailed map of the acquired assets in relation to Crescent Point’s existing land position is provided later in the release. - Increases Premium Drilling Inventory to Over 20 Years: Adds approximately 800 net Montney drilling locations, further bolstering Crescent Point’s short-cycle asset portfolio. This Transaction provides decades of inventory with highly attractive returns, capital efficiencies and finding and development costs, which all rank in the top quartile within the Company’s portfolio. Crescent Point’s inventory of premium drilling locations is estimated to exceed 20 years on a pro forma basis, providing an attractive growth profile.
- Significant Infrastructure Ownership and Market Access: Enhances the Company’s ownership of significant infrastructure within the Alberta Montney, including oil batteries, compressors, water disposal and gathering lines to third party processing plants. Cumulative capital investment made by Hammerhead on major infrastructure since inception is expected to total approximately
$500 million by the end of 2023. This infrastructure will support the acquired assets as they grow from approximately 56,000 boe/d (50% oil and liquids) expected in 2024 to over an estimated 80,000 boe/d within Crescent Point’s five-year business plan. Crescent Point also expects to benefit from long-term contracts already in place to ensure the Company has adequate market access for future scalability. - Expected Accretion of Over 15 Percent Per-Share to Excess Cash Flow and Return of Capital: The Transaction is expected to be accretive to Crescent Point’s 2024 metrics, including adjusted funds flow and excess cash flow per share. Over the Company’s five-year business plan, the Transaction is expected to further strengthen Crescent Point’s excess cash flow and return of capital profile by over 15 percent per share, on average, in addition to its current outlook for mid-single digit organic growth. Crescent Point expects to generate significant financial and operational synergies in the near-term through lower general and administrative expenses and capital costs. The Company will focus on realizing additional value over time, including the efficient development of the acquired assets by optimizing the number of wells drilled per section. The Transaction also provides Crescent Point with an estimated
$1.3 billion of tax pools. - Creates Seventh-Largest E&P in
Canada by Production Volume (Weighted 65% to Oil and Liquids): Pro-forma production is expected to total over 200,000 boe/d, with significant drilling inventory in place to deliver additional long-term organic growth. Crescent Point is expected to immediately become the largest owner of land in the Alberta Montney’s volatile oil fairway, in addition to already controlling the largest amount of land in the condensate-rich Kaybob Duvernay play. This increased scale is expected to allow the Company to continue to improve its cost of capital.
All financial figures are approximate and in Canadian dollars unless otherwise noted. This press release contains forward-looking information and references to specified financial measures including: excess cash flow, excess cash flow per share, adjusted funds flow, leverage ratio, recycle ratio, base dividend and net debt. Refer to the Specified Financial Measures section in this press release for further information. Significant related assumptions and risk factors, and reconciliations are described under the Specified Financial Measures and Forward-Looking Statements sections of this press release.
UPDATED PRELIMINARY 2024 GUIDANCE
Crescent Point’s revised 2024 preliminary guidance, which incorporates the Transaction, includes estimated annual production of 200,000 to 208,000 boe/d (65% oil and liquids) based on development capital expenditures of
Approximately 80 percent of Crescent Point's 2024 budget is expected to be allocated to its
The revised capital expenditures budget incorporates approximately
The Company plans to release its formal 2024 guidance upon closing of the Transaction, which is expected in
FOCUS ON OPERATIONAL EXECUTION, BALANCE SHEET, AND INCREASING RETURN OF CAPITAL
Crescent Point’s strategic priorities will continue to focus on operational execution, balance sheet strength and increasing return of capital to shareholders.
This Transaction builds on the operational momentum achieved by the Company since its initial entry into the Kaybob Duvernay and
Given the expected accretion from this Transaction, the Company plans to increase its quarterly base dividend by 15 percent to
Crescent Point’s net debt is expected to total approximately
The Company plans to continue to allocate approximately 60 percent of its excess cash flow to dividends and share repurchases in the interim and plans to increase this allocation over time as it further strengthens its balance sheet.
Over the long-term, Crescent Point continues to target a leverage ratio of less than 1.0 times in a low commodity price environment. To protect against commodity price volatility, the Company will continue to hedge a portion of its production, including approximately a third of its anticipated production in 2024, net of royalty interest.
TRANSACTION METRICS
Based on estimated production for the acquired assets of approximately 56,000 boe/d in 2024, the Transaction metrics are as follows, assuming
- 3.4 times annual net operating income;
$45,500 per flowing boe; and$8.25 per boe of Proved plus Probable (“2P”) reserves of 308.7 MMboe, as estimated by the independent evaluatorMcDaniel & Associates Consultants Ltd. , as atNovember 1, 2023 . Including approximately$2.7 billion of undiscounted future development capital, the Transaction equates to$16.93 per boe of 2P reserves, resulting in a recycle ratio of approximately 2.2 times.
The net present value (“NPV”) of the Proved (“1P”) and 2P reserves of the acquired assets total approximately
TRANSACTION FINANCING AND FINANCIAL ADVISORS
Total consideration for the Transaction is approximately
The Company plans to fund the cash portion of the Transaction through its existing credit facilities, a new three-year term loan totaling
The Boards of Directors of both Crescent Point and Hammerhead have unanimously approved the Transaction, which is subject to court,
The Agreement provides for mutual non-completion fees of
Hammerhead shareholders, including certain directors and all of the officers, holding an aggregate of approximately 82 percent of Hammerhead shares outstanding, have entered into voting support agreements with Crescent Point to vote in favour of the Transaction and against any alternative or competing transaction.
Certain affiliates of
The Bank of Nova Scotia,
CONFERENCE CALL DETAILS
Crescent Point management will host a pre-recorded conference call today,
Participants can listen to this event online via webcast. The conference call can be accessed without operator assistance by registering online to receive an instant automated call back. Alternatively, the conference call can be accessed with operator assistance 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. The replay will be available approximately one hour following completion of the call.
Shareholders and investors can also find a presentation on Crescent Point's website, further highlighting details of the Transaction.
ALBERTA MONTNEY LAND POSITION
The following graphic shows the acquired assets in relation to Crescent Point’s existing land position in the Alberta Montney.
2024 PRELIMINARY GUIDANCE
Prior | Revised | |||
Total Annual Average Production (boe/d) (1) | 145,000 - 151,000 | 200,000 - 208,000 | ||
Capital Expenditures | ||||
Development capital expenditures ($ millions) | ||||
Capitalized administration ($ millions) | ||||
Total ($ millions) (2) |
1) The revised total annual average production (boe/d) is comprised of approximately 65% Oil, Condensate & NGLs and 35% Natural Gas. Assumes production of 56,000 boe/d (50% oil and liquids) for the assets acquired as part of the Transaction
2) Land expenditures and net property acquisitions and dispositions are not included. Revised development capital expenditures is allocated as follows: approximately 90% drilling & development and 10% facilities & seismic
RETURN OF CAPITAL OUTLOOK
Prior | Revised | |||||
Base Dividend | ||||||
Current quarterly base dividend per share (1) | ||||||
Additional Return of Capital | ||||||
% of excess cash flow (2) | 60% | 60% |
1) The planned quarterly base dividend increase to
2) Total return of capital is based on a framework that targets to return to shareholders approximately 60% of excess cash flow
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor will there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
The common shares offered in the equity offering described herein will be offered to the public through certain underwriters and their affiliates by way of a prospectus supplement (the "Prospectus Supplement") to Crescent Point’s short form base shelf prospectus dated November 3, 2023 (the "Prospectus") filed with the securities regulatory authorities in each of the provinces of
A copy of the Prospectus is, and a copy of the Prospectus Supplement will be, available free of charge on SEDAR+ at www.sedarplus.com and on the
Definitions / Specified Financial Measures
Throughout this press release, the Company uses the terms "adjusted funds flow" (equivalent to "adjusted funds flow from operations"), "excess cash flow", "excess cash flow per share", "net debt", "leverage ratio" (equivalent to "net debt to adjusted funds flow") "base dividends" and "recycle ratio". These specified financial measures do not have any standardized meaning as prescribed by International Financial Reporting Standards and, therefore, may not be comparable with the calculation of similar measures presented by other issuers.
The most directly comparable financial measure for adjusted funds flow from operations and excess cash flow disclosed in the Company's financial statements is cash flow from operating activities, which, for the three and nine month periods ended
Excess cash flow forecasted for 2023 to 2024 is a forward-looking non-IFRS measure and is 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 three and nine month periods ended
Excess cash flow per share is a non-IFRS ratio and calculated as excess cash flow divided by the number of shares outstanding. Excess cash flow per share presents a measure of financial performance to assess the ability of the Company to finance dividends, potential share repurchases, debt repayments and returns-based growth. This measure is based on current shares outstanding.
Recycle ratio is a non-IFRS ratio and is calculated as operating netback before hedging divided by FD&A costs. Recycle ratios may not be comparable year-over-year given significant changes executed over the last three years. Recycle ratio is a common metric used in the oil and gas industry and is used to measure profitability on a per boe basis.
For an explanation of the composition of adjusted funds flow, excess cash flow, excess cash flow per share, net debt, leverage ratio and how they provide useful information to an investor and qualitative reconciliations to the applicable IFRS measures, see the Company's MD&A for the quarter ended
Management believes the presentation of the specified financial measures above provides 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. This information should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.
Notice to US Readers Regarding Oil and Gas Disclosure
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
Forward-Looking Statements
This press release contains "forward-looking statements" and "future oriented financial information" within the meaning of applicable securities legislation, such as section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934, and contains “forward-looking information” within the meaning of applicable Canadian securities laws (collectively, “forward-looking statements”). The Company has tried to identify such forward-looking statements by use of such words as "could", "should", "can", "anticipate", "expect", "believe", "will", "may", "continues", "strategy", "potential", "grow", "estimate" and other similar expressions, but these words are not the exclusive means of identifying such statements.
In particular, this press release contains forward-looking statements pertaining, among other things, to the following: the expected benefits of the Transaction, including, but not limited to the accretion to adjusted funds flow and excess cash flow per share metrics, enhanced return of capital profile and a dominant position in both the Alberta Montney and Kaybob Duvernay plays; the Company's low-decline, long-cycle assets in
Statements relating to "reserves" are also 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. Actual reserve values may be greater than or less than the estimates provided herein. Unless otherwise noted, reserves referenced herein are given as at
With respect to disclosure contained herein regarding resources other than reserves, there is uncertainty that it will be commercially viable to produce any portion of the resources and there is significant uncertainty regarding the ultimate recoverability of such resources.
All forward-looking statements are based on Crescent Point's beliefs and assumptions based on information available at the time the assumption was made. Crescent Point believes that the expectations reflected in these forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. By their nature, such forward-looking statements are subject to a number of risks, uncertainties and assumptions, which could cause actual results or other expectations to differ materially from those anticipated, expressed or implied by such statements, including those material risks discussed in the Company's Annual Information Form for the year ended
Included in this press release are Crescent Point's 2024 guidance in respect of capital expenditures and average annual production and five-year plan information and expectations which are based on various assumptions as to production levels, commodity prices and other assumptions and are provided for illustration only and are based on budgets and forecasts that have not been finalized and are subject to a variety of contingencies including prior years' results. The Company's return of capital framework, including the expected increase to the Company’s quarterly dividend, is based on certain facts, expectations and assumptions that may change and, therefore, this framework may be amended as circumstances necessitate or require. To the extent such estimates constitute a "financial outlook" or "future oriented financial information" in this presentation, as defined by applicable securities legislation, such information has been approved by management of Crescent Point. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.
Additional information on these and other factors that could affect Crescent Point's operations or financial results are included in
Reserves and Drilling Data
Certain terms used herein but not defined are defined in NI 51-10, CSA Staff Notice 51-324 – Revised Glossary to NI 51-101 Standards of Disclosure for Oil and Gas Activities (“CSA Staff Notice 51-324”) and/or the Canadian Oil and Gas Evaluation (“COGE”) Handbook and, unless the context otherwise requires, shall have the same meanings herein as in NI 51-101, CSA Staff Notice 51-324 and the COGE Handbook, as the case may be.
This press release contains metrics commonly used in the oil and natural gas industry, including "recycle ratio", and “future development capital”. These terms do not have a standardized meaning and may not be comparable to similar measures presented by other companies and, therefore, should not be used to make such comparisons. Readers are cautioned as to the reliability of oil and gas metrics used in this press release. Management uses these oil and gas metrics for its own performance measurements and to provide investors with measures to compare the Company’s performance over time; however, such measures are not reliable indicators of the Company’s future performance, which may not compare to the Company’s performance in previous periods, and therefore should not be unduly relied upon.
Recycle ratio is calculated as operating netback divided by finding and development (F&D) costs. Management uses recycle ratio for its own performance measurements and to provide shareholders with measures to compare the Company’s performance over time.
Future development capital ("FDC") reflects the best estimate of the cost required to bring undeveloped proved and probable reserves on production. Changes in FDC can result from acquisition and disposition activities, development plans or changes in capital efficiencies due to inflation or reductions in service costs and/or improvements to drilling and completion methods.
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 and associated cash flow 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. The Company’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.
The estimates for reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties due to the effects of aggregation. This press release contains estimates of the net present value of the Company’s future net revenue from our reserves. Such amounts do not represent the fair market value of our reserves. The recovery and reserve estimates of the Company’s reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.
This press release references more than 20 years of premium drilling locations in the Corporation’s corporate inventory, including booked and unbooked locations. Drilling locations exclude wells that are currently being drilled or have been drilled and are awaiting completion. Drilling locations are disclosed in two categories: (i) net booked 2P locations; and (ii) unbooked locations. Of the 800 drilling locations of Hammerhead identified herein, 252 are net booked 2P locations and 548 are unbooked locations, as assigned by independent evaluator
NI 51-101 includes condensate within the product type of natural gas liquids (NGLs). The Company has disclosed condensate separately from other natural gas liquids in this press release since the price of condensate as compared to other natural gas liquids is currently significantly higher and the Company believes that presenting the two commodities separately provides a more accurate description of its operations and results therefrom. This press release discloses potential net drilling locations, which are not yet booked. The Company’s ability to drill and develop these locations and the drilling locations on which the Company actually drills wells depends on a number of uncertainties and factors, including, but not limited to, the availability of capital, equipment and personnel, oil and natural gas prices, costs, inclement weather, seasonal restrictions, drilling results, additional geological, geophysical and reservoir information that is obtained, production rate recovery, gathering system and transportation constraints, the net price received for commodities produced, regulatory approvals and regulatory changes. As a result of these uncertainties, there can be no assurance that the potential future drilling locations that the Company has identified will ever be drilled and, if drilled, that such locations will result in additional crude oil, natural gas or NGLs produced. As such, the Company’s actual drilling activities may differ materially from those presently identified, which could adversely affect the company’s business.
Where applicable, a barrels of oil equivalent ("boe") conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent (6Mcf:1bbl) has been used based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of the 6:1 conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an indication of value.
FOR MORE INFORMATION ON CRESCENT POINT ENERGY, PLEASE CONTACT:
Telephone: (403) 693-0020 Toll-free (US and
Address:
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/d3f06e61-4e7f-4242-97b8-ea80f1d41ab1
Fig. 1
ALBERTA MONTNEY LAND POSITION
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